1
EXHIBIT 13
14
INDUSTRY SEGMENT INFORMATION(1)
Springs Industries, Inc.
(CHART)
SALES PER INDUSTRY SEGMENT
(In percent) (PIE Graph)
Pie graph showing the percentage
of total sales generated by
each segment for 1995.
(CHART)
OPERATING INCOME PER INDUSTRY SEGMENT
(In percent) [Pie Graph]
Pie graph showing the percentage
of total operating income generated
by each segment for 1995.
(In millions)
1995 1994 1993
TRADE SALES:
Home furnishings.................... $ 1,642.4 $ 1,460.1 $1,386.4
Specialty fabrics................... 590.7 608.8 636.4
- ------------------------------------------------------------------------------------
TOTAL......................... $ 2,233.1(2) $ 2,068.9(2) $2,022.8(2)
====================================================================================
OPERATING INCOME:
Home furnishings.................... $ 89.6 $ 97.5 $ 99.8
Specialty fabrics................... 43.9 38.3 22.1
- ------------------------------------------------------------------------------------
Total ........................ $ 133.5 $ 135.8 $ 121.9
- ------------------------------------------------------------------------------------
Interest expense ................... 32.0 29.2 30.3
Other (income) expense ............. (9.4) (0.1) 7.8
- ------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ADOPTION
OF SFAS NOS. 106 & 109 ....... $ 110.9 $ 106.7 $ 83.8
====================================================================================
IDENTIFIABLE ASSETS AT YEAR END:
Home furnishings ................ $ 1,263.1 $ 990.4 $ 957.3
Specialty fabrics ............... 394.6 430.3 461.2
LIFO reserve .................... (132.8) (132.5) (129.2)
Corporate ....................... 2.6 .8 2.8
- ------------------------------------------------------------------------------------
TOTAL ........................ $ 1,527.5 $ 1,289.0 $1,292.1
====================================================================================
CAPITAL EXPENDITURES:
Home furnishings ................ $ 56.8 $ 69.1 $ 71.0
Specialty fabrics ............... 18.4 23.5 17.3
- ------------------------------------------------------------------------------------
TOTAL ........................ $ 75.2 $ 92.6 $ 88.3
====================================================================================
DEPRECIATION AND AMORTIZATION:
Home furnishings ................ $ 77.5 $ 67.6 $ 64.1
Specialty fabrics ............... 21.0 22.7 23.0
- ------------------------------------------------------------------------------------
TOTAL ........................ $ 98.5 $ 90.3 $ 87.1
====================================================================================
(1) This schedule provides consolidated financial information by segment, but
not financial information of the segments as separate entities. Operating
income represents sales less cost of goods sold and selling, general
and administrative expenses. See the notes to the financial statements for
further comments regarding industry segments.
(2) Sales for 1995, 1994, and 1993 include sales of $266.9 million, $258.4
million, and $222.4 million, respectively, to one customer. The Company's home
furnishings segment had sales of $210.2 million, $202.8 million, and $172.1
million for 1995, 1994, and 1993, respectively, to this customer. Sales to this
customer of $56.7 million, $55.6 million, and $50.3 million for 1995, 1994, and
1993, respectively, are included in the specialty fabrics segment.
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15
CONSOLIDATED STATEMENT
OF OPERATIONS AND RETAINED EARNINGS
Springs Industries, Inc.
(In thousands except per share data)
For the Fiscal Years Ended December 30, 1995, December 31, 1994, and
January 1, 1994
1995 1994 1993
OPERATIONS
NET SALES ..................................... $2,233,053 $2,068,911 $2,022,816
- ----------------------------------------------------------------------------------
Cost of goods sold ......................... 1,828,542 1,650,743 1,630,179
Selling, general and
administrative expenses ................... 270,989 282,326 270,782
- ----------------------------------------------------------------------------------
Operating income ....................... 133,522 135,842 121,855
Interest expense ........................... 32,035 29,253 30,256
Other (income) expense ..................... (9,446) (123) 7,786
- ----------------------------------------------------------------------------------
Income before income taxes
and cumulative effect of adoption of
SFAS Nos. 106 & 109 ......................... 110,933 106,712 83,813
Income tax provision .......................... 39,307 44,485 36,557
- ----------------------------------------------------------------------------------
Income before cumulative effect of
adoption of SFAS Nos. 106 & 109 .............. 71,626 62,227 47,256
Cumulative effect of adoption of SFAS
Nos. 106 & 109, net of income tax. ........... - - (72,543)
- ----------------------------------------------------------------------------------
NET INCOME (LOSS) ...................... $ 71,626 $ 62,227 $ (25,287)
==================================================================================
PER SHARE:
Income before cumulative effect of
adoption of SFAS Nos. l06 & 109 .............. $ 3.71 $ 3.50 $ 2.65
Cumulative effect of adoption of SFAS
Nos. 106 & 109, net of income tax ............ - - (4.07)
- ----------------------------------------------------------------------------------
NET INCOME (LOSS) ...................... $ 3.71 $ 3.50 $ (1.42)
==================================================================================
1995 1994 1993
RETAINED EARNINGS
RETAINED EARNINGS
AT BEGINNING OF YEAR .......................... $ 568,403 $ 526,428 $ 571,864
Net income (loss) ............................. 71,626 62,227 (25,287)
Class A cash dividends declared ............... (14,840) (11,758) (11,624)
Class B cash dividends declared ............... (8,842) (8,494) (8,525)
- ----------------------------------------------------------------------------------
RETAINED EARNINGS
AT END OF YEAR.......................... $ 616,347 $ 568,403 $ 526,428
==================================================================================
See Notes to Consolidated Financial Statements.
(CHART)
DISTRIBUTION OF THE SALES DOLLAR
(In percent) [Pie Graph]
Pie Graph showing percentage of each 1995
sales dollar spent on (i) raw materials and purchased
goods, (ii) wages, salaries and benefits, (iii) other
manufacturing, selling, general and administrative expenses,
(iv) cash dividends and retained earnings and (v) income taxes.
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16
CONSOLIDATED BALANCE SHEET
Springs Industries, Inc.
