-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FDED6R8GGl0B+PLQh1luzBsq5qlcmTTTM12/TvBh7LF51XlpD+z5Povzx97ZiWbi wqfVll9iMqCoh5l6nO23cA== 0000950123-01-505103.txt : 20010808 0000950123-01-505103.hdr.sgml : 20010808 ACCESSION NUMBER: 0000950123-01-505103 CONFORMED SUBMISSION TYPE: SC 13E3/A PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20010807 GROUP MEMBERS: ANNE S. CLOSE GROUP MEMBERS: CRANDALL C. BOWLES GROUP MEMBERS: DERICK S. CLOSE GROUP MEMBERS: ELLIOTT S. CLOSE GROUP MEMBERS: FRANCES A. CLOSE GROUP MEMBERS: HEARTLAND INDUSTRIAL PARTNERS GROUP MEMBERS: HEARTLAND SPRINGS INVESTMENT GROUP MEMBERS: HUGH W. CLOSE JR GROUP MEMBERS: KANAWHA INSURANCE COMPANY GROUP MEMBERS: KATHERINE A. CLOSE GROUP MEMBERS: LEROY S. CLOSE GROUP MEMBERS: PATRICIA CLOSE GROUP MEMBERS: THE SPRINGS COMPANY GROUP MEMBERS: TRUST NO. 10-A GROUP MEMBERS: TRUST NO. 10-D GROUP MEMBERS: TRUST NO. 10-E GROUP MEMBERS: TRUST NO. 10-M GROUP MEMBERS: TRUST NO. 11-A-10 GROUP MEMBERS: TRUST NO. 11-A-3 GROUP MEMBERS: TRUST NO. 11-A-4 GROUP MEMBERS: TRUST NO. 11-A-5 GROUP MEMBERS: TRUST NO. 11-A-6 GROUP MEMBERS: TRUST NO. 11-A-7 GROUP MEMBERS: TRUST NO. 11-A-8 GROUP MEMBERS: TRUST NO. 11-A-9 GROUP MEMBERS: TRUST NO. 11-B-10 GROUP MEMBERS: TRUST NO. 11-B-3 GROUP MEMBERS: TRUST NO. 11-B-4 GROUP MEMBERS: TRUST NO. 11-B-5 GROUP MEMBERS: TRUST NO. 11-B-6 GROUP MEMBERS: TRUST NO. 11-B-7 GROUP MEMBERS: TRUST NO. 11-B-8 GROUP MEMBERS: TRUST NO. 11-B-9 GROUP MEMBERS: TRUST NO. 11-C-10 GROUP MEMBERS: TRUST NO. 11-C-3 GROUP MEMBERS: TRUST NO. 11-C-4 GROUP MEMBERS: TRUST NO. 11-C-5 GROUP MEMBERS: TRUST NO. 11-C-6 GROUP MEMBERS: TRUST NO. 11-C-7 GROUP MEMBERS: TRUST NO. 11-C-8 GROUP MEMBERS: TRUST NO. 11-C-9 GROUP MEMBERS: TRUST NO. 12-10 GROUP MEMBERS: TRUST NO. 12-3 GROUP MEMBERS: TRUST NO. 12-4 GROUP MEMBERS: TRUST NO. 12-5 GROUP MEMBERS: TRUST NO. 12-6 GROUP MEMBERS: TRUST NO. 12-7 GROUP MEMBERS: TRUST NO. 12-8 GROUP MEMBERS: TRUST NO. 12-9 GROUP MEMBERS: TRUST NO. 3-3 GROUP MEMBERS: TRUST NO. 3-4 GROUP MEMBERS: TRUST NO. 3-5 GROUP MEMBERS: TRUST NO. 3-6 GROUP MEMBERS: TRUST NO. 3-7 GROUP MEMBERS: TRUST NO. 3-8 GROUP MEMBERS: TRUST NO. 3-9 GROUP MEMBERS: TRUST NO. 3-M GROUP MEMBERS: TRUST NO. 4-M GROUP MEMBERS: TRUST NO. 5-M GROUP MEMBERS: TRUST NO. 6-M GROUP MEMBERS: TRUST NO. 8-M GROUP MEMBERS: TRUST NO. 9-M GROUP MEMBERS: TRUST NO. T-3 GROUP MEMBERS: TRUST NO. T-4 GROUP MEMBERS: TRUST NO. T-5 GROUP MEMBERS: TRUST NO. T-6 GROUP MEMBERS: TRUST NO. T-7 GROUP MEMBERS: TRUST NO. T-8 GROUP MEMBERS: TRUST NO. T-9 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SPRINGS INDUSTRIES INC CENTRAL INDEX KEY: 0000093102 STANDARD INDUSTRIAL CLASSIFICATION: BROADWOVEN FABRIC MILLS, COTTON [2211] IRS NUMBER: 570252730 STATE OF INCORPORATION: SC FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: SC 13E3/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-13672 FILM NUMBER: 1699322 BUSINESS ADDRESS: STREET 1: 205 N WHITE ST CITY: FORT MILL STATE: SC ZIP: 29715 BUSINESS PHONE: 8035471500 MAIL ADDRESS: STREET 1: 205 NORTH WHITE STREET CITY: FORT MILL STATE: SC ZIP: 29715 FORMER COMPANY: FORMER CONFORMED NAME: SPRINGS MILLS INC DATE OF NAME CHANGE: 19820517 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SPRINGS INDUSTRIES INC CENTRAL INDEX KEY: 0000093102 STANDARD INDUSTRIAL CLASSIFICATION: BROADWOVEN FABRIC MILLS, COTTON [2211] IRS NUMBER: 570252730 STATE OF INCORPORATION: SC FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: SC 13E3/A BUSINESS ADDRESS: STREET 1: 205 N WHITE ST CITY: FORT MILL STATE: SC ZIP: 29715 BUSINESS PHONE: 8035471500 MAIL ADDRESS: STREET 1: 205 NORTH WHITE STREET CITY: FORT MILL STATE: SC ZIP: 29715 FORMER COMPANY: FORMER CONFORMED NAME: SPRINGS MILLS INC DATE OF NAME CHANGE: 19820517 SC 13E3/A 1 y51534sc13e3a.txt AMENDMENT NO. 2 TO SCHEDULE 13E-3 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13E-3 (RULE 13E-100) TRANSACTION STATEMENT UNDER SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 13E-3 THEREUNDER RULE 13E-3 TRANSACTION STATEMENT UNDER SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 2) Springs Industries, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Springs Industries, Inc. Heartland Industrial Partners, L.P. Heartland Springs Investment Company Crandall C. Bowles Frances A. Close Leroy S. Close Patricia Close Elliott S. Close Hugh W. Close, Jr. Derick S. Close Katherine A. Close Anne S. Close The Springs Company Kanawha Insurance Company Trust No. 3-M Trust No. T-3 Trust No. 3-3 Trust No. 11-A-3 Trust No. 11-B-3 Trust No. 11-C-3 Trust No. 12-3 Trust No. 4-M Trust No. T-4 Trust No. 3-4 Trust No. 11-A-4 Trust No. 11-B-4 Trust No. 11-C-4 2 Trust No. 12-4 Trust No. 5-M Trust No. T-5 Trust No. 3-5 Trust No. 11-A-5 Trust No. 11-B-5 Trust No. 11-C-5 Trust No. 12-5 Trust No. 6-M Trust No. T-6 Trust No. 3-6 Trust No. 11-A-6 Trust No. 11-B-6 Trust No. 11-C-6 Trust No. 12-6 Trust No. T-7 Trust No. 3-7 Trust No. 11-A-7 Trust No. 11-B-7 Trust No. 11-C-7 Trust No. 12-7 Trust No. 8-M Trust No. T-8 Trust No. 3-8 Trust No. 11-A-8 Trust No. 11-B-8 Trust No. 11-C-8 Trust No. 12-8 Trust No. 9-M Trust No. T-9 Trust No. 3-9 Trust No. 11-A-9 Trust No. 11-B-9 Trust No. 11-C-9 Trust No. 12-9 Trust No. 10-M Trust No. 10-A Trust No. 10-D Trust No. 10-E Trust No. 11-A-10 Trust No. 11-B-10 Trust No. 11-C-10 Trust No. 12-10 - -------------------------------------------------------------------------------- (Name of Person(s) Filing Statement) -2- 3 Class A Common Stock, par value $.25 per share, of Springs Industries, Inc. Class B Common Stock, par value $.25 per share, of Springs Industries, Inc. - -------------------------------------------------------------------------------- (Title of Class of Securities) 851783 10 0 (Class A Common Stock) 851783 20 9 (Class B Common Stock) - -------------------------------------------------------------------------------- (CUSIP Number of Class of Securities) Crandall C. Bowles David A. Stockman Springs Industries, Inc. Heartland Industrial Partners, L.P. 205 North White Street 55 Railroad Avenue, 1st Floor Fort Mill, South Carolina 29715 Greenwich, Connecticut 06830 (803) 547-1500 (203) 861-2622 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Person(s) Filing Statement) With copies to:
Elliott V. Stein, Esq. W. Leslie Duffy, Esq. Benjamin F. Stapleton, Esq. Wachtell, Lipton, Rosen & Katz Cahill Gordon & Reindel Sullivan & Cromwell 51 West 52nd Street 80 Pine Street 125 Broad Street New York, New York 10019 New York, New York 10005 New York, New York 10004 (212) 403-1000 (212) 701-3000 (212) 558-4000
This statement is filed in connection with (check the appropriate box): a. [X] The filing of solicitation materials or an information statement subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities Exchange Act of 1934. b. [ ] The filing of a registration statement under the Securities Act of 1933. c. [ ] A tender offer. d. [ ] None of the above. Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: [ ] Check the following box if the filing is a final amendment reporting the results of the transaction: [ ] CALCULATION OF FILING FEE - -------------------------------------------------------------------------------- Transaction Amount of Filing Fee Valuation* - -------------------------------------------------------------------------------- $505,450,630.56 $101,090.13 - -------------------------------------------------------------------------------- -3- 4 * For purposes of calculating the fee only. Calculated in accordance with Exchange Act Rule 0-11. Assumes (1) the purchase of 10,645,300 shares of Class A Common Stock, par value $.25 per share, and Class B Common Stock, par value $.25 per share, of Springs Industries, Inc. at a price of $46.00 per share in cash and (2) a cash-out of 1,944,493 options to purchase Class A Common Stock for an aggregate of $15,766,830.56. [X] Check the box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: $101,578.82 Filing Party: Springs Industries, Inc. Form or Registration No.: Schedule 14A Date Filed: May 9, 2001 -4- 5 INTRODUCTION This Amendment No. 2 to the Rule 13e-3 Transaction Statement on Schedule 13E-3 (this "Transaction Statement"), first filed on May 9, 2001, is being filed by (1) Springs Industries, Inc., a South Carolina corporation and issuer of the class A common stock, par value $.25 per share ("Class A Common Stock"), and the class B common stock, par value $.25 per share ("Class B Common Stock"), which are the subject of the Rule 13e-3 transaction ("Springs"), (2) each member of the Close family, (3) Heartland Industrial Partners, L.P., a Delaware limited partnership ("Heartland") and (4) Heartland Springs Investment Company, a South Carolina corporation newly organized by Heartland ("Heartland Springs"). The Close family consists of (1) certain descendants of Leroy Springs, Springs' founder, including Crandall C. Bowles, chairman and chief executive officer of Springs, and Leroy S. Close, a director of Springs, (2) certain trusts for the benefit of these Close family members and their children and (3) two privately owned companies controlled by these individuals and trusts. This Transaction Statement relates to the Recapitalization Agreement, dated as of April 24, 2001, between Springs and Heartland Springs (the "Recapitalization Agreement"). Under the Recapitalization Agreement, Heartland Springs will be merged with and into Springs, with Springs as the surviving corporation (the "Recapitalization"). At the effective time of the Recapitalization, (i) each share of Class A Common Stock and Class B Common Stock not owned by the Close family, by Heartland (or its co-investors), by key management employees who elect prior to the effective time of the recapitalization to retain their Springs shares ("Key Management Employees") and by shareholders of Class B Common Stock who exercise their dissenters' rights, would be converted into the right to receive $46.00 in cash, (ii) each share of Class A Common Stock and Class B Common Stock owned by the Close family, by Heartland (and its co-investors) and by Key Management Employees, would remain outstanding and (iii) each share of common stock of Heartland Springs, all of which would be held by Heartland (and its co-investors), would be converted into one share of Class A Common Stock. As a result of the Recapitalization, Springs would become privately held by the Close family, whose ownership interest in the Company's common stock would increase from approximately 41% to approximately 56%, and Heartland, whose ownership interest in the Company's common stock would be approximately 44%. Concurrently with the filing of this Transaction Statement, Springs is filing with the Securities and Exchange Commission its definitive proxy statement (the "Proxy Statement") under Regulation 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), relating to the annual meeting of shareholders of Springs, at which the shareholders of Springs will consider and vote upon, among other things, a proposal to approve the Recapitalization Agreement and a proposal to amend Springs' articles of incorporation to exempt Springs from the restrictions on business combinations contained in the South Carolina Code. A copy of the Proxy Statement is attached hereto as Exhibit (a)(1). The information in the Proxy Statement, including all appendices thereto, is expressly incorporated by reference herein in its entirety and responses to each item herein are qualified in their entirety by the provisions of the Proxy Statement. -5- 6 ITEM 1. SUMMARY TERM SHEET. The information contained in the section of the Proxy Statement entitled "Summary Term Sheet" is incorporated herein by reference. ITEM 2. SUBJECT COMPANY INFORMATION. (a) The information contained in the section of the Proxy Statement entitled "Summary Term Sheet-Recapitalization Participants" is incorporated herein by reference. (b) The information contained in the section of the Proxy Statement entitled "The Annual Meeting--Record Date; Outstanding Voting Securities" is incorporated herein by reference. (c) The information contained in the section of the Proxy Statement entitled "Comparative Per Share Market Price and Dividend Information" is incorporated herein by reference. (d) The information contained in the section of the Proxy Statement entitled "Comparative Per Share Market Price and Dividend Information" is incorporated herein by reference. (e) Not applicable. (f) Not applicable. ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON. (a) The information contained in the sections of the Proxy Statement entitled "Summary Term Sheet-The Recapitalization," "Information About the Recapitalization Participants," "Special Factors-Shareholders Agreement" and "Directors and Executive Officers of Springs" is incorporated herein by reference. (b) The information contained in the section of the Proxy Statement entitled "Information About the Recapitalization Participants" is incorporated herein by reference. (c)(1)-(5)The information contained in the sections of the Proxy Statement entitled "Information About the Recapitalization Participants," "Directors and Executive Officers of Springs" and "Election of Directors-Directors and Nominees" is incorporated herein by reference. ITEM 4. TERMS OF THE TRANSACTION. (a)(1) Not applicable. -6- 7 (a)(2) The information contained in the sections of the Proxy Statement entitled "Summary Term Sheet," "The Annual Meeting-Vote Required," "Special Factors-Structure of the Recapitalization," "Special Factors-Background of the Recapitalization," "Special Factors-Recommendation of the Special Committee and the Springs Board; Springs' Purpose and Reasons for the Recapitalization," "Special Factors-Springs' Position Regarding the Fairness of the Recapitalization," "Special Factors-Opinion of UBS Warburg LLC," "Special Factors-The Close Family's Position Regarding the Fairness of the Recapitalization," "Special Factors-The Close Family's Purpose and Reasons for the Recapitalization," "Special Factors-Heartland's Position Regarding the Fairness of the Recapitalization," "Special Factors-Heartland's Purpose and Reasons for the Recapitalization," "Special Factors-Accounting Treatment" and "U.S. Federal Income Tax Consequences" is incorporated herein by reference. (c) The information contained in the sections of the Proxy Statement entitled "Special Factors-Structure of the Recapitalization," "Special Factors-Interests of Certain Persons in the Recapitalization," "The Recapitalization-Treatment of Management Incentive Plans" and "Dissenters' Rights" is incorporated herein by reference. (d) The information contained in the section of the Proxy Statement entitled "Dissenters' Rights" and in Appendix D to the Proxy Statement is incorporated herein by reference. (e) The information contained in the section of the Proxy Statement entitled "Where You Can Find More Information" is incorporated herein by reference. (f) Not applicable. ITEM 5. PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS. (a)(1) Not applicable. (a)(2) The information contained in the section of the Proxy Statement entitled "Director and Executive Officer Compensation-Directors' Compensation" is incorporated herein by reference. (b) The information contained in the sections of the Proxy Statement entitled "Special Factors-Background of the Recapitalization," "Special Factors-Shareholders Agreement" and "The Recapitalization" is incorporated herein by reference. (c) The information contained in the sections of the Proxy Statement entitled "Special Factors-Background of the Recapitalization" and "Special Factors-Shareholders Agreement" is incorporated herein by reference. -7- 8 (e) The information contained in the sections of the Proxy Statement entitled "Special Factors-Background of the Recapitalization," "Special Factors-Interests of Certain Persons in the Recapitalization," "Special Factors-Shareholders Agreement," "Financing for the Recapitalization" and "The Recapitalization" is incorporated herein by reference. ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS. (b) The information contained in the sections of the Proxy Statement entitled "Special Factors-Structure of the Recapitalization," "Special Factors-Certain Effects of the Recapitalization," "Special Factors-Plans for Springs after the Recapitalization" and "The Recapitalization-Recapitalization Consideration" is incorporated herein by reference. (c)(1)-(8)The information contained in the sections of the Proxy Statement entitled "Special Factors-Structure of the Recapitalization," "Special Factors-Background of the Recapitalization," "Special Factors-Shareholders Agreement," "Special Factors-Certain Effects of the Recapitalization," "Special Factors-Plans for Springs after the Recapitalization," "Financing for the Recapitalization," "The Recapitalization" and "Comparative Per Share Market Price and Dividend Information" is incorporated herein by reference. ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS. (a)-(c)The information contained in the sections of the Proxy Statement entitled "Special Factors-Background of the Recapitalization," "Special Factors-Recommendation of the Special Committee and the Springs Board; Springs' Purpose and Reasons for the Recapitalization," "Special Factors-Springs' Position Regarding the Fairness of the Recapitalization," "Special Factors-Opinion of UBS Warburg LLC," "Special Factors-The Close Family's Position Regarding the Fairness of the Recapitalization," "Special Factors-The Close Family's Purpose and Reasons for the Recapitalization," "Special Factors-Heartland's Position Regarding the Fairness of the Recapitalization" and "Special Factors-Heartland's Purpose and Reasons for the Recapitalization" is incorporated herein by reference. (d) The information contained in the sections of the Proxy Statement entitled "Summary Term Sheet," "Special Factors-Structure of the Recapitalization," "Special Factors-Recommendation of the Special Committee and the Springs Board; Springs' Purpose and Reasons for the Recapitalization," "Special Factors-Springs' Position Regarding the Fairness of the Recapitalization," "Special Factors-Opinion of UBS Warburg LLC," "Special Factors-The Close Family's Position Regarding the Fairness of the Recapitalization," "Special Factors-The Close Family's Purpose and Reasons for the Recapitalization," "Special Factors-Heartland's Position Regarding the Fairness of the Recapitalization," "Special Factors-Heartland's Purpose and -8- 9 Reasons for the Recapitalization," "Special Factors-Interests of Certain Persons in the Recapitalization," "Special Factors-Shareholders Agreement," "Special Factors-Certain Effects of the Recapitalization," "Special Factors-Plans for Springs after the Recapitalization," "Special Factors-Accounting Treatment," "Financing for the Recapitalization" and "U.S. Federal Income Tax Consequences" is incorporated herein by reference. ITEM 8. FAIRNESS OF THE TRANSACTION. (a)-(b)The information contained in the sections of the Proxy Statement entitled "Special Factors-Background of the Recapitalization," "Special Factors-Recommendation of the Special Committee and the Springs Board; Springs' Purpose and Reasons for the Recapitalization," "Special Factors-Springs' Position Regarding the Fairness of the Recapitalization," "Special Factors-Opinion of UBS Warburg LLC," "Special Factors-The Close Family's Position Regarding the Fairness of the Recapitalization," "Special Factors-The Close Family's Purpose and Reasons for the Recapitalization," "Special Factors-Heartland's Position Regarding the Fairness of the Recapitalization," "Special Factors-Heartland's Purpose and Reasons for the Recapitalization" and "Special Factors-Interests of Certain Persons in the Recapitalization" is incorporated herein by reference. (c) The information contained in the section of the Proxy Statement entitled "The Annual Meeting-Vote Required" is incorporated herein by reference. (d) The information contained in the sections of the Proxy Statement entitled "Special Factors-Background of the Recapitalization," "Special Factors-Special Committee," "Special Factors-Recommendation of the Special Committee and the Springs Board; Springs' Purpose and Reasons for the Recapitalization," "Special Factors-Springs' Position Regarding the Fairness of the Recapitalization" and "Special Factors-Opinion of UBS Warburg LLC" is incorporated herein by reference. (e) The information contained in the sections of the Proxy Statement entitled "Special Factors-Background of the Recapitalization," "Special Factors-Special Committee," "Special Factors-Recommendation of the Special Committee and the Springs Board; Springs' Purpose and Reasons for the Recapitalization" and "Special Factors-Springs' Position Regarding the Fairness of the Recapitalization" is incorporated herein by reference. (f) Not applicable. ITEM 9. REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS. (a)-(c) The information contained in the sections of the Proxy Statement entitled "Special Factors-Background of the Recapitalization," "Special Factors-Recommendation of the Special Committee and the Springs Board; Springs' Purpose and Reasons for the Recapitalization," "Special -9- 10 Factors-Springs' Position Regarding the Fairness of the Recapitalization" "Special Factors-Opinion of UBS Warburg LLC" and "Where You Can Find More Information" and in Appendix B to the Proxy Statement is incorporated herein by reference. ITEM 10. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION. (a)-(b) The information contained in the section of the Proxy Statement entitled "Financing for the Recapitalization" is incorporated herein by reference. (c) The information contained in the section of the Proxy Statement entitled "The Recapitalization-Estimated Fees and Expenses of the Recapitalization" is incorporated herein by reference. (d)(1)-(2) The information contained in the section of the Proxy Statement entitled "Financing for the Recapitalization" is incorporated herein by reference. ITEM 11. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) The information contained in the sections of the Proxy Statement entitled "Information About the Recapitalization Participants-The Close Family" and "Other Annual Meeting Matters-Security Ownership of Certain Beneficial Owners and Management" is incorporated herein by reference. (b) The information contained in the section of the Proxy Statement entitled "Other Annual Meeting Matters-Transactions Effected by the Springs of Achievement Partnership Plan" is incorporated herein by reference. ITEM 12. THE SOLICITATION OR RECOMMENDATION. (d) The information contained in the sections of the Proxy Statement entitled "The Annual Meeting-Vote Required," "Special Factors-Structure of the Recapitalization," "Special Factors-Special Committee," "Special Factors-Recommendation of the Special Committee and the Springs Board; Springs' Purpose and Reasons for the Recapitalization," "Special Factors-Springs' Position Regarding the Fairness of the Transaction," "Special Factors-Opinion of UBS Warburg LLC," "Special Factors-The Close Family's Position Regarding the Fairness of the Recapitalization," "Special Factors-The Close Family's Purpose and Reasons for the Recapitalization" and "Special Factors-Interests of Certain Persons in the Recapitalization" is incorporated herein by reference. (e) The information contained in the sections of the Proxy Statement entitled "Special Factors-Recommendation of the Special Committee and the Springs Board; Springs' Purpose and Reasons for the Recapitalization," "Special Factors-Springs' Position Regarding the Fairness of the Transaction" and "Special Factors-Opinion of UBS Warburg LLC" is incorporated herein by reference. -10- 11 ITEM 13. FINANCIAL STATEMENTS. (a)(1)-(4) The information contained in the section of the Proxy Statement entitled "Selected Historical Consolidated Financial Data," in Springs' Consolidated Financial Statements on pages 12 through 24 of Springs' 2000 Annual Report to Shareholders, filed with the Securities and Exchange Commission on March 28, 2001 as part of Exhibit 13 to Springs' Annual Report on Form 10-K for the fiscal year ended December 30, 2000, and in Springs' Unaudited Condensed Consolidated Financial Statements on pages 3 through 12 of Springs' Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, filed with the Securities and Exchange Commission on May 15, 2001, is incorporated herein by reference. (b)(1)-(3) Not applicable. ITEM 14. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED. (a)-(b) The information contained in the section of the Proxy Statement entitled "The Annual Meeting-Proxy Solicitation" is incorporated herein by reference. ITEM 15. ADDITIONAL INFORMATION. (b) The information contained in the Proxy Statement, including all appendices thereto, is incorporated herein by reference. ITEM 16. EXHIBITS. (a)(1) Definitive Proxy Statement filed by Springs Industries, Inc. with the Securities and Exchange Commission on August 7, 2001 under cover of Schedule 14A (incorporated by reference to the Definitive Proxy Statement filed by Springs Industries, Inc. on August 7, 2001 under cover of Schedule 14A). (a)(2) Form of Proxy Cards to be sent to holders of Class A Common Stock, Class B Common Stock and Class A Common Stock allocated under the Springs of Achievement Partnership Plan, filed with the Securities and Exchange Commission along with the Definitive Proxy Statement (incorporated by reference to the Definitive Proxy Statement filed by Springs Industries, Inc. on August 7, 2001 under cover of Schedule 14A). (a)(3) Press release issued by Springs Industries, Inc., dated April 25, 2001 (incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K filed by Springs Industries, Inc. on April 30, 2001). (b)(1) Commitment Letter, dated as of April 24, 2001, to Heartland Springs Investment Company from The Chase Manhattan Bank and J.P. Morgan Chase & Co., a division of Chase Securities Inc. (incorporated by reference to Exhibit 99.6 of Amendment No. 1 to Schedule 13D for Springs Industries, Inc. filed on April 30, 2001). (b)(2) Amendment Letter, dated July 26, 2001, to Heartland Springs Investment Company from The Chase Manhattan Bank and J.P. Morgan Securities Inc. -11- 12 (c)(1) Opinion of UBS Warburg LLC (incorporated by reference to Appendix B of the Definitive Proxy Statement filed by Springs Industries, Inc. on August 7, 2001 under cover of Schedule 14A). (c)(2) Financial presentation materials of UBS Warburg LLC, dated April 24, 2001.* (c)(3) Financial presentation materials of Sheffield Merchant Banking Group, a business group of CRT Capital Group LLC, dated February 15, 2001.** (c)(4) Financial materials of Sheffield Merchant Banking Group, dated February 18,2001. (c)(5) Preliminary draft financial presentation materials of UBS Warburg LLC, dated March 19, 2001. (c)(6) Preliminary draft financial materials of UBS Warburg LLC, dated April 2, 2001. (c)(7) Financial materials of Sheffield Merchant Banking Group, dated October 6, 2000.** (d)(1) Recapitalization Agreement, dated as of April 24, 2001, between Springs Industries, Inc. and Heartland Springs Investment Company (incorporated by reference, as amended, to Appendix A of the Definitive Proxy Statement filed by Springs Industries, Inc. on August 7, 2001 under cover of Schedule 14A). (d)(2) Shareholders Agreement, dated as of April 24, 2001, by and among the Persons listed on the signature pages thereof (incorporated by reference to Exhibit 99.10 of Amendment No. 1 to Schedule 13D for Springs Industries, Inc. filed on April 30, 2001). (d)(3) Amendment No. 1 to Recapitalization Agreement, dated as of July 31, 2001, between Springs Industries, Inc. and Heartland Springs Investment Company. (f) Sections 33-13-101 through 33-13-310 of the South Carolina Business Corporation Act (incorporated by reference to Appendix D of the Definitive Proxy Statement filed by Springs Industries, Inc. on August 7, 2001 under cover of Schedule 14A). (g) Not applicable. - ----------------- * Previously filed. ** Portions omitted pursuant to a request for confidential treatment. -12- 13 SIGNATURE After due inquiry and to the best of our knowledge and belief, we certify that the information set forth in this Transaction Statement is true, complete and correct. Date: August 7, 2001 SPRINGS INDUSTRIES, INC. By: /s/ Crandall C. Bowles ------------------------------------------- Crandall C. Bowles Chairman of the Board and Chief Executive Officer Date: August 7, 2001 /s/ Crandall C. Bowles ----------------------------------------------- Crandall C. Bowles Date: August 7, 2001 Frances A. Close* Leroy S. Close* Patricia Close* Elliott S. Close* Hugh W. Close, Jr.* Derick S. Close* Katherine A. Close* Anne S. Close* The Springs Company* Kanawha Insurance Company* Trust No. 3-M* Trust No. T-3* Trust No. 3-3* Trust No. 11-A-3* Trust No. 11-B-3* Trust No. 11-C-3* Trust No. 12-3* Trust No. 4-M* Trust No. T-4* Trust No. 3-4* Trust No. 11-A-4* Trust No. 11-B-4* Trust No. 11-C-4* Trust No. 12-4* Trust No. 5-M* Trust No. T-5* Trust No. 3-5* Trust No. 11-A-5* Trust No. 11-B-5* 14 Trust No. 11-C-5* Trust No. 12-5* Trust No. 6-M* Trust No. T-6* Trust No. 3-6* Trust No. 11-A-6* Trust No. 11-B-6* Trust No. 11-C-6* Trust No. 12-6* Trust No. T-7* Trust No. 3-7* Trust No. 11-A-7* Trust No. 11-B-7* Trust No. 11-C-7* Trust No. 12-7* Trust No. 8-M* Trust No. T-8* Trust No. 3-8* Trust No. 11-A-8* Trust No. 11-B-8* Trust No. 11-C-8* Trust No. 12-8* Trust No. 9-M* Trust No. T-9* Trust No. 3-9* Trust No. 11-A-9* Trust No. 11-B-9* Trust No. 11-C-9* Trust No. 12-9* Trust No. 10-M* Trust No. 10-A* Trust No. 10-D* Trust No. 10-E* Trust No. 11-A-10* Trust No. 11-B-10* Trust No. 11-C-10* Trust No. 12-10* *By: /s/ Harry B. Emerson ------------------------------------------- Harry B. Emerson Attorney-in-Fact 15 HEARTLAND INDUSTRIAL PARTNERS, L.P. Date: August 7, 2001 By: Heartland Industrial Associates, LLC, its general partner By: /s/ W. Gerald McConnell ------------------------------------------- Name: W. Gerald McConnell Title: Senior Managing Director Date: August 7, 2001 HEARTLAND SPRINGS INVESTMENT COMPANY By: /s/ W. Gerald McConnell ------------------------------------------- Name: W. Gerald McConnell Title: Vice President and Secretary 16 EXHIBIT INDEX
Exhibit No. Description - ----------- --'--------- (a)(1) Definitive Proxy Statement filed by Springs Industries, Inc. with the Securities and Exchange Commission on August 7, 2001 under cover of Schedule 14A (incorporated by reference to the Definitive Proxy Statement filed by Springs Industries, Inc. on August 7, 2001 under cover of Schedule 14A). (a)(2) Form of Proxy Cards to be sent to holders of Class A Common Stock, Class B Common Stock and Class A Common Stock allocated under the Springs of Achievement Partnership Plan, filed with the Securities and Exchange Commission along with the Definitive Proxy Statement (incorporated by reference to the Definitive Proxy Statement filed by Springs Industries, Inc. on August 7, 2001 under cover of Schedule 14A). (a)(3) Press release issued by Springs Industries, Inc., dated April 25, 2001 (incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K filed by Springs Industries, Inc. on April 30, 2001). (b)(1) Commitment Letter, dated as of April 24, 2001, to Heartland Springs Investment Company from The Chase Manhattan Bank and J.P. Morgan Chase & Co., a division of Chase Securities Inc. (incorporated by reference to Exhibit 99.6 of Amendment No. 1 to Schedule 13D for Springs Industries, Inc. filed on April 30, 2001). (b)(2) Amendment Letter, dated July 26, 2001, to Heartland Springs Investment Company from The Chase Manhattan Bank and J.P. Morgan Securities Inc. (c)(1) Opinion of UBS Warburg LLC (incorporated by reference to Appendix B of the Definitive Proxy Statement filed by Springs Industries, Inc. on August 7, 2001 under cover of Schedule 14A). (c)(2) Financial presentation materials of UBS Warburg LLC, dated April 24, 2001.* (c)(3) Financial presentation materials of Sheffield Merchant Banking Group, a business group of CRT Capital Group LLC, dated February 15, 2001.** (c)(4) Financial materials of Sheffield Merchant Banking Group, dated February 18, 2001. (c)(5) Preliminary draft financial presentation materials of UBS Warburg LLC, dated March 19, 2001. (c)(6) Preliminary draft financial materials of UBS Warburg LLC, dated April 2, 2001. (c)(7) Financial materials of Sheffield Merchant Banking Group, dated October 6, 2000.** (d)(1) Recapitalization Agreement, dated as of April 24, 2001, between Springs Industries, Inc. and Heartland Springs Investment Company (incorporated by reference, as amended, to Appendix A of the Definitive Proxy Statement filed by Springs Industries, Inc. on August 7, 2001 under cover of Schedule 14A). (d)(2) Shareholders Agreement, dated as of April 24, 2001, by and among the Persons listed on the signature pages thereof (incorporated by reference to Exhibit 99.10 of Amendment No. 1 to Schedule 13D for Springs Industries, Inc. filed on April 30, 2001). (d)(3) Amendment No. 1 to Recapitalization Agreement, dated as of July 31, 2001, between Springs Industries, Inc. and Heartland Springs Investment Company. (f) Sections 33-13-101 through 33-13-310 of the South Carolina Business Corporation Act (incorporated by reference to Appendix D of the Definitive Proxy Statement filed by Springs Industries, Inc. on August 7, 2001 under cover of Schedule 14A). (g) Not applicable.
- ------------- * Previously filed. ** Portions omitted pursuant to a request for confidential treatment. EX-99.B.2 3 y51534ex99-b_2.txt AMENDMENT LETTER 1 Exhibit (b)(2) THE CHASE MANHATTAN BANK 270 Park Avenue New York, New York 10017 J.P. MORGAN SECURITIES INC. 270 Park Avenue New York, New York 10017 July 26, 2001 Heartland Springs Investment Company c/o Heartland Industrial Partners, L.P. 320 Park Avenue 33rd Floor New York, NY 10022 Attention: David A. Stockman Springs Industries Inc. $650,000,000 Senior Secured Credit Facilities $200,000,000 Receivables Purchase Facility Amendment Letter Ladies and Gentlemen: Reference is made to the Commitment Letter (the "Commitment Letter") dated April 24, 2001, among The Chase Manhattan Bank ("Chase"), J.P. Morgan Securities Inc. ("JPMorgan") and you. You, Chase and JPMorgan agree that (a) any previous amendment letters in respect of the Commitment Letter are hereby superceded by this Amendment Letter and (b) the twelfth paragraph of the Commitment Letter is hereby amended by replacing the text "the earlier of (a) 90 days after the date that the Recapitalization Agreement is executed and (b) 120 days after the date of this Commitment Letter" with the text "September 14, 2001". 2 2 Please indicate your acceptance of the amendment made herein by signing in the appropriate space below and returning to Chase the enclosed duplicate originals hereof. Very truly yours, THE CHASE MANHATTAN BANK, by /s/ Bruce Borden ------------------------------------ Name: BRUCE BORDEN Title: VICE PRESIDENT J.P. MORGAN SECURITIES INC., by /s/ Bruce Borden ------------------------------------ Name: BRUCE BORDEN Title: VICE PRESIDENT Accepted and agreed to as of the date first above written: HEARTLAND SPRINGS INVESTMENT COMPANY, by ------------------------------------ Name: Title: EX-99.C.3 4 y51534ex99-c_3.txt FINANCIAL PRESENTATION MATERIALS 1 Exhibit (c)(3) CREDIT RESEARCH & TRADING LLC Project Snug February 15, 2001 [Please note that references to "base" case correspond to the Scenario 2 projections and references to "downside" case correspond to the Scenario 1 projections.] 2 SPRINGS INDUSTRIES INC. Table of Contents SECTION 1 HEARTLAND INVESTMENT THESIS SECTION 2 PERSPECTIVES ON SPRINGS AND THE HOME TEXTILES INDUSTRY SECTION 3 VALUATION PERSPECTIVES SECTION 4 REVIEW OF ALTERNATIVES SECTION 5 ISSUES APPENDIX A COMPARABLE PUBLIC COMPANY ANALYSIS APPENDIX B DISCOUNTED CASH FLOW ANALYSIS APPENDIX C * INVESTMENT COMMITTEE MEMORANDUM GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT * Omitted and filed separately with the Commission. 3 SPRINGS INDUSTRIES INC. Background of Strategic Review Process Summer 2000 Board of Directors authorizes C. Bowles to explore strategic alternatives for Springs. C. Bowles hires R. Lee to provide strategic advice. R. Lee had worked with Springs while at Morgan Stanley and in June left Morgan Stanley to build a boutique Investment Bank to work with mid-cap companies August 2000 David Stockman approaches C. Bowles on behalf of Heartland and indicates an interest in making an equity investment in Springs October 2000 Board of Directors meets to consider review of strategic alternatives presented by C. Bowles and R. Lee and authorizes management to pursue various investment and acquisition transactions, including a potential transaction involving Heartland October 2000 - January 2001 Management and R. Lee meet with various potential investors (see Section 4 for a summary of these efforts) regarding a potential equity investment in Springs October 2000 - February 2001 Substantial due diligence of Springs by Heartland and discussions between Heartland and C. Bowles regarding future strategy and the terms of a potential recapitalization of Springs
GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 4 SPRINGS INDUSTRIES INC. Section 1 -- Heartland Investment Thesis SECTOR CONSOLIDATION - - Heartland has identified seven industry sectors where it is interested in partnering with a leading company in a sector which is ripe for consolidation. - - Heartland believes there is considerable consolidation opportunity currently in the home textile sector and no other company has the scale and financial wherewithal other than Springs to execute a consolidation opportunity. 1999 SALES OF U.S. HOME TEXTILES COMPANIES ($ Millions) [BAR CHART] Springs $2,220 WestPoint $1,868 Pillowtex $1,552 Mohawk $ 470 Dan River $ 432 Crown Craft $ 310 Burlington $ 300 Croscill $ 283 PCF $ 230 Glenoit $ 222 Hollander $ 201 Maples $ 160 Louisville $ 156 Revman $ 141 Sunbeam $ 136 Keeco $ 132
POTENTIAL CONSOLIDATION TARGETS BATH BED Towel Capacity & Brands Basic Bedding Pillowtex Hollander Investment in Davidson Cotton Pacific Coast Feather Investment in Coteminas Pillowtex SOURCING Croscill Glenoit Divisions Calvin Klein Ex-Cell American Pacific Keeco DIVERSIFICATION Town & Country Blankets Charles Owen Sunbeam Kitchen Allure IMPACT OF SCALE ON VALUATION - - A core valuation creation strategy for Heartland is to grow platform situations from approximately $2 billion in revenues to approximately $5 billion over a period of 3-5 years and potentially obtain a higher valuation multiple from the stock market vs. the base $2 billion company, particularly when the platform company becomes the clear industry leader. IMPACT OF SCALE ON OPERATIONS - - Scale of revenues and EBITDA relative to competition allows the largest companies in a sector to more effectively invest in supply chain expertise and infrastructure which should become a core competitive advantage. PARTNERSHIP APPROACH TO VALUE REALIZATION - - Agreement between Heartland and the Close family to allow (but not require) each party to participate equally in any value realization transaction. GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 5 SPRINGS INDUSTRIES INC. Heartland Experience and Resources REPUTATION - - Good partner to management - very bright, gets involved enough to understand the business of the portfolio company and to assist or support management in decision making and investment in growth - - Strength in developing and utilizing sophisticated management information systems - - Can become enamored of certain investments or strategies BROAD RANGE OF CAPABILITIES FOR PORTFOLIO COMPANIES - - Acquisition Expertise - Core Stockman expertise - Perry Lewis: former senior Smith Barney banker and successful private equity investor and merger advisor at Morgan, Lewis, Githens and Ahn - - Financing Expertise - Several senior level former bank financing professionals, including Gerry McConnell, on the Heartland team - - Management Expertise - Tim Leuliette: former CEO of Penske Organization and COO of ITT Automotive - Cindy Hess: former VP Quality/Engineering of Chrysler - last role was leadership position in PT Cruiser Program - - Information Systems - Gary Banks - former CIO of Xerox - - Key element of Heartland approach is to work closely with its portfolio companies and to provide senior level assistance as requested by the portfolio companies. Consistent with D. Stockman's reputation, a primary near term focus of Heartland would be to develop strong management information systems which can be utilized by the company to make more effective decisions and to provide in-depth information to Heartland so that it can effectively participate in assisting senior management. PERFORMANCE - - Raised $1.2 billion fund in mid 2000 - - Historical Performance is broad and generally good, but with some mixed results
Performance Summary IRR Recent Heartland Transactions MascoTech N/A Simpson Industries N/A Global Metal Technologies N/A Collins & Aikman N/A Prior Realized Blackstone Transactions Aristech Chemical 22% DeBartolo Corp. 35% LaSalle Re Holdings 25% UCAR International 198% American Axle and Manufacturing 69% Collins & Aikman 1% Prior Unrealized Blackstone Transactions Clark USA Valued at cost Haynes International Valued at cost Republic Technologies Valued at cost Imperial Home Decor Group Total write off ($85MM)
GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 6 SPRINGS INDUSTRIES INC. Section 2 -- Perspectives on Springs and the Home Textiles Industry GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 7 SPRINGS INDUSTRIES INC. Home Textiles Industry - - RECENTLY, THE MAJOR RETAILERS HAVE BEEN DEVELOPING BETTER IN-HOUSE CAPABILITIES TO PURSUE SOURCING FROM FOREIGN MANUFACTURERS, EVEN SETTING UP OFFICES IN CERTAIN COUNTRIES While annual growth in Springs' core bed and bath markets runs a healthy 5%, there exist a number of negative factors with which each competitor will have to deal going forward. A few of the major factors include the following: GROWING IMPORTS Imports are perhaps the most important competitive issue facing U.S. textile companies. In 1999, approximately one-quarter of all sheets and pillowcases and more than one-third of all towels sold in the United States were imported, and the share of imports is expected to grow. While the vast majority of imports are for promotional and seasonal products, the concern is that imports will start to gain market share in core open stock programs, particularly at lower price points. The import trend will force competitors both to optimize their U.S. manufacturing of certain products and to develop sourcing relationships and capabilities for products whose manufacturing is destined to move overseas. This trend will put particular burden on non-branded entry point products currently manufactured in the U.S. EXCESS INVENTORIES Despite persistent efforts by most U.S. textiles companies to reduce inventories in 2000, low inventory turnover remains an industry-wide drain on capital and profitability, both for manufacturers and for retailers. However, supply chain management expertise, for larger companies like Springs and WestPoint Stevens that are able to leverage their scale to develop a comparative advantage, should create the opportunity to improve margins and returns on capital and to develop stronger, interdependent relationships with their key retail accounts. CLOSE-OUT LOSSES The channels through which close-out and off-quality merchandise was historically disposed have become a significant source of losses for home textiles manufacturers. Largely due to growth in imports made especially for those channels, U.S. manufacturers will likely incur significant losses in disposing of close-out and off-quality merchandise going forward. As a result, there will be an increasing focus on minimizing manufacturing defects and shortening the lag between production and retail sale. CHARGE-BACKS With few exceptions, home textiles retailers in 2000 became significantly more aggressive about charging their suppliers for any and all packaging and shipping errors and manufacturing defects -- often at punitive rates. Certain retailers (Kmart, for example) have come to view such efforts as a source of margin improvement. This trend is expected to continue, as competitive pressures in the retail industry are not expected to abate anytime soon. GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 8 SPRINGS INDUSTRIES INC. Springs' Competitive Position - - SPRINGS HAS ACHIEVED CONSIDERABLE SUCCESS AT WAL*MART AND THROUGH ITS AGGRESSIVENESS IS PUSHING THE BED-IN-A-BAG LINE ACROSS A BROAD RANGE OF ACCOUNTS - - SPRINGS' PORTFOLIO WEAKNESS IS IN TOWELS. IT RANKS WELL BEHIND WESTPOINT STEVENS AND PILLOWTEX AND ITS PROFITABILITY IS SIGNIFICANTLY BELOW SATISFACTORY LEVELS SPRINGS [BAR CHART]
1996 1997 1998 1999 2000 Revenues $2,243 $2,226 $2,181 $2,220 $2,275 EBITDA Margin 9% 10% 9% 11% 11%
BREADTH OF PRODUCTS Springs has perhaps the broadest product offering in the home textiles industry. For example, the company ranks second in sheets and pillowcases behind WestPoint Stevens, first in comforters and bedspreads, fourth in pillows behind Pillowtex, third in towels (but well behind WestPoint Stevens and Pillowtex), second in bath and area rugs and first in shower curtains. Generally, WestPoint Stevens has a more limited product offering, tending to focus primarily on markets in which it ranks first or second. Most other competitors lack the scale required to compete against Springs across its product spectrum. STABLE REVENUES As the table above indicates, Springs' revenues have been fairly stagnant in recent history. However, even though revenue growth was low in 2000, "low growth" was much better than the loss of revenue at WestPoint Stevens and Pillowtex. Until this year, WestPoint Stevens has had better overall revenue growth than Springs. Pillowtex tripled its size with the Fieldcrest Cannon acquisition in 1997 but has suffered considerably over the last 12-18 months. Dan River is the only major competitor that has experienced substantial growth, fueled in part by its early entry into the fast-growing Bed-in-a-Bag market and its acquisition of Bibb. LOW BUT IMPROVING MARGINS Owing in part to the complexity of its operations, Springs' operating margins have lagged those of each of its major competitors . However, Springs has managed gradual improvement and expects that trend to continue. LOW FINANCIAL LEVERAGE Springs has much greater financial strength than any of its major competitors -- Pillowtex is in Chapter XI, and WestPoint Stevens and Dan River are very highly leveraged. Springs' could take on considerable debt before its leverage threatened to limit its flexibility or interfere with the implementation of its business strategy, which is clearly the case with its competitors. GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 9 SPRINGS INDUSTRIES INC. Each of Springs' Major Competitors Has Been Weakened by Difficult Conditions in Home Textiles Markets - - REPORTED MARGINS FOR WESTPOINT STEVENS ARE PROBABLY OVERSTATED, AS THEY DO NOT REFLECT LARGE WRITE-OFFS AND RESTRUCTURING CHARGES. IF THE 1998 AND 2000 WRITE-OFFS AND CHARGES WERE AMORTIZED OVER FIVE YEARS, THE MARGINS IN 1998, 1999 AND 2000 WOULD BE 17.9%, 18.2% AND 15.3%, RESPECTIVELY. WESTPOINT STEVENS [BAR CHART]
1996 1997 1998 1999 2000 Revenues $1,724 $1,658 $1,779 $1,883 $1,815 EBITDA Margin 16% 18% 19% 19% 17%
WESTPOINT STEVENS (WXS) Historically the best operator with the most modern facilities among U.S. home textiles manufacturers, WestPoint acts largely as a contract manufacturer for brands such as Ralph Lauren and Martha Stewart. WestPoint Stevens has obtained some success with Target by moving the Martex brand there in response to Springs giving the Springmaid label to Wal*Mart. WestPoint has been perhaps hardest hit by the recent economic slowdown, with fourth quarter 2000 revenues down 14% from the prior year -- though its margins remain the best in the industry. EBITDA for 2000 was $310 million, 12% lower than in 1999, leaving the company highly leveraged with a debt-to-EBITDA ratio of approximately 5.3x. - - FULL 2000 RESULTS FOR DAN RIVER HAVE NOT BEEN MADE AVAILABLE DAN RIVER [BAR CHART]
1996 1997 1998 1999 2000 (1) Revenues $380 $476 $517 $629 $647 EBITDA Margin 12% 15% 15% 15% 15%
DAN RIVER (DRF) Dan River is the market leader in Bed-in-a-Bag ensembles and is the fourth largest U.S. producer of sheets and pillowcase. Dan River does not market towels, however, and generally lacks the breadth of products offered by Springs, WestPoint and Pillowtex. Revenue growth has been strong, and Dan River's historical margins are between that of Springs at the low end and WestPoint Stevens at the high end, though they were likely hit in 2000, especially in the fourth quarter, by the need to reduce inventory. - - DATA FOR PILLOWTEX IN 1996 IS NOT AVAILABLE ON A COMPARABLE BASIS TO INCLUDE THE 1997 ACQUISITION OF FIELDCREST CANNON. 2000 RESULTS FOR PILLOWTEX HAVE NOT BEEN MADE AVAILABLE PILLOWTEX [BAR CHART]
1996 1997 1998 1999 2000 (1) Revenues $1,785 $1,510 $1,552 $1,450 EBITDA Margin 8% 13% 8% 7%
PILLOWTEX (PTEXQ) Pillowtex is the second largest manufacturer of towels and the largest producer of pillows in the United States. Pillowtex has the strongest brands in the home textiles business -- Royal Velvet, Charisma and Fieldcrest-Cannon. Unable to integrate successfully the operations of Fieldcrest Cannon, acquired in 1997, Pillowtex's EBITDA margins fell from 13.0% in 1998 to 7.9% in 1999 on sales of $1.6 billion and $1.5 billion, respectively -- levels insufficient to support the acquisition financing. Pillowtex filed for Chapter 11 bankruptcy protection in December 2000 and is generally expected to take quite some timestabilizing its operations before it emerges from bankruptcy. Further erosion in the company's competitive position is expected as it reorganizes, which could continue to destabilize competitive conditions in the home textiles industry. (1) LTM through 9/30/00 GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 10 SPRINGS INDUSTRIES INC. Projected Results KEY MANAGEMENT PRIORITIES: - - MATERIALLY IMPROVE QUALITY AND DEPTH OF MANAGEMENT IN OPERATIONS AND MANUFACTURING - - FIX TOWEL PROFITABILITY - - INVEST IN SUPPLY CHAIN MANAGEMENT EFFICIENCY - - EXPAND FOREIGN SOURCING CAPABILITY SPRINGS MANAGEMENT SEES MEANINGFUL UPSIDE POTENTIAL IN THE BUSINESS BUT HAS HAD TO CONSISTENTLY SCALE BACK ITS ASSESSMENT OF THAT POTENTIAL SUBSTANTIALLY OWING TO A MUCH MORE COMPETITIVE ENVIRONMENT PROFIT FROM OPERATIONS ($ millions) [BAR CHART]
1998 1999 2000 2001 2002 2003 2004 2005 1998 Plan $120 $183 $245 $305 1999 Plan $106 $134 $180 $224 $290 $330 2000 Plan $149 $177 $210 $257 $275 $297 Revised 2000 Plan $142 $152 $180 $224 $235 $248
GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 11 SPRINGS INDUSTRIES INC. Historical and Projected Revenues and Profit from Operations - - FOR MODELING PURPOSES, WE HAVE DEVELOPED A DOWNSIDE CASE TO TEST RETURNS AND LEVERAGE AT LOWER LEVELS OF PERFORMANCE REVENUES ($ MILLIONS) [BAR CHART]
1998 1999 2000A 2001P 2002P 2003P 2004P 2005P Base Case (1) $2,181 $2,220 $2,275 $2,323 $2,477 $2,638 $2,766 $2,902* Downside Case $2,265 $2,321 $2,388 $2,447 $2,513**
* `00-'05 CAGR = 5.0% ** `00-'05 CAGR = 2.0% PROFIT FROM OPERATIONS ($ MILLIONS) [BAR CHART]
1998 1999 2000A 2001P 2002P 2003P 2004P 2005P Base Case (1) $106 (4.9%) $134 (6.0%) $146 (6.4%) $152 (6.5%) $180 (7.3%) $224 (8.3%) $235 (8.3%) $248 (8.4%) Downside Case $139 (6.1%) $145 (6.3%) $156 (6.5%) $159 (6.5%) $165 (6.6%)
2000 EBIT MARGINS [BAR CHART] Springs 6.4% Dan River 7.9% Mohawk 9.7% WestPoint Stevens 12.6%
DEBT TO EBITDA MULTIPLES
1998 1999 2000A 2001P 2002P 2003P 2004P 2005P Base Case 1.4x 1.4x 1.3x 0.9x 0.6x 0.3x 0.0x 0.0x Downside Case 1.4x 1.4x 1.3x 1.0x 0.7x 0.4x 0.2x 0.0x
(1) The Base Case is consistent with the company's Revised 2000 Plan GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 12 SPRINGS INDUSTRIES INC. Section 3 -- Valuation Perspectives GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 13 SPRINGS INDUSTRIES INC. Historical Stock Price and Premium Analysis TWO-YEAR STOCK PRICE HISTORY [LINE GRAPH] 1-Jan-99 $ 41 8-Jan-99 $ 40 15-Jan-99 $ 41 22-Jan-99 $ 40 29-Jan-99 $ 42 5-Feb-99 $ 38 12-Feb-99 $ 37 19-Feb-99 $ 35 26-Feb-99 $ 33 5-Mar-99 $ 32 12-Mar-99 $ 32 19-Mar-99 $ 32 26-Mar-99 $ 29 2-Apr-99 $ 28 9-Apr-99 $ 29 16-Apr-99 $ 30 23-Apr-99 $ 36 30-Apr-99 $ 37 7-May-99 $ 41 14-May-99 $ 42 21-May-99 $ 44 28-May-99 $ 40 4-Jun-99 $ 42 11-Jun-99 $ 38 18-Jun-99 $ 38 25-Jun-99 $ 40 2-Jul-99 $ 43 9-Jul-99 $ 42 16-Jul-99 $ 41 23-Jul-99 $ 41 30-Jul-99 $ 40 6-Aug-99 $ 40 13-Aug-99 $ 40 20-Aug-99 $ 39 27-Aug-99 $ 38 3-Sep-99 $ 39 10-Sep-99 $ 39 17-Sep-99 $ 36 24-Sep-99 $ 34 1-Oct-99 $ 34 8-Oct-99 $ 34 15-Oct-99 $ 33 22-Oct-99 $ 39 29-Oct-99 $ 40 5-Nov-99 $ 42 12-Nov-99 $ 42 19-Nov-99 $ 41 26-Nov-99 $ 40 3-Dec-99 $ 40 10-Dec-99 $ 39 17-Dec-99 $ 38 24-Dec-99 $ 39 31-Dec-99 $ 40 7-Jan-00 $ 39 14-Jan-00 $ 40 21-Jan-00 $ 38 28-Jan-00 $ 37 4-Feb-00 $ 38 11-Feb-00 $ 39 18-Feb-00 $ 39 25-Feb-00 $ 34 3-Mar-00 $ 37 10-Mar-00 $ 37 17-Mar-00 $ 38 24-Mar-00 $ 38 31-Mar-00 $ 38 7-Apr-00 $ 39 14-Apr-00 $ 38 21-Apr-00 $ 42 28-Apr-00 $ 41 5-May-00 $ 47 12-May-00 $ 48 19-May-00 $ 47 26-May-00 $ 47 2-Jun-00 $ 42 9-Jun-00 $ 40 16-Jun-00 $ 40 23-Jun-00 $ 34 30-Jun-00 $ 32 7-Jul-00 $ 32 14-Jul-00 $ 32 21-Jul-00 $ 34 28-Jul-00 $ 32 4-Aug-00 $ 32 11-Aug-00 $ 32 18-Aug-00 $ 31 25-Aug-00 $ 31 1-Sep-00 $ 30 8-Sep-00 $ 31 15-Sep-00 $ 29 22-Sep-00 $ 28 29-Sep-00 $ 28 6-Oct-00 $ 27 13-Oct-00 $ 25 20-Oct-00 $ 23 27-Oct-00 $ 23 3-Nov-00 $ 24 10-Nov-00 $ 26 17-Nov-00 $ 27 24-Nov-00 $ 28 1-Dec-00 $ 28 8-Dec-00 $ 24 15-Dec-00 $ 28 22-Dec-00 $ 30 29-Dec-00 $ 32 5-Jan-01 $ 31 12-Jan-01 $ 32 19-Jan-01 $ 33 26-Jan-01 $ 34 2-Feb-01 $ 36 2/9/01 36.28
ONE-YEAR STOCK PRICE HISTORY [LINE GRAPH] 1/7/00 $ 39 1/14/00 $ 40 1/21/00 $ 38 1/28/00 $ 37 2/4/00 $ 38 2/11/00 $ 39 2/18/00 $ 39 2/25/00 $ 34 3/3/00 $ 37 3/10/00 $ 37 3/17/00 $ 38 3/24/00 $ 38 3/31/00 $ 38 4/7/00 $ 39 4/14/00 $ 38 4/21/00 $ 42 4/28/00 $ 41 5/5/00 $ 47 5/12/00 $ 48 5/19/00 $ 47 5/26/00 $ 47 6/2/00 $ 42 6/9/00 $ 40 6/16/00 $ 40 6/23/00 $ 34 6/30/00 $ 32 7/7/00 $ 32 7/14/00 $ 32 7/21/00 $ 34 7/28/00 $ 32 8/4/00 $ 32 8/11/00 $ 32 8/18/00 $ 31 8/25/00 $ 31 9/1/00 $ 30 9/8/00 $ 31 9/15/00 $ 29 9/22/00 $ 28 9/29/00 $ 28 10/6/00 $ 27 10/13/00 $ 25 10/20/00 $ 23 10/27/00 $ 23 11/3/00 $ 24 11/10/00 $ 26 11/17/00 $ 27 11/24/00 $ 28 12/1/00 $ 28 12/8/00 $ 24 12/15/00 $ 28 12/22/00 $ 30 12/29/00 $ 32 1/5/01 $ 31 1/12/01 $ 32 1/19/01 $ 33 1/26/01 $ 34 2/2/01 $ 36 2/9/01 36.28
PREMIA TO AVERAGE STOCK PRICES - -------------------------------------------------------------------------------- PREMIUM TO AVERAGE STOCK PRICE AT SELECTED RECAP PRICES AVERAGE ------------------------------------------- TIME PERIOD PRICE $ 40 $ 42 $ 44 $ 46 - -------------------------------------------------------------------------------- At 2/9/01 $ 36.28 10% 16% 21% 27% One Month 33.31 20% 26% 32% 38% Three Months 29.57 35% 42% 49% 56% Six Months 28.97 38% 45% 52% 59% One Year 34.06 17% 23% 29% 35%
GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 14 SPRINGS INDUSTRIES INC. Historical Stock Performance - - WHILE UNDER-PERFORMING THE S&P 500 IN THE MOST RECENT ONE- AND TWO-YEAR PERIODS, SPRINGS' STOCK HAS OUTPERFORMED THOSE OF DAN RIVER AND WESTPOINT STEVENS DURING ALL PERIODS PRESENTED - - SPRINGS HAS OUTPERFORMED THE S&P 500 DURING THE LAST THREE- AND SIX-MONTH PERIODS THREE-MONTH RELATIVE STOCK PRICE GRAPH [LINE GRAPH]
