1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10-Q
For the Quarter Ended October 1, 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 November 4, 1994, there were 9,745,584 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 65 pages in the sequentially numbered, manually signed original of
this report.
Page 1 of 65
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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 65
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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 THIRTY-NINE WEEKS ENDED
---------------------- -----------------------
October 1, OCTOBER 2, October 1, October 2,
1994 1993 1994 1993
--------- --------- --------- -----------
Operations
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 535,265 $ 514,464 $1,535,738 $1,500,090
Cost and expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . 417,758 410,759 1,222,752 1,205,461
Selling, general and
administrative expenses . . . . . . . . . . . . . . . . . . . 76,324 69,697 224,781 211,255
Interest expense . . . . . . . . . . . . . . . . . . . . . . . 6,795 7,530 21,228 23,080
Other (income) expense . . . . . . . . . . . . . . . . . 530 1,613 (52) 3,484
---------- ---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501,407 489,599 1,468,709 1,443,280
---------- ---------- ---------- ----------
Income before income taxes . . . . . . . . . . . . . . . . . . . 33,858 24,865 67,029 56,810
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 14,244 11,192 28,534 25,029
---------- ---------- ---------- ----------
Income before cumulative effects
of changes in accounting
principles . . . . . . . . . . . . . . . . . . . . . . . . . . 19,614 13,673 38,495 31,781
========== ========== ========== ==========
Cumulative effects of changes in
accounting principles . . . . . . . . . . . . . . . . . . . . . - - - (72,543)
---------- ---------- ---------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . $ 19,614 $ 13,673 $ 38,495 $ (40,762)
========== ========== ========== ==========
Per share:
Income before cumulative effects
of changes in accounting
principles . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.10 $ .77 $ 2.16 $ 1.78
Cumulative effects of changes in
accounting principles . . . . . . . . . . . . . . . . . . . . - - - (4.07)
---------- ---------- ---------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . $ 1.10 $ .77 $ 2.16 $ (2.29)
========== ========== ========== ==========
Cash dividends - Class A shares . . . . . . . . . . . . . . . . . $ .30 $ .30 $ .90 $ .90
========== ========== ========== ==========
Cash dividends - Class B shares . . . . . . . . . . . . . . . . . $ .27 $ .27 $ .81 $ .81
========== ========== ========== ==========
Weighted average shares of
common stock . . . . . . . . . . . . . . . . . . . . . . . . . 17,792 17,827
========== ==========
RETAINED EARNINGS
Retained earnings at beginning
of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 535,229 $ 507,357 $ 526,428 $ 571,864
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . 19,614 13,673 38,495 (40,762)
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . (5,051) (5,037) (15,131) (15,109)
---------- ---------- ---------- ----------
Retained earnings at end of period . . . . . . . . . . . . . . . $ 549,792 $ 515,993 $ 549,792 $ 515,993
========== ========== ========== ==========
Page 3 of 65
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SPRINGS INDUSTRIES, INC.
Condensed Consolidated Balance Sheet
(In thousands except share data)
(Unaudited)
OCTOBER 1, JANUARY 1,
1994 1994
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 482 $ 2,790
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353,328 315,834
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274,922 267,842
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,629 40,073
---------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 671,361 626,539
---------- -----------
Property, plant, and equipment . . . . . . . . . . . . . . . . . . . . . . . 1,233,978 1,195,843
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . (683,940) (645,938)
---------- -----------
Property, plant, and equipment; net . . . . . . . . . . . . . . . . . . . 550,038 549,905
---------- -----------
Other assets and deferred charges . . . . . . . . . . . . . . . . . . . . . . 114,621 115,687
---------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,336,020 $ 1,292,131
========== ===========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 70,900 $ 61,420
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . 20,516 20,511
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,753 73,640
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 132,581 117,439
---------- -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 303,750 273,010
---------- -----------
Noncurrent liabilities:
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270,164 293,028
Long-term benefit plans and deferred
compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,898 139,284
Deferred income taxes and other deferred
credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,688 43,616
---------- -----------
Total noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . 464,750 475,928
---------- -----------
Shareowners' equity:
Class A common stock - $.25 par value
(9,865,507 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549,792 526,428
Cost of Class A shares in treasury
(October 1, 1994 - 120,023 shares;
January 1, 1994 - 129,460 shares) . . . . . . . . . . . . . . . . . . . . (2,607) (2,785)
Currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . 4,477 3,978
---------- -----------
Shareowners' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 567,520 543,193
---------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,336,020 $ 1,292,131
========== ===========
Page 4 of 65
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SPRINGS INDUSTRIES, INC.
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
THIRTY-NINE WEEKS ENDED
--------------------------------
OCTOBER1, OCTOBER 2,
1994 1993
--------- ----------
Cash Provided (Used) by:
Operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,495 $ (40,762)
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 . . . . . . . . . . . . . . . . . . . . . . . . 68,974 66,588
Changes in operating assets and liabilities,
excluding effects of the transfer of European
subsidiaries and sale of business . . . . . . . . . . . . . . . . . . . . . . (27,545) (86,748)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (54) (6,247)
--------- ---------
Net cash provided by operating activities . . . . . . . . . . . . . . . . . 79,870 5,374
--------- ---------
Investing activities:
Purchase of property, plant and
equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (66,439) (56,549)
Acquisition of minority interest . . . . . . . . . . . . . . . . . . . . . . . - (8,780)
Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . 387 691
Proceeds from sale of business . . . . . . . . . . . . . . . . . . . . . . . . 17,813 -
--------- ---------
Net cash (used) by investing activities . . . . . . . . . . . . . . . . . . (48,239) (64,638)
--------- ---------
Financing activities:
Proceeds from short-term borrowings . . . . . . . . . . . . . . . . . . . . . . 9,480 58,486
Proceeds from commercial paper and long-term
debt borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,158 48,996
Payment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,407) (28,817)
Payment of dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,170) (20,143)
--------- ---------
Net cash provided (used) by
financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . (33,939) 58,522
--------- ---------
Decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ (2,308) $ (742)
========= =========
Page 5 of 65
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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" or "the Company") 1993 Annual Report on Form
10-K.