(In thousands except share data)
December 30, 1995, and December 31, 1994
1995 1994
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ...................................................... $ 2,606 $ 769
Accounts receivable ............................................................ 351,669 312,739
Inventories .................................................................... 384,730 264,161
Other. ......................................................................... 30,300 39,335
- -----------------------------------------------------------------------------------------------------------
Total current assets ....................................................... 769,305 617,004
- -----------------------------------------------------------------------------------------------------------
PROPERTY (AT COST):
Land and improvements .......................................................... 17,750 16,546
Buildings ...................................................................... 287,851 224,410
Machinery, equipment, etc ...................................................... 1,075,058 1,012,104
- -----------------------------------------------------------------------------------------------------------
Total ...................................................................... 1,380,659 1,253,060
Accumulated depreciation ....................................................... (766,700) (697,810)
- -----------------------------------------------------------------------------------------------------------
Property, net .............................................................. 613,959 555,250
- -----------------------------------------------------------------------------------------------------------
OTHER ASSETS AND DEFERRED CHARGES ................................................. 144,280 116,789
- -----------------------------------------------------------------------------------------------------------
TOTAL ...................................................................... $1,527,544 $1,289,043
===========================================================================================================
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings .......................................................... $ 21,900 $ 11,100
Current maturities of long-term debt ........................................... 13,078 21,318
Accounts payable ............................................................... 103,737 83,232
Accrued incentive pay and benefit plans ........................................ 34,051 39,178
Other accrued liabilities. ..................................................... 90,224 89,128
- -----------------------------------------------------------------------------------------------------------
Total current liabilities .................................................. 262,990 243,956
- -----------------------------------------------------------------------------------------------------------
NONCURRENT LIABILITIES:
Long-term debt ................................................................. 326,949 265,384
Accrued benefits and deferred compensation ..................................... 154,673 144,967
Deferred income taxes .......................................................... 26,608 30,731
Deferred credits and other liabilities ......................................... 21,802 19,914
- -----------------------------------------------------------------------------------------------------------
Total noncurrent liabilities ............................................... 530,032 460,996
- -----------------------------------------------------------------------------------------------------------
SHAREOWNERS' EQUITY:
Class A common stock- $.25 par value (12,642,903 and 9,884,143 shares
issued in 1995 and 1994, respectively) ....................................... 3,161 2,471
Class B common stock- $.25 par value (7,604,579 and 7,830,375 shares
issued in 1995 and 1994, respectively) ....................................... 1,901 1,958
Additional paid-in capital ..................................................... 109,840 11,413
Retained earnings .............................................................. 616,347 568,403
Cost of Class A shares in treasury (1995-110,526 shares; 1994-119,585 shares) .. (2,449) (2,602)
Currency translation adjustment and other ...................................... 5,722 2,448
- -----------------------------------------------------------------------------------------------------------
Total shareowners' equity .................................................. 734,522 584,091
- -----------------------------------------------------------------------------------------------------------
TOTAL ...................................................................... $1,527,544 $1,289,043
===========================================================================================================
See Notes to Consolidated Financial Statements.
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17
CONSOLIDATED STATEMENT OF CASH FLOWS
Springs Industries, Inc.
(In thousands)
For the Fiscal Years Ended December 30, 1995, December 31, 1994, and January 1, 1994
1995 1994 1993
OPERATING ACTIVITIES:
Net income (loss) .............................................................. $ 71,626 $ 62,227 $ (25,287)
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 ............................................. 98,514 90,290 87,138
Deferred income taxes ..................................................... 7,837 1,409 3,625
Changes in assets and liabilities excluding effects of
acquisitions and dispositions of businesses:
Accounts receivable .................................................... 20,906 (6,632) (29,285)
Inventories ............................................................ (24,765) (5,556) (13,599)
Accounts payable, accrued incentive pay and benefit plans,
and other accrued liabilities ........................................ (16,459) 37,709 (5,102)
Accrued restructuring costs ............................................ - (10,317) (9,495)
Other (20,151) (1,256) 501
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities ................................. 137,508 167,874 81,039
- -------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property .......................................................... (75,175) (92,642) (88,289)
Acquisitions of businesses, net of stock issued
and cash acquired, and other investments ..................................... (82,557) - (8,780)
Proceeds from sales of businesses and other assets ............................. 14,183 20,069 203
- -------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities ..................................... (143,549) (72,573) (96,866)
- -------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from (repayment of) short-term borrowings, net ........................ 10,800 (50,320) 15,406
Proceeds from long-term debt ................................................... 99,719 1,896 49,005
Repayment of long-term debt .................................................... (80,332) (28,732) (29,678)
Cash dividends paid ............................................................ (22,309) (20,166) (20,149)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities .......................... 7,878 (97,322) 14,584
- -------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................................... 1,837 (2,021) (1,243)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ..................................... 769 2,790 4,033
- -------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR .................................. $ 2,606 $ 769 $ 2,790
=========================================================================================================================
See Notes to Consolidated Financial Statements.
163
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18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 or the Company). 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.
USE OF ESTIMATES: The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosures relating to contingent assets and
liabilities at the date of the financial statements, and the reported amounts
of revenues and expenses for the reporting period.
REVENUE RECOGNITION: Revenue from product sales is recognized at the time
ownership of the goods transfers to the customer.
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 reserve for doubtful accounts was approximately $9,904,000 and $7,067,000
in 1995 and 1994, respectively, which management believes is adequate to
provide for expected credit losses. Accounts receivable balances at December
30, 1995, and December 31, 1994, included receivables from one customer
totaling $41.5 million and $37.2 million, respectively.
INVENTORIES: Inventories are summarized as follows
(in thousands):
1995 1994
Standard cost (which approximates
average cost) or average cost:
Finished goods ...................... $251,277 $173,729
In process .......................... 192,094 166,347
Raw materials and supplies............ 74,195 56,553
- ------------------------------------------------------------
517,566 396,629
Less LIFO reserve .................... (132,836) (132,468)
- ------------------------------------------------------------
Total .............................. $384,730 $264,161
============================================================
Inventories are valued at the lower of cost or market. Cost is determined using
the last-in, first-out method (LIFO) for approximately 85 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,
ranging from 10 to 20 years for land improvements, 20 to 40 years for
buildings, and 3 to 11 years for machinery and equipment.