SPX SMI DRF WXS MHK 11/1/00 11/2/00 100.4995708 101.0638298 105 101.7391304 100.2898551 11/3/00 100.3848806 101.0638298 105 100.8695652 100.5797101 11/6/00 100.7718721 105.5851064 107.5 100.8695652 100.8695652 11/7/00 100.7493562 107.9787234 110 102.6086957 99.13043478 11/8/00 99.15987673 113.2978723 105 100.8695652 98.26086957 11/9/00 98.51676728 110.106383 105 100 95.94202899 11/10/00 96.11319852 108.7765957 100 101.7391304 95.07246377 11/13/00 95.07746865 111.9680851 100 98.26086957 97.10144928 11/14/00 97.30724307 112.5 90 105.2173913 99.13043478 11/15/00 97.78992696 111.4361702 87.5 102.6086957 98.55072464 11/16/00 96.55929413 109.5744681 85 102.6086957 100.2898551 11/17/00 96.23562854 114.0957447 77.5 99.13043478 101.7391304 11/20/00 94.46954025 114.6276596 87.5 93.04347826 103.7681159 11/21/00 94.80235291 116.7553191 82.5 89.56521739 103.4782609 11/22/00 93.04400445 115.4255319 87.5 86.08695652 102.3188406 11/24/00 94.40973248 118.6170213 87.5 87.82608696 103.1884058 11/27/00 94.91633948 119.4148936 85 95.65217391 107.5362319 11/28/00 94.01007585 118.3510638 85 92.17391304 106.3768116 11/29/00 94.41958318 118.3510638 82.5 90.43478261 110.4347826 11/30/00 92.52262141 115.9574468 85 88.69565217 109.8550725 12/1/00 92.54232279 118.3510638 87.5 87.82608696 114.4927536 12/4/00 93.22764948 118.6170213 86 83.47826087 111.884058 12/5/00 96.85622212 120.212766 89.6 85.9826087 116.8115942 12/6/00 95.09154107 110.6382979 87.6 92.10434783 115.942029 12/7/00 94.53497699 101.8617021 92 90.15652174 116.8115942 12/8/00 96.38831427 103.4574468 90 90.99130435 119.1304348 12/11/00 97.11374734 114.893617 91.6 88.20869565 120.8695652 12/12/00 96.47908135 122.3404255 90 90.57391304 117.3913043 12/13/00 95.69172964 124.2021277 93.2 91.82608696 113.6231884 12/14/00 94.35062833 119.1489362 90.4 92.66086957 114.2028986 12/15/00 92.32560758 117.287234 92 90.57391304 115.6521739 12/18/00 93.07074204 119.6808511 90 86.8173913 115.6521739 12/19/00 91.86473593 122.3404255 87.2 87.93043478 114.4927536 12/20/00 88.98974121 120.7446809 86 87.51304348 111.3043478 12/21/00 89.70180549 119.6808511 86 83.47826087 112.4637681 12/22/00 91.8907699 128.4574468 86 85.70434783 117.3913043 12/26/00 92.53950831 127.9255319 84.4 90.85217391 116.8115942 12/27/00 93.50557971 132.4468085 88 99.47826087 128.4057971 12/28/00 93.87849875 134.5744681 92.4 104.2086957 134.4927536 12/29/00 92.89765131 138.0319149 88.8 104.2086957 126.9565217 1/2/01 90.29355061 131.6489362 93.6 110.4695652 126.3768116 1/3/01 94.81712895 135.3723404 96 125.2173913 132.173913 1/4/01 93.81658012 135.9042553 99.6 123.826087 137.1014493 1/5/01 91.35461083 130.3191489 100 120.9043478 137.1014493 1/8/01 91.17940924 135.9042553 99.6 117.9826087 142.6086957 1/9/01 91.52699793 134.3085106 99.2 114.7826087 141.4492754 1/10/01 92.40441311 135.6382979 100 114.9217391 139.1304348 1/11/01 93.35781934 136.4361702 98.8 116.173913 139.1304348 1/12/01 92.75974163 135.9042553 99.2 116.5913043 143.1884058 1/16/01 93.34585778 137.5 100 118.4 146.3768116 1/17/01 93.54427886 140.9574468 100 126.0521739 143.7681159 1/18/01 94.8459774 141.7553191 100 135.6521739 143.7681159 1/19/01 94.46461491 141.2234043 100 134.2608696 139.1304348 1/22/01 94.48924164 136.9680851 104 126.0521739 141.1594203 1/23/01 95.72057809 146.8085106 119.6 128 144.057971 1/24/01 95.99499022 142.8191489 125.6 127.3043478 140 1/25/01 95.51723167 145.4787234 128.4 127.3043478 143.1884058 1/26/01 95.33710474 144.1489362 128 125.3565217 140 1/29/01 95.98584315 145.2765957 129.2 128.6956522 143.0724638 1/30/01 96.65850467 145.3191489 128 121.6 142.2376812 1/31/01 96.11530938 150.5531915 120.4 125.773913 146.0869565 2/1/01 96.64021052 149.7021277 124.8 127.3043478 149.3333333 2/2/01 94.95152052 153.1914894 124 123.6869565 148.1275362 2/5/01 95.29207301 154.6808511 112 122.573913 147.8956522 2/6/01 95.14783074 156.1276596 111.2 124.9391304 148.2666667 2/7/01 94.34781385 158.4255319 114 122.0173913 145.9478261
SIX-MONTH RELATIVE STOCK PRICE GRAPH [LINE GRAPH]
SPX SMI DRF WXS MHK 8/1/00 8/2/00 100.0417217 101.1811024 101.4492754 101.0416667 99.30555556 8/3/00 101.0054934 100.3937008 98.55072464 101.0416667 97.68518519 8/4/00 101.7265837 99.40944882 98.55072464 102.0833333 99.30555556 8/7/00 102.8662819 101.3779528 97.10144928 102.0833333 100.9259259 8/8/00 103.1082679 100.5905512 98.55072464 100.5208333 101.3888889 8/9/00 102.4177735 99.80314961 98.55072464 104.1666667 100 8/10/00 101.5402267 100 95.65217391 102.0833333 96.99074074 8/11/00 102.3461512 100.1968504 95.65217391 106.7708333 99.53703704 8/14/00 103.7174049 101.1811024 98.55072464 110.4166667 99.53703704 8/15/00 103.2216118 98.62204724 100 112.5 98.61111111 8/16/00 102.9031361 98.03149606 105.7971014 117.1875 98.37962963 8/17/00 104.0310131 99.40944882 105.7971014 117.1875 96.2962963 8/18/00 103.7285307 99.01574803 111.5942029 116.1458333 95.60185185 8/21/00 104.2681316 97.63779528 113.0434783 111.9791667 95.60185185 8/22/00 104.1742577 100 110.1449275 112.5 97.4537037 8/23/00 104.7194215 98.81889764 108.6956522 112.5 93.75 8/24/00 104.8821362 99.40944882 108.6956522 113.0208333 94.21296296 8/25/00 104.7527988 98.62204724 108.6956522 113.0208333 92.36111111 8/28/00 105.2840554 96.8503937 104.3478261 111.4583333 88.88888889 8/29/00 104.9885265 94.48818898 107.2463768 112.5 90.74074074 8/30/00 104.4843891 94.68503937 104.3478261 113.0208333 88.42592593 8/31/00 105.5336903 94.15622047 102.8985507 117.1875 87.96296296 9/1/00 105.7485571 93.8976378 102.8985507 115.625 89.81481481 9/5/00 104.7966066 93.50393701 102.8985507 114.5833333 86.80555556 9/6/00 103.7653849 98.42519685 101.4492754 117.1875 98.14814815 9/7/00 104.4788262 98.42519685 102.8985507 118.75 100.2314815 9/8/00 103.9218413 98.03149606 101.4492754 117.7083333 95.83333333 9/11/00 103.5574717 94.68503937 101.4492754 116.6666667 94.21296296 9/12/00 103.0519435 93.30708661 101.4492754 116.6666667 95.13888889 9/13/00 103.2549892 91.92913386 100 118.2291667 90.97222222 9/14/00 102.974063 92.71653543 100 118.75 88.65740741 9/15/00 101.9268479 90.94488189 102.8985507 116.6666667 86.34259259 9/18/00 100.445727 90.15748031 100 112.5 82.87037037 9/19/00 101.515889 91.14173228 102.8985507 111.4583333 81.94444444 9/20/00 100.9206592 88.77952756 101.4492754 114.0625 80.09259259 9/21/00 100.7614213 87.79527559 101.4492754 111.9791667 78.7037037 9/22/00 100.7384744 86.61417323 98.55072464 110.9375 81.48148148 9/25/00 100.0646687 86.22047244 98.55072464 109.375 83.10185185 9/26/00 99.24275085 85.43307087 100 100.5208333 81.48148148 9/27/00 99.19824769 85.62992126 100 100 81.01851852 9/28/00 101.4039357 86.61417323 95.65217391 97.39583333 84.25925926 9/29/00 99.88943745 88.77952756 100 102.0833333 80.78703704 10/2/00 99.86996732 87.79527559 95.65217391 95.3125 79.62962963 10/3/00 99.19059871 89.37007874 97.10144928 93.22916667 78.93518519 10/4/00 99.73715319 90.7480315 95.65217391 96.875 79.62962963 10/5/00 99.87344413 91.14173228 97.10144928 95.3125 81.71296296 10/6/00 97.9758014 85.43307087 94.20289855 92.70833333 81.94444444 10/9/00 97.4918295 85.23622047 94.20289855 88.54166667 80.32407407 10/10/00 96.44809123 84.84251969 94.20289855 73.95833333 78.47222222 10/11/00 94.88839441 82.08661417 91.30434783 72.39583333 73.14814815 10/12/00 92.46783951 80.70866142 69.56521739 71.875 71.52777778 10/13/00 95.55455114 80.11811024 69.56521739 71.35416667 72.22222222 10/16/00 95.58584243 79.92125984 63.76811594 68.75 73.14814815 10/17/00 93.87177526 77.36220472 60.86956522 63.54166667 71.06481481 10/18/00 93.3266115 75.78740157 59.42028986 63.54166667 71.52777778 10/19/00 96.56908421 75.39370079 60.86956522 64.0625 74.53703704 10/20/00 97.13719491 72.44094488 63.76811594 62.5 74.53703704 10/23/00 97.05722829 71.25984252 63.76811594 58.85416667 72.4537037 10/24/00 97.22063834 71.65354331 60.86956522 59.89583333 72.4537037 10/25/00 94.90995063 72.04724409 57.97101449 58.85416667 71.99074074 10/26/00 94.87796398 71.65354331 62.31884058 59.375 75 10/27/00 95.93074195 72.44094488 57.97101449 61.45833333 74.76851852 10/30/00 97.25749252 73.81889764 55.07246377 61.45833333 78.47222222 10/31/00 99.39503512 74.21259843 56.52173913 59.89583333 80.78703704 11/1/00 98.82622905 74.01574803 57.97101449 59.89583333 79.86111111 11/2/00 99.31993603 74.80314961 60.86956522 60.9375 80.09259259 11/3/00 99.20659203 74.80314961 60.86956522 60.41666667 80.32407407 11/6/00 99.5890411 78.1496063 62.31884058 60.41666667 80.55555556 11/7/00 99.56678951 79.92125984 63.76811594 61.45833333 79.16666667 11/8/00 97.9959669 83.85826772 60.86956522 60.41666667 78.47222222 11/9/00 97.36040609 81.49606299 60.86956522 59.89583333 76.62037037 11/10/00 94.98504972 80.51181102 57.97101449 60.9375 75.92592593 11/13/00 93.96147695 82.87401575 57.97101449 58.85416667 77.5462963 11/14/00 96.16507892 83.26771654 52.17391304 63.02083333 79.16666667 11/15/00 96.64209721 82.48031496 50.72463768 61.45833333 78.7037037 11/16/00 95.42590919 81.1023622 49.27536232 61.45833333 80.09259259 11/17/00 95.1060427 84.4488189 44.92753623 59.375 81.25 11/20/00 93.36068424 84.84251969 50.72463768 55.72916667 82.87037037 11/21/00 93.68959043 86.41732283 47.82608696 53.64583333 82.63888889 11/22/00 91.95188095 85.43307087 50.72463768 51.5625 81.71296296 11/24/00 93.30157847 87.79527559 50.72463768 52.60416667 82.40740741 11/27/00 93.80223907 88.38582677 49.27536232 57.29166667 85.87962963 11/28/00 92.90661289 87.5984252 49.27536232 55.20833333 84.9537037 11/29/00 93.31131354 87.5984252 47.82608696 54.16666667 88.19444444 11/30/00 91.43661776 85.82677165 49.27536232 53.125 87.73148148 12/1/00 91.45608789 87.5984252 50.72463768 52.60416667 91.43518519 12/4/00 92.13337042 87.79527559 49.85507246 50 89.35185185 12/5/00 95.71935192 88.97637795 51.94202899 51.5 93.28703704 12/6/00 93.97538419 81.88976378 50.7826087 55.16666667 92.59259259 12/7/00 93.4253529 75.39370079 53.33333333 54 93.28703704 12/8/00 95.25693624 76.57480315 52.17391304 54.5 95.13888889 12/11/00 95.97385439 85.03937008 53.10144928 52.83333333 96.52777778 12/12/00 95.34663793 90.5511811 52.17391304 54.25 93.75 12/13/00 94.56852792 91.92913386 54.02898551 55 90.74074074 12/14/00 93.24316807 88.18897638 52.4057971 55.5 91.2037037 12/15/00 91.24191642 86.81102362 53.33333333 54.25 92.36111111 12/18/00 91.97830471 88.58267717 52.17391304 52 92.36111111 12/19/00 90.78645435 90.5511811 50.55072464 52.66666667 91.43518519 12/20/00 87.94520548 89.37007874 49.85507246 52.41666667 88.88888889 12/21/00 88.64891176 88.58267717 49.85507246 50 89.81481481 12/22/00 90.81218274 95.07874016 49.85507246 51.33333333 93.75 12/26/00 91.45330645 94.68503937 48.92753623 54.41666667 93.28703704 12/27/00 92.40803838 98.03149606 51.01449275 59.58333333 102.5462963 12/28/00 92.77658021 99.60629921 53.56521739 62.41666667 107.4074074 12/29/00 91.80724567 102.1653543 51.47826087 62.41666667 101.3888889 1/2/01 89.23371115 97.44094488 54.26086957 66.16666667 100.9259259 1/3/01 93.70419303 100.1968504 55.65217391 75 105.5555556 1/4/01 92.71538836 100.5905512 57.73913043 74.16666667 109.4907407 1/5/01 90.28231695 96.45669291 57.97101449 72.41666667 109.4907407 1/8/01 90.10917182 100.5905512 57.73913043 70.66666667 113.8888889 1/9/01 90.45268062 99.40944882 57.50724638 68.75 112.962963 1/10/01 91.31979695 100.3937008 57.97101449 68.83333333 111.1111111 1/11/01 92.26201238 100.984252 57.27536232 69.58333333 111.1111111 1/12/01 91.67095473 100.5905512 57.50724638 69.83333333 114.3518519 1/16/01 92.25019122 101.7716535 57.97101449 70.91666667 116.8981481 1/17/01 92.44628329 104.3307087 57.97101449 75.5 114.8148148 1/18/01 93.73270287 104.9212598 57.97101449 81.25 114.8148148 1/19/01 93.3558167 104.5275591 57.97101449 80.41666667 111.1111111 1/22/01 93.38015437 101.3779528 60.28985507 75.5 112.7314815 1/23/01 94.59703776 108.6614173 69.33333333 76.66666667 115.0462963 1/24/01 94.86822891 105.7086614 72.8115942 76.25 111.8055556 1/25/01 94.39607816 107.6771654 74.43478261 76.25 114.3518519 1/26/01 94.2180655 106.6929134 74.20289855 75.08333333 111.8055556 1/29/01 94.85918921 107.5275591 74.89855072 77.08333333 114.2592593 1/30/01 95.52395522 107.5590551 74.20289855 72.83333333 113.5925926 1/31/01 94.9871358 111.4330709 69.79710145 75.33333333 116.6666667 2/1/01 95.50587581 110.8031496 72.34782609 76.25 119.2592593 2/2/01 93.83700716 113.3858268 71.88405797 74.08333333 118.2962963 2/5/01 94.17356234 114.488189 64.92753623 73.41666667 118.1111111 2/6/01 94.03101314 115.5590551 64.46376812 74.83333333 118.4074074 2/7/01 93.24038662 117.2598425 66.08695652 73.08333333 116.5555556
ONE-YEAR RELATIVE STOCK PRICE GRAPH [LINE GRAPH]
SPX SMI DRF WXS MHK 1/7/00 1/14/00 101.6 102.6 100 99.3 101.5 1/21/00 100 97.4 97.5 92.4 96.2 1/28/00 94.4 95.5 92.5 94.9 93.7 2/4/00 98.8 97.9 100 100.4 94.7 2/11/00 96.2 101.6 107.5 80.9 88.6 2/18/00 93.4 100.2 113.8 95.3 92.6 2/25/00 92.5 88.7 115 96 87.8 3/3/00 97.8 96.6 106.3 97.8 87.1 3/10/00 96.8 95.2 110 93.9 80.5 3/17/00 101.6 98.1 106.3 94.9 84.3 3/24/00 106 98.5 107.5 98.9 83.5 3/31/00 104 98.2 128.8 109.7 90.9 4/7/00 105.2 101.3 117.5 104.3 90.4 4/14/00 94.1 98.7 108.8 94.2 89.6 4/21/00 99.5 107.9 113.8 100.4 95.2 4/28/00 100.8 106.1 113.8 108.3 100.8 5/5/00 99.4 122.5 112.5 112.6 101.3 5/12/00 98.6 124.6 106.3 107.6 99.2 5/19/00 97.6 120.2 105 104 93.9 5/26/00 95.6 122.1 100 65.3 92.1 6/2/00 102.5 109.5 98.8 63.2 98 6/9/00 101.1 103.1 95 67.1 90.1 6/16/00 101.6 102.3 97.5 58.1 87.1 6/23/00 100 87.9 100 51.6 85 6/30/00 100.9 82.7 95 64.3 88.3 7/7/00 102.6 82.1 95 68.6 98.2 7/14/00 104.8 82.9 92.5 68.2 101.3 7/21/00 102.7 88 96.3 65.7 99.7 7/28/00 98.5 83.8 93.8 65.7 105.1 8/4/00 101.5 81.6 85 70.8 108.9 8/11/00 102.1 82.2 82.5 74 109.1 8/18/00 103.5 81.3 96.3 80.5 104.8 8/25/00 104.5 80.9 93.8 78.3 101.3 9/1/00 105.5 77.1 88.8 80.1 98.5 9/8/00 103.7 80.5 87.5 81.6 105.1 9/15/00 101.7 74.6 88.8 80.9 94.7 9/22/00 100.5 71.1 85 76.9 89.3 9/29/00 99.7 72.9 86.3 70.8 88.6 10/6/00 97.7 70.1 81.3 64.3 89.8 10/13/00 95.3 65.8 60 49.5 79.2 10/20/00 96.9 59.5 55 43.3 81.7 10/27/00 95.7 59.5 50 42.6 82 11/3/00 99 61.4 52.5 41.9 88.1 11/10/00 94.8 66.1 50 42.2 83.2 11/17/00 94.9 69.3 38.8 41.2 89.1 11/24/00 93.1 72.1 43.8 36.5 90.4 12/1/00 91.2 71.9 43.8 36.5 100.3 12/8/00 95 62.8 45 37.8 104.3 12/15/00 91 71.2 46 37.6 101.3 12/22/00 90.6 78 43 35.6 102.8 12/29/00 91.6 83.8 44.4 43.3 111.2 1/5/01 90.1 79.2 50 50.2 120.1 1/12/01 91.5 82.6 49.6 48.4 125.4 1/19/01 93.1 85.8 50 55.7 121.8 1/26/01 94 87.6 64 52 122.6 2/2/01 93.6 93.1 62 51.4 129.7
TWO-YEAR RELATIVE STOCK PRICE GRAPH [LINE GRAPH]
SPX SMI WXS DRF MHK 1/1/99 1/8/99 103.7307908 96.68174962 89.5049505 85.63829787 93.61069837 1/15/99 101.1413649 99.39668175 85.34653465 92.55319149 89.7473997 1/22/99 99.67133897 96.53092006 86.93069307 92.55319149 88.55869242 1/29/99 104.1009412 100.7541478 84.25758416 84.04255319 91.53046062 2/5/99 100.8273472 92.60935143 84.85164356 79.78723404 87.07280832 2/12/99 100.0732166 88.53695324 86.73267327 79.25531915 84.69539376 2/19/99 100.8102633 84.76621418 78.21782178 67.55319149 83.50668648 2/26/99 100.7403008 80.2413273 80.79207921 55.85106383 77.26597325 3/5/99 103.7617045 78.28054299 81.58415842 58.5106383 75.0371471 3/12/99 105.3171498 76.6214178 77.22772277 63.29787234 72.51114413 3/19/99 105.6995029 76.77224736 88.71287129 61.70212766 67.31054978 3/26/99 104.3580127 70.13574661 91.68316832 61.17021277 61.8127786 4/2/99 105.2463737 66.36500754 91.18827723 69.68085106 67.75631501 4/9/99 109.6906193 70.58823529 98.41584158 68.08510638 72.95690936 4/16/99 107.3029457 73.45399698 109.7029703 72.87234043 74.14561664 4/23/99 110.3821091 87.93363499 110.0990099 78.19148936 74.59138187 4/30/99 108.6192169 90.19607843 108.5148515 82.9787234 76.67161961 5/7/99 109.418091 99.24585219 114.0594059 85.63829787 89.59881129 5/14/99 108.8323585 100.1508296 114.0594059 84.04255319 81.57503715 5/21/99 108.2214069 104.9773756 109.7029703 87.23404255 73.69985141 5/28/99 105.9069499 95.62594268 100.1980198 78.19148936 69.24219911 6/4/99 108.0147735 101.3574661 96.23762376 82.44680851 76.07726597 6/11/99 105.2398656 92.760181 95.34669307 82.44680851 73.69985141 6/18/99 109.2423712 92.15686275 91.48514851 79.78723404 75.48291233 6/25/99 107.0027578 97.13423831 91.08910891 63.82978723 72.36255572 7/2/99 113.1781684 103.3182504 93.06930693 67.0212766 71.91679049 7/9/99 114.1592704 101.6591252 93.46534653 61.70212766 69.83655275 7/16/99 115.4202224 99.84917044 102.970297 57.44680851 62.85289747 7/23/99 110.3894308 99.24585219 99.8019802 61.17021277 66.56760773 7/30/99 108.0936847 95.92760181 86.33663366 57.44680851 66.41901932 8/6/99 105.7808547 96.83257919 85.34653465 55.31914894 56.90936107 8/13/99 108.0090789 97.13423831 89.7029703 60.63829787 55.8692422 8/20/99 108.7355499 95.173454 84.55445545 63.82978723 56.61218425 8/27/99 109.6841112 92.760181 79.00990099 61.70212766 54.08618128 9/3/99 110.4138363 93.81598793 72.87128713 60.63829787 54.23476969 9/10/99 109.9598936 92.91101056 86.33663366 57.9787234 52.45170877 9/17/99 108.6387413 86.2745098 83.96039604 57.44680851 50.07429421 9/24/99 103.9154593 81.29713424 79.20792079 54.25531915 47.84546805 10/1/99 104.3588263 81.74962293 73.26732673 54.78723404 47.25111441 10/8/99 108.6875524 81.74962293 73.26732673 51.59574468 49.92570579 10/15/99 101.4789746 80.69381599 63.36633663 50 52.74888559 10/22/99 105.891493 93.06184012 61.78217822 48.93617021 53.64041605 10/29/99 110.8767277 96.07843137 60 45.21276596 54.53194651 11/5/99 111.4705954 102.413273 66.73267327 47.87234043 58.69242199 11/12/99 113.5719109 100.7541478 61.78217822 42.55319149 57.20653789 11/19/99 115.682175 98.19004525 59.6039604 42.55319149 55.27488856 11/26/99 115.2445027 96.22926094 69.30693069 43.61702128 61.66419019 12/3/99 116.6014497 95.62594268 63.16831683 42.55319149 61.8127786 12/10/99 115.2786704 92.91101056 59.00990099 42.0212766 60.62407132 12/17/99 115.6048909 91.40271493 50.0990099 40.95744681 61.06983655 12/24/99 118.6384973 94.57013575 52.27722772 42.0212766 59.28677563 12/31/99 119.5260448 96.3800905 55.44554455 43.61702128 62.70430906 1/7/00 117.2660934 93.36349925 54.85148515 42.55319149 58.54383358 1/14/00 119.1925026 95.77677225 54.45544554 42.55319149 59.43536404 1/21/00 117.2571447 90.95022624 50.69306931 41.4893617 56.31500743 1/28/00 110.6513834 89.14027149 52.07920792 39.36170213 54.82912333 2/4/00 115.8749786 91.40271493 55.04950495 42.55319149 55.42347697 2/11/00 112.8446263 94.87179487 44.35643564 45.74468085 51.85735513 2/18/00 109.5067644 93.51432881 52.27722772 48.40425532 54.23476969 2/25/00 108.4711567 82.80542986 52.67326733 48.93617021 51.4115899 3/3/00 114.6384322 90.19607843 53.66336634 45.21276596 50.96582467 3/10/00 113.4913726 88.83861237 51.48514851 46.80851064 47.102526 3/17/00 119.1371834 91.55354449 52.07920792 45.21276596 49.33135215 3/24/00 124.2615296 92.00603318 54.25742574 45.74468085 48.88558692 3/31/00 121.9120913 91.70437406 60.1980198 54.78723404 53.19465082 4/7/00 123.3577117 94.57013575 57.22772277 50 52.897474 4/14/00 110.3585171 92.15686275 51.68316832 46.27659574 52.45170877 4/21/00 116.7023258 100.7541478 55.04950495 48.40425532 55.72065379 4/28/00 118.1577085 99.09502262 59.40594059 48.40425532 58.98959881 5/5/00 116.546944 114.3288084 61.78217822 47.87234043 59.28677563 5/12/00 115.5975692 116.2895928 59.00990099 45.21276596 58.09806835 5/19/00 114.4578313 112.2171946 57.02970297 44.68085106 54.97771174 5/26/00 112.1043255 114.0271493 35.84158416 42.55319149 53.93759287 6/2/00 120.1776722 102.2624434 34.65346535 42.0212766 57.3551263 6/9/00 118.5254184 96.22926094 36.83168317 40.42553191 52.74888559 6/16/00 119.1363699 95.5412368 31.88118812 41.4893617 50.96582467 6/23/00 117.2669069 82.05128205 28.31683168 42.55319149 49.77711738 6/30/00 118.3342418 77.22473605 35.24752475 40.42553191 51.67167905 7/7/00 120.3110891 76.6214178 37.62376238 40.42553191 57.50371471 7/14/00 122.8395012 77.37556561 37.42574257 39.36170213 59.28677563 7/21/00 120.4160328 82.20211161 36.03960396 40.95744681 58.39524517 7/28/00 115.5105228 78.28054299 36.03960396 39.89361702 61.51560178 8/4/00 119.0119018 76.16892911 38.81188119 36.17021277 63.74442793 8/11/00 119.7367458 76.77224736 40.59405941 35.10638298 63.89301634 8/18/00 121.3540184 75.86726998 44.15841584 40.95744681 61.36701337 8/25/00 122.5523295 75.56561086 42.97029703 39.89361702 59.28677563 9/1/00 123.7172864 71.94570136 43.96039604 37.76595745 57.65230312 9/8/00 121.5801762 75.11312217 44.75247525 37.23404255 61.51560178 9/15/00 119.2461948 69.68325792 44.35643564 37.76595745 55.42347697 9/22/00 117.8558935 66.36500754 42.17821782 36.17021277 52.30312036 9/29/00 116.8625888 68.02413273 38.81188119 36.70212766 51.85735513 10/6/00 114.6237889 65.46003017 35.24752475 34.57446809 52.60029718 10/13/00 111.7911213 61.38763198 27.12871287 25.53191489 46.35958395 10/20/00 113.6426869 55.50527903 23.76237624 23.40425532 47.84546805 10/27/00 112.2312342 55.50527903 23.36633663 21.27659574 47.99405646 11/3/00 116.0637147 57.31523379 22.97029703 22.34042553 51.56017831 11/10/00 111.1248505 61.6892911 23.16831683 21.27659574 48.73699851 11/17/00 111.2664025 64.70588235 22.57425743 16.4893617 52.15453195 11/24/00 109.1553249 67.26998492 20 18.61702128 52.897474 12/1/00 106.9962497 67.11915535 20 18.61702128 58.69242199 12/8/00 111.4429358 58.67269985 20.72079208 19.14893617 61.06983655 12/15/00 106.7456863 66.5158371 20.62574257 19.57446809 59.28677563 12/22/00 106.2429326 72.85067873 19.51683168 18.29787234 60.17830609 12/29/00 107.407076 78.28054299 23.73069307 18.89361702 65.08172363 1/5/01 105.6230323 73.90648567 27.53267327 21.27659574 70.28231798 1/12/01 107.2476266 77.07390649 26.55049505 21.10638298 73.40267459 1/19/01 109.2187792 80.09049774 30.57425743 21.27659574 71.32243685 1/26/01 110.2275408 81.74962293 28.54653465 27.23404255 71.76820208 2/2/01 109.7817333 86.87782805 28.16633663 26.38297872 75.9346211
GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 15 SPRINGS INDUSTRIES INC. Recent Trading Volume Analysis (through 02/09/01) - - THERE HAS BEEN RELATIVELY LITTLE TRADING OF SPRINGS' STOCK ABOVE THE $34 TO $35 DOLLAR RANGE IN THE LAST SIX MONTHS THREE MONTH TRADING VOLUME PER STOCK PRICE RANGE [BAR CHART]
Stock Price Range % of Trading Volume ----------------- ------------------- 22-23 7% 24-25 12% 26-27 39% 28-29 12% 30-31 14% 32-33 8% 34-35 3% 36-37 3% 38-39 0% 40-41 0% 42-43 0% 44-45 0% 46-47 0%
SIX MONTH TRADING VOLUME PER STOCK PRICE RANGE [BAR CHART]
Stock Price Range % of Trading Volume ----------------- ------------------- 22-23 13% 24-25 11% 26-27 33% 28-29 14% 30-31 19% 32-33 6% 34-35 2% 36-37 2% 38-39 0% 40-41 0% 42-43 0% 44-45 0% 46-47 0%
PERIODIC TRADING VOLUME AT OR ABOVE VARIOUS STOCK PRICES ----------------------------------- $ 40 $ 42 $ 44 ------- ------- ------- One Year 17.9% 13.5% 11.1% Two Year 23.3% 13.5% 7.6%
ONE YEAR TRADING VOLUME PER STOCK PRICE RANGE [BAR CHART]
Stock Price Range % of Trading Volume ----------------- ------------------- 22-23 6% 24-25 5% 26-27 16% 28-29 7% 30-31 14% 32-33 12% 34-35 8% 36-37 10% 38-39 5% 40-41 4% 42-43 2% 44-45 9% 46-47 2%
TWO YEAR TRADING VOLUME PER STOCK PRICE RANGE [BAR CHART]
Stock Price Range % of Trading Volume ----------------- ------------------- 22-23 4% 24-25 2% 26-27 11% 28-29 7% 30-31 9% 32-33 11% 34-35 9% 36-37 8% 38-39 16% 40-41 10% 42-43 6% 44-45 1% 46-47 6% 48-49 1%
GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 16 SPRINGS INDUSTRIES INC. Valuation Synopsis
Public Market Trading Parameters Discounted Cash Relative to (1): Flow Valuation - ------------------------------------------- ------------------------------ Revenues EBIT P/E Base Case Downside Case - ------------- ------------- ------------- ------------- ------------- $32.33-$44.50 $33.89-$41.62 $35.24-$39.00 $53.31-$71.72 $40.45-$55.00 0.4x - 0.5x 6.5x - 7.5x 9.0x - 10.0x
(1) Does not include premium for change of control GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 17 SPRINGS INDUSTRIES INC. EBITDA Multiples and Margins
EBITDA MULTIPLES AT VARIOUS STOCK PRICES ---------------------------------------------------------- $ 36 $ 38 $ 40 $ 42 $ 44 $ 46 ---- ---- ---- ---- ---- ---- 2000 EBITDA 3.9 4.0 4.2 4.3 4.5 4.6 2001E EBITDA 3.8 3.9 4.0 4.2 4.3 4.5
- - EBITDA MULTIPLES ARE THE MOST COMMONLY REFERENCED VALUATION PARAMETERS ACROSS MANY INDUSTRIES. HOWEVER, THIS INDICATOR IGNORES THE RELATIVE LEVEL OF CAPITAL SPENDING REQUIRED TO SUPPORT THE EBITDA GENERATION. THE NEXT PAGE LOOKS AT EBIT MULTIPLES, WHICH INCLUDE DEPRECIATION AS ONE PROXY OF RELATIVE CAPITAL SPENDING QUARTERLY LTM EBITDA MULTIPLES [BAR CHART]
SMI WXS 1Q98 6.44 10.08 2Q98 6.22 10.63 3Q98 5.14 9.86 4Q98 5.82 9.81 1Q99 4.25 8.84 2Q99 5.38 9.16 3Q99 4.37 7.99 4Q99 4.45 6.97 1Q00 4.51 7.07 2Q00 3.70 6.34 3Q00 3.29 6.50 4Q00 3.57 6.44
COMPARATIVE ENTERPRISE VALUE TO EBITDA [BAR CHART]
1999A 2000E 2001P Springs 4.2 3.9 3.7 Dan River 4.8 4.8 4.6 Mohawk 5.8 5.8 5.9 WestPoint Stevens 5.8 6.6 6.2
COMPARATIVE COMPOUND ANNUAL GROWTH RATES (1999-2001) [BAR CHART]
Springs Dan River Mohawk WestPoint Stevens Revenues 1.70% 4.20% 0.03% 1.80% EBITDA 5.30% 1.80% -0.03% -3.50%
COMPARATIVE EBITDA MARGIN [BAR CHART]
Springs Dan River Mohawk WestPoint Stevens 1999 10.60% 14.70% 1.3% 18.70% 2000E 11.10% 14.00% 12.3% 17.10% 2001P 11.40% 14.00% 11.2% 16.80%
GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 18 SPRINGS INDUSTRIES INC. EBIT Multiples and Margins
EBIT MULTIPLES AT VARIOUS STOCK PRICES - -------------------------------------------------------------------------------- $ 36 $ 38 $ 40 $ 42 $ 44 $ 46 ----- ----- ----- ----- ----- ----- 2000 EBIT 6.8 7.0 7.3 7.6 7.8 8.1 2001E EBIT 6.5 6.7 7.0 7.2 7.5 7.7
QUARTERLY LTM EBIT MULTIPLES [BAR CHART]
SMI WXS 1Q98 10.79 13.69 2Q98 10.91 14.31 3Q98 9.81 13.15 4Q98 11.01 12.99 1Q99 7.93 11.74 2Q99 9.74 12.14 3Q99 7.80 10.48 4Q99 7.73 9.15 1Q00 7.64 9.21 2Q00 6.07 8.15 3Q00 5.44 8.42 4Q00 6.26 8.71
COMPARATIVE ENTERPRISE VALUE TO EBIT MULTIPLES [BAR CHART]
1999A 2000E 2001P Springs Industries 7.4 6.8 6.5 Dan River 8.8 8.5 8.3 Mohawk 7.9 7.3 8.0 WestPoint Stevens 7.7 8.9 8.2
COMPARATIVE COMPOUND ANNUAL GROWTH RATES (1999-2001) [BAR CHART]
Revenues EBIT Springs 1.70% 6.20% Dan River 4.20% 3.30% Mohawk 3.7% -3.5% WestPoint Stevens 1.80% -3.50%
COMPARATIVE EBIT MARGIN [BAR CHART]
1999A 2000A 2001P Springs 6.00% 6.40% 6.60% Dan River 8.10% 7.90% 7.90% Mohawk 9.6% 9.7% 8.3% WestPoint Stevens 14.20% 12.60% 12.80%
GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 19 SPRINGS INDUSTRIES INC. Valuation Relative to Revenues and EPS
P/E RATIO AT VARIOUS STOCK PRICES ------------------------------------------------------------- $ 36 $ 38 $ 40 $ 42 $ 44 $ 46 ----- ----- ------ ------ ------ ------ 2000 EPS 9.2 9.7 10.3 10.8 11.3 11.9 2001E EPS 9.2 9.8 10.3 10.8 11.4 11.9
COMPARATIVE EBIT MARGIN [BAR CHART]
1999A 2000A 2001P Springs 6.00% 6.40% 6.60% Dan River 8.10% 7.90% 7.90% Mohawk 9.6% 9.7% 8.3% WestPoint Stevens 14.20% 12.60% 12.80%
EPS GROWTH AND NET INCOME MARGINS [BAR CHART]
EPS CAGR 1999-2001 Ave. Net Margins 1999-2000 Springs Industries 0.30% 3.10% Dan River -10.00% 1.90% Mohawk 2.7% 4.9% WestPoint Stevens -10.30% 4.30%
ENTERPRISE VALUE TO REVENUES [BAR CHART]
1999 2000A 2001P Springs 0.4 0.4 0.4 Dan River 0.7 0.6 0.6 Mohawk 0.7 0.7 0.6 WestPoint Stevens 1.1 1.1 1.0
PRICE TO EARNINGS RATIO [BAR CHART]
1999 2000E 2001P Springs 9.5 9.4 9.3 Dan River 4.1 5.6 5.7 Mohawk 10.8 10.2 11.1 WestPoint Stevens 4.2 5.8 5.9
GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 20 SPRINGS INDUSTRIES INC. Section 4 -- Review of Alternatives GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT -20- 21 SPRINGS INDUSTRIES INC. Summary of Alternatives STATUS QUO Implementation of the company's existing strategic plan absent a leveraged buyout, material share repurchase, sale of the company or active acquisition program. Both the family and the public shareholders would retain their existing ownership of the company, which would remain public. SHARE REPURCHASE Share repurchases of various sizes are open to the company to effect from its own balance sheet without new investors. Unlike the recapitalization alternative, the family would neither confront the governance complexities nor enjoy the qualitative capabilities that a new investor would bring. A repurchase program in the $75 million range could likely be effected without any refinancing of the company's existing debt, saving the company the associated fees and expenses of refinancing its entire existing bank facility. Alternatively, a larger repurchase program, in the neighborhood of $150 million, would require the company to refinance its lending agreements. LEVERAGED RECAP The family takes the company private, either alone or with a new investor, and operates it privately for a period of time (five years on average) prior to an eventual exit through the public markets, through a sale to third party or through some other exit transaction such as another leveraged recap. Financial leverage would increase in either case (with the increase materially greater in the go-it-alone scenario), though the company's low leverage presently would allow it to incur a substantial amount of transaction-related debt and still be underlevered relative to its major competitors. Qualitative considerations dictate whether a go-it-alone strategy is more attractive than bringing in a new equity investor. With a partner, governance complexity increases, but so does the company's market profile and ability to attract and retain key senior executives. The partner would participate actively with senior management in the decision-making framework at the company, bringing its experience and other management capabilities to bear in helping management implement its business strategy. SALE OF COMPANY The family could put the company up for auction, intending to exit its investment. This method of exit is unlikely to be viable from an economic perspective, however, as there are believed to be no U.S. or foreign buyers willing or reasonably capable of acquiring the company for a total enterprise value in the range currently being considered by Heartland. Moreover, no financial buyers other than Heartland have expressed interest in acquiring even a minority position in Springs at those values. Additionally, this alternative would involve the family ceding total control over the company and its operations as well as the potential upside in value to a third party. GROWTH THROUGH ACQUISITION There exist a number of acquisition opportunities the company could pursue in lieu of, or in addition to, the alternatives presented above, and the company's low financial leverage make it perhaps the only competitor in the home textiles industry that could implement a sizable acquisition strategy. In terms of acquisition targets, Pillowtex is an obvious candidate whose business complements that of Springs well, but its recent bankruptcy filing and pending reorganization are expected to make any sizeable transaction unlikely in the near-term. Even then a transaction could be complicated and risky given the volatility and weakness in Pillowtex's operations. WestPoint Stevens is also unlikely for antitrust reasons. More likely is a roll-up strategy in which the company acquires smaller, niche players (of which there are many in the industry) to enhance its product offerings or acquire relationships and experience, such as in foreign sourcing. GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT -21- 22 SPRINGS INDUSTRIES INC. COMPARATIVE SHARE OWNERSHIP $46 RECAP Family Shares 6.24MM Heartland Shares 5.44MM Shares Repurchased 6.60MM Family Ownership 53.4% Heartland Ownership 46.6% Family Value $311.9MM Heartland Value $250.0MM
- - NUMBERS IN WHITE DENOTE THE PERCENTAGE OF OUTSTANDING SHARES OWNED BY THE FAMILY AS OF THE CLOSING SHARES OUTSTANDING UNDER VARIOUS ALTERNATIVES [BAR GRAPH]
Rolled Publicly Purchased Repurchased % Owned by Family Over by Family Held by Heartland from Public As of Closing Status Quo (1) 7.3 10.6 $75MM Repurchase at $38 (1) 7.3 8.6 2 40.9% $150MM Repurchase at $40 (1) 7.3 6.8 3.8 45.9% Heartland Recap at $46 6.2 5.4 6.6 51.7% Family LBO at $46 7.3 0 10.9 53.4% 100%
GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT -22- 23 SPRINGS INDUSTRIES INC. COMPARATIVE LEVERAGE - - THE LEVEL OF DEBT TO EBITDA (CASH FLOW) IS THE MOST COMMONLY USED INDICATOR OF FINANCIAL LEVERAGE. INVESTMENT GRADE CREDITS (BBB) WOULD GENERALLY BE LOW -- APPROXIMATELY 2.75X DEBT TO TRAILING EBITDA - - CURRENT LENDING CONDITIONS MAY PRECLUDE A FAMILY-LED LBO AT DEBT LEVELS AT OR ABOVE 3.0X EBITDA - - GENERALLY, HIGHER LEVERAGE LEVELS ARE AVAILABLE WHEN A WELL-KNOWN FINANCIAL INVESTOR ACTS AS A "SPONSOR" OF A TRANSACTION - - EVEN THOUGH THE LEVERAGE LEVELS CONTEMPLATED ARE SIGNIFICANTLY BELOW THOSE OF ITS THREE PRIMARY COMPETITORS, CUSTOMERS MAY REACT NEGATIVELY TO A HIGHLY-LEVERAGED PLATFORM FOR SPRINGS DEBT TO 2000 EBITDA -- PRO FORMA AS OF 12/31/00 [BAR GRAPH]
Family Dan River 4 WestPoint Stevens 5.3 Status Quo 1.3 $75MM Repurchase at $38 1.6 $150MM Repurchase at $40 2 HIP Recap at $46 2.7 HIP Recap at $46 (w/ Growth) (1) 2.7 Family LBO at $46 3.4
DEBT TO EBITDA (Heartland Recap at $46) [BAR GRAPH]
Base Downside Case Case 2000PF 2.7 2.7 2001P 2.3 2.4 2002P 1.8 2.1 2003P 1.3 1.7 2004P 1 1.5 2005P 0.6 1.1
(1) Assumes HIP acquisition strategy is pursued GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT -23- 24 SPRINGS INDUSTRIES INC. COMPARATIVE EXPENSES - - Heartland fees are at the high end of the range for investment firms - A 1% transaction fee is common, but normally this is for an investment for approximately 80% of the equity versus half that amount - A $4 million management fee is high; normal fee would be $1-2 million - - To offset these amounts, an annual fee of $3.0 million was negotiated for the benefit of the family. ONE-TIME TRANSACTION EXPENSES
$150MM SHARE $75MM SHARE Heartland Family Repurchase Repurchase Status Recap at $46 LBO at $46 at $40 at $38 Quo --------------- --------------- --------------- --------------- --------------- Heartland (1%) $ 11.7 $ -- $ -- $ -- $ -- Chase / Banks (2.5%) 16.9 22.3 12.4 -- -- CRT (0.5%) 5.9 5.9 0.8 0.4 -- Special Committee Banker 2.0 2.0 -- -- -- Legal 5.0 5.0 0.5 0.3 -- --------------- --------------- --------------- --------------- --------------- TOTAL $ 41.5 $ 35.2 $ 13.6 $ 0.6 $ -- =============== =============== =============== =============== ===============
ANNUAL MONITORING FEES (Heartland Recap Only) Heartland $ 4.0 Family $ 3.0 --------------- Total $ 7.0 =============== GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT -24- 25 SPRINGS INDUSTRIES INC. Comparative Returns - - THE HIGH POINT OF THE RANGE IN EACH COLUMN TO THE RIGHT REPRESENTS AN ASSUMED EXIT MULTIPLE OF 5.0X EBITDA; THE LOWER END OF THE RANGE REPRESENTS AN ASSUMED EBITDA MULTIPLE OF 4.0X - - THE PERIOD UNTIL EXIT IS ASSUMED TO BE FIVE YEARS - - THE TOP TWO RETURN CHARTS SHOW RELATIVE RETURN LEVELS WHICH ARE GENERALLY EMPLOYED IN DECIDING TO INVEST OR NOT INVEST IN A SITUATION. IN THE CASE OF THE CLOSE FAMILY, THE RETURN LEVELS WOULD INFLUENCE THE DECISION TO KEEP MONEY IN THE COMPANY OR TO TAKE MONEY OUT AT THE PRICE INDICATED. - - THE TWO CHARTS AT THE BOTTOM SHOW THE COMPARATIVE RETURNS ASSUMING THE INVESTOR CHOOSES TO KEEP MONEY IN THE COMPANY AND IS EVALUATING ALTERNATIVE STRATEGIES TO ENHANCE SHAREHOLDER VALUE BASE CASE RETURNS (Five-Year) [BAR GRAPH]
Status Quo 23% - 28% $75MM Repurchase at $38 23% - 28% $150MM Repurchase at $40 23% - 28% HIP Recap at $46 21% - 28% HIP Recap at $46 (w/ Growth) (1) 29% - 36% Family LBO at $46 26% - 36%
DEBT TO EBITDA MULTIPLE
Status Quo 1.3x $75MM Repurchase at $38 1.6x $150MM Repurchase at $40 2.0x HIP Recap at $46 2.7x HIP Recap at $46 (w/ Growth) (1) 2.7x Family LBO at $46 3.4x
BASE CASE RETURNS (Five-Year -- Assuming $36 Starting Investment Value) [BAR GRAPH]
Status Quo 23% - 28% $75MM Repurchase at $38 25% - 30% $150MM Repurchase at $40 26% - 31% HIP Recap at $46 27% - 33% HIP Recap at $46 (w/ Growth) (1) 35% - 43% Family LBO at $46 32% - 40%
DOWNSIDE CASE RETURNS (Five-Year) [BAR GRAPH]
Status Quo 17% - 22% $75MM Repurchase at $38 16% - 21% $150MM Repurchase at $40 16% - 21% HIP Recap at $46 12% - 18% HIP Recap at $46 (w/ Growth) (1) 21% - 29% Family LBO at $46 15% - 8%
DEBT TO EBITDA MULTIPLE
Status Quo 1.3x $75MM Repurchase at $38 1.6x $150MM Repurchase at $40 2.0x HIP Recap at $46 2.7x HIP Recap at $46 (w/ Growth) (1) 2.7x Family LBO at $46 3.4x
DOWNSIDE CASE RETURNS (Five-Year -- Assuming $36 Starting Investment Value) [BAR GRAPH]
Status Quo 17% - 22% $75MM Repurchase at $38 18% - 23% $150MM Repurchase at $40 18% - 23% HP Recap at $46 18% - 25% HP Recap at $46 (w/ Growth) (1) 28% - 36% Family LBO at $46 20% - 29%
(1) Assumes HIP acquisition strategy is pursued GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT -25- 26 SPRINGS INDUSTRIES INC. Net Present Value Per Share APPROXIMATE MARKET RATES OF RETURN RELATIVE TO FINANCIAL LEVERAGE [BAR GRAPH]
Debt to EBITDA Expected IRR 1 12% - 15% 1.5 14% - 16% 2 16% - 18% 2.5 19% - 21% 3 24% - 26% 3.5 29% - 31%
NET PRESENT VALUE PER SHARE AT 4.5X EBITDA ---------------------------------------------------------------------------- NPV PER SHARE (adjusted for relative NPV AT 15% RETURN @ RETURN financial risk) --------------------- PARAMETER --------------------- ALTERNATIVE LEVERAGE BASE DOWNSIDE REQUIRED BASE DOWNSIDE - ----------- -------- ---- -------- -------- ---- -------- Status Quo 1.31x $54.61 $42.38 13.0% $59.44 $46.08 $75MM Repurchase at $38 1.61x $58.34 $44.56 15.0% $58.34 $44.56 $150MM Repurchase at $40 1.95x $61.82 $46.32 17.0% $56.87 $42.65 Recap at $46 2.67x $65.99 $47.17 21.0% $51.73 $37.13 Recap at $46 (w/ Growth) 2.67x $90.41 $69.27 25.0% $60.40 $41.46 Family LBO at $46 3.43x $84.82 $54.82 30.0% $45.95 $29.70
NPV PER SHARE AT 4.5X EBITDA -- CAPITAL ASSET PRICING MODEL DISCOUNT RATES ---------------------------------------------------------------------------- Status Quo 10.4% $66.69 $51.67 $75MM Repurchase at $38 10.8% $69.91 $53.30 $150MM Repurchase at $40 13.2% $66.75 $49.97 Recap at $46 14.4% $67.55 $48.26 Recap at $46 (w/ Growth) 14.4% $92.56 $70.90 Family LBO at $46 18.7% $72.39 $46.79
GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT -26- 27 SPRINGS INDUSTRIES INC. Impact of Alternative Strategies on Acquisition Borrowing Capacity - - HEARTLAND HAS TENTATIVELY AGREED TO INVEST APPROXIMATELY $50 MILLION IN ADDITIONAL EQUITY TO SUPPORT ACQUISITIONS - - THE BORROWING CAPACITY WITH THE SPONSORSHIP OF A RECOGNIZED FINANCIAL INVESTOR MAY BE GREATER THAN FOR THE COMPANY ON ITS OWN ACQUISITION BORROWING CAPACITY AT DECEMBER 2000 (1) [BAR GRAPH]
Incremental Base Borrowing Additional Borrowing Capacity HIP Equity at 3.5x EBITDA Status Quo 856.9 $75MM Repurchase at $38 706.9 $150MM Repurchase at $40 532.1 HIP Recap at $46 210.4 50 338
ACQUISITION BORROWING CAPACITY AT DECEMBER 2002 (1) [BAR GRAPH]
Marginal Base Borrowing Additional Borrowing Capacity HIP Equity to 3.5x EBITDA Status Quo 1,420.40 $75MM Repurchase at $38 1,263.00 $150MM Repurchase at $40 1,079.50 HIP Recap at $46 498.3 50 499.2
TOTAL DEBT (Recap at $46 With and Without Growth) [BAR GRAPH]
Heartland Heartland Recap Recap at $46 w/ at $46 Growth 2000PF 678.2 678.2 2001P 594.6 646 2002P 551.3 751.9 2003P 459.1 792.1 2004P 355.8 858.7 2005P 215.3 645.4
DEBT TO EBITDA (Recap at $46 With and Without Growth) [BAR GRAPH]
Heartland Heartland Recap Recap at $46 w/ at $46 Growth 2000PF 2.67 2.67 2001P 2.26 2.39 2002P 1.84 2.05 2003P 1.31 1.62 2004P 0.96 1.49 2005P 0.55 1.03
(1) The amount of debt that could be incurred in connection with acquisitions while leaving the pro forma ratio of debt to EBITDA at or below 3.0x. The red portion in the Heartland case shows the additional borrowing capacity that might be obtained by extending the borrowing level to 3.5x EBITDA, while the yellow portion represents $50 million of additional equity from Heartland. GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT -30- 28 SPRINGS INDUSTRIES INC. EFFORTS TO ATTRACT ALTERNATE PRIVATE EQUITY INVESTORS HAVE BEEN UNSUCCESSFUL - - Each of these private equity firms was approached regarding the opportunity to invest in Springs on terms similar to Heartland's, but each declined for the reasons mentioned - - * reviewed the opportunity with CRT, but declined the opportunity to meet with management - - * was conflicted in looking at Springs as it was still actively considering an investment in WestPoint Stevens - - * was the only firm that expressed interest in Springs, but it did so at price levels significantly below that offered by Heartland - - * Investment Committee Memorandum, summarizing its opinion of the Springs opportunity, is attached as Appendix C - - * declined to consider investing in Springs unless it could acquire at least 80% of the equity * - - M&A advisory and private equity firm founded in 19* and led by * - - * million private equity fund - - Close advisory relationships with * - - Conducted intensive due diligence over short time frame in January. * continues to express interest in the company and the sector, but believes that the appropriate value is in the * range (see * Investment Committee memorandum attached as Appendix C). Further, in order to achieve mid-30% returns, * would propose levering the company to the 3.0x EBITDA level * PARTNERS - - Presently has * billion in capital under management, including $2.5 billion in * IV.L.P., has made * investments totalling approximately * billion since 1988 - - * has invested in such companies as * - - After meetings with management and R. Lee, declined to invest based on an unfavorable view of the home textiles industry * - - Founded in 19* has * billion in committed capital from * - - Previously investments include * - - After meetings with management and Credit Research & Trading, declined to invest based on the breadth of initiatives required to deliver the projected performance * - - Invested more than * billion in * companies since 1980; presently investing * IV.L.P., a * billion private equity fund - - Previously investments include such companies as * - - After meetings with management and Credit Research & Trading, declined to invest based on an unfavorable view of the home textiles industry GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT * Omitted and filed separately with the Commission. -31- 29 SPRINGS INDUSTRIES INC. NO STRATEGIC BUYERS ARE POSITIONED TO EFFECT A MAJOR ACQUISITION IN THE HOME TEXTILES INDUSTRY - - None of Springs' U.S. competitors have both the size and financial flexibility necessary to acquire Springs - - WestPoint Stevens and Pillowtex are of sufficient revenue scale to contemplate such a transaction with Springs, but each lacks the financial strength required to do so - - All other home textiles competitors are essentially niche players - - There are believed to be no foreign or non-industry acquirors looking to enter the U.S. home textiles industry - - Management of Newell, the largest company focused on supplying big box retailers, has categorically stated they are not interested in the home textiles sector - - Mohawk has been rumored to be interested in expanding into this sector, but has yet to surface in any acquisition situation in the sector other than rugs. Mohawk is primarily focused on a well-publicized, strategic move into hard flooring 1999 Sales of U.S. Home Textiles Companies ($ Millions) [BAR CHART]
Sales ----- Springs $2,220 WestPoint $1,868 Pillowtex $1,552 Mohawk $ 470 Dan River $ 432 Crown Craft $ 310 Burlington $ 300 Croscill $ 283 PCF $ 230 Glenoit $ 222 Hollander $ 201 Maples $ 160 Louisville $ 156 Revman $ 141 Sunbeam $ 136 Keeco $ 132
Equity P/E Debt/ Revenues Value Ratio EBITDA -------- ----- ----- ------ WestPoint Stevens $1,815.9 $ 433.8 5.9x 5.3x Mohawk 3,255.8 1,595.6 11.1x 1.5x Newell 6,413.3 7,501.2 12.6x 1.9x Springs 2,275.1 650.5 9.3x 1.3x
GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT -32- 30 SPRINGS INDUSTRIES INC. EXIT STRATEGIES - - One advantage of being private is the ability to execute acquisitions which tend to be dilutive to earnings in the first year or two. The strategy for consolidation "plays" is to build a base while private and slow the acquisition pace just before going to the market to realize value EXIT MECHANISMS - - IPO This is the primary exit alternative for Heartland; Heartland's primary thesis is that it can obtain multiple expansion by building scale in a platform company through the combination of acquisitions and internal growth. That said, the market for consumer-based IPOs has been weak for several years, being crowded out by higher-growth or much larger capitalization situations. - - SALE There does not appear to be any logical industry candidates at this time. This may change over the course of five years, but should not be counted on. (Sale to another financial buyer falls into the category of leveraged recapitalization) - - LEVERAGED RECAPITALIZATION This is a very logical and often-used mechanism to extract value -- borrowing against a strong company and using the proceeds to repurchase shares. This can be done without changing the ownership level. Sometimes this strategy can be pursued with a new equity source, particularly when the amount of funds desired is large relative to the capital structure or when one party seeks to exit. EXIT TIMING - - FIRST THREE YEARS Both parties have agreed tentatively not to pursue exit alternatives for the first three years - - IPO Can be pursued at the instigation of either party after three years - - RECAPITALIZATION OR SALE Can be pursued at the instigation of either party after the fifth year if the company has not sold at least 20% of the stock into the public market GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT -33- 31 SPRINGS INDUSTRIES INC. SECTION 5 -- ISSUES RELATED TO HEARTLAND - - David Stockman's level of involvement D. Stockman appears very competent, very enthusiastic and has worn well on the management team to date, even through an extensive due diligence process. David's personal involvement is a core attraction of Heartland as a partner. Possibly his involvement could wane as he spreads himself across more investments. - - Heartland will push C. Bowles to aggressively improve the quality of management. L. Close is generally in agreement and the assumption is that involvement by an outside investor should enhance the prospects of attracting stronger candidates. - - There exists some concern about the balance between D. Stockman's ardor for growth through acquisitions and the reasonable pace for digestion by the company. On its own, Springs would need to materially expand the scope of its management team to pursue acquisitions. Heartland immediately bridges part of this gap through its own expertise. Springs' current acquisition capacity is approximately one every two years. However, Heartland may be interested in one to two transactions per year. Even though Heartland has the capacity, Springs may be strained to integrate acquisitions at that rate. - - D. Stockman has a reputation of relying very heavily on the information presented (often generated at his direction) and can thus drive toward poor decisions if the information is not correct or not pertinent. Effective utilization of D. Stockman's strengths requires strong input from management to make sure the critical information is at hand and requires strong input from the Close family board members to push back against D. Stockman's approach in selected situations. He has demonstrated the capacity to modify his approach very efficiently when presented with better information. RELATED TO PRICING AND STRUCTURE - - The risk return trade off leads investor to desire less equity in order to obtain better returns. The contra to this is enough equity to support acquisitions. Heartland has offered to invest to the same level as the Close family. We have asked them to invest less in order to improve returns. The expectation is that leverage of 2.5x EBITDA going in at the start should be sufficient to support a reasonable acquisition program (1-2 deals per year in the $100-$200 million range). A Pillowtex transaction would be beyond the initial resources and require additional equity. Heartland has requested an option to invest additional equity if the Company (Close family agreement needed here) needs it. We have recently turned this around to request a "call" on that equity and expect Heartland to agree. - - The high price required to take the company private versus buying a block of shares at a lower price, together with the low level of leverage, dampens returns to both sides. This puts a burden on the partnership to assume that Heartland brings qualitative factors which would enhance the returns versus a stand alone approach. This might come from the following: -- Hands-on active involvement by the Heartland Board members vs. hands-off involvement by Springs' current Board members may lead to more dynamic change and accountability throughout the organization -- Significant expansion of management information system and tools -- Assistance in pursuing and executing acquisition-based growth strategy -- Value accretion that comes from successful execution of a growth strategy -- Expertise and assistance in the value realization process GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 32 SPRINGS INDUSTRIES INC. SUMMARY ASSESSMENT OF TRANSACTION WITH HEARTLAND BENEFITS - - Partnership with Heartland would represent a major change in the management and direction of Springs -- Heartland will bring an intense set of resources and expectations to the table, directed to help the company achieve a clear leadership position in its industry - - Heartland brings the experience and resources to help the company take advantage of the potential to lead a consolidation of the home textiles sector - - Taking the company private will allow the company to pursue strategic directions which would be difficult as a public company - - Taking the company private, together with successful execution of a growth strategy, will allow the family and Heartland to take advantage of any improvement in valuation parameters (multiple expansion) -- We have modeled exit values at 4.0x to 5.0x EBITDA. Heartland expects exit multiples to be in the 5.5x to 6.5x range - - Heartland's involvement should enhance the company's ability to: -- Attract senior-level management -- Access capital more aggressively ISSUES - - Any financial investor will push management to achieve the company's potential. This may place considerably more pressure on the entire senior management team, including C. Bowles. - - The premium required to take the company private versus a share buyback, together with a conservative capital structure, affects the returns. In order to achieve materially better returns, either the capital structure needs to be levered up or the company needs to realize a qualitative benefit from partnering with Heartland -- either through effecting a growth strategy or through assisting management in effecting an improvement in the company's competitive position and economics. GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 33 SPRINGS INDUSTRIES INC. APPENDIX A -- COMPARABLE PUBLIC COMPANY ANALYSIS GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 34 COMPARABLE PUBLIC COMPANY ANALYSIS Textile and Apparel Companies (figures in millions, except per share numbers and where noted)
SPRINGS INDUSTRIES WESTPOINT STEVENS DAN RIVER MOHAWK INDUSTRIES ------------------ ----------------- --------- ----------------- Ticker Symbol SMI WXS DRF MHK LTM Period Ended: 12/31/00 12/31/00 09/30/00 12/31/00 Stock Price as of 2/9/01 $36.28 $8.75 $2.93 $29.41 Primary Shares Outstanding 17.931 49.577 21.766 54.255 MARKET CAPITALIZATION $650.5 $433.8 $63.8 $1,595.6 In the Money Options Outstanding 0.763 0.000 0.000 1.752 Weighted Average Exercise Price $32.40 $0.00 $0.00 $16.62 Option Shares (Treasury Method) 0.1 0.0 0.0 0.8 Other Common Share Equivalents 0.0 0.0 0.0 0.0 FD Shares Outstanding (1) 18.0 49.6 21.8 55.0 EQUITY VALUE $653.5 $433.8 $63.8 $1,618.0 - ----------------------------------------------------------------------------------------------------------------------------- (-) Cash & equivalents $2.9 $0.2 $3.2 $0.0 (-) Equity in Unconsolid. Affil. 0.0 0.0 0.0 0.0 (+) Total Debt (2) 333.2 1,627.8 389.5 589.8 (+) Preferred Stock (3) 0.0 0.0 0.0 0.0 (+) Minority Interest 0.0 0.0 0.0 0.0 AGGREGATE VALUE (4) $983.8 $2,061.5 $450.1 $2,207.9 - -----------------------------------------------------------------------------------------------------------------------------
AGGREGATE VALUATIONS: -------------------- Revenues: 1999A 0.44x 1999A 1.09x 1999A 0.72x 1999A 0.72x LTM 0.43 LTM 1.14 LTM 0.70 LTM 0.68 2000A 0.43 2000A 1.14 2000A 0.68 2000A 0.68 2001P 0.43 2001P 1.06 2001P 0.66 2001P 0.67 - ---------------------------------------------------------------------------------------------------------------------------------- EBITDA: 1999A 4.18x 1999A 5.85x 1999A 4.86x 1999A 5.52x LTM 3.88 LTM 6.64 LTM 4.62 LTM 5.53 2000A 3.88 2000A 6.64 2000A 4.84 2000A 5.53 2001P 3.77 2001P 6.29 2001P 4.69 2001P 5.97 - ---------------------------------------------------------------------------------------------------------------------------------- EBIT: 1999A 7.34x 1999A 7.69x 1999A 8.86x 1999A 7.49x LTM 6.81 LTM 8.98 LTM 7.92 LTM 6.96 2000A 6.81 2000A 8.98 2000A 8.56 2000A 6.96 2001P 6.51 2001P 8.25 2001P 8.31 2001P 8.04
EQUITY VALUATION: ---------------- Net Income (EPS): 1999A 9.39x 1999A 4.17x 1999A 4.34x 1999A 10.29x LTM 9.28 LTM 6.50 LTM 4.25 LTM 9.69 2000A 9.28 2000A 6.50 2000A 5.92 2000A 9.69 2001P 9.32 2001P 5.92 2001P 5.75 2001P 11.11 - ---------------------------------------------------------------------------------------------------------------------------------- Book Equity: MRQ 0.80x MRQ -0.61x MRQ 0.23x MRQ 2.14x - ----------------------------------------------------------------------------------------------------------------------------------
(1) FD shares outstanding includes in-the-money options and convertibles calculated based on weighted average exercise price (2) Includes ST and LT debt, out-of-the-money convertibles, capitalized leases (3) Includes out-of-the-money convertibles (4) Aggregate value includes equity value plus LT debt, ST debt, capitalized leases, preferred stock, out-of-the-money convertibles, and minority interest, less equity investments in unconsolidated affiliates and cash & equivalents ================================================================================ CREDIT RESEARCH & TRADING LLC 35 COMPARABLE PUBLIC COMPANY ANALYSIS Textile and Apparel Companies (figures in millions, except per share numbers and where noted) - --------------------------------------------------------------------------------
SPRINGS INDUSTRIES WESTPOINT STEVENS -------------------------------------------------- -------------------------------------------------- Margins: 3yr CAGR: Margins: 3yr CAGR: -------- --------- -------- --------- REVENUES: 1998A $2,180.5 1998A $1,779.0 1999A 2,220.4 1999A 1,883.3 LTM 2,275.1 LTM 1,815.9 2000A 2,275.1 2000A 1,815.9 2001P 2,298.0 1.8% 2001P 1,953.2 3.2% - -------------------------------------------------------------------------------------------------------------------------------- EBITDA: 1998A $ 191.5 8.8% 1998A $ 328.9 18.5% 1999A 235.3 10.6% 1999A 352.2 18.7% LTM 253.5 11.1% LTM 310.3 17.1% 2000A 253.5 11.1% 2000A 310.3 17.1% 2001P 261.1 11.4% 10.9% 2001P 327.9 16.8% -0.1% - -------------------------------------------------------------------------------------------------------------------------------- EBIT: 1998A $ 104.5 4.8% 1998A $ 248.3 14.0% 1999A 134.0 6.0% 1999A 268.1 14.2% LTM 144.5 6.4% LTM 229.5 12.6% 2000A 144.5 6.4% 2000A 229.5 12.6% 2001P 151.1 6.6% 13.1% 2001P 249.9 12.8% 0.2% - -------------------------------------------------------------------------------------------------------------------------------- CAPEX: 1998A $ 115.0 5.3% 1998A $ 147.5 8.3% 1999A 166.8 7.5% 1999A 148.6 7.9% LTM 93.0 4.1% LTM 76.7 4.2% 2000A 93.0 4.1% 2000A 76.7 4.2% 2001P 110.0 4.8% -1.5% 2001P 70.0 3.6% -22.0% - -------------------------------------------------------------------------------------------------------------------------------- NET INCOME: 1998A $ 54.1 2.5% 1998A $ 90.6 5.1% 1999A 69.6 3.1% 1999A 104.1 5.5% LTM 70.4 3.1% LTM 66.7 3.7% 2000A 70.4 3.1% 2000A 66.7 3.7% 2001P 70.1 3.1% 9.0% 2001P 73.3 3.8% -6.8% - -------------------------------------------------------------------------------------------------------------------------------- EPS: 1998A $ 2.86 1998A $ 1.51 1999A 3.83 1999A 1.84 LTM 3.88 LTM 1.34 2000A 3.88 2000A 1.34 2001P 3.85 10.4% 2001P 1.48 -0.7% - -------------------------------------------------------------------------------------------------------------------------------- BOOK EQUITY: MRQ $ 819.8 MRQ ($712.8) - -------------------------------------------------------------------------------------------------------------------------------- DEBT/LTM EBITDA: 1.31 x 5.25 x DEBT/BOOK EQUITY 0.41 x -2.28 x - -------------------------------------------------------------------------------------------------------------------------------- FY ENDS: December December LTM ENDED: 12/31/00 12/31/00 EPS/PROJECTIONS AS OF: 02/01/01 (First Union) 02/09/01 (First Union)