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. Inventory:
Inventories are summarized as follows (in thousands):
October 1, January 1,
1994 1994
---------- ----------
Standard cost (which approximates
average cost) or average cost:
Finished goods $ 187,083 $ 180,989
In process 172,354 165,190
Raw materials and supplies 49,721 50,824
--------- ---------
409,158 397,003
--------- ---------
Less LIFO reserve (134,236) (129,161)
--------- ---------
Total $ 274,922 $ 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
Page 6 of 65
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(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.
5. Restructuring:
During the third quarter of 1994, the Company substantially completed its
plan for restructuring of certain finished fabrics operations which was
announced in 1990. The Company did not recognize in 1994 any gain or loss
in connection with the completion of this plan.
6. 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 65
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ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales
Net sales for the third quarter were up four percent from those reported in the
third quarter of 1993. Sales for the home furnishings segment increased eight
percent, due to increased shipments of bedding, bath, and window fashions
products. After adjusting for the sale of Clark-Schwebel Distribution Corp. in
June 1994, the specialty fabrics segment reported sales 11 percent greater than
a year ago. The specialty fabrics sales increase resulted from improved
shipments in both finished and industrial fabrics.
Year-to-date net sales improved two percent compared to the first nine months
of 1993. Strong volume in window fashions products and increased shipments in
bedding and bath products contributed to a sales increase of nearly six percent
in the home furnishings segment over last year. After adjusting for the sale
of Clark-Schwebel Distribution Corp. in June 1994, year-to-date specialty
fabrics sales were unchanged from the prior year. Improvements in industrial
fabric shipments were offset somewhat by a moderate decline in finished fabric
sales.
Earnings
Third quarter earnings of $1.10 per share were 43 percent higher than the
previous year's $.77 per share. The home furnishings segment's operating
profits exceeded last year's level as a result of sales growth and some margin
improvement. In addition, operating profits for the specialty fabrics segment
improved substantially over last year. The improvement in specialty fabrics
operating profits came in both the finished fabrics and industrial fabrics
businesses as a result of improved operating efficiencies and increased
industrial fabric sales volume. Other (income) expense improved as a result of
reduced foreign losses.
Year-to-date earnings of $2.16 per share represented a 21 percent increase
over 1993 nine-month earnings of $1.78, before the effect of one-time
accounting changes implemented during the first quarter of 1993. As a result
of margin pressure in the home furnishings segment's bedding division in the
first part of the year, the segment's year-to-date operating profits were below
those of the prior year, which included record first-quarter operating profits
for the segment. In the specialty fabrics segment, year- to-date operating
profits increased substantially, again due to improved operating efficiencies
and increased industrial fabric sales volume, as well as the total exclusion in
1994 of losses from former consolidated subsidiaries, now accounted for as
other (income) expense. Other (income) expense improved substantially as a
result of reduced foreign losses and the gain on the sale of Clark-Schwebel
Distribution Corp. in June 1994.
Capital Resources and Liquidity
Cash needs for capital expenditures and payments of long-term debt, including a
long-term debt prepayment, were funded through proceeds from operating cash
flows and the Company's sale of Clark-Schwebel Distribution Corp. Increased
operating cash flows resulted in a decreased need for short-term bank
Page 8 of 65
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borrowings compared to the prior year. Annual 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
During the third quarter of 1994, the Company substantially completed its plan,
announced in 1990, for the restructuring of certain finished fabrics
operations. The Company did not recognize in 1994 any gain or loss in
connection with the completion of this plan.
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 in the amount 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 became effective during the third
quarter of 1994. The Company also announced a plan on March 22, 1994, to
reduce annual operation costs by at least $15 million. The Company believes it
will achieve its cost reduction plan.
Page 9 of 65
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PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS
The following exhibits are filed as part of this report:
(10) Material Contracts
(a) Springs Industries, Inc. Deferred Compensation Plan, as
amended and restated on August 18, 1994, is filed herewith (28 pages).
(b) Springs Industries, Inc. Deferred Compensation Plan for
Outside Directors, as amended and restated on August 18, 1994, is filed
herewith (24 pages).
(27) Financial Data Schedule (for SEC purposes only)
Page 10 of 65
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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: November 14, 1994
Page 11 of 65
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EXHIBIT INDEX
Item
- - ----
(10) Material Contracts
PAGE
----
(a) Springs Industries, Inc. Deferred Compensation Plan, 13
as amended and restated on August 18, 1994, is filed herewith (28
pages).
(b) Springs Industries, Inc. Deferred Compensation Plan 41
for Outside Directors, as amended and restated on August 18, 1994,
is filed herewith (24 pages).
(27) Financial Data Schedule (for SEC purposes only) 65
Page 12 of 65