INCOME TAXES: The provision for income taxes includes federal, state, and
foreign taxes currently payable and deferred taxes. Deferred taxes were
determined using the liability approach as required by Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." This
method considers future tax consequences associated with differences between
financial accounting and tax bases of assets and liabilities and gives immediate
effect to changes in income tax laws upon enactment.
EARNINGS 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. Such average shares totaled 19,300,000 in 1995, 17,793,000 in
1994, and 17,825,000 in 1993. Certain common stock equivalents are not included
in the 1995 and 1994 calculations because they are antidilutive.
RECLASSIFICATION: During the first quarter of 1995, the Company completed an
evaluation of indirect manufacturing costs that in 1994 and prior years were
classified as selling, general and administrative expenses. As a result of that
evaluation, the Company began including in inventoriable costs certain indirect
manufacturing and certain manufacturing-related information services costs. No
material effect on inventory or net income resulted from the accounting change.
Certain other costs relating to designs have been reclassified from selling,
general and administrative expenses to cost of goods sold in the current and
prior years.
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19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 2. ACQUISITIONS AND DIVESTITURES:
The Company acquired three businesses during 1995. On May 27, 1995, the Company
purchased all of the outstanding stock of Dundee Mills, Incorporated, a leading
manufacturer of towels, infant and toddler bedding, knitted infant apparel, and
health care products. The purchase price was $119.6 million, $21.2 million of
which was paid in cash and the remainder through the issuance of approximately
2.5 million shares of Springs Class A common stock with a fair value of $98.4
million. Effective May 28, 1995, the Company purchased substantially all of the
assets of Dawson Home Fashions, Inc., a leading manufacturer of shower curtains
and bath fashions accessories. Springs paid $39 million in cash for the
business. On July 28, 1995, the Company purchased substantially all of the
assets of a leading manufacturer of wood window blinds and interior shutters,
the Nanik Window Coverings Group of Apogee Enterprises, Inc.
The acquisitions have been accounted for using the purchase method of
accounting. The costs of the businesses acquired have been allocated on the
basis of the fair values of the assets acquired and liabilities assumed.
Liabilities assumed totaled $66.3 million, including $33.9 million of long-term
debt. The operating results of Dundee, Dawson and Nanik are included in the
Company's consolidated results of operations from their respective dates of
acquisition.
The following summary of unaudited pro forma results of operations presents
information as if the acquisitions had occurred at the beginning of each fiscal
year. The pro forma earnings per share calculation treats the Springs Class A
common shares issued in the Dundee acquisition as having been outstanding
during all of 1994 and 1995. The pro forma information is provided for
informational purposes only and is not indicative of results which would have
occurred or which may occur in the future (in thousands, except per share
amounts):
Year Ended Year Ended
Dec. 30, 1995 Dec. 31, 1994
------------- -------------
Net sales ........... $2,387,266 $2,450,964
Net income .......... 69,574 57,102
Earnings per share .. 3.42 2.82
===================================================
On December 29, 1995, the Company sold the assets of its Intek office panel
fabrics business. In connection with this sale, the Company received a cash
payment of $13.2 million. The gain on this transaction is included in other
(income) expense.
On June 24, 1994, the Company sold all of the stock of Clark-Schwebel
Distribution Corp., a subsidiary of Clark-Schwebel, Inc. In connection with
this sale, the Company received cash payments of $19.1 million. The gain on
this transaction is included in other (income) expense. The 1994 pro forma
amounts above include the results of Clark-Schwebel Distribution Corp. through
the date of disposition and the gain on sale.
On March 25, 1993, the Company contributed its two European subsidiaries (net
assets of $17.1 million) and $8.8 million in cash to CS-Interglas A.G., of Ulm,
Germany, in exchange for a minority equity interest in CS-Interglas A.G. and
convertible notes. No gain or loss was recognized as a result of this
nonmonetary exchange.
- -------------------------------------------------------------------------------
NOTE 3. INDUSTRY SEGMENT INFORMATION:
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, infant and toddler bedding, curtains, bath rugs, towels, other bath
fashion accessories, knitted infant apparel, baby and health care products,
juvenile novelties, drapery hardware and decorative window furnishings to all
major channels of retail distribution and to institutional customers. The
specialty fabrics segment manufactures, purchases for resale, and markets woven
and non-woven fabrics, including apparel fabrics, home-sewing fabrics, fiber
glass 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 page 14 and is an
integral part of the financial statements.
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20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4. LONG-TERM DEBT:
Long-term debt consists of (in thousands):
1995 1994
Commercial paper, average interest rate 6.1% in 1995, 4.7% in 1994 .. $ 69,825 $ 79,812
Revolving credit agreements, interest at 6.5% ....................... - 20,000
Senior notes payable in annual installments of $6,250 in 1996,
$12,500 in years 1997 through 2001, and $6,250 in years
2002 through 2003, effective interest rate of 10.0% ............... 81,250 93,750
Notes payable in quarterly installments of $3,125 through January 1,
1996, then $2,093 on April 1, 1996, interest at a variable market
rate, 6.2% at December 30, 1995 ................................... 5,218 18,357
Senior notes payable in annual installments of $5,000 in years 1997
through 2006, interest at 9.6% .................................... 50,000 50,000
Notes payable in quarterly installments of $2,857 from August,
1998 through May, 2005, effective interest rate of 6.7% ........... 80,000 -
Notes payable in quarterly installments of $714 from December,
1998 through September, 2005, interest at 6.7% .................... 20,000 -
Industrial Revenue Bond Obligations, payable in varying annual
amounts to 2019, interest at rates ranging from 2.7% to 8.3% ...... 32,243 21,175
Other ............................................................... 1,491 3,608
- -----------------------------------------------------------------------------------------
Total ............................................................. 340,027 286,702
Current maturities .................................................. (13,078) (21,318)
- -----------------------------------------------------------------------------------------
LONG-TERM DEBT .................................................... $ 326,949 $ 265,384
=========================================================================================
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. These revolving credit agreements carry no specific
expiration dates but would terminate thirteen months after notice from banks.
Springs pays an annual commitment fee equal to 1/8 of 1 percent on the unused
portion of the revolving credit agreements.
Certain long-term debt agreements contain requirements concerning, among other
things, the maintenance of working capital and tangible net worth, limitations
on the incurrence of indebtedness, and restrictions on the payment of dividends
and/or redemption of stock. At December 30, 1995, retained earnings of
approximately $83,000,000 were available for dividends and/or the redemption of
stock.