DAN RIVER MOHAWK INDUSTRIES ---------------------------------------------------- ------------------------------------------------ Margins: 3yr CAGR: Margins: 3yr CAGR: -------- --------- -------- --------- REVENUES: 1998A $517.4 1998A $2,744.6 1999A 628.9 1999A 3,083.3 LTM 647.1 LTM 3,255.8 2000A 663.0 2000A 3,255.8 2001P 682.9 9.7% 2001P 3,315.0 6.5% - ---------------------------------------------------------------------------- ------------------------------------------------ EBITDA: 1998A $ 77.3 14.9% 1998A $ 321.7 11.7% 1999A 92.6 14.7% 1999A 400.1 13.0% LTM 97.3 15.0% LTM 399.5 12.3% 2000A 93.1 14.0% 2000A 399.5 12.3% 2001P 95.9 14.0% 7.4% 2001P 369.7 11.2% 4.7% - ---------------------------------------------------------------------------- ------------------------------------------------ EBIT: 1998A $ 46.5 9.0% 1998A $ 249.1 9.1% 1999A 50.8 8.1% 1999A 294.8 9.6% LTM 56.8 8.8% LTM 317.1 9.7% 2000A 52.6 7.9% 2000A 317.1 9.7% 2001P 54.1 7.9% 5.2% 2001P 274.7 8.3% 3.3% - ---------------------------------------------------------------------------- ------------------------------------------------ CAPEX: 1998A $ 39.5 7.6% 1998A $ 83.2 3.0% 1999A 36.7 5.8% 1999A 145.6 4.7% LTM 38.4 5.9% LTM 73.5 2.3% 2000A 40.0 6.0% 2000A 73.5 2.3% 2001P 30.0 4.4% -8.7% 2001P 95.0 2.9% 4.5% - ---------------------------------------------------------------------------- ------------------------------------------------ NET INCOME: 1998A $ 17.1 3.3% 1998A $ 128.0 4.7% 1999A 14.7 2.3% 1999A 157.2 5.1% LTM 15.0 2.3% LTM 166.9 5.1% 2000A 10.8 1.6% 2000A 166.9 5.1% 2001P 11.1 1.6% -13.4% 2001P 145.6 4.4% 4.4% - ---------------------------------------------------------------------------- ------------------------------------------------ EPS: 1998A $ 0.85 1998A $ 2.09 1999A 0.63 1999A 2.61 LTM 0.68 LTM 3.08 2000A 0.50 2000A 3.08 2001P 0.51 -15.7% 2001P 2.75 9.5% - ---------------------------------------------------------------------------- ------------------------------------------------ BOOK EQUITY: MRQ $279.4 MRQ $ 754.4 - ---------------------------------------------------------------------------- ------------------------------------------------ DEBT/LTM EBITDA: 4.00 x 1.48 x DEBT/BOOK EQUITY 1.39 x 0.78 x - ---------------------------------------------------------------------------- ------------------------------------------------ FY ENDS: December December LTM ENDED: 09/30/00 12/31/00 EPS/PROJECTIONS AS OF: 10/27/00 (First Union)(1) 02/09/01 (CSFB) (2)
(1) DRF preannounced on 2/5/01 and provided 2000E Sales and EPS. New research not out yet - some data has been estimated by CRT. (2) MHK Capex per SunTrust Equitable 1-29-01. ================================================================================ CREDIT RESEARCH & TRADING LLC 36 SPRINGS INDUSTRIES INC. APPENDIX B -- DISCOUNTED CASH FLOW ANALYSIS GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 37 SPRINGS INDUSTRIES INC. DISCOUNTED CASH FLOW ANALYSIS COMPARATIVE UNLEVERED BETAS Springs 0.44 Dan River 0.62 Mohawk 0.53 WestPoint Stevens 0.70 Average (excluding Springs) 0.61
2001 2002 2003 2004 2005 ------ ------ ------ ------ ------ EBITDA Base Case $261.5 $298.6 $350.3 $369.6 $391.0 Downside Case 248.6 263.4 282.0 293.6 308.0 UNLEVERED AFTER-TAX FREE CASH FLOW Base Case 129.7 78.1 123.8 131.5 161.9 Downside Case 134.6 77.8 99.5 100.2 126.1
Net Present Value Per Share -------------------------------------------------------- Base Case Downside Case ------------------------- -------------------------- Discount Rates Terminal EBITDA Multiple Terminal EBITDA Multiple ------------------------- -------------------------- 3.5x 4.0x 4.5x 3.5x 4.0x 4.5x ------ ------ ------ ------ ------ ------ 9.0% $57.63 $64.68 $71.72 $43.89 $49.45 $55.00 9.5% $56.15 $63.04 $69.92 $42.72 $48.14 $53.57 10.0% $54.71 $61.44 $68.17 $41.57 $46.87 $52.18 10.5% $53.31 $59.89 $66.47 $40.45 $45.63 $50.82
Weighted Average Cost of Capital Calculation - --------------------------------------------------------------------------------------- Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 ---------- ---------- ---------- ---------- ---------- Debt 40.0% 50.0% 60.0% 70.0% 80.0% Common Equity 60.0% 50.0% 40.0% 30.0% 20.0% ---------- ---------- ---------- ---------- ---------- Total Capitalization 100.0% 100.0% 100.0% 100.0% 100.0% Relevered Beta 0.87 1.00 1.19 1.50 2.14 Pre-tax Cost of Debt 7.0% 8.0% 9.0% 10.0% 11.0% After-tax Cost of Debt 4.3% 5.0% 5.6% 6.2% 6.8% Cost of Equity 12.6% 13.7% 15.3% 18.0% 23.4% COST OF CAPITAL 9.3% 9.3% 9.5% 9.7% 10.1%
GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT 38 SPRINGS INDUSTRIES INC. APPENDIX C -- * INVESTMENT COMMITTEE MEMORANDUM Please see Appendix D to the Close Family Meeting Materials for the * Memorandum GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT * Omitted and filed separately with the Commission. 39 MEMORANDUM TO: Investment Committee FROM: * DATE: January 21, 2001 RE: Project Snug ================================================================================ Over the past few days we have worked to develop greater insight on key investment issues, and further refine our perspective on this transaction. This memo covers: I. Investment summary - Positives - Risks - Investment Thesis II. Review of company financial performance III. Anticipated governance terms IV. Transaction structure V. Preliminary financial models VI. Timing and next steps We would like to review the transaction with the Committee on Monday, with the objective of reaching consensus on the appropriate message for the CEO as to our interest level in making an investment. A gating issue is that the Company has not finalized their 2001 budget and its implications for their longer term forecast, although they have given us fairly specific direction on both revenue and EBITDA projections. Thus at this point we do not have a detailed analysis of the sources of profit improvement for the forecast period. I. INVESTMENT SUMMARY INVESTMENT POSITIVES This investment opportunity has a number of positive features in terms of the company's competitive position and the opportunities for value creation. The key positive features of this opportunity include: - Strong player with good competitive position * Omitted and filed separately with the Commission. * 40 - One of the top two manufacturers in most of its market segments, with market shares ranging from 10%-30% - Limited number of scale competitors: Westpoint Stevens, Pillowtex (recently filed for bankruptcy), and Dan River - Other smaller players are less well positioned to meet needs of a consolidating retailer base - - Strong retailer relationships - The company sells to the right retailers, and is well positioned within these retailers given its meaningful share of their home textile sales - The company is gaining share in its most attractive accounts due to its strategy of focusing on core accounts and pruning less profitable customers - - Relatively stable end-user demand - Consumer demand does not vary significantly, with most of its core products growing at 4%-5% annually over the past five years - Long term fundamentals indicate continued growth in demand in line with historical levels - Continuing mix shift, as consumers trade up to higher quality products - Favorable demographic trends, with increase in number of people in prime home textile purchasing age groups - Increasing per capita demand due to higher average number of bedrooms and bathrooms in homes, and increase in average bed size - - Significant, identifiable potential upside in operating cost performance - The company has historically produced relatively stable but low EBIT margins in the mid to high single digit range. This performance is meaningfully behind that of Westpoint Stevens and Dan River. (See Exhibit 1) - McKinsey's analysis indicates that the bulk of the performance differential is not driven by structural disadvantages, but rather by suboptimal plant utilization and efficiency (primarily in the production of grey fabrics) and inefficient purchasing practices. The company believes that the structural cost gap with Westpoint Stevens is approximately 2%. - Near term, these profit improvement opportunities are tactical in nature * * Omitted and filed separately with the Commission. 2 41 - Purchasing cost reductions through centralized purchasing management and supplier negotiations - Manufacturing cost reductions through many "blocking and tackling" opportunities - Some overhead and IT reductions - Longer term, there is the potential to create significant additional economic value through substantially reconfiguring the asset base and moving to outsource production, primarily in the grey fabric product area - Long, term, there is a clear opportunity to create value through acquisition - The company needs additional brands to increase penetration within its core accounts, and could roll out acquired brands and product lines to selected customers - The industry has a number of smaller niche players who are increasingly unable to meet the needs of mass merchandisers, and would be more valuable to a strategic acquiror than as independent companies - Relatively low purchase price -- we think that a transaction could be done at 4.5x LTM EBITDA, which is close to the low end of the historical trading range of 4-6x. Key Investment Risks and Considerations We believe that this investment has a relatively high risk profile due to company specific issues, the structural challenges inherent in this industry, the difficult near-term operating environment, and some significant longer-term strategic risks. A.) Company specific issues - The Company faces significant execution risk in the near and medium term - The identified profit improvement opportunities will require the company to move aggressively on cost reduction in the manufacturing area. To date, the company has captured some significant cost reduction in the area, but has also run into some meaningful problems in achieving forecasts, primarily in the towel manufacturing area. (See discussion below in "Financial Performance" section.) The company acknowledges that the key gap in the management team is leadership on the manufacturing and operations side of the business. Note: We do not at this point have a detailed understanding of all of the sources of profit improvement in 2001, due to the company's delay in revising their budget. Thus we are unable at this time to more accurately gauge the achievability of projected profit improvement initiatives. * * Omitted and filed separately with the Commission. 3 42 - The company requires a major near-term IT upgrade. The current systems are antiquated, high cost, and do not provide management with the full information needed to run the business. Management has not yet made a decision on the new IT platform, and is considering both an ERP implementation and a major overhaul of legacy systems. Management expects this upgrade to cost $70 - $90 million and take place over the next 2 1/2 years. - - The company has significant customer concentration risk - As a result of its core account strategy, the percentages of sales and operating profits generated by its top 8 customers have grown to 60% and 77% respectively. Importantly, Wal-Mart is by far the largest single customer, accounting for 28% and * of sales and *. - - The company appears to have some lack of visibility into near term financial performance, which makes it difficult for us to have confidence in the projections and which raises the issue of potential quarter-to-quarter volatility. (See "Financial Review" for a more in-depth discussion of this issue.) - The company's shortfall in Q3 and Q4 of 2000 illustrate the potential vulnerability of margins in the short term to factors outside the company's control - The delay in preparing the 2001 budget further illustrates the difficulty of getting a strong handle on near term performance - This lack of visibility implies that a conservative capital structure is required for the transaction B.) Industry structure issues - - The US textiles industry is structurally challenging - This is a mature industry with excess manufacturing capacity - An increasingly concentrated retailer base wields significant power over the manufacturers, and captures much if not most of the consistent improvements in productivity - Unit prices decline on a fairly consistent basis, with effective annual unit price reductions in the 2% - 3% range. - Two of Snug's key competitors have significantly higher profit margins, and thus are positioned to win in pricing wars * * Omitted and filed separately with the Commission. 4 43 - - There is a clear trend of increased competition from low cost imports, although this is both a threat and an opportunity for the company, in that they will increasingly outsource their own production to lower cost countries - Historically, Snug's product segments have been somewhat protected from import competition as they have relatively low labor content. However, imports have nonetheless grown consistently and now have penetration rates in the 20%-40% range across Snug's key product segments and are growing at approximately 10%-20% per year. Several countries -- particularly Pakistan -- have targeted the home textiles segment as a key source of economic growth, and have invested heavily in both basic grey fabric manufacturing capacity, as well as in higher value added finishing and fabrication capacity. - The regulatory environment is changing as quotas are phased out by the 2005 timeframe and will replaced by GATT regulation. This creates the threat of a significant increase in import penetration as trade barriers fall. There appears to be pent-up capacity waiting to enter the US market as quotas fall, given that quotas in Snug's primary product lines for the key home textile exporting countries are typically fully utilized. - Increasing access to low cost imports encourages retailers to go direct on product sourcing, and to by-pass the US producers. - - Longer term, success in this industry will require the company to fundamentally shift its production model to increase outsourcing of product, shut domestic manufacturing capacity, and focus increasingly on developing "close to the customer" competencies, including customer account management, product design & development, distribution, and supply chain management. C. Difficult near term environment - - The US home textiles industry faces a very difficult near-term environment - Soft revenue due to slowdown in consumer demand has hurt the top line and margins, and is expected to continue through at least the first half of 2000 - Retailers have become increasingly aggressive at squeezing profits out of the manufacturers, primarily by aggressively pursuing claims and returns - The sector faces a huge inventory build-up across the supply chain, with average inventory levels at 15 weeks at manufacturers and 11 weeks at retailers (all products), for an estimated total of 26 weeks across the industry. (This total is likely understated due to LIFO accounting and the slower moving nature of home textile products compared to other products at retailers.) An inventory correction could put significant near term pressure on margins due to plant stand-downs and price reductions. * * Omitted and filed separately with the Commission. 5 44 INVESTMENT THESIS Given the investment positives and risks, our decision to invest would be based on the following points: - The company can achieve significant improvement in near-term operating performance and returns on capital - Attractive returns on the transaction appear to be attainable, as they only require the company to perform at profit levels approaching those achieved by competitors - However, these required margins would be significantly in excess of what the company has done historically - These margins would need to be achieved in the face of continuing price reductions and cost pressures - The company can significantly reconfigure the manufacturing strategy and asset base over next three to five years. We believe that long term success in this business will require a combination of outsourced and owned manufacturing, due to the increasing penetration of low cost imports. - The company will need to outsource production of products in which they are not competitive (most importantly, grey fabric.) The company already sources approximately 20-25% of its total requirements in grey, and is focused on developing outsourcing relationships. - The existing manufacturing base will need to be rationalized, and in particular the company will need to close some high-cost grey fabric plants. - Fundamentally, the company needs to move from a manufacturing-focused firm to one which has as its core competencies product design, development & sourcing; customer relationship management; supply chain management and distribution. - This is the strategy set by the company as a result of McKinsey work over past two years, and the company is moving in this direction - Some companies in comparable industries have successfully made this shift, and have achieved strong financial performance as a result. (See the Sara Lee case study in Exhibit 2 as an example of a successful transformation.) - The company is appropriately capitalized to manage through potential near term volatility in financial performance * * Omitted and filed separately with the Commission. 6 45 - The capital structure and bank arrangements need to contemplate the potential near term volatility in financial results -- "Don't blow the bank covenants two quarters out of the box" - The company can manage through the anticipated difficult near term environment Management Team Crandall Bowles has significantly upgraded Snug's management team since taking helm as CEO in 1998. Key hires include a CFO, CIO, head of purchasing, and human resources. We have generally been impressed with management's knowledge of their business and their understanding of the operating and strategic issues facing their business. Our general sense is that they are headed in the right direction and have a realistic assessment of the challenges facing the company. Clearly, one major challenge for the new management team has been in implementing new management techniques and reports. For example, the budgeting and reporting system has been substantially revamped and is moving in the right direction, but still has a number of kinks which need to be worked out. As another example, the strategic planning process has been meaningfully upgraded, but still is not sufficiently linked to the budgeting process. There are still some critical management gaps and cultural challenges in driving improved performance. - The most important gap is on operations and manufacturing side. The company does not have the leadership in place to drive improved performance in the manufacturing operations, and more broadly in the supply chain management strategy of the company. The company is fully aware of this gap and intends to hire an outsider to join, possibly as COO. - Culturally, the company has historically been relatively unaggressive and slow moving (resulting in its relative operating profit performance versus competitors). - Snug has had relatively underleveraged balance sheet when compared to its competitors, and thus has not faced as much pressure to take costs out and improve the cash performance of the operations - Our sense is that management is relatively cautious in implementing change, although the team has made a number of hard decisions, e.g. plant closings II. REVIEW OF COMPANY FINANCIAL PERFORMANCE Review of 2000 Budget Snug developed its 2000 budget using a bottoms-up approach. For each of its products and cost centers, Snug was relatively aggressive in setting profit improvement goals. * Omitted and filed separately with the Commission. * 7 46 Due to the aggressive nature of the individual business forecasts, Snug included a $40 million contingency in its budget, which was not allocated to any specific products or cost centers. As shown in Exhibit 3, management used Snug's 1999 profit from operations (PFO) of $134 million as a baseline for its budget. In 2000, management expected profitability improvements equaling $28.8 million from revenue growth and improved account mix, $32.3 million from its manufacturing cost reduction initiatives and $26.5 million from its purchasing initiatives. This implied a budget of approximately $220 million prior to the $40 million contingency, and a $180 million including the contingency. 2000 Actual Performance vs. Budget Snug's actual PFO in 2000 was $145 million, or $35 million (19.4%) below the budgeted $180 million. As summarized in Exhibit 4, Snug was on-track to achieve its budgeted performance after the first two quarters, but was affected significantly during the retail slow-down in the second half. Snug's purchasing initiatives and some manufacturing initiatives were successful in 2000, but offsetting factors in other areas of the business prevented Snug from achieving its budget (see Exhibit 5). - - Purchasing Initiatives: Snug achieved approximately $31.3 million of cost savings in 2000 due to purchasing initiatives, slightly more than what was budgeted. Excluding cotton, greige and natural gas costs, purchasing cost savings totaled $20.6 million in 2000 (versus $14.8 million budgeted). Most of this savings was the result of consolidated buying and leveraging information / buying power across the organization. As shown in Exhibit 6, the largest source of purchasing cost savings in 2000 was in Fabrication/Packaging/Other (threads, cartons, tape, etc.), where Snug consolidated suppliers from 35 to 3 and took advantaged of the depressed apparel industry and the Pillowtex situation to reduce purchase prices. Management expects these savings to hold going forward. Cotton and greige costs (which were at historic lows) contributed $15.3 million of total purchasing cost savings, and natural gas (which unexpectedly rose in price) offset $4.6 million of these savings. - - Manufacturing Initiatives: Although management believes it was successful on approximately two-thirds of its manufacturing improvement projects during 2000, this resulted in only approximately $7.5 million of manufacturing cost savings due to three primary offsetting expenses: - Towels: Snug recently spent $65 million on modernizing its towel facilities, and management had budgeted an $11 million cost savings in 2000 as a result of this modernization. Snug believes it did not account for these projected savings accurately. Specifically, the modernizations increased Snug's towel capacity, but will not result in cost savings until this capacity is filled in 2001. As a result, the improved efficiency did not impact the 2000 results, and the towel operations remained at breakeven. However, Snug does not expect the towel operations to * Omitted and filed separately with the Commission. * 8 47 achieve desired profitability in 2001, either, and has not yet identified what needs to be done to allow efficiency improvements to flow through to the bottom line. -- Window Fashions: Snug lost an unanticipated $6 million in its window fashions segment, primarily due to contributions of blindmakers to retailers (machines that allow sales representatives to custom-cut blinds for customers) as well as recognition of sales tax on previously-contributed blindmakers (which the company is currently disputing with the IRS). -- Plant Standings: In an effort to reduce inventory levels in the second half of 2000, Snug stood down plants for approximately five weeks, for a total cost of approximately $4.0 million. - - Sales Volume / Account Mix: Snug budgeted $28.8 million of improved profitability as the result of increased sales volume and improved account mix in 2000. However, due to the soft industry environment in the second half of the year, these profit improvements were not realized. Instead, three factors contributed to a combined $17.9 million deterioration of the core business profitability: -- Volume: As retailers focused on reducing inventory levels in the second half of 2000, the resulting impact on Snug's sales volume had a $10 million impact on its PFO. -- Claims: Retailers were also much more aggressive on claims in 2000 than had been expected. As shown in Exhibit 7, claims as a percentage of sales increased from *% in the third quarter of 1999 (when the 2000 budget was developed) to *% in 2000. Most of the increase in claims was due to operational claims (e.g., refunds because the UPC was on the wrong corner of a box), which increased by approximately $10 million for the core bed and bath segment and another $10 million for the hard windows segment compared to 1999. For all of 2000, claims were approximately $23 million over budget. -- Loss on Closeouts: Snug liquidates its closeout inventory (primarily leftover inventory from canceled programs) and off-quality inventory through the wholesale channel (both through its own outlets and through discount retailers such as T.J. Maxx). Prior to 1998, Snug was able to realize close to 80% of its cost on the sale of this closeout inventory. However, in 1999, the percentage realization declined to the high sixties (see Exhibit 8). As a result, Snug held back its closeout inventory in the fourth quarter of 1999, hoping wholesale pricing would improve. Pricing through the wholesale channel declined even further to 54% realization in 2000, and Snug lost $13.6 million more than anticipated. Management believes the softness in wholesale pricing is driven by the impact of low-cost imports in the channel, and that this low level of realization will continue. However, as Snug's manufacturing is realigned to optimize the levels of closeout and off-quality inventory, these expenses should be reduced somewhat. Financial Projections * Omitted and filed separately with the Commission. * 9 48 Snug is currently in the process of revising its 2001 budget to account for the recent industry downturn. We have not yet seen from management a detailed build-up to expected 2001 operating performance or revised projections beyond 2001. However, management has provided us with its most recent high-level estimates for 2001 performance. Based on its most recent estimates, management expects to generate profits from operations of $153 million in 2001 on gross sales of $2.5 billion. The impact of the revised 2001 projections on results going forward is unclear, and we have not been given guidance by Snug as to this impact, although they have initially indicated a target of $175 million in profit from operations for 2002. Management expects to complete its 2001 budget later this week and complete its detailed product and customer account forecasts by next week. As shown in the table below, the 2001 outlook has been revised on three different occasions since October:
Actual 2001E -------------- --------------------------------------------- Strategic October December January (In millions) 1999 2000 Plan Estimates Estimates Estimates ---- ---- --------- --------- --------- --------- Gross Sales * * * * * * Growth 3.2% 4.5% 4.0% 2.5% 1.5% PFO $ 136 $ 145 $ 177 $ 147 $ 151 $ 153 PFO as % of Gross Sales 5.7% 5.9% 6.7% 5.6% 5.9% 6.1%
The October estimates represent what was a high level first cut at estimating the impact of the slowing industry environment on revenue and PFO. In December, Snug reevaluated its 2001 projections and reduced revenue to * million from * million. This new figure assumed revenue growth of (3.5%), (1.5%), 10% and 12% in Q1, Q2, Q3 and Q4, respectively. Based on the revised December revenue projection, PFO would have been $132 million. However, Snug identified $19 million of additional cost savings to offset this decline, and estimated PFO of $151 million. In January, Snug again revised its 2001 estimates by slowing the growth assumptions in the second two quarters of the year. This new revenue figure, * million, implied an additional PFO shortfall of $16 million. However, Snug identified cost savings opportunities of $18 million to offset this shortfall. A large component of the total $37 million of newly discovered cost savings ($19 million in December plus $18 million in January) results from Snug's desire to reduce fixed costs by 2-3%. III. ANTICIPATED GOVERNANCE TERMS We have had an initial conversation on governance with the CEO and her outside advisor, and have a general sense of the arrangements although few specifics. The contemplated governance arrangements between the CEO and Heartland has an initial board composed of an equal number of family members and Heartland representatives, * * Omitted and filed separately with the Commission 10 49 with 3 seats each. Crandall would have the ability to break ties. If and when Crandall is replaced as CEO, the CEO would get a seat and effectively would be the tie-breaking vote. - Board approval is required for "standard operating items, including a budget" - Consensus is required for "major decisions, i.e. acquisitions/divestitures, changes in financial structure, etc." We do not know what sort of deadlock mechanism is currently contemplated. We anticipate we could get 1 of the 3 Heartland seats, but no specific negative control rights unique to *. Our read on the situation is that in the event of a dispute, we would be more likely to be aligned with management than with Heartland, due to our similar perspectives on the business priorities. IV. TRANSACTION STRUCTURE - ------------------------- As contemplated, the proposed transaction would be done at an equity purchase price of $40 per Snug share. However, given that Snug's stock has recently risen and is currently trading at $33.19, we believe it would be difficult to complete a deal at this price and have therefore assumed a purchase price of $42 per share. (See historical share price graph in Exhibit 9 and stock price histogram in Exhibit 10.) The Close family (Crandall Close Bowles' family) owns approximately 40% of the economic interest in Snug and 75% of the voting stock. A $42 purchase price implies approximately a $460 million purchase price for the outstanding public stake (excluding rolled-over Close family shares). Heartland and * would invest approximately a combined $300 million in the transaction, and the remainder of the non-family public equity would be repurchased with new bank debt. A detailed sources and uses table is outlined below: Sources Uses - ----------------------------- --------------------------------------- Roll-Over Equity $302 Equity Purchase Price $762 Heartland/* Equity 302 Refinance Existing Debt 370 Bank Debt 558 Transaction Expenses 30 --- -- $1,162 $1,162 The proposed structure would imply the following enterprise value and debt multiples: Enterprise Value $1,133 Net Debt $558 EV/LTM EBITDA 4.5x Net Debt/LTM EBITDA 2.2x V. PRELIMINARY FINANCIAL MODELS - ------------------------------- Although we have not yet received management's revised projections, we have developed three financial cases to help provide a directional indication of returns. We * * Omitted and filed separately with the Commission. 11 50 have run our cases at a $42 share price, which we believe is more realistic than the $40 in management's models. + Management Base Case (Exhibit 11): Assumes management's prior revenue growth and annual margin improvement forecasts in 2003-2005, starting from the reduced 2001 base and using initial guidance of $175 million for 2002. Assuming no multiple expansion, this case indicates returns in the low- to mid-twenties. We believe that management's projections may be optimistic. + Management "Downside" Case (Exhibit 12): Assumes revenue growth and annual margin improvement forecasts in 2002-2005 based on the downside estimates provided by Snug's advisor, starting from the reduced 2001 base. Assuming no multiple expansion, this case indicates returns in the high teens. + Flat Margins Case (Exhibit 13): Provided for illustrative purposes only, this case assumes flat margins and 3% annual revenue growth, starting from the reduced 2001 base. Assuming no multiple expansion, this case indicates returns in the high single digits. VI. TIMING AND NEXT STEPS We have committed to Crandall that we will give her a response as to our interest level in pursuing this transaction early this week. We have explained that it is difficult for us to reach a conclusion on the transaction before they have finalized their view about the projected financial performance of the business and the sources of profit improvement. Thus we anticipate that we could gain some additional time before giving her our definitive response. However, we will still need to be very specific as to the open due diligence items and what level of proof is required to address these issues. ATTACHMENTS Exhibit 1: Summary Comparative Operating Statistics Exhibit 2: Sara Lee Case Study Exhibit 3: Snug 2000 Budgeted Profit from Operations Exhibit 4: Quarterly Performance vs. Budget Exhibit 5: Snug 2000 Actual Profit from Operations Exhibit 6: 2000 Purchasing Initiatives Exhibit 7: Consolidated Claims Experience Exhibit 8: Wholesale Trends Exhibit 9: 3-Year Stock Price History Exhibit 10: 3-Year Stock Price Histogram Exhibit 11: Preliminary LBO Model: Management Base Case Exhibit 12: Preliminary LBO Model: Management Downside Case Exhibit 13: Preliminary LBO Model: Flat Margins Case * 12 * Omitted and filed separately with the Commission. 51 Project Snug - -------------------------------------------------------------------------------- Exhibit 1: Summary Comparative Operating Statistics ($ in millions unless noted)
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 LTM ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- --- Revenue Growth Springs Industries NA 10% 5% (2%) 1% 5% 2% 2% 8% (1%) 0% (2%) 2% NA Westpoint Stevens NA NA NA NA NA NA 0% 6% 3% (9%) 10% 7% 6% NA Dan River NA NA NA NA NA NA NA 17% 4% (1%) 26% 9% 22% NA EBITDA Growth Springs Industries NA 4% 5% (10%) (5%) 21% 4% 8% 3% (12%) 5% (10%) 23% NA Westpoint Stevens NA NA NA NA NA NA 7% 7% 4% 3% 12% 15% 8% NA Dan River NA NA NA NA NA NA NA 164% 37% (4%) 106% 14% 15% NA Gross Profit Margin Springs Industries 20% 19% 20% 19% 19% 20% 20% 20% 18% 18% 18% 18% 19% 20% Westpoint Stevens NA NA NA NA NA 18% 7% 7% 11% 24% 25% 26% 27% 27% Dan River NA NA NA NA NA NA 10% 14% 15% 15% 20% 20% 18% 19% EBITDA Margin Springs Industries 11% 10% 10% 9% 9% 10% 10% 11% 10% 9% 10% 9% 11% 12% Westpoint Stevens NA NA NA NA NA 14% 15% 15% 15% 17% 17% 18% 19% 18% Dan River NA NA NA NA NA NA 3% 7% 9% 9% 14% 15% 14% 15% EBIT Margin Springs Industries 7% 7% 6% 5% 4% 6% 6% 7% 6% 5% 6% 5% 6% 7% Westpoint Stevens NA NA NA NA NA 4% (6%) (6%) (1%) 12% 12% 14% 14% 14% Dan River NA NA NA NA NA NA (2%) 2% 4% 3% 8% 9% 7% 9% ROE Springs Industries NA 10% 12% (1%) 5% 8% 8% 11% 11% 12% 9% 5% 9% NA Westpoint Stevens NA NA NA NA NA NA (702%) 85% 31% (12%) (16%) (20%) (21%) NA Dan River NA NA NA NA NA NA NA 10% 0% 8% 11% 8% 6% NA Pre-Tax EBIT ROA Springs Industries NA 11% 11% 8% 6% 9% 10% 11% 9% 8% 9% 7% 9% NA Westpoint Stevens NA NA NA NA NA NA (5%) (6%) (1%) 15% 17% 18% 18% NA Dan River NA NA NA NA NA NA NA 2% 4% 4% 11% 8% 6% NA Pre-Tax EBIT ROIC Springs Industries NA 18% 15% 11% 9% 12% 13% 15% 14% 11% 13% 11% 13% NA Westpoint Stevens NA NA NA NA NA NA (7%) (10%) (2%) 27% 30% 30% 29% NA Dan River NA NA NA NA NA NA NA 3% 6% 5% 14% 10% 8% NA
- 1 - 52 PROJECT SNUG PRELIMINARY DRAFT -- CONFIDENTIAL - -------------------------------------------------------------------------------- EXHIBIT 2: SARA LEE CASE STUDY OVERVIEW OF SARA LEE'S OUTSOURCING STRATEGY - - In September 1997, Sara Lee announced plans for a "fundamental reshaping" of its operations that would "deverticalize" its structure by shedding manufacturing assets, outsourcing its production and focus on building its brand name. - - Using Nike Inc. as a model, Sara Lee noted that the value added would be in the design and branding of the product. - In announcing the plan, Sara Lee stated that it was "imperative" for companies to focus on new products, managing brands and building market share, an area where it had been lacking. - Management noted that Pillsbury, for example, spent $88 million on its brand, more than 25 times what Sara Lee spent. - - The actions sought to mollify investor dissatisfaction. Sara Lee's shares were selling at a 20% discount to the overall market. In addition, its multiples were lagging behind its peers and its sales growth had slowed. - - The plan focused on a four-part restructuring: 1) Management planned to deverticalized operations by selling manufacturing operations and outsource its work to these firms. Sara Lee aimed to achieve $3 billion in surplus cash from this strategy 2) Sara Lee also sought to divest businesses that failed to meet its standards for returns on capital. These divestitures were expected to increase returns on invested capital (ROIC) from 16% to 20%. 3) Management targeted cost-cutting measures in an attempt to reduce SG&A expenses, which accounted for 29% of the sales base. 4) With $4 billion in proceeds from asset sales and outsourcing, management sought to repurchase outstanding shares. - - With these initiatives, management targeted an EPS growth rate of 13% to 15%, compared to its historical growth of 6% for the five years prior. 53 PROJECT SNUG PRELIMINARY DRAFT -- CONFIDENTIAL - ------------------------------------------------------------------------------- EXHIBIT 2: SARA LEE CASE STUDY (CONT'D.) IMPLEMENTATION - - Within the first month, Sara Lee sold 9 yarn and textile facilities for $600 million and outlined plans to sell four more facilities for a total of $1.4 billion. By the following month, Sara Lee stock had gained over ten points for a 26% gain in its stock price to $52 per share, its 52-week high. - - Within the following year, Sara Lee had shut 34% of its facilities earmarked for closure. It sold its Household and Body Care production units for $125 million and a meat products facility for $500 million. The Company announced its plan to sell its turkey meat facilities, sold three factories in Europe for $200 million and cut its tobacco unit for $1.08 billion. - - By 1999, the company had closed or consolidated 78 facilities and signed 30 outsourcing arrangements. RESULTS - - As a result, capital expenditures as a percent of sales dropped from 4.9% in 1993 to 2.4% in 1998, and 1.9% of sales in 1999. Furthermore, Sara Lee achieved almost $200 million in working capital savings. - - Sara Lee also grew its EPS to $2.50 by 1998, on target with 13% earnings growth, despite foreign currency translation problems that plagued the company throughout the year. At the same time, the Company's EPS multiple expanded to over 25x forward estimates. - - Sara Lee was also able to increase its dividend to $1.45 per share from $0.84 per share over three years, mainly as a result of over $3.0 billion in share repurchases. - - The Company also witnessed a 60-basis point rise in EBIT margin to 9.7%, driven by operating leverage, a favorable product mix shift and higher hedging gains. - - Furthermore, ROIC climbed from 16% to 17.5% in 1998, and 21.3% in 2000. - - For the year following the announcement, Sara Lee's stock price rose as much as 47% to $64.00 per share. However, Sara Lee's stock had slumped in 1999, due in part to worries about listeria outbreaks. It has taken some time to recover, and has only recently reached levels seen in 1998. 54 PROJECT SNUG - -------------------------------------------------------------------------------- EXHIBIT 3: SNUG 2000 BUDGETED PROFIT FROM OPERATIONS (PFO) [BAR GRAPH: PFO Contribution (mm) 1999 PFO $134.0 Growth & Acct. Mix $28.8 Manufacturing Efficiencies $32.3 Purchasing $26.5 General & Administrative -$3.0 2000 Budgeted PFO $218.6 (Pre-contingency) Contingency $38.6 2000 Budget $180.0] 55 PROJECT SNUG - -------------------------------------------------------------------------------- EXHIBIT 4: QUARTERLY PERFORMANCE VS. BUDGET
Full Q1 Q2 Q3 Q4 Year -------------------------------------------------------------------- Budgeted PFO $37.0 $42.0 $48.1 $53.1 $180.2 Changes: Volume $ 4.4 ($0.9) ($4.3) ($9.2) ($10.0) Claims (8.3) (4.3) (6.3) (4.2) (23.1) Loss on Close-Outs/Seconds (1.5) (0.6) (2.7) (8.8) (13.6) Window Fashions Blindmaker 0.0 0.0 (1.7) (2.1) (3.6) Sales Tax 0.0 (2.2) 0.0 0.0 (2.2) USDA Cotton Rebate 2.2 1.5 1.3 1.2 6.2 AIP, Profit Sharing 0.0 4.7 3.0 6.8 14.5 Plant Standings 0.0 0.0 (0.8) (3.2) (4.0) All Other 6.2 1.7 (1.4) (6.7) 0.3 ----- ----- ------ ------ ------ Total Changes $ 3.0 ($0.1) ($12.9) ($25.7) ($35.7) Current Projections $40.0 $41.9 $35.2 $27.4 $144.5
56 PROJECT SNUG - -------------------------------------------------------------------------------- EXHIBIT 5: SNUG 2000 ACTUAL PROFIT FROM OPERATIONS (PFO) [BAR GRAPH: 2000 PFO Contribution (mm) 1999 PFO $134.0 Expected Growth & Acct. Mix: Budget $ 28.8 Less: Volume -$ 10.0 Less: Claims -$ 23.1 Less: Loss of Closeouts -$ 13.6 ------ Actual -$ 17.9 Manufacturing Efficiencies: Budget $ 32.3 Less: Towels -$ 11.0 Less: Window Fashions -$ 6.0 Less: Plant Standings -$ 4.0 Less: Other -$ 3.8 ------ Actual $ 7.5 Purchasing: Budget $ 26.5 Additional Savings $ 3.8 ------ Actual $ 31.3 2000 Actual $145.0 2000 Budget (excl. Contingency) $180.0]
57 PROJECT SNUG - -------------------------------------------------------------------------------- EXHIBIT 6: 2000 PURCHASING INITIATIVES
VARIANCE VS. BUDGET ------------------- COMMODITY ACTUAL BUDGET $ % - -------------------------------------------------- ------------ --------- --------- --------- Fab/Packaging/Other $6,658 $2,980 $3,678 123.4% Utilities 4,731 4,000 731 18.3% Polyester (3,468) (3,869) 401 10.4% MRO/Supplies 3,227 2,827 400 14.1% Chemicals 2,265 2,875 (610) (21.2%) Yarn 1,754 1,999 (245) (12.3%) Backing/Coatings 1,455 360 1,095 304.2% Contract Labor 1,136 759 377 49.7% Dyes 997 600 397 66.2% Travel 954 1,200 (246) (20.5%) Cap/Constr/Other 938 1,063 (125) (11.8%) ------- ------- ------- ------ Subtotal (excl. Cotton, Greige & Natural Gas) $20,647 $14,794 $5,853 39.6% Cotton $11,710 $12,742 ($1,032) (8.1%) Greige 3,566 535 3,031 566.5% Natural Gas (4,592) 0 (4,592) NM ------- ------- ------- ------ Subtotal (Cotton, Greige & Natural Gas Only) $10,684 $13,277 (2,593) (19.5%) Total $31,331 $28,071 3,260 11.6%
58 EXHIBIT 7
CONSOLIDATED CLAIMS EXPERIENCE 1999 2000 --------------------------------------------- ----------------------------------------------- Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year --- --- --- --- ---- --- --- --- --- ---- Core B+B Net Sales 354 301 308 284 1247 345 315 326 316 1303 Windows/Other Net Sales 230 244 255 246 975 248 258 248 265 1018 Consolidated Net Sales 584 545 583 529 2221 593 573 574 581 2321 Returns * * * * * * * * * * % CB+B Net Sales * * * * * * * * * * Promotional * * * * * * * * * * % CB+B Net Sales * * * * * * * * * * Operational 5.3 4.3 6.5 3.0 19.1 7.3 9.3 6.5 6.5 29.6 % CB+B Net Sales 1.5% 1.4% 2.1% 1.1% 1.5% 2.1% 3.0% 2.0% 2.1% 2.3% Other 0.0 0.0 0.0 3.3 3.3 2.4 -2.5 0.0 0.0 -0.1 % CB+B Net Sales 0.0% 0.0% 0.0% 1.2% 0.3% 0.7% -0.8% 0.0% 0.0% 0.0% Total Core Bed + Bath Claims * * * * * * * * * * % CB+B Net Sales * * * * * * * * * * Budget 2000 * * * * * * * * * * Windows/Other Total Claims * * * * * * * * * * % Windows?Other N.S. * * * * * * * * * * Consolidated Claims * * * * * * * * * * % Total Net Sales * * * * * * * * * *
* Omitted and filed separately with the Commission. 59 Exhibit 8 --------- WHOLESALE TRENDS
Inventory Realization 1999 Sold Revenue Loss % - ---- --------- ------- ------ --------- Quarter 1 * 12.5 * * Quarter 2 * 13.3 * * Quarter 3 * 13.1 * * Quarter 4 * (0.3) * * -------- ------- ------ ------ Total Year 1999 * 38.9 * * - --------------- ======== ======= ====== ====== 2000 - ---- Quarter 1 * 9.6 * * Quarter 2 * 13.0 * * Quarter 3 * 12.3 * * Quarter 4 * 12.6 * * -------- ------- ------ ------ Total Year 2000 * 47.6 * * =============== ======== ======= ====== ======
* Omitted and filed separately with the Commission. 60 PROJECT SNUG - -------------------------------------------------------------------------------- EXHIBIT 9: 3-YEAR STOCK PRICE HISTORY [STOCK PRICE HISTORY LINE GRAPH: S&P 500 Composite (Indexed) Westpoint Stevens (Indexed) Snug Dan River (Indexed) Dates: 1/20/98 -- 11/20/00] 61 PROJECT SNUG - -------------------------------------------------------------------------------- EXHIBIT 10: 3-YEAR STOCK PRICE HISTOGRAM [BAR GRAPH: Days Closing Price in Range Stock Price Range (Last 3 Years) < $25 17 $25 - $30 74 $30 - $35 154 $35 - $40 252 $40 - $45 124 $45 - $50 35 $50 - $55 28 > $55 74] 62 EXHIBIT 11 Project Snug Case Mgmt Base OVERVIEW Cap Struct: Base (Amounts in Millions) No Acquisitions
EQUITY PURCHASE PRICE Current Share Price (1/19/01) $33.19 Premium Paid 26.6% ------- Purchase Price Per Share $42.00 Share Outstanding 18.1 ------- Equity Purchase Price $762.2
PRO FORMA SHARE OWNERSHIP Shares Value -------- ------- Rolled-Over Close Family Shares 7.2 $301.7 * Shares 1.8 $75.4 Heartland Shares 5.4 226.2 ---- ------ Total Outside Investors 7.2 $301.7 Shares Repurchased with Debt 3.8 $158.9 Total Equity Purchase Price 18.1 $762.2
SOURCES Rate $ % -------- --------- --------- Revolver 9.0% 50.0 0.0% Senior Debt 9.0% 558.7 48.1% Subordinated Debt 12.0% 0.0 0.0% Roll-Over Equity 301.7 26.0% Investors' Equity 301.7 26.0% ----- ---- Total Sources $1,162.0 100.0% -------- ----- USES Equity Purchase Price $762.2 Refinance Existing Debt 373.0 Transaction Expenses 29.5 Prepayment Penalties 0.0 Existing Cash (2.7) --------- Total Uses $1,162.0 ---------
ACQUISITION MULTIPLES Multiples Amount Enterprise Transaction --------- ------ ---------- ----------- Purchase Price Revenue - -------------- Equity Purchase Price $762.2 FYE 12/30/00 $2,278.1 0.5% 0.5% Plus: Net Debt 370.3 FYE 12/31/01 2,313.2 0.5 0.5 ----- Enterprise Value $1,132.5 EBITDA Plus: Fees & Expenses 29.5 FYE 12/30/00 $254.0 4.5% 4.6% Transaction Value $1,162.0 FYE 12/31/01 255.8 4.4 4.5 -------- EBIT FYE 12/30/00 $145.0 7.8% 8.0% FYE 12/31/01 133.0 7.4 7.6
FINANCIAL SUMMARY Historical Fiscal Year Ending December 31, -------------------------------- ------------------------------------------------- 1998 PF 1999 PF 2000E PF 2001 2002 2003 2004 2005 ------- ------- -------- ------ ------ ------ ------ ------ Revenue $2,180.5 $2,220.5 $2,278.1 $2,313.2 $2,453.9 $2,610.2 $2,756.8 $2,915.9 Gross Profit 384.7 419.6 437.4 449.9 490.0 552.2 587.2 626.2 EBITDA 191.5 239.1 254.0 255.8 290.7 354.2 373.9 404.2 PFO 104.5 134.1 145.0 153.0 175.0 217.2 233.4 251.9 EBIT 104.5 137.8 145.0 139.5 158.8 198.0 213.5 231.3 Net Income 55.5 69.7 96.5 112.0 130.8 Cap Ex 120.5 166.8 100.0 144.0 168.0 139.0 125.0 125.0 Interest Expense $50.3 $47.0 $42.7 $37.2 $26.8 $13.3 Revenue Growth 1.8% 2.6% 1.5% 6.1% 6.4% 5.6% 5.8% Gross Margin 17.6% 18.9% 19.2% 19.4% 20.0% 21.2% 21.3% 21.5% EBITDA Margin 8.8% 10.8% 11.1% 11.1% 11.8% 13.2% 13.6% 13.9% PFO Margin 4.8% 6.0% 6.4% 6.6% 7.1% 8.3% 8.5% 8.6% EBIT Margin 4.8% 6.2% 6.4% 6.0% 6.5% 7.6% 7.7% 7.9% CREDIT RATIOS EBITDA/Interest 4.8% 5.1% 5.4% 6.8% 9.1% 14.0% 30.5% (EBITDA-CapEx)/Int. 1.4 3.1 2.4 2.9 5.5 9.3 21.1 Net Debt/EBITDA 2.3 2.2 1.9 1.6 1.1 0.6 0.2 Total Debt/EBITDA 2.3 2.2 1.9 1.6 1.1 0.6 0.2 % of Debt Remaining 100.0% 87.0% 82.7% 65.3% 41.2% 11.6% FINANCIAL MEASURES Asset Turns 1.40% 1.46% 1.51% 1.58% 1.68% Days Sales in Inventory (COGS) 90.6 88.5 86.3 84.9 83.7 PRE-TAX EDIT ROIC 11.6% 13.0% 15.9% 17.4% 19.3%
FINANCIAL RETURNS Trailing EBITDA Exit Multiple ------------------------------------------------------------------- PRIVATE SALE IN 2005 3.5% 4.0% 4.5% 5.0% 5.5% ------ ------ ------ ------ ------ * 16.8% 20.1% 23.0% 25.6% 28.1% Gain to Management $37.3 $47.4 $57.5 $67.6 $77.7 PRIVATE SALE IN 2003 * 11.3% 18.2% 24.3% 29.9% 35.1% Gain to Management $12.0 $20.6 $29.3 $37.9 $46.5
% OWNERSHIP Capital Primary F.D. Amount ------- ------ ------- * 12.5% 11.9% $75.4 Heartland 37.5% 35.6% 226.2 Close Family 50.0% 47.5% 301.7 Management 0.0% 5.0% 0.0 ----- ----- ------ Total 100.0% 100.0% $603.3
* Omitted and filed separately with the Commission. 63 EXHIBIT 12 Case: Mgmt Downside Project Snug Cap Struct: Base Overview No Acquisitions (Amounts in millions) Equity Purchase Price Current Share Price (1/19/01) $33.19 Premium Paid 26.6% Purchase Price Per Share $42.00 Shares Outstanding 18.1 Equity Purchase Price $762.2
Pro Forma Share Ownership Shares Value ------ ----- Rolled Over Close Family Shares 7.2 $301.7 * Shares 1.8 575.4 Heartland Shares 5.4 226.2 ------ ----- Total Outside Investors 7.2 $301.7 Shares Repurchased with Debt 3.8 $158.9 Total Equity Purchase Price 18.1 $762.2
Sources Rate $ % ----- -------- ------ Revolves 9.0% 50.0 0.0% Senior Debt 9.0% 558.7 48.1% Subordinated Debt 12.0% 0.0 0.0% Roll-Over Equity 301.7 26.0% Investors' Equity 301.7 26.0% -------- ------ Total Sources $1,162.0 100.0% -------- ------ Uses Equity Purchase Price 762.2 Refinance Existing Debt 373.0 Transaction Expenses 29.5 Prepayment Penalties 0.0 Existing Cash (2.7) -------- Total Uses $1,162.0
Acquisition Multiples Multiples Amount Enterprise Transaction ------------ -------- ---------- ----------- Purchase Price Revenue Equity Purchase Price $ 762.2 FYE 12/30/00 $2,276.1 0.5x 0.5x Plus: Net Debt 370.3 FYE 12/31/01 2,313.2 0.5 0.5 Enterprise Value $1,832.5 EBITDA Plus: Fees & Expenses 29.5 FYE 12/30/01 $ 254.0 4.5x 4.6x -------- Transaction Value $1,162.0 FYE 12/31/01 259.2 4.4 4.5 -------- EBIT FYE 12/30/00 $ 145.0 7.8x 8.0x FYE 12/31/01 153.0 7.4 7.0
Financial Summary Historical Fiscal Year Ending December 31, ---------------------------- ------------------------------------------------ 1998 PF 1999PF 2000E PF 2001 2002 2003 2004 2005 -------- -------- -------- -------- -------- -------- -------- -------- Revenue $2,180.5 $2,220.5 $2,278.1 $2,313.2 $2,398.0 $2,496.7 $2,565.6 $2,641.4 Gross Profit 384.7 419.6 0.0 449.9 474.1 505.4 521.4 $39.9 EBITDA 191.5 239.1 254.0 259.2 284.6 314.6 334.7 355.6 PPO 104.5 134.1 145.0 153.0 166.3 184.9 192.2 200.9 EBIT 104.5 137.8 145.0 143.0 152.8 167.4 374.3 182.7 Net Income 55.9 62.6 73.9 83.2 95.0 Cap Ex 120.5 166.8 100.0 144.0 168.0 139.0 125.0 125.0 Interest Expense $50.3 $49.8 $48.5 $44.2 $35.7 $24.3 Revenue Growth 1.8% 2.6% 1.5% 3.7% 4.1% 2.8% 3.0% Gross Margin 17.6% 18.9% 0.0% 19.4% 19.8% 20.2% 20.3% 20.4% EBITDA Margin 8.8% 10.8% 11.1% 11.2% 15.9% 12.6% 13.0% 13.5% PFO Margin 4.8% 6.0% 6.4% 6.6% 6.9% 7.4% 7.5% 7.6% EBIT Margin 4.8% 6.2% 6.4% 6.2% 6.4% 6.7% 6.8% 6.9% Credit Ratios: EBITDA/Interest 4.8x 5.1x 5.2x 5.9x 7.1x 9.4x 14.6x (EBITDA-CapEx) mgmt 1.4 3.1 2.3 2.4 4.0 5.9 9.5 Net Debt/EBITDA 2.3 2.2 2.1 1.9 1.4 1.0 0.6 Total Debt/EBITDA 2.3 2.2 2.1 1.9 1.4 1.0 0.6 &% of Debt Remaining 100.0% 98.2% 94.6% 81.2% 60.7% 36.8% Financial Resources Asset Turns 1.40x 1.43x 1.46x 1.50x 1.57x Days Sales in Inventory (COOS) 91.2 89.7 88.1 86.9 85.6 Pre-Tax EBIT ROIC 11.5% 11.5% 12.9% 13.6% 14.6%
Financial Returns Trailing EBITDA Exit Multiple ---------------------------------------------- Private Sale in 2005 3.5x 4.0x 4.5x 5.0x 5.5x ----- ----- ----- ----- ----- * 11.1% 14.5% 17.6% 20.4% 23.0% Gain to Management $22.0 $30.9 $39.8 $48.0 $57.5 Private Sale in 2001 * 2.3% 9.6% 16.1% 21.9% 27.2% Gain to Management $2.2 $10.1 $17.9 $25.8 $33.7
% Ownership Capital Primary P.D. Amount ------ ------ ------ * 12.5% 11.9% $25.4 Heartland 37.5% 35.6% 226.2 Close Family 50.0% 47.5% 301.7 Management 0.0% 5.0% 0.0 ------ ------ ------ Total 100.0% 100.0% $603.7
* Omitted and filed separately with the Commission. 64 PROJECT SNUG EXHIBIT 13 Case: Flat Margins OVERVIEW Cap Street: Base (AMOUNTS IN MILLIONS) No Acquisitions
EQUITY PURCHASE PRICE Current Share Price (1/19/01) $33.19 Premium Paid 26.6% ------ Purchase Price Per Share $42.00 Shares Outstanding 18.1 ------ Equity Purchase Price $762.2
PRO FORMA SHARE OWNERSHIP SHARES VALUE ------ ------ Rolled-Over Close Family Shares 7.2 $301.7 * Shares 1.8 $75.4 Heartland Shares 5.4 226.2 ------ ------ Total Outside Investors 7.2 $301.7 Shares Repurchased with Debt 3.8 $158.9 Total Equity Purchase Price 18.1 $762.2
SOURCES Rate $ % ----- ------- ---- Revolver 9.0% $0.0 0.0% Senior Debt 9.0% 558.7 48.1% Subordinated Debt 12.0% 0.0 0.0% Roll-Over Equity 301.7 26.0% Investors' Equity 301.7 26.0% -------- ----- Total Sources $1,162.0 100.0% ======== ===== USES Equity Purchase Price $762.2 Refinance Existing Debt 373.0 Transaction Expenses 29.5 Prepaying Penalties 0.0 Existing Cash (2.7) -------- Total Uses $1,162.0 ========
ACQUISITION MULTIPLES MULTIPLES AMOUNT ENTERPRISE TRANSACTION --------- -------- ---------- ----------- PURCHASE PRICE REVENUE Equity Purchase Price $762.2 FYE 12/30/00 $2,264.3 0.5x 0.5x Plus: Net Debt 370.3 FYE 12/31/01 2,299.2 0.5 0.5 -------- EBITDA Enterprise Value $1,132.5 FYE 12/30/00 $254.0 4.5x 4.6x Plus: Fees & Expenses 29.5 FYE 12/31/01 263.6 4.3 4.4 Transaction Value $1,162.0 EBIT -------- FYE 12/30/00 $145.0 7.8x 8.0x FYE 12/31/01 153.0 7.4 7.6
FINANCIAL SUMMARY HISTORICAL FISCAL YEAR ENDING DECEMBER 31, ---------------------------- ------------------------------------------------ 1998 PF 1999 PF 2000E PF 2001 2002 2003 2004 2005 Revenue $2,180.5 $2,220.5 $2,264.3 $2,299.2 $2,368.1 $2,439.2 $2,512.4 $2,587.7 Gross Profit 384.7 419.6 434.7 441.4 454.7 468.3 482.4 496.8 EBITDA 191.5 239.1 254.0 263.6 271.4 279.4 287.7 296.2 PFO 104.5 134.1 145.0 153.0 157.6 162.3 167.2 172.2 EBIT 104.5 137.8 145.0 153.0 157.6 162.3 167.2 172.2 Net Income 62.2 65.6 69.4 74.8 83.2 Cap Ex 120.5 166.8 100.0 144.0 168.0 139.0 125.0 125.0 Interest Expense $50.3 $49.3 $48.3 $46.7 $42.5 $36.9 Revenue Growth 1.8% 2.0% 1.5% 3.0% 3.0% 3.0% 3.0% Gross Margin 17.6% 18.9% 19.2% 19.2% 19.2% 19.2% 19.2% 19.2% EBITDA Margin 8.8% 10.8% 11.2% 11.5% 11.5% 11.5% 11.5% 11.4% PFO Margin 4.8% 6.0% 6.4% 6.7% 6.7% 6.7% 6.7% 6.1% EBIT Margin 4.8% 6.2% 6.4% 6.7% 6.7% 6.7% 6.7% 6.1% CREDIT RATIOS EBITDA/Interest 4.8x 5.1x 5.4x 3.6x 6.0x 6.8x 8.0x (EBITDA-CapEx)/int. 1.4 3.1 2.4 2.1 3.0 3.8 4.6 Net Debt/EBITDA 2.3 2.2 2.0 2.0 1.8 1.5 1.3 Total Debt/EBITDA 2.3 2.2 2.0 2.0 1.8 1.5 1.3 % of Debt Remaining 100.0% 95.9% 96.0% 89.7% 79.4% 67.4% FINANCIAL MEASURES Asset Turns 1.37x 1.36x 1.35x 1.36x 1.38x Days Sales in Inventory (COGS) 101.0 101.0 101.0 101.0 101.0 Pre-Tax EBIT ROIC 12.4% 12.3% 12.1% 12.3% 12.5%
FINANCIAL RETURNS Trailing EBITDA Exit Multiple ------------------------------------------------ PRIVATE SALE IN 2005 3.5x 4.0x 4.5x 5.0x 5.5x --------- -------- --------- --------- --------- * 1.7% 5.7% 9.2% 12.3% 15.1% Gain to Management $2.8 $10.2 $17.6 $25.0 $32.4 PRIVATE SALE IN 2001 * (7.6%) 0.7% 7.4% 13.5% 18.9% Gain to Management $0.0 $0.6 $7.6 $14.6 $21.6
% OWNERSHIP CAPITAL PRIMARY F.D. AMOUNT ------- ----- ------- * 12.5% 12.9% 573.4 Heartland 37.5% 35.6% 226.2 Close Family 50.0% 47.5% 301.7 Management 0.0% 5.0% 0.0 ----- ----- ----- Total 100.0% 100.0% $601.3
* Omitted and filed separately with the Commission. 65 PROJECT SNUG SHARE PRICE AND LEVERAGE SENSITIVITY ANALYSIS RETURNS IN 2005 (ASSUMING EXIT MULTIPLE OF 4.5x 2005 EBITDA) ACQUISITION PRICE PER SHARE FINANCIAL CAPITAL ------------------------------------------------------- CASE STRUCTURE * * * * * * - ---------------------------------------------------------------------------------------------------- Base Capital Structure Mgmt Base Base 28.9% 27.3% 25.8% 24.3% 23.0% 21.7% Mgmt Mid Base 26.9% 25.3% 23.9% 22.4% 21.1% 19.8% Mgmt Downside Base 24.8% 23.2% 21.7% 20.3% 19.0% 17.7% 2.75x Leverage Capital Structure Mgmt Base 2.75x Leverage 36.7% 33.7% 31.0% 28.6% 26.4% 24.4% Mgmt Mid 2.75x Leverage 34.3% 31.3% 28.7% 26.3% 24.2% 22.2% Mgmt Downside 2.75x Leverage 31.6% 28.7% 26.1% 23.8% 21.7% 19.8% 3x Leverage Capital Structure Mgmt Base 3x Leverage 41.4% 37.6% 34.2% 31.3% 28.7% 26.4% Mgmt Mid 3x Leverage 38.8% 35.0% 31.8% 28.9% 26.4% 24.0% Mgmt Downside 3x Leverage 35.8% 32.1% 28.9% 26.1% 23.7% 21.4%
* Omitted and filed separately with the Commission. 66
Project Snug Care: Mgmt Mid Overview Cap Stock: 2.75x Leverage - -------- No Acquisitions (Amounts in millions) EQUITY PURCHASE PRICE Current Share Price (1/19/01) $33.19 Premium Paid 8.5% Purchase Price Per Share $36.00 Shares Outstanding 18.0 Equity Purchase Price $648.3
- -------------------------------------------------------------------------------
PRO FORMA SHARE OWNERSHIP Shares Value ---------- ---------- Rolled-Over Close Family Shares 7.2 $258.6 Outside Investors Shares 2.5 591.0 Other Equity Shares 0.0 0.0 --- --- Total Outside Investors 2.5 591.0 Shares Repurchased with Debt 8.3 $298.7 Total Equity Purchase Price 10.0 $648.3
- -------------------------------------------------------------------------------
