1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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F O R M 10-Q
For the Quarter Ended July 2, 1994 Commission File Number 1-5315
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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 August 11, 1994, there were 10,025,485 shares of Class A Common Stock and
7,849,781 shares of Class B Common Stock of Springs Industries, Inc.
outstanding.
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There are 28 pages in the sequentially numbered, manually signed original of
this report.
Page 1 of 28
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
ITEM PAGE
- - ---- ----
6. EXHIBITS 10
SIGNATURES 11
EXHIBIT INDEX 12
Page 2 of 28
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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 ENDED TWENTY-SIX WEEKS ENDED
-------------------- ----------------------
JULY 2, JULY 3, JULY 2, JULY 3,
1994 1993 1994 1993
------- ------- -------- --------
OPERATIONS
Net sales . . . . . . . . . . . . . . . . . . . $515,260 $483,872 $1,000,473 $985,626
Cost and expenses:
Cost of goods sold . . . . . . . . . . . . . 412,855 389,893 804,994 794,702
Selling, general and
administrative expenses . . . . . . . . . . 73,685 69,396 148,457 141,558
Interest expense . . . . . . . . . . . . . . 7,254 7,509 14,433 15,550
Other (income) expense . . . . . . . . . . . (1,346) 1,641 (582) 1,871
-------- -------- ----------- --------
Total . . . . . . . . . . . . . . . . . . . 492,448 468,439 967,302 953,681
-------- -------- ----------- --------
Income before income taxes . . . . . . . . . . 22,812 15,433 33,171 31,945
Income taxes . . . . . . . . . . . . . . . . . 9,732 6,482 14,290 13,837
-------- -------- ----------- --------
Income before cumulative effects
of changes in accounting
principles . . . . . . . . . . . . . . . . . 13,080 8,951 18,881 18,108
-------- -------- ----------- --------
Cumulative effects of changes in
accounting principles . . . . . . . . . . . . - - - (72,543)
-------- -------- ----------- --------
Net income (loss) . . . . . . . . . . . . . . . $ 13,080 $ 8,951 $ 18,881 $(54,435)
======== ======== =========== ========
Per share:
Income before cumulative effects
of changes in accounting
principles . . . . . . . . . . . . . . . . $ .73 $ .50 $ 1.06 $ 1.01
Cumulative effects of changes in
accounting principles . . . . . . . . . . . - - - (4.07)
-------- -------- ----------- --------
Net income (loss) . . . . . . . . . . . . . . . $ .73 $ .50 $ 1.06 $ (3.06)
======== ======== =========== ========
Cash dividends - Class A shares . . . . . . . . $ .30 $ .30 $ .60 $ .60
======== ======== =========== ========
Cash dividends - Class B shares . . . . . . . . $ .27 $ .27 $ .54 $ .54
======== ======== =========== ========
Weighted average shares of
common stock . . . . . . . . . . . . . . . . 17,788 17,840
=========== ========
RETAINED EARNINGS
Retained earnings at beginning
of period . . . . . . . . . . . . . . . . . . $527,188 $503,443 $ 526,428 $571,864
Net income (loss) . . . . . . . . . . . . . . . 13,080 8,951 18,881 (54,435)
Cash dividends . . . . . . . . . . . . . . . . (5,039) (5,037) (10,080) (10,072)
-------- -------- ----------- --------
Retained earnings at end of period . . . . . . $535,229 $507,357 $ 535,229 $507,357
======== ======== =========== ========
Page 3 of 28
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SPRINGS INDUSTRIES, INC.