Total annual maturities of long-term debt, excluding commercial paper will be:
1996 - $13,078,000; 1997 - $18,355,000; 1998 - $25,460,000; 1999 -
$33,152,000; 2000 - $33,014,000 and varying amounts thereafter through 2019.
Total interest payments in 1995, 1994, and 1993 were $31,357,000, $29,837,000,
and $27,894,000, respectively.
The Company enters into interest rate swap agreements to reduce the potential
impact of increases in interest rates on floating-rate long-term debt. The
Company is exposed to credit loss in the event of nonperformance by the
counterparties to the interest rate swap agreements. However, the Company
believes its counterparties will perform. At December 30, 1995, and December
31, 1994, the notional amount of these agreements totaled $113,000,000 and
$5,000,000 respectively. The fair value of these agreements at December 30,
1995, was an unrealized gain of $847,000 based on market prices for similar
instruments.
166
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21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5. SHAREOWNERS' EQUITY:
Changes in shareowners' equity, exclusive of retained earnings, are (in
thousands):
Class A Class B Class A
Common Stock Issued Common Stock Issued Stock Held in Treasury Currency
------------------- ------------------- Additional ---------------------- Translation
Number Par Number Par Paid-In Number Adjustment
Of Shares Value Of Shares Value Capital Of Shares Cost And Other
- -----------------------------------------------------------------------------------------------------------------------------------
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
Exchange of Class B common stock
for Class A common stock ........ 23 5 (23) (5) - - - -
Shares awarded under various
employee plans .................. 3 1 - - 269 (9) (183) -
Currency translation adjustment .. - - - - - - - (1,530)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 ..... 9,884 $2,471 7,830 $1,958 $ 11,413 120 $2,602 $2,448
Exchange of Class B common stock
for Class A common stock ........ 225 57 (225) (57) - - - -
Shares awarded under various
employee plans .................. 20 5 - - 691 (9) (153) -
Shares issued in acquisition of
Dundee Mills, Incorporated ...... 2,514 628 - - 97,736 - - -
Currency translation adjustment .. - - - - - - - 4,801
Other ............................ - - - - - - - (1,527)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 30, 1995 ..... 12,643 $3,161 7,605 $1,901 $109,840 111 $2,449 $5,722
===================================================================================================================================
As of December 30, 1995, 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 shareowners 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.
The Company has a stock option plan under which options to purchase Class A
shares of common stock may be granted to certain key associates. The plan
provides that the option price shall not be less than the fair market value of
the shares on the date of grant and that no portion of the grant may be
exercised beyond ten years from that date. Options become exercisable ratably
over a three- to five-year period beginning on the third anniversary of the
grant date. As of December 30, 1995, options for 94,000 shares were
exercisable. The table on the following page is a summary of changes in Class
A common stock options:
167
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22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Number Exercise Price
Of Shares Per Share
--------- --------------
Outstanding at Jan.2, 1993 .. 380,000 $ 29.00
Granted ..................... 59,000 46.38
- ---------------------------------------------------------------
Outstanding at Jan.1, 1994 .. 439,000 29.00-46.38
Granted ..................... 62,000 34.33
Cancelled.................... (129,000) 29.00-46.38
- ---------------------------------------------------------------
Outstanding at Dec. 31, 1994. 372,000 29.00-46.38
Granted ..................... 608,000 39.13-41.88
Cancelled ................... (40,000) 29.00-46.38
Exercised ................... (14,000) 29.00
- ---------------------------------------------------------------
Outstanding at Dec. 30, 1995. 926,000 $29.00-46.38
===============================================================
(1) Grants related to 460,000 shares at an exercise price of $41.88 are subject
to approval by the shareowners at the 1996 annual meeting.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation." The provisions of this Statement
encourage, but do not require, the Company to adopt the fair value method of
accounting for employee stock-based compensation. Under the fair value method,
compensation cost is measured at the grant date based on the fair value of the
award and is recognized over the service period, which is usually the vesting
period. The Company has elected to continue to account for such transactions
under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees," and as required by SFAS No. 123, will include in the notes to the
1996 financial statements pro forma net income and earnings per share
information as if the company had applied the fair value method of accounting.
- -------------------------------------------------------------------------------
NOTE 6. INCOME TAXES:
The following tables present the provision for income taxes, the principal
items of deferred income taxes at the end of 1995 and 1994, and a
reconciliation of the statutory U.S. income tax rate to the effective income
tax rate. The Company adopted SFAS No. 109, "Accounting for Income Taxes" as of
the beginning of 1993, and the cumulative effect of this change was reported in
the 1993 Consolidated Statement of Operations. The cumulative effect of
adoption was a charge against 1993 income of $20.9 million, or $1.17 per share.
RECONCILIATION TO EFFECTIVE TAX RATES:
1995 1994 1993
Provision at statutory
U.S. tax rate ......... 35.0% 35.0% 35.0%
Effective state income
tax rate .............. 3.9 4.6 4.8
Changes in valuation
allowance ............. (2.0) 0.1 2.4
Amortization of acqui-
sition price not deduct-
ible for tax purposes 0.3 0.3 0.5
Other .................. (1.8) 1.7 0.9
- -------------------------------------------------------------
Total. .............. 35.4% 41.7% 43.6%
=============================================================
Income before income taxes includes foreign income, consisting of both interest
income and the Company's equity investment earnings, of $6,932,000 in 1995.
Foreign losses for 1994 and 1993 were $295,000 and $6,377,000, respectively.
The provision for income taxes includes state income taxes of $6,513,000 in
1995, $7,711,000 in 1994, and $6,225,000 in 1993. Springs made income tax
payments of approximately $47,691,000, $32,907,000, and $45,837,000 in 1995,
1994, and 1993, respectively.