SOURCES Rate $ % ---------- ---------- --------- Revolver 9.0% $0.0 0.0% Senior Debt 9.0% $71.5 54.5% Subordinated Debt 13.0% 127.0 12.1% Roll-Over Equity 258.6 24.7% Investors' Equity 91.0 8.7% ---- ----- Total Sources $1,048.1 100.0% -------- ------ USES Equity Purchase Price $648.3 Refinance Existing Debt 373.0 Transaction Expenses 29.5 Prepayment Penalties 0.0 Existing Cash (2.7) -------- Total Uses $1,068.1
- ------------------------------------------------------------------------------- ACQUISITION MULTIPLES Multiples Amount Enterprise Transaction --------- ------ ---------- ----------- Purchase Price Revenue - -------------- Equity Purchase Price $643.3 FYE 12/30/00 $2,278.2 0.4x 0.5x Plus: Net Debt 370.3 FYE 12/31/01 2,313.2 0.4 0.5 ----- Enterprise Value $1,018.5 EBITDA Plus: Fees & Expenses 29.5 FYE 12/30/00 $254.0 4.0x 4.0x ---- Transaction Value $1,048.1 FYE 12/31/01 257.5 4.0 4.1 -------- EBIT FYE 12/30/00 $145.0 7.0x 7.2x FYE 12/31/01 $153.0 6.7 6.9
- ----------------------------------------------------------------------------------------------------------------------------------- Financial Summary Historical Fiscal Year Ending December 31, -------------------------------------------------- ----------------------------------------------- 1998 PF 1999PF 2000EPF 2001 2002 2003 2004 2005 --------- --------- ---------- --------- -------- -------- -------- -------- Revenue $2,180.5 $2,220.5 $2,278.1 $2,313.2 $2,426.0 $2,553.1 $2,660.0 $2,776.1 Gross Profit 384.7 419.6 437.4 444.1 477.0 523.2 548.1 576.0 EBITDA 191.5 239.1 254.0 257.5 288.6 330.6 354.8 380.1 -------- -------- -------- -------- -------- -------- -------- -------- PPO 104.5 134.1 145.0 153.0 171.0 201.8 213.3 226.6 EBIT 104.5 137.8 145.0 141.2 150.8 183.5 194.4 207.3 Net Income 45.3 36.6 73.1 86.8 101.4 Cap Ex 120.5 166.8 100.0 144.0 168.0 139.0 125.0 125.0 567.9 365.8 362.5 538.4 549.8 538.3 Revenue Growth 1.6% 2.6% 1.5% 4.9% 5.2% 4.2% 4.0% Gross Margin 17.6% 18.9% 19.2% 19.2% 19.7% 20.5% 20.6% 20.7% EBITDA Margin 8.8% 10.8% 11.1% 11.1% 13.9% 13.0% 13.3% 13.7% PPO Margin 4.8% 6.0% 6.4% 6.6% 7.1% 7.9% 8.0% 8.2% EBIT Margin 4.8% 6.2% 6.4% 6.3% 6.5% 7.2% 7.3% 7.5% Credit Ratios - ------------- EBITDA/Interest 3.5x 3.7x 3.9x 4.6x 5.7x 7.1x 9.9x (EBITDA-CapEx) Mgmt 1.1 2.3 1.7 1.9 3.3 4.6 6.7 Net Debt/EBITDA 2.9 2.8 2.5 2.2 1.7 1.2 0.8 Total Debt/EBITDA 2.9 2.8 2.5 2.2 1.7 1.2 0.8 % of Debt Remaining 100.0% 91.4% 89.4% 78.4% 62.0% 41.8% Financial Measures - ------------------ Asset Terms 1.40x 1.45x 1.49x 8.54x 1.62x Days Sales in Inventory (COGS) 90.9 89.1 87.2 85.9 84.6 Pre-Tax EBIT RONC 11.7% 12.8% 14.8% 15.9% 17.4%
- -------------------------------------------------------------------------------
Financial Returns Trailing EBITDA Exit Multiple ----------------------------------------------- Private Sale in 2005 3.5x 4.0x 4.5x 3.0x 3.5x - -------------------- ----------------------------------------------- Outside Investors 23.5% 27.6% 31.3% 34.6% 37.6% Gain to Management $34.4 $43.9 $53.4 $62.9 $72.4 Private Sale in 2003 - -------------------- Outside Investors 19.5% 29.2% 37.6% 45.0% 51.9% Gain to Management $13.0 $21.3 $29.5 $37.8 $46.1
- -------------------------------------------------------------------------------
% Ownership Capital Primary F.D. Amount --------------- ------- ---------- Outside Investors 26.0% 24.7% $91.0 Other Equity 0.0% 0.0% 0.0 Close Family 74.0% 70.3% 258.6 Management 0.0% 5.0% 0.0 ----- ----- --- Total 100.0% 100.0% $349.6
- ------------------------------------------------------------------------------- 67 Project Snug Case: Mgmt Mid Overview Cap Struck: 3x Leverage (Amounts in millions) No Acquisitions
Equity Purchase Price Current Share Price (1/19/01) $33.19 Premium Paid 8.5% ------ Purchase Price Per Share $36.00 Shares Outstanding 18.0 ------ Equity Purchase Price $648.3
Pro Forma Share Ownership Shares Value ------ ----- Rolled-Over Close Family Shares 7.2 $258.6 Outside Investors Shares 0.8 527.5 Other Equity Shares 0.0 0.0 ------ ------ Total Outside Investors 0.8 527.5 Shares Repurchased with Debt 10.1 $362.2 Total Equity Purchase Price 18.0 $648.3
Sources Rate $ % ---- ------- ------- Revolves 9.0% $0.0 0.0% Senior Debt 9.0% 635.0 60.6% Subordinated Debt 13.0% 127.0 12.1% Roll-Over Equity 258.6 24.7% Investors' Equity 27.5 2.6% -------- ------ Total Sources $1,048.1 100.0% -------- ------ Uses Equity Purchase Price $ 648.3 Refinance Existing Debt 373.0 Transaction Expenses 29.5 Prepayment Penalties 0.0 Existing Cash (2.7) -------- Total Uses $1,048.1 --------
Acquisition Multiples Multiples Amount Enterprise Transaction --------- ------ ---------- ----------- Purchase Price Revenue Equity Purchase Price $ 648.3 FYE 12/30/00 $2,278.1 0.4x 0.5x Plus: Net Debt 370.3 FYE 12/31/01 2,313.2 0.4 0.5 -------- Enterprise Value $1,018.5 EBITDA Plus: Fees & Expenses 29.5 FYE 12/30/00 $ 254.0 4.0x 4.1x -------- Transaction Value $1,048.1 FYE 12/31/01 257.5 4.0 4.1 -------- EBIT FYE 12/30/00 $ 145.0 7.0x 7.2x FYE 12/31/01 153.0 6.7 6.9
Financial Summary Historical Fiscal Year Ending December 31, ---------------------------------- ---------------------------------------------------- 1998 PF 1999 PF 2000E PF 2001 2002 2003 2004 2005 ------- ------- -------- -------- -------- -------- -------- -------- Revenue $2,180.5 $2,220.5 $2,278.1 $2,313.2 $2,426.0 $2,553.1 $2,660.0 $2,776.1 Gross Profit 384.7 419.6 437.4 444.1 477.0 523.2 548.1 576.0 EBITDA 191.5 239.1 254.0 257.5 288.6 330.6 354.8 380.1 PFO 104.5 134.1 145.0 153.0 171.6 201.8 213.3 226.6 EBIT 104.5 137.8 145.0 141.2 156.8 183.5 194.4 207.3 Net Income 41.8 52.9 71.1 82.7 97.0 Cap Ex 120.5 166.8 100.0 144.0 168.0 139.0 125.0 125.0 Interest Expense $73.7 $71.6 $68.7 $64.9 $56.7 $45.6 Revenue Growth 1.8% 2.6% 1.5% 4.9% 5.2% 4.2% 4.4% Gross Margin 17.6% 18.9% 19.2% 19.2% 19.7% 20.5% 20.6% 20.7% EBITDA Margin 8.8% 10.8% 11.1% 11.1% 11.9% 13.0% 13.3% 13.7% PFO Margin 4.8% 6.0% 6.4% 6.6% 7.1% 7.9% 8.0% 8.2% EBIT Margin 4.8% 6.2% 6.4% 6.1% 6.5% 7.2% 7.3% 7.5% Credit Ratios - ------------- EBITDA/Interest 3.2x 3.4x 3.6x 4.2x 5.1x 6.3x 8.3x (EBITDA-CapEx)/Int. 1.0 2.1 1.6 1.8 3.0 4.1 5.6 Net Debt/EBITDA 3.2 3.0 2.7 2.4 1.9 1.4 1.0 Total Debt/EBITDA 3.2 3.0 2.7 2.4 1.9 1.4 1.0 % of Debt Remaining 100.0% 92.6% 91.3% 81.7% 67.2% 49.3% Financial Measures - ------------------ Asset Turns 1.40x 1.45x 1.49x 1.54x 1.62x Days Sales in Inventory (COGS) 90.9 89.1 87.2 85.9 84.6 Pre-Tax EDIT ROIC 11.7% 12.8% 14.8% 15.9% 17.4%
Financial Returns Trailing EBITDA Exit Multiple ------------------------------------------------- Private Sale in 2005 3.5x 4.0x 4.5x 5.0x 5.5x -------- -------- -------- -------- -------- Outside Investors 26.4% 31.0% 35.0% 38.6% 41.9% Gain to Management $33.4 $43.0 $52.5 $62.0 $71.5 Private Sale in 2003 Outside Investors 22.2% 33.4% 43.0% 51.4% 39.0% Gain to Management $12.4 $20.7 $29.0 $37.2 $45.5
% Ownership Capital Primary F.D. Amount ------- -------- ------- Outside Investors 9.6% 9.1% $ 27.5 Other Equity 0.0% 0.0% 0.0 Close Family 90.4% 85.9% 258.6 Management 0.0% 5.0% 0.0 ------ ------ ------ Total 100.0% 100.0% $286.1
EX-99.C.4 5 y51534ex99-c_4.txt FINANCIAL PRESENTATION MATERIALS 1 Exhibit (c)(4) CREDIT RESEARCH & TRADING LLC PROJECT SNUG February 18, 2001 [Please note that references to "base" case correspond to the Scenario 2 projections and references to "downside" case correspond to the Scenario 1 projections.] 2 SPRINGS INDUSTRIES INC. VALUATION AND PREMIA TO HISTORICAL STOCK PRICES (1)
DRF MHK WXS $36.10 $42.00 $43.00 $44.00 $45.00 $46.00 $47.00 $48.00 ($2.94) ($30.77) ($8.37) ------ ------ ------ ------ ------ ------ ------ ------ ------- -------- ------- Aggregate Value/2000 Revenues 0.45x 0.50x 0.51x 0.51x 0.52x 0.53x 0.54x 0.55x 0.68x 0.70x 1.12x Aggregate Value/ 2000 EBITDA 4.0x 4.5x 4.5x 4.6x 4.7x 4.8x 4.8x 4.9x 4.8x 5.7x 6.6x 2001 EBITDA 3.9x 4.3x 4.4x 4.5x 4.5x 4.6x 4.7x 4.8x 4.7x 5.8x 6.2x Aggregate Value/ 2000 EBIT 7.0x 7.8x 8.0x 8.1x 8.2x 8.4x 8.5x 8.6x 8.6x 7.2x 8.9x 2001 EBIT 6.7x 7.6x 7.8x 7.9x 8.0x 8.2x 8.3x 8.4x 8.3x 7.4x 8.2x Equity Value/ 2000 Pro Forma Net Income 9.6x 11.3x 11.6x 11.9x 12.2x 12.5x 12.8x 13.0x 5.9x 10.2x 6.2x 2001 Pro Forma Net Income 12.5x 16.1x 16.8x 17.6x 18.3x 19.1x 20.0x 20.9x 5.8x 10.5x 5.7x Premium to: February 16 @ $36.10 0.0% 16.3% 19.1% 21.9% 24.7% 27.4% 30.2% 33.0% 30-day Average @ $35.05 3.0% 19.8% 22.7% 25.5% 28.4% 31.3% 34.1% 37.0% 60-day Average @ $33.21 8.7% 26.5% 29.5% 32.5% 35.5% 38.5% 41.5% 44.6% 90-day Average @ $31.21 15.7% 34.6% 37.8% 41.0% 44.2% 47.4% 50.6% 53.8% 6-month Average @ $29.29 23.3% 43.4% 46.8% 50.2% 53.6% 57.1% 60.5% 63.9% 1-year Average @ $33.70 7.1% 24.6% 27.6% 30.6% 33.5% 36.5% 39.5% 42.4% 2-year Average @ $35.65 1.3% 17.8% 20.6% 23.4% 26.2% 29.0% 31.8% 34.6% Premium to: $32.00 12.8% 31.3% 34.4% 37.5% 40.6% 43.8% 46.9% 50.0% $33.00 9.4% 27.3% 30.3% 33.3% 36.4% 39.4% 42.4% 45.5% $34.00 6.2% 23.5% 26.5% 29.4% 32.4% 35.3% 38.2% 41.2% $35.00 3.1% 20.0% 22.9% 25.7% 28.6% 31.4% 34.3% 37.1%
(1) Assumes that $38.9 million related to deferred compensation is treated as debt. GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT -1- 3 SPRINGS INDUSTRIES INC. RECENT TRADING VOLUME ANALYSIS(through 02/16/01) THREE MONTH TRADING VOLUME PER STOCK PRICE RANGE [BAR CHART]
% of Stock Price Trading Range($) Volume -------- ------ 22-23 1% 24-25 3% 26-27 20% 28-29 40% 30-31 15% 32-33 9% 34-35 4% 36-37 9% 38-39 0% 40-41 0% 42-43 0% 44-45 0% 46-47 0% 48-49 0%
SIX MONTH TRADING VOLUME PER STOCK PRICE RANGE [BAR CHART]
% of Stock Price Trading Range($) Volume -------- ------ 22-23 12% 24-25 8% 26-27 33% 28-29 18% 30-31 14% 32-33 6% 34-35 3% 36-37 6% 38-39 0% 40-41 0% 42-43 0% 44-45 0% 46-47 0% 48-49 0%
ONE YEAR TRADING VOLUME FOR STOCK PRICE RANGE [BAR CHART]
% of Stock Price Trading Range($) Volume -------- ------ 22-23 6% 24-25 4% 26-27 16% 28-29 8% 30-31 11% 32-33 9% 34-35 12% 36-37 7% 38-39 8% 40-41 3% 42-43 5% 44-45 1% 46-47 9% 48-49 2%
TWO YEAR TRADING VOLUME PER STOCK PRICE RANGE [BAR CHART]
% of Stock Price Trading Range($) Volume -------- ------ 22-23 4% 24-25 3% 26-27 11% 28-29 8% 30-31 9% 32-33 11% 34-35 9% 36-37 8% 38-39 15% 40-41 8% 42-43 6% 44-45 1% 46-47 6% 48-49 1%
GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT -2- 4 SPRINGS INDUSTRIES INC. HISTORICAL STOCK PRICE AND PREMIUM ANALYSIS THREE-MONTH STOCK PRICE HISTORY [LINE CHART OMITTED] 16-Nov-00 25.75 17-Nov-00 26.8125 20-Nov-00 26.9375 21-Nov-00 27.4375 22-Nov-00 27.125 24-Nov-00 27.875 27-Nov-00 28.0625 28-Nov-00 27.8125 29-Nov-00 27.8125 30-Nov-00 27.25 01-Dec-00 27.8125 04-Dec-00 27.875 05-Dec-00 28.25 06-Dec-00 26 07-Dec-00 23.9375 08-Dec-00 24.3125 11-Dec-00 27 12-Dec-00 28.75 13-Dec-00 29.1875 14-Dec-00 28 15-Dec-00 27.5625 18-Dec-00 28.125 19-Dec-00 28.75 20-Dec-00 28.375 21-Dec-00 28.125 22-Dec-00 30.1875 26-Dec-00 30.0625 27-Dec-00 31.125 28-Dec-00 31.625 29-Dec-00 32.4375 02-Jan-01 30.9375 03-Jan-01 31.8125 04-Jan-01 31.9375 05-Jan-01 30.625 08-Jan-01 31.9375 09-Jan-01 31.5625 10-Jan-01 31.875 11-Jan-01 32.0625 12-Jan-01 31.9375 16-Jan-01 32.3125 17-Jan-01 33.125 18-Jan-01 33.3125 19-Jan-01 33.1875 22-Jan-01 32.1875 23-Jan-01 34.5 24-Jan-01 33.5625 25-Jan-01 34.1875 26-Jan-01 33.875 29-Jan-01 34.14 30-Jan-01 34.15 31-Jan-01 35.38 01-Feb-01 35.18 02-Feb-01 36 05-Feb-01 36.35 06-Feb-01 36.69 07-Feb-01 37.23 08-Feb-01 36.11 09-Feb-01 36.28 12-Feb-01 36.6 13-Feb-01 37.5 14-Feb-01 36.72 15-Feb-01 36.44 16-Feb-01 36.1
SIX-MONTH STOCK PRICE HISTORY [LINE CHART OMITTED] 16-Aug-00 31.125 17-Aug-00 31.5625 18-Aug-00 31.4375 21-Aug-00 31 22-Aug-00 31.75 23-Aug-00 31.375 24-Aug-00 31.5625 25-Aug-00 31.3125 28-Aug-00 30.75 29-Aug-00 30 30-Aug-00 30.0625 31-Aug-00 29.8946 01-Sep-00 29.8125 05-Sep-00 29.6875 06-Sep-00 31.25 07-Sep-00 31.25 08-Sep-00 31.125 11-Sep-00 30.0625 12-Sep-00 29.625 13-Sep-00 29.1875 14-Sep-00 29.4375 15-Sep-00 28.875 18-Sep-00 28.625 19-Sep-00 28.9375 20-Sep-00 28.1875 21-Sep-00 27.875 22-Sep-00 27.5 25-Sep-00 27.375 26-Sep-00 27.125 27-Sep-00 27.1875 28-Sep-00 27.5 29-Sep-00 28.1875 02-Oct-00 27.875 03-Oct-00 28.375 04-Oct-00 28.8125 05-Oct-00 28.9375 06-Oct-00 27.125 09-Oct-00 27.0625 10-Oct-00 26.9375 11-Oct-00 26.0625 12-Oct-00 25.625 13-Oct-00 25.4375 16-Oct-00 25.375 17-Oct-00 24.5625 18-Oct-00 24.0625 19-Oct-00 23.9375 20-Oct-00 23 23-Oct-00 22.625 24-Oct-00 22.75 25-Oct-00 22.875 26-Oct-00 22.75 27-Oct-00 23 30-Oct-00 23.4375 31-Oct-00 23.5625 01-Nov-00 23.5 02-Nov-00 23.75 03-Nov-00 23.75 06-Nov-00 24.8125 07-Nov-00 25.375 08-Nov-00 26.625 09-Nov-00 25.875 10-Nov-00 25.5625 13-Nov-00 26.3125 14-Nov-00 26.4375 15-Nov-00 26.1875 16-Nov-00 25.75 17-Nov-00 26.8125 20-Nov-00 26.9375 21-Nov-00 27.4375 22-Nov-00 27.125 24-Nov-00 27.875 27-Nov-00 28.0625 28-Nov-00 27.8125 29-Nov-00 27.8125 30-Nov-00 27.25 01-Dec-00 27.8125 04-Dec-00 27.875 05-Dec-00 28.25 06-Dec-00 26 07-Dec-00 23.9375 08-Dec-00 24.3125 11-Dec-00 27 12-Dec-00 28.75 13-Dec-00 29.1875 14-Dec-00 28 15-Dec-00 27.5625 18-Dec-00 28.125 19-Dec-00 28.75 20-Dec-00 28.375 21-Dec-00 28.125 22-Dec-00 30.1875 26-Dec-00 30.0625 27-Dec-00 31.125 28-Dec-00 31.625 29-Dec-00 32.4375 02-Jan-01 30.9375 03-Jan-01 31.8125 04-Jan-01 31.9375 05-Jan-01 30.625 08-Jan-01 31.9375 09-Jan-01 31.5625 10-Jan-01 31.875 11-Jan-01 32.0625 12-Jan-01 31.9375 16-Jan-01 32.3125 17-Jan-01 33.125 18-Jan-01 33.3125 19-Jan-01 33.1875 22-Jan-01 32.1875 23-Jan-01 34.5 24-Jan-01 33.5625 25-Jan-01 34.1875 26-Jan-01 33.875 29-Jan-01 34.14 30-Jan-01 34.15 31-Jan-01 35.38 01-Feb-01 35.18 02-Feb-01 36 05-Feb-01 36.35 06-Feb-01 36.69 07-Feb-01 37.23 08-Feb-01 36.11 09-Feb-01 36.28 12-Feb-01 36.6 13-Feb-01 37.5 14-Feb-01 36.72 15-Feb-01 36.44 16-Feb-01 36.1
ONE-YEAR STOCK PRICE HISTORY [LINE CHART OMITTED] 16-Feb-00 39.8125 17-Feb-00 39.3125 18-Feb-00 38.75 22-Feb-00 38.5625 23-Feb-00 38.5 24-Feb-00 35.4375 25-Feb-00 34.3125 28-Feb-00 34 29-Feb-00 35.4375 01-Mar-00 35.25 02-Mar-00 37.1875 03-Mar-00 37.375 06-Mar-00 36.375 07-Mar-00 35.8125 08-Mar-00 36.1875 09-Mar-00 37.5 10-Mar-00 36.8125 13-Mar-00 35.625 14-Mar-00 34.6875 15-Mar-00 35.375 16-Mar-00 37.5625 17-Mar-00 37.9375 20-Mar-00 37.25 21-Mar-00 38.0625 22-Mar-00 38.125 23-Mar-00 38.125 24-Mar-00 38.125 27-Mar-00 37.625 28-Mar-00 37.875 29-Mar-00 38 30-Mar-00 38.375 31-Mar-00 38 03-Apr-00 38.5 04-Apr-00 38.3125 05-Apr-00 38.4375 06-Apr-00 39.1875 07-Apr-00 39.1875 10-Apr-00 38.75 11-Apr-00 40.0625 12-Apr-00 40.0625 13-Apr-00 38.9375 14-Apr-00 38.1875 17-Apr-00 38.6875 18-Apr-00 39 19-Apr-00 40.375 20-Apr-00 41.75 24-Apr-00 42.0625 25-Apr-00 43.1875 26-Apr-00 43.1875 27-Apr-00 42.0625 28-Apr-00 41.0625 01-May-00 43.5 02-May-00 45.625 03-May-00 47.0625 04-May-00 48.5625 05-May-00 47.375 08-May-00 47.375 09-May-00 46.9375 10-May-00 47.4375 11-May-00 48.8125 12-May-00 48.1875 15-May-00 47.0625 16-May-00 47.25 17-May-00 47 18-May-00 46.8125 19-May-00 46.5 22-May-00 46.3125 23-May-00 45.1875 24-May-00 46.5625 25-May-00 46.3125 26-May-00 47.25 30-May-00 47.4375 31-May-00 47.5 01-Jun-00 43.875 02-Jun-00 42.375 05-Jun-00 42.9375 06-Jun-00 41.875 07-Jun-00 41.625 08-Jun-00 39.9375 09-Jun-00 39.875 12-Jun-00 39.9375 13-Jun-00 38.75 14-Jun-00 39.25 15-Jun-00 39.5 16-Jun-00 39.5899 19-Jun-00 35.875 20-Jun-00 35.8125 21-Jun-00 34.6875 22-Jun-00 34.3125 23-Jun-00 34 26-Jun-00 34.25 27-Jun-00 33.4375 28-Jun-00 34.0899 29-Jun-00 34.3125 30-Jun-00 32 03-Jul-00 32.625 05-Jul-00 32.75 06-Jul-00 31.5625 07-Jul-00 31.75 10-Jul-00 31.75 11-Jul-00 32.3125 12-Jul-00 32.125 13-Jul-00 31.875 14-Jul-00 32.0625 17-Jul-00 32.3125 18-Jul-00 31.5 19-Jul-00 31.375 20-Jul-00 32.9375 21-Jul-00 34.0625 24-Jul-00 33.625 25-Jul-00 33.3125 26-Jul-00 33.0625 27-Jul-00 32.875 28-Jul-00 32.4375 31-Jul-00 32.25 01-Aug-00 31.75 02-Aug-00 32.125 03-Aug-00 31.875 04-Aug-00 31.5625 07-Aug-00 32.1875 08-Aug-00 31.9375 09-Aug-00 31.6875 10-Aug-00 31.75 11-Aug-00 31.8125 14-Aug-00 32.125 15-Aug-00 31.3125 16-Aug-00 31.125 17-Aug-00 31.5625 18-Aug-00 31.4375 21-Aug-00 31 22-Aug-00 31.75 23-Aug-00 31.375 24-Aug-00 31.5625 25-Aug-00 31.3125 28-Aug-00 30.75 29-Aug-00 30 30-Aug-00 30.0625 31-Aug-00 29.8946 01-Sep-00 29.8125 05-Sep-00 29.6875 06-Sep-00 31.25 07-Sep-00 31.25 08-Sep-00 31.125 11-Sep-00 30.0625 12-Sep-00 29.625 13-Sep-00 29.1875 14-Sep-00 29.4375 15-Sep-00 28.875 18-Sep-00 28.625 19-Sep-00 28.9375 20-Sep-00 28.1875 21-Sep-00 27.875 22-Sep-00 27.5 25-Sep-00 27.375 26-Sep-00 27.125 27-Sep-00 27.1875 28-Sep-00 27.5 29-Sep-00 28.1875 02-Oct-00 27.875 03-Oct-00 28.375 04-Oct-00 28.8125 05-Oct-00 28.9375 06-Oct-00 27.125 09-Oct-00 27.0625 10-Oct-00 26.9375 11-Oct-00 26.0625 12-Oct-00 25.625 13-Oct-00 25.4375 16-Oct-00 25.375 17-Oct-00 24.5625 18-Oct-00 24.0625 19-Oct-00 23.9375 20-Oct-00 23 23-Oct-00 22.625 24-Oct-00 22.75 25-Oct-00 22.875 26-Oct-00 22.75 27-Oct-00 23 30-Oct-00 23.4375 31-Oct-00 23.5625 01-Nov-00 23.5 02-Nov-00 23.75 03-Nov-00 23.75 06-Nov-00 24.8125 07-Nov-00 25.375 08-Nov-00 26.625 09-Nov-00 25.875 10-Nov-00 25.5625 13-Nov-00 26.3125 14-Nov-00 26.4375 15-Nov-00 26.1875 16-Nov-00 25.75 17-Nov-00 26.8125 20-Nov-00 26.9375 21-Nov-00 27.4375 22-Nov-00 27.125 24-Nov-00 27.875 27-Nov-00 28.0625 28-Nov-00 27.8125 29-Nov-00 27.8125 30-Nov-00 27.25 01-Dec-00 27.8125 04-Dec-00 27.875 05-Dec-00 28.25 06-Dec-00 26 07-Dec-00 23.9375 08-Dec-00 24.3125 11-Dec-00 27 12-Dec-00 28.75 13-Dec-00 29.1875 14-Dec-00 28 15-Dec-00 27.5625 18-Dec-00 28.125 19-Dec-00 28.75 20-Dec-00 28.375 21-Dec-00 28.125 22-Dec-00 30.1875 26-Dec-00 30.0625 27-Dec-00 31.125 28-Dec-00 31.625 29-Dec-00 32.4375 02-Jan-01 30.9375 03-Jan-01 31.8125 04-Jan-01 31.9375 05-Jan-01 30.625 08-Jan-01 31.9375 09-Jan-01 31.5625 10-Jan-01 31.875 11-Jan-01 32.0625 12-Jan-01 31.9375 16-Jan-01 32.3125 17-Jan-01 33.125 18-Jan-01 33.3125 19-Jan-01 33.1875 22-Jan-01 32.1875 23-Jan-01 34.5 24-Jan-01 33.5625 25-Jan-01 34.1875 26-Jan-01 33.875 29-Jan-01 34.14 30-Jan-01 34.15 31-Jan-01 35.38 01-Feb-01 35.18 02-Feb-01 36 05-Feb-01 36.35 06-Feb-01 36.69 07-Feb-01 37.23 08-Feb-01 36.11 09-Feb-01 36.28 12-Feb-01 36.6 13-Feb-01 37.5 14-Feb-01 36.72 15-Feb-01 36.44 16-Feb-01 36.1
TWO-YEAR STOCK PRICE HISTORY [LINE CHART OMITTED] 16-Feb-99 36.125 17-Feb-99 35.5 18-Feb-99 35.75 19-Feb-99 35.125 22-Feb-99 34.0625 23-Feb-99 33.125 24-Feb-99 31.8125 25-Feb-99 33.1875 26-Feb-99 33.25 01-Mar-99 31.9375 02-Mar-99 32 03-Mar-99 32.25 04-Mar-99 32.625 05-Mar-99 32.4375 08-Mar-99 32.5 09-Mar-99 32.0625 10-Mar-99 32 11-Mar-99 31.8125 12-Mar-99 31.75 15-Mar-99 30.75 16-Mar-99 31.6875 17-Mar-99 32.0625 18-Mar-99 33.4375 19-Mar-99 31.8125 22-Mar-99 31.4375 23-Mar-99 29.9375 24-Mar-99 29.875 25-Mar-99 30.1875 26-Mar-99 29.0625 29-Mar-99 29.25 30-Mar-99 29.1875 31-Mar-99 27.0625 01-Apr-99 27.5 05-Apr-99 27.8125 06-Apr-99 28.1875 07-Apr-99 28.5 08-Apr-99 27.8125 09-Apr-99 29.25 12-Apr-99 29.25 13-Apr-99 29 14-Apr-99 29.25 15-Apr-99 29.625 16-Apr-99 30.4375 19-Apr-99 32.0625 20-Apr-99 34.5625 21-Apr-99 37 22-Apr-99 35.9375 23-Apr-99 36.4375 26-Apr-99 36.1875 27-Apr-99 35.8125 28-Apr-99 36.5625 29-Apr-99 38 30-Apr-99 37.375 03-May-99 40.1875 04-May-99 40.0625 05-May-99 40.625 06-May-99 40.5 07-May-99 41.125 10-May-99 42.4375 11-May-99 41.9375 12-May-99 41.75 13-May-99 42.9375 14-May-99 41.5 17-May-99 41.125 18-May-99 40.1875 19-May-99 39.8125 20-May-99 41.3125 21-May-99 43.5 24-May-99 41.4375 25-May-99 40.5 26-May-99 40.4375 27-May-99 39.4375 28-May-99 39.625 01-Jun-99 38.9375 02-Jun-99 41.5625 03-Jun-99 42 04-Jun-99 42 07-Jun-99 42 08-Jun-99 41 09-Jun-99 39.9375 10-Jun-99 39.625 11-Jun-99 38.4375 14-Jun-99 38.75 15-Jun-99 38.5625 16-Jun-99 37.8125 17-Jun-99 38.6875 18-Jun-99 38.1875 21-Jun-99 38.625 22-Jun-99 39.125 23-Jun-99 39.5 24-Jun-99 39.6875 25-Jun-99 40.25 28-Jun-99 40.75 29-Jun-99 42.4375 30-Jun-99 43.625 01-Jul-99 42.875 02-Jul-99 42.8125 06-Jul-99 43.3125 07-Jul-99 43.25 08-Jul-99 42.375 09-Jul-99 42.125 12-Jul-99 41.375 13-Jul-99 41.8125 14-Jul-99 40.75 15-Jul-99 41.75 16-Jul-99 41.375 19-Jul-99 40.625 20-Jul-99 41.5 21-Jul-99 41.5 22-Jul-99 41.4375 23-Jul-99 41.125 26-Jul-99 41.1875 27-Jul-99 40.9375 28-Jul-99 40.625 29-Jul-99 40.125 30-Jul-99 39.75 02-Aug-99 39.5625 03-Aug-99 39 04-Aug-99 39.125 05-Aug-99 39.75 06-Aug-99 40.125 09-Aug-99 40 10-Aug-99 39.9375 11-Aug-99 39.75 12-Aug-99 39.375 13-Aug-99 40.25 16-Aug-99 40.125 17-Aug-99 39.5 18-Aug-99 39.375 19-Aug-99 39.5 20-Aug-99 39.4375 23-Aug-99 39.4375 24-Aug-99 39.3125 25-Aug-99 39.5625 26-Aug-99 39.0625 27-Aug-99 38.4375 30-Aug-99 37.6875 31-Aug-99 37.5625 01-Sep-99 38.375 02-Sep-99 37.75 03-Sep-99 38.875 07-Sep-99 38.875 08-Sep-99 38.625 09-Sep-99 38.625 10-Sep-99 38.5 13-Sep-99 37.375 14-Sep-99 37.0625 15-Sep-99 37.1875 16-Sep-99 35.9375 17-Sep-99 35.75 20-Sep-99 36.0625 21-Sep-99 35.4375 22-Sep-99 35.25 23-Sep-99 33.875 24-Sep-99 33.6875 27-Sep-99 33.875 28-Sep-99 33.9375 29-Sep-99 33.6875 30-Sep-99 33.9375 01-Oct-99 33.875 04-Oct-99 33.75 05-Oct-99 33.75 06-Oct-99 33.9375 07-Oct-99 34 08-Oct-99 33.875 11-Oct-99 33.875 12-Oct-99 33.5625 13-Oct-99 33.875 14-Oct-99 33.8125 15-Oct-99 33.4375 18-Oct-99 33.1875 19-Oct-99 33 20-Oct-99 32.9375 21-Oct-99 35.6875 22-Oct-99 38.5625 25-Oct-99 39.625 26-Oct-99 39.375 27-Oct-99 39.4375 28-Oct-99 39.3125 29-Oct-99 39.8125 01-Nov-99 39.8125 02-Nov-99 40.0625 03-Nov-99 40.75 04-Nov-99 42.0625 05-Nov-99 42.4375 08-Nov-99 43.4375 09-Nov-99 42.5625 10-Nov-99 41.625 11-Nov-99 41.1875 12-Nov-99 41.75 15-Nov-99 39.375 16-Nov-99 40.8125 17-Nov-99 40.125 18-Nov-99 41.25 19-Nov-99 40.6875 22-Nov-99 39.8125 23-Nov-99 39.5625 24-Nov-99 38.625 26-Nov-99 39.875 29-Nov-99 39.75 30-Nov-99 40 01-Dec-99 39.125 02-Dec-99 39.375 03-Dec-99 39.625 06-Dec-99 38.25 07-Dec-99 38.25 08-Dec-99 37.8125 09-Dec-99 37.9375 10-Dec-99 38.5 13-Dec-99 38.5 14-Dec-99 38.3125 15-Dec-99 38.375 16-Dec-99 37.3125 17-Dec-99 37.875 20-Dec-99 38.75 21-Dec-99 37.9375 22-Dec-99 39.4375 23-Dec-99 39.1875 27-Dec-99 40.6875 28-Dec-99 39.25 29-Dec-99 39.5 30-Dec-99 39.8125 31-Dec-99 39.9375 03-Jan-00 39.875 04-Jan-00 38.125 05-Jan-00 39.3125 06-Jan-00 38.75 07-Jan-00 38.6875 10-Jan-00 38.6875 11-Jan-00 39.1875 12-Jan-00 39.9375 13-Jan-00 39.5 14-Jan-00 39.6875 18-Jan-00 39.625 19-Jan-00 39.25 20-Jan-00 38.25 21-Jan-00 37.6875 24-Jan-00 37.4375 25-Jan-00 37.9375 26-Jan-00 36.875 27-Jan-00 37.0625 28-Jan-00 36.9375 31-Jan-00 36.375 01-Feb-00 36.8125 02-Feb-00 37.1875 03-Feb-00 38.8125 04-Feb-00 37.875 07-Feb-00 38.375 08-Feb-00 38.125 09-Feb-00 39.6875 10-Feb-00 39.5 11-Feb-00 39.3125 14-Feb-00 39.375 15-Feb-00 39.375 16-Feb-00 39.8125 17-Feb-00 39.3125 18-Feb-00 38.75 22-Feb-00 38.5625 23-Feb-00 38.5 24-Feb-00 35.4375 25-Feb-00 34.3125 28-Feb-00 34 29-Feb-00 35.4375 01-Mar-00 35.25 02-Mar-00 37.1875 03-Mar-00 37.375 06-Mar-00 36.375 07-Mar-00 35.8125 08-Mar-00 36.1875 09-Mar-00 37.5 10-Mar-00 36.8125 13-Mar-00 35.625 14-Mar-00 34.6875 15-Mar-00 35.375 16-Mar-00 37.5625 17-Mar-00 37.9375 20-Mar-00 37.25 21-Mar-00 38.0625 22-Mar-00 38.125 23-Mar-00 38.125 24-Mar-00 38.125 27-Mar-00 37.625 28-Mar-00 37.875 29-Mar-00 38 30-Mar-00 38.375 31-Mar-00 38 03-Apr-00 38.5 04-Apr-00 38.3125 05-Apr-00 38.4375 06-Apr-00 39.1875 07-Apr-00 39.1875 10-Apr-00 38.75 11-Apr-00 40.0625 12-Apr-00 40.0625 13-Apr-00 38.9375 14-Apr-00 38.1875 17-Apr-00 38.6875 18-Apr-00 39 19-Apr-00 40.375 20-Apr-00 41.75 24-Apr-00 42.0625 25-Apr-00 43.1875 26-Apr-00 43.1875 27-Apr-00 42.0625 28-Apr-00 41.0625 01-May-00 43.5 02-May-00 45.625 03-May-00 47.0625 04-May-00 48.5625 05-May-00 47.375 08-May-00 47.375 09-May-00 46.9375 10-May-00 47.4375 11-May-00 48.8125 12-May-00 48.1875 15-May-00 47.0625 16-May-00 47.25 17-May-00 47 18-May-00 46.8125 19-May-00 46.5 22-May-00 46.3125 23-May-00 45.1875 24-May-00 46.5625 25-May-00 46.3125 26-May-00 47.25 30-May-00 47.4375 31-May-00 47.5 01-Jun-00 43.875 02-Jun-00 42.375 05-Jun-00 42.9375 06-Jun-00 41.875 07-Jun-00 41.625 08-Jun-00 39.9375 09-Jun-00 39.875 12-Jun-00 39.9375 13-Jun-00 38.75 14-Jun-00 39.25 15-Jun-00 39.5 16-Jun-00 39.5899 19-Jun-00 35.875 20-Jun-00 35.8125 21-Jun-00 34.6875 22-Jun-00 34.3125 23-Jun-00 34 26-Jun-00 34.25 27-Jun-00 33.4375 28-Jun-00 34.0899 29-Jun-00 34.3125 30-Jun-00 32 03-Jul-00 32.625 05-Jul-00 32.75 06-Jul-00 31.5625 07-Jul-00 31.75 10-Jul-00 31.75 11-Jul-00 32.3125 12-Jul-00 32.125 13-Jul-00 31.875 14-Jul-00 32.0625 17-Jul-00 32.3125 18-Jul-00 31.5 19-Jul-00 31.375 20-Jul-00 32.9375 21-Jul-00 34.0625 24-Jul-00 33.625 25-Jul-00 33.3125 26-Jul-00 33.0625 27-Jul-00 32.875 28-Jul-00 32.4375 31-Jul-00 32.25 01-Aug-00 31.75 02-Aug-00 32.125 03-Aug-00 31.875 04-Aug-00 31.5625 07-Aug-00 32.1875 08-Aug-00 31.9375 09-Aug-00 31.6875 10-Aug-00 31.75 11-Aug-00 31.8125 14-Aug-00 32.125 15-Aug-00 31.3125 16-Aug-00 31.125 17-Aug-00 31.5625 18-Aug-00 31.4375 21-Aug-00 31 22-Aug-00 31.75 23-Aug-00 31.375 24-Aug-00 31.5625 25-Aug-00 31.3125 28-Aug-00 30.75 29-Aug-00 30 30-Aug-00 30.0625 31-Aug-00 29.8946 01-Sep-00 29.8125 05-Sep-00 29.6875 06-Sep-00 31.25 07-Sep-00 31.25 08-Sep-00 31.125 11-Sep-00 30.0625 12-Sep-00 29.625 13-Sep-00 29.1875 14-Sep-00 29.4375 15-Sep-00 28.875 18-Sep-00 28.625 19-Sep-00 28.9375 20-Sep-00 28.1875 21-Sep-00 27.875 22-Sep-00 27.5 25-Sep-00 27.375 26-Sep-00 27.125 27-Sep-00 27.1875 28-Sep-00 27.5 29-Sep-00 28.1875 02-Oct-00 27.875 03-Oct-00 28.375 04-Oct-00 28.8125 05-Oct-00 28.9375 06-Oct-00 27.125 09-Oct-00 27.0625 10-Oct-00 26.9375 11-Oct-00 26.0625 12-Oct-00 25.625 13-Oct-00 25.4375 16-Oct-00 25.375 17-Oct-00 24.5625 18-Oct-00 24.0625 19-Oct-00 23.9375 20-Oct-00 23 23-Oct-00 22.625 24-Oct-00 22.75 25-Oct-00 22.875 26-Oct-00 22.75 27-Oct-00 23 30-Oct-00 23.4375 31-Oct-00 23.5625 01-Nov-00 23.5 02-Nov-00 23.75 03-Nov-00 23.75 06-Nov-00 24.8125 07-Nov-00 25.375 08-Nov-00 26.625 09-Nov-00 25.875 10-Nov-00 25.5625 13-Nov-00 26.3125 14-Nov-00 26.4375 15-Nov-00 26.1875 16-Nov-00 25.75 17-Nov-00 26.8125 20-Nov-00 26.9375 21-Nov-00 27.4375 22-Nov-00 27.125 24-Nov-00 27.875 27-Nov-00 28.0625 28-Nov-00 27.8125 29-Nov-00 27.8125 30-Nov-00 27.25 01-Dec-00 27.8125 04-Dec-00 27.875 05-Dec-00 28.25 06-Dec-00 26 07-Dec-00 23.9375 08-Dec-00 24.3125 11-Dec-00 27 12-Dec-00 28.75 13-Dec-00 29.1875 14-Dec-00 28 15-Dec-00 27.5625 18-Dec-00 28.125 19-Dec-00 28.75 20-Dec-00 28.375 21-Dec-00 28.125 22-Dec-00 30.1875 26-Dec-00 30.0625 27-Dec-00 31.125 28-Dec-00 31.625 29-Dec-00 32.4375 02-Jan-01 30.9375 03-Jan-01 31.8125 04-Jan-01 31.9375 05-Jan-01 30.625 08-Jan-01 31.9375 09-Jan-01 31.5625 10-Jan-01 31.875 11-Jan-01 32.0625 12-Jan-01 31.9375 16-Jan-01 32.3125 17-Jan-01 33.125 18-Jan-01 33.3125 19-Jan-01 33.1875 22-Jan-01 32.1875 23-Jan-01 34.5 24-Jan-01 33.5625 25-Jan-01 34.1875 26-Jan-01 33.875 29-Jan-01 34.14 30-Jan-01 34.15 31-Jan-01 35.38 01-Feb-01 35.18 02-Feb-01 36 05-Feb-01 36.35 06-Feb-01 36.69 07-Feb-01 37.23 08-Feb-01 36.11 09-Feb-01 36.28 12-Feb-01 36.6 13-Feb-01 37.5 14-Feb-01 36.72 15-Feb-01 36.44 16-Feb-01 36.1
GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT -3- 5 SPRINGS INDUSTRIES INC. VALUATION SYNOPSIS
Value Per Share Public Market Trading Parameters Relative to (1): Revenues $32.33 - $44.50 0.4x- 0.5x EBIT $33.89 - $41.62 6.5x- 7.5x P/E $35.24 - $39.00 9.0x-10.0x Discounted Cash Flow Valuation(2): Base Case $51.35 - $69.85 Downside Case $38.43 - $53.05
(1) Does not include premium for change of control. (2) Assumes that $38.9 million related to deferred compensation is treated as debt. GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT -4- 6 SPRINGS INDUSTRIES INC. COMPARATIVE LEVERAGE(1) - - The level of debt to EBITDA (cash flow) is the most commonly used indicator of financial leverage. Investment grade credits (BBB) would generally be low -- approximately 2.75x debt to trailing EBITDA - - Current lending conditions may preclude a family-led LBO at debt levels at or above 3.0x EBITDA - - Generally, higher leverage levels are available when a well-known financial investor acts as a "sponsor" of a transaction - - Even though the leverage levels contemplated are significantly below those of its three primary competitors, customers may react negatively to a highly-leveraged platform for Springs DEBT TO 2000 EBITDA -- PRO FORMA AS OF 12/31/00 [BAR CHART OMITTED] Dan River 4.0x WestPoint Stevens 5.3x Status Quo 1.5x $75MM Repurchase at $38 1.8x $150MM Repurchase at $40 2.1x HIP Recap at $46 2.9x HIP Recap at $46 (w/ Growth)(2) 2.9x Family LBO at $46 3.6x
DEBT TO EBITDA (HEARTLAND RECAP AT $46) [BAR CHART OMITTED]
Base Case Downside Case 2000PF 2.9x 2.9x 2001P 2.5x 2.7x 2002P 2.1x 2.4x 2003P 1.6x 2.0x 2004P 1.2x 1.7x 2005P 0.8x 1.4x
(1) Heartland Recap cases assume that Heartland invests $225 million and that the Close family sells $50 million in stock. Also assumes that $38.9 million related to deferred compensation is treated as debt. (2) Assumes that HIP acquisition strategy is pursued. GREENWICH CREDIT RESEARCH [SPRINGS LOGO] & TRADING CONNECTICUT -5- EX-99.C.5 6 y51534ex99-c_5.txt PRELIMINARY DRAFT MATERIALS 1 Exhibit 99(c)(5) [UBS WARBURG LOGO] STRICTLY PRIVATE AND CONFIDENTIAL Project Mill Presentation to the Special Committee of the Board of Directors March 19, 2001 MARCH 2001 Preliminary Draft -- For Discussion Purposes Only [Please note that references to "base" case correspond to the Scenario 2 projections and references to "downside" case correspond to the Scenario 1 projections.] 2 The accompanying material was compiled on a confidential basis for use solely by The Special Committee of the Board of Directors of Springs Industries, Inc. (the "Company") in evaluating the proposal described herein. This material was prepared for a specific use by specific persons and was not prepared to conform with any disclosure standards under applicable federal securities laws or otherwise. Neither the Company nor UBS Warburg ("UBS Warburg") nor any of their respective officers, directors, employees, affiliates, advisors, agents or representatives warrants the accuracy or completeness of any of the material set forth herein. Nothing contained in the accompanying material is, or shall be relied upon as, a promise or representation as to the past or the future. It should be understood that any estimates, valuations and/or projections contained in the accompanying material were prepared or derived from information supplied by the Company without any independent verification thereof by UBSW. Accordingly, no representation or warranty can be or is made by UBS Warburg as to the accuracy or achievability of any such valuations, estimates and/or projections. 3 CONTENTS Section 1 TRANSACTION OVERVIEW ................................. 1 Section 2 INDUSTRY AND COMPANY OVERVIEW ........................ 10 Section 3 FINANCIAL OVERVIEW ................................... 39 Section 4 PRELIMINARY VALUATION ANALYSES ....................... 52
APPENDICES A Comparable Company Descriptions B Comparable Transaction Descriptions C Heartland Transaction Summaries
[UBS WARBURG LOGO] 4 TRANSACTION OVERVIEW Section 1 [UBS WARBURG LOGO] 5 TRANSACTION OVERVIEW - - Heartland Industrial Partners, L.P. ("Heartland") and members of the Close Family and certain management shareholders (collectively, the "Continuing Shareholders") have proposed to acquire all of the outstanding shares of the common stock of Springs Industries, Inc. ("Springs" or the "Company") not owned by the Continuing Shareholders for $44.00 per share in cash - - Pursuant to the draft Recapitalization Agreement (the "Agreement") dated March 12, 2001 to be entered into by Springs and Heartland Springs Investment Company ("Merger Subsidiary"), an entity controlled by Heartland, Springs will undertake a recapitalization whereby: - Merger Subsidiary will merge with and into the Company (the "Merger"); - shares of the Company (other than the shares held by the Continuing Shareholders) will be converted into the right to receive $44.00 per share in cash (the "Cash Merger Consideration"), subject to the terms and conditions as set forth in the Agreement; - - For the purposes of our analyses, UBS Warburg has assumed the Merger will close on June 30, 2001 [UBS WARBURG LOGO] Section 1: Transaction Overview 2 6 HEARTLAND OVERVIEW - - Heartland is a private equity investment fund formed in 1999 with equity commitments in excess of $1.1 billion ($2 billion targeted by the final close of the fund) with offices in Greenwich, CT, New York, NY and Detroit, MI - - Primary investment focus is on mid- to large-cap, industrial companies with a "buy, build and grow" platform scale-up investment strategy to be concentrated among five industrial sectors - - Targeted industries include those that are poised for consolidation and have long-term growth potential: automotive, aerospace material/components, metal forming/fabrication, specialty chemicals, home textiles/furnishings, machine tools, and heavy equipment - - Heartland was founded by David Stockman, a former partner at The Blackstone Group and a former Reagan Administration cabinet officer; Timothy Leuliette, the former president and COO of Penske Corporation; and Daniel Tredwell, a former managing director of Chase Securities. Heartland currently has 7 partners and 20 professionals - - Transactions completed to date have focused on the automotive supply sector. Three of these transactions resulted in the creation of Metaldyne Corporation in January 2001. Summaries of these transactions can be found in Appendix D - MascoTech, Inc. -- November 2000 (Metaldyne) - Simpson Industries, Inc. -- December 2000 (Metaldyne) - Global Metal Technologies, Inc. -- January 2001 (Metaldyne) - Collins & Aikman Corporation -- March 2001 (60% ownership) [UBS WARBURG LOGO] Section 1: Transaction Overview 3 7 PRINCIPAL TERMS & CONDITIONS Form of Transaction: - Leveraged recapitalization via reverse merger Merger Consideration: - $44.00 per share in cash Tax Structure: - Fully taxable to selling shareholders Accounting Treatment: - Recapitalization accounting under GAAP (no push-down of goodwill) Significant Conditions and - Special Committee approval of the proposed amendment to the Company's Other Terms: Articles of Incorporation (the "Amendment") and the Agreement and recommendation of same to the Board of Directors - Approval by Springs' Board of Directors and recommendation to the Company's shareholders (other than the Continuing Shareholders) - Affirmative vote by 2/3 of the votes by the Company's shareholders in favor of the Amendment, with the Class A and Class B shareholders voting together as a single class (with the holders of Class B shares entitled to four votes per share) (Close Family shares represent 73% of the vote) - Affirmative vote by 2/3 of the votes by the Company's shareholders in favor of the Merger, with the Class A and Class B shareholders voting together as a single class (with the holders of Class B shares entitled to one vote per share) (Close Family shares represent 41% of the vote) - Customary conditions relating to regulatory approvals and no material adverse effect - Financing out is subject to (i) the terms and conditions of the bank commitment letter; (ii) bank financing shall have been completed on substantially the terms and conditions in the bank commitment letter (or on terms and conditions which are not materially more onerous); (iii) compliance with respect to the Shareholders Agreement; and (iv) the terms and conditions of the equity commitment letter - No shop provision subject to fiduciary out
[UBS WARBURG LOGO] Section 1: Transaction Overview 4 8 Termination Conditions: - Customary termination conditions and provisions including: - termination by mutual consent - termination by either Springs or Heartland, if (i) the Merger is not consummated on or before 180 days from the signing of the Agreement; (ii) failure to receive the requisite vote in favor of the Amendment; and (iii) failure to receive the requisite vote in favor of the Merger; - termination by Heartland, if the Special Committee or Board of Directors shall have failed to make or withdrawn its approval or recommendation of the Merger - termination by the Company, if the Company receives from any third party an Acquisition Proposal providing for consideration greater than the Cash Merger Consideration and which the Special Committee and the Board of Directors accept or recommend in respect of their fiduciary duties; - no termination fee (except for expense reimbursement in the case of a termination under certain circumstances);
[UBS WARBURG LOGO] Section 1: Transaction Overview 5 9 PURCHASER FINANCING - - Heartland intends to finance the Merger through the use of: (i) $700 million senior secured credit facilities provided by JP Morgan Chase ("Morgan Chase"); (ii) a $200 million receivables purchase facility; and (iii) $225 million of equity capital provided by Heartland in addition to the equity rolled over by Continuing Shareholders - - The Morgan Chase credit facilities are comprised of a term loan facility, a revolving credit facility and a receivables purchase facility - term loan facility is comprised of two tranches: (i) a 5.5-year, amortizing, term loan facility (the "Tranche A Term Loan Facility") in the amount of $200 million and (ii) a 7-year, amortizing, term loan facility (the "Tranche B Term Loan Facility") in the amount of $300 million - secured revolving credit facility is available in the amount of up to $200 million (undrawn and available at closing) for a period of 5.5 years - receivables purchase facility in the amount of up to $200 million ($165 million provided at closing) through which the Company will securitize its trade receivables through the issuance of commercial paper (backed by the cash flows from the eligible trade receivables sold to a special purpose subsidiary or trust). This facility has a term of one year which may be extended for additional one-year terms - pricing, subject to a leverage performance grid, will initially be set at a spread to adjusted LIBOR ("LIBOR") or to the commercial paper rate, as follows: - Tranche A Term Loan Facility: LIBOR + 1.75% - Tranche B Term Loan Facility: LIBOR + 2.25% - Secured Revolving Credit Facility: LIBOR + 1.75% - Receivable Purchase Facility: CP Rate (at market) [UBS WARBURG LOGO] Section 1: Transaction Overview 6 10 PURCHASER FINANCING (CONTINUED) - - Significant financing conditions include: - Morgan Chase (Bank Financing) - (i) customary conditions relating to fees, documentation, compliance with law, etc.; (ii) no material adverse change in the Company or in the financial, banking or capital markets as they relate to hindering Morgan Chase's ability to syndicate the facilities; (iii) knowledge that no other competing financing for a Heartland affiliate occurs during the syndication without the consent of Morgan Chase; (iv) Morgan Chase's completion of ongoing legal, environmental, tax and accounting due diligence; and (v) satisfied as to the nature of the environmental and employee health/safety exposures and receipt of environmental assessments (including Phase I and II reports, as applicable) satisfactory to Morgan Chase - Heartland (Equity Financing) -- (i) satisfaction of the conditions to Merger Subsidiary's obligations under the Agreement; and (ii) termination of commitment congruent with the termination provisions in the Agreement - - An estimated sources and uses of funds for the transaction (as provided by Morgan Chase) is illustrated below: [UBS WARBURG LOGO] Section 1: Transaction Overview 7 11 ESTIMATED SOURCES
AMOUNT ($MM) ----- Sr. Bank Term Revolver 0.0 Receivables Purchasing Facility 165.0 Sr. Bank Term Loan 200.0 Sr. Bank Term Loan 300.0 Assumed Debt 28.6 ------- TOTAL DEBT 693.6 ------- Heartland Equity 225.0 Shareholder Rollover 276.3 ------- TOTAL EQUITY 501.3 ======= TOTAL SOURCES 1,194.9 =======
ESTIMATED USES
AMOUNT ($MM) ----- Purchase of Springs Equity 803.4 Repay Indebtedness 308.9 Assumed Debt 28.6 Excess Cash (working capital) 14.3 Fees & Expenses 40.0 ======= TOTAL USES 1,194.9 =======
[UBS WARBURG LOGO] Section 1: Transaction Overview 8 12 VALUATION ANALYSIS AT VARIOUS SHARE PRICES SPRINGS TRANSACTION VALUE AT PROPOSED OFFER PRICE(1)
($MM, EXCEPT PER SHARE) - ----------------------- Proposed Transaction Price Per Share 44.00 Total Diluted Shares Outstanding 19.96 ------- 878.2 ------- Less: Option Proceeds (72.7) ======= TRANSACTION EQUITY MARKET VALUE 805.5 ======= Plus: Springs Debt (incl. make whole pmts.) 340.2 Plus: Unfunded Pension Liability 22.8 Plus: Unfunded Deferred Comp. Liability 40.5 Less: Cash and Equivalents (2.9) ======= TRANSACTION ENTERPRISE VALUE 1,206.2 =======
SPRING SHARES SOLD VS ROLLED
SHARES AMOUNT (1) SHARES SOLD (MM) ($MM) - ----------- ---- ----- Public 11.0 485.2 Close Family 1.0 44.0 ----- ------ TOTAL SHARES SOLD 12.0 529.2 ----- ------ Close Family Shares Rolled 6.3 276.3 ===== ====== TOTAL SHARES OUTSTANDING 18.3 805.5 ===== ======
NOTE: (1) At $44.00 per share IMPLIED VALUATION MULTIPLES AT VARIOUS SHARE PRICES(2) PER SHARE VALUE ($) 40.00 42.00 44.00 46.00 48.00 50.00 52.00 ----- ----- ----- ----- ----- ----- ----- TEV/LTM Revenue (x) 0.50 0.51 0.53 0.55 0.57 0.58 0.60 TEV/LTM EBITDA (x) 4.4 4.5 4.7 4.9 5.0 5.2 5.3 TEV/LTM Free Cash Flow(3)(x) 6.9 7.1 7.4 7.6 7.9 8.1 8.4 TEV/LTM EBIT (x) 7.6 7.9 8.2 8.4 8.7 9.0 9.3 EMV/LTM Net Income (x) 10.1 10.6 11.1 11.7 12.2 12.8 13.4
NOTES: (1) Based on fiscal year-end 2000 balance sheet (2) Implied multiples based on adjusted fiscal year 2000 results (3) Free cash flow is defined as EBITDA less capital expenditures [UBS WARBURG LOGO] Section 1: Transaction Overview 9 13 INDUSTRY AND COMPANY OVERVIEW Section 2 [UBS WARBURG LOGO] 14 COMPANY OVERVIEW * SPRINGS IS A LEADER IN THE HOME TEXTILE FURNISHINGS MARKET BEDDING PRODUCTS - - Leader in double digit growth Bed-In-A-Bag category -- in both mid-market and high end - - Strength in core color programs, account management and replenishment capabilities - - Heavy focus and strong competitive advantage in printed ensembles and "fashion products" (coordinated sheets, comforters, bedding accessories and curtains) which face limited competition from imports - - Have made investments in distribution and system applications to improve customer service and achieve one of the best service records in the industry. Direct importers lack the infrastructure to effectively compete in this area BATH PRODUCTS - - Springs has a balanced portfolio of towels, bath rugs, showers curtains and accessories - - Springs has been traditionally #3 in towels but now has the opportunity to make significant gains: - Market leader Pillowtex is in bankruptcy - Springs terry modernization should improve product costs and quality - Springs is developing major off-shore sourcing partnership - - Through acquisition and internal growth, Springs has developed a #1 market share position in shower curtains and accessories WINDOWS AND OTHER HOME FURNISHINGS - - Major window blinds product innovation (cut-to-size) has stimulated SPRINGS MAJOR PRODUCT SEGMENTS [SPRINGS MAJOR PRODUCT SEGMENTS PLOTPOINTS] Bedding 43% Other(Windows, Baby, Other) 36% Bath 21%
2000 Sales: $2.3 billion 2000 EBITDA BY SEGMENT [2000 EBITDA BY SEGMENT PLOTPOINTS] Bedding 55% Other(Windows, Baby, Other) 29% Bath 16%
2000 EBITDA: $254 million [UBS WARBURG LOGO] Section 2: Industry and Company Overview 11 15 INDUSTRY TRENDS AND OBSERVATIONS - - The home furnishings/textiles industry continues to be subjected to numerous pressures resulting from: - industry structure/characteristics - channel and customer issues - imports - - Industry structure/characteristics - mature, highly fragmented and competitive - stable, albeit slow, growth - excess capacity resulting in plant shut downs and restructuring charges - over leveraged and capital intensive - - Channel and customer issues - continued channel shift from department stores to mass merchants and specialty retailers - pricing pressure resulting from channel consolidation and imports - retailer issues: product differentiation, inability to pass on price increases, possible direct sourcing initiatives - shift of inventory risk from retailers to the mills; supply chain issues - continued favorable consumer demographics - - Imports - continued and increasing pressure from imports in bedding and towels (low and high price points); changing quota restrictions - increased emphasis on global sourcing - - Recent industry trends/events include: - softening retail environment and retailer inventory adjustments resulting in a slow down in sales and higher inventories for the Company and its competitors - increasing raw material prices - particularly cotton, energy and grey cloth - over capacity and cost pressure resulting in plant shut downs and restructuring costs (e.g., WestPoint) [UBS WARBURG LOGO] Section 2: Industry and Company Overview 12 16 - margin pressure from plant standings - Pillowtex bankruptcy filing [UBS WARBURG LOGO] Section 2: Industry and Company Overview 13 17 HOME TEXTILE INDUSTRY TOTAL HOME TEXTILE MARKET GROWTH (1) [TOTAL HOME TEXTILE MARKET GROWTH PLOTPOINTS]
1998 1999 2000 2001 2002 2003 2004 2005 ($bn) 16.3 17.0 17.7 18.5 19.2 20.1 20.9 21.8
2000-2005 CAGR = 4.2% SOURCE: Company Reports NOTES: (1) KSA estimated growth rates (2) Wholesale value including imports. Data estimates by KSA US MARKET BY PRODUCT LINE
TREND 1999 SHIPMENTS(2) GROWTH AMOUNT RATE PRODUCT LINE ($MM) % TOTAL (%) ------------ ----- ------- --- Bath Towels 2,482 14.6 4.3 Sheets/Pillowcases 2,463 14.5 3.5 Comforters/Bedspreads 1,717 10.1 5.0 Sleep Pillows 1,133 6.7 3.0 Ready-Made Window Coverings 1,025 6.0 4.0 Bath Rugs 961 5.7 4.0 Shower Curtains 589 3.5 3.0 Down Comforters 432 2.5 5.0 Mattress Pads 341 2.0 4.0 ------ ----- --- SPRINGS' SERVED MARKETS 11,143 65.6 4.0 ------ ----- --- TOTAL SERVED MARKET 17,000 100.0 4.2 ====== ===== ===
[UBS WARBURG LOGO] Section 2: Industry and Company Overview 14 18 IMPORT TRENDS DIRECT IMPORT MARKET SHARE
1995 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- ---- TOTAL BEDDING CAGR(1995-2000) 11.7% 12.1% 11.3% 13.3% 16.6% 19.1% 21.0% TOTAL BATH CAGR(1995-2000) 11.4% 9.4% 10.1% 11.8% 12.6% 14.4% 16.1%
- - Home textile imports have grown steadily and tend to be concentrated in: - Specialty products - high labor content "up-market" goods such as high thread count and heavily embroidered sheets and bedding - high volume and low-end functional products - - Imports beginning to enter into high price point segment - encouraged by relative labor cost advantage - encouraged by "big box" retailers in search of low cost supply [UBS WARBURG LOGO] Section 2: Industry and Company Overview 15 19 COMPETITIVE ANALYSIS - - Springs' is one of the largest home furnishings company in the United States with FY 2000 revenues of $2,275 million - - There are few large competitors in the market and many smaller specialist players - - In the three core business segments that Springs' operates in (Bedding, Bath, Window Fashions), they are number one, two or three in market share - - Springs' focus on core customers in the specialty retail and mass merchandiser categories (i.e., Bed Bath & Beyond, Walmart, etc.) has resulted in stable growth and market share positions [UBS WARBURG LOGO] Section 2: Industry and Company Overview 16 20 HOME FURNISHINGS MARKET -- 2000 NET SALES (%) [HOME FURNISHINGS MARKET -- 2000 NET SALES (%) PIECHART] Springs 25% West Point 20% Pillowtex 16% Dan River 7% Mohawk 6% Other 25%
SPRINGS PRODUCT MARKET RANKINGS
PRODUCT CATEGORY MARKET RANK - ---------------- ----------- Top-of-Bed 1 Canadian Bedding 1 Bath Accessories 1 Shower Curtains 1 Retail Fabrics 1 Bath Rugs 2 Retail Sheets/Pillowcases 2 Bed-In-A-Bag 2 Retail Towels 3 Institutional Towels 3 Hard Window Treatment/Hardware 3 Baby Bedding/Bath 3 -----------
[UBS WARBURG LOGO] Section 2: Industry and Company Overview 17 21 CUSTOMERS - - 70% of sales are to Springs' top ten customers which are heavily weighted to the strongest, most dynamically growing retailers in the US - - These retailers are steadily raising supplier performance and capability standards -- thereby permitting Springs to develop increasing competitive advantage versus smaller, undercapitalized, narrow-product-line competitors - - Large mass merchants and specialty chain customers are actively reducing their supplier bases and seeking "one-stop shopping" with home furnishings suppliers with Springs' breadth of product range - - Retailers demand high standards from full service vendors. - supply chain execution systems - low prices - specification creep - on time delivery DISTRIBUTION OF SPRINGS' SALES BY CUSTOMER [DISTRIBUTION OF SPRINGS' SALES BY CUSTOMER PIECHART] Wal-Mart 28.1% Kmart 7.6% Home Depot 6.0% LNT 5.0% BBB 4.5% Target 4.0% JC Penneys 3.6% Sears 3.6% Lowes 2.8% Federated 1.9% All Others 32.9%
Retail Total Gross Sales: $2.5 billion SOURCE: Company Reports [UBS WARBURG LOGO] Section 2: Industry and Company Overview 18 22 Pricing Trends - - Industry prices have increased steadily but at relatively low growth rates (4.1% or less) over the past 10 years - - Price increases have, to a certain extent, been counter balanced by "specification creep" (i.e., larger and heavier weight bath towels for the same price) - - EDLP's (Every Day Low Prices - i.e. Wal-Mart) are in constant search of the lowest prices and at times source from international suppliers in order to keep prices low - - Imports have historically focused on low quality products but have increasingly focused on high-end content with greater variety. This has the potential to result in price pressure throughout the entire spectrum of the industry WHOLESALE TOWEL PRICES (PRICE PER DOZEN) [WHOLESALE TOWEL PRICES GRAPH]
1990-1999 CAGR 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Domestic Mills 4.1% $16.26 $16.61 $16.7 $16.75 $17.51 $17.62 $19.11 $20.95 $21.63 $23.35 Imports 4.0% $5.28 $5.42 $4.66 $5.22 $5.22 $5.43 $6.01 $6.24 $6.96 $7.52
SOURCE: Company Reports WHOLESALE SHEET (PRICE PER DOZEN) [WHOLESALE SHEET GRAPH]
1990-1999 CAGR 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Total Consumption 1.5% $47.31 $49.09 $48.64 $49.22 $49.76 $52.68 $54.30 $53.56 $53.39 $55.04 US Mill Shipments 1.4% $49.49 $51.60 $51.16 $50.40 $51.68 $55.01 $56.83 $56.00 $55.20 $56.73
SOURCE: Company Reports [UBS WARBURG LOGO] Section 2: Industry and Company Overview 19 23 COST STRUCTURE & PROFITABILITY COGS AS A % OF SALES
cogs 1997 1998 1999 2000 Springs 81.8 82.4 81.1 81.3 Pillowtex(1) 83.7 81.9 87.6 na WestPoint 74.7 73.3 73.2 73.9 Dan River 78.1 78.6 81.6 81.6
SG&A AS A % OF SALES
sg&a 1997 1998 1999 2000 Springs 12.0 12.1 12.5 12.1 Pillowtex(1) 9.0 8.5 8.5 na WestPoint 12.4 12.7 12.6 13.5 Dan River 11.4 11.3 10.3 10.1
EBIT MARGIN (%)
1997 1998 1999 2000 Springs 6 5 6 7 Pillowtex(1) 7 10 4 na WestPoint 13 14 14 13 Dan River 9 9 8 8
EBITDA MARGIN (%)
ebitda 1997 1998 1999 2000 Springs 9.8 8.7 10.8 11.3 Pillowtex(1) 10.1 13.1 7.9 na WestPoint 17.6 18.5 18.7 17.1 Dan River 14.8 14.8 14.3 13.9
NOTE: (1) Filed for bankruptcy 11/14/00 - - Springs has traditionally had lower EBIT and EBITDA margins, along with higher costs as a percentage of sales, when compared to its peers - - Evidence of the Company's cost reduction initiatives can be seen in the improving trend in EBIT and EBITDA margins from 1997 to 2000 - - Springs has smaller, less efficient plants than its peers WestPoint and Dan River [UBS WARBURG LOGO] Section 2: Industry and Company Overview 20 24 CAPITAL INTENSITY EBITDA AS A % OF TANGIBLE ASSETS
1997 1998 1999 2000 Springs 15 14.6 15.5 16.9 Pillowtex(1) 5.1 14.5 8.7 na WestPoint 23.3 24.9 23.9 22 Dan River 18 12.7 16.1 14.6
CAPITAL EXPENDITURES AS A % OF SALES
1997 1998 1999 2000 Springs 4.5 5.3 4.1 4.7 Pillowtex(1) 3.5 8.8 5.8 na WestPoint 9.2 8.3 7.9 4.2 Dan River 5.1 7.6 5.8 5.1
NOTE: (1) Filed for bankruptcy 11/14/00 21 25 Inflation - - Purchasing and Cost Savings - Springs is taking a number of measures to cut costs: - a move from a 5-shift schedule to a 4-shift schedule - benefits due to investments in PP&E and technology - source more raw materials internationally - - Price increases in raw materials are generally not transferable to retail customers, hence, resulting in margin erosion
COMMODITY PRICES: COTTON (US$) POLYESTER (US$) FIBERFILL (US$) 2000 0.56/lb 0.52/lb 0.40/lb 2001 0.64/lb 0.50/lb 0.42/lb 2002 0.70/lb 0.55/lb 0.46/lb 2003 0.72/lb 0.60/lb 0.50/lb
- Wage rates, energy and chemical prices have also increased, a trend expected to continue [UBS WARBURG LOGO] Section 2: Industry and Company Overview 22 26 INFORMATION TECHNOLOGY - Springs' IT system currently consists of 15 platforms running over 120 applications with over 300 FTE employees - Annual cost is approximately $66 million driven by: - quantity and redundancy of systems - age of hardware and applications (9.5 years) - large support group and related workload - Annual IT cost is approximately 2.8% of revenues versus: - < 2.0% for American manufacturing companies (Gartner Group sample) - < 1.5% for textile manufacturing companies (Gartner Group sample) - Key IT objective for Springs is to develop an IT plan and strategy congruent with the strategic needs of the Company: - improved information, better integration and decision support - supply chain management and connectivity - customer and brand management - cost competitive and efficient - Alternative IT plan scenarios: - Baseline - $158 million cash outlay over next 3 years - Required Incremental - $197 million cash outlay over next 3 years - Integration Program (ERP) - equal to the Required Incremental cash outlay [UBS WARBURG LOGO] Section 2: Industry and Company Overview 23 27 HISTORICAL 5-YEAR FINANCIAL SUMMARY
CAGR 1995 - 2000 ($MM) 1995 1996 1997 1998 1999 2000 (%) - --------------------------------------------------------------------------------------------------------------------------------- OPERATING DATA: Net Sales 2,223.2 2,221.0 2,226.1 2,180.5 2,220.4 2,275.1 0.5 % Growth 7.5% (0.1)% 0.2% (2.0)% 1.8% 2.5% EBITDA(1) 232.0 203.2 213.6 191.5 235.3 254.0 1.8 % Margin 10.4% 9.1% 9.1% 8.8% 10.6% 11.2% EBIT(1) 133.5 113.8 129.0 104.5 134.0 144.1 1.5 % Margin 6.0% 5.1% 5.8% 4.8% 6.0% 6.3% Net Income(1) 71.6 106.9 78.3 59.6 68.0 72.4 0.2 % Margin 3.2% 4.8% 3.5% 2.7% 3.1% 3.2% Diluted EPS(1) 3.69 5.18 3.79 3.15 3.74 3.99 1.5 % Growth 0.0% 40.4% (26.8)% (16.9)% 18.7% 6.7% Diluted Shares Outstanding 19.4 20.6 20.7 18.9 18.2 18.2 Balance Sheet Data: Cash and Equivalents 2.6 30.7 0.4 48.1 4.2 2.9 Net PP&E 614.0 534.6 540.5 549.7 625.6 617.9 0.1 Total Assets 1,527.5 1,398.5 1,408.7 1,425.5 1,575.0 1,584.0 0.7 Total Debt(2) 361.9 184.6 186.2 289.3 340.2 333.2 (1.6) Shareholders Equity 734.5 780.8 804.6 724.1 774.9 819.8 2.2 Cash Flow Data: Depreciation and Amortization 98.5 89.4 84.6 87.0 101.3 109.4 2.1 Capital Expenditures 75.2 75.1 98.5 115.0 166.8 93.3 4.4 - ---------------------------------------------------------------------------------------------------------------------------------
SOURCE: Company Reports NOTES: (1) Excludes non-recurring items (2) Includes short-term and long-term debt [UBS WARBURG LOGO] Section 2: Industry and Company Overview 24 28 QUALITY OF EARNINGS ANALYSIS ANALYTICAL ADJUSTMENTS TO EARNINGS
(US$mm, except per share data) FY 1998 FY 1999 FY 2000 - ------------------------------------------------------------------------------------ EBITDA Adjustments: EBITDA-Reported 191.5 235.3 253.9 "Above the Line" Non-Recurring Items- Expense (Income) 12.9 0.0 3.1 - ------------------------------------------------------------------------------------ EBITDA-Adjusted 204.4 235.3 257.0 - ------------------------------------------------------------------------------------ EBITDA-Reported-Margin % 8.8 10.6 11.2 EBITDA-Adjusted-Margin % 9.4 10.6 11.3 EBIT Adjustments: EBIT-Reported 104.5 134.0 144.5 "Above the Line" Non-Recurring Items- Expense (Income) 12.9 0.0 3.1 - ------------------------------------------------------------------------------------ EBIT-Adjusted 117.4 134.0 147.6 - ------------------------------------------------------------------------------------ EBIT-Reported-Margin % 4.8 6.0 6.4 EBIT-Adjusted-Margin % 5.4 6.0 6.5 Net Income Adjustments: Net Income to Common-Reported 37.3 69.0 67.1 After-Tax Total Non-Recurring Items- Expense (Income) 22.0 (1.1) 5.2 - ------------------------------------------------------------------------------------ Net Income to Common-Adjusted 59.3 67.9 72.3 - ------------------------------------------------------------------------------------ Net Income-Reported-Margin % 1.7 3.1 3.0 Net Income-Adjusted-Margin % 2.7 3.1 3.2 Wtd. Avg. Diluted Shares (Class A & Class B) 18.938 18.168 18.160 EPS-Reported 1.97 3.80 3.70 - ------------------------------------------------------------------------------------ EPS-Adjusted 3.13 3.73 3.98 - ------------------------------------------------------------------------------------
SOURCE: Company 10K and internal reports DETAIL OF ADJUSTMENTS/NON-RECURRING ITEMS