Condensed Consolidated Balance Sheet
(In thousands except share data)
JULY 2, JANUARY 1,
1994 1994
------- ----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . $ 2,679 $ 2,790
Accounts receivable . . . . . . . . . . . . . 317,272 315,834
Inventories . . . . . . . . . . . . . . . . . 279,670 267,842
Other . . . . . . . . . . . . . . . . . . . . 41,952 40,073
---------- ----------
Total current assets . . . . . . . . . . . 641,573 626,539
---------- ----------
Property, plant and equipment . . . . . . . . . 1,230,492 1,195,843
Accumulated depreciation . . . . . . . . . . (674,404) (645,938)
---------- ----------
Property, plant, and equipment, net . . . . 556,088 549,905
---------- ----------
Other assets and deferred charges . . . . . . . 113,767 115,687
---------- ----------
Total . . . . . . . . . . . . . . . . . . $1,311,428 $1,292,131
========== ==========
LIABILITIES AND SHAREOWNER'S EQUITY
Current liabilities:
Short-term borrowings . . . . . . . . . . . . $ 106,100 $ 61,420
Current maturities of long-term debt . . . . 20,513 20,511
Accounts payable . . . . . . . . . . . . . . 67,781 73,640
Accrued restructuring costs . . . . . . . . . 7,584 10,317
Other accrued liabilities . . . . . . . . . . 102,404 107,122
---------- ----------
Total current liabilities . . . . . . . . . 304,382 273,010
---------- ----------
Noncurrent liabilities:
Long-term debt . . . . . . . . . . . . . . . 270,362 293,028
Long-term benefit plans and deferred
compensation . . . . . . . . . . . . . . . 140,896 139,284
Deferred income taxes and other deferred
credits . . . . . . . . . . . . . . . . . . 43,928 43,616
---------- ----------
Total noncurrent liabilities . . . . . . . 455,186 475,928
---------- ----------
Shareowners' equity:
Class A common stock- $.25 par value
(9,865,460 and 9,858,035 shares issued
in 1994 and 1993, respectively) . . . . . . 2,466 2,465
Class B common stock- $.25 par value
(7,849,781 and 7,853,087 shares issued
in 1994 and 1993, respectively) . . . . . . 1,962 1,963
Additional paid-in capital . . . . . . . . . 11,430 11,144
Retained earnings . . . . . . . . . . . . . . 535,229 526,428
Cost of Class A shares in treasury
(July 2, 1994-120,357 shares;
January 1, 1994 - 129,460 shares) . . . . . (2,615) (2,785)
Currency translation adjustment . . . . . . . 3,388 3,978
---------- ----------
Shareowners' equity . . . . . . . . . . . . 551,860 543,193
---------- ----------
Total . . . . . . . . . . . . . . . . . . $1,311,428 $1,292,131
========== ==========
Page 4 of 28
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SPRINGS INDUSTRIES, INC.
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
TWENTY-SIX WEEKS ENDED
----------------------
JULY 2, JULY 3,
1994 1993
------- -------
CASH PROVIDED (USED) BY:
Operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . $ 18,881 $ (54,435)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating
activities:
Cumulative effects of changes in
accounting principles . . . . . . . . . . . . . . . - 72,543
Depreciation and amortization . . . . . . . . . . . 46,024 46,332
Changes in operating assets and liabilities
excluding effects of the transfer of European
subsidiaries and sale of business . . . . . . . . . (33,509) (83,452)
Other, net . . . . . . . . . . . . . . . . . . . . . (6,141) 623
--------- ---------
Net cash provided (used) by operating
activities . . . . . . . . . . . . . . . . . . 25,255 (18,389)
--------- ---------
Investing activities:
Purchase of property, plant and
equipment . . . . . . . . . . . . . . . . . . . . . (50,042) (37,276)
Acquisition of minority interest . . . . . . . . . . - (8,780)
Proceeds from sale of assets . . . . . . . . . . . . 356 307
Proceeds from sale of business . . . . . . . . . . . 17,813 -
--------- ---------
Net cash (used) by investing activities . . . . . (31,873) (45,749)
--------- ---------
Financing activities:
Proceeds from short-term borrowings . . . . . . . . . 44,680 55,086
Proceeds from commercial paper and long-term
debt borrowings . . . . . . . . . . . . . . . . . . 1,052 49,047
Payment of long-term debt . . . . . . . . . . . . . . (24,106) (25,412)
Payment of dividends . . . . . . . . . . . . . . . . (15,119) (15,106)
--------- ---------
Net cash provided by financing activities . . . . 6,507 63,615
--------- ---------
Decrease in cash and cash equivalents . . . . . . . . . $ (111) $ (523)
========= =========
Page 5 of 28
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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):
July 2, January 1,
1994 1994
-------- -----------
Standard cost (which approximates
average cost) or average cost:
Finished goods . . . . . . . . . . . . . . $ 197,495 $ 180,989
In process . . . . . . . . . . . . . . . . 166,416 165,190
Raw materials and supplies . . . . . . . . 50,119 50,824
--------- ---------
414,030 397,003
--------- ---------
Less LIFO reserve . . . . . . . . . . . (134,360) (129,161)
--------- ---------
Total . . . . . . . . . . . . . . . . . . $ 279,670 $ 267,842
========= =========
3. Sale of Subsidiary:
On June 24, 1994, the Company sold all of the stock of Clark-Schwebel
Distribution Corp., a subsidiary of Clark-Schwebel, Inc. The Company
received a cash payment of $17.8 million and a note receivable of $1.3
million in connection with this sale. The gain on this transaction is
included in other (income) expense.