INCOME TAX PROVISION BEFORE CUMULATIVE EFFECT
(in thousands):
1995 1994 1993
Current. ............ $31,470 $43,076 $32,932
Deferred ............ 7,837 1,409 3,625
- ----------------------------------------------------------------------
Total tax provision
before cumulative
effect ............ $39,307 $44,485 $36,557
======================================================================
Temporary differences which give rise to deferred income taxes and the
resulting assets and liabilities are as follows (in thousands):
1995 1994
Employee benefit accruals ...... $40,233 $36,504
Deferred compensation .......... 26,420 25,662
Equity investments ............. 2,232 4,435
Accounts receivable reserves 4,580 4,090
Environmental accruals ......... 5,594 4,279
Other items .................... 17,196 14,233
- ----------------------------------------------------
Subtotal. .................... 96,255 89,203
Less valuation allowance ....... (3,399) (4,435)
- ----------------------------------------------------
Total deferred tax assets .... 92,856 84,768
- ----------------------------------------------------
Property ....................... (82,351) (73,845)
Inventories .................... (11,610) -
Equity investments ............. (9,287) (9,213)
Intangibles .................... (1,665) (3,554)
Other items .................... (1,554) (4,095)
- ----------------------------------------------------
Total deferred tax liabilities (106,467) (90,707)
- ----------------------------------------------------
Net deferred tax liability ..... $(13,611) $(5,939)
====================================================
168
10
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 7. 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, and these contributions 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. Assets in
defined benefit plans are invested in money market and other fixed income
securities (including United States government obligations) and in diversified
equity securities.
Defined contribution plan expenses for 1995, 1994, and 1993 were $22,538,000,
$24,721,000, and $22,827,000, respectively. The net assets available for
benefits under defined contribution plans had a market value of approximately
$560 million as of December 31, 1995.
Defined benefit retirement plan expenses were $2,772,000 in 1995, $1,703,000 in
1994, and $1,486,000 in 1993.
The following assumptions and components were used to develop the net pension
expense:
1995 1994 1993
ASSUMPTIONS:
Discount rate for obligations ............................ 7.00% 7.75% 7.00%
Assumed rate of compensation increases (1) ............... 4.50% - -
Expected long-term rate of return on assets .............. 7.50% 7.50% 7.50%
COMPONENTS OF NET PENSION (INCOME) EXPENSE (in thousands):
Service cost ............................................. $ 1,598 $ 824 $ 423
Interest cost on Projected Benefit Obligations ........... 3,728 1,331 1,278
Actual return on assets .................................. (3,737) 80 (255)
Net amortization and deferral ............................ 1,183 (532) 40
- ------------------------------------------------------------------------------------
Pension expense, net ..................................... $ 2,772 $1,703 $1,486
====================================================================================
(1) Applicable only to certain plans of businesses acquired during 1995.
The following table sets forth the funding status of Springs' defined benefit
pension plans (in thousands):
1995 1994
---------------------------- -------------
Assets Exceed Accumulated Accumulated
Accumulated Benefits Benefits
Benefits Exceed Assets Exceed Assets
Accumulated Benefit Obligation:
Vested ......................................................... $(22,435) $(45,841) $(19,396)
Non-vested ..................................................... (19) (1,731) (56)
- ---------------------------------------------------------------------------------------------------------------
Accumulated Benefit Obligation ................................... $(22,454) $(47,572) $(19,452)
===============================================================================================================
Effect of projected future compensation .......................... (2,014) (6,142) -
- ---------------------------------------------------------------------------------------------------------------
Projected Benefit Obligation ..................................... $(24,468) $(53,714) $(19,452)
Plan assets at fair value ........................................ 26,526 31,039 6,532
- ---------------------------------------------------------------------------------------------------------------
Excess (deficiency) of assets over Projected Benefit Obligation .. 2,058 (22,675) (12,920)
Unrecognized (gain) loss and effects of changes in assumptions ... (402) 1,735 844
Additional minimum liability ..................................... - (2,363) (1,699)
- ---------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension cost recognized in the balance sheet ... $ 1,656 $(23,303) $(13,775)
===============================================================================================================
169
11
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company sponsors a defined benefit postretirement medical plan which covers
substantially all salaried and nonsalaried associates. The plan provides
medical benefits and is contributory, with retiree contributions adjusted
periodically.
The Company adopted the provisions of 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 following table sets forth the status of Springs' obligation under its
postretirement medical plan at December 30, 1995, and December 31, 1994 (in
thousands):
1995 1994
Retirees ................................................................... $(46,009) $(40,214)
Fully eligible active plan participants .................................... (4,934) (3,943)
Other active plan participants ............................................. (22,326) (19,249)
- --------------------------------------------------------------------------------------------------
Accumulated Postretirement Benefit Obligation .............................. $(73,269) $(63,406)
- --------------------------------------------------------------------------------------------------
Unrecognized prior service cost ............................................ 885 -
- ------------------------------------------------------------------------------------------------
Unrecognized effects of changes resulting from experience different
from that assumed......................................................... (7,102) (18,485)
- --------------------------------------------------------------------------------------------------
Accrued Postretirement Benefit Obligation recognized in the balance sheet .. $(79,486) $(81,891)
==================================================================================================
Net postretirement benefit cost consisted of the following
components (in thousands):
1995 1994 1993
Service cost -
benefits earned ..... $1,145 $1,374 $1,132
Interest cost on
Accumulated
Postretirement
Benefit Obligation 4,666 4,577 6,320
Amortization of
actuarial gain ...... (768) (477) -
- ------------------------------------------------------------------------------
Net postretirement
benefit cost ......... $5,043 $5,474 $7,452
==============================================================================
Net unrecognized actuarial gains at December 30, 1995, and December 31, 1994,
primarily resulted from lower health care cost inflation than assumed and
changes in the discount rate.
For measurement purposes, an 11.2 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1996; this 11.2
percent rate is assumed to decrease gradually to 5.5 percent by 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 9 percent and the
aggregate of the service and interest cost components of net postretirement
benefit cost would increase by 10 percent. The discount rates used in
determining the APBO at December 30, 1995, and December 31, 1994, were 7
percent and 7.75 percent, respectively.
- ------------------------------------------------------------------------------
NOTE 8. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company has estimated the fair value 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, certain
other assets, accounts payable, and short-term borrowings are reasonable
estimates of their fair value at December 30, 1995, and December 31, 1994.
Long-term debt (including current maturities) of $340 million had an estimated
fair value at December 30, 1995, of $358 million. The estimated fair value of
long-term debt at December 31, 1994, approximated its carrying value. 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.