(US$mm, except per share data) FY 1998 FY 1999 FY 2000 - ------------------------------------------------------------------------------------------- Reported Restructuring & Realignment Expenses (Income): Katherine/Elliott Plants Shutdown -- -- 2.4 Griffin/Jackson Plants Shutdown -- -- 2.9 Rockhill Plant Shutdown and Other 19.9 -- -- - ------------------------------------------------------------------------------------------- Total Restructuring & Realignment Expense (Income) ($) 19.9 0.0 5.3 - ------------------------------------------------------------------------------------------- Effective Tax Rate (%) 36.5 38.0 37.0 - ------------------------------------------------------------------------------------------- After-Tax Restructuring & Realignment Expense (Income) ($) 12.6 0.0 3.3 - ------------------------------------------------------------------------------------------- Other Non-Recurring/One-Time Expenses (Income): "Above the EBIT Line" Items Acctg. Change - Supplies Inventory (Gain) -- -- (1.5) Wisconsin Sales Tax Assessment -- -- 2.5 Blindmaker Receivable Charge-Off -- -- 2.1 Employee Severance Expenses 5.4 -- -- Receivables Charge-Off - Window Fashions 7.5 -- -- - ------------------------------------------------------------------------------------------- Total "Above the EBIT Line" Non-Recurring Items ($) 12.9 0.0 3.1 - ------------------------------------------------------------------------------------------- "Below the EBIT Line" Items Gain on Sale/Leaseback of NYC Building -- (1.5) (1.8) Gain on Sale of Closed Mfg. Facilities -- (4.3) -- Impairment Charge-Property for Sale/Disposal 1.2 3.0 1.6 Gain on Sale of UltraSuede & Rockhill Facility (13.9) -- -- Impairment Charge-Terry Mfg. Facility Consolidation 4.8 -- -- Loss on Sale of Industrial Products & Springfield Facility 2.7 -- -- Year 2000 Expenses 7.1 1.0 -- - ------------------------------------------------------------------------------------------- Total "Below the EBIT Line" Non-Recurring Items 1.9 (1.8) (0.2) - ------------------------------------------------------------------------------------------- Total Other Non-Recurring Items ($) 14.8 (1.8) 2.9 Grand Total Non-Recurring Items ($) 34.7 (1.8) 8.2 Effective Tax Rate (%) 36.5 38.0 37.0 - ------------------------------------------------------------------------------------------- After-Tax Grand Total Non-Recurring Items ($) 22.0 (1.1) 5.2 - -------------------------------------------------------------------------------------------
[UBS WARBURG LOGO] Section 2: Industry and Company Overview 25 29 FYE 2000 Balance Sheet
Assets FYE 2000 - --------------------------------------------------------- Current Assets: Cash and Cash Equivalents 2.9 Accounts Receivable, net 291.1 Inventories, net 508.1 Other 34.4 - --------------------------------------------------------- Total Current Assets 836.4 - --------------------------------------------------------- Property, Plant & Equipment, net 617.9 Goodwill and Other Assets 129.9 ========================================================= TOTAL ASSETS 1,584.1 =========================================================
Liabilities & Shareholders' Equity FYE 2000 - --------------------------------------------------------- Current Liabilities: Short-Term Borrowings 24.7 Current Maturities of Long-Term Debt 25.2 Accounts Payable 106.7 Other Accrued Liabilities 114.4 - --------------------------------------------------------- Total Current Liabilities 271.0 - --------------------------------------------------------- Noncurrent Liabilities: Long-Term Debt 283.3 Accrued Benefits and Deferred Compensation 176.1 Other 34.0 - --------------------------------------------------------- Total Noncurrent Liabilities 493.4 - --------------------------------------------------------- Total Shareholders' Equity 819.8 ========================================================= TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 1,584.1 =========================================================
[UBS WARBURG LOGO] Section 2: Industry and Company Overview 26 30 SPRINGS STOCK PRICE HISTORY -- ANNOTATED -- LAST TWELVE MONTHS
SMI PRICE VOLUME 3/16/00 37.56 93.30 3/17/00 37.94 85.00 3/20/00 37.25 62.20 3/21/00 38.06 85.10 3/22/00 38.13 75.40 3/23/00 38.13 45.00 3/24/00 38.13 40.90 3/27/00 37.63 176.30 3/28/00 37.88 54.00 3/29/00 38.00 27.70 3/30/00 38.38 39.70 3/31/00 38.00 64.70 4/3/00 38.50 33.60 4/4/00 38.31 61.80 4/5/00 38.44 53.20 4/6/00 39.19 37.70 4/7/00 39.19 62.80 4/10/00 38.75 33.50 4/11/00 40.06 66.90 4/12/00 40.06 70.10 4/13/00 38.94 39.60 4/14/00 38.19 72.10 4/17/00 38.69 68.20 4/18/00 39.00 60.00 4/19/00 40.38 88.10 4/20/00 41.75 96.20 4/24/00 42.06 101.90 4/25/00 43.19 98.40 4/26/00 43.19 40.70 4/27/00 42.06 59.50 4/28/00 41.06 141.20 5/1/00 43.50 154.80 5/2/00 45.63 174.90 5/3/00 47.06 214.60 5/4/00 48.56 161.50 5/5/00 47.38 166.20 5/8/00 47.38 142.00 5/9/00 46.94 273.40 5/10/00 47.44 232.40 5/11/00 48.81 119.50 5/12/00 48.19 113.20 5/15/00 47.06 108.20 5/16/00 47.25 161.40 5/17/00 47.00 50.90 5/18/00 46.81 93.60 5/19/00 46.50 101.30 5/22/00 46.31 105.00 5/23/00 45.19 84.90 5/24/00 46.56 191.80 5/25/00 46.31 179.90 5/26/00 47.25 105.80 5/30/00 47.44 61.00 5/31/00 47.50 167.70 6/1/00 43.88 390.70 6/2/00 42.38 208.80 6/5/00 42.94 158.20 6/6/00 41.88 299.50 6/7/00 41.63 110.40 6/8/00 39.94 147.00 6/9/00 39.88 57.60 6/12/00 39.94 76.10 6/13/00 38.75 138.10 6/14/00 39.25 127.60 6/15/00 39.50 74.90 6/16/00 39.56 150.60 6/19/00 35.88 243.00 6/20/00 35.81 231.30 6/21/00 34.69 224.50 6/22/00 34.31 121.20 6/23/00 34.00 94.00 6/26/00 34.25 161.50 6/27/00 33.44 214.30 6/28/00 34.06 397.70 6/29/00 34.38 76.90 6/30/00 32.00 213.80 7/3/00 32.63 48.70 7/5/00 32.75 87.50 7/6/00 31.56 221.50 7/7/00 31.75 72.20 7/10/00 31.75 143.60 7/11/00 32.31 102.60 7/12/00 32.13 91.60 7/13/00 31.88 78.80 7/14/00 32.06 62.30 7/17/00 32.31 60.80 7/18/00 31.50 74.60 7/19/00 31.38 36.70 7/20/00 32.88 153.40 7/21/00 34.06 194.20 7/24/00 33.63 80.60 7/25/00 33.31 80.60 7/26/00 33.06 88.80 7/27/00 32.88 75.60 7/28/00 32.44 48.60 7/31/00 32.25 44.70 8/1/00 31.75 66.50 8/2/00 32.13 29.40 8/3/00 31.88 61.90 8/4/00 31.56 83.40 8/7/00 32.19 51.40 8/8/00 31.94 122.40 8/9/00 31.69 95.20 8/10/00 31.75 37.00 8/11/00 31.81 29.10 8/14/00 32.13 20.10 8/15/00 31.31 48.60 8/16/00 31.13 27.90 8/17/00 31.56 24.70 8/18/00 31.44 27.60 8/21/00 31.00 30.80 8/22/00 31.75 69.50 8/23/00 31.38 40.30 8/24/00 31.56 31.20 8/25/00 31.31 34.80 8/28/00 30.75 43.70 8/29/00 30.00 46.70 8/30/00 30.06 41.10 8/31/00 29.88 33.60 9/1/00 29.81 33.50 9/5/00 29.69 77.80 9/6/00 31.25 66.90 9/7/00 31.25 31.40 9/8/00 31.13 34.70 9/11/00 30.06 30.20 9/12/00 29.63 42.50 9/13/00 29.19 39.00 9/14/00 29.44 30.40 9/15/00 28.88 53.90 9/18/00 28.63 40.70 9/19/00 28.94 36.20 9/20/00 28.19 109.70 9/21/00 27.88 72.60 9/22/00 27.50 97.30 9/25/00 27.38 48.30 9/26/00 27.13 48.10 9/27/00 27.19 33.50 9/28/00 27.50 76.10 9/29/00 28.19 52.60 10/2/00 27.88 33.20 10/3/00 28.38 70.50 10/4/00 28.81 75.00 10/5/00 28.94 48.50 10/6/00 27.13 89.30 10/9/00 27.06 31.30 10/10/00 26.94 21.90 10/11/00 26.06 49.70 10/12/00 25.63 64.10 10/13/00 25.44 47.10 10/16/00 25.38 47.80 10/17/00 24.56 35.00 10/18/00 24.06 86.00 10/19/00 23.94 118.10 10/20/00 23.00 138.20 10/23/00 22.63 145.80 10/24/00 22.75 47.80 10/25/00 22.88 93.30 10/26/00 22.75 84.60 10/27/00 23.00 103.30 10/30/00 23.44 71.40 10/31/00 23.56 79.10 11/1/00 23.50 112.10 11/2/00 23.75 113.90 11/3/00 23.75 70.30 11/6/00 24.81 102.80 11/7/00 25.38 107.10 11/8/00 26.63 138.60 11/9/00 25.88 84.40 11/10/00 25.56 57.00 11/13/00 26.31 100.10 11/14/00 26.44 62.50 11/15/00 26.19 65.20 11/16/00 25.75 99.90 11/17/00 26.81 83.40 11/20/00 26.94 140.70 11/21/00 27.44 110.00 11/22/00 27.13 96.30 11/24/00 27.88 55.80 11/27/00 28.06 78.10 11/28/00 27.81 70.60 11/29/00 27.81 53.40 11/30/00 27.25 73.50 12/1/00 27.81 68.70 12/4/00 27.88 80.90 12/5/00 28.25 37.00 12/6/00 26.00 313.20 12/7/00 23.94 319.70 12/8/00 24.31 226.90 12/11/00 27.00 1838.20 12/12/00 28.75 593.80 12/13/00 29.19 201.70 12/14/00 28.00 114.40 12/15/00 27.56 71.80 12/18/00 28.13 121.20 12/19/00 28.75 92.30 12/20/00 28.38 87.20 12/21/00 28.13 87.10 12/22/00 30.19 99.60 12/26/00 30.06 76.30 12/27/00 31.13 42.10 12/28/00 31.63 87.30 12/29/00 32.44 83.50 1/2/01 30.94 130.50 1/3/01 31.81 168.90 1/4/01 31.94 103.10 1/5/01 30.63 83.90 1/8/01 31.94 87.80 1/9/01 31.56 131.60 1/10/01 31.88 99.90 1/11/01 32.06 140.80 1/12/01 31.94 67.30 1/16/01 32.31 76.30 1/17/01 33.13 96.00 1/18/01 33.31 58.90 1/19/01 33.19 69.00 1/22/01 32.19 76.60 1/23/01 34.50 78.80 1/24/01 33.56 61.80 1/25/01 34.19 44.20 1/26/01 33.88 50.80 1/29/01 34.14 33.60 1/30/01 34.15 37.50 1/31/01 35.38 47.80 2/1/01 35.18 140.60 2/2/01 36.00 99.70 2/5/01 36.35 56.60 2/6/01 36.69 65.50 2/7/01 37.23 37.10 2/8/01 36.11 100.50 2/9/01 36.28 48.50 2/12/01 36.60 100.10 2/13/01 37.50 55.70 2/14/01 36.72 73.40 2/15/01 36.44 36.20 2/16/01 36.10 25.90 2/20/01 43.82 1000.10 2/21/01 43.73 413.80 2/22/01 44.45 418.00 2/23/01 45.15 371.90 2/26/01 45.20 101.30 2/27/01 44.95 111.90 2/28/01 44.61 95.30 3/1/01 44.87 106.00 3/2/01 44.69 101.40 3/5/01 44.65 107.30 3/6/01 44.64 125.60 3/7/01 44.55 178.80 3/8/01 44.50 103.20 3/9/01 44.51 65.00 3/12/01 44.55 86.4 3/13/01 44.65 107.3 3/14/01 43.75 228.6 3/15/01 43.87 50.1
SOURCE: Factset ANNOTATIONS A Springs announces record first quarter sales & net income B WestPoint announces proposed recapitalization plan C WestPoint announces termination of recapitalization plan D Springs cut to "Hold" from "Buy" at First Union and CSFB E Springs reports record second quarter sales & net income F CSFB raises estimates after Springs beats second quarter estimates G Springs announces third quarter results of $1.00 vs. the Company's $1.02 estimate H Springs Industries eliminates some production in two plants affecting 320 people I Springs acquires Maybank's yarn mill in Georgia J Springs announces fourth quarter earnings of $0.61 vs. the Company's $0.65 estimate K Springs announces proposal from Heartland L Springs cut to "Neutral" from "Buy" at Wachovia Securities
SELECTED STATISTICS (1)(2) ($) - -------------------------------------------------- Pre-announcement Price (2/16/01) 36.10 30 Day Average 35.05 90 Day Average 31.21 52 Week Average 33.70 52 Week High 48.81 52 Week Low 22.63
NOTE: (1) Statistics at or prior to 2/16/01 (2) Closing Prices [UBS WARBURG LOGO] Section 2: Industry and Company Overview 27 31 Springs Stock Price History -- Last Three Years 3/16/98 - 3/16/01
DATE SMI S&P 500 ---- --- ------- 03/16/1998 100.00 100.00 03/17/1998 100.89 100.11 03/18/1998 100.00 100.58 03/19/1998 101.56 100.97 03/20/1998 101.78 101.84 03/23/1998 100.45 101.51 03/24/1998 101.00 102.44 03/25/1998 98.11 102.10 03/26/1998 99.44 101.99 03/27/1998 99.55 101.50 03/30/1998 98.89 101.32 03/31/1998 98.22 102.08 04/01/1998 98.33 102.68 04/02/1998 99.44 103.77 04/03/1998 97.88 104.02 04/06/1998 97.44 103.90 04/07/1998 96.33 102.81 04/08/1998 96.77 102.07 04/09/1998 98.33 102.91 04/13/1998 98.55 102.82 04/14/1998 99.33 103.38 04/15/1998 100.11 103.71 04/16/1998 99.78 102.68 04/17/1998 99.67 104.03 04/20/1998 99.44 104.11 04/21/1998 96.99 104.39 04/22/1998 96.88 104.75 04/23/1998 96.33 103.73 04/24/1998 95.32 102.65 04/27/1998 96.44 100.67 04/28/1998 97.66 100.54 04/29/1998 97.33 101.42 04/30/1998 98.11 103.01 05/01/1998 98.22 103.87 05/04/1998 98.00 103.97 05/05/1998 97.77 103.36 05/06/1998 97.66 102.38 05/07/1998 98.44 101.47 05/08/1998 99.55 102.67 05/11/1998 99.67 102.54 05/12/1998 100.78 103.38 05/13/1998 100.67 103.67 05/14/1998 99.44 103.53 05/15/1998 99.33 102.73 05/18/1998 99.33 102.46 05/19/1998 100.22 102.80 05/20/1998 100.45 103.69 05/21/1998 100.67 103.28 05/22/1998 99.78 102.89 05/26/1998 99.00 101.37 05/27/1998 98.55 101.20 05/28/1998 100.22 101.70 05/29/1998 100.00 101.07 06/01/1998 99.33 101.09 06/02/1998 99.00 101.29 06/03/1998 99.89 100.32 06/04/1998 101.34 101.44 06/05/1998 102.56 103.20 06/08/1998 102.23 103.38 06/09/1998 108.24 103.63 06/10/1998 104.90 103.06 06/11/1998 103.45 101.42 06/12/1998 102.34 101.81 06/15/1998 100.22 99.79 06/16/1998 86.86 100.77 06/17/1998 87.31 102.58 06/18/1998 85.75 102.51 06/19/1998 85.63 101.98 06/22/1998 85.08 102.22 06/23/1998 84.74 103.73 06/24/1998 82.52 104.97 06/25/1998 82.85 104.63 06/26/1998 83.30 105.00 06/29/1998 80.73 105.49 06/30/1998 82.18 105.06 07/01/1998 83.85 106.42 07/02/1998 82.74 106.22 07/06/1998 81.85 107.23 07/07/1998 79.51 106.99 07/08/1998 77.51 108.07 07/09/1998 76.50 107.35 07/10/1998 76.39 107.88 07/13/1998 76.28 107.96 07/14/1998 76.39 109.11 07/15/1998 74.83 108.85 07/16/1998 74.72 109.70 07/17/1998 75.17 109.96 07/20/1998 75.28 109.71 07/21/1998 74.72 107.95 07/22/1998 73.83 107.86 07/23/1998 72.49 105.60 07/24/1998 71.49 105.70 07/27/1998 70.71 106.30 07/28/1998 70.27 104.72 07/29/1998 71.71 104.26 07/30/1998 71.27 105.90 07/31/1998 68.26 103.84 08/03/1998 68.37 103.07 08/04/1998 66.37 99.34 08/05/1998 65.48 100.20 08/06/1998 64.59 100.96 08/07/1998 66.82 100.94 08/10/1998 66.15 100.36 08/11/1998 64.25 99.05 08/12/1998 65.14 100.46 08/13/1998 63.36 99.60 08/14/1998 65.59 98.47 08/17/1998 64.81 100.41 08/18/1998 65.37 102.03 08/19/1998 65.26 101.74 08/20/1998 65.48 101.14 08/21/1998 64.81 100.18 08/24/1998 65.37 100.82 08/25/1998 64.03 101.26 08/26/1998 61.92 100.46 08/27/1998 60.36 96.60 08/28/1998 60.13 95.17 08/31/1998 58.91 88.70 09/01/1998 61.92 92.12 09/02/1998 61.69 91.77 09/03/1998 60.02 91.01 09/04/1998 58.02 90.24 09/08/1998 65.70 94.83 09/09/1998 59.69 93.23 09/10/1998 58.69 90.82 09/11/1998 59.02 93.49 09/14/1998 59.80 95.41 09/15/1998 58.91 96.15 09/16/1998 61.47 96.87 09/17/1998 59.58 94.40 09/18/1998 62.14 94.52 09/21/1998 62.69 94.87 09/22/1998 60.36 95.40 09/23/1998 63.25 98.78 09/24/1998 63.47 96.61 09/25/1998 63.70 96.80 09/28/1998 66.48 97.17 09/29/1998 64.37 97.20 09/30/1998 61.92 94.23 10/01/1998 58.24 91.39 10/02/1998 59.69 92.90 10/05/1998 60.47 91.60 10/06/1998 58.35 91.23 10/07/1998 59.58 89.94 10/08/1998 58.24 88.90 10/09/1998 57.02 91.21 10/12/1998 58.02 92.44 10/13/1998 59.24 92.17 10/14/1998 58.24 93.17 10/15/1998 59.35 97.06 10/16/1998 58.80 97.88 10/19/1998 61.25 98.44 10/20/1998 61.47 98.58 10/21/1998 63.14 99.13 10/22/1998 61.92 99.93 10/23/1998 61.69 99.20 10/26/1998 62.92 99.36 10/27/1998 64.03 98.71 10/28/1998 63.25 98.96 10/29/1998 62.58 100.62 10/30/1998 63.03 101.80 11/02/1998 66.93 103.00 11/03/1998 67.26 102.93 11/04/1998 68.04 103.65 11/05/1998 68.26 105.06 11/06/1998 70.27 105.72 11/09/1998 70.82 104.72 11/10/1998 70.27 104.54 11/11/1998 71.16 103.86 11/12/1998 71.49 103.56 11/13/1998 74.05 104.30 11/16/1998 72.16 105.24 11/17/1998 71.94 105.56 11/18/1998 68.71 106.04 11/19/1998 69.04 106.80 11/20/1998 69.04 107.81 11/23/1998 68.60 110.09 11/24/1998 66.48 109.61 11/25/1998 70.71 109.97 11/27/1998 68.82 110.48 11/30/1998 69.38 107.82 12/01/1998 70.49 108.90 12/02/1998 74.83 108.52 12/03/1998 72.94 106.57 12/04/1998 69.27 109.03 12/07/1998 69.49 110.05 12/08/1998 67.71 109.46 12/09/1998 69.93 109.66 12/10/1998 67.48 107.95 12/11/1998 67.48 108.08 12/14/1998 65.59 105.74 12/15/1998 68.82 107.74 12/16/1998 70.16 107.66 12/17/1998 72.83 109.33 12/18/1998 70.60 110.08 12/21/1998 70.94 111.45 12/22/1998 69.71 111.52 12/23/1998 69.49 113.83 12/24/1998 70.82 113.62 12/28/1998 71.38 113.55 12/29/1998 74.61 115.06 12/30/1998 73.05 114.14 12/31/1998 73.83 113.89 01/04/1999 75.17 113.79 01/05/1999 73.61 115.34 01/06/1999 72.27 117.89 01/07/1999 72.16 117.65 01/08/1999 71.38 118.14 01/11/1999 73.05 117.11 01/12/1999 71.49 114.85 01/13/1999 71.16 114.37 01/14/1999 71.27 112.32 01/15/1999 73.39 115.19 01/19/1999 73.72 116.00 01/20/1999 75.72 116.43 01/21/1999 72.38 114.44 01/22/1999 71.27 113.52 01/25/1999 71.60 114.33 01/26/1999 71.05 116.03 01/27/1999 69.60 115.19 01/28/1999 73.94 117.24 01/29/1999 74.39 118.57 02/01/1999 70.60 117.95 02/02/1999 70.27 116.93 02/03/1999 74.39 117.86 02/04/1999 69.49 115.68 02/05/1999 68.37 114.84 02/08/1999 67.26 115.24 02/09/1999 66.70 112.68 02/10/1999 65.03 113.37 02/11/1999 65.48 116.19 02/12/1999 65.37 113.98 02/16/1999 64.37 115.07 02/17/1999 63.25 113.41 02/18/1999 63.70 114.64 02/19/1999 62.58 114.82 02/22/1999 60.69 117.87 02/23/1999 59.02 117.78 02/24/1999 56.68 116.14 02/25/1999 59.13 115.36 02/26/1999 59.24 114.74 03/01/1999 56.90 114.54 03/02/1999 57.02 113.55 03/03/1999 57.46 113.75 03/04/1999 58.13 115.51 03/05/1999 57.80 118.18 03/08/1999 57.91 118.85 03/09/1999 57.13 118.58 03/10/1999 57.02 119.23 03/11/1999 56.68 120.24 03/12/1999 56.57 119.95 03/15/1999 54.79 121.12 03/16/1999 56.46 121.04 03/17/1999 57.13 120.25 03/18/1999 59.58 121.99 03/19/1999 56.68 120.39 03/22/1999 56.01 120.17 03/23/1999 53.34 116.94 03/24/1999 53.23 117.54 03/25/1999 53.79 119.52 03/26/1999 51.78 118.86 03/29/1999 52.12 121.39 03/30/1999 52.00 120.52 03/31/1999 48.22 119.19 04/01/1999 49.00 119.87 04/05/1999 49.55 122.41 04/06/1999 50.22 122.11 04/07/1999 50.78 122.94 04/08/1999 49.55 124.53 04/09/1999 52.12 124.93 04/12/1999 52.12 125.89 04/13/1999 51.67 125.07 04/14/1999 52.12 123.09 04/15/1999 52.78 122.57 04/16/1999 54.23 122.21 04/19/1999 57.13 119.48 04/20/1999 61.58 121.02 04/21/1999 65.92 123.80 04/22/1999 64.03 125.90 04/23/1999 64.92 125.72 04/26/1999 64.48 126.01 04/27/1999 63.81 126.27 04/28/1999 65.14 125.17 04/29/1999 67.71 124.42 04/30/1999 66.59 123.71 05/03/1999 71.60 125.51 05/04/1999 71.38 123.42 05/05/1999 72.38 124.84 05/06/1999 72.16 123.42 05/07/1999 73.27 124.62 05/10/1999 75.61 124.19 05/11/1999 74.72 125.60 05/12/1999 74.39 126.38 05/13/1999 76.50 126.71 05/14/1999 73.94 123.95 05/17/1999 73.27 124.11 05/18/1999 71.60 123.54 05/19/1999 70.94 124.55 05/20/1999 73.61 124.05 05/21/1999 77.51 123.26 05/24/1999 73.83 121.07 05/25/1999 72.16 119.01 05/26/1999 72.05 120.89 05/27/1999 70.27 118.73 05/28/1999 70.60 120.62 06/01/1999 69.38 119.92 06/02/1999 74.05 119.97 06/03/1999 74.83 120.41 06/04/1999 74.83 123.02 06/07/1999 74.83 123.65 06/08/1999 73.05 122.06 06/09/1999 71.16 122.18 06/10/1999 70.60 120.71 06/11/1999 68.49 119.86 06/14/1999 69.04 119.90 06/15/1999 68.71 120.56 06/16/1999 67.37 123.27 06/17/1999 68.93 124.15 06/18/1999 68.04 124.42 06/21/1999 68.82 124.99 06/22/1999 69.71 123.78 06/23/1999 70.38 123.52 06/24/1999 70.71 121.91 06/25/1999 71.71 121.87 06/28/1999 72.61 123.36 06/29/1999 75.61 125.22 06/30/1999 77.73 127.19 07/01/1999 76.39 127.95 07/02/1999 76.28 128.90 07/06/1999 77.17 128.62 07/07/1999 77.06 129.33 07/08/1999 75.50 129.20 07/09/1999 75.06 130.02 07/12/1999 73.72 129.63 07/13/1999 74.50 129.12 07/14/1999 72.61 129.55 07/15/1999 74.39 130.61 07/16/1999 73.72 131.46 07/19/1999 72.38 130.43 07/20/1999 73.94 127.60 07/21/1999 73.94 127.80 07/22/1999 73.83 126.10 07/23/1999 73.27 125.73 07/26/1999 73.39 124.88 07/27/1999 72.94 126.27 07/28/1999 72.38 126.51 07/29/1999 71.49 124.25 07/30/1999 70.82 123.11 08/02/1999 70.49 123.05 08/03/1999 69.49 122.51 08/04/1999 69.71 120.95 08/05/1999 70.82 121.72 08/06/1999 71.49 120.48 08/09/1999 71.27 120.25 08/10/1999 71.16 118.73 08/11/1999 70.82 120.63 08/12/1999 70.16 120.28 08/13/1999 71.71 123.02 08/16/1999 71.49 123.30 08/17/1999 70.38 124.54 08/18/1999 70.16 123.49 08/19/1999 70.38 122.64 08/20/1999 70.27 123.84 08/23/1999 70.27 126.03 08/24/1999 70.04 126.34 08/25/1999 70.49 128.03 08/26/1999 69.60 126.20 08/27/1999 68.49 124.92 08/30/1999 67.15 122.68 08/31/1999 66.93 122.34 09/01/1999 68.37 123.33 09/02/1999 67.26 122.22 09/03/1999 69.27 125.76 09/07/1999 69.27 125.13 09/08/1999 68.82 124.54 09/09/1999 68.82 124.87 09/10/1999 68.60 125.24 09/13/1999 66.59 124.54 09/14/1999 66.04 123.81 09/15/1999 66.26 122.12 09/16/1999 64.03 122.16 09/17/1999 63.70 123.73 09/20/1999 64.25 123.74 09/21/1999 63.14 121.15 09/22/1999 62.81 121.43 09/23/1999 60.36 118.64 09/24/1999 60.02 118.35 09/27/1999 60.36 118.91 09/28/1999 60.47 118.80 09/29/1999 60.02 117.52 09/30/1999 60.47 118.85 10/01/1999 60.36 118.86 10/04/1999 60.13 120.88 10/05/1999 60.13 120.58 10/06/1999 60.47 122.81 10/07/1999 60.58 122.09 10/08/1999 60.36 123.79 10/11/1999 60.36 123.71 10/12/1999 59.80 121.66 10/13/1999 60.36 119.11 10/14/1999 60.25 118.92 10/15/1999 59.58 115.58 10/18/1999 59.13 116.20 10/19/1999 58.80 116.87 10/20/1999 58.69 119.47 10/21/1999 63.59 118.93 10/22/1999 68.71 120.60 10/25/1999 70.60 119.86 10/26/1999 70.16 118.78 10/27/1999 70.27 120.15 10/28/1999 70.04 124.38 10/29/1999 70.94 126.28 11/01/1999 70.94 125.47 11/02/1999 71.38 124.88 11/03/1999 72.61 125.54 11/04/1999 74.94 126.26 11/05/1999 75.61 126.96 11/08/1999 77.39 127.59 11/09/1999 75.84 126.50 11/10/1999 74.16 127.26 11/11/1999 73.39 128.00 11/12/1999 74.39 129.35 11/15/1999 70.16 129.20 11/16/1999 72.72 131.58 11/17/1999 71.49 130.71 11/18/1999 73.50 132.03 11/19/1999 72.49 131.76 11/22/1999 70.94 131.66 11/23/1999 70.49 130.15 11/24/1999 68.82 131.30 11/26/1999 71.05 131.26 11/29/1999 70.82 130.44 11/30/1999 71.27 128.69 12/01/1999 69.71 129.51 12/02/1999 70.16 130.55 12/03/1999 70.60 132.80 12/06/1999 68.15 131.88 12/07/1999 68.15 130.57 12/08/1999 67.37 130.08 12/09/1999 67.59 130.47 12/10/1999 68.60 131.30 12/13/1999 68.60 131.13 12/14/1999 68.26 130.01 12/15/1999 68.37 130.95 12/16/1999 66.48 131.46 12/17/1999 67.48 131.67 12/20/1999 69.04 131.39 12/21/1999 67.59 132.81 12/22/1999 70.27 133.06 12/23/1999 69.82 135.12 12/27/1999 72.49 135.01 12/28/1999 69.93 135.06 12/29/1999 70.38 135.60 12/30/1999 70.94 135.69 12/31/1999 71.16 136.13 01/03/2000 71.05 134.83 01/04/2000 67.93 129.66 01/05/2000 70.04 129.91 01/06/2000 69.04 130.04 01/07/2000 68.93 133.56 01/10/2000 68.93 135.05 01/11/2000 69.82 133.29 01/12/2000 71.16 132.71 01/13/2000 70.38 134.32 01/14/2000 70.71 135.75 01/18/2000 70.60 134.83 01/19/2000 69.93 134.90 01/20/2000 68.15 133.94 01/21/2000 67.15 133.55 01/24/2000 66.70 129.86 01/25/2000 67.59 130.65 01/26/2000 65.70 130.10 01/27/2000 66.04 129.58 01/28/2000 65.81 126.03 01/31/2000 64.81 129.20 02/01/2000 65.59 130.58 02/02/2000 66.26 130.56 02/03/2000 69.15 132.03 02/04/2000 67.48 131.98 02/07/2000 68.37 131.96 02/08/2000 67.93 133.59 02/09/2000 70.71 130.80 02/10/2000 70.38 131.28 02/11/2000 70.04 128.52 02/14/2000 70.16 128.79 02/15/2000 70.16 129.91 02/16/2000 70.94 128.57 02/17/2000 70.04 128.63 02/18/2000 69.04 124.72 02/22/2000 68.71 125.29 02/23/2000 68.60 126.08 02/24/2000 63.14 125.40 02/25/2000 61.14 123.54 02/28/2000 60.58 124.90 02/29/2000 63.14 126.61 03/01/2000 62.81 127.79 03/02/2000 66.26 128.03 03/03/2000 66.59 130.57 03/06/2000 64.81 128.91 03/07/2000 63.81 125.61 03/08/2000 64.48 126.63 03/09/2000 66.82 129.87 03/10/2000 65.59 129.26 03/13/2000 63.47 128.20 03/14/2000 61.80 125.93 03/15/2000 63.03 128.99 03/16/2000 66.93 135.13 03/17/2000 67.59 135.69 03/20/2000 66.37 134.96 03/21/2000 67.82 138.41 03/22/2000 67.93 139.04 03/23/2000 67.93 141.52 03/24/2000 67.93 141.53 03/27/2000 67.04 141.19 03/28/2000 67.48 139.70 03/29/2000 67.71 139.77 03/30/2000 68.37 137.86 03/31/2000 67.71 138.85 04/03/2000 68.60 139.54 04/04/2000 68.26 138.49 04/05/2000 68.49 137.81 04/06/2000 69.82 139.11 04/07/2000 69.82 140.50 04/10/2000 69.04 139.40 04/11/2000 71.38 139.04 04/12/2000 71.38 135.94 04/13/2000 69.38 133.47 04/14/2000 68.04 125.69 04/17/2000 68.93 129.85 04/18/2000 69.49 133.57 04/19/2000 71.94 132.26 04/20/2000 74.39 132.92 04/24/2000 74.94 132.48 04/25/2000 76.95 136.89 04/26/2000 76.95 135.37 04/27/2000 74.94 135.73 04/28/2000 73.16 134.58 05/01/2000 77.51 136.04 05/02/2000 81.29 134.01 05/03/2000 83.85 131.12 05/04/2000 86.53 130.60 05/05/2000 84.41 132.74 05/08/2000 84.41 131.96 05/09/2000 83.63 130.84 05/10/2000 84.52 128.15 05/11/2000 86.97 130.44 05/12/2000 85.86 131.66 05/15/2000 83.85 134.57 05/16/2000 84.19 135.84 05/17/2000 83.74 134.15 05/18/2000 83.41 133.17 05/19/2000 82.85 130.36 05/22/2000 82.52 129.78 05/23/2000 80.51 127.30 05/24/2000 82.96 129.63 05/25/2000 82.52 128.01 05/26/2000 84.19 127.68 05/30/2000 84.52 131.80 05/31/2000 84.63 131.63 06/01/2000 78.17 134.24 06/02/2000 75.50 136.88 06/05/2000 76.50 135.98 06/06/2000 74.61 135.08 06/07/2000 74.16 136.33 06/08/2000 71.16 135.43 06/09/2000 71.05 134.99 06/12/2000 71.16 133.98 06/13/2000 69.04 136.15 06/14/2000 69.93 136.25 06/15/2000 70.38 137.01 06/16/2000 70.49 135.69 06/19/2000 63.92 137.69 06/20/2000 63.81 136.75 06/21/2000 61.80 137.05 06/22/2000 61.14 134.55 06/23/2000 60.58 133.56 06/26/2000 61.02 134.84 06/27/2000 59.58 134.40 06/28/2000 60.69 134.80 06/29/2000 61.25 133.65 06/30/2000 57.02 134.78 07/03/2000 58.13 136.16 07/05/2000 58.35 134.00 07/06/2000 56.24 134.97 07/07/2000 56.57 137.03 07/10/2000 56.57 136.72 07/11/2000 57.57 137.21 07/12/2000 57.24 138.33 07/13/2000 56.79 138.60 07/14/2000 57.13 139.91 07/17/2000 57.57 139.95 07/18/2000 56.12 138.40 07/19/2000 55.90 137.31 07/20/2000 58.57 138.57 07/21/2000 60.69 137.15 07/24/2000 59.91 135.67 07/25/2000 59.35 136.62 07/26/2000 58.91 134.57 07/27/2000 58.57 134.31 07/28/2000 57.80 131.56 07/31/2000 57.46 132.57 08/01/2000 56.57 133.25 08/02/2000 57.24 133.30 08/03/2000 56.79 134.59 08/04/2000 56.24 135.55 08/07/2000 57.35 137.07 08/08/2000 56.90 137.39 08/09/2000 56.46 136.47 08/10/2000 56.57 135.30 08/11/2000 56.68 136.37 08/14/2000 57.24 138.20 08/15/2000 55.79 137.54 08/16/2000 55.46 137.12 08/17/2000 56.24 138.62 08/18/2000 56.01 138.22 08/21/2000 55.23 138.93 08/22/2000 56.57 138.81 08/23/2000 55.90 139.54 08/24/2000 56.24 139.75 08/25/2000 55.79 139.58 08/28/2000 54.79 140.29 08/29/2000 53.45 139.89 08/30/2000 53.56 139.22 08/31/2000 53.23 140.62 09/01/2000 53.12 140.91 09/05/2000 52.90 139.64 09/06/2000 55.68 138.26 09/07/2000 55.68 139.22 09/08/2000 55.46 138.47 09/11/2000 53.56 137.99 09/12/2000 52.78 137.31 09/13/2000 52.00 137.58 09/14/2000 52.45 137.21 09/15/2000 51.45 135.82 09/18/2000 51.00 133.84 09/19/2000 51.56 135.27 09/20/2000 50.22 134.47 09/21/2000 49.67 134.26 09/22/2000 49.00 134.23 09/25/2000 48.78 133.33 09/26/2000 48.33 132.24 09/27/2000 48.44 132.18 09/28/2000 49.00 135.12 09/29/2000 50.22 133.10 10/02/2000 49.67 133.07 10/03/2000 50.56 132.17 10/04/2000 51.34 132.90 10/05/2000 51.56 133.08 10/06/2000 48.33 130.55 10/09/2000 48.22 129.91 10/10/2000 48.00 128.51 10/11/2000 46.44 126.44 10/12/2000 45.66 123.21 10/13/2000 45.32 127.32 10/16/2000 45.21 127.37 10/17/2000 43.76 125.08 10/18/2000 42.87 124.36 10/19/2000 42.65 128.68 10/20/2000 40.98 129.43 10/23/2000 40.31 129.33 10/24/2000 40.53 129.54 10/25/2000 40.76 126.47 10/26/2000 40.53 126.42 10/27/2000 40.98 127.83 10/30/2000 41.76 129.59 10/31/2000 41.98 132.44 11/01/2000 41.87 131.68 11/02/2000 42.32 132.34 11/03/2000 42.32 132.19 11/06/2000 44.21 132.70 11/07/2000 45.21 132.67 11/08/2000 47.44 130.58 11/09/2000 46.10 129.73 11/10/2000 45.55 126.57 11/13/2000 46.88 125.20 11/14/2000 47.10 128.14 11/15/2000 46.66 128.77 11/16/2000 45.88 127.15 11/17/2000 47.77 126.73 11/20/2000 48.00 124.40 11/21/2000 48.89 124.84 11/22/2000 48.33 122.52 11/24/2000 49.67 124.32 11/27/2000 50.00 124.99 11/28/2000 49.55 123.80 11/29/2000 49.55 124.33 11/30/2000 48.55 121.84 12/01/2000 49.55 121.86 12/04/2000 49.67 122.77 12/05/2000 50.33 127.54 12/06/2000 46.33 125.22 12/07/2000 42.65 124.49 12/08/2000 43.32 126.93 12/11/2000 48.11 127.88 12/12/2000 51.22 127.05 12/13/2000 52.00 126.01 12/14/2000 49.89 124.24 12/15/2000 49.11 121.58 12/18/2000 50.11 122.56 12/19/2000 51.22 120.97 12/20/2000 50.56 117.18 12/21/2000 50.11 118.12 12/22/2000 53.79 121.00 12/26/2000 53.56 121.86 12/27/2000 55.46 123.13 12/28/2000 56.35 123.62 12/29/2000 57.80 122.33 01/02/2001 55.12 118.90 01/03/2001 56.68 124.86 01/04/2001 56.90 123.54 01/05/2001 54.57 120.30 01/08/2001 56.90 120.07 01/09/2001 56.24 120.53 01/10/2001 56.79 121.68 01/11/2001 57.13 122.94 01/12/2001 56.90 122.15 01/16/2001 57.57 122.92 01/17/2001 59.02 123.18 01/18/2001 59.35 124.90 01/19/2001 59.13 124.39 01/22/2001 57.35 124.43 01/23/2001 61.47 126.05 01/24/2001 59.80 126.41 01/25/2001 60.91 125.78 01/26/2001 60.36 125.54 01/29/2001 60.83 126.40 01/30/2001 60.85 127.28 01/31/2001 63.04 126.57 02/01/2001 62.68 127.26 02/02/2001 64.14 125.04 02/05/2001 64.77 125.48 02/06/2001 65.37 125.29 02/07/2001 66.33 124.24 02/08/2001 64.34 123.47 02/09/2001 64.64 121.82 02/12/2001 65.21 123.26 02/13/2001 66.82 122.19 02/14/2001 65.43 121.93 02/15/2001 64.93 122.92 02/16/2001 64.32 120.59 02/20/2001 78.08 118.50 02/21/2001 77.92 116.31 02/22/2001 79.20 116.08 02/23/2001 80.45 115.44 02/26/2001 80.53 117.45 02/27/2001 80.09 116.55 02/28/2001 79.48 114.89 03/01/2001 79.95 115.01 03/02/2001 79.63 114.35 03/05/2001 79.55 115.02 03/06/2001 79.54 116.17 03/07/2001 79.38 116.92 03/08/2001 79.29 117.18 03/09/2001 79.31 114.28 03/12/2001 79.38 109.35 03/13/2001 79.55 110.97 03/14/2001 77.95 108.10 03/15/2001 78.16 108.74
SOURCE: Factset
SELECTED STATISTICS(1)(2) ($) SELECTED STATISTICS(1) ($) Pre-announcement: Pre-announcement: Current Price (2/16/01) 36.10 3 Year Average 38.53 30 Day Average 35.05 3 Year High 60.75 90 Day Average 31.21 3 Year Low 22.63
NOTES: (1) Statistics at or prior to 2/16/01 (2) Closing Prices [UBS WARBURG LOGO] Section 2: Industry and Company Overview 28 32 SPRINGS INDUSTRIES -- THREE YEAR HISTORICAL PRICE PERFORMANCE RELATIVE SHARE PRICE PERFORMANCE
DATE SPRINGS BURLINGTON CROWN CRAFTS DAN RIVER GALEY & LORD MOHAWK IND. WESTPOINT PEER GROUP 03/16/1998 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 03/17/1998 100.89 100.00 100.29 100.00 99.69 100.68 98.08 99.65 03/18/1998 100.00 100.38 98.53 100.73 99.69 99.77 98.56 99.55 03/19/1998 101.56 102.68 93.82 100.00 99.69 104.56 98.80 101.41 03/20/1998 101.78 101.92 90.29 101.82 101.25 108.66 98.32 102.55 03/23/1998 100.45 102.68 93.24 101.09 102.81 111.16 98.32 103.68 03/24/1998 101.00 102.68 95.00 100.73 103.44 120.05 96.15 106.05 03/25/1998 98.11 103.07 94.41 102.19 106.25 117.54 95.67 105.40 03/26/1998 99.44 103.45 97.06 103.65 106.88 113.44 100.00 105.66 03/27/1998 99.55 102.68 97.65 102.92 111.25 115.95 106.73 108.53 03/30/1998 98.89 104.21 97.65 105.11 110.63 113.90 109.13 109.00 03/31/1998 98.22 107.66 98.53 110.95 115.00 114.81 110.10 111.01 04/01/1998 98.33 106.90 97.65 111.68 119.38 115.95 112.02 112.06 04/02/1998 99.44 108.43 98.82 108.76 119.38 115.49 110.58 111.61 04/03/1998 97.88 106.51 102.35 110.95 125.31 114.35 110.10 111.36 04/06/1998 97.44 108.81 101.47 112.04 127.50 114.81 113.46 113.13 04/07/1998 96.33 105.75 98.53 112.77 129.69 112.07 113.46 111.66 04/08/1998 96.77 103.07 97.06 113.50 130.63 107.52 115.87 110.38 04/09/1998 98.33 104.98 96.76 114.23 136.88 110.25 115.38 111.91 04/13/1998 98.55 103.45 97.06 116.06 136.25 110.93 115.38 111.95 04/14/1998 99.33 104.60 93.24 123.36 141.25 112.98 118.75 114.52 04/15/1998 100.11 106.51 91.76 120.80 136.25 115.49 122.36 116.27 04/16/1998 99.78 102.68 92.65 112.77 132.50 118.45 118.51 114.55 04/17/1998 99.67 103.45 91.76 112.41 133.13 122.32 118.27 115.88 04/20/1998 99.44 102.68 94.12 117.52 131.88 121.41 124.04 117.55 04/21/1998 96.99 103.45 96.47 119.71 130.63 119.82 122.12 116.81 04/22/1998 96.88 105.75 98.53 117.52 131.56 117.08 124.04 116.91 04/23/1998 96.33 104.21 101.18 116.79 131.88 116.63 126.20 117.16 04/24/1998 95.32 103.83 103.53 116.42 129.38 116.40 127.88 117.44 04/27/1998 96.44 99.62 100.00 114.60 127.50 112.07 118.51 112.00 04/28/1998 97.66 103.45 100.29 113.14 127.81 108.43 121.15 112.27 04/29/1998 97.33 104.21 102.65 112.41 130.94 109.34 128.85 115.21 04/30/1998 98.11 107.28 104.12 112.77 130.63 112.53 128.85 116.95 05/01/1998 98.22 108.81 105.29 112.77 132.50 116.63 133.17 120.04 05/04/1998 98.00 113.03 102.06 116.06 135.94 116.86 132.21 120.98 05/05/1998 97.77 110.34 101.76 118.98 135.00 122.32 125.00 120.28 05/06/1998 97.66 109.20 100.59 117.52 134.38 122.32 126.44 120.28 05/07/1998 98.44 108.81 104.12 118.25 129.06 124.15 123.80 119.93 05/08/1998 99.55 110.73 104.71 120.80 129.06 126.88 125.00 121.80 05/11/1998 99.67 113.03 104.71 118.61 127.50 125.06 127.40 122.11 05/12/1998 100.78 110.34 102.06 117.88 125.00 121.64 123.56 119.01 05/13/1998 100.67 110.73 100.29 114.60 124.06 120.27 122.84 118.04 05/14/1998 99.44 110.73 100.29 108.76 123.44 121.18 123.08 117.93 05/15/1998 99.33 109.20 102.06 107.30 121.88 119.59 120.67 116.26 05/18/1998 99.33 108.81 102.65 108.76 124.06 116.40 119.95 115.18 05/19/1998 100.22 109.20 100.59 110.95 125.00 120.27 123.56 117.73 05/20/1998 100.45 105.75 97.65 110.22 126.25 118.22 123.80 116.32 05/21/1998 100.67 107.28 89.71 109.85 127.19 116.40 123.32 115.57 05/22/1998 99.78 108.81 63.24 110.22 125.31 114.81 122.84 114.03 05/26/1998 99.00 105.36 67.06 105.11 124.38 109.11 123.08 111.24 05/27/1998 98.55 101.53 68.53 105.11 122.50 104.56 120.19 108.08 05/28/1998 100.22 109.58 68.53 108.76 122.81 107.06 122.60 111.53 05/29/1998 100.00 108.05 66.47 111.68 123.75 110.71 125.96 113.61 06/01/1998 99.33 106.51 64.12 114.60 123.13 110.71 124.52 112.97 06/02/1998 99.00 108.05 65.59 114.23 123.44 110.93 124.04 113.26 06/03/1998 99.89 110.34 66.47 113.14 123.44 111.16 122.60 113.32 06/04/1998 101.34 109.96 66.47 113.14 122.19 117.54 122.12 115.14 06/05/1998 102.56 108.81 66.76 114.23 123.75 118.45 120.67 114.96 06/08/1998 102.23 106.90 68.24 112.41 90.94 119.59 121.15 113.22 06/09/1998 108.24 103.07 68.24 112.41 91.25 117.08 119.23 111.07 06/10/1998 104.90 103.07 67.35 109.85 85.00 119.82 120.67 111.82 06/11/1998 103.45 101.92 66.76 110.22 79.69 116.63 118.75 109.68 06/12/1998 102.34 100.00 66.76 109.49 77.50 114.81 118.75 108.52 06/15/1998 100.22 98.47 67.94 108.39 76.25 112.53 117.79 107.07 06/16/1998 86.86 99.62 67.94 106.20 76.25 110.93 118.27 106.75 06/17/1998 87.31 99.62 66.76 106.57 76.25 109.80 118.03 106.28 06/18/1998 85.75 96.93 67.06 106.57 76.88 108.43 117.31 105.13 06/19/1998 85.63 91.19 66.47 108.03 76.25 108.88 115.14 103.54 06/22/1998 85.08 93.49 66.76 101.82 76.88 109.11 112.26 102.79 06/23/1998 84.74 92.72 67.65 99.64 74.69 112.30 115.63 104.43 06/24/1998 82.52 91.19 68.24 97.81 74.69 113.67 117.07 104.88 06/25/1998 82.85 91.57 69.12 100.00 75.31 112.07 119.23 105.31 06/26/1998 83.30 85.82 70.88 103.65 75.31 110.02 122.60 104.83 06/29/1998 80.73 85.06 71.18 104.38 74.06 113.90 122.60 105.95 06/30/1998 82.18 86.21 72.35 99.27 74.38 115.49 126.92 107.66 07/01/1998 83.85 85.44 72.94 101.09 74.69 117.08 125.48 107.78 07/02/1998 82.74 82.76 73.24 102.92 73.75 117.31 123.56 106.86 07/06/1998 81.85 82.76 74.12 100.73 74.06 121.41 124.52 108.38 07/07/1998 79.51 81.23 77.35 100.00 72.19 115.72 125.96 106.59 07/08/1998 77.51 81.99 77.65 102.19 72.81 117.08 125.48 107.27 07/09/1998 76.50 78.16 77.65 102.19 73.75 120.05 125.24 107.46 07/10/1998 76.39 77.78 77.65 102.92 74.38 120.27 128.85 108.61 07/13/1998 76.28 74.33 74.71 104.38 74.38 124.60 128.37 109.19 07/14/1998 76.39 77.39 73.24 104.38 74.69 123.69 136.54 111.87 07/15/1998 74.83 75.48 73.24 103.28 73.75 120.27 135.58 109.94 07/16/1998 74.72 79.31 72.65 103.65 73.13 119.36 133.89 109.89 07/17/1998 75.17 79.69 73.53 105.84 74.69 120.73 144.47 113.83 07/20/1998 75.28 78.16 73.82 105.84 72.81 120.50 137.98 111.44 07/21/1998 74.72 75.86 74.71 102.55 72.19 123.46 132.21 110.00 07/22/1998 73.83 76.25 74.71 98.54 72.19 120.96 135.34 109.86 07/23/1998 72.49 75.48 73.82 97.08 72.19 117.77 136.54 108.86 07/24/1998 71.49 73.18 73.53 98.54 72.81 118.00 136.30 108.54 07/27/1998 70.71 68.20 74.12 95.62 69.38 116.63 134.62 106.20 07/28/1998 70.27 67.05 73.53 92.70 65.00 117.08 133.41 105.27 07/29/1998 71.71 69.73 70.59 92.70 61.88 116.86 134.38 105.72 07/30/1998 71.27 67.82 68.24 92.70 63.75 116.63 138.94 106.62 07/31/1998 68.26 65.13 48.24 88.32 61.88 113.44 137.98 103.46 08/03/1998 68.37 66.28 41.47 87.59 62.50 110.48 123.56 98.15 08/04/1998 66.37 62.07 37.35 83.94 56.25 108.88 120.55 95.10 08/05/1998 65.48 61.30 38.53 83.94 52.50 109.11 119.71 94.61 08/06/1998 64.59 63.60 39.41 83.94 53.44 109.80 120.43 95.60 08/07/1998 66.82 62.07 42.06 83.58 52.50 111.39 123.56 96.77 08/10/1998 66.15 59.77 41.76 83.94 52.50 113.67 121.63 96.51 08/11/1998 64.25 59.39 42.06 86.13 52.50 112.53 122.60 96.52 08/12/1998 65.14 60.15 42.06 88.32 52.81 117.54 129.33 100.50 08/13/1998 63.36 59.00 40.88 88.69 52.50 116.86 135.58 101.85 08/14/1998 65.59 59.39 40.88 87.59 52.81 117.54 134.86 101.87 08/17/1998 64.81 59.39 39.41 87.23 51.25 123.92 135.10 103.87 08/18/1998 65.37 63.60 40.88 87.23 52.50 126.20 135.58 105.74 08/19/1998 65.26 65.90 40.59 86.50 52.19 127.11 131.73 105.28 08/20/1998 65.48 65.13 38.82 86.50 52.50 122.55 129.57 102.93 08/21/1998 64.81 66.67 38.82 85.40 48.75 120.05 131.73 102.76 08/24/1998 65.37 66.67 38.24 85.40 47.50 120.27 129.81 102.18 08/25/1998 64.03 65.90 37.65 85.04 48.13 118.91 126.68 100.63 08/26/1998 61.92 64.75 35.88 81.75 46.25 115.72 123.32 97.92 08/27/1998 60.36 61.69 35.29 78.83 47.19 112.07 121.39 95.34 08/28/1998 60.13 60.15 34.71 77.01 46.88 104.33 117.79 91.23 08/31/1998 58.91 60.54 35.88 76.28 46.56 96.81 113.94 87.67 09/01/1998 61.92 60.54 37.94 73.72 45.63 97.72 114.42 87.95 09/02/1998 61.69 62.84 41.18 71.17 45.94 95.90 111.54 86.92 09/03/1998 60.02 62.84 40.88 70.80 45.00 93.85 103.85 83.88 09/04/1998 58.02 62.84 42.06 69.71 45.00 92.03 106.73 84.09 09/08/1998 65.70 65.13 42.65 70.07 46.25 94.08 109.13 86.06 09/09/1998 59.69 60.54 40.59 69.71 47.19 90.66 106.73 83.24 09/10/1998 58.69 59.00 40.00 69.71 47.50 86.79 104.33 80.94 09/11/1998 59.02 58.24 40.88 68.61 51.88 89.29 102.16 81.16 09/14/1998 59.80 59.39 41.18 67.88 50.00 89.07 104.81 81.95 09/15/1998 58.91 61.30 40.59 62.04 50.31 88.84 104.33 81.66 09/16/1998 61.47 59.77 40.00 64.23 50.63 87.70 108.17 82.27 09/17/1998 59.58 55.17 39.12 64.23 51.88 83.83 104.33 78.97 09/18/1998 62.14 54.79 39.12 66.42 53.75 87.47 112.02 82.64 09/21/1998 62.69 54.41 37.65 66.06 55.00 92.48 109.38 83.41 09/22/1998 60.36 55.17 37.35 64.96 55.00 102.28 111.06 87.19 09/23/1998 63.25 57.09 37.35 63.87 54.38 105.69 115.14 89.79 09/24/1998 63.47 56.32 36.47 62.77 54.69 105.01 114.42 89.09 09/25/1998 63.70 55.17 36.47 62.04 55.31 102.96 113.22 87.81 09/28/1998 66.48 53.64 36.47 63.14 57.19 100.23 113.22 86.79 09/29/1998 64.37 52.49 37.35 64.60 58.13 98.86 114.18 86.59 09/30/1998 61.92 59.00 37.35 64.23 59.69 99.77 117.31 89.18 10/01/1998 58.24 54.41 37.35 61.31 58.75 98.63 109.62 85.34 10/02/1998 59.69 55.56 37.65 60.95 59.69 97.49 115.38 86.93 10/05/1998 60.47 52.87 34.41 58.39 59.38 92.94 110.10 82.98 10/06/1998 58.35 54.79 33.53 58.39 59.38 94.08 111.78 84.20 10/07/1998 59.58 51.34 31.76 58.39 58.75 91.57 106.01 80.87 10/08/1998 58.24 47.89 32.35 58.03 56.25 83.83 98.08 75.14 10/09/1998 57.02 47.51 30.59 56.93 55.63 87.02 101.44 76.91 10/12/1998 58.02 50.19 30.59 52.92 55.63 88.38 99.76 77.10 10/13/1998 59.24 49.81 30.29 53.28 55.31 87.93 100.48 77.08 10/14/1998 58.24 49.04 29.41 52.55 52.50 88.38 112.50 80.37 10/15/1998 59.35 49.43 29.41 52.55 53.44 94.53 105.29 80.40 10/16/1998 58.80 49.43 29.12 52.55 55.00 106.38 107.45 85.02 10/19/1998 61.25 51.72 27.94 54.01 56.88 112.07 106.25 87.17 10/20/1998 61.47 55.17 27.65 59.49 60.00 112.30 109.13 89.37 10/21/1998 63.14 53.64 27.06 59.49 64.69 111.39 107.45 88.50 10/22/1998 61.92 53.64 26.18 58.03 65.94 111.16 108.17 88.56 10/23/1998 61.69 54.79 25.88 60.58 66.25 109.34 106.73 87.97 10/26/1998 62.92 57.47 27.65 57.66 66.88 111.39 107.93 89.42 10/27/1998 64.03 56.71 26.47 55.84 67.19 109.11 103.37 86.99 10/28/1998 63.25 55.94 27.35 57.30 68.13 109.34 104.33 87.40 10/29/1998 62.58 55.94 26.76 52.55 68.44 113.67 106.25 89.02 10/30/1998 63.03 57.09 26.47 50.73 68.13 110.02 109.38 88.80 11/02/1998 66.93 56.32 27.65 53.28 68.13 112.98 117.79 92.35 11/03/1998 67.26 57.09 27.94 54.38 68.44 117.54 117.79 94.12 11/04/1998 68.04 57.09 28.24 52.92 68.13 117.77 117.07 93.86 11/05/1998 68.26 56.32 28.82 52.19 68.13 117.08 115.87 93.10 11/06/1998 70.27 60.54 27.65 51.82 65.00 116.17 118.51 94.18 11/09/1998 70.82 63.98 27.65 49.27 63.13 114.12 120.67 94.53 11/10/1998 70.27 62.45 27.06 49.64 62.81 110.93 116.59 91.95 11/11/1998 71.16 62.84 26.18 51.46 61.88 109.57 116.35 91.56 11/12/1998 71.49 62.84 26.76 50.73 61.25 110.71 117.31 92.15 11/13/1998 74.05 63.60 27.06 48.54 57.50 111.62 115.63 91.75 11/16/1998 72.16 63.22 26.47 47.81 54.69 111.16 113.46 90.65 11/17/1998 71.94 63.98 25.88 47.81 55.00 113.90 114.42 91.98 11/18/1998 68.71 64.37 26.18 49.64 56.25 117.54 118.03 94.54 11/19/1998 69.04 64.37 30.59 49.64 55.94 121.41 116.83 95.63 11/20/1998 69.04 64.75 29.71 48.91 54.06 127.56 117.07 97.61 11/23/1998 68.60 66.28 29.71 49.27 53.75 138.27 118.51 101.89 11/24/1998 66.48 65.90 28.24 49.27 53.13 135.54 116.35 100.18 11/25/1998 70.71 66.28 28.82 48.18 53.44 131.66 116.83 99.08 11/27/1998 68.82 65.90 29.41 48.18 53.44 130.98 117.07 98.87 11/30/1998 69.38 65.90 29.12 47.45 54.06 135.99 115.38 99.99 12/01/1998 70.49 65.13 28.82 52.55 53.75 133.26 114.18 98.95 12/02/1998 74.83 63.60 28.53 52.92 53.13 130.30 113.46 97.43 12/03/1998 72.94 62.45 28.82 56.20 49.69 129.84 112.98 96.99 12/04/1998 69.27 63.60 26.76 53.28 47.19 131.66 112.50 97.23 12/07/1998 69.49 63.22 27.65 52.92 47.50 131.21 109.62 96.17 12/08/1998 67.71 61.30 28.24 52.55 47.50 132.12 108.65 95.80 12/09/1998 69.93 61.69 28.24 53.65 47.50 133.49 109.13 96.56 12/10/1998 67.48 61.30 28.82 54.74 45.94 134.40 107.21 96.24 12/11/1998 67.48 59.39 28.24 52.19 45.63 130.75 106.01 94.05 12/14/1998 65.59 60.15 28.24 51.82 46.25 126.88 102.40 91.87 12/15/1998 68.82 55.56 28.24 52.19 47.19 125.97 105.05 91.51 12/16/1998 70.16 55.17 28.53 52.19 46.25 128.02 98.80 90.23 12/17/1998 72.83 53.64 28.82 52.55 46.25 129.39 106.73 92.75 12/18/1998 70.60 53.26 29.12 50.00 43.75 130.75 106.97 92.87 12/21/1998 70.94 56.32 29.12 50.36 44.38 131.66 112.50 95.48 12/22/1998 69.71 59.00 28.82 50.73 43.13 126.88 108.17 93.11 12/23/1998 69.49 60.54 29.12 49.27 42.50 134.85 107.69 95.77 12/24/1998 70.82 61.30 27.94 49.27 42.19 139.64 106.25 97.01 12/28/1998 71.38 58.62 28.24 51.82 43.13 145.10 107.69 98.96 12/29/1998 74.61 61.30 28.24 56.20 42.50 142.60 108.41 99.19 12/30/1998 73.05 63.60 29.12 61.31 42.50 145.56 112.02 102.13 12/31/1998 73.83 68.20 29.12 68.61 43.13 153.30 121.39 108.97 01/04/1999 75.17 65.13 29.12 65.33 44.38 148.97 115.63 105.04 01/05/1999 73.61 63.60 29.41 61.31 44.06 146.92 116.11 103.88 01/06/1999 72.27 63.60 29.12 58.39 42.50 148.06 114.90 103.58 01/07/1999 72.16 63.98 29.71 58.39 41.88 143.96 113.46 101.87 01/08/1999 71.38 61.30 30.59 58.76 42.50 143.51 108.65 99.86 01/11/1999 73.05 62.07 30.59 64.23 42.19 139.86 110.58 99.79 01/12/1999 71.49 60.92 28.82 62.04 40.31 141.00 110.82 99.66 01/13/1999 71.16 58.24 28.82 63.87 41.25 138.27 109.62 98.05 01/14/1999 71.27 59.39 28.53 63.14 38.75 138.27 106.97 97.30 01/15/1999 73.39 59.00 29.41 63.50 36.88 137.59 103.61 95.97 01/19/1999 73.72 59.39 31.18 63.50 35.00 141.91 104.57 97.73 01/20/1999 75.72 59.77 30.88 63.14 35.63 141.46 104.33 97.58 01/21/1999 72.38 59.39 31.18 62.04 31.88 139.18 104.33 96.47 01/22/1999 71.27 59.00 31.76 63.50 32.81 135.76 105.53 95.81 01/25/1999 71.60 59.39 35.29 63.14 32.50 135.54 105.05 95.77 01/26/1999 71.05 50.57 35.00 62.77 30.00 138.27 104.81 94.65 01/27/1999 69.60 50.96 34.71 59.85 28.44 135.76 101.92 92.73 01/28/1999 73.94 46.74 33.82 58.39 28.75 143.51 102.88 94.59 01/29/1999 74.39 40.61 30.59 57.66 27.50 140.32 102.28 91.86 02/01/1999 70.60 42.53 30.29 55.84 27.50 140.55 100.48 91.64 02/02/1999 70.27 42.53 27.94 57.30 28.13 140.32 99.28 91.26 02/03/1999 74.39 39.46 28.82 56.93 27.19 138.50 100.72 90.42 02/04/1999 69.49 44.06 29.41 55.11 25.63 135.76 100.00 90.03 02/05/1999 68.37 40.23 29.41 54.74 25.00 133.49 103.00 89.33 02/08/1999 67.26 41.76 30.00 54.74 25.00 133.03 106.01 90.40 02/09/1999 66.70 41.00 29.71 55.11 25.31 132.80 108.41 90.92 02/10/1999 65.03 40.61 29.41 54.38 25.00 131.44 107.21 89.95 02/11/1999 65.48 40.61 30.00 54.74 24.38 129.61 106.01 89.01 02/12/1999 65.37 38.70 30.00 54.38 22.50 129.84 105.29 88.36 02/16/1999 64.37 40.23 29.41 53.28 23.75 125.28 100.96 85.85 02/17/1999 63.25 38.31 28.82 52.92 24.69 126.20 100.48 85.62 02/18/1999 63.70 38.31 29.41 46.72 25.00 131.21 98.80 86.34 02/19/1999 62.58 38.70 29.12 46.35 25.31 128.02 94.95 84.20 02/22/1999 60.69 38.70 29.71 44.53 25.00 125.28 99.76 84.59 02/23/1999 59.02 38.31 29.12 37.96 25.63 127.11 97.12 83.83 02/24/1999 56.68 37.93 28.53 38.69 25.31 122.32 93.27 81.06 02/25/1999 59.13 37.16 29.12 38.32 24.38 119.82 96.88 81.09 02/26/1999 59.24 37.93 29.12 38.32 23.44 118.45 98.08 81.09 03/01/1999 56.90 37.55 28.24 38.32 22.19 117.77 93.03 79.19 03/02/1999 57.02 37.55 28.82 39.42 21.25 112.98 95.43 78.38 03/03/1999 57.46 37.55 28.53 39.05 20.94 110.71 94.23 77.22 03/04/1999 58.13 37.16 29.41 39.78 20.94 111.16 96.39 78.03 03/05/1999 57.80 36.78 28.24 40.15 20.63 115.03 99.04 79.97 03/08/1999 57.91 35.63 28.09 41.24 20.31 114.81 104.33 81.28 03/09/1999 57.13 33.72 28.24 42.34 20.00 112.07 99.52 78.65 03/10/1999 57.02 32.95 28.24 43.43 20.00 113.21 97.84 78.46 03/11/1999 56.68 34.48 26.47 43.07 19.69 112.98 96.39 78.15 03/12/1999 56.57 34.10 24.71 43.43 19.69 111.16 93.75 76.65 03/15/1999 54.79 34.10 24.12 43.80 20.00 110.93 92.07 76.10 03/16/1999 56.46 36.02 24.12 42.34 19.69 108.20 99.04 77.51 03/17/1999 57.13 34.87 23.82 41.61 20.00 104.56 106.73 78.29 03/18/1999 59.58 35.25 24.12 41.61 19.69 103.64 105.05 77.57 03/19/1999 56.68 35.25 24.41 42.34 20.00 103.19 107.69 78.28 03/22/1999 56.01 37.16 26.47 43.07 19.69 102.73 111.30 79.71 03/23/1999 53.34 37.55 26.76 41.61 18.44 99.77 110.34 78.35 03/24/1999 53.23 42.91 27.06 42.34 18.44 97.27 109.62 78.46 03/25/1999 53.79 44.83 26.47 41.61 19.38 98.41 112.98 80.18 03/26/1999 51.78 42.91 25.29 41.97 20.63 94.76 111.30 78.15 03/29/1999 52.12 43.30 23.82 41.97 22.50 99.77 112.98 80.42 03/30/1999 52.00 40.61 23.53 41.97 22.81 104.33 111.54 80.96 03/31/1999 48.22 40.61 23.53 49.64 22.19 109.34 106.49 81.68 04/01/1999 49.00 42.15 23.82 47.81 21.25 103.87 110.70 81.25 04/05/1999 49.55 41.38 23.53 45.62 20.94 105.69 110.58 81.46 04/06/1999 50.22 40.61 23.82 43.43 21.25 108.20 109.13 81.57 04/07/1999 50.78 43.30 23.24 44.53 21.88 108.66 115.38 84.19 04/08/1999 49.55 44.06 23.53 43.43 21.56 112.30 118.27 86.31 04/09/1999 52.12 44.06 23.53 46.72 22.19 111.85 119.47 86.80 04/12/1999 52.12 42.15 24.12 45.26 22.50 110.93 122.36 86.90 04/13/1999 51.67 43.30 24.71 44.53 21.88 110.48 123.80 87.34 04/14/1999 52.12 42.91 26.76 45.99 21.88 111.62 126.44 88.62 04/15/1999 52.78 43.30 27.94 47.81 21.56 110.93 128.49 89.24 04/16/1999 54.23 49.04 27.94 50.00 21.88 113.67 133.17 92.87 04/19/1999 57.13 52.87 28.24 48.54 21.25 118.91 142.55 98.00 04/20/1999 61.58 51.34 27.06 48.18 20.00 117.08 140.26 96.27 04/21/1999 65.92 50.19 25.88 50.36 20.63 116.86 136.54 95.02 04/22/1999 64.03 49.81 26.18 50.73 20.00 113.44 132.45 92.62 04/23/1999 64.92 49.04 26.18 53.65 20.94 114.35 133.65 93.39 04/26/1999 64.48 49.43 25.88 52.55 22.81 115.49 134.38 94.07 04/27/1999 63.81 46.36 25.59 54.74 22.50 117.54 127.64 92.28 04/28/1999 65.14 47.89 25.59 54.38 23.13 118.45 125.48 92.26 04/29/1999 67.71 50.96 26.47 53.28 21.88 120.96 131.01 95.21 04/30/1999 66.59 49.81 27.06 56.93 22.81 117.54 131.73 94.43 05/03/1999 71.60 49.43 27.65 58.76 22.50 121.87 131.73 95.93 05/04/1999 71.38 49.43 27.35 59.12 21.88 126.42 134.62 98.26 05/05/1999 72.38 48.66 26.47 58.39 21.88 130.75 132.93 98.94 05/06/1999 72.16 49.04 27.35 58.03 21.88 133.94 136.30 101.07 05/07/1999 73.27 48.66 27.06 58.76 20.00 137.36 138.46 102.70 05/10/1999 75.61 49.04 26.76 57.30 20.94 139.41 137.98 103.24 05/11/1999 74.72 50.57 26.76 58.03 20.63 133.94 141.23 102.74 05/12/1999 74.39 49.43 26.76 58.76 20.31 132.57 141.59 102.21 05/13/1999 76.50 50.96 27.94 60.58 20.63 129.16 140.14 101.17 05/14/1999 73.94 49.81 27.94 57.66 20.63 125.06 138.46 98.86 05/17/1999 73.27 50.19 26.47 59.85 20.63 120.05 130.77 95.13 05/18/1999 71.60 50.96 24.71 59.49 20.63 115.26 131.25 93.74 05/19/1999 70.94 52.87 25.29 58.39 20.63 109.34 131.73 92.26 05/20/1999 73.61 53.26 25.59 59.12 20.63 113.21 134.13 94.39 05/21/1999 77.51 53.64 25.88 59.85 20.63 112.98 133.17 94.18 05/24/1999 73.83 54.02 26.18 57.66 20.94 113.90 127.88 92.85 05/25/1999 72.16 54.02 25.29 58.03 20.94 115.49 124.52 92.38 05/26/1999 72.05 55.17 24.71 54.01 20.31 113.44 125.96 91.99 05/27/1999 70.27 57.09 23.53 51.82 20.63 110.02 120.91 89.56 05/28/1999 70.60 60.15 23.82 53.65 20.63 106.15 121.63 89.26 06/01/1999 69.38 59.00 23.53 58.03 21.56 105.24 119.23 88.40 06/02/1999 74.05 59.39 24.41 57.30 20.94 107.06 108.41 85.83 06/03/1999 74.83 59.39 24.71 56.93 20.31 111.85 116.11 89.63 06/04/1999 74.83 59.00 23.53 56.57 20.63 116.63 116.83 91.28 06/07/1999 74.83 55.94 22.35 56.57 20.31 115.72 121.39 91.65 06/08/1999 73.05 55.94 22.06 57.30 20.31 112.07 122.12 90.70 06/09/1999 71.16 55.17 22.06 56.20 19.06 114.12 119.23 90.22 06/10/1999 70.60 54.79 21.76 56.57 18.13 113.21 116.59 89.03 06/11/1999 68.49 55.17 21.18 56.57 18.44 112.98 115.75 88.77 06/14/1999 69.04 55.94 21.47 55.84 20.00 114.12 115.63 89.31 06/15/1999 68.71 55.17 21.18 55.11 17.81 110.93 113.94 87.42 06/16/1999 67.37 55.94 21.76 56.93 16.25 112.07 110.82 87.10 06/17/1999 68.93 54.02 21.47 55.84 16.25 116.63 111.54 88.34 06/18/1999 68.04 54.02 21.47 54.74 15.63 115.72 111.06 87.78 06/21/1999 68.82 52.49 21.18 54.74 15.94 116.17 112.02 87.91 06/22/1999 69.71 52.49 21.18 46.72 17.50 115.72 111.06 86.94 06/23/1999 70.38 53.64 21.18 45.26 19.38 112.98 108.65 85.55 06/24/1999 70.71 52.49 21.76 43.43 20.00 110.25 109.13 84.47 06/25/1999 71.71 52.11 21.76 43.80 20.31 110.93 110.58 85.09 06/28/1999 72.61 56.71 22.65 47.45 22.50 111.62 107.69 85.83 06/29/1999 75.61 56.71 21.47 47.45 24.06 111.39 112.26 87.14 06/30/1999 77.73 56.71 20.59 43.07 21.88 110.71 114.66 87.13 07/01/1999 76.39 57.09 20.29 44.53 23.75 111.16 113.94 87.35 07/02/1999 76.28 56.71 20.59 45.99 23.75 110.25 112.98 86.81 07/06/1999 77.17 55.56 20.29 45.62 23.13 110.02 112.38 86.25 07/07/1999 77.06 52.49 20.00 43.43 24.06 108.43 112.26 84.94 07/08/1999 75.50 52.87 20.88 42.34 22.81 106.61 111.78 84.16 07/09/1999 75.06 50.96 20.59 42.34 23.75 107.06 113.46 84.46 07/12/1999 73.72 52.11 20.59 40.88 23.75 106.38 113.22 84.28 07/13/1999 74.50 51.34 20.88 40.88 23.75 103.87 113.70 83.46 07/14/1999 72.61 50.19 20.88 40.51 22.19 101.59 117.55 83.50 07/15/1999 74.39 50.57 20.59 40.51 20.63 98.63 122.60 83.99 07/16/1999 73.72 50.19 20.29 39.42 22.19 96.36 125.00 83.86 07/19/1999 72.38 50.57 20.29 40.15 21.56 94.76 122.60 82.72 07/20/1999 73.94 48.66 20.29 40.15 20.63 97.49 121.39 82.83 07/21/1999 73.94 53.64 20.29 41.24 22.50 97.04 123.80 84.58 07/22/1999 73.83 47.51 20.59 42.34 22.19 105.69 121.63 85.64 07/23/1999 73.27 48.28 20.29 41.97 21.88 102.05 121.15 84.40 07/26/1999 73.39 44.83 20.29 40.51 21.88 104.78 118.51 83.71 07/27/1999 72.94 41.76 20.88 38.32 21.88 103.64 117.79 82.36 07/28/1999 72.38 41.76 21.18 40.51 20.63 102.51 114.66 81.18 07/29/1999 71.49 41.00 21.18 39.05 21.25 101.14 107.81 78.47 07/30/1999 70.82 42.53 21.18 39.42 21.25 101.82 104.81 78.15 08/02/1999 70.49 41.76 21.03 39.42 20.63 100.23 103.85 77.15 08/03/1999 69.49 42.53 21.18 39.05 20.00 97.49 104.33 76.48 08/04/1999 69.71 40.61 21.18 37.96 20.31 93.62 100.00 73.48 08/05/1999 70.82 41.38 21.47 38.32 20.00 89.75 99.76 72.31 08/06/1999 71.49 42.91 20.59 37.96 20.00 87.24 103.61 72.86 08/09/1999 71.27 41.76 18.24 38.69 20.63 87.24 103.13 72.48 08/10/1999 71.16 41.38 17.06 40.88 22.50 87.47 102.28 72.45 08/11/1999 70.82 42.91 17.65 41.97 23.44 87.47 103.85 73.38 08/12/1999 70.16 42.53 17.65 40.51 22.81 87.24 106.73 73.93 08/13/1999 71.71 42.91 17.65 41.61 22.81 85.65 108.89 74.21 08/16/1999 71.49 43.30 17.06 41.61 22.19 85.42 109.62 74.36 08/17/1999 70.38 42.15 16.47 41.61 21.25 84.05 108.65 73.32 08/18/1999 70.16 41.76 16.47 41.97 21.25 87.02 108.29 74.14 08/19/1999 70.38 40.61 16.18 43.80 20.63 86.10 103.00 72.14 08/20/1999 70.27 40.23 16.18 43.80 20.63 86.79 102.64 72.19 08/23/1999 70.27 39.85 15.88 42.70 20.31 88.84 101.92 72.46 08/24/1999 70.04 39.85 16.18 41.61 20.31 84.28 100.00 70.32 08/25/1999 70.49 39.46 16.47 42.34 20.31 86.56 98.08 70.49 08/26/1999 69.60 39.85 16.47 41.97 20.63 82.46 98.20 69.24 08/27/1999 68.49 38.70 17.06 42.34 20.94 82.92 95.91 68.56 08/30/1999 67.15 36.40 17.06 40.88 20.94 82.00 91.11 66.26 08/31/1999 66.93 34.87 17.65 40.88 20.63 82.46 92.31 66.47 09/01/1999 68.37 33.33 17.79 40.88 20.63 83.60 94.23 67.11 09/02/1999 67.26 35.25 17.65 41.24 20.31 81.78 88.94 65.34 09/03/1999 69.27 37.16 17.06 41.61 20.63 83.14 88.46 66.05 09/07/1999 69.27 36.40 17.06 42.34 20.00 83.83 94.95 68.06 09/08/1999 68.82 31.42 17.06 41.24 20.00 80.64 98.32 66.92 09/09/1999 68.82 31.03 16.76 40.88 20.00 77.45 97.60 65.53 09/10/1999 68.60 32.18 16.47 39.78 19.69 80.41 104.81 68.75 09/13/1999 66.59 31.42 16.47 40.51 19.69 80.64 103.61 68.38 09/14/1999 66.04 30.27 16.47 40.15 18.75 77.45 98.80 65.60 09/15/1999 66.26 28.74 16.18 39.78 18.75 76.31 101.92 65.79 09/16/1999 64.03 29.12 15.88 39.42 18.75 76.31 100.48 65.41 09/17/1999 63.70 29.50 15.88 39.42 16.56 76.77 101.92 65.94 09/20/1999 64.25 27.97 15.59 38.69 16.25 75.63 102.40 65.31 09/21/1999 63.14 26.82 15.29 37.23 15.94 74.72 100.48 64.07 09/22/1999 62.81 26.82 15.29 38.69 15.63 74.49 100.00 63.95 09/23/1999 60.36 27.97 15.59 37.59 15.63 72.89 93.51 61.67 09/24/1999 60.02 26.82 15.88 37.23 15.94 73.35 96.15 62.37 09/27/1999 60.36 26.82 16.18 37.96 16.25 71.75 95.91 61.86 09/28/1999 60.47 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11.49 5.59 25.55 20.63 94.31 54.33 52.78 09/11/2000 53.56 11.49 4.41 25.55 20.94 92.71 53.85 52.08 09/12/2000 52.78 11.11 4.41 25.55 19.38 93.62 53.85 52.22 09/13/2000 52.00 10.34 4.41 25.18 19.06 89.52 54.57 50.88 09/14/2000 52.45 11.49 4.71 25.18 18.75 87.24 54.81 50.42 09/15/2000 51.45 9.20 4.12 25.91 18.13 84.97 53.85 48.92 09/18/2000 51.00 8.81 3.82 25.18 17.50 81.55 51.92 47.05 09/19/2000 51.56 9.20 3.53 25.91 16.56 80.64 51.44 46.68 09/20/2000 50.22 9.58 3.82 25.55 17.50 78.82 52.64 46.54 09/21/2000 49.67 8.43 4.41 25.55 18.13 77.45 51.68 45.64 09/22/2000 49.00 8.43 4.41 24.82 19.69 80.18 51.20 46.43 09/25/2000 48.78 7.66 4.41 24.82 21.88 81.78 50.48 46.71 09/26/2000 48.33 8.05 4.71 25.18 20.31 80.18 46.39 45.01 09/27/2000 48.44 7.66 4.12 25.18 20.00 79.73 46.15 44.67 09/28/2000 49.00 8.05 4.12 24.09 20.63 82.92 44.95 45.39 09/29/2000 50.22 7.66 5.00 25.18 20.00 79.50 47.12 44.91 10/02/2000 49.67 8.05 5.29 24.09 20.00 78.36 43.99 43.62 10/03/2000 50.56 7.66 5.88 24.45 20.00 77.68 43.03 43.09 10/04/2000 51.34 8.05 5.59 24.09 17.50 78.36 44.71 43.71 10/05/2000 51.56 8.43 5.59 24.45 16.88 80.41 43.99 44.24 10/06/2000 48.33 8.05 5.00 23.72 15.00 80.64 42.79 43.70 10/09/2000 48.22 8.05 5.59 23.72 15.00 79.04 40.87 42.63 10/10/2000 48.00 8.43 5.00 23.72 15.63 77.22 34.13 40.13 10/11/2000 46.44 8.05 5.29 22.99 15.63 71.98 33.41 38.07 10/12/2000 45.66 9.20 6.18 17.52 15.63 70.39 33.17 37.32 10/13/2000 45.32 8.81 6.18 17.52 15.31 71.07 32.93 37.38 10/16/2000 45.21 8.05 7.65 16.06 15.00 71.98 31.73 37.10 10/17/2000 43.76 8.43 7.35 15.33 15.00 69.93 29.33 35.72 10/18/2000 42.87 8.05 6.76 14.96 15.00 70.39 29.33 35.74 10/19/2000 42.65 8.43 6.47 15.33 15.00 73.35 29.57 36.88 10/20/2000 40.98 8.05 7.06 16.06 14.06 73.35 28.85 36.62 10/23/2000 40.31 8.43 6.76 16.06 15.63 71.30 27.16 35.60 10/24/2000 40.53 8.43 6.47 15.33 13.13 71.30 27.64 35.54 10/25/2000 40.76 8.43 6.18 14.60 13.13 70.84 27.16 35.18 10/26/2000 40.53 8.05 5.00 15.69 13.13 73.80 27.40 36.18 10/27/2000 40.98 7.28 4.71 14.60 13.13 73.58 28.37 36.14 10/30/2000 41.76 7.28 4.71 13.87 13.44 77.22 28.37 37.30 10/31/2000 41.98 7.66 5.00 14.23 13.75 79.50 27.64 37.98 11/01/2000 41.87 8.05 4.41 14.60 15.00 78.59 27.64 37.83 11/02/2000 42.32 7.66 3.82 15.33 14.69 78.82 28.13 37.98 11/03/2000 42.32 8.05 3.24 15.33 14.38 79.04 27.88 38.02 11/06/2000 44.21 8.43 3.24 15.69 14.69 79.27 27.88 38.22 11/07/2000 45.21 8.81 3.53 16.06 14.69 77.90 28.37 38.03 11/08/2000 47.44 8.43 2.94 15.33 15.00 77.22 27.88 37.52 11/09/2000 46.10 8.81 2.94 15.33 10.31 75.40 27.64 36.67 11/10/2000 45.55 9.20 3.24 14.60 11.56 74.72 28.13 36.68 11/13/2000 46.88 9.20 3.09 14.60 11.56 76.31 27.16 36.92 11/14/2000 47.10 9.58 2.65 13.14 11.25 77.90 29.09 37.94 11/15/2000 46.66 9.58 2.65 12.77 11.25 77.45 28.37 37.55 11/16/2000 45.88 8.81 2.35 12.41 11.25 78.82 28.37 37.81 11/17/2000 47.77 8.81 2.21 11.31 10.00 79.95 27.40 37.74 11/20/2000 48.00 8.43 1.76 12.77 10.00 81.55 25.72 37.78 11/21/2000 48.89 8.43 2.06 12.04 9.69 81.32 24.76 37.36 11/22/2000 48.33 8.43 1.76 12.77 9.69 80.41 23.80 36.82 11/24/2000 49.67 8.81 1.76 12.77 9.69 81.09 24.28 37.27 11/27/2000 50.00 8.43 1.47 12.41 10.00 84.51 26.44 38.93 11/28/2000 49.55 8.43 1.62 12.41 9.38 83.60 25.48 38.32 11/29/2000 49.55 8.43 1.76 12.04 9.69 86.79 25.00 39.23 11/30/2000 48.55 8.05 1.62 12.41 9.69 86.33 24.52 38.88 12/01/2000 49.55 8.43 1.76 12.77 9.69 89.98 24.28 40.12 12/04/2000 49.67 8.43 1.62 12.55 10.00 87.93 23.08 39.08 12/05/2000 50.33 8.05 1.62 13.08 10.00 91.80 23.77 40.53 12/06/2000 46.33 8.81 1.32 12.79 11.25 91.12 25.46 40.99 12/07/2000 42.65 9.20 1.32 13.43 15.63 91.80 24.92 41.42 12/08/2000 43.32 9.20 1.47 13.14 14.69 93.62 25.15 42.03 12/11/2000 48.11 9.96 1.32 13.37 15.00 94.99 24.38 42.43 12/12/2000 51.22 11.11 1.32 13.14 12.81 92.26 25.04 41.82 12/13/2000 52.00 9.96 1.47 13.61 13.13 89.29 25.38 40.77 12/14/2000 49.89 9.96 1.18 13.20 13.13 89.75 25.62 40.95 12/15/2000 49.11 9.58 1.18 13.43 13.44 90.89 25.04 41.11 12/18/2000 50.11 10.34 1.32 13.14 13.13 90.89 24.00 40.92 12/19/2000 51.22 9.20 1.32 12.73 13.13 89.98 24.31 40.45 12/20/2000 50.56 9.20 1.32 12.55 12.50 87.47 24.19 39.54 12/21/2000 50.11 9.20 1.18 12.55 12.50 88.38 23.08 39.51 12/22/2000 53.79 9.20 1.32 12.55 12.50 92.26 23.69 40.97 12/26/2000 53.56 9.58 1.18 12.32 13.13 91.80 25.12 41.33 12/27/2000 55.46 9.96 1.32 12.85 13.13 100.91 27.50 45.16 12/28/2000 56.35 10.34 1.32 13.49 12.50 105.69 28.81 47.22 12/29/2000 57.80 10.73 1.32 12.96 12.50 99.77 28.81 45.30 01/02/2001 55.12 9.58 1.32 13.66 12.50 99.32 30.54 45.48 01/03/2001 56.68 9.96 1.62 14.01 11.88 103.87 34.62 48.27 01/04/2001 56.90 9.58 1.76 14.54 11.56 107.74 34.23 49.39 01/05/2001 54.57 9.96 1.76 14.60 12.50 107.74 33.42 49.28 01/08/2001 56.90 9.96 1.62 14.54 12.50 112.07 32.62 50.46 01/09/2001 56.24 10.73 1.62 14.48 11.25 111.16 31.73 49.98 01/10/2001 56.79 11.11 1.91 14.60 11.25 109.34 31.77 49.49 01/11/2001 57.13 11.11 1.76 14.42 11.88 109.34 32.12 49.60 01/12/2001 56.90 10.73 2.06 14.48 12.50 112.53 32.23 50.66 01/16/2001 57.57 10.34 2.21 14.60 13.13 115.03 32.73 51.61 01/17/2001 59.02 9.96 2.35 14.60 14.38 112.98 34.85 51.56 01/18/2001 59.35 10.34 2.35 14.60 14.69 112.98 37.50 52.43 01/19/2001 59.13 10.73 2.65 14.60 14.69 109.34 37.12 51.21 01/22/2001 57.35 10.34 2.35 15.18 14.69 110.93 34.85 51.02 01/23/2001 61.47 10.34 2.21 17.46 13.44 113.21 35.38 52.03 01/24/2001 59.80 10.34 2.35 18.34 14.69 110.02 35.19 51.07 01/25/2001 60.91 10.73 2.35 18.74 14.69 112.53 35.19 52.00 01/26/2001 60.36 10.34 2.21 18.69 14.06 110.02 34.65 50.89 01/29/2001 60.83 10.67 2.12 18.86 14.10 112.44 35.58 52.04 01/30/2001 60.85 11.34 2.12 18.69 14.35 111.78 33.62 51.38 01/31/2001 63.04 11.40 2.12 17.58 14.30 114.81 34.77 52.64 02/01/2001 62.68 10.91 2.31 18.22 13.15 117.36 35.19 53.50 02/02/2001 64.14 11.52 2.35 18.10 14.50 116.41 34.19 53.09 02/05/2001 64.77 11.89 2.31 16.35 13.10 116.23 33.88 52.79 02/06/2001 65.37 11.65 2.31 16.23 13.45 116.52 34.54 53.04 02/07/2001 66.33 11.52 2.26 16.64 14.23 114.70 33.73 52.25 02/08/2001 64.34 11.52 2.12 16.64 13.80 112.07 33.27 51.22 02/09/2001 64.64 13.36 2.82 17.11 13.25 107.19 33.65 50.13 02/12/2001 65.21 14.10 2.26 16.82 13.75 108.06 34.00 50.65 02/13/2001 66.82 13.49 2.07 16.88 13.75 108.76 33.65 50.65 02/14/2001 65.43 13.49 1.88 17.17 14.35 109.34 32.62 50.58 02/15/2001 64.93 13.49 2.52 17.34 14.95 111.85 33.15 51.64 02/16/2001 64.32 13.43 2.26 17.17 15.50 112.15 32.19 51.45 02/20/2001 78.08 13.79 2.02 17.28 19.10 114.84 33.73 53.06 02/21/2001 77.92 13.55 1.98 17.11 15.75 116.56 33.81 53.40 02/22/2001 79.20 13.12 2.21 16.64 15.00 114.70 33.85 52.65 02/23/2001 80.45 13.18 2.21 16.06 15.25 112.62 33.23 51.76 02/26/2001 80.53 13.49 2.02 15.47 17.95 113.20 34.42 52.46 02/27/2001 80.09 13.49 2.02 15.59 17.10 111.27 33.35 51.47 02/28/2001 79.48 13.79 2.21 14.13 17.75 109.16 32.38 50.48 03/01/2001 79.95 14.10 2.31 14.07 18.65 108.39 32.08 50.25 03/02/2001 79.63 14.10 2.24 13.78 21.00 110.18 31.54 50.78 03/05/2001 79.55 14.71 2.35 13.84 25.00 112.87 33.19 52.51 03/06/2001 79.54 14.53 2.35 13.14 20.25 110.07 35.15 51.81 03/07/2001 79.38 15.33 2.12 14.01 20.60 111.38 34.85 52.39 03/08/2001 79.29 15.94 2.31 14.54 21.00 112.77 34.85 53.04 03/09/2001 79.31 16.67 2.33 13.43 22.00 112.73 35.81 53.43 03/12/2001 79.38 16.25 2.26 14.01 21.75 112.36 35.77 53.24 03/13/2001 79.55 15.94 2.21 14.01 20.50 109.45 36.15 52.26 03/14/2001 77.95 15.63 2.31 13.84 21.65 105.77 35.38 50.81 03/15/2001 78.16 15.63 2.21 13.87 21.00 107.85 35.85 51.60