4. Acquisition of Minority Interest:
On March 25, 1993, Springs' subsidiary, Clark-Schwebel, Inc.
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
Page 6 of 28
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subsidiaries from consolidation and began accounting for its interest
in CS-Interglas A.G. under the equity method of accounting.
5. Legal and Environmental:
As disclosed in the 1993 Annual Report on Form 10-K, 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.
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 28
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ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales
Net sales for the second quarter were six percent greater than net sales
reported in the second quarter of 1993. Sales for the home furnishings segment
were seven percent higher than in the prior year due to stronger volume in
window fashion products and increased shipments in bedding and bath products.
Sales for the specialty fabrics segment were four percent greater than in the
prior year primarily as a result of an increase in electrical fabrics sales.
Year-to-date net sales improved one percent compared to the first six months
of 1993. Stronger volume in window fashion products and increased shipments in
bedding and bath products contributed to a sales increase of four percent in
the home furnishings segment over last year. Year-to-date specialty fabrics
sales were four percent lower than in the prior year. This decrease is due in
part to the reduced volume in apparel and piece goods during the first quarter
of 1994. In addition, specialty fabrics sales reflect the exclusion of
European fiberglass sales, which were included only in first quarter 1993
sales. The Company's former European subsidiaries became part of CS-Interglas
A.G. on March 25, 1993, at which time the Company began accounting for its
interest in CS-Interglas A.G. under the equity method.
Earnings
Second quarter earnings of $.73 per share represented a 46 percent increase
over earnings of $.50 per share in the second quarter of 1993. Operating
profits in the home furnishings segment were comparable to those of the second
quarter of 1993. Margin pressure in the segment's bedding divisions was offset
by strong demand for window fashion products. The bedding divisions have
implemented a general price increase which will be effective during the third
quarter of 1994. In the specialty fabrics segment, operating profits increased
substantially as a result of improved operating efficiencies. Other (income)
expense improved as a result of reduced foreign losses and the gain on the
sale of Clark-Schwebel Distribution Corp., a subsidiary of Clark-Schwebel,
Inc. which was sold on June 24, 1994.
Year-to-date earnings of $1.06 per share represented a four percent increase
over 1993 first-half earnings of $1.01 per share, before the effect of one-time
accounting changes. As a result of margin pressure in the segment's bedding
divisions, the home furnishings segment's operating profits were below those of
the prior year, when the segment had record first-quarter earnings. In the
specialty fabrics segment, operating profits increased substantially due to
improved operating efficiencies and the total exclusion of losses in the
current year from former consolidated subsidiaries, now accounted for under
the equity method as other (income) expense. Other (income) expense improved
again as a result of reduced foreign losses and the gain on the sale of
Clark-Schwebel Distribution Corp.
Page 8 of 28
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Capital Resources and Liquidity
A normal seasonal increase in inventories and payments of long-term debt,
including an optional prepayment, resulted in an increase in short-term bank
borrowings during the first half of 1994. This increase was partially offset
with proceeds from the Company's sale of Clark-Schwebel Distribution Corp. Cash
needs for 1994 capital expenditures are still expected to slightly exceed 1993
levels. It is expected that the Company will be able to fund its cash needs
for the rest of the year from operating cash flows, commercial paper and
short-term bank borrowings.
Other
On June 24, 1994, the Company sold all of the stock of Clark-Schwebel
Distribution Corp., a subsidiary of Clark-Schwebel, Inc. The Company received
a cash payment of $17.8 million and a note receivable of $1.3 million in
connection with this sale. The gain on this transaction is included in other
(income) expense.
In February 1994, the Company communicated to its bedding customers the first
general price increase since 1988, which will be effective during the third
quarter of 1994. The Company also announced a plan on March 22, 1994, to
reduce annual operating costs by at least $15 million. The Company believes
it will meet its cost reduction plan.
Page 9 of 28
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PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS
The following exhibit is filed as part of this report:
(3) Articles of Incorporation and Bylaws
Springs Industries, Inc.'s Restated Articles of Incorporation,
amended and restated as of April 18, 1994, are filed herewith (16 pages).
Page 10 of 28
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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: August 15, 1994
Page 11 of 28
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EXHIBIT INDEX
Item
(6) (3) Articles of Incorporation and Bylaws
Springs Industries, Inc.'s Restated Articles of Incorporation,
amended and restated as of April 18, 1994, are filed herewith (16 pages).
Page 12 of 28