See Note 4 for comments regarding the fair value of interest rate swap
agreements at December 30, 1995.
170
12
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 9. OTHER MATTERS:
TRANSACTIONS WITH RELATED PARTIES: Two members of the Board of Directors,
their family and related entities own approximately 99 percent of Springs'
Class B common stock. Springs transacts business with certain companies that
are controlled by these persons 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 annually reviews its conclusions with the Audit Committee of the
Board of Directors.
CONTINGENCIES: 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 insurers or other
parties.
The Company has accrued a liability of approximately $15 million, which
represents management's best estimate of Springs' probable liability concerning
all known environmental matters. Management believes the $15 million will be
paid out over the next 8 to 15 years. This accrual has not been reduced by any
potential insurance recovery to which the Company may be entitled regarding
environmental matters. A significant 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 where Springs
is the sole responsible party. Springs, the EPA 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 the EPA. The
remedial design for groundwater cleanup has been approved by the EPA; the
Company has begun implementing the remedial design plan.
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.
COMMITMENTS: The Company enters into forward delivery contracts for cotton
purchases, consistent with the size of its business, to hedge the Company's
exposure to price volatility. Management assesses these contracts on a
continuous basis to determine if contract prices will be recovered through
subsequent sales. At December 30, 1995, the aggregate market value of the
contracts in force approximated the aggregate contract price.
SUBSEQUENT EVENT: Subsequent to the Company's year-end, on February 24, 1996,
the Company signed a contract under which it will sell its subsidiary,
Clark-Schwebel, Inc., to an investor group led by Vestar Equity Partners, L.P.
(Vestar). Pursuant to the terms of the agreement, the Company will receive
approximately $155 million in cash plus Clark-Schwebel securities consisting of
preferred stock with a $30 million liquidation value as of the closing and a
minority common equity interest. The proposed transaction is subject to certain
contingencies, including financing arrangements by Vestar and completion of the
due diligence process. In 1995, Clark-Schwebel contributed about 10 percent of
the Company's sales of $2.233 billion and had record earnings representing about
24 percent of Springs' earnings before interest expense and taxes of $143
million. During the five years ended in 1995, Clark-Schwebel's average
contribution was 13 percent of Springs' sales and 9 percent of its earnings
before interest and taxes.
171
13
26
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
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 systems provide this appropriate balance. An internal audit staff tests,
evaluates, and reports on the adequacy and effectiveness of internal control
systems 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 associates its intentions to maintain high standards of
ethical business conduct in all of its activities. Ongoing review programs are
carried out to monitor compliance with this policy.
The Board of Directors pursues its oversight responsibility with respect to 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 LLP, rely on the
Company's internal control structure to the extent they deem appropriate 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.
/s/ James F. Zahrn
James F. Zahrn
Senior Vice President--Chief Financial Officer
- -------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Springs Industries, Inc.
We have audited the accompanying consolidated balance sheet of Springs
Industries, Inc. as of December 30, 1995, and December 31, 1994, 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 December 30, 1995.
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
December 30, 1995, and December 31, 1994, and the results of its operations and
its cash flows for each of the three fiscal years in the period ended December
30, 1995, in conformity with generally accepted accounting principles.
As discussed in Notes 6 and 7 to the 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.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Charlotte, North Carolina
January 26, 1996
(February 24, 1996, as to the last paragraph in Note 9)
172
14
27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
A ten-year summary of Selected Financial Data appears on pages 30 through 31. A
three-year analysis of industry segment information appears on page 14.
RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
1995 Compared with 1994
SALES
Record annual sales in 1995 of $2.233 billion exceeded the previous year's
record mark of $2.069 billion by eight percent. Increased home furnishings
sales were partially offset by a decline in specialty fabrics sales volume.
Home furnishings sales improved 12 percent to $1.642 billion as a result of
three acquisitions completed during the year. Without the acquisitions, the
full year's sales of home furnishings would have been about equal to the prior
year in spite of a weakening of retail demand in November and December.
Sales of the Company's specialty fabrics segment reached $590.7 million for
1995. This represented a decline of three percent from the prior year.
Adjusting for the absence of Clark-Schwebel Distribution Corp., sold in June
1994, the 1995 specialty fabrics sales showed a gain of four percent over 1994
as a result of strong demand for industrial textiles.
EARNINGS
Net income for 1995 increased to $71.6 million, a 15 percent improvement over
1994 net income of $62.2 million. Earnings per share in 1995 rose six percent
to $3.71 from the $3.50 reported for 1994.
Operating income of $133.5 million in 1995 was slightly below the prior year's
level of $135.8 million. A decline in the operating income of the home
furnishings segment was nearly offset by an increase in specialty fabrics
profits.
The home furnishings segment reported operating income of $89.6 million, which
was eight percent below the $97.5 million reported for 1994. The results of the
home furnishings segment reflected increased raw material and supply costs as
well as a weakening of retail demand in November and December.
Despite lower sales, the specialty fabrics segment reported operating income of
$43.9 million compared to $38.3 million in 1994. The strength of the segment's
industrial fabrics businesses more than offset the effect of sluggish markets
for finished fabrics for home sewing and apparel.
Other (income) expense benefited from higher equity investment income, interest
income and a gain on the sale of the Company's Intek office panel fabrics
business.
Lower effective state income tax rates and a reduction in the valuation
allowance associated with one of the company's foreign equity investments
contributed to a decrease in the effective tax rate to 35.4 percent in 1995
compared to 41.7 percent in 1994. See Note 6 to the Consolidated Financial
Statements.
- --------------------------------------------------------------------------------
1994 Compared with 1993
SALES
Record annual sales in 1994 of $2.069 billion exceeded the previous year's
record mark of $2.023 billion by two percent. Increased home furnishings sales
were partially offset by a decline in specialty fabrics sales volume. Home
furnishings sales improved five percent due to increased shipments in bedding,
bath and window fashions products. The sales improvement in bedding products
was aided by a price increase which took effect during the third quarter of the
year.
The Company's specialty fabrics segment reported sales nearly four percent
lower, primarily due to the sale of Clark-Schwebel Distribution Corp. in June
1994. Excluding the effects of this sale, specialty fabrics sales would have
risen nearly four percent over the prior year due to increased shipments of
industrial fabrics.