SOURCE: FactSet [UBS WARBURG LOGO] Section 2: Industry and Company Overview 29 33 SPRINGS INDUSTRIES -- ONE YEAR HISTORICAL PRICE PERFORMANCE RELATIVE SHARE PRICE PERFORMANCE
DATE SPRINGS BURLINGTON CROWN CRAFTS DAN RIVER GALEY & LORD MOHAWK IND. WESTPOINT PEER GROUP 3/16/00 100.00 100.00 100 100.00 100 100.00 100 100.00 3/17/00 101.00 105.00 100.00 96.59 93.75 98.52 99.25 99.22 3/20/00 99.17 106.67 100.00 98.86 100.00 93.47 98.87 96.95 3/21/00 101.33 115.00 100.00 98.86 96.88 93.47 99.62 97.93 3/22/00 101.50 140.00 104.55 97.73 100.00 93.18 101.89 100.83 3/23/00 101.50 126.67 100.00 100.00 100.00 97.63 101.13 101.62 3/24/00 101.50 116.67 100.00 97.73 100.00 97.63 103.40 101.44 3/27/00 100.17 115.00 95.45 98.86 96.88 95.25 107.17 101.50 3/28/00 100.83 106.67 95.45 109.09 96.88 96.44 104.91 101.01 3/29/00 101.16 113.33 100.00 115.91 96.88 100.30 106.42 104.37 3/30/00 102.16 123.33 95.45 110.23 96.88 110.98 111.70 112.07 3/31/00 101.16 116.67 95.45 117.05 96.88 106.23 114.72 110.58 4/3/00 102.50 108.33 100.00 113.64 103.13 109.20 113.21 110.67 4/4/00 102.00 105.00 100.00 111.36 100.00 108.90 109.81 108.86 4/5/00 102.33 100.00 100.00 106.82 100.00 104.45 109.43 105.90 4/6/00 104.33 108.33 100.00 107.95 100.00 106.23 109.81 107.70 4/7/00 104.33 103.33 100.00 106.82 96.88 105.64 109.06 106.60 4/10/00 103.16 105.00 97.73 98.86 90.63 105.64 108.68 106.16 4/11/00 106.66 100.00 95.45 95.45 96.88 105.64 106.04 104.65 4/12/00 106.66 98.33 109.09 97.73 100.00 109.50 103.40 105.64 4/13/00 103.66 96.67 100.00 97.73 96.88 109.20 103.02 105.13 4/14/00 101.66 88.33 104.55 98.86 96.88 104.75 98.49 100.67 4/17/00 103.00 85.00 113.64 100.00 90.63 105.04 101.89 101.78 4/18/00 103.83 86.67 122.73 96.59 93.75 103.56 103.02 101.53 4/19/00 107.49 85.00 122.73 100.00 100.00 105.93 103.02 102.76 4/20/00 111.15 85.00 122.73 103.41 118.75 111.28 104.91 106.40 4/24/00 111.98 90.00 145.45 105.68 134.38 116.91 104.15 109.71 4/25/00 114.98 105.00 145.45 106.82 137.50 116.62 104.53 111.12 4/26/00 114.98 111.67 145.45 107.95 150.00 115.43 110.19 113.37 4/27/00 111.98 115.00 154.55 106.82 150.00 116.91 110.94 114.65 4/28/00 109.32 116.67 154.55 103.41 146.88 117.80 113.21 115.85 5/1/00 115.81 118.33 154.55 104.55 143.75 121.07 115.09 118.29 5/2/00 121.46 113.33 159.09 106.82 150.00 116.32 115.09 115.74 5/3/00 125.29 110.00 154.55 106.82 150.00 116.62 114.34 115.29 5/4/00 129.28 111.67 159.09 105.68 146.88 118.40 115.85 116.78 5/5/00 126.12 113.33 163.64 102.27 143.75 118.40 117.74 117.44 5/8/00 126.12 111.67 163.64 100.00 140.63 113.65 117.36 114.71 5/9/00 124.96 111.67 154.55 100.00 146.88 113.35 115.85 114.04 5/10/00 126.29 108.33 145.45 100.00 150.00 114.84 112.83 113.36 5/11/00 129.95 113.33 140.91 98.86 134.38 120.77 112.08 116.17 5/12/00 128.29 116.67 140.91 96.59 128.13 116.02 112.45 114.12 5/15/00 125.29 118.33 136.36 98.86 131.25 114.54 115.47 114.75 5/16/00 125.79 118.33 145.45 100.00 128.13 117.21 116.23 116.40 5/17/00 125.12 111.67 140.91 97.73 131.25 113.06 112.83 112.46 5/18/00 124.63 108.33 127.27 96.59 125.00 111.87 109.06 110.03 5/19/00 123.79 106.67 122.73 95.45 118.75 109.79 108.68 108.59 5/22/00 123.29 100.00 122.73 87.50 118.75 112.46 80.00 98.56 5/23/00 120.30 96.67 122.73 87.50 125.00 115.73 73.96 97.74 5/24/00 123.96 88.33 122.73 87.50 125.00 110.98 66.79 92.10 5/25/00 123.29 93.33 113.64 88.64 121.88 110.09 66.79 92.08 5/26/00 125.79 100.00 109.09 90.91 125.00 107.72 68.30 92.18 5/30/00 126.29 98.33 109.09 90.91 118.75 108.90 67.17 92.14 5/31/00 126.46 88.33 104.55 90.91 112.50 113.06 61.51 91.14 6/1/00 116.81 91.67 104.55 90.91 121.88 112.76 65.66 92.89 6/2/00 112.81 108.33 104.55 89.77 118.75 114.54 66.04 95.28 6/5/00 114.31 105.00 100.00 88.64 112.50 112.46 68.68 94.78 6/6/00 111.48 101.67 100.00 89.77 115.63 110.68 67.17 93.16 6/7/00 110.82 100.00 100.00 88.64 115.63 108.01 69.43 92.48 6/8/00 106.32 100.00 95.45 84.09 115.63 108.01 67.92 91.69 6/9/00 106.16 93.33 95.45 86.36 115.63 105.34 70.19 90.73 6/12/00 106.32 91.67 90.91 86.36 118.75 102.37 67.17 88.06 6/13/00 103.16 90.00 95.45 88.64 109.38 101.48 63.77 86.28 6/14/00 104.49 85.00 90.91 85.23 115.63 102.37 66.79 87.24 6/15/00 105.16 78.33 100.00 85.23 115.63 106.53 66.42 88.58 6/16/00 105.32 78.33 95.45 88.64 115.63 101.78 60.75 84.37 6/19/00 95.51 56.67 100.00 88.64 112.50 102.97 58.11 82.06 6/20/00 95.34 61.67 100.00 90.91 112.50 104.15 52.83 81.28 6/21/00 92.35 58.33 95.45 89.77 121.88 99.41 54.34 79.24 6/22/00 91.35 56.67 95.45 89.77 106.25 98.52 53.21 78.08 6/23/00 90.52 53.33 100.00 90.91 112.50 99.41 53.96 78.64 6/26/00 91.18 56.67 81.82 87.50 112.50 102.97 60.38 82.72 6/27/00 89.02 53.33 81.82 86.36 106.25 106.53 61.51 84.45 6/28/00 90.68 55.00 86.36 84.09 103.13 107.12 64.91 86.00 6/29/00 91.51 55.00 81.82 78.41 100.00 114.24 67.92 90.22 6/30/00 85.19 45.00 86.36 86.36 103.13 103.26 67.17 84.16 7/3/00 86.86 53.33 81.82 84.09 103.13 115.13 68.68 91.08 7/5/00 87.19 55.00 81.82 84.09 106.25 110.68 68.68 89.10 7/6/00 84.03 53.33 81.82 85.23 109.38 111.57 69.81 89.88 7/7/00 84.53 53.33 77.27 86.36 109.38 114.84 71.70 92.18 7/10/00 84.53 53.33 77.27 80.68 125.00 116.91 72.45 93.36 7/11/00 86.02 58.33 77.27 80.68 153.13 115.43 70.57 92.69 7/12/00 85.52 60.00 77.27 77.27 159.38 114.24 69.43 91.76 7/13/00 84.86 65.00 72.73 78.41 156.25 115.43 67.92 92.23 7/14/00 85.36 66.67 81.82 84.09 150.00 118.40 71.32 95.30 7/17/00 86.02 66.67 72.73 85.23 156.25 116.32 69.81 93.82 7/18/00 83.86 66.67 68.18 87.50 146.88 114.84 68.68 92.68 7/19/00 83.53 65.00 31.82 87.50 150.00 114.54 69.06 92.36 7/20/00 87.52 65.00 45.45 87.50 181.25 116.91 67.17 93.24 7/21/00 90.68 58.33 54.55 87.50 181.25 116.62 68.68 93.09 7/24/00 89.52 58.33 54.55 84.09 187.50 116.62 68.30 92.86 7/25/00 88.69 56.67 50.00 84.09 178.13 118.99 69.43 94.15 7/26/00 88.02 55.00 50.00 84.09 175.00 123.15 67.92 95.45 7/27/00 87.52 43.33 45.45 82.95 171.88 123.15 68.68 94.57 7/28/00 86.36 46.67 45.45 85.23 171.88 122.85 68.68 94.84 7/31/00 85.86 43.33 45.45 81.82 162.50 126.71 72.45 97.52 8/1/00 84.53 46.67 40.91 78.41 159.38 128.19 72.83 98.45 8/2/00 85.52 46.67 43.18 79.55 156.25 127.30 73.21 98.19 8/3/00 84.86 41.67 36.36 77.27 156.25 125.22 73.21 96.59 8/4/00 84.03 45.00 36.36 77.27 175.00 127.30 73.96 98.37 8/7/00 85.69 45.00 45.45 76.14 187.50 129.38 73.96 99.50 8/8/00 85.02 45.00 45.45 77.27 178.13 129.97 72.83 99.34 8/9/00 84.36 45.00 40.91 77.27 181.25 128.19 75.47 99.43 8/10/00 84.53 45.00 40.91 75.00 175.00 124.33 73.96 96.84 8/11/00 84.69 45.00 40.91 75.00 175.00 127.60 77.36 99.65 8/14/00 85.52 46.67 40.91 77.27 171.88 127.60 79.62 100.69 8/15/00 83.36 45.00 40.91 78.41 171.88 126.41 81.51 100.70 8/16/00 82.86 40.00 36.36 82.95 175.00 126.11 84.91 101.57 8/17/00 84.03 41.67 29.55 82.95 187.50 123.44 84.91 100.51 8/18/00 83.69 40.00 31.82 87.50 190.63 122.55 84.15 99.92 8/21/00 82.53 45.00 34.09 88.64 196.88 122.55 81.13 99.41 8/22/00 84.53 51.67 36.36 86.36 206.25 124.93 81.51 101.29 8/23/00 83.53 48.33 36.36 85.23 218.75 120.18 81.51 98.76 8/24/00 84.03 48.33 31.82 85.23 228.13 120.77 81.89 99.26 8/25/00 83.36 50.00 31.82 85.23 206.25 118.40 81.89 98.03 8/28/00 81.86 48.33 31.82 81.82 209.38 113.95 80.75 95.18 8/29/00 79.87 45.00 27.27 84.09 221.88 116.32 81.51 96.52 8/30/00 80.03 46.67 36.36 81.82 215.63 113.35 81.89 95.24 8/31/00 79.53 46.67 36.36 80.68 221.88 112.76 84.91 96.05 9/1/00 79.37 46.67 59.09 80.68 212.50 115.13 83.77 96.82 9/5/00 79.03 46.67 68.18 80.68 225.00 111.28 83.02 94.85 9/6/00 83.19 51.67 72.73 79.55 225.00 125.82 84.91 103.01 9/7/00 83.19 51.67 90.91 80.68 209.38 128.49 86.04 104.71 9/8/00 82.86 50.00 86.36 79.55 206.25 122.85 85.28 101.43 9/11/00 80.03 50.00 68.18 79.55 209.38 120.77 84.53 100.09 9/12/00 78.87 48.33 68.18 79.55 193.75 121.96 84.53 100.35 9/13/00 77.70 45.00 68.18 78.41 190.63 116.62 85.66 97.78 9/14/00 78.37 50.00 72.73 78.41 187.50 113.65 86.04 96.91 9/15/00 76.87 40.00 63.64 80.68 181.25 110.68 84.53 94.03 9/18/00 76.21 38.33 59.09 78.41 175.00 106.23 81.51 90.42 9/19/00 77.04 40.00 54.55 80.68 165.63 105.04 80.75 89.71 9/20/00 75.04 41.67 59.09 79.55 175.00 102.67 82.64 89.45 9/21/00 74.21 36.67 68.18 79.55 181.25 100.89 81.13 87.71 9/22/00 73.21 36.67 68.18 77.27 196.88 104.45 80.38 89.22 9/25/00 72.88 33.33 68.18 77.27 218.75 106.53 79.25 89.76 9/26/00 72.21 35.00 72.73 78.41 203.13 104.45 72.83 86.49 9/27/00 72.38 33.33 63.64 78.41 200.00 103.86 72.45 85.84 9/28/00 73.21 35.00 63.64 75.00 206.25 108.01 70.57 87.23 9/29/00 75.04 33.33 77.27 78.41 200.00 103.56 73.96 86.31 10/2/00 74.21 35.00 81.82 75.00 200.00 102.08 69.06 83.83 10/3/00 75.54 33.33 90.91 76.14 200.00 101.19 67.55 82.80 10/4/00 76.71 35.00 86.36 75.00 175.00 102.08 70.19 84.00 10/5/00 77.04 36.67 86.36 76.14 168.75 104.75 69.06 85.02 10/6/00 72.21 35.00 77.27 73.86 150.00 105.04 67.17 83.98 10/9/00 72.05 35.00 86.36 73.86 150.00 102.97 64.15 81.93 10/10/00 71.71 36.67 77.27 73.86 156.25 100.59 53.58 77.13 10/11/00 69.38 35.00 81.82 71.59 156.25 93.77 52.45 73.16 10/12/00 68.22 40.00 95.45 54.55 156.25 91.69 52.08 71.72 10/13/00 67.72 38.33 95.45 54.55 153.13 92.58 51.70 71.83 10/16/00 67.55 35.00 118.18 50.00 150.00 93.77 49.81 71.30 10/17/00 65.39 36.67 113.64 47.73 150.00 91.10 46.04 68.66 10/18/00 64.06 35.00 104.55 46.59 150.00 91.69 46.04 68.70 10/19/00 63.73 36.67 100.00 47.73 150.00 95.55 46.42 70.89 10/20/00 61.23 35.00 109.09 50.00 140.63 95.55 45.28 70.39 10/23/00 60.23 36.67 104.55 50.00 156.25 92.88 42.64 68.42 10/24/00 60.57 36.67 100.00 47.73 131.25 92.88 43.40 68.30 10/25/00 60.90 36.67 95.45 45.45 131.25 92.28 42.64 67.61 10/26/00 60.57 35.00 77.27 48.86 131.25 96.14 43.02 69.54 10/27/00 61.23 31.67 72.73 45.45 131.25 95.85 44.53 69.46 10/30/00 62.40 31.67 72.73 43.18 134.38 100.59 44.53 71.69 10/31/00 62.73 33.33 77.27 44.32 137.50 103.56 43.40 72.99 11/1/00 62.56 35.00 68.18 45.45 150.00 102.37 43.40 72.69 11/2/00 63.23 33.33 59.09 47.73 146.88 102.67 44.15 72.99 11/3/00 63.23 35.00 50.00 47.73 143.75 102.97 43.77 73.07 11/6/00 66.06 36.67 50.00 48.86 146.88 103.26 43.77 73.45 11/7/00 67.55 38.33 54.55 50.00 146.88 101.48 44.53 73.08 11/8/00 70.88 36.67 45.45 47.73 150.00 100.59 43.77 72.10 11/9/00 68.89 38.33 45.45 47.73 103.13 98.22 43.40 70.47 11/10/00 68.05 40.00 50.00 45.45 115.63 97.33 44.15 70.50 11/13/00 70.05 40.00 47.73 45.45 115.63 99.41 42.64 70.95 11/14/00 70.38 41.67 40.91 40.91 112.50 101.48 45.66 72.92 11/15/00 69.72 41.67 40.91 39.77 112.50 100.89 44.53 72.16 11/16/00 68.55 38.33 36.36 38.64 112.50 102.67 44.53 72.66 11/17/00 71.38 38.33 34.09 35.23 100.00 104.15 43.02 72.53 11/20/00 71.71 36.67 27.27 39.77 100.00 106.23 40.38 72.62 11/21/00 73.04 36.67 31.82 37.50 96.88 105.93 38.87 71.81 11/22/00 72.21 36.67 27.27 39.77 96.88 104.75 37.36 70.77 11/24/00 74.21 38.33 27.27 39.77 96.88 105.64 38.11 71.63 11/27/00 74.71 36.67 22.73 38.64 100.00 110.09 41.51 74.82 11/28/00 74.04 36.67 25.00 38.64 93.75 108.90 40.00 73.65 11/29/00 74.04 36.67 27.27 37.50 96.88 113.06 39.25 75.39 11/30/00 72.55 35.00 25.00 38.64 96.88 112.46 38.49 74.72 12/1/00 74.04 36.67 27.27 39.77 96.88 117.21 38.11 77.11 12/4/00 74.21 36.67 25.00 39.09 100.00 114.54 36.23 75.12 12/5/00 75.21 35.00 25.00 40.73 100.00 119.58 37.31 77.89 12/6/00 69.22 38.33 20.45 39.82 112.50 118.69 39.97 78.78 12/7/00 63.73 40.00 20.45 41.82 156.25 119.58 39.12 79.61 12/8/00 64.73 40.00 22.73 40.91 146.88 121.96 39.49 80.77 12/11/00 71.88 43.33 20.45 41.64 150.00 123.74 38.28 81.55 12/12/00 76.54 48.33 20.45 40.91 128.13 120.18 39.31 80.37 12/13/00 77.70 43.33 22.73 42.36 131.25 116.32 39.85 78.36 12/14/00 74.54 43.33 18.18 41.09 131.25 116.91 40.21 78.69 12/15/00 73.38 41.67 18.18 41.82 134.38 118.40 39.31 79.01 12/18/00 74.88 45.00 20.45 40.91 131.25 118.40 37.68 78.65 12/19/00 76.54 40.00 20.45 39.64 131.25 117.21 38.16 77.74 12/20/00 75.54 40.00 20.45 39.09 125.00 113.95 37.98 75.99 12/21/00 74.88 40.00 18.18 39.09 125.00 115.13 36.23 75.93 12/22/00 80.37 40.00 20.45 39.09 125.00 120.18 37.19 78.74 12/26/00 80.03 41.67 18.18 38.36 131.25 119.58 39.43 79.43 12/27/00 82.86 43.33 20.45 40.00 131.25 131.45 43.17 86.79 12/28/00 84.19 45.00 20.45 42.00 125.00 137.69 45.22 90.74 12/29/00 86.36 46.67 20.45 40.36 125.00 129.97 45.22 87.06 1/2/01 82.36 41.67 20.45 42.55 125.00 129.38 47.94 87.41 1/3/01 84.69 43.33 25.00 43.64 118.75 135.31 54.34 92.77 1/4/01 85.02 41.67 27.27 45.27 115.63 140.36 53.74 94.91 1/5/01 81.53 43.33 27.27 45.45 125.00 140.36 52.47 94.71 1/8/01 85.02 43.33 25.00 45.27 125.00 145.99 51.20 96.98 1/9/01 84.03 46.67 25.00 45.09 112.50 144.81 49.81 96.05 1/10/01 84.86 48.33 29.55 45.45 112.50 142.43 49.87 95.11 1/11/01 85.36 48.33 27.27 44.91 118.75 142.43 50.42 95.33 1/12/01 85.02 46.67 31.82 45.09 125.00 146.59 50.60 97.37 1/16/01 86.02 45.00 34.09 45.45 131.25 149.85 51.38 99.19 1/17/01 88.19 43.33 36.36 45.45 143.75 147.18 54.70 99.08 1/18/01 88.69 45.00 36.36 45.45 146.88 147.18 58.87 100.77 1/19/01 88.35 46.67 40.91 45.45 146.88 142.43 58.26 98.41 1/22/01 85.69 45.00 36.36 47.27 146.88 144.51 54.70 98.05 1/23/01 91.85 45.00 34.09 54.36 134.38 147.48 55.55 100.00 1/24/01 89.35 45.00 36.36 57.09 146.88 143.32 55.25 98.14 1/25/01 91.02 46.67 36.36 58.36 146.88 146.59 55.25 99.94 1/26/01 90.18 45.00 34.09 58.18 140.63 143.32 54.40 97.81 1/29/01 90.89 46.40 32.73 58.73 141.00 146.47 55.85 100.01 1/30/01 90.92 49.33 32.73 58.18 143.50 145.61 52.77 98.74 1/31/01 94.19 49.60 32.73 54.73 143.00 149.55 54.58 101.17 2/1/01 93.66 47.47 35.64 56.73 131.50 152.88 55.25 102.82 2/2/01 95.84 50.13 36.36 56.36 145.00 151.64 53.68 102.02 2/5/01 96.77 51.73 35.64 50.91 131.00 151.41 53.19 101.46 2/6/01 97.68 50.67 35.64 50.55 134.50 151.79 54.22 101.94 2/7/01 99.11 50.13 34.91 51.82 142.25 149.41 52.95 100.42 2/8/01 96.13 50.13 32.73 51.82 138.00 145.99 52.23 98.44 2/9/01 96.59 58.13 43.64 53.27 132.50 139.63 52.83 96.34 2/12/01 97.44 61.33 34.91 52.36 137.50 140.77 53.37 97.34 2/13/01 99.83 58.67 32.00 52.55 137.50 141.67 52.83 97.34 2/14/01 97.76 58.67 29.09 53.45 143.50 142.43 51.20 97.21 2/15/01 97.01 58.67 38.91 54.00 149.50 145.71 52.05 99.25 2/16/01 96.11 58.40 34.91 53.45 155.00 146.09 50.54 98.88 2/20/01 116.66 60.00 31.27 53.82 191.00 149.60 52.95 101.98 2/21/01 116.42 58.93 30.55 53.27 157.50 151.83 53.07 102.63 2/22/01 118.34 57.07 34.18 51.82 150.00 149.41 53.13 101.18 2/23/01 120.20 57.33 34.18 50.00 152.50 146.71 52.17 99.48 2/26/01 120.33 58.67 31.27 48.18 179.50 147.47 54.04 100.83 2/27/01 119.67 58.67 31.27 48.55 171.00 144.95 52.35 98.92 2/28/01 118.76 60.00 34.18 44.00 177.50 142.20 50.84 97.02 3/1/01 119.45 61.33 35.64 43.82 186.50 141.20 50.35 96.57 3/2/01 118.98 61.33 34.55 42.91 210.00 143.53 49.51 97.60 3/5/01 118.87 64.00 36.36 43.09 250.00 147.04 52.11 100.92 3/6/01 118.84 63.20 36.36 40.91 202.50 143.38 55.18 99.58 3/7/01 118.60 66.67 32.73 43.64 206.00 145.09 54.70 100.69 3/8/01 118.47 69.33 35.64 45.27 210.00 146.90 54.70 101.94 3/9/01 118.50 72.53 36.00 41.82 220.00 146.85 56.21 102.69 3/12/01 118.60 70.67 34.91 43.64 217.50 146.37 56.15 102.33 3/13/01 118.87 69.33 34.18 43.64 205.00 142.58 56.75 100.44 3/14/01 116.47 68.00 35.64 43.09 216.50 137.78 55.55 97.66 3/15/01 116.79 68.00 34.18 43.18 210.00 140.49 56.27 99.16
SOURCE: FactSet [UBS WARBURG LOGO] Section 2: Industry and Company Overview 30 34 Shares Traded at Specific Prices -- Latest Twelve Months(1) TOTAL VOLUME: 23,900,000 (APPROXIMATELY 1.3x THE TOTAL SHARES OUTSTANDING)
PRICE RANGE(2)($) % OF TOTAL VOLUME TRADED - ----------------- ------------------------ 20.00-22.99 1.6 23.00-25.99 8.7 26.00-28.99 23.9 29.00-31.99 14.2 32.00-34.99 15.6 35.00-37.99 7.7 38.00-40.99 7.9 41.00-43.99 7.8 44.00-46.99 5.0 47.00-49.99 7.5
NOTES: (1) Source: Factset (2) Based on closing prices for the latest twelve months ending February 16, 2000 - Approximately 87% of Springs shares traded over the last twelve months were at prices less than $44.00 per share [UBS WARBURG LOGO] Section 2: Industry and Company Overview 31 35 RESEARCH COMMENTARY
FIRM RECOMMENDATION PRICE TARGET COMMENT - ---- -------------- ------------ ------- CSFB Not Rated na "We reduced our 2001 earnings per share estimate to (2/20/01) $3.80 from $4.15. We project sales and earnings to fall in the first half, owing to continued weakness at re-tail and further initiatives to reduce inventory. We expect at least a small sales recovery in the second half against easy comparisons. We estimate that full-year sales will be essentially flat at $2.27 billion. We project that the gross margin will remain unchanged at 18.7%. Reduced profitability from planned production curtailments and higher sales of closeout and off-price products in the first half should be offset by improved profitability in the second half. We expect SG&A to increase modestly to 12.5% from 12.4%." Merrill Lynch Accumulate na "We think it likely that margin pressure will (2/2/01) continue to be driven by claims, low cost sourced goods, weakness particularly at starting price points, and commodity and energy inflation. Cost savings initiatives as well as recent downsized capacity should enable Springs to run plants at fuller levels thus improving overhead absorption rates. Lower outsourced production (and thus inventory) should also reduce working capital requirements. Springs' goal is to reduce inventory by $30 million in 2001. The Company has downsized its capital expenditure plans significantly (to $110 million) delaying non-essential projects. In our view, the conservative approach toward capital projects will further strengthen the balance sheet, which should position Springs to weather the storms presented by the current difficult economic environment." Wachovia Securities Buy 37 "Over the last seven years, dollar volume in the bed (11/27/00) and bath industries has increased at annual rates of 6.2% and 5.5% respectively. Demographics remain favorable for continued growth over the next five years, in our opinion. These trends are expected to persist till 2006. Although Springs has been profitable throughout its history, the level of profit margins has been uninspiring. A new management team and well-defined strategy appear to have energized the company and we believe the longer term result will be a higher operating margin."
[UBS WARBURG LOGO] Section 2: Industry and Company Overview 32 36 ECONOMIC VS VOTING OWNERSHIP CLASS A OWNERSHIP
Class Total Amount (%) (%) ------ --- --- 13F Institutions 8,013,346 73.7 44.5 Close Family 173,097 1.6 1.0 Other Insiders 150,437 1.4 0.8 Other/Retail 2,531,108 23.3 14.0 ---------- ----- ---- TOTAL CLASS A SHARES 10,867,988 100.0 60.3 ========== ===== ====
ECONOMIC OWNERSHIP [PIE CHART] 13F Institutions 44.5% Other/Retail 14.1% Other Insider 0.8% Close Family 40.6%
CLASS B OWNERSHIP
Class Total Amount (%) (%) ------ --- --- Close Family 7,149,291 99.9 39.7 Other/Retail 5,472 0.1 nm ---------- ----- ----- TOTAL CLASS B SHARES 7,154,763 100.0 39.7 ---------- ===== ----- TOTAL SHARES OUTSTANDING 18,022,751 100.0 ========== =====
VOTING OWNERSHIP [PIE CHART] 13F Institutions 20.3% Other/Retail 6.5% Other Insider 0.4% Close Family 72.8%
[UBS WARBURG LOGO] Section 2: Industry and Company Overview 33 37 FINANCIAL OVERVIEW SECTION 3 [UBS WARBURG LOGO] 38 HISTORICAL PERFORMANCE AGAINST BUDGET - - ANNUAL -- ONE YEAR FORWARD LOOKING
($MM) 1997 1998 1999 2000 - ----- ---- ---- ---- ---- Revenues Actual 2,226.1 2,180.5 2,234.1 2,275.1 Budget 2,308.9 2,314.6 2,171.0 2,327.2 --------- --------- --------- --------- Variance (82.8) (134.1) 63.1 (57.7) Variance % (vs Budget) (3.6) (5.8) 2.8 (2.5) EBIT Actual 129.1 117.4 134.0 147.6 Budget 161.8 165.0 157.4 180.2 --------- --------- --------- --------- Variance (32.7) (47.4) (23.4) (32.6) Variance % (vs Budget) (20.2) (40.5) (14.9) (22.1) Net Income Before Unusual Items Actual 73.5 59.3 67.9 72.3 Budget 81.8 80.6 76.5(1) 91.5 --------- --------- --------- --------- Variance (8.3) (21.3) (8.6) (19.2) Variance % (vs Budget) (10.1) (35.9) (11.2) (26.6) --------- --------- --------- ---------
NOTE: (1) Budget amount adjusted to exclude pre-tax "contingency expense" of $24 million. - - Springs has consistently missed its budget forecasts over the past few years - - On average, for the years presented, Springs has missed its annual EBIT budget by approximately 24% - - Applying this average percentage variance to Springs' budgeted 2001 EBIT would imply a range of outcomes between $115 million and $152 million (budgeted amount) [UBS WARBURG LOGO] Section 3: Financial Overview 36 39 HISTORICAL RESULTS VS MCKINSEY PROJECTIONS - - MANAGEMENT HAS DIFFICULTY FORECASTING AND IMPLEMENTING LONG RANGE STRATEGIC PLANS - - Manufacturing and purchasing initiatives offset by inflation and other negative influences - - Top-line growth difficult in retailing environment -- competitive pressures, import threats, low pricing flexibility and specification creep EBIT [BAR GRAPH]
($MM) 1998 1999 2000 2001 ---- ---- ---- ---- Initial Diagnostic 120 183 245 305 1999 View 106 134 180 224 Actual/Base 106 134 148 152 Downside 139
[UBS WARBURG LOGO] Section 3: Financial Overview 35 40 OVERVIEW OF MANAGEMENT'S PROJECTIONS MANAGEMENT "BASE" CASE - - Net sales grow at a compound average growth rate of 5.0% through the projection period (2000 - 2005) - substantially above the Company's historical experience of 2.0% over the last ten years and 0.5% over the last five years - - Management "Base" Case projections assume market share gains in the following core product segments:
% US MARKET 2000 - 2005 1995 - 2000 ----------- GAIN GAIN 2000 2005 (%) (%) ---- ---- --- --- Core Bed 15.9 16.1 + 0.2 + 2.0 Total Bath 17.2 21.6 + 4.4 + 0.4 Windows 12.8 13.7 + 0.9 - 0.3 ---- ---- --- ---
- - EBITDA margins are projected to improve over historical results, increasing from 11.2% in 2000 to 13.3% by 2005P - - Capital expenditures for 2001E and beyond are expected to remain in the range of $110 million - $125 million and reflect the Company's planned IT investments as well as normal maintenance and operating expenditures MANAGEMENT "DOWNSIDE" CASE - - Revenues grow at an average annual rate of 2.1% through the projection period, consistent with historical experience - - EBITDA margins are consistent with historical results, increasing from 11.2% in 2000 to 11.7% in 2005P - - Capital expenditures, depreciation and amortization are the same as in the "Base" Case - - No working capital improvements [UBS WARBURG LOGO] Section 3: Financial Overview 36 41 BUSINESS MIX MANAGEMENT "BASE" CASE
2000A REVENUES(1) 2005P REVENUES CAGR ----------------- -------------- ---- OPERATING BUSINESS SEGMENTS ($MM) % TOTAL ($MM) % TOTAL 1995 - 2000 (%) 2000 - 2005 (%) - --------------------------- ----- ------- ----- ------- --------------- --------------- Core Bedding 742.2 32.6 903.7 31.1 na 4.0 Other Bedding 231.9 10.2 367.3 12.7 na 9.6 ------- ----- ------- ----- --- --- TOTAL BEDDING 974.1 42.8 1,271.0 43.8 3.1 5.5 ------- ----- ------- ----- --- --- Bath 482.5 21.2 670.3 23.1 0.7 6.8 ------- ----- ------- ----- --- --- TOTAL BEDDING AND BATH 1,456.6 64.0 1,941.3 66.9 2.3 5.9 ------- ----- ------- ----- --- --- Windows 371.9 16.3 458.3 15.8 na 4.3 Baby 71.4 3.1 87.6 3.0 na 4.2 Other 375.1 16.5 415.2 14.3 na 2.1 ======= ===== ======= ===== === === TOTAL 2,275.1 100.0 2,902.4 100.0 0.5 5.0 ======= ===== ======= ===== === ===
MANAGEMENT "DOWNSIDE" CASE
2000A REVENUES(1) 2005P REVENUES CAGR ----------------- -------------- ---- OPERATING BUSINESS SEGMENTS ($MM) % TOTAL ($MM) % TOTAL 1995 - 2000 (%) 2000 - 2005 (%) - --------------------------- ----- ------- ----- ------- --------------- --------------- Core Bedding 742.2 32.6 789.5 31.4 na 1.2 Other Bedding 231.9 10.2 287.6 11.4 na 4.4 ------- ----- ------- ----- --- --- TOTAL BEDDING 974.1 42.8 1,077.1 42.9 3.1 2.0 ------- ----- ------- ----- --- --- Bath 482.5 21.2 589.4 23.5 0.7 4.1 ------- ----- ------- ----- --- --- TOTAL BEDDING AND BATH 1,456.6 64.0 1,666.5 66.3 2.3 2.7 ------- ----- ------- ----- --- --- Windows 371.9 16.3 420.8 16.7 na 2.5 Baby 71.4 3.1 80.3 3.2 na 2.4 Other 375.1 16.5 345.0 13.7 na (1.7) ======= ===== ======= ===== === === TOTAL 2,275.1 100.0 2,512.6 100.0 0.5 2.0 ======= ===== ======= ===== === ===
NOTE: (1) FY 2000 net sales based on internal unaudited financial reports (before audit-related GAAP adjustments) versus $2,275.1 million net sales reported in the draft FY 2000 Annual Report. Reconciliation pending. [UBS WARBURG LOGO] Section 3: Financial Overview 37 42 EBIT BRIDGE -- 2000A VS 2001E "BASE" CASE [BAR GRAPH] 2000 EBIT 147.6 AIP Restatement - 12.0 Growth + 9.5 Claims Reduction + 13.7 Mfg. Initiatives + 50.0 Purchasing Initiatives + 18.2 Inflation & Other - 69.9 Contingency Expense - 5.5 2001P Base Case -151.6
[UBS WARBURG LOGO] Section 3: Financial Overview 38 43 Management "Base" Case
($MM) FOR THE FISCAL YEARS ENDED FOR THE PROJECTED FISCAL YEARS ENDING - ----- -------------------------- ------------------------------------- 1999 2000 2001 2002 2003 2004 2005 ---- ---- ---- ---- ---- ---- ---- Operating Data: Net Sales 2,220.4 2,275.1 2,322.7 2,477.2 2,637.7 2,766.2 2,902.4 % Growth 1.8 2.4 2.1 6.6 6.5 4.9 4.9 EBITDA -- Adjusted (1) 235.6 257.0 262.8 299.4 349.5 365.8 380.1 % Margin 10.6 11.3 11.3 12.1 13.2 13.2 13.1 EBIT -- Adjusted (1) 134.0 147.6 151.6 180.4 224.0 234.1 241.6 % Margin 6.0 6.5 6.5 7.3 8.5 8.5 8.3 Net Income -- Adjusted (1) 67.9 72.3 78.3 96.4 125.9 135.6 143.8 % Margin 3.1 3.2 3.4 3.9 4.8 4.9 5.0 Diluted EPS -- Adjusted (1) 3.73 3.98 4.31 5.31 6.93 7.47 7.92 % Growth 19.2 6.7 8.2 23.1 30.6 7.8 6.0 Diluted Shares Outstanding 18.17 18.16 18.16 18.16 18.16 18.16 18.16 Balance Sheet Data: Cash & Equivalents 4.2 2.9 -- -- -- 7.5 92.0 Net PP&E 625.6 617.9 626.1 640.1 640.2 645.3 629.1 Total Assets 1,575.0 1,584.1 1,587.6 1,624.1 1,647.1 1,682.7 1,772.3 Total Debt 340.2 333.2 299.4 262.8 184.4 108.6 77.0 Shareholders' Equity 774.9 819.8 875.0 948.3 1,051.1 1,163.6 1,284.3 Cash Flow Data: Depreciation & Amortization 101.3 109.4 111.2 119.0 125.5 131.7 138.5 Capital Expenditures 166.8 93.3 110.0 123.0 114.0 125.0 110.0 ----- ---- ----- ----- ----- ----- -----
NOTE: (1) Excludes non-recurring items for fiscal years 1999 and 2000 [UBS WARBURG LOGO] Section 3: Financial Overview 39 44 MANAGEMENT "DOWNSIDE" CASE
($MM) FOR THE FISCAL YEARS ENDED FOR THE PROJECTED FISCAL YEARS ENDING - ----- -------------------------- ------------------------------------------------------------- 1999 2000 2001 2002 2003 2004 2005 ---- ---- ---- ---- ---- ---- ---- Operating Data: Net Sales 2,220.4 2,275.1 2,264.8 2,320.7 2,387.9 2,446.6 2,512.6 % Growth 1.8 2.4 (0.5) 2.5 2.9 2.5 2.7 EBITDA -- Adjusted (1) 235.6 257.0 249.7 264.4 281.2 287.8 295.1 % Margin 10.6 11.3 11.0 11.4 11.8 11.8 11.7 EBIT -- Adjusted (1) 134.0 147.6 138.5 145.4 155.7 156.1 156.6 % Margin 6.0 6.5 6.1 6.3 6.5 6.4 6.2 Net Income -- Adjusted (1) 67.9 72.3 70.2 75.1 83.6 86.2 89.2 % Margin 3.1 3.2 3.1 3.2 3.5 3.5 3.6 Diluted EPS -- Adjusted (1) 3.73 3.98 3.87 4.14 4.61 4.75 4.91 % Growth 19.2 6.7 (2.9) 7.0 11.3 3.0 3.4 Diluted Shares Outstanding 18.17 18.16 18.16 18.16 18.16 18.16 18.16 Balance Sheet Data: Cash & Equivalents 4.2 2.9 -- -- -- -- 13.0 Net PP&E 625.6 617.9 626.1 640.1 640.2 645.3 629.1 Total Assets 1,575.0 1,584.1 1,570.6 1,577.3 1,576.5 1,584.1 1,582.0 Total Debt 340.2 333.2 292.4 251.1 194.1 142.5 77.0 Shareholders' Equity 774.9 819.8 866.9 918.9 979.5 1,042.6 1,108.7 Cash Flow Data: Depreciation & Amortization 101.3 109.4 111.2 119.0 125.5 131.7 138.5 Capital Expenditures 166.8 93.3 110.0 123.0 114.0 125.0 110.0 ----- ---- ----- ----- ----- ----- -----
NOTE: (1) Excludes non-recurring items for fiscal years 1999 and 2000 [UBS WARBURG LOGO] Section 3: Financial Overview 40 45 MANAGEMENT "BASE" CASE VS "DOWNSIDE" CASE
($MM) 2000A(1) 2001E 2002P 2003P 2004P 2005P - ----- -------- ----- ----- ----- ----- ----- "Base" Case Revenue 2,275.1 2,322.7 2,477.2 2,637.7 2,766.2 2,902.4 EBITDA 257.0 262.8 299.4 349.5 365.8 380.1 EBIT 147.6 151.6 180.4 224.0 234.1 241.6 Net Income 72.3 76.0 94.0 123.4 133.0 141.1 Diluted EPS 3.98 4.13 5.11 6.60 7.11 7.43 "Downside" Case Revenue 2,275.1 2,264.8 2,320.7 2,387.9 2,446.6 2,512.6 EBITDA 257.0 249.7 264.4 281.2 287.8 295.1 EBIT 147.6 138.5 145.4 155.7 156.1 156.6 Net Income 72.3 67.9 72.7 81.1 83.5 86.5 Diluted EPS 3.98 3.69 3.95 4.34 4.47 4.55 Difference ("Base" vs "Downside") Revenue -- 57.9 156.5 249.8 319.6 389.8 EBITDA -- 13.1 35.0 68.3 78.0 85.0 EBIT -- 13.1 35.0 68.3 78.0 85.0 Net Income -- 8.1 21.3 42.3 49.5 54.6 Diluted EPS -- 0.44 1.16 2.26 2.64 2.88 ------- -------- ------- ------- ------- -------
NOTE: (1) Excludes non-recurring items for fiscal year 2000 [UBS WARBURG LOGO] Section 3: Financial Overview 41 46 CONTRIBUTION ANALYSIS -- SALES "BASE" CASE CONTRIBUTION ANALYSIS -- SALES GROWTH (%)
PROJECTED -------------------------------------------------------- 2000A 2001 2002 2003 2004 2005 ----- ---- ---- ---- ---- ---- Core Bedding (BIAB, Top of Bed & Retail Sheets) (2.3) (0.8) 4.3 5.4 5.0 6.4 Other Bedding (Institutional Sheets, AFI, Freestanding Window, Custom Design) 24.3 12.3 12.2 10.7 7.4 5.7 ---- ---- ---- ---- --- --- TOTAL BEDDING 3.0 2.3 6.3 6.8 5.7 6.2 ---- ---- ---- ---- --- --- Bath (Retail Towels, Springs Rugs, Institutional Towels, Regal Rugs, Shower Curtain, Bath Acc.) 0.8 6.3 9.2 8.4 5.5 4.7 ---- ---- ---- ---- --- --- TOTAL BEDDING & BATH 2.3 3.6 7.3 7.4 5.6 5.7 ---- ---- ---- ---- --- --- Windows 4.0 4.3 4.0 5.0 4.0 4.0 Baby (5.4) 2.8 5.0 5.0 4.0 4.0 Other (Retail & Specialty, Springs Direct, Springs Canada, Int'l & Other) (0.3) (6.3) 7.1 4.5 2.8 2.7 ==== ==== ==== ==== === === TOTAL REVENUE 1.8 2.1 6.6 6.5 4.9 4.9 ==== ==== ==== ==== === ===
"DOWNSIDE" CASE CONTRIBUTION ANALYSIS -- SALES GROWTH (%)
PROJECTED ------------------------------------------------------- 2000A 2001 2002 2003 2004 2005 ----- ---- ---- ---- ---- ---- Core Bedding (BIAB, Top of Bed & Retail Sheets) (2.3) (1.6) 1.0 2.1 2.0 2.8 Other Bedding (Institutional Sheets, AFI, Freestanding Window, Custom Design) 24.3 4.3 5.4 5.0 3.7 3.6 ---- ----- ---- --- --- --- TOTAL BEDDING 3.0 (0.2) 2.1 2.8 2.5 3.0 ---- ----- ---- --- --- --- Bath (Retail Towels, Springs Rugs, Institutional Towels, Regal Rugs, Shower Curtain, Bath Acc.) 0.8 4.2 5.1 3.9 3.6 3.6 ---- ----- ---- --- --- --- TOTAL BEDDING & BATH 2.3 1.3 3.1 3.2 2.9 3.2 ---- ----- ---- --- --- --- Windows 4.0 4.3 2.7 2.5 1.5 1.5 Baby (5.4) 2.9 2.4 2.5 1.9 2.0 Other (Retail & Specialty, Springs Direct, Springs Canada, Int'l & Other) (0.3) (12.5) (0.7) 2.1 1.8 1.8 ==== ===== ==== === === === TOTAL REVENUE 1.8 (0.5) 2.5 2.9 2.5 2.7 ==== ===== ==== === === ===
[UBS WARBURG LOGO] Section 3: Financial Overview 42 47 Contribution Analysis -- EBITDA Margin "BASE" CASE CONTRIBUTION ANALYSIS -- EBITDA MARGIN (%)
ACTUAL PROJECTED ------------ ------------------------------------ 1999 2000 2001 2002 2003 2004 2005 ---- ---- ---- ---- ---- ---- ---- Core Bedding (BIAB, Top of Bed & Retail Sheets) 15.4 15.3 14.1 14.2 15.8 15.8 15.6 Other Bedding (Institutional Sheets, AFI, Freestanding Window, Custom Design) 12.8 11.8 10.0 11.6 13.7 13.8 13.8 ---- ---- ---- ---- ---- ---- ---- TOTAL BEDDING 14.9 14.5 13.0 13.5 15.2 15.2 15.1 ---- ---- ---- ---- ---- ---- ---- Bath (Retail Towels, Springs Rugs, Institutional Towels, Regal Rugs, Shower Curtain, Bath Acc.) 8.0 8.4 11.2 12.4 13.3 13.2 12.9 Windows 11.3 10.5 12.0 13.4 14.6 14.6 14.6 Baby 3.3 (0.6) 7.3 7.2 7.1 7.0 6.8 Other (Retail & Specialty, Springs Direct, Springs Canada, Int'l & Other) 3.5 9.1 8.3 8.7 8.7 8.5 8.3 ==== ==== ==== ==== ==== ==== ==== TOTAL EBITDA MARGIN (BEFORE CONTINGENCY EXPENSE) 10.5 11.2 11.5 12.3 13.5 13.4 13.3 ==== ==== ==== ==== ==== ==== ====
"DOWNSIDE" CASE CONTRIBUTION ANALYSIS -- EBITDA MARGIN (%)
ACTUAL PROJECTED ------------ ------------------------------------ 1999 2000 2001 2002 2003 2004 2005 ---- ---- ---- ---- ---- ---- ---- Core Bedding (BIAB, Top of Bed & Retail Sheets) 15.4 15.3 13.9 14.1 15.1 15.1 15.0 Other Bedding (Institutional Sheets, AFI, Freestanding Window, Custom Design) 12.8 11.8 10.0 10.4 11.4 12.1 12.6 ---- ---- ---- ---- ---- ---- ---- TOTAL BEDDING 14.9 14.5 12.9 13.2 14.1 14.3 14.4 ---- ---- ---- ---- ---- ---- ---- Bath (Retail Towels, Springs Rugs, Institutional Towels, Regal Rugs, Shower Curtain, Bath Acc.) 8.0 8.4 10.8 11.5 12.2 11.8 11.7 Windows 11.3 10.5 11.6 11.3 10.7 10.8 10.7 Baby 3.3 (0.6) 6.8 5.8 5.3 5.2 4.9 Other (Retail & Specialty, Springs Direct, Springs Canada, Int'l & Other) 3.5 9.1 6.0 7.2 6.6 6.6 6.4 ==== ==== ==== ==== ==== ==== ==== TOTAL EBITDA MARGIN (BEFORE CONTINGENCY EXPENSE) 10.5 11.2 11.0 11.4 11.8 11.8 11.7 ==== ==== ==== ==== ==== ==== ====
[UBS WARBURG LOGO] Section 3: Financial Overview 43 48 EBITDA Bridge Analysis-2000A vs. 2005P
"BASE" CASE ($MM) ----------- 2000 Adj 257 Revenue Growth + 70 Variable Contribution Margin Improvement + 40 Fixed Overhead Absorption + 18 Brand Related Expense + 5 Selling and Merchandising + 9 Segment G&A Absorption + 6 Corporate O/H Expense Absorption - 28 Contingency/Expense - 6 Other + 10 2005P -380
"DOWNSIDE" CASE ($MM) --------------- 2000 Adj 257 Revenue Growth + 27 Variable Contribution Margin Improvement - 5 Fixed Overhead Absorption + 21 Brand Related Expense + 5 Selling and Merchandising + 11 Segment G&A Absorption + 6 Corporate O/H Expense Absorption - 28 Contingency/Expense 0 Other + 2 2005P -295
[UBS WARBURG LOGO] Section 3: Financial Overview 44 49 PRELIMINARY VALUATION ANALYSES SECTION 4 [UBS WARBURG LOGO] 50 VALUATION FRAMEWORK - - Springs' valuation involves an appropriate balancing of various valuation methodologies, market benchmarks, perspectives and structures VALUATION METHODOLOGIES Comparable Public Company Analysis - To determine the current public market value and trading multiples of companies similar to Springs, in order to impute a "public market" valuation range Premiums Paid Analysis - To determine the historical stock price premiums paid for public companies over the last few years, in order to compare such premiums to the premium being paid in the Merger Comparable Transaction Analysis - To determine the historical private market value and transaction multiples of companies similar to Springs, in order to impute a "private market" valuation range for Springs Discounted Cash Flow Analysis - To determine the present value of the projected after-tax, free cash flows of Springs utilizing a range of discount rates and terminal value methodologies Leveraged Recapitalization Analysis - To determine the range of feasible purchase prices given a financial buyer's return criteria and typical capital structure Present Value of Hypothetical - To determine the present value of Future Stock Prices Analysis hypothetical future stock prices implied by a range of P/E multiples and utilizing a range of discount rates [UBS WARBURG LOGO] Section 4: Preliminary Valuation Analyses 45 51 VALUATION ANALYSIS AT VARIOUS SHARE PRICES SPRINGS TRANSACTION VALUE AT PROPOSED OFFER PRICE(1) ($MM, EXCEPT PER SHARE) Proposed Transaction Price Per Share 44.00 Total Diluted Shares Outstanding 19.96 -------- 878.2 -------- Less: Option Proceeds (72.7) ======== TRANSACTION EQUITY MARKET VALUE 805.5 ======== Plus: Springs Debt (incl. make whole pmts.) 340.2 Plus: Unfunded Pension Liability 22.8 Plus: Unfunded Deferred Comp. Liability 40.5 Less: Cash and Equivalents (2.9) ======== TRANSACTION ENTERPRISE VALUE 1,206.2 ========
IMPLIED VALUATION MULTIPLES AT VARIOUS SHARE PRICES(2) PER SHARE VALUE ($) 40.00 42.00 44.00 46.00 48.00 50.00 52.00 ----- ----- ----- ----- ----- ----- ----- TEV/LTM Revenue (x) 0.50 0.51 0.53 0.55 0.57 0.58 0.60 TEV/LTM EBITDA (x) 4.4 4.5 4.7 4.9 5.0 5.2 5.3 TEV/LTM Free Cash Flow(3)(x) 6.9 7.1 7.4 7.6 7.9 8.1 8.4 TEV/LTM EBIT (x) 7.6 7.9 8.2 8.4 8.7 9.0 9.3 EMV/LTM Net Income (x) 10.1 10.6 11.1 11.7 12.2 12.8 13.4 ----- ----- ----- ----- ----- ----- -----
NOTES: (1) Based on fiscal year-end 2000 balance sheet (2) Implied multiple based on adjusted fiscal year 2000 results (3) Free cash flow is defined as EBITDA less capital expenditures [UBS WARBURG LOGO] Section 4: Preliminary Valuation Analyses 46 52 Comparable Company Analysis
MARGIN TO REVENUE 2000 CURRENT(1) EQUITY NET ENTERPRISE ---------------- PRICE VALUE DEBT VALUE EBITDA COMPANY TICKER ($) ($MM) ($MM) ($MM) (%) EBIT ------ ----- ----- ---- ----- ------ ---- Burlington Industries, Inc(5) BUR 2.55 137.0 592.4 729.4 6.0 0.9 Crown Crafts, Inc CRW 0.47 4.0 90.6 94.6 nm nm Dan River DRF 2.37 51.6 365.6 417.2 13.9 7.8 Galey & Lord GNL 4.20 50.4 525.0 575.4 10.9 6.5 Mohawk Industries MHK 29.59 1,564.0 300.2 1,864.2 12.3 9.7 Westpoint WXS 9.32 462.6 1,477.7 1,940.3 17.1 12.6 12.0 Mean 426.5 551.8 978.3 12.0 7.5 Median 51.6 365.6 575.4 12.3 7.8 Harmonic Mean 17.3 253.9 317.3 17.1 12.6 High 1,564.0 1,477.7 1,940.3 6.0 0.9 Low 4.0 90.6 94.6 10.6 3.2 Springs Ind.(2/16/01) SMI 36.10 651.7 400.7 1,052.4 Springs Ind. @ 44/sh SMI 44.00 796.7 400.7 1,197.4
ENTERPRISE VALUE TO: 2000(2) P/E 2000 ------------------------------ --------------- ---------------- SALES EBITDA EBIT FCF(3) 2000(2) 2001(4) EBITDA EBIT COMPANY (X) (X) (X) (X) (X) (X) (%) (%) ----- ------ ---- ------ ------- ------- ------ ---- Burlington Industries, Inc(5) 0.45 7.5 nm nm nm 21.8 6.0 0.9 Crown Crafts, Inc 0.33 nm nm nm nm nm nm nm Dan River 0.63 4.5 8.0 7.1 4.8 13.9 13.9 7.8 Galey & Lord 0.59 5.4 9.0 5.6 nm 5.1 10.9 6.5 Mohawk Industries 0.57 4.7 5.9 5.7 9.6 9.7 12.3 9.7 Westpoint 1.07 6.3 8.5 8.3 7.0 6.3 17.1 12.6 Mean 0.64 5.2 7.8 6.7 7.1 8.8 13.5 9.2 Median 0.59 5.0 8.2 6.4 7.0 8.0 13.1 8.8 Harmonic Mean 0.56 5.1 7.6 6.5 6.6 7.6 13.2 8.6 High 1.07 6.3 9.0 8.3 9.6 13.9 17.1 12.6 Low 0.33 4.5 5.9 5.6 4.8 5.1 10.9 6.5 Springs Ind.(2/16/01) 0.46 4.1 7.1 6.4 9.1 9.2 11.3 6.5 Springs Ind. @ 44/sh 0.53 4.7 8.1 7.3 11.1 11.2 11.3 6.5
NOTES: (1) Closing stock prices as of March 16, 2001 (2) Latest twelve months ending December 31, 2000 (3) Free cash flow (FCF) is defined as EBITDA less capital expenditures (4) Source: I/B/E/S (5) Burlington Industries is not included in the summary calculation [UBS WARBURG LOGO] Section 4: Preliminary Valuation Analyses 47 53 PREMIUMS PAID ANALYSES-TWO YEAR HISTORICAL - - THE FOLLOWING ANALYSIS SHOWS THE PREMIUMS PAID IN CONTROL PRECEDENT TRANSACTIONS(1)
PREMIUM TO STOCK PRICE (%) ------------------------------------------ ONE DAY ONE WEEK ONE MONTH NUMBER OF DEALS PRIOR PRIOR PRIOR --------------- ----- ----- ----- Deals Completed in 2001 YTD Cash Deals 33 36.7 41.2 53.8 Other Deals 52 29.4 41.4 38.0 All Deals 85 29.7 41.2 47.0 Deals Completed in 2000 Cash Deals 287 23.6 32.7 38.1 Other Deals 381 27.8 34.5 42.4 All Deals 668 27.0 34.0 41.4 Deals Completed in 1999 Cash Deals 303 22.7 28.9 34.7 Other Deals 344 24.4 30.1 38.6 All Deals 647 24.2 29.8 37.2 Combined Averages Cash Deals 623 27.7 34.3 42.2 Other Deals 777 27.2 35.3 39.7 All Deals 1,400 27.0 35.0 41.9 Implied Premium of Proposed Offer @ $44.00/share(2)(%) 21.9 21.3 36.2 @ $46.00/share(2)(%) 27.4 26.8 42.4 @ $48.00/share(2)(%) 33.0 33.0 48.6 @ $50.00/share(2)(%) 38.5 38.5 54.8 @ $52.00/share(2)(%) 44.0 44.0 60.9
NOTES: (1) Based on US Transactions from 1/1/99 to 3/14/01; $200m - $2,000m deal size range (2) Premiums calculated based on Springs' closing stock prices one day, one week, and one month prior to announcement ($36.10, $36.28, and $32.31, respectively) [UBS WARBURG LOGO] Section 4: Preliminary Valuation Analyses 48 54 PREMIUMS PAID ANALYSES -- 10 YEAR HISTORICAL - - UBS WARBURG ANALYZED PREMIUMS PAID IN CONTROL AND MINORITY CLOSE-OUT PRECEDENT TRANSACTIONS OVER A TEN YEAR PERIOD
AVERAGE FINAL STOCK PRICE PREMIUMS IN CONTROL TRANSACTIONS BY CONSIDERATION (1),(2) ------------------------------------- 1 DAY 1 WEEK 1 MONTH ----- ------ ------- Cash (383 Deds) 33.7% 37.4% 40.9% Stock (79 Deds) 25.8% 29.2% 30.6% Both (64 Deds) 29.1% 35.4% 41.3% All (526 Deds) 31.9% 35.9% 39.4% Springs @ $44/share 21.9% 21.3% 36.2%
AVERAGE FINAL STOCK PRICE PREMIUMS IN MINORITY CLOSE-OUT TRANSACTIONS BY CONSIDERATION (1) ------------------------------------- 1 DAY 1 WEEK 1 MONTH ----- ------ ------- Cash (101 Deds) 27.8% 29.1% 30.2% Stock (31 Deds) 17.7% 19.4% 22.7% Both (6 Deds) 29.6% 29.4% 26.9% All (138 Deds) 25.6% 26.9% 28.4% Springs @ $44/share 21.9% 21.3% 36.2%
NOTES: (1) Data collected from precedent transactions announced from January 1990 through February 2001 (2) Control transactions are transactions in which the acquiror owned greater than 50% after the transaction post-closing [UBS WARBURG LOGO] Section 4: Preliminary Valuation Analyses 49 55 COMPARABLE TRANSACTION ANALYSIS
ONE ONE ONE EQUITY 3 YEAR DAY WEEK MONTH ENTERPRISE MARKET LTM REVENUE EBITDA FCF EBIT DATE PREMIUM PREMIUM PREMIUM VALUE VALUE REVENUE GROWTH MARGIN MARGIN MARGIN ACQUIROR/TARGET ANNC. (%) (%) (%) ($MM) ($MM) ($MM) (%) (%) (%) (%) - --------------- ---- ------- ------- ------- ----- ----- ------- ------ ------ ------ ------ Berkshire Hathaway/ 9/6/00 18.8 23.8 26.7 3,277.1 2,393.9 4,095.7 7.2 13.1 9.6 7.5 Shaw Industries Investor Group/ 10/6/99 77.9 75.4 58.2 106.4 66.1 117.6 27.6 15.1 12.5 11.5 Conso International GCW Southeast Partners/ 8/30/99 65.5 84.6 50.0 155.5 32.5 267.6 (6.1) 9.9 7.4 2.6 Johnston Industries Dan River/ 6/29/98 19.5 22.2 38.9 267.3 172.9 242.9 (20.1) 6.0 (7.5) 3.2 Bibb Company Pillowtex Corp/ 9/11/97 1.5 8.6 30.5 912.5 406.9 1,100.1 1.3 7.1 1.8 3.8 Fieldcrest Cannon, Inc Springs Industries/ 2/6/95 na na na 143.5 118.0 272.1 3.8 5.4 2.1 1.3 Dundee Mills, Inc Mean 36.6 42.9 40.8 810.4 531.7 1,016.0 2.3 9.4 4.3 5.0 Median 19.5 23.8 38.9 211.4 145.5 269.8 2.6 8.5 4.7 3.5 Harmonic Mean 6.2 21.9 37.5 214.7 95.2 283.2 nm 8.1 nm 3.1 Low 1.5 8.6 26.7 106.4 32.5 117.6 (20.1) 5.4 (7.5) 1.3 High 77.9 84.6 58.2 3,277.1 2,393.9 4,095.7 27.6 15.1 12.5 11.5 Heartland/Springs 2/20/01 21.9 21.3 28.5 1,206.2 805.5 2,275.1 2.5 11.3 7.2 6.5 Industries @ $44 per share Investor Group/ 4/24/00 27.5 30.4 28.5 2,113.8 649.2 1,883.3 6.7 18.7 10.8 14.2 WestPoint Stevens
TOTAL ENTERPRISE VALUE EQUITY MULTIPLES MARKET NET ------------------------------- VALUE/ INCOME LTM LTM LTM LTM NET MARGIN REVENUE EBITDA FCF EBIT INCOME ACQUIROR/TARGET (%) (X) (X) (X) (X) (X) - --------------- ------ ------- ------ --- ---- ------ Berkshire Hathaway/ 4.4 0.80 6.1 8.3 10.7 13.3 Shaw Industries Investor Group/ 4.9 0.90 6.0 7.2 7.9 11.5 Conso International GCW Southeast Partners/ (1.1) 0.58 5.9 7.9 22.6 nm Johnston Industries Dan River/ (0.4) 1.10 18.4 nm 33.9 nm Bibb Company Pillowtex Corp/ 1.5 0.83 11.7 47.3 21.8 23.9 Fieldcrest Cannon, Inc Springs Industries/ (0.5) 0.53 9.8 25.4 40.7 nm Dundee Mills, Inc Mean 1.5 0.79 9.6 19.2 22.9 16.2 Median 0.6 0.81 8.0 8.3 22.2 13.3 Harmonic Mean nm 0.74 8.1 11.2 16.5 14.7 Low (1.1) 0.53 5.9 7.2 7.9 11.5 High 4.9 1.10 18.4 47.3 40.7 23.9 Heartland/Springs 3.2 0.53 4.7 7.4 8.2 11.1 Industries @ $44 per share Investor Group/ 5.5 1.12 6.0 10.4 7.9 6.2 WestPoint Stevens
NOTE: (1) WestPoint transaction was terminated on 5/19/00 [UBS WARBURG LOGO] Section 4: Preliminary Valuation Analyses 50 56 DISCOUNTED CASH FLOW ANALYSIS - - KEY ASSUMPTIONS - - Discounted cash flow analyses incorporate the Company's projected operating performance for the period 2001 -- 2005. Projections are based on the Company's "Base" Case and "Downside" Case - - Projections do not include acquisitions or plant closings - - Tax rate assumed at 38% - - Discount rates (weighted average cost of capital) assumed at 8.75% to 12.75% - - Exit EBITDA multiples are consistent with the comparable public company analysis and the results are summarized below:
IMPLIED VALUATION AT VARIOUS EXIT MULTIPLES ($ PER SHARE) RELEVANT RANGE IMPLIED SHARE VALUE DERIVED RANGE "BASE" CASE EBITDA 4.0x - 6.0x 49.80-89.58 EBIT 6.0x - 8.0x 52.54-69.46 FCF 6.0x - 8.0x 53.03-85.05 Perpetuity Growth 0.0% - 2.0% 41.40-95.11 $45.00-$85.00 "DOWNSIDE" CASE EBITDA 4.0x - 6.0x 36.48-67.47 EBIT 6.0x - 8.0x 32.16-43.17 FCF 6.0x - 8.0x 34.23-56.50 Perpetuity Growth 0.0% - 2.0% 30.00-71.85 $33.00 - $63.00
[UBS WARBURG LOGO] Section 4: Preliminary Valuation Analyses 51 57 Typical Financial Sponsor Investment Criteria - - A leveraged recapitalization is a transaction structure designed to avoid a step-up in the accounting basis of an acquired company (as reflected in the Company's books), thereby avoiding the incurrence of incremental goodwill amortization and asset depreciation - - In a leveraged recapitalization transaction, a substantial shareholder group partners with a financial sponsor to repurchase the remaining public shares of the Company - - Following the recapitalization, the Company is taken private by the newly formed shareholder group, i.e., shareholders "rolling over" their equity and the financial sponsor investing new equity - - Financial buyers and their debt sources typically require the following parameters (depending upon market conditions and target industry): Internal Rate of Return: Greater than 25% Total Debt/EBITDA: No more than 3.0x - 4.5x in Year 1 EBITDA/Interest Expense: No less than 2.0x in year 1 Cumulative Senior Debt Paydown: No less than 50% by Year 5
[UBS WARBURG LOGO] Section 4: Preliminary Valuation Analyses 52 58 Springs Leveraged Recapitalization Issues - - Large capital expenditures can limit the use of leverage to recapitalize the Company - - Reduced leverage would pressure returns to financial sponsor - - Projected or required returns limit flexibility in shareholder buyout price - - Acceptable rates of return may rely upon a recovery or expansion in industry valuation multiples and achievement of projected financial results - - Industry growth rates, profitability and other issues may pressure exit valuation - - Reduced equity capital and increased leverage may hinder the ability to effect future acquisitions or grow organically [UBS WARBURG LOGO] Section 4: Preliminary Valuation Analyses 53 59 LEVERAGED RECAPITALIZATION ANALYSIS KEY ASSUMPTIONS Leveraged recapitalization analyses were generated by using the "Base" Case projections and "Downside" Case projections. In addition to the assumptions inherent in the projections, the following additional assumptions were made: - - A purchase price per share range from $42.00 to $50.00, implying an equity value range from $766.1 to $925.4 and a total enterprise value range from $1,166.8 to $1,326.1 - - In order to satisfy coverage requirements and financing market constraints, the following debt structure and interest rates were assumed in the $44.00 per share analysis: ESTIMATED SOURCE
Amount ($mm) ($) - -------------------------------------------------- Sr. Bank Term Revolver 167.5 Receivables Purchasing Facility 0.0 Sr. Bank Term Loan 200.0 Sr. Bank Term Loan 300.0 Assumed Debt 28.1 - -------------------------------------------------- Total Debt 695.6 - -------------------------------------------------- Heartland Equity 225.0 Shareholder Rollover 276.3 - -------------------------------------------------- Total Equity 501.3 ================================================== TOTAL SOURCES 1,196.9 ==================================================
ESTIMATED USES
Amount ($mm) ($) - ------------------------------------------------------------------------- Purchase of Springs Equity (including rollover equity) 805.5 Repay Indebtedness 308.9 Assumed Debt 28.1 Excess Cash (working capital) 14.3 Fees & Expenses 40.0 ========================================================================= TOTAL USES 1,196.9 =========================================================================
- - Recapitalization accounting was assumed (no push-down of goodwill) - - Assumed closing date of June 30, 2001 - - Management options for 10% of the Company - - Financing from the term revolver was used instead of the receivables purchasing facility - - Investors are assumed to exit in 4.5 years (2005) at an EBITDA multiple of 5.0x [UBS WARBURG LOGO] Section 4: Preliminary Valuation Analyses 54 60 LEVERAGED RECAPITALIZATION ANALYSIS SUMMARY IRRs AT VARIOUS PURCHASE PRICES Assuming Approximately 42.0% Equity Investment (including rollover equity) and an EBITDA Exit Multiple of 5.0x
INTERNAL RATE OF RETURN PURCHASE PRICE ----------------------- PER SHARE BASE DOWNSIDE - -------------- --------- ------------ $44.00 27.6% 15.7% $46.00 26.2% 14.2% $48.00 24.8% 12.7% $50.00 23.5% 11.2%
LEVERAGE AND COVERAGE STATISTICS -- "BASE" CASE
PURCHASE PRICE PER SHARE ------------------------------------------ $44.00 $46.00 $48.00 $50.00 - ---------------------------------------------------------------------- 2000 Pro Forma: Total Debt/EBITDA 2.7x 2.8x 2.9x 3.0x EBITDA/Interest Expense 4.3x 4.1x 4.0x 3.9x % Debt Paydown by 2005 55.6% 53.1% 50.8% 48.5%
[UBS WARBURG LOGO] Section 4: Preliminary Valuation Analyses 55 61 PRESENT VALUE OF HYPOTHETICAL FUTURE STOCK PRICES(1) "BASE" CASE [BAR CHART]
Base Case 2001P 2002P 2003P 2004P 2005P 8.0x 33.11 37.26 43.91 43.02 41.49 9.0x 37.17 41.71 49.07 47.97 46.15 10.0x 41.23 46.16 54.23 52.91 50.81
"DOWNSIDE" CASE [BAR CHART]
Downside 2001P 2002P 2003P 2004P 2005P 8.0x 29.79 29.42 30.08 28.61 27.32 9.0x 33.44 32.89 33.52 31.76 30.21 10.0x 37.09 36.36 36.95 34.9 33.1
NOTE: (1) Hypothetical future stock prices and dividend stream discounted at 12.5% (levered cost of equity) [UBS WARBURG LOGO] Section 4: Preliminary Valuation Analyses 56 62 PRESENT VALUE ANALYSIS OF HYPOTHETICAL FUTURE STOCK PRICE "BASE" CASE
2000-2005 ($ PER SHARE) 2001P 2002P 2003P 2004P 2005P CAGR - ----------------------------------------------------------------------------------------------------------- Projected Springs EPS 4.31 5.31 6.93 7.47 7.92 14.8% HYPOTHETICAL FUTURE STOCK PRICE P/E Multiple: 8.0x 34.48 42.48 55.44 59.76 63.36 9.0x 38.79 47.79 62.37 67.23 71.28 10.0x 43.10 53.10 69.30 74.70 79.20 FUTURE DIVIDENDS PER SHARE(1) 1.27 1.27 1.27 1.27 1.27 PRESENT VALUE OF HYPOTHETICAL STOCK PRICE(2) P/E Multiple: 8.0x 33.11 37.26 43.91 43.02 41.49 9.0x 37.17 41.71 49.07 47.97 46.15 10.0x 41.23 46.16 54.23 52.91 50.81
NOTES: (1) Assumes constant per share dividend policy (2) Hypothetical future stock prices and dividend stream discounted at 12.5% (levered cost of equity) [UBS WARBURG LOGO] Section 4: Preliminary Valuation Analyses 57 63 PRESENT VALUE ANALYSIS OF HYPOTHETICAL FUTURE STOCK PRICE "DOWNSIDE" CASE
2000-2005 ($ PER SHARE) 2001P 2002P 2003P 2004P 2005P CAGR - ----------------------------------------------------------------------------------------------------------- Projected Springs EPS 3.87 4.14 4.61 4.75 4.91 4.3% HYPOTHETICAL FUTURE STOCK PRICE P/E Multiple: 8.0x 30.96 33.12 36.88 38.00 39.28 9.0x 34.83 37.26 41.49 42.75 44.19 10.0x 38.70 41.40 46.10 47.50 49.10 Dividends Per SHARE(1) 1.27 1.27 1.27 1.27 1.27 PRESENT VALUE OF HYPOTHETICAL STOCK PRICE(2) P/E Multiple: 8.0x 29.79 29.42 30.08 28.61 27.32 9.0x 33.44 32.89 33.52 31.76 30.21 10.0x 37.09 36.36 36.95 34.90 33.10
NOTES: (1) Assumes constant per share dividend policy (2) Hypothetical future stock prices and dividend stream discounted at 12.5% (levered cost of equity) [UBS WARBURG LOGO] Section 4: Preliminary Valuation Analyses 58 64 COMPARABLE COMPANY DESCRIPTIONS APPENDIX A [UBS WARBURG LOGO] 65 COMPARABLE COMPANY DESCRIPTIONS
COMPARABLE COMPANY DESCRIPTIONS - -------------------------------------------------------------------------------- Burlington Industries, Burlington Industries is a diversified manufacturer Inc. of soft goods for apparel and interior furnishings. It is a developer, marketer and manufacturer of fabrics and other textile products used in a variety of apparel and interior furnishings end uses. Burlington is organized in three industry segments: Performance Wear, Casual Wear and Interior Furnishings. Crown Crafts, Inc. Crown Crafts, Inc. operates directly and indirectly through its subsidiaries, in two principal business segments within the textile industry: Adult Home Furnishing and Juvenile Products, and Infant Products. Adult Home Furnishing and Juvenile Products consists of Bedroom Products (adult comforters and accessories), Throws and Decorative Home Accessories (primarily jacquard-woven throws in cotton, acrylic, rayon or chenille), and similar products targeted to the juvenile segment. The Infant Products segment consists of four main business segments: infant bedding, bibs, infant soft goods and accessories. Sales are generally made directly to retailers, department and specialty stores, mass merchants, large chain stores and gift stores. These products are marketed under a variety of company-owned trademarks, as unbranded merchandise and with customers' private labels in three product groups: bedroom products, throws and decorative home accessories, and infant and juvenile products. Dan River, Inc. Dan River, Inc. is a designer, manufacturer and marketer of products for the home fashions and apparel fabrics markets. Dan River designs, manufactures and markets a line of value-added home fashion products consisting of bedroom furnishings such as comforters, sheets, pillowcases, shams, bed skirts, decorative pillows and draperies. The company also designs, manufactures and markets a range of high quality woven cotton and cotton-blend apparel fabrics. Dan River also manufactures and sells specialty engineered yarns and woven fabrics for use in making high-pressure hoses and other industrial products.