EARNINGS
Net income for 1994 increased to $62.2 million or $3.50 per share. This was a
32 percent improvement over 1993 net income of $47.3 million or $2.65 per
share. The prior year figures are before one-time charges relating to the
first quarter 1993 adoption of two new financial accounting standards.
Operating income of $135.8 million in 1994 was eleven percent higher than in
1993. The home furnishings segment reported operating income of $97.5 million,
only slightly below the prior year level of $99.8 million. The home
furnishings segment results reflect continued strong revenue performance.
Additionally, during the second half, the segment realized increasing benefits
from cost reductions, improved pricing and marketing initiatives. However,
these benefits were offset by margin pressures in the segment's bedding
divisions during the first half of the year.
Despite lower sales, the specialty fabrics segment reported operating income of
$38.3 million compared to $22.1 million in 1993. The improvement resulted from
a resurgent industrial fabrics market and strong earnings improvements in our
restructured finished fabrics businesses.
Other (income) expense benefited from significantly reduced foreign equity
investment losses and the gain on the sale of Clark-Schwebel Distribution Corp.
Higher domestic income combined with a reduction in foreign equity investment
losses resulted in a decrease in the effective tax rate to 41.7 percent in 1994
compared to 43.6 percent in 1993.
173
15
28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
- --------------------------------------------------------------------------------
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 85 percent of its inventories.
Under this method, the cost of goods sold reported in the Statement of
Operations generally reflects current costs.
- --------------------------------------------------------------------------------
CAPITAL RESOURCES AND LIQUIDITY
The Company acquired three businesses during 1995. On May 27, 1995, the Company
purchased all of the outstanding stock of Dundee Mills, Incorporated, a leading
manufacturer of towels, infant and toddler bedding, knitted infant apparel and
health care products. The purchase price was $119.6 million, $21.2 million of
which was paid in cash and the remainder through the issuance of approximately
2.5 million shares of Springs Class A common stock with a fair value of $98.4
million. Effective May 28, 1995, the Company purchased substantially all of
the assets of Dawson Home Fashions, Inc., a leading manufacturer of shower
curtains and bath fashions accessories. Springs paid $39 million in cash for
the business. On July 28, 1995, the Company purchased substantially all of the
assets of a leading manufacturer of wood window blinds and interior shutters,
the Nanik Window Coverings Group of Apogee Enterprises, Inc.
The Company's overall cash needs for 1995 were provided primarily from
operations. The Company's financing activities consisted principally of the
issuance of approximately $111 million of long-term debt and repayment of
borrowings totaling $80 million. Long-term debt as a percent of total capital
was 35.7 percent at December 30, 1995, compared to 37.2 percent at December 31,
1994. Expenditures for property, plant, and equipment totaling $75 million
were made in 1995. Acquisitions of businesses, net of stock issued and cash
acquired, and other investments completed during 1995 totaled $83 million.
The Company expects capital expenditures for 1996 to approximate $105 million.
Springs believes its 1996 cash needs will be adequately provided from
operations, issuance of commercial paper, and short-term bank borrowings.
Dividends declared in 1995 represented 33 percent of net income. Class A
dividends declared in 1995 were $14.8 million, or $1.26 per share, while Class
B dividends declared totaled $8.9 million, or $1.14 per share.
- --------------------------------------------------------------------------------
OTHER
The Company enters into forward delivery contracts for cotton purchases,
consistent with the size of its business, to hedge the Company's exposure to
price volatility. Management assesses these contracts on a continuous basis to
determine if contract prices will be recovered through subsequent sales. At
December 30, 1995, the aggregate market value of the contracts in force
approximated the aggregate contract price.
Subsequent to the Company's year-end, on February 24, 1996, the Company signed
a contract under which it will sell its subsidiary, Clark-Schwebel, Inc., to an
investor group led by Vestar Equity Partners, L.P. (Vestar). Pursuant to the
terms of the agreement, the Company will receive approximately $155 million in
cash plus Clark-Schwebel securities consisting of preferred stock with a $30
million liquidation value as of the closing and a minority common equity
interest. The proposed transaction is subject to certain contingencies,
including financing arrangements by Vestar and completion of the due diligence
process. In 1995, Clark-Schwebel contributed about 10 percent of the Company's
sales of $2.233 billion and had record earnings representing about 24 percent
of Springs' earnings before interest expense and taxes of $143 million. During
the five years ended in 1995, Clark-Schwebel's average contribution was 13
percent of Springs' sales and 9 percent of its earnings before interest and
taxes. The Company intends to use the proceeds from the sale to meet strategic
objectives, which might include repurchase of stock, debt reduction, and
further investments in home furnishings.
174
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29
QUARTERLY FINANCIAL DATA (UNAUDITED)
(In millions except per share data)
1995 1994
QUARTER 1ST 2ND 3RD 4TH YEAR 1ST 2ND 3RD 4TH YEAR
Net sales. ......... $483.1 $532.7 $623.8 $593.5 $2,233.1 $485.2 $515.3 $535.3 $533.1 $2,068.9
Gross profit ....... 87.1 95.2 111.9 110.3 404.5 90.7 98.8 110.9 117.8 418.2
Net income ......... 9.9 14.4 21.3 26.0 71.6 5.8 13.1 19.6 23.7 62.2
===================================================================================================================================
Per share:
Net income ......... $ .55 $ .78 $ 1.08 $ 1.30 $ 3.71 $ .33 $ .73 $ 1.10 $ 1.34 $ 3.50
Class A dividends
declared ......... .30 .30 .33 .33 1.26 .30 .30 .30 .30 1.20
Class B dividends
declared ......... .27 .27 .30 .30 1.14 .27 .27 .27 .27 1.08
===================================================================================================================================
Common stock prices:
High ............. 40 1/4 40 1/2 44 3/4 44 1/2 44 3/4 39 5/8 35 1/8 37 7/8 41 41
Low .............. 35 1/4 36 3/8 35 3/4 39 35 1/4 33 3/8 29 1/4 29 3/4 34 1/8 29 1/4
===================================================================================================================================
PRICE RANGE OF COMMON STOCK
(by quarter)
[Line Graph]
Line graph showing the high and low price of the Company's common stock
by quarter for 1994 and 1995.