[UBS WARBURG LOGO] Appendix A: Comparable Company Descriptions 60 66 COMPARABLE COMPANY DESCRIPTIONS (CONTINUED)
COMPARABLE COMPANY DESCRIPTIONS - -------------------------------------------------------------------------------- Galey & Lord, Inc. Galey & Lord, Inc. was incorporated in Delaware in 1987 for the purpose of acquiring substantially all of the assets of the Blends Apparel and Prints divisions of Burlington Industries, Inc. in February 1988. The company is a global manufacturer of textiles for sportswear, including cotton casuals, denim and corduroy, and is an international manufacturer of work wear fabrics. The company also is a manufacturer of dyed and printed fabrics for use in home fashions. WestPoint Stevens Inc. WestPoint Stevens Inc. is the successor corporation to West Point-Pepperell, Inc. through a series of mergers occurring in December 1993. The company is engaged in the manufacture, marketing and distribution of bed and bath home fashions products. The company manufactures and markets home fashions consumer products for distribution to chain and department stores, mass merchants and specialty stores. Home fashions products are manufactured and distributed under its owned trademarks and pursuant to various licensing agreements. WestPoint Stevens manufactures and markets a broad range of bed and bath products, including: decorative sheets, designer sheets, sheets, accessories and towels for the hospitality industry; blankets; private label sheets, accessories and towels.
[UBS WARBURG LOGO] Appendix A: Comparable Company Descriptions 61 67 COMPARABLE TRANSACTION DESCRIPTIONS APPENDIX B [UBS WARBURG LOGO] 68 COMPARABLE TRANSACTION DESCRIPTION
TARGET COMPANY DESCRIPTIONS - -------------------------------------------------------------------------------- Shaw Industries, Inc. Shaw Industries, Inc. is a global carpet manufacturer. Shaw designs and manufactures approximately 1,600 styles of tufted and woven carpet for residential and commercial use under the PHILADELPHIA, TRUSTMARK, CABIN CRAFTS, SHAW COMMERCIAL CARPETS, STRATTON, NETWORX, SHAWMARK, EVANS BLACK, SALEM, SUTTON, KOSSET, CROSSLEY, ABINGDON, REDBOOK, MINSTER, INVICTA and TERZA trade names and under certain private labels. The company's manufacturing operations are fully integrated from the processing of yarns through the finishing of carpet. The company's carpet is sold in a range of prices, patterns, colors and textures with the majority of its sales in the medium to high retail price range. Shaw sells its products to retailers, distributors and commercial users throughout the United States, Canada, Mexico, Australia and the United Kingdom and, to a lesser degree, exports to additional overseas markets. Conso International Conso International Corporation is the world's Corporation largest manufacturer of decorative trimmings for the home furnishings industry and, through its subsidiary, Simplicity Pattern Co., Inc. ("Simplicity"), is a producer of patterns and other instructional material for home sewing of apparel, home decorating, and crafts. The company, including its British Trimmings ("BT") subsidiary, produces and sells a range of knitted and woven fringes, decorative cords, tasseled accessories, jacquard and other woven braids, and apparel trims, as well as sewing tapes and supplies. Conso also distributes window accoutrements and other home furnishings accessories. Through its salesforce, the Company's products are marketed to manufacturers, distributors and retailers. Manufacturing facilities are located in the United States, the United Kingdom, Mexico, and India. Johnston Industries The company is a designer, manufacturer and marketer of finished and unfinished (greige) cotton, synthetic and blended fabrics used in a broad range of industrial and consumer applications. The company's products are sold to a number of "niche" markets, including segments of the home furnishings, hospitality, industrial, automotive and specialty markets. In addition, the company reprocesses and markets waste textile fiber and off-quality fabrics for sale to a range of specialty markets. The company also manufactures fabrics used in engineered composite materials serving mainly the recreation and construction markets. The company conducts its operations through four business units: (i) the Greige Fabrics Division, (ii) the Finished Fabrics Division, (iii) the Fiber Products Division, and (iv) JICR.
[UBS WARBURG LOGO] Appendix B: Comparable Transaction Descriptions 63 69 COMPARABLE TRANSACTION DESCRIPTION (CONTINUED)
TARGET COMPANY DESCRIPTIONS - -------------------------------------------------------------------------------- Bibb Company The Bibb Company, is a domestic manufacturer and marketer of textile products, principally sheets, pillowcases and other bedding accessories for use in the home, hotels, hospitals, and others serving the hospitality market. The company also manufactures specially treated and engineered textile products used primarily in producing high-pressure automobile hoses and conveyor belts. Fieldcrest Cannon, Inc. Fieldcrest operates a single segment business in the textile industry and is principally involved in the manufacture and sale of home furnishing products. Fieldcrest designs, manufactures and markets a broad range of household textile products consisting of towels, sheets, comforters, bath rugs and furniture coverings. These products are marketed primarily by the company's own sales and marketing staff and distributed nationally to customers for ultimate retail sale. Customers consist mainly of department stores, chain stores, mass merchants, specialty home furnishing stores, catalog warehouse clubs and other retail outlets, and institutional, government and contract accounts. Dundee Mills, Dundee Mills, Incorporated, is a manufacturer of Incorporated towels, infant and toddler bedding, knitted infant apparel, and baby and healthcare products. The business of Dundee is divided into three primary divisions: terry towel products, baby and healthcare products, and broadcloth fabric.
[UBS WARBURG LOGO] Appendix B: Comparable Transaction Descriptions 64 70 HEARTLAND TRANSACTION SUMMARIES APPENDIX C [UBS WARBURG LOGO] 71 HEARTLAND TRANSACTION SUMMARIES - - LEVERAGED RECAPITALIZATION OF MASCOTECH, INC. Company Description: MascoTech, Inc. manufactures and supplies metal formed components used in a variety of applications. The company's products are used in drivetrain applications, as well as specialty fasteners, towing systems, specialty container products, and other industrial products. MascoTech was a publicly listed company on the New York Stock Exchange. Date Announced: August 2, 2000 Date Completed: November 29, 2000 Terms: Cash payment of $16.90/share based on 44.8m shares + additional amount based on proceeds on the disposition of Saturn Electronics & Engineering Inc. and net debt of $1.38 billion Value of Transaction: $2.1 billion Other Details: MascoTech, Simpson Industries, and GMTI combined to operate as one company called Metaldyne Corporation in January 2001
VALUATION ANALYSIS
ENTERPRISE VALUE (LTM) --------------------------------- REVENUE EBITDA EBIT - ------------------------------------------------------ 1.19x 6.6x 9.1x
[UBS WARBURG LOGO] Appendix C: Heartland Transaction Summaries 66 72 HEARTLAND TRANSACTION SUMMARIES (CONTINUED) - - ACQUISITION OF SIMPSON INDUSTRIES, INC. Company Description: Simpson Industries, Inc. supplies powertrain and chassis products to original equipment manufacturers in the worldwide automotive and medium and heavy duty diesel engine markets. Simpson's products are focused in three groups: noise, vibration & harshness; wheel-end and suspension; and modular engine assemblies. Simpson's manufacturing facilities are located in the United States, Canada, Mexico, Brazil, England, India, France, Spain and South Korea. Simpson Industries, Inc. was a publicly listed company on the NASDAQ. Date Announced: September 29, 2000 Date Completed: December 18, 2000 Terms: $13.00/share in cash based on 18.8mm shares + net debt of $121 million Value of Transaction: $354.1 million Other Details: MascoTech, Simpson Industries, and GMTI combined to operate as one company called Metaldyne Corporation in January 2001
VALUATION ANALYSIS
ENTERPRISE VALUE (LTM) --------------------------------- REVENUE EBITDA EBIT - ------------------------------------------------------ 0.65x 5.3x 9.1x ----- ---- ----
[UBS WARBURG LOGO] Appendix C: Heartland Transaction Summaries 67 73 HEARTLAND TRANSACTION SUMMARIES (CONTINUED) - - ACQUISITION OF GLOBAL METAL TECHNOLOGIES, INC. (GMTI) Company Description: GMTI is a major supplier of aluminum die cast components to the automotive industry with sales in excess of $230 million. The Company is a major supplier of transmission, engine and chassis components with four die casting operations, two tool shops and one machining operation. GMTI Inc. one of the largest automotive suppliers utilizing die cast components in North America. GMTI was acquired from the Pritzker Family & TMB Industries. Date Announced: Undisclosed Date Completed: January 1, 2001 Terms: Undisclosed Value of Transaction: Undisclosed Other Details: MascoTech, Simpson Industries, and GMTI combined to operate as one company called Metaldyne Corporation in January 2001
[UBS WARBURG LOGO] Appendix C: Heartland Transaction Summaries 68 74 HEARTLAND TRANSACTION SUMMARIES (CONTINUED) ACQUISITION OF COLLINS & AIKMAN CORPORATION Company Description: Collins & Aikman Corporation supplies automotive interior systems, including textile and plastic products, acoustics, and convertible top systems. The Company operates facilities world-wide, including automotive design, development, and testing centers, as well as manufacturing centers for automotive trim products. Collins & Aikman Corporation is a publicly traded company on the New York Stock Exchange. Date Announced: January, 12, 2001 Date Completed: Pending result of shareholder vote on March 6, 2001 Terms: Heartland purchased 25 million newly issued shares for $5/share, and 27 million shares from Blackstone Capital Partners L.P. and Wasserstein Perella Partners L.P. Value of Transaction: $260 million in cash Other Details: Heartland will own approximately 60% of the outstanding shares of Collins & Aikman
VALUATION ANALYSIS
ENTERPRISE VALUE (LTM) --------------------------------- REVENUE EBITDA EBIT - ------------------------------------------------------ 0.59x 5.3x 8.1x
[UBS WARBURG LOGO] Appendix C: Heartland Transaction Summaries 69 EX-99.C.6 7 y51534ex99-c_6.txt PRELIMINARY DRAFT MATERIALS 1 Exhibit (c)(6) [UBS WARBURG LOGO] STRICTLY PRIVATE AND CONFIDENTIAL PROJECT MILL PRELIMINARY VALUATION ANALYSIS APRIL 2, 2001 APRIL 2001 PRELIMINARY DRAFT -- FOR DISCUSSION PURPOSES ONLY 2 VALUATION ANALYSIS AT VARIOUS SHARE PRICES - -------------------------------------------------------------------------------- SPRINGS TRANSACTION VALUE AT PROPOSED OFFER PRICE(1)
($MM, EXCEPT PER SHARE) - -------------------------------------------------------------------------------- Proposed Transaction Price Per Share 44.00 Total Diluted Shares Outstanding 19.96 - -------------------------------------------------------------------------------- 878.2 - -------------------------------------------------------------------------------- Less: Option Proceeds (72.7) ================================================================================ TRANSACTION EQUITY MARKET VALUE 805.5 ================================================================================ Plus: Springs Debt (incl. make whole pmts.) 340.2 Plus: Unfunded Pension Liability 22.8 Plus: Unfunded Deferred Comp. Liability 40.5 Less: Cash and Equivalents (2.9) ================================================================================ TRANSACTION ENTERPRISE VALUE 1,206.2 ================================================================================
IMPLIED VALUATION MULTIPLES AT VARIOUS SHARE PRICES(2) - --------------------------------------------------------------------------------
PER SHARE VALUE ($) 40.00 42.00 44.00 46.00 48.00 50.00 52.00 55.00 - ------------------------------------------------------------------------------------------------ TEV/LTM Revenue(x) 0.50 0.51 0.55 0.55 0.57 0.58 0.60 0.63 TEV/LTM EBITDA(x) 4.4 4.5 4.7 4.8 5.0 5.2 5.3 5.5 TEV/LTM Free Cash Flow(3)(x) 6.9 7.1 7.4 7.6 7.9 8.1 8.3 8.7 TEV/LTM EBIT(x) 7.6 7.9 8.2 8.4 8.7 9.0 9.3 9.7 EMV/LTM Net Income(x) 10.1 10.6 11.1 11.7 12.2 12.8 13.3 14.2 - ------------------------------------------------------------------------------------------------
NOTES (1) Based on fiscal year-end 2000 balance sheet (2) Implied multiple based on adjusted fiscal year 2000 results (3) Free cash flow is defined as EBITDA less capital expenditures [UBS WARBURG LOGO] 1 3 PROJECT MILL - -------------------------------------------------------------------------------- COMPARABLE COMPANY ANALYSIS
FY2000 1998-2000 5-year Margins ------------ Revenue Growth Current(1) Equity Net Enterprise EBITDA EBIT CAGR Rate(3) Company Ticker Price Value Debt Value (%) (%) (%) (%) - -------------------------------------------------------------------------------------------------------- Burlington Industries BUR 2.65 142.3 653.1 795.5 6.0 0.9 (10.2) (30.3) Crown Crafts, Inc. CRW 0.39 3.4 90.6 93.9 nm nm 0.1 (10.9) Dan River DRF 1.90 41.4 351.2 392.6 13.9 7.8 13.2 (2.4) Galey & Lord GNL 2.25 26.9 507.2 534.7 10.9 6.5 3.0 (22.6) Mohawk Industries MHK 28.08 1,471.2 589.8 2,061.0 12.3 9.7 8.9 40.6 Westpoint WXS 9.00 445.2 1,433.2 1,878.4 17.1 12.6 1.0 14.8 Mean 355.1 604.2 959.2 12.0 7.5 2.7 (1.8) Median 91.8 548.5 664.8 12.3 7.8 2.0 (6.7) Harmonic Mean 16.3 303.2 346.0 10.6 3.2 na na High 1,471.2 1,433.2 2,061.0 17.1 12.6 13.2 40.6 Low 3.4 90.6 93.9 6.0 0.9 (10.2) (30.3) Springs Industries SMI 36.10 551.7 393.6 1,045.3 11.3 6.5 2.1 2.5 Springs Industries SMI 44.00 805.5 400.7 1,206.2 11.3 6.5 2.1 2.5 Springs Industries SMI 50.00 925.4 400.7 1,326.1 11.3 6.5 2.1 2.5 Springs Industries SMI 55.00 1,025.4 400.7 1,426.1 11.3 6.5 2.1 2.5 - --------------------------------------------------------------------------------------------------------
Enterprise Value to 2000E(2) P/E --------------------------- ------------ Sales EBITDA EBIT FCF(4) 2000E 2001E Company (x) (x) (x) (x) (x) (x) - -------------------------------------------------------------------- Burlington Industries 0.49 8.2 nm nm nm 22.6 Crown Crafts, Inc. 0.33 nm nm nm nm nm Dan River 0.59 4.2 7.6 6.7 3.9 11.2 Galey & Lord 0.55 5.0 8.3 6.1 nm 2.7 Mohawk Industries 0.63 5.7 6.50 6.3 8.8 9.2 Westpoint 1.03 6.0 8.2 8.0 6.7 6.1 Mean 0.60 5.7 7.6 6.8 6.5 10.4 Median 0.57 5.2 7.9 6.5 6.7 9.2 Harmonic Mean 0.54 5.5 7.6 6.7 5.8 6.5 High 1.03 8.2 8.3 8.0 8.8 22.6 Low 0.33 4.25 6.5 6.1 3.9 2.7 Springs Industries 0.46 4.3 7.1 6.4 9.1 9.2 Springs Industries 0.53 4.7 8.2 7.4 11.1 11.2 Springs Industries 0.58 5.2 9.0 8.? 12.8 12.7 Springs Industries 0.62 5.5 9.7 8.7 14.2 14.0 - --------------------------------------------------------------------
NOTES: 1 Closing Stock Prices as of March 30, 2001 2 Latest twelve months ending December 31, 2000 3 Source: I/B/E/S 5 year EPS growth estimate 4 Free cash flow (FCF) is defined as EBITDA less capital expenditures [UBS WARBURG LOGO] 2 4 PROJECT MILL (CONTINUED) - -------------------------------------------------------------------------------- COMPARABLE TRANSACTION ANALYSIS
One Day One One 3-year LTM LTM LTM Prior Week Month Total Equity Revenue EBITDA FCF EBIT Date Premium Premium Premium Enterprise Market LTM Growth Margin Margin Margin Acquiror/Target Announced (%) (%) (%) Value Value Revenue (%) (%) (%) (%) - --------------------------------------------------------------------------------------------------------------------------- GCW Southeast Partners/ 8/30/99 65.5 84.6 50.0 155.5 32.5 267.6 (6.1) 9.9 7.4 2.6 Johnston Industries Dan River/ 6/29/98 19.5 22.2 38.9 267.3 172.9 242.9 (20.1) 6.0 (7.5) 3.2 Bibb Company Pillowtex Corp/ 9/21/97 1.5 8.6 30.5 912.5 406.9 1100.1 1.3 7.1 1.8 3.8 Fieldcrest Cannon Inc Springs Industries/ 2/6/95 na na na 143.5 118.0 272.1 3.8 5.4 2.1 1.3 Dundee Mills, Inc Investor Group/ 10/6/99 77.9 75.4 58.2 106.4 66.1 117.6 27.6 15.1 12.5 11.5 Conso International Berkshire Hathaway/ 9/6/00 18.8 23.8 26.7 3277.1 2393.9 4095.7 7.2 13.1 9.6 7.5 Shaw Industries Mean 36.0 42.8 40.8 810.4 531.7 1,016.0 2.3 5.4 4.3 5.0 Median 19.5 23.8 38.9 211.4 145.5 269.8 2.6 8.5 4.8 3.5 Min 1.5 8.6 26.7 106.4 32.5 117.6 (20.1) 5.4 (7.5) 1.3 Max 77.9 34.6 58.2 3,277.1 2,393.9 4055.7 27.6 15.1 12.5 11.5 Harmonic Mean 6.2 21.9 37.5 214.7 95.2 283.2 3.4 8.1 3.2 3.1 Springs Industries @ 44 2/20/01 21.9 21.3 28.5 1206.2 805.5 2,275.1 2.5 11.3 7.2 6.5 Springs Industries @ 50 2/20/01 38.5 37.8 54.7 1,326.1 925.4 2,275.1 2.5 11.3 7.2 6.5 Springs Industries @ 55 2/20/01 52.4 61.6 70.2 1,426.1 1,025.4 2,275.1 2.5 11.3 7.2 6.5 Westpoint Stevens 4/24/00 27.5 30.4 28.5 2113.8 649.2 1883.3 6.7 18.7 10.8 14.2 - ---------------------------------------------------------------------------------------------------------------------------
LTM Total Enterprise Value Multiples Net Income -------------------------------- Equity Margin LTM LTM LTM LTM Mkt. Value/ (%) Revenue EBITDA FCF EBIT Net Income - ------------------------------------------------------------------------------------- GCW Southeast Partners/ (1.0) 0.58 5.9 7.8 22.3 nm Johnston Industries Dan River/ (0.4) 1.10 18.4 nm 33.9 nm Bibb Company Pillowtex Corp/ 1.5 0.83 11.7 47.3 21.8 23.9 Fieldcrest Cannon Inc Springs Industries/ (0.5) 0.53 9.8 25.4 40.7 nm Dundee Mills, Inc Investor Group/ 4.9 0.90 6.0 7.7 7.9 11.5 Conso International Berkshire Hathaway/ 4.4 0.80 6.1 8.3 10.7 13.3 Shaw Industries Mean ??? 0.79 9.6 19.2 22.9 15.2 Median 9.5 0.81 8.0 8.3 22.0 13.3 Min (1.0) 0.53 5.9 7.2 7.9 11.5 Max ??? 7.10 18.4 47.3 40.7 23.9 Harmonic Mean na 0.74 8.1 11.2 15.4 14.7 Springs Industries @ 44 3.2 0.53 4.7 7.4 8.2 11.1 Springs Industries @ 50 3.2 0.53 5.2 8.1 9.0 12.8 Springs Industries @ 55 3.2 0.53 5.5 8.7 9.7 14.2 Westpoint Stevens 5.5 1.12 6.0 10.4 7.9 6.2 - --------------------------------------------------------------------------------
NOTE: (1) WestPoint transaction was terminated on 5/19/00 [UBS WARBURG LOGO] 3 5 PROJECT MILL (continued) - -------------------------------------------------------------------------------- * DISCOUNTED CASH FLOW ANALYSIS EXIT MULTIPLE (EBITDA)
(%) 4.00x 4.50x 5.00x 5.50x 6.00x - -------------------------------------------------------------------------------- 8.75 41.01 46.66 52.31 57.96 63.60 WACC/ 9.75 38.77 44.18 49.60 55.02 60.44 DISCOUNT 10.75 36.62 41.83 47.03 52.23 57.43 RATE 11.75 34.58 39.58 44.57 49.57 54.57 12.75 32.63 37.43 42.23 47.03 51.83 - --------------------------------------------------------------------------------
[UBS WARBURG LOGO] 4 EX-99.C.7 8 y51534ex99-c_7.txt FINANCIAL MATERIALS 1 Exhibit (c)(7) SPRINGS INDUSTRIES REVIEW OF STRATEGIC & FINANCIAL ALTERNATIVES ================================================================================ October 6, 2000 - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 2 SPRINGS INDUSTRIES
TABLE OF CONTENTS ================================================================================ - -------------------------------------------------------------------------------- SECTION 1 PERSPECTIVES ON SECTOR - -------------------------------------------------------------------------------- SECTION 2 PERSPECTIVES ON SPRINGS BASIC BUSINESS PLAN / STRATEGY - -------------------------------------------------------------------------------- SECTION 3 REVIEW OF ALTERNATIVE GROWTH STRATEGIES - Selected Acquisitions in Core Bed & Bath Area - Development of Significant Foreign Sourcing - Broad Based Acquisition Strategy - -------------------------------------------------------------------------------- SECTION 4 REVIEW OF FINANCIAL STRUCTURE ALTERNATIVES - Base Case Capital Structure Alternatives - Access to Capital to Support Growth Strategies - -------------------------------------------------------------------------------- APPENDIX 1 HEARTLAND INDUSTRIAL PARTNERS - -------------------------------------------------------------------------------- APPENDIX 2 PILLOWTEX RESEARCH - -------------------------------------------------------------------------------- APPENDIX 3 GLENOIT RESEARCH - -------------------------------------------------------------------------------- APPENDIX 4 SUPPORTING INFORMATION - --------------------------------------------------------------------------------
- ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 2 3 SPRINGS INDUSTRIES RANGE OF ALTERNATIVES CONSIDERED ================================================================================ STRATEGIC ALTERNATIVES - Base Case Business Plan - Acquisitions in core bed & bath product areas - Material investment in non-domestic sourcing - Broad based home textiles acquisition strategy FINANCIAL ALTERNATIVES - Base Case Capital Structure - Capital Structure Considerations - Share Repurchase - Leveraged Recapitalization - Access to Capital to Support Growth Strategies - Dividend Policy - Divestitures - New Equity - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 3 4 SPRINGS INDUSTRIES SECTION 1 PERSPECTIVES ON SECTOR ================================================================================ - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 4 5 SPRINGS INDUSTRIES SECTOR GROWTH ================================================================================ - - OVERALL PRODUCT MIX IS VERY CONSISTENT OVER THE PERIOD:
17% INSTITUTIONAL 83% RETAIL 46% BEDDING* 26% BATH 14% CURTAINS & DRAPES 5% TABLE LINENS 4% DECORATIVE PILLOWS 6% OTHER
- - NOTABLE EXCEPTION IS DECLINE IN BED SPREADS
SECTOR GROWTH IS EXPECTED TO IMPORTS ARE GAINING MOST OF THE BE REASONABLE - 5-6% SHARE GROWTH COMPOUND ANNUAL GROWTH AT RETAIL MARKET SHARE OF IMPORTS (1) ------------------------------------- --------------------------- 1995-1999 2000-2005 1995 1999 --------- --------- ---- ---- Home Textiles 5.0% 5.0% Sectors - ------- Sheets 4.7% 4.0% 16.5% 25.1% BIAB 16.6% 16.6% NA NA Comforters, 2.7% 2.0% 17.7% 26.3% Quilts, Bedspreads Towels 6.4% 6.0% 28.0% 37.3% Rugs 6.8% 6.0% 6.3% 9.8%
(1) Source: Hayes - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 5 6 SPRINGS INDUSTRIES DOMESTIC VS. IMPORT PRODUCTION MIX ================================================================================ - - IMPORTS ARE GAINING SHARE: - MOSTLY AT LOWER END- PROMOTIONAL PROGRAMS VS. CONTINUAL REPLENISHMENT - ALSO AT HIGH END WHERE LABOR CONTENT IS GREATER SHEETS & PILLOWCASES [BAR CHART]
1995 1996 1997 1998 1999 - ---- ---- ---- ---- ---- 1742 1824 1936 1916 1993 330 336 436 579 641
SPRINGS $535 $550 $575 $560 $620 WESTPOINT $565 $620 $670 $655 $680
COMFORTERS, QUILTS BEDSPREADS & ACCESSORIES [BAR CHART]
1995 1996 1997 1998 1999 - ----- ---- ---- ---- ---- 1608 1608 1577 1626 1642 333 318 353 444 551
SPRINGS $235 $240 $245 $275 $325 WESTPOINT $220 $210 $225 $250 $360
TOWELS & WASH CLOTHS [BAR CHART]
1995 1996 1997 1998 1999 - ----- ---- ---- ---- ---- 1432 1507 1609 1611 1546 522 544 654 771 858
SPRINGS $200 $190 $200 $195 $190 WESTPOINT $460 $500 $600 $615 $630 PILLOWTEX $595 $625 $675 $605 $590
BATH & AREA RUGS [BAR CHART]
1995 1996 1997 1998 1999 - ---- ---- ---- ---- ---- 794 853 839 905 940 53 41 75 73 102
SPRINGS $147 $159 $152 $137 $137 MOHAWK $224 $251 $257 $270 $325
- ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- - ---------- (1) Source: Hayes 6 7 SPRINGS INDUSTRIES DOMESTIC / IMPORT PRODUCTION MIX ================================================================================ BLANKETS & THROWS [BAR CHART]
1995 1996 1997 1998 1999 - ---- ---- ---- ---- ---- 746 716 705 713 723 96 97 117 159 182
MATTRESS PADS & FEATHER BEDS [BAR CHART]
1995 1996 1997 1998 1999 - ---- ---- ---- ---- ---- 277 287 297 307 309 24 18 26 28 46
PILLOWS & CUSHIONS [BAR CHART]
1995 1996 1997 1998 1999 - ---- ---- ---- ---- ---- 888 952 1016 986 1035 72 70 94 165 174
WINDOW CURTAINS, DRAPERIES & SHOWER CURTAINS [BAR CHART]
1995 1996 1997 1998 1999 - ---- ---- ---- ---- ---- 1594 1557 1799 1818 1873 165 156 196 242 335
- ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 7 8 SPRINGS INDUSTRIES Customer Trends Mass merchants and specialty stores are gaining market share of home textiles at the expense of department stores. [CUSTOMER TRENDS CHART: Same Store Sales (%) v. Total Growth (%) Sears JCP Federated May K-Mart Saks Target Wal-Mart Lowes L & T Kohls Home Depot BBB] Source HTT - August 14, 2000 8 - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 9 SPRINGS INDUSTRIES Brand Stratification (Sheets) - - Long established textile brand names moving to mass channels. - - Largest merchants have developed store brands and seek to take proprietary control of selected third party brands. - - Pressure on major home textile companies to produce across a wide portfolio of brands, stratified to meet the needs of its largest customers. - - Designer brands have remained exclusively at department stores. - -------- BRAND ---------------------------------------------- POSITION BB&B LNT DEPT STORES - -------- ---------------------------------------------- - Wamsutta - Wamsutta - Ralph Lauren HIGH END - High - Hillcrest (wps) Country (c) - Wamsutta (c) - Royal - Charisma (ptx) - Hillcrest Sateen - Royal Sateen (c) (cc) (cc) ---------------------------- - Royal - Limoges - Calvin Klein SEARS JC PENNEY Sateen (c) (cc) ---------------------------- (cc) - Royal Velvet - Whole - JCP Home (ptx) Home Collection - Tommy Hilfiger (wps/ptx/ (cl/wps/ - Various smi) smi) ---------------------------------------------- ------------------------------------------- - Royal - Wamsutta - Wamsutta - Wamsutta WAL*MART K-MART TARGET Velvet - Alexander - Alexander - Martex ------------------------------------------- (ptx) Julian (dr) Julian (dr) - Various - Springmaid - Martha - Serenity - LNT (pl) - Ralph Lauren Stewart 5 (smi) ---------------------------- (wps) Star (smi/ - Royal - Fieldcrest - JCP Home ---------------------------------------------- wps) Legacy - Colormate Essentials - Assorted - Assorted - Assorted (wps) (wps) (wps) Promotions Promotions Promotions - Indulgence - JCP Home - Springmaid - Springmaid (wps) Expressions ---------------------------------------------- - Waverly (wps) (smi) - Martex (wps) ------------------------------------------- - Springmaid - Martha - Weekend - Jubilee Stewart 4 (wps) (smi/ptx) Star - Cotton - Favorite (dr/wps) Luxury (smi) Things (smi) - English ---------------------------- - Vintage Florals - Assorted - Assorted Home (k) (smi/wps) Promotions Promotions - Ultra Touch (wps) ------------------------------------------- ---------------------------- - Basics - Home - Springs (wps) Essentials Home (smi) (wps) LOW END - -----------------------------------------------------------------------------------------------------------------------------------
Legend: c - Converter cc - Crown Craft cl - Croscill dr - Dan River k - Keeco pl - Private Label ptx - Pillowtex smi - Springs wps - WestPoint - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 9 10 SPRINGS INDUSTRIES While Major Customers Consolidate - Home Textiles Industry Remains Fragmented
- ------------------------------------------------------- Largest Home Textile Companies Have Remained Narrowly Focused in Core Bed & Bath Segment - ------------------------------------------------------- - ------------------------- ------------------------- Bedding Bath - ------------------------- ------------------------- Sheets/ Bath Towels $2,482 Pillowcases $2,463 Bath Rugs 961 Comforters/ Shower Curtains 589 Bedspreads 1,717 Sleep Pillows 1,113 Blankets 739 Down Comforters 432 Mattress Pads 341 ------ ------ Total $6,825 Total $4,032 ====== ====== EXTREMELY FRAGMENTED INDUSTRY SPRINGS 15% Pillowtex 18% Westpoint Stevens 14% Westpoint Stevens 16% Pillowtex 12% SPRINGS 12% Dan River 6% ------ ------ 46% 47%
- ------------------------------------------------------------------------------------------- Little Leverage as Yet by Bed & Bath Industry Leaders into Specialty Segments - ------------------------------------------------------------------------------------------- - ------------------------ ------------------ ---------------------- ------------------ Ready-Made Kitchen Area Rugs Window Covers Other - ------------------------ ------------------ ---------------------- ------------------ Table Linen $1,352 Area Rugs $1,487 Ready-Made Throws $ 350 Kitchen Text. 540 Window Other 866 Covers $1,025 Decorative Pillows 522 ------ ------ ------ ------ Total $1,895 Total $1,487 Total $1,025 Total $1,738 ====== ====== ====== ====== Town & Country 5% Mohawk 16% Burlington 18% Next 4 Companies 10% Beaulieu 8% S. Lichtenberg 10% ------ Maples 8% CHF 9% 15% Burlington 6% Miller 9% ------ SPRINGS 9% 38% Croscill 6% ------ 55%
Source: KSA, in wholesale dollars. - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 10 11 SPRINGS INDUSTRIES Strategic Positioning in the Bed & Bath Product Categories 1999 BEDDING CATEGORY VOLUMES ($ MILLIONS)
Westpoint Dan Other Springs Stevens Pillowtex River Domestic Imports TOTAL ------- --------- --------- ----- -------- ------- ----- Sheets & Pillowcases $620 $680 $260 $220 $ 213 $ 641 $2,634 #2 #1 #3 #4 Comforters, Bedspreads, Quilts & Acc. 325 300 215 210 592 551 2,193 #1 #2 #3 #4 Blankets & Throws -- 95 151 -- 477 182 905 #1 #3 Mattress Pads & Feather Beds 70 -- 239 46 345 #2 Bed Pillows 60 46 160 -- 293 NA 559 #4 #5 #1 (incl. below) Other Pillows & Cushions -- -- -- -- -- -- -- ------ ------ ---- ---- ------ ------ ------ $1,005 $1,121 $856 $430 $2,290 $1,594 $7,286 ====== ====== ==== ==== ====== ====== ======
Source: E. D. Hayes - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 11 12 SPRINGS INDUSTRIES Strategic Positioning in the Bed & Bath Product Categories 1999 BATH CATEGORY VOLUMES ($ MILLIONS)
Westpoint Other Springs Stevens Pillowtex Mohawk Domestic Imports TOTAL ------- --------- --------- ------ -------- ------- ------ Towels & Wash Cloths $ 190 $ 630 $ 590 $ 120 $ 858 $2,404 #3 #1 #2 Bath & Area Rugs 137 55 $ 325 423 102 1,042 #2 #5 #1 -------------- Shower Curtains 75 -- -- -- 193 268 #1 ----- ----- ------ ------ -------------- ------ $ 402 $ 630 $ 645 $ 325 $1,696 $3,714 ===== ===== ====== ====== ====== ======
Source: E. D. Hayes - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 12 13 SPRINGS INDUSTRIES Strategic Positioning in the Bed & Bath Product Categories 1999 SHARE OF DOMESTIC PRODUCTION ($ MILLIONS)
Comforters, Retail Bedspreads, Total Retail Total Sheets Quilts, etc. Bed Towels Bath ------ ------------ ----- ------ ----- Westpoint Stevens 35% 20% 20% 41% 23% Springs 32% 22% 18% 12% 15% Pillowtex 13% 10% 15% 39% 24% Dan River 9% 14% 8% -- --
Market Shares for Total Sectors are Misleading: Pillowtex is a minor player in the core retail sheet business: - Its bedding volume is derived from secondary products -- pillows, blankets, mattress pads and institutional sheets Springs is a minor player in the core retail towel business: - Its bath volume is derived from secondary products -- bath rugs, shower curtains, accessories and institutional towels Westpoint Stevens is not diversified across product categories: - It is concentrated in the core retail towel and bed segments - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 13 14 SPRINGS INDUSTRIES - - Core Bed & Bath Cap-Ex spending - 1993-2000: - SPRINGS $715 MILLION - WESTPOINT $915 MILLION - - Average EBITDA Margin 1933-2000: - SPRINGS 9.6% - WESTPOINT 16.9% [LINE GRAPHIC] WestPoint Stevens - Strategic Position PRIMARY STRENGTH IS RETAIL SHEETS AND TOWELS - - #1 market position in each category LOW COST PRODUCER - - WestPoint has spent approximately $250 million more than Springs in core sheets and towel capital expenditures WESTPOINT HAS EFFECTIVELY BECOME A CONTRACT MANUFACTURER - - Focus of production is licensed products -- Ralph Lauren, Martha Stewart, Disney -- and strong private label programs - - Design and merchandise expertise is significantly narrower than Springs - - Recent strategic initiatives emphasize expansion of brands and marketing expertise -- example is Martex at Target ATTRACTIVE MARGINS DRIVEN BY: - - Narrow product line - - Simplified account structures - - Meaningful capital expenditures over narrow base WESTPOINT STARTING TO BROADEN BASE - - Expansion of Vellux blanket business - - 1998 Acquisition of Liebhardt (pillows) - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 14 15 SPRINGS INDUSTRIES Strategic Directions Required to Serve Customer - - A successful supplier could leverage its expertise, client relationships and brands across a wider array of home textile products. - Ability to produce or source across a wide range of products and price points - Expertise in supply chain management - Breadth of design / merchandise expertise to support proprietary brands and customers' private label brands - Ownership of broad range of proprietary brands in order to maximize returns and customer loyalty - Competitive cost structure - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 15 16 SPRINGS INDUSTRIES Section 2 Perspectives on Springs Basic Business Plan / Strategy - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 16 17 SPRINGS INDUSTRIES Perspectives Regarding Springs Strategic Positioning
Strengths Weaknesses -Strong in sheets -Weak in towels - Strength in mass market - Distant third in retail market share -Strong at Wal*Mart, mass market -Weak in department stores / malls and specialty stores -Low EBITDA margin -Strong financial position -Diversified product line -Diversified product line - Complexity - Breadth - Branding -IT systems need significant upgrade to mitigate the complexity -Core capability in replenishment of business processes and multiple supply chain management applications -Generally ahead of other US -Long US based manufacturing manufacturers in development of assets foreign sourcing
- ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 17 18 SPRINGS INDUSTRIES Margin Pressures & Opportunities - - Impact of margin improvement opportunities: Springs - 2000 11% Fix 3 Operations 2% Foreign Sourcing 2% ---- Springs Pro Forma 15% ==== - - Estimated 2000 EBITDA margins for selected competitors: WestPoint Stevens 19% Pillowtex 7% Dan River 16% Constant Pressure on Margin Consolidation of customers, acceleration of imports and actions by competitors seeking to maintain market share all put pressure on margins - requiring annual initiatives and capital investments just to maintain basic margins. Opportunities to Materially Improve Margins
Development of Foreign Sourcing Reversal of Weaknesses in 3 Key Partners and Investment in Foreign Business Areas Sourcing Assets ------------------------------- ----------------------------------- -Rugs - Nashville plant High Priority Projects: -AFI - incremental volume to fill -Investment in Greige sourcing capacity -Investment in towel capacity -Towels - efficiencies from modernization investment Size of Investment - * million -2000 EBITDA Margins - Return on Investment - Pro forma EBITDA margin would A four-year pay back implies increase 200 basis points assuming savings of * million per above 3 operations earned 5-7% year or 200-400 EBITDA margin EBITDA margins basis points
- ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- * Omitted and filed separately with the Commission. 18 19 SPRINGS INDUSTRIES Base Case - Strategic Direction - - Focus on two core segments - Bed & Bath - - Leverage brands - - Leverage strength with mass market customers - - Fix three profit problem areas: - AFI - Rugs, Nashville and - Towel modernization - - Leadership position in development of foreign sourcing channels may prove to be a differentiating factor in sector.