QUARTERLY INCOME COMPARISON
(by quarter)
[Bar Graph]
Bar graph showing a quarterly comparison of earnings per share for 1994
and 1995.
175
17
30
SELECTED FINANCIAL DATA
Springs Industries, Inc.
1995 1994 1993
SUMMARY OF OPERATIONS (in millions):
Net sales .......................................... $2,233.1 $2,068.9 $2,022.8
Operating income(c) ................................ 133.5 135.8 121.9
Income from continuing operations .................. 71.6 62.2 47.2
Net income (loss) .................................. 71.6 62.2 (25.3)(i)
Class A cash dividends declared. ................... 14.8 11.8 11.6
Class B cash dividends declared .................... 8.9 8.5 8.5
- ----------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK:
Net income (loss) .................................. 3.71 3.50 (1.42)(i)
Class A cash dividends declared .................... 1.26 1.20 1.20
Class B cash dividends declared .................... 1.14 1.08 1.08
Shareowners' equity ................................ 36.48 33.20 30.90
Class A stock price range:
High ............................................. 44 3/4 41 49
Low .............................................. 35 1/4 29 1/4 33 1/2
- ----------------------------------------------------------------------------------------
STATISTICAL DATA:
Net income (loss) to net sales ..................... 3.2% 3.0% (1.3)%
Net income (loss) to average shareowners' equity. .. 10.8% 11.2% (4.7)%
Operating return on assets employed (f) ............ 9.8% 10.4% 8.8%
Inventory turnover (g) ............................. 5.3 5.8 5.6
Accounts receivable turnover (h) ................... 6.6 6.5 6.5
Net sales divided by average assets ................ 1.5 1.6 1.6
Current ratio ...................................... 2.9 2.5 2.3
Capital expenditures (in millions) ................. $ 75.2 $ 92.6 $ 88.3
Depreciation (in millions) ......................... $ 84.6 $ 79.7 $ 78.1
EBITDA (in millions) (e) ........................... $ 241.5 $ 226.3 $ 201.2
Approximate number of shareowners .................. 3,200 3,200 3,200
Average number of associates ....................... 22,600 20,300 20,300
- ----------------------------------------------------------------------------------------
SELECTED BALANCE SHEET DATA (in millions):
Net working capital ................................ $ 506.3 $ 373.0 $ 353.5
Net property ....................................... 614.0 555.3 549.9
Total assets ....................................... 1,527.5 1,289.0 1,292.1
Long-term debt ..................................... 326.9 265.4 293.0
Shareowners' equity ................................ 734.5 584.1 543.2
- ----------------------------------------------------------------------------------------
(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) Net sales less cost of goods sold and selling, general and administrative
expenses.
(d) Fifty-three weeks.
(e) Pretax income plus restructuring charge, depreciation, amortization, and
interest expense.
(f) Pretax income before restructuring charge and interest expense divided by
average of month-end total assets used in operations.
(g) Cost of goods sold divided by average of month-end inventories.
(h) Net sales divided by average of month-end receivables.
(i) 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.
176
18
31
SELECTED FINANCIAL DATA
Springs Industries, Inc.
1992(d) 1991 1990 1989 1988 1987 1986
$1,975.7 $1,890.4 $1,878.0 $1,909.3 $1,824.8 $1,661.1 $1,505.0
113.2 79.4 92.8 122.0 121.7 120.2 79.0
44.5 27.1 (6.8) 64.9 52.8 55.7 32.6
44.5 27.1 (6.8)(a) 64.9 52.8(b) 55.7 32.6
11.5 11.4 11.6 11.5 14.7 14.5 13.5
8.6 8.7 8.7 8.7 2.8 - -
- ------------------------------------------------------------------------------
2.50 1.53 (.39)(a) 3.64 2.98(b) 3.13 1.83
1.20 1.20 1.20 1.20 1.01 .82 .76
1.08 1.08 1.08 1.08 .27 - -
33.47 32.39 32.05 33.08 30.67 28.64 26.24
43 7/8 36 1/4 39 1/2 45 1/4 38 3/4 38 1/4 28 7/16
30 1/2 21 1/4 16 7/8 30 1/2 27 20 3/4 20 1/2
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2.3% 1.4% (0.4)%(a) 3.4% 2.9%(b) 3.4% 2.2%
7.7% 4.9% (1.2)%(a) 11.6% 10.2%(b) 11.5% 7.3%
8.7% 6.6% 7.7% 11.2% 12.0% 12.3% 8.8%
6.0 6.0 5.6 5.8 6.2 5.8 5.0
6.5 6.3 6.2 6.4 6.4 6.5 6.3
1.6 1.5 1.6 1.7 1.7 1.6 1.5
2.2 2.2 2.5 2.4 2.7 3.0 3.3
$ 80.3 $ 115.9 $ 117.8 $ 108.3 $ 77.1 $ 69.9 $ 57.0
$ 77.7 $ 75.2 $ 72.6 $ 67.5 $ 62.1 $ 57.8 $ 55.6
198.8 167.9 174.9 204.0 195.1 186.6 144.6
3,300 3,500 3,400 3,500 3,700 3,400 3,300
20,900 21,700 23,200 24,100 23,400 23,100 23,500
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$ 328.2 $ 329.7 $ 356.5 $ 354.9 $ 389.8 $ 428.1 $ 402.2
559.3 572.1 524.2 475.0 424.5 393.1 383.3
1,250.3 1,251.3 1,201.1 1,188.4 1,118.3 1,083.7 1,010.4
273.6 287.8 260.4 227.5 238.5 256.8 271.0
588.1 568.9 560.9 585.1 541.6 505.0 464.6
- ------------------------------------------------------------------------------
Note: Selected Financial Data includes the following since their respective
dates of acquisition: Uniglass, February 1988; Andre Richard, March
1988; Carey-McFall, March 1989; C. S. Brooks, April 1991; C. S. Brooks
Canada, August 1992; Griffiths-Kerr, October 1992; Dundee Mills,
Incorporated, May 1995; the principal assets of Dawson Home Fashions,
Inc., May 1995; and the principal assets of Nanik Window Coverings Group,
July 1995. Selected Financial Data also includes Clark-Schwebel
Distribution Corp. until the date of its sale in June 1994, and the
Company's Intek office panel fabrics business until the date of its sale
in December 1995.
177