Bedding Bath ------- ---- -Leverage strength in sheets to -Develop cost competitive towel capacity round out bedding portfolio (owned or not) and utilize customer relationships and brand strengths to gain market share at Market Rank expense of Pillowtex (easier said Sheets #2 than done, key is lower cost sourcing BIAB #2 channel; even then Pillowtex may Top of Bed #2 react irrationally) Basic Bedding #5 -Most of the building blocks are in Market Rank place to build basic bedding position Towels #3 - brand, relationships, capacity Bath rugs #1 Accessories #1 -Develop sourcing channel for Greige Shower curtains #1 goods -allocation of resources -Springs is capacity -attempt to lead industry constrained in towels and thus dependent on sourcing for growth
- ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 19 20 SPRINGS INDUSTRIES Section 3 Review of Alternative Growth Strategies - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 20 21 SPRINGS INDUSTRIES Section 3 Review of Alternative Strategies ================================================================================ - - Selected Acquisition in Core Bed & Bath Area - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 21 22 SPRINGS INDUSTRIES Strategic Positioning - Bedding ================================================================================ - - CORE BEDDING IS A STRENGTH FOR SPRINGS AT MASS MERCHANTS - - OPPORTUNITY TO LEVERAGE BRAND STRENGTH AND CUSTOMER RELATIONSHIPS TO "BASIC BEDDING" - - BIAB IS KEY DIFFERENTIATING FACTOR AND A CORE ELEMENT OF THE SPRINGS PLATFORM SHEETS & PILLOWCASES - RETAIL
Share --------------- Company 1999 2003 - ------- ---- ---- WestPoint Stevens 32% 34% SPRINGS 31% 33% Pillowtex 16% 10% Dan River 4% 7%
SHEETS & PILLOWCASES - INSTITUTIONAL
Share --------------- 1999 2003 ---- ---- WestPoint Stevens 28% 30% SPRINGS 25% 32% Dan River 23% 22% Thomaston 11% 8% Pillowtex 6% 3%
BIAB
Share --------------- Company 1999 2003 - ------- ---- ---- Dan River 41% 37% SPRINGS 33% 45% WestPoint Stevens 5% 6% Pillowtex 6% 0% Hollander 6% 7%
TOP OF BED
Share --------------- Company 1999 2003 - ------- ---- ---- SPRINGS 19% 18% WestPoint Stevens 11% 17% Croscill 10% 11% Pillowtex 10% 5% Dan River 3% 5%
BASIC BEDDING
Share --------------- Company 1999 2003 - ------- ---- ---- Pillowtex 30% 25% Pacific Coast Feather 22% 25% Hollander 11% 9% Louisville 11% 9% SPRINGS 8% 15% WestPoint Stevens 5% 10%
BLANKETS
Share --------------- Company 1999 2003 - ------- ---- ---- Pillowtex 30% 23% Sunbeam 26% 26% WestPoint Stevens 21% 28% Charles Owens 15% 15% Chatham 4% 4%
- ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 22 23 SPRINGS INDUSTRIES Strategic Positioning -- Bath ================================================================================ - - RETAIL TOWEL IS THE STARTING POINT IN BUILDING A BATH STRATEGY. SPRINGS FOLLOWS WESTPOINT AND PILLOWTEX TOWELS - RETAIL
Share --------------- Company 1999 2003 - ------- ---- ---- Pillowtex 44% 38% Westpoint 42% 42% SPRINGS 8% 11% Sateens 2% 3%
TOWELS - INSTITUTIONAL
Share --------------- Company 1999 2003 - ------- ---- ---- Pillowtex 21% 16% WestPoint Stevens 19% 20% SPRINGS 21% 24% Blair 9% 10% 1888 3% 3%
BATH RUGS
Share --------------- Company 1999 2003 - ------- ---- ---- SPRINGS 36% 39% Aladdin/Newmark 26% 27% Maples 8% 8% Pillowtex 13% 7% Georgia Tufted 4% 6% Burlington 5% 5%
SHOWER CURTAINS
Share --------------- Company 1999 2003 - ------- ---- ---- SPRINGS 28% 27% Allure 24% 24% Excell 22% 22% Creative 11% 11% Maytex 9% 9%
BATH ACCESSORIES
Share --------------- Company 1999 2003 - ------- ---- ---- SPRINGS 36% 41% Allure 24% 27% Creative Bath 12% 13% Croscill 14% 16%
- ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 23 24 SPRINGS INDUSTRIES Acquisition Strategy - Build Up of Basic Platform ================================================================================ - - PILLOWTEX FILLS MOST OF SPRINGS' VOIDS: - PRODUCT AREAS - UPSTAIR BRANDS - MALL BASED ACCOUNTS - JC PENNEY - SEARS Bedding - -------------------------------------------------------------------------------- - - ROUND OUT PORTFOLIO IN BASIC BEDDING:
Market Rank ----------- PILLOWS PILLOWTEX (down & synthetic) #1 Pacific Coast Feather (down) #2 Hollander (synthetic & down) #3 MATTRESS PADS PILLOWTEX #2 Pacific Coast Feather #4 Hollander #5 DOWN COMFORTERS PILLOWTEX #1 Pacific Coast Feather #2 Hollander #2 Phoenix Down #3 United Feather #4 OTHER BEDDING COMPANIES: Crown Craft Croscill Glenoit Keeco
Bath - -------------------------------------------------------------------------------- - - Acquisition of part or all of Pillowtex would significantly change Springs position, giving Springs a full product portfolio - - Pillowtex Brands Royal Velvet (JC Penney) Charisma (Dept Stores) Cannon (K-Mart) Serenity (Target) - - Broader range of accounts through Pillowtex - - Only alternative to Pillowtex is development of sourcing strategy to attempt to gain share - - Side benefit of Pillowtex is broad range of products in bedding areas where Springs is under-represented
Pillowtex Market Rank --------------------- PILLOWS #1 DOWN COMFORTER #1 MATTRESS PADS #2 Blankets (not profitable) #1
- ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 24 25 SPRINGS INDUSTRIES Acquisition Strategy - Pillowtex Fills Most of Springs' Voids ================================================================================
RELATIVE SHARE OF DOMESTIC PRODUCTS ---------------------------------------------------------- Comforters, Retail Bedspreads, Total Retail Total Sheets Quilts, etc. Bed Towels Bath ------ ------------ --- ------ ---- Westpoint Stevens 35% 20% 20% 41% 23% Springs 32% 22% 18% 12% 15% Springs Pro Forma 45%* 32% 33% 51%* 39%
RELATIVE SHARE OF ALL PRODUCERS, INCLUDING IMPORTS ---------------------------------------------------------- Total Total Sheets Towels ------ ------ Pro Forma as a % of Combined Domestic and Imported Product 33% 25% 22% 32% 28%
- ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 25 26 SPRINGS INDUSTRIES Acquisition Candidates - Build Up of Basic Platform ================================================================================
PACIFIC COAST CROWN PILLOWTEX FEATHER HOLLANDER GLENOIT KEECO CRAFT CROSCILL ------------- ------------- ------------- ------------- ------------- ------------- ------------- 1999 REVENUES BEDDING Sheets/Pillowcases 260 9 34 67 Bedspreads/Comforters 145 46 76 96 110 Pillows 160 106 100 Mattress Pads 70 16 14 Blankets 135 Down Comforters 70 74 40 ------------- ------------- ------------- ------------- ------------- ------------- ------------- 840 196 200 66 85 130 177 BATH Terry Towels Bath Rugs 590 55 Shower Curtains & Access. 55 75 ------------- ------------- ------------- 645 130 46 OTHER 67 34 46 48 198 60 ------------- ------------- ------------- ------------- ------------- ------------- ------------- TOTAL 1552 230 200 242 133 328 283 ============= ============= ============= ============= ============= ============= ============= NOTE: 24% annual Basic Mostly All foreign Calvin Klein 22% growth in growth rate Bedding foreign sourced license top of bed - sourced strong design capability
Source: Ed Hayes - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 26 27 SPRINGS INDUSTRIES Acquisition Candidates in Core Bed & Bath Sector ================================================================================
5-Year Rev. Multiple to Multiple to 1999 Growth Value Prior Year Prior Year Revenues Rate EBITDA(1) Range(1) Revenues EBITDA -------- ---- --------- -------- -------- ------ Broad Platform: Pillowtex $1,300 (2)% $ 100 $ 550-650 .35x-.42x 5.0x-6.0x (Distressed Situation) Basic Bedding: One of: Pacific Coast Feather $ 230 25% $ 23 * * * Hollander 200 8 20 * * * Foreign Sourcing: Glenoit $ 242 5%+ $ 24 * * * Keeco 135 2% 15 * * * Top of Bed Design Strength: Croscill $ 283 15% $ 35 * * * Calvin Klein License: Crown Craft $ 328 11% $ 15 * * * (Distressed Situation)
(1) Estimated by CRT - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- * Omitted and filed separately with the Commission. 27 28 SPRINGS INDUSTRIES Corporate Development Approach at Springs ================================================================================ Pursuit of Multiple Targets Requires Allocation of Resources - - DEDICATED PERSONNEL - - TEAM APPROACH - - LEADERSHIP FROM CEO Requires Flexibility - -------------------------------------------------------------------------------- Availability of Targets Different Characteristics of Targets PILLOWTEX - - Breadth of product - Good fits for Springs - More complicated - - Problems - unforeseen attendant to troubled situation - - Good portfolio of brand names - - No goodwill - - Distressed value and little competition - - Fixed assets in US - - Execution is critical to successful combination SOURCING COMPANIES: GLENOIT KEECO - - High growth - - High value to earnings and book value - thus high goodwill - - Management retention - - Sourcing skill sets STRONG SPECIALTY COMPANIES: PACIFIC COAST FEATHER CROSCILL - - Success in core area - - High growth, high P/E multiples - - Retention of management Espirit des Corps in Springs environment - - Motivation of management team - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 28 29 SPRINGS INDUSTRIES Capital Required for Selected Acquisition Strategies ================================================================================
MULTI-TARGET PLAN ----------------- PILLOWTEX HOLLANDER/KEECO/GLENOIT --------- ----------------------- ($s millions) HOLLANDER KEECO GLENOIT TOTAL --------- ----- ------- ----- Purchase Price (Mid-point) $ 600 120 * * * EBITDA 100 20 * * * Multiples to EBITDA 6.0 6.0x * * * Book Value $ 600 60 24 20 104 Goodwill -- 251 Annual Amortization -- 16.7 Revenue 1,300 200 135 242 577 Revenue Growth Rate 5% 8% 10%+ 10%+ 9%
- ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- * Omitted and filed separately with the Commission. 29 30 SPRINGS INDUSTRIES Impact on Springs of Selected Acquisition Strategies ================================================================================ PILLOWTEX: - - $1,300 MILLION OF REVENUES TO BE ACQUIRED POST DIVESTITURES - - CURRENT RUN RATE EBITDA ASSUMED TO BE $100 MILLION (7.7%) - - PROJECTIONS ASSUME A 3 POINT IMPROVEMENT IN MARGIN TO 10.7% BY 2002 (VS. SPRINGS CURRENT EBITDA MARGIN OF 11.1%) MULTI-TARGET PLAN: - - HIGHLY INFLUENCED BY GOODWILL - - CASH RETURNS EXCLUDING GOODWILL ARE 5% ACCRETIVE IN 2001 AND 13% IN 2002
MULTI-TARGET PLAN PILLOWTEX HOLLANDER/KEECO/GLENOIT --------------------------------------- ---------------------------------------- 2000 2001 2002 2003 2000 2001 2002 2003 ------- ------- ------- ------- ------- ------- ------- ------- INCOME STATEMENT DATA: Springs Revenue $ 2,331 $ 2,422 $ 2,574 $ 2,739 $ 2,331 $ 2,422 $ 2,574 $ 2,739 Acquired Revenue 1,235 1,321 1,414 1,513 570 627 690 759 ------- ------- ------- ------- ------- ------- ------- ------- Total Revenue 3,566 3,743 3,988 4,252 2,901 3,049 3,264 3,498 Springs EBITDA 258 301 349 408 258 301 349 408 Acquired EBITDA 76 128 165 177 49 76 91 100 ------- ------- ------- ------- ------- ------- ------- ------- Total EBITDA 334 429 514 585 307 377 440 508 Springs Depreciation & Amort. 109 118 132 144 109 118 132 144 Acquired Depreciation & Amort. 50 48 46 44 15 17 19 21 Amort. of Cap. Expenses & Trans. Fees 5 5 5 5 3 3 3 3 ------- ------- ------- ------- ------- ------- ------- ------- Total Depreciation & Amort. 164 171 183 193 124 135 151 165 Interest Cost 113 112 108 103 81 80 78 75 EBT 57 147 223 290 102 162 211 268 Tax (37%) 21 54 83 107 38 60 78 99 GOODWILL -- -- -- -- 17 17 17 17 ------- ------- ------- ------- ------- ------- ------- ------- Net Income $ 36 $ 92 $ 141 $ 183 $ 47 $ 85 $ 116 $ 152 ======= ======= ======= ======= ======= ======= ======= ======= Net Income: Springs Stand-alone $ 73 $ 97 $ 118 $ 151 $ 73 $ 97 $ 118 $ 151 Springs Pro Forma 36 92 141 183 47 85 116 152 ------- ------- ------- ------- ------- ------- ------- ------- ACCRETION/DILUTION $ (37) $ (5) $ 23 $ 32 $ (26) $ (12) $ (2) $ 1 PERCENT (51)% (5)% 19% 21% (36)% (12)% (2)% 1% Cost of Refinancing Existing Debt $ 6 $ 5 $ 5 $ 4 $ 6 $ 5 $ 5 $ 4 Debt/EBITDA: Springs 1.59x 1.22x 0.97x 0.63x 1.59x 1.22x 0.97x 0.63x Pro Forma 3.06x 2.35x 1.89x 1.56x 2.48x 2.00x 1.66x 1.37x Debt/Total Capital Springs 0.33x 0.29x 0.25x 0.19x 0.33x 0.29x 0.25x 0.19x Pro Forma 0.55x 0.52x 0.48x 0.43x 0.47x 0.45x 0.41x 0.37x Capital Expenditures Springs $ 125 $ 140 $ 140 $ 130 $ 125 $ 140 $ 140 $ 130 Acquisition 40 40 42 45 16 18 20 22 ------- ------- ------- ------- ------- ------- ------- ------- Total Capital Expenditures $ 165 $ 180 $ 182 $ 175 $ 141 $ 155 $ 160 $ 152 ======= ======= ======= ======= ======= ======= ======= =======
- ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 30 31 SPRINGS INDUSTRIES Section 3 Review of Alternative Strategies ================================================================================ - - Development of Significant Foreign Sourcing - -------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT 31 - -------------- 32 SPRINGS INDUSTRIES $250 MILLION, 3 YEAR PROGRAM TO BUILD FOREIGN SOURCING ================================================================================ - - Assumes 4.5 year pay back on investment - - Dilutive through 2003 - - May drive higher growth and access to designer brand names/new accounts
2001 2002 2003 2004 2005 ---- ---- ---- ---- ---- ($millions) INVESTMENT $ 50.0 $100.0 $100.0 - - Impact on EBITDA - 6.0 24.0 48.0 60.0 Depreciation - 5.0 15.0 25.0 25.0 Cost of Debt (9.5%) - 4.8 14.0 22.4 20.0 Pre-tax Income Effect - (3.8) (5.0) 0.6 15.0 Net Income Effect - (2.3) (3.1) 0.4 9.3 Cash Flow Effect - 2.7 11.9 24.6 34.3 Year End Debt 50.0 147.3 235.4 210.8 176.5
PRO FORMA IMPACT ON EBITDA MARGINS [BAR CHART]
11.1% 11.4% 12.1% 13.2% 13.7% 18.8% 15.7% SPRINGS BASE PRO FORMA PRO FORMA PRO FORMA PRO FORMA WESTPOINT DAN RIVER CASE 2000 YEAR 1 YEAR 2 YEAR 3 YEAR 4 STEVENS 2000 2000
- -------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT 32 - -------------- 33 SPRINGS INDUSTRIES IMPACT OF $250 MILLION 3-YEAR PROGRAM TO BUILD FOREIGN SOURCING ================================================================================
2001 2002 2003 2004 2005 ---- ---- ---- ---- ---- Cap-Ex Springs Base Case $144 $168 $139 $106 $ 107 Pro Forma 194 268 239 106 107 Debt Springs Base Case $367 $340 $258 $ 95 $ (95) Pro Forma 417 487 493 306 79 Debt/EBITDA Springs Base Case 1.22x 0.97x 0.63x 0.21x --- Pro Forma 1.39x 1.37x 1.14x 0.63x 0.15x
EBITDA MARGIN [BAR CHART]
2000 2001 2002 2003 2004 2005 WestPoint 2000 Dan River 2000 ---- ---- ---- ---- ---- ---- -------------- -------------- Springs Base Case* 11.1% 12.4% 13.6% 14.8% 15.2% 15.5% 18.6% 16.0% Pro Forma** 11.1% 12.4% 13.8% 15.8% 16.8% 17.5%
* Springs Base Case ** Pro Forma assuming 4.5 year pay back - -------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT 33 - -------------- 34 SPRINGS INDUSTRIES SECTION 3 REVIEW OF ALTERNATIVE STRATEGIES ================================================================================ - - Broad Based Acquisition Strategy - -------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT 34 - -------------- 35 SPRINGS INDUSTRIES SPRINGS IS BETTER POSITIONED THAN ITS PRIMARY COMPETITORS TO LEAD A CONSOLIDATION WITHIN THE HOME TEXTILE SECTOR ================================================================================ - - WestPoint Stevens is highly leverage - - Pillowtex is severely distressed - - Dan River does not have enough scale to lead consolidation - - Even though stronger financially, Springs has borrowing limitations of 3-3.5x EBITDA - - Numerous available acquisition targets (1999 Sales in Millions) [BAR CHART]
TIER I TIER II -------------------------------------- ----------------------------------------------------------------- Springs* WestPoint* Pillowtex* Mohawk* Dan River* Crown Craft* Burlington* Croscill** ------- --------- --------- ------ --------- ----------- ---------- -------- $2,220 $1,868 $1,552 $470 $432 $310 $300 $283
TIER II -------------------------------------------------------------------------------------------- PCF** Glenoit* Hollander** Maples** Louisville* Revman* Sunbeam* Keeco** --- ------- --------- ------ ---------- ------ ------- ------ $230 $222 $201 $160 $156 $141 $136 $132
* Financially Distressed ** Open to Merger Discussions - -------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - -------------- 35 36 SPRINGS INDUSTRIES HOME TEXTILE EXPANSION OPPORTUNITIES BEYOND CORE BED & BATH ================================================================================ PROFITABILITY OF THE CATEGORY Table Linens 200M Kitchen Towels 200M Dec Pillows 450M Area Rugs 1500M Soft Windows 1200M Down Comforters 600M Blankets 500M Kitchen As a Room 400M SPRINGS' ABILITY TO IMPACT - -------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - -------------- 36 37 SPRINGS INDUSTRIES POTENTIAL DIVERSIFICATION TARGETS ================================================================================ DECORATIVE PILLOWS
1999 % Company Volume Share - ------- ------ ----- Brentwood $100 21% Arlee 50 11% Glenoit 21 4% Newport/Layton 21 4% Fashion Pillows 21 4%
BATH & AREA RUGS
1999 % Company Volume Share - ------- ------ ----- Mohawk $325 35% Maples 156 17% Burlington 90 10% Glenoit 55 6% Pillowtex 55 6% Georgia Tufters 50 5%
SOFT WINDOWS & DRAPERIES
1999 % COMPANY VOLUME SHARE - ------- ------ ----- Burlington $120 7% S.Lichtenberg 115 7% CHF 97 6% Miller Curtain 93 5% Croscill 67 4%
BLANKETS
1999 % COMPANY VOLUME SHARE - ------- ------ ----- Pillowtex $135 30% Sunbeam 116 26% Charles D.Owen 66 15% CMI-Chatham 20 4%
KITCHEN TEXTILES
1999 % COMPANY VOLUME SHARE - ------- ------ ----- Barth & Dreyfuss $59 11% Franco Mfg 45 8% Cecil Saydah 44 8% Charles Craft 18 3% John Ritzenthaler 18 3%
TABLE LINENS
1999 % COMPANY VOLUME SHARE - ------- ------ ----- Town & Country $90 7% Bardwill 50 4% Avon Home 35 3% Elrene 35 3%
Source: Ed Hayes - -------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - -------------- 37 38 SPRINGS INDUSTRIES DIVERSIFICATION ACQUISITION CANDIDATES ================================================================================
MULTIPLE W/ MULTIPLE TO 1999 VALUE PRIOR YEAR PRIOR YEAR REVENUES EBITDA RANGE REVENUES EBITDA Rugs & Windows: Burlington $ 290 $ 25 $ * * * Selected Divisions Rugs & Dec. Pillows: Glenoit $ 242 $ 24 $ * * * Rugs: Maples $ 220 $ 31 $ * * * Blankets: Sunbeam $ 136 $ 12 $ * * * Decorative Pillows: Brentwood $ 100 $ 12 $ * * * Kitchen: Miscellaneous $ 100 $ 10 $ 60 .6x 6.0x Top of Bed Croscill $ 283 $ 35 $ * * *
- -------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - -------------- * Omitted and filed separately with the Commission. 38 39 SPRINGS INDUSTRIES CAPITAL REQUIRED FOR SELECTED DIVERSIFICATION ACQUISITIONS ================================================================================
BURLINGTON MAPLES SUNBEAM BRENTWOOD TOTAL Purchase Price $ * $ * $ * $ * $ * EBITDA * * * * * Multiple EBITDA * * * * * Book Value 150 110 80 40 380 Goodwill --- 110 --- 40 150 Annual Amortization --- 7 --- 3 10 Revenue 290 220 136 100 $746
- -------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - -------------- * Omitted and filed separately with the Commission. 39 40 SPRINGS INDUSTRIES IMPACT OF DIVERSIFICATION ACQUISITION STRATEGY ================================================================================ IMPACT OF DIVERSIFICATION ACQUISITIONS ON EXPANDED BED & BATH PLATFORMS
MULTI-TARGET PLAN PILLOWTEX HOLLANDER/KEECO/GLENOIT --------- ------------------------------- Income Statement Data: 2000 2001 2002 2003 2000 2001 2002 2003 ----- ----- ----- ----- ----- ----- ----- ----- Sales: Springs $ 2,331 $2,422 $2,574 $2,739 $ 2,331 $ 2,422 $2,574 $2,739 Acquired Bed & Bath 1,235 1,321 1,414 1,513 570 627 690 759 Acquired Diversification 746 798 854 914 746 798 854 914 ------- ------ ------ ------ ------- ------- ------ ------ Total Revenue 4,312 4,541 4,842 5,166 3,647 3,847 4,118 4,412 Springs EBITDA 258 301 349 408 258 301 349 408 Acquired Bed & Bath EBITDA 76 128 151 162 49 76 91 100 Acquired Diversification EBITDA 80 101 117 125 80 101 117 125 ------- ------ ------ ------ ------- ------- ------ ------ Total EBITDA 414 530 617 695 387 478 557 633 Depreciation & Amort. 109 118 132 144 109 118 132 144 Acquired B&B Depreciation & Amort. 60 63 67 71 15 17 19 21 Acquired Divers. Deprec. & Amort. 30 32 34 37 30 32 34 37 Amort. of Cap. Expenses & Trans. Fees 8 8 8 8 7 7 7 7 ------- ------ ------ ------ ------- ------- ------ ------ Total Depreciation & Amort 207 221 242 260 161 174 192 208 Interest Cost 132 130 126 118 124 123 121 116 EBT 74 179 249 317 102 182 244 308 Tax (37%) 27 66 92 117 38 67 90 114 Goodwill 10 10 10 10 27 27 27 27 ------- ------ ------ ------ ------- ------- ------ ------ Net Income $ 37 $ 103 $ 147 $ 190 $ 38 $ 88 $ 127 $ 168 ======= ====== ====== ====== ======= ======= ====== ====== Net Income: Springs Stand-alone $ 73 $ 97 $ 118 $ 151 $ 73 $ 97 $ 118 $ 151 Springs Pro Forma 37 103 147 190 38 88 127 168 ------- ------ ------ ------ ------- ------- ------ ------ ACCRETION/DILUTION $ (36) $ 6 $ 29 $ 39 $ (35) $ (9) $ 9 $ 17 PERCENT (49)% 6% 25% 26% (48)% (9)% 8% 11% Debt/EBITDA: Base 1.59x 1.22x 0.97x 0.63x 1.59x 1.22x 0.97x 0.63x Pro Forma 3.78x 2.90x 2.43x 2.04x 3.42x 2.74x 2.32x 1.96x Debt/Total Capital: Base 0.33x 0.29x 0.25x 0.19x 1.59x 1.22x 0.97x 0.63x Pro Forma 0.60x 0.57x 0.53x 0.48x 0.49x 0.56x 0.52x 0.48x Capital Expenditures: Springs $ 125 $ 140 $ 140 $ 130 $ 125 $ 140 $ 140 $ 130 Acquisitions B&B 25 25 25 25 20 20 20 20 Acquisition Diversification 40 40 40 40 16 18 20 22 ------- ------ ------ ------ ------- ------- ------ ------ Total Capital Expenditures $ 190 $ 205 $ 207 $ 200 $ 161 $ 178 $ 180 $ 172 ======= ====== ====== ====== ======= ======= ====== ======
- -------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - -------------- 40 41 SPRINGS INDUSTRIES SECTION 4 REVIEW OF FINANCIAL STRUCTURE ALTERNATIVES ================================================================================ - -------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - -------------- 41 42 SPRINGS INDUSTRIES SECTION 4 REVIEW OF FINANCIAL STRUCTURE ALTERNATIVES ================================================================================ - - Share Repurchase / Optimization of Capital Structure - -------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - -------------- 42 43 SPRINGS INDUSTRIES Base Capital Structure Considerations ================================================================================ - - Springs is less than optimally leveraged and will become more so as it executes on its business plan - - This has the impact of driving its cost of capital higher and instilling more pressure on its ability to achieve attractive equity returns - - SHARE REPURCHASE AT $35/SHARE IS EQUAL TO AN ACQUISITION YIELDING 21% ROIC PRE TAX - -------------------------------------------------------------------------------- Debt / Total Capital - --------------------------------------------------------------------------------
SPRINGS 1998 28% 1999 33% 2000 32% 2001 29% 2002 25% 2003 19% 2004 7% COMPARATIVE DATA "A" Credit 39% "BBB" Credit 46% "BB" Credit 59% "B" 71%
- -------------------------------------------------------------------------------- Weighted Average Cost of Capital - -------------------------------------------------------------------------------- [WEIGHTED AVERAGE COST OF CAPITAL LINE GRAPH] WEIGHTED AVERAGE COST OF CAPITAL
DEBT/TOTAL CAPITAL 30 35 40 45 50 55 60 COST OF CAPITAL 9.23 9.12 9.035 8.945 8.89 9.15 9.22 30.6 38.6 34.6 31.6 45.9 46.9 45 43.9
- --------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - --------------- 43 44 SPRINGS INDUSTRIES Share Buyback Economics - Highly Accretive ================================================================================ - -------------------------------------------------------------------------------- One Time Share Buyback - -------------------------------------------------------------------------------- REPURCHASE 20% OF FLOAT OUTSTANDING AT EXISTING SHARE PRICE
NPV 2000 2001 2002 2003 2004 2005 TOTAL @ 12% ---------------------------------------------------------------------------------- Base EPS(1) $ 4.02 $ 5.29 $ 6.42 $ 8.07 $ 9.01 $ 9.91 -- Base Stock Price(2) 37.03 44.94 56.49 63.01 69.37 -- -- # of Shares Repurchased (000s) 2,097.0 -- -- -- -- -- -- Price Per Share 37.03 -- -- -- -- -- -- Total Cost of Shares Repurchased(3) 77.6 -- -- -- -- -- 77.6 77.6 Pro Forma EPS(4) 4.17 5.69 7.03 9.13 10.27 11.48 -- Accretion 0.15 0.40 0.61 1.06 1.26 1.57 -- % Accretion 3.6% 7.0% 8.7% 11.6% 12.3% 13.7% -- Pro Forma Share Price(2) 39.83 49.21 63.91 71.92 80.38 -- -- Debt / Total Capital - - Base 44.9% 35.7% 29.8% 20.4% 7.8% -- -- - - Pro Forma 51.5% 41.5% 35.1% 25.1% 13.3% -- --
- -------------------------------------------------------------------------------- Consistent Share Buyback - -------------------------------------------------------------------------------- REPURCHASE 4% OF FLOAT EACH YEAR AT THEN EXISTING SHARE PRICE
NPV 2000 2001 2002 2003 2004 2005 TOTAL @ 12% ---------------------------------------------------------------------------------- Base EPS(1) $ 4.02 $ 5.29 $ 6.42 $ 8.07 $ 9.01 $ 9.91 -- Base Stock Price(2) 37.03 44.94 56.49 63.01 69.37 -- -- # of Shares Repurchased (000s) 419.4 419.4 419.4 419.4 419.4 -- -- Price Per Share 28.14 47.53 61.85 70.10 78.56 -- -- Total Cost of Shares Repurchased(3) 11.8 19.9 25.9 29.4 32.9 -- 120.0 82.3 Pro Forma EPS(4) 4.13 5.53 6.79 8.84 10.01 11.22 Accretion 0.11 0.24 0.37 0.77 1.00 1.31 % Accretion 2.7% 4.3% 5.5% 8.7% 10.09% 11.7% Pro Forma Share Price(2) 38.71 47.53 61.88 70.07 78.40 -- -- Debt / Total Capital - - Base 44.9% 35.7% 29.8% 20.4% 7.8% -- - - Pro Forma 45.6% 37.5% 32.3% 24.8% 15.2% --
(1) Company projections with modest growth. (2) Assumes stock trades at 7x forward earnings. (3) In millions. (4) Share repurchase with incremental debt at LIBOR +300. - --------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - --------------- 44 45 SPRINGS INDUSTRIES Impact On Share Price of Share Repurchase Program ================================================================================ [POTENTIAL SHARE PRICES AT 7X FORWARD EPS LINE GRAPH] POTENTIAL SHARE PRICES AT 7X FORWARD EPS
2000 2001 2002 2003 2004 LBO $19.40 $38.15 $64.77 $72.70 $80.55 Share Repurchase $38.71 $47.53 $61.88 $70.07 $78.59 Base $37.03 $44.99 $56.49 $63.01 $69.37
- - Share repurchase assume 4% of float repurchased each year at price of 7x forward EPS & financed at 7.2% - - LBO assumes all debt refinanced at 9.5% for senior and 13% for subordinated - --------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - -------------- 45 46 SPRINGS INDUSTRIES Share Buyback Economics ================================================================================ Repurchase 20% of Float Over 5 Year Period - 4%/Year [EPS BAR CHART] EPS
2000 2001 2002 2003 2004 2005 BASE 4.02 5.29 6.42 8.07 9.01 9.91 PRO FORMA 4.17 5.69 7.03 9.13 10.27 11.48 NORTH 45.9 46.9 45 43.9
[DEBT / TOTAL CAPITAL BAR CHART] DEBT / TOTAL CAPITAL
2000 2001 2002 2003 2004 BASE 0.45 0.36 0.3 0.2 0.08 PRO FORMA 0.46 0.38 0.32 0.25 0.15 NORTH 45.9 46.9 45 43.9
- --------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - --------------- 46 47 SPRINGS INDUSTRIES Section 4 Review of Financial Structure Alternatives ================================================================================ - - Potential Leveraged Recapitalization - --------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - --------------- 47 48 SPRINGS INDUSTRIES Current Stock Market Trading Environment is at an All Time Low ================================================================================ REFLECTIVE OF MARKET CONCERNS: - - POTENTIAL IMPACT OF IMPORTS ON DOMESTIC PRODUCERS - - PRECEDENT IN APPAREL INDUSTRY - - HIGH LEVERAGE IN INDUSTRY - - COMPETITIVE FACTORS ASSOCIATED WITH CONSOLIDATION OF CORE CUSTOMERS - -------------------------------------------------------------------------------- 5 Years Stock Price Range - -------------------------------------------------------------------------------- Springs Industries, Inc. Daily Price Volume [5 Years Stock Price Range Line Graph] OCTOBER 2, 1995 - OCTOBER 3, 2000 Trading Range $45-$50 COMPANY TICKER SYMBOL: SMI Currency: Local (U.S. Dollar) Currency: Local (U.S. Dollar)
SHARE PRICE Date Price Close Volume 10/2/95 39.75 20.70 10/3/95 39.63 16.40 10/4/95 39.50 11.60 10/5/95 40.88 41.60 10/6/95 41.63 14.90 10/9/95 41.25 32.80 10/10/95 41.38 17.70 10/11/95 41.63 15.40 10/12/95 41.38 9.00 10/13/95 42.25 15.30 10/16/95 42.50 51.80 10/17/95 41.88 10.00 10/18/95 41.75 7.70 10/19/95 41.75 30.20 10/20/95 42.63 23.30 10/23/95 42.88 12.20 10/24/95 42.50 85.90 10/25/95 42.25 19.30 10/26/95 41.38 26.80 10/27/95 41.88 22.40 10/30/95 42.50 9.00 10/31/95 42.88 33.30 11/1/95 42.50 5.50 11/2/95 42.75 35.10 11/3/95 42.13 13.90 11/6/95 41.75 61.20 11/7/95 42.25 19.30 11/8/95 41.75 14.10 11/9/95 42.13 42.80 11/10/95 41.88 10.00 11/13/95 41.75 5.90 11/14/95 41.38 12.20 11/15/95 41.50 5.30 11/16/95 41.25 24.30 11/17/95 41.00 21.40 11/20/95 41.00 15.60 11/21/95 42.38 13.20 11/22/95 43.00 45.40 11/24/95 43.00 0.90 11/27/95 42.75 7.00 11/28/95 42.50 13.00 11/29/95 42.50 11.10 11/30/95 42.00 56.50 12/1/95 41.88 17.20 12/4/95 41.88 8.40 12/5/95 42.63 32.20 12/6/95 43.13 25.50 12/7/95 43.25 24.60 12/8/95 43.38 26.00 12/11/95 43.38 11.50 12/12/95 43.75 5.70 12/13/95 43.75 9.90 12/14/95 43.63 31.40 12/15/95 43.75 43.00 12/18/95 42.50 29.90 12/19/95 42.38 46.60 12/20/95 41.50 31.90 12/21/95 42.00 33.60 12/22/95 42.00 15.40 12/26/95 42.25 20.80 12/27/95 41.63 15.10 12/28/95 41.63 17.10 12/29/95 41.38 33.80 1/2/96 42.00 39.00 1/3/96 41.63 26.40 1/4/96 42.00 21.50 1/5/96 41.25 19.70 1/8/96 41.38 2.20 1/9/96 40.50 10.80 1/10/96 39.75 33.50 1/11/96 39.75 26.60 1/12/96 39.50 19.60 1/15/96 39.88 34.80 1/16/96 40.50 25.70 1/17/96 40.13 11.30 1/18/96 40.13 55.90 1/19/96 40.50 45.30 1/22/96 40.50 16.00 1/23/96 40.63 28.40 1/24/96 41.13 43.00 1/25/96 41.13 15.50 1/26/96 41.00 25.50 1/29/96 41.25 13.90 1/30/96 41.00 11.20 1/31/96 40.00 55.50 2/1/96 39.88 84.30 2/2/96 40.13 35.50 2/5/96 39.75 13.80 2/6/96 41.25 52.00 2/7/96 41.00 22.50 2/8/96 41.00 22.40 2/9/96 41.50 39.30 2/12/96 41.88 23.20 2/13/96 42.25 32.10 2/14/96 42.88 29.80 2/15/96 43.63 51.00 2/16/96 43.13 64.50 2/20/96 43.00 20.80 2/21/96 44.00 58.30 2/22/96 44.63 32.20 2/23/96 43.88 11.50 2/26/96 44.13 27.70 2/27/96 43.75 15.80 2/28/96 43.00 30.90 2/29/96 43.25 47.20 3/1/96 43.75 28.00 3/4/96 44.88 32.10 3/5/96 44.75 27.00 3/6/96 44.63 21.60 3/7/96 44.50 76.10 3/8/96 43.88 49.70 3/11/96 43.88 15.70 3/12/96 43.75 19.40 3/13/96 44.00 15.40 3/14/96 44.63 25.00 3/15/96 44.50 31.10 3/18/96 44.50 47.40 3/19/96 45.63 51.10 3/20/96 45.88 32.00 3/21/96 46.13 35.10 3/22/96 46.25 19.10 3/25/96 46.25 22.00 3/26/96 46.38 31.10 3/27/96 46.88 62.60 3/28/96 46.00 36.70 3/29/96 46.00 22.30 4/1/96 46.25 27.50 4/2/96 45.63 14.50 4/3/96 45.38 21.00 4/4/96 45.25 36.90 4/8/96 43.88 15.10 4/9/96 45.25 37.80 4/10/96 43.63 16.70 4/11/96 43.63 21.50 4/12/96 43.38 13.50 4/15/96 43.63 16.10 4/16/96 44.13 28.00 4/17/96 44.75 40.40 4/18/96 45.00 18.50 4/19/96 45.00 35.30 4/22/96 45.63 15.80 4/23/96 45.88 34.90 4/24/96 46.50 23.80 4/25/96 46.25 165.60 4/26/96 45.63 17.40 4/29/96 45.50 11.60 4/30/96 46.00 16.80 5/1/96 46.75 7.70 5/2/96 46.00 31.40 5/3/96 45.50 103.50 5/6/96 45.13 33.10 5/7/96 44.88 45.40 5/8/96 44.13 48.50 5/9/96 44.13 32.70 5/10/96 45.38 21.70 5/13/96 45.63 13.80 5/14/96 46.13 27.50 5/15/96 45.50 96.60 5/16/96 45.00 35.60 5/17/96 45.63 92.70 5/20/96 46.00 15.10 5/21/96 46.13 10.70 5/22/96 46.88 18.20 5/23/96 47.63 33.90 5/24/96 47.88 29.40 5/28/96 46.63 35.80 5/29/96 46.38 23.20 5/30/96 46.50 13.80 5/31/96 46.38 12.50 6/3/96 46.88 19.40 6/4/96 47.63 22.60 6/5/96 48.75 13.90 6/6/96 49.00 83.10 6/7/96 48.25 24.50 6/10/96 48.13 6.90 6/11/96 48.25 27.20 6/12/96 47.25 10.00 6/13/96 47.63 15.20 6/14/96 46.75 18.40 6/17/96 47.00 20.80 6/18/96 47.25 46.40 6/19/96 47.25 45.70 6/20/96 47.00 25.30 6/21/96 46.50 46.00 6/24/96 46.38 23.20 6/25/96 47.25 25.30 6/26/96 46.38 37.10 6/27/96 47.25 31.40 6/28/96 50.25 89.40 7/1/96 49.25 83.20 7/2/96 48.13 23.70 7/3/96 47.88 35.60 7/5/96 46.38 6.10 7/8/96 44.88 48.40 7/9/96 45.38 89.00 7/10/96 45.00 57.90 7/11/96 45.38 45.00 7/12/96 45.13 13.00 7/15/96 42.50 28.80 7/16/96 42.38 38.40 7/17/96 42.63 26.70 7/18/96 43.25 29.10 7/19/96 43.50 122.40 7/22/96 42.88 17.20 7/23/96 43.38 23.50 7/24/96 43.50 46.20 7/25/96 43.75 47.90 7/26/96 43.88 17.90 7/29/96 44.00 19.20 7/30/96 44.88 17.60 7/31/96 45.63 31.60 8/1/96 45.50 18.10 8/2/96 46.00 29.00 8/5/96 46.00 22.90 8/6/96 45.63 20.50 8/7/96 45.50 28.70 8/8/96 45.50 15.60 8/9/96 45.63 5.10 8/12/96 46.00 11.80 8/13/96 45.38 6.80 8/14/96 44.50 19.10 8/15/96 45.75 17.10 8/16/96 45.50 8.30 8/19/96 45.75 4.20 8/20/96 46.00 16.90 8/21/96 45.63 16.80 8/22/96 45.50 26.70 8/23/96 45.75 14.70 8/26/96 45.75 10.30 8/27/96 45.25 7.20 8/28/96 45.75 17.10 8/29/96 45.13 33.30 8/30/96 45.13 18.90 9/3/96 45.00 30.80 9/4/96 45.13 13.90 9/5/96 45.50 4.70 9/6/96 46.00 30.20 9/9/96 45.75 7.00 9/10/96 45.88 20.20 9/11/96 45.75 11.50 9/12/96 45.88 18.30 9/13/96 45.50 33.10 9/16/96 45.38 22.30 9/17/96 46.13 11.00 9/18/96 45.75 6.90 9/19/96 45.75 20.20 9/20/96 45.88 37.90 9/23/96 45.38 18.10 9/24/96 45.50 14.80 9/25/96 44.38 36.20 9/26/96 42.63 50.30 9/27/96 44.38 35.10 9/30/96 44.50 31.50 10/1/96 44.13 24.90 10/2/96 43.50 18.30 10/3/96 43.00 36.00 10/4/96 43.63 27.80 10/7/96 43.63 9.60 10/8/96 43.63 9.30 10/9/96 43.38 12.90 10/10/96 43.00 7.80 10/11/96 43.50 10.20 10/14/96 43.38 25.50 10/15/96 43.13 19.10 10/16/96 43.25 94.10 10/17/96 43.88 12.90 10/18/96 43.75 11.00 10/21/96 44.13 11.80 10/22/96 44.13 96.30 10/23/96 45.38 44.30 10/24/96 44.38 25.40 10/25/96 45.25 28.50 10/28/96 45.88 50.70 10/29/96 45.88 30.40 10/30/96 45.63 10.00 10/31/96 45.13 23.00 11/1/96 44.75 15.40 11/4/96 45.50 10.20 11/5/96 45.63 9.50 11/6/96 46.13 17.50 11/7/96 46.50 16.00 11/8/96 46.25 6.30 11/11/96 46.00 9.30 11/12/96 46.00 6.50 11/13/96 45.63 9.50 11/14/96 45.63 12.00 11/15/96 45.50 15.80 11/18/96 46.00 46.50 11/19/96 45.88 6.80 11/20/96 45.63 14.20 11/21/96 45.25 27.90 11/22/96 45.75 26.70 11/25/96 46.75 11.10 11/26/96 46.25 27.20 11/27/96 46.13 10.60 11/29/96 46.50 3.10 12/2/96 47.63 36.60 12/3/96 47.50 34.50 12/4/96 47.13 26.20 12/5/96 47.13 12.50 12/6/96 46.50 16.10 12/9/96 47.25 11.60 12/10/96 46.75 24.30 12/11/96 43.63 303.90 12/12/96 43.88 36.10 12/13/96 43.63 51.20 12/16/96 41.75 14.70 12/17/96 42.63 40.20 12/18/96 42.88 31.80 12/19/96 43.13 37.00 12/20/96 43.63 71.70 12/23/96 42.13 22.80 12/24/96 42.50 11.40 12/26/96 44.38 57.40 12/27/96 43.75 11.20 12/30/96 43.38 16.30 12/31/96 43.00 11.70 1/2/97 42.25 35.90 1/3/97 42.88 30.40 1/6/97 42.38 26.40 1/7/97 42.63 17.00 1/8/97 41.13 18.00 1/9/97 42.00 29.10 1/10/97 42.25 50.90 1/13/97 42.50 21.40 1/14/97 42.25 22.50 1/15/97 42.13 22.80 1/16/97 42.50 26.00 1/17/97 42.63 28.20 1/20/97 42.50 7.30 1/21/97 42.50 41.20 1/22/97 42.88 11.40 1/23/97 43.25 38.10 1/24/97 42.50 24.90 1/27/97 42.00 24.60 1/28/97 42.13 19.70 1/29/97 42.25 26.80 1/30/97 43.25 15.70 1/31/97 42.25 38.80 2/3/97 42.25 45.40 2/4/97 42.00 19.70 2/5/97 41.75 45.60 2/6/97 41.88 46.30 2/7/97 42.63 33.10 2/10/97 43.25 28.30 2/11/97 42.38 22.50 2/12/97 43.00 16.20 2/13/97 43.75 22.70 2/14/97 43.13 17.10 2/18/97 43.75 19.80 2/19/97 44.13 29.40 2/20/97 44.13 10.60 2/21/97 44.88 18.50 2/24/97 43.75 38.40 2/25/97 43.63 14.20 2/26/97 44.00 66.60 2/27/97 44.63 21.70 2/28/97 44.13 36.70 3/3/97 45.00 26.80 3/4/97 44.88 38.00 3/5/97 45.75 39.40 3/6/97 45.88 17.60 3/7/97 47.50 47.60 3/10/97 47.25 37.90 3/11/97 46.88 63.10 3/12/97 47.25 39.00 3/13/97 47.13 17.50 3/14/97 47.00 50.20 3/17/97 46.63 47.30 3/18/97 46.88 67.70 3/19/97 47.00 66.10 3/20/97 46.88 27.70 3/21/97 46.63 96.20 3/24/97 46.63 52.10 3/25/97 46.13 24.50 3/26/97 45.88 37.70 3/27/97 44.88 20.10 3/31/97 44.75 49.80 4/1/97 44.25 19.60 4/2/97 43.13 39.90 4/3/97 44.13 39.70 4/4/97 45.25 84.20 4/7/97 44.75 37.90 4/8/97 44.88 34.30 4/9/97 45.00 22.00 4/10/97 44.63 16.60 4/11/97 43.50 36.20 4/14/97 44.00 16.50 4/15/97 44.50 69.50 4/16/97 45.50 52.50 4/17/97 44.50 31.60 4/18/97 45.00 32.40 4/21/97 45.25 24.60 4/22/97 46.13 50.40 4/23/97 45.38 33.50 4/24/97 45.00 23.80 4/25/97 45.75 31.40 4/28/97 45.75 24.30 4/29/97 46.00 44.80 4/30/97 46.75 34.60 5/1/97 47.13 34.20 5/2/97 46.50 66.90 5/5/97 47.38 60.70 5/6/97 47.00 40.20 5/7/97 47.50 63.40 5/8/97 47.25 58.90 5/9/97 47.63 39.50 5/12/97 48.13 44.70 5/13/97 47.75 34.00 5/14/97 47.63 88.50 5/15/97 48.25 36.40 5/16/97 48.25 35.10 5/19/97 48.38 5.90 5/20/97 49.13 8.20 5/21/97 48.00 22.10 5/22/97 49.00 22.40 5/23/97 49.38 18.40 5/27/97 49.38 27.20 5/28/97 49.88 17.00 5/29/97 49.38 24.10 5/30/97 50.63 31.80 6/2/97 50.50 13.30 6/3/97 51.00 17.00 6/4/97 50.63 14.60 6/5/97 51.50 15.70 6/6/97 52.25 34.50 6/9/97 52.00 26.50 6/10/97 52.63 21.60 6/11/97 52.88 13.60 6/12/97 53.38 16.70 6/13/97 53.38 35.10 6/16/97 53.00 23.40 6/17/97 52.63 15.60 6/18/97 53.25 52.70 6/19/97 53.63 16.70 6/20/97 53.63 60.40 6/23/97 53.38 43.10 6/24/97 53.81 26.90 6/25/97 53.19 47.20 6/26/97 52.00 33.10 6/27/97 53.31 55.10 6/30/97 52.75 33.50 7/1/97 52.88 38.20 7/2/97 52.94 30.10 7/3/97 53.31 36.90 7/7/97 51.63 53.30 7/8/97 53.56 50.70 7/9/97 50.94 141.30 7/10/97 51.94 52.70 7/11/97 51.44 23.70 7/14/97 50.75 22.00 7/15/97 51.00 58.10 7/16/97 51.19 25.00 7/17/97 50.13 52.60 7/18/97 50.88 33.80 7/21/97 50.00 68.40 7/22/97 50.00 116.30 7/23/97 49.75 69.50 7/24/97 48.94 37.30 7/25/97 48.63 80.60 7/28/97 48.88 32.10 7/29/97 48.94 92.00 7/30/97 48.44 86.30 7/31/97 48.38 36.40 8/1/97 48.06 36.20 8/4/97 47.19 48.70 8/5/97 47.63 30.80 8/6/97 48.13 23.90 8/7/97 47.63 25.40 8/8/97 46.50 56.10 8/11/97 46.75 55.80 8/12/97 46.06 51.10 8/13/97 45.63 56.80 8/14/97 45.38 42.80 8/15/97 43.75 89.10 8/18/97 45.00 95.40 8/19/97 45.69 117.00 8/20/97 47.00 102.20 8/21/97 45.81 69.30 8/22/97 45.44 59.50 8/25/97 46.38 44.70 8/26/97 45.75 266.40 8/27/97 46.44 261.10 8/28/97 46.81 106.20 8/29/97 47.00 35.90 9/2/97 47.13 39.50 9/3/97 48.31 54.00 9/4/97 47.63 43.60 9/5/97 48.13 26.00 9/8/97 48.69 51.60 9/9/97 48.50 35.30 9/10/97 48.81 47.50 9/11/97 49.25 137.20 9/12/97 49.88 16.80 9/15/97 50.25 56.20 9/16/97 51.13 19.40 9/17/97 51.69 25.60 9/18/97 51.75 41.20 9/19/97 53.25 42.80 9/22/97 52.38 50.80 9/23/97 52.88 29.80 9/24/97 52.88 20.90 9/25/97 52.25 35.30 9/26/97 52.44 48.50 9/29/97 53.25 19.70 9/30/97 52.50 53.10 10/1/97 52.31 95.90 10/2/97 52.31 18.90 10/3/97 52.31 53.20 10/6/97 52.44 15.30 10/7/97 52.44 19.10 10/8/97 50.19 62.80 10/9/97 51.25 29.50 10/10/97 51.25 48.90 10/13/97 51.31 23.60 10/14/97 48.19 127.50 10/15/97 49.38 66.90 10/16/97 47.75 82.40 10/17/97 47.00 55.30 10/20/97 46.50 64.20 10/21/97 47.44 47.50 10/22/97 47.69 36.20 10/23/97 47.06 44.50 10/24/97 47.50 45.60 10/27/97 45.00 83.70 10/28/97 45.13 86.90 10/29/97 46.06 24.40 10/30/97 45.44 38.40 10/31/97 46.38 32.10 11/3/97 46.63 35.00 11/4/97 46.44 36.80 11/5/97 46.44 45.20 11/6/97 46.56 24.70 11/7/97 46.25 45.20 11/10/97 46.13 18.40 11/11/97 45.56 20.50 11/12/97 45.25 23.20 11/13/97 46.25 24.00 11/14/97 46.63 52.10 11/17/97 47.50 32.40 11/18/97 48.38 63.80 11/19/97 49.06 73.70 11/20/97 49.38 95.60 11/21/97 49.88 44.50 11/24/97 48.88 55.30 11/25/97 49.31 46.00 11/26/97 49.25 18.60 11/28/97 50.44 19.60 12/1/97 50.94 54.00 12/2/97 51.06 50.00 12/3/97 50.94 52.60 12/4/97 50.75 26.90 12/5/97 51.00 28.70 12/8/97 50.50 29.70 12/9/97 50.63 63.30 12/10/97 51.13 59.60 12/11/97 50.00 38.00 12/12/97 50.75 44.30 12/15/97 51.75 55.70 12/16/97 50.44 39.10 12/17/97 50.75 37.60 12/18/97 51.31 15.40 12/19/97 49.81 81.60 12/22/97 50.63 38.70 12/23/97 50.63 32.70 12/24/97 50.38 22.00 12/26/97 50.13 9.80 12/29/97 51.31 38.60 12/30/97 52.13 29.80 12/31/97 52.00 45.00 1/2/98 52.56 31.40 1/5/98 52.19 38.30 1/6/98 51.94 41.00 1/7/98 52.00 119.50 1/8/98 51.63 23.50 1/9/98 50.50 24.50 1/12/98 51.00 109.20 1/13/98 51.38 46.40 1/14/98 52.06 15.10 1/15/98 52.81 29.50 1/16/98 53.56 64.60 1/20/98 53.63 30.30 1/21/98 53.13 24.50 1/22/98 52.44 50.30 1/23/98 52.50 31.60 1/26/98 52.44 11.10 1/27/98 52.69 55.60 1/28/98 52.88 39.20 1/29/98 52.75 58.80 1/30/98 52.63 26.70 2/2/98 53.44 36.50 2/3/98 53.31 39.60 2/4/98 53.13 38.20 2/5/98 53.63 29.70 2/6/98 54.50 57.10 2/9/98 54.81 32.80 2/10/98 55.94 30.20 2/11/98 55.69 34.40 2/12/98 56.81 28.00 2/13/98 56.63 33.80 2/17/98 56.81 26.40 2/18/98 57.19 67.70 2/19/98 56.25 59.80 2/20/98 56.25 74.40 2/23/98 55.94 26.40 2/24/98 55.13 48.90 2/25/98 56.00 45.10 2/26/98 55.75 29.90 2/27/98 55.94 13.10 3/2/98 55.88 38.00 3/3/98 56.50 89.30 3/4/98 56.38 30.00 3/5/98 56.06 37.70 3/6/98 56.31 34.50 3/9/98 56.25 29.30 3/10/98 56.88 37.50 3/11/98 56.88 37.30 3/12/98 56.50 16.40 3/13/98 55.63 59.10 3/16/98 56.13 40.10 3/17/98 56.63 42.20 3/18/98 56.13 50.00 3/19/98 57.00 61.90 3/20/98 57.13 68.80 3/23/98 56.38 63.70 3/24/98 56.69 21.90 3/25/98 55.06 77.30 3/26/98 55.81 53.70 3/27/98 55.88 19.20 3/30/98 55.50 45.30 3/31/98 55.13 75.80 4/1/98 55.19 27.20 4/2/98 55.81 37.50 4/3/98 54.94 35.90 4/6/98 54.69 26.60 4/7/98 54.06 33.80 4/8/98 54.31 27.80 4/9/98 55.19 34.10 4/13/98 55.31 47.50 4/14/98 55.75 31.20 4/15/98 56.19 33.50 4/16/98 56.00 36.40 4/17/98 55.94 34.30 4/20/98 55.81 43.90 4/21/98 54.44 71.60 4/22/98 54.38 20.70 4/23/98 54.06 37.20 4/24/98 53.50 36.20 4/27/98 54.13 21.10 4/28/98 54.81 67.60 4/29/98 54.63 33.00 4/30/98 55.06 64.20 5/1/98 55.13 24.60 5/4/98 55.00 29.60 5/5/98 54.88 52.40 5/6/98 54.81 59.70 5/7/98 55.25 32.00 5/8/98 55.88 37.00 5/11/98 55.94 44.60 5/12/98 56.56 41.40 5/13/98 56.50 31.10 5/14/98 55.81 16.20 5/15/98 55.75 24.80 5/18/98 55.75 43.90 5/19/98 56.25 45.80 5/20/98 56.38 46.10 5/21/98 56.50 35.30 5/22/98 56.00 14.90 5/26/98 55.56 54.80 5/27/98 55.31 39.90 5/28/98 56.25 13.10 5/29/98 56.13 34.40 6/1/98 55.75 45.50 6/2/98 55.56 42.30 6/3/98 56.06 27.20 6/4/98 56.88 34.80 6/5/98 57.56 71.40 6/8/98 57.38 33.20 6/9/98 60.75 108.10 6/10/98 58.88 79.60 6/11/98 58.06 40.10 6/12/98 57.44 49.60 6/15/98 56.25 24.50 6/16/98 48.75 219.10 6/17/98 49.00 142.50 6/18/98 48.13 61.50 6/19/98 48.06 78.00 6/22/98 47.75 81.20 6/23/98 47.56 106.40 6/24/98 46.31 64.50 6/25/98 46.50 64.60 6/26/98 46.75 52.20 6/29/98 45.31 71.40 6/30/98 46.13 71.20 7/1/98 47.06 59.30 7/2/98 46.44 48.70 7/6/98 45.94 56.40 7/7/98 44.63 72.00 7/8/98 43.50 99.90 7/9/98 42.94 75.50 7/10/98 42.88 61.80 7/13/98 42.81 23.00 7/14/98 42.88 20.10 7/15/98 42.00 104.80 7/16/98 41.94 85.80 7/17/98 42.19 15.80 7/20/98 42.25 52.00 7/21/98 41.94 49.20 7/22/98 41.44 57.20 7/23/98 40.69 59.10 7/24/98 40.13 66.50 7/27/98 39.69 57.10 7/28/98 39.44 56.30 7/29/98 40.25 75.20 7/30/98 40.00 48.60 7/31/98 38.31 47.30 8/3/98 38.38 47.90 8/4/98 37.25 42.50 8/5/98 36.75 58.90 8/6/98 36.25 66.10 8/7/98 37.50 83.70 8/10/98 37.13 51.60 8/11/98 36.06 42.90 8/12/98 36.56 63.40 8/13/98 35.56 95.40 8/14/98 36.81 104.30 8/17/98 36.38 55.90 8/18/98 36.69 56.30 8/19/98 36.63 29.70 8/20/98 36.75 47.90 8/21/98 36.38 58.60 8/24/98 36.69 54.40 8/25/98 35.94 29.00 8/26/98 34.75 32.60 8/27/98 33.88 29.60 8/28/98 33.75 46.00 8/31/98 33.06 80.10 9/1/98 34.75 114.40 9/2/98 34.63 97.10 9/3/98 33.69 89.80 9/4/98 32.56 72.30 9/8/98 36.88 158.10 9/9/98 33.50 101.80 9/10/98 32.94 73.10 9/11/98 33.13 73.60 9/14/98 33.56 63.40 9/15/98 33.06 76.20 9/16/98 34.50 44.50 9/17/98 33.44 58.70 9/18/98 34.88 65.30 9/21/98 35.19 51.30 9/22/98 33.88 84.90 9/23/98 35.50 56.30 9/24/98 35.63 50.50 9/25/98 35.75 94.40 9/28/98 37.31 80.20 9/29/98 36.13 87.50 9/30/98 34.75 88.20 10/1/98 32.69 115.50 10/2/98 33.50 89.40 10/5/98 33.94 118.70 10/6/98 32.75 54.30 10/7/98 33.44 49.00 10/8/98 32.69 42.30 10/9/98 32.00 71.00 10/12/98 32.56 17.90 10/13/98 33.25 41.80 10/14/98 32.69 16.60 10/15/98 33.31 24.90 10/16/98 33.00 31.20 10/19/98 34.38 24.90 10/20/98 34.50 95.50 10/21/98 35.44 20.10 10/22/98 34.75 39.30 10/23/98 34.63 28.30 10/26/98 35.31 48.80 10/27/98 35.94 37.80 10/28/98 35.50 25.10 10/29/98 35.13 26.70 10/30/98 35.38 26.90 11/2/98 37.56 49.40 11/3/98 37.75 24.00 11/4/98 38.19 31.70 11/5/98 38.31 19.80 11/6/98 39.44 22.90 11/9/98 39.75 43.70 11/10/98 39.44 18.60 11/11/98 39.94 30.50 11/12/98 40.13 14.70 11/13/98 41.56 49.60 11/16/98 40.50 36.60 11/17/98 40.38 28.50 11/18/98 38.56 36.20 11/19/98 38.75 21.00 11/20/98 38.75 23.60 11/23/98 38.50 49.10 11/24/98 37.31 64.50 11/25/98 39.69 47.00 11/27/98 38.63 20.10 11/30/98 38.94 26.00 12/1/98 39.56 24.90 12/2/98 42.00 85.40 12/3/98 40.94 62.70 12/4/98 38.88 52.90 12/7/98 39.00 53.00 12/8/98 38.00 57.20 12/9/98 39.25 26.50 12/10/98 37.88 13.00 12/11/98 37.88 12.00 12/14/98 36.81 38.10 12/15/98 38.63 82.50 12/16/98 39.38 52.40 12/17/98 40.88 70.90 12/18/98 39.63 79.90 12/21/98 39.81 26.50 12/22/98 39.13 41.90 12/23/98 39.00 31.80 12/24/98 39.75 13.90 12/28/98 40.06 28.60 12/29/98 41.88 40.40 12/30/98 41.00 22.20 12/31/98 41.44 56.70 1/4/99 42.19 35.90 1/5/99 41.31 34.40 1/6/99 40.56 56.20 1/7/99 40.50 74.70 1/8/99 40.06 88.00 1/11/99 41.00 26.20 1/12/99 40.13 17.10 1/13/99 39.94 33.60 1/14/99 40.00 46.80 1/15/99 41.19 72.70 1/19/99 41.38 57.20 1/20/99 42.50 72.20 1/21/99 40.63 56.00 1/22/99 40.00 100.60 1/25/99 40.19 55.20 1/26/99 39.88 38.50 1/27/99 39.06 16.70 1/28/99 41.50 49.60 1/29/99 41.75 67.00 2/1/99 39.63 41.30 2/2/99 39.44 144.10 2/3/99 41.75 82.30 2/4/99 39.00 105.60 2/5/99 38.38 66.20 2/8/99 37.75 89.50 2/9/99 37.44 37.20 2/10/99 36.50 60.40 2/11/99 36.75 77.30 2/12/99 36.69 30.60 2/16/99 36.13 38.20 2/17/99 35.50 47.80 2/18/99 35.75 57.20 2/19/99 35.13 75.30 2/22/99 34.06 74.40 2/23/99 33.13 104.20 2/24/99 31.81 101.40 2/25/99 33.19 52.30 2/26/99 33.25 22.70 3/1/99 31.94 34.20 3/2/99 32.00 54.10 3/3/99 32.25 47.50 3/4/99 32.63 42.40 3/5/99 32.44 18.90 3/8/99 32.50 64.90 3/9/99 32.06 82.90 3/10/99 32.00 75.80 3/11/99 31.81 75.90 3/12/99 31.75 36.50 3/15/99 30.75 57.60 3/16/99 31.69 45.20 3/17/99 32.06 84.00 3/18/99 33.44 93.50 3/19/99 31.81 53.40 3/22/99 31.44 70.70 3/23/99 29.94 77.10 3/24/99 29.88 74.40 3/25/99 30.19 118.80 3/26/99 29.06 112.50 3/29/99 29.25 93.20 3/30/99 29.19 58.70 3/31/99 27.06 115.90 4/1/99 27.50 74.20 4/5/99 27.81 47.30 4/6/99 28.19 24.90 4/7/99 28.50 84.50 4/8/99 27.81 42.20 4/9/99 29.25 77.70 4/12/99 29.25 59.60 4/13/99 29.00 39.80 4/14/99 29.25 71.30 4/15/99 29.63 42.80 4/16/99 30.44 54.90 4/19/99 32.06 173.70 4/20/99 34.56 109.50 4/21/99 37.00 194.30 4/22/99 35.94 56.30 4/23/99 36.44 32.40 4/26/99 36.19 33.00 4/27/99 35.81 29.30 4/28/99 36.56 54.00 4/29/99 38.00 57.80 4/30/99 37.38 63.70 5/3/99 40.19 76.40 5/4/99 40.06 84.50 5/5/99 40.63 70.70 5/6/99 40.50 77.60 5/7/99 41.13 46.10 5/10/99 42.44 61.10 5/11/99 41.94 52.80 5/12/99 41.75 42.60 5/13/99 42.94 24.20 5/14/99 41.50 49.80 5/17/99 41.13 33.70 5/18/99 40.19 23.50 5/19/99 39.81 37.90 5/20/99 41.31 67.60 5/21/99 43.50 76.90 5/24/99 41.44 70.80 5/25/99 40.50 22.80 5/26/99 40.44 34.90 5/27/99 39.44 42.50 5/28/99 39.63 30.20 6/1/99 38.94 54.50 6/2/99 41.56 104.80 6/3/99 42.00 75.70 6/4/99 42.00 44.60 6/7/99 42.00 12.10 6/8/99 41.00 11.70 6/9/99 39.94 40.10 6/10/99 39.63 49.50 6/11/99 38.44 45.30 6/14/99 38.75 46.10 6/15/99 38.56 25.30 6/16/99 37.81 32.20 6/17/99 38.69 60.30 6/18/99 38.19 65.50 6/21/99 38.63 21.30 6/22/99 39.13 49.20 6/23/99 39.50 32.20 6/24/99 39.69 60.70 6/25/99 40.25 47.70 6/28/99 40.75 50.90 6/29/99 42.44 73.00 6/30/99 43.63 112.20 7/1/99 42.88 115.40 7/2/99 42.81 34.90 7/6/99 43.31 36.00 7/7/99 43.25 24.90 7/8/99 42.38 62.90 7/9/99 42.13 11.80 7/12/99 41.38 39.70 7/13/99 41.81 20.30 7/14/99 40.75 50.30 7/15/99 41.75 28.60 7/16/99 41.38 48.20 7/19/99 40.63 26.30 7/20/99 41.50 48.80 7/21/99 41.50 41.70 7/22/99 41.44 23.30 7/23/99 41.13 6.30 7/26/99 41.19 14.60 7/27/99 40.94 42.00 7/28/99 40.63 14.40 7/29/99 40.13 10.50 7/30/99 39.75 14.50 8/2/99 39.56 13.70 8/3/99 39.00 24.50 8/4/99 39.13 16.20 8/5/99 39.75 30.40 8/6/99 40.13 31.00 8/9/99 40.00 12.70 8/10/99 39.94 50.30 8/11/99 39.75 44.00 8/12/99 39.38 13.10 8/13/99 40.25 17.40 8/16/99 40.13 10.20 8/17/99 39.50 89.70 8/18/99 39.38 45.10 8/19/99 39.50 22.10 8/20/99 39.44 21.00 8/23/99 39.44 9.80 8/24/99 39.31 73.20 8/25/99 39.56 18.70 8/26/99 39.06 6.00 8/27/99 38.44 63.10 8/30/99 37.69 19.20 8/31/99 37.56 20.80 9/1/99 38.38 19.20 9/2/99 37.75 21.10 9/3/99 38.88 45.90 9/7/99 38.88 23.10 9/8/99 38.63 18.60 9/9/99 38.63 23.10 9/10/99 38.50 12.90 9/13/99 37.38 61.40 9/14/99 37.06 70.30 9/15/99 37.19 17.50 9/16/99 35.94 28.30 9/17/99 35.75 24.00 9/20/99 36.06 12.40 9/21/99 35.44 10.00 9/22/99 35.25 7.60 9/23/99 33.88 45.50 9/24/99 33.69 23.10 9/27/99 33.88 47.70 9/28/99 33.94 15.00 9/29/99 33.69 30.60 9/30/99 33.94 18.70 10/1/99 33.88 9.80 10/4/99 33.75 27.00 10/5/99 33.75 82.80 10/6/99 33.94 20.60 10/7/99 34.00 40.40 10/8/99 33.88 21.30 10/11/99 33.88 11.60 10/12/99 33.56 17.60 10/13/99 33.88 74.60 10/14/99 33.81 84.50 10/15/99 33.44 28.20 10/18/99 33.19 16.80 10/19/99 33.00 184.00 10/20/99 32.94 250.30 10/21/99 35.69 102.60 10/22/99 38.56 116.50 10/25/99 39.63 208.30 10/26/99 39.38 92.20 10/27/99 39.44 89.20 10/28/99 39.31 61.00 10/29/99 39.81 61.20 11/1/99 39.81 50.90 11/2/99 40.06 97.00 11/3/99 40.75 127.90 11/4/99 42.06 70.90 11/5/99 42.44 70.70 11/8/99 43.44 91.70 11/9/99 42.56 40.70 11/10/99 41.63 24.90 11/11/99 41.19 50.00 11/12/99 41.75 46.00 11/15/99 39.38 83.90 11/16/99 40.81 59.30 11/17/99 40.13 40.60 11/18/99 41.25 59.30 11/19/99 40.69 62.60 11/22/99 39.81 47.90 11/23/99 39.56 63.70 11/24/99 38.63 76.90 11/26/99 39.88 19.50 11/29/99 39.75 45.70 11/30/99 40.00 55.70 12/1/99 39.13 51.00 12/2/99 39.38 21.10 12/3/99 39.63 32.80 12/6/99 38.25 43.60 12/7/99 38.25 54.60 12/8/99 37.81 28.30 12/9/99 37.94 113.70 12/10/99 38.50 42.50 12/13/99 38.50 26.40 12/14/99 38.31 15.90 12/15/99 38.38 27.50 12/16/99 37.31 7.70 12/17/99 37.88 66.20 12/20/99 38.75 38.40 12/21/99 37.94 43.40 12/22/99 39.44 35.10 12/23/99 39.19 27.40 12/27/99 40.69 46.70 12/28/99 39.25 22.50 12/29/99 39.50 5.90 12/30/99 39.81 29.80 12/31/99 39.94 12.80 1/3/00 39.88 65.90 1/4/00 38.13 38.30 1/5/00 39.31 38.00 1/6/00 38.75 35.60 1/7/00 38.69 24.80 1/10/00 38.69 33.90 1/11/00 39.19 17.60 1/12/00 39.94 18.70 1/13/00 39.50 30.30 1/14/00 39.69 23.10 1/18/00 39.63 34.20 1/19/00 39.25 22.40 1/20/00 38.25 40.10 1/21/00 37.69 32.10 1/24/00 37.44 48.30 1/25/00 37.94 41.90 1/26/00 36.88 52.60 1/27/00 37.06 32.00 1/28/00 36.94 35.50 1/31/00 36.38 50.50 2/1/00 36.81 57.50 2/2/00 37.19 80.60 2/3/00 38.81 64.90 2/4/00 37.88 77.20 2/7/00 38.38 71.20 2/8/00 38.13 36.20 2/9/00 39.69 100.30 2/10/00 39.50 77.20 2/11/00 39.31 47.30 2/14/00 39.38 46.10 2/15/00 39.38 39.30 2/16/00 39.81 47.50 2/17/00 39.31 98.10 2/18/00 38.75 47.50 2/22/00 38.56 54.90 2/23/00 38.50 30.90 2/24/00 35.44 124.20 2/25/00 34.31 178.10 2/28/00 34.00 140.20 2/29/00 35.44 79.70 3/1/00 35.25 37.80 3/2/00 37.19 123.70 3/3/00 37.38 70.00 3/6/00 36.38 78.50 3/7/00 35.81 56.40 3/8/00 36.19 54.70 3/9/00 37.50 133.20 3/10/00 36.81 88.40 3/13/00 35.63 71.00 3/14/00 34.69 80.20 3/15/00 35.38 65.00 3/16/00 37.56 93.30 3/17/00 37.94 85.00 3/20/00 37.25 62.20 3/21/00 38.06 85.10 3/22/00 38.13 75.40 3/23/00 38.13 45.00 3/24/00 38.13 40.90 3/27/00 37.63 176.30 3/28/00 37.88 54.00 3/29/00 38.00 27.70 3/30/00 38.38 39.70 3/31/00 38.00 64.70 4/3/00 38.50 33.60 4/4/00 38.31 61.80 4/5/00 38.44 53.20 4/6/00 39.19 37.70 4/7/00 39.19 62.80 4/10/00 38.75 33.50 4/11/00 40.06 66.90 4/12/00 40.06 70.10 4/13/00 38.94 39.60 4/14/00 38.19 72.10 4/17/00 38.69 68.20 4/18/00 39.00 60.00 4/19/00 40.38 88.10 4/20/00 41.75 96.20 4/24/00 42.06 101.90 4/25/00 43.19 98.40 4/26/00 43.19 40.70 4/27/00 42.06 59.50 4/28/00 41.06 141.20 5/1/00 43.50 154.80 5/2/00 45.63 174.90 5/3/00 47.06 214.60 5/4/00 48.56 161.50 5/5/00 47.38 166.20 5/8/00 47.38 142.00 5/9/00 46.94 273.40 5/10/00 47.44 232.40 5/11/00 48.81 119.50 5/12/00 48.19 113.20 5/15/00 47.06 108.20 5/16/00 47.25 161.40 5/17/00 47.00 50.90 5/18/00 46.81 93.60 5/19/00 46.50 101.30 5/22/00 46.31 105.00 5/23/00 45.19 84.90 5/24/00 46.56 191.80 5/25/00 46.31 179.90 5/26/00 47.25 105.80 5/30/00 47.44 61.00 5/31/00 47.50 167.70 6/1/00 43.88 390.70 6/2/00 42.38 208.80 6/5/00 42.94 158.20 6/6/00 41.88 299.50 6/7/00 41.63 110.40 6/8/00 39.94 147.00 6/9/00 39.88 57.60 6/12/00 39.94 76.10 6/13/00 38.75 138.10 6/14/00 39.25 127.60 6/15/00 39.50 74.90 6/16/00 39.56 150.60 6/19/00 35.88 243.00 6/20/00 35.81 231.30 6/21/00 34.69 224.50 6/22/00 34.31 121.20 6/23/00 34.00 94.00 6/26/00 34.25 161.50 6/27/00 33.44 214.30 6/28/00 34.06 397.70 6/29/00 34.38 76.90 6/30/00 32.00 213.80 7/3/00 32.63 48.70 7/5/00 32.75 87.50 7/6/00 31.56 221.50 7/7/00 31.75 72.20 7/10/00 31.75 143.60 7/11/00 32.31 102.60 7/12/00 32.13 91.60 7/13/00 31.88 78.80 7/14/00 32.06 62.30 7/17/00 32.31 60.80 7/18/00 31.50 74.60 7/19/00 31.38 36.70 7/20/00 32.88 153.40 7/21/00 34.06 194.20 7/24/00 33.63 80.60 7/25/00 33.31 80.60 7/26/00 33.06 88.80 7/27/00 32.88 75.60 7/28/00 32.44 48.60 7/31/00 32.25 44.70 8/1/00 31.75 66.50 8/2/00 32.13 29.40 8/3/00 31.88 61.90 8/4/00 31.56 83.40 8/7/00 32.19 51.40 8/8/00 31.94 122.40 8/9/00 31.69 95.20 8/10/00 31.75 37.00 8/11/00 31.81 29.10 8/14/00 32.13 20.10 8/15/00 31.31 48.60 8/16/00 31.13 27.90 8/17/00 31.56 24.70 8/18/00 31.44 27.60 8/21/00 31.00 30.80 8/22/00 31.75 69.50 8/23/00 31.38 40.30 8/24/00 31.56 31.20 8/25/00 31.31 34.80 8/28/00 30.75 43.70 8/29/00 30.00 46.70 8/30/00 30.06 41.10 8/31/00 29.88 33.60 9/1/00 29.81 33.50 9/5/00 29.69 77.80 9/6/00 31.25 66.90 9/7/00 31.25 31.40 9/8/00 31.13 34.70 9/11/00 30.06 30.20 9/12/00 29.63 42.50 9/13/00 29.19 39.00 9/14/00 29.44 30.40 9/15/00 28.88 53.90 9/18/00 28.63 40.70 9/19/00 28.94 36.20 9/20/00 28.19 109.70 9/21/00 27.88 72.60 9/22/00 27.50 97.30 9/25/00 27.38 48.30 9/26/00 27.13 48.10 9/27/00 27.19 33.50 9/28/00 27.50 76.10 9/29/00 28.19 52.60 10/2/00 27.88 33.20 10/3/00 28.38 70.50
- -------------------------------------------------------------------------------- One Year Stock Price Range - -------------------------------------------------------------------------------- Springs Industries, Inc. Daily Price Volume [One Year Stock Price Range Line Graph] OCTOBER 1, 1999 - OCTOBER 3, 2000 Trading Range $45-$50 LTM Average $37.11 LSM Average $36.16 COMPANY TICKER SYMBOL: SMI Currency: Local (U.S. Dollar) Currency: Local (U.S. Dollar)
SHARE PRICE Date Price Close Volume 10/1/99 33.88 9.80 10/4/99 33.75 27.00 10/5/99 33.75 82.80 10/6/99 33.94 20.60 10/7/99 34.00 40.40 10/8/99 33.88 21.30 10/11/99 33.88 11.60 10/12/99 33.56 17.60 10/13/99 33.88 74.60 10/14/99 33.81 84.50 10/15/99 33.44 28.20 10/18/99 33.19 16.80 10/19/99 33.00 184.00 10/20/99 32.94 250.30 10/21/99 35.69 102.60 10/22/99 38.56 116.50 10/25/99 39.63 208.30 10/26/99 39.38 92.20 10/27/99 39.44 89.20 10/28/99 39.31 61.00 10/29/99 39.81 61.20 11/1/99 39.81 50.90 11/2/99 40.06 97.00 11/3/99 40.75 127.90 11/4/99 42.06 70.90 11/5/99 42.44 70.70 11/8/99 43.44 91.70 11/9/99 42.56 40.70 11/10/99 41.63 24.90 11/11/99 41.19 50.00 11/12/99 41.75 46.00 11/15/99 39.38 83.90 11/16/99 40.81 59.30 11/17/99 40.13 40.60 11/18/99 41.25 59.30 11/19/99 40.69 62.60 11/22/99 39.81 47.90 11/23/99 39.56 63.70 11/24/99 38.63 76.90 11/26/99 39.88 19.50 11/29/99 39.75 45.70 11/30/99 40.00 55.70 12/1/99 39.13 51.00 12/2/99 39.38 21.10 12/3/99 39.63 32.80 12/6/99 38.25 43.60 12/7/99 38.25 54.60 12/8/99 37.81 28.30 12/9/99 37.94 113.70 12/10/99 38.50 42.50 12/13/99 38.50 26.40 12/14/99 38.31 15.90 12/15/99 38.38 27.50 12/16/99 37.31 7.70 12/17/99 37.88 66.20 12/20/99 38.75 38.40 12/21/99 37.94 43.40 12/22/99 39.44 35.10 12/23/99 39.19 27.40 12/27/99 40.69 46.70 12/28/99 39.25 22.50 12/29/99 39.50 5.90 12/30/99 39.81 29.80 12/31/99 39.94 12.80 1/3/00 39.88 65.90 1/4/00 38.13 38.30 1/5/00 39.31 38.00 1/6/00 38.75 35.60 1/7/00 38.69 24.80 1/10/00 38.69 33.90 1/11/00 39.19 17.60 1/12/00 39.94 18.70 1/13/00 39.50 30.30 1/14/00 39.69 23.10 1/18/00 39.63 34.20 1/19/00 39.25 22.40 1/20/00 38.25 40.10 1/21/00 37.69 32.10 1/24/00 37.44 48.30 1/25/00 37.94 41.90 1/26/00 36.88 52.60 1/27/00 37.06 32.00 1/28/00 36.94 35.50 1/31/00 36.38 50.50 2/1/00 36.81 57.50 2/2/00 37.19 80.60 2/3/00 38.81 64.90 2/4/00 37.88 77.20 2/7/00 38.38 71.20 2/8/00 38.13 36.20 2/9/00 39.69 100.30 2/10/00 39.50 77.20 2/11/00 39.31 47.30 2/14/00 39.38 46.10 2/15/00 39.38 39.30 2/16/00 39.81 47.50 2/17/00 39.31 98.10 2/18/00 38.75 47.50 2/22/00 38.56 54.90 2/23/00 38.50 30.90 2/24/00 35.44 124.20 2/25/00 34.31 178.10 2/28/00 34.00 140.20 2/29/00 35.44 79.70 3/1/00 35.25 37.80 3/2/00 37.19 123.70 3/3/00 37.38 70.00 3/6/00 36.38 78.50 3/7/00 35.81 56.40 3/8/00 36.19 54.70 3/9/00 37.50 133.20 3/10/00 36.81 88.40 3/13/00 35.63 71.00 3/14/00 34.69 80.20 3/15/00 35.38 65.00 3/16/00 37.56 93.30 3/17/00 37.94 85.00 3/20/00 37.25 62.20 3/21/00 38.06 85.10 3/22/00 38.13 75.40 3/23/00 38.13 45.00 3/24/00 38.13 40.90 3/27/00 37.63 176.30 3/28/00 37.88 54.00 3/29/00 38.00 27.70 3/30/00 38.38 39.70 3/31/00 38.00 64.70 4/3/00 38.50 33.60 4/4/00 38.31 61.80 4/5/00 38.44 53.20 4/6/00 39.19 37.70 4/7/00 39.19 62.80 4/10/00 38.75 33.50 4/11/00 40.06 66.90 4/12/00 40.06 70.10 4/13/00 38.94 39.60 4/14/00 38.19 72.10 4/17/00 38.69 68.20 4/18/00 39.00 60.00 4/19/00 40.38 88.10 4/20/00 41.75 96.20 4/24/00 42.06 101.90 4/25/00 43.19 98.40 4/26/00 43.19 40.70 4/27/00 42.06 59.50 4/28/00 41.06 141.20 5/1/00 43.50 154.80 5/2/00 45.63 174.90 5/3/00 47.06 214.60 5/4/00 48.56 161.50 5/5/00 47.38 166.20 5/8/00 47.38 142.00 5/9/00 46.94 273.40 5/10/00 47.44 232.40 5/11/00 48.81 119.50 5/12/00 48.19 113.20 5/15/00 47.06 108.20 5/16/00 47.25 161.40 5/17/00 47.00 50.90 5/18/00 46.81 93.60 5/19/00 46.50 101.30 5/22/00 46.31 105.00 5/23/00 45.19 84.90 5/24/00 46.56 191.80 5/25/00 46.31 179.90 5/26/00 47.25 105.80 5/30/00 47.44 61.00 5/31/00 47.50 167.70 6/1/00 43.88 390.70 6/2/00 42.38 208.80 6/5/00 42.94 158.20 6/6/00 41.88 299.50 6/7/00 41.63 110.40 6/8/00 39.94 147.00 6/9/00 39.88 57.60 6/12/00 39.94 76.10 6/13/00 38.75 138.10 6/14/00 39.25 127.60 6/15/00 39.50 74.90 6/16/00 39.56 150.60 6/19/00 35.88 243.00 6/20/00 35.81 231.30 6/21/00 34.69 224.50 6/22/00 34.31 121.20 6/23/00 34.00 94.00 6/26/00 34.25 161.50 6/27/00 33.44 214.30 6/28/00 34.06 397.70 6/29/00 34.38 76.90 6/30/00 32.00 213.80 7/3/00 32.63 48.70 7/5/00 32.75 87.50 7/6/00 31.56 221.50 7/7/00 31.75 72.20 7/10/00 31.75 143.60 7/11/00 32.31 102.60 7/12/00 32.13 91.60 7/13/00 31.88 78.80 7/14/00 32.06 62.30 7/17/00 32.31 60.80 7/18/00 31.50 74.60 7/19/00 31.38 36.70 7/20/00 32.88 153.40 7/21/00 34.06 194.20 7/24/00 33.63 80.60 7/25/00 33.31 80.60 7/26/00 33.06 88.80 7/27/00 32.88 75.60 7/28/00 32.44 48.60 7/31/00 32.25 44.70 8/1/00 31.75 66.50 8/2/00 32.13 29.40 8/3/00 31.88 61.90 8/4/00 31.56 83.40 8/7/00 32.19 51.40 8/8/00 31.94 122.40 8/9/00 31.69 95.20 8/10/00 31.75 37.00 8/11/00 31.81 29.10 8/14/00 32.13 20.10 8/15/00 31.31 48.60 8/16/00 31.13 27.90 8/17/00 31.56 24.70 8/18/00 31.44 27.60 8/21/00 31.00 30.80 8/22/00 31.75 69.50 8/23/00 31.38 40.30 8/24/00 31.56 31.20 8/25/00 31.31 34.80 8/28/00 30.75 43.70 8/29/00 30.00 46.70 8/30/00 30.06 41.10 8/31/00 29.88 33.60 9/1/00 29.81 33.50 9/5/00 29.69 77.80 9/6/00 31.25 66.90 9/7/00 31.25 31.40 9/8/00 31.13 34.70 9/11/00 30.06 30.20 9/12/00 29.63 42.50 9/13/00 29.19 39.00 9/14/00 29.44 30.40 9/15/00 28.88 53.90 9/18/00 28.63 40.70 9/19/00 28.94 36.20 9/20/00 28.19 109.70 9/21/00 27.88 72.60 9/22/00 27.50 97.30 9/25/00 27.38 48.30 9/26/00 27.13 48.10 9/27/00 27.19 33.50 9/28/00 27.50 76.10 9/29/00 28.19 52.60 10/2/00 27.88 33.20 10/3/00 28.38 70.50
- --------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - --------------- 48 49 SPRINGS INDUSTRIES Financial Parameters of a Leveraged Recapitalization ================================================================================
LBO at ------ Current(1) $40 $45 $50 WXS(2) DR (2) ---------- --- --- --- ------ ------ Premium to 12 mo. Avg. ($37.11) (23.5)% 7.8% 21.3% 34.7% -- -- Premium to 6 mo. Avg. ($36.16) (21.5) 10.6 24.5 38.3 -- -- P/2000 EPS 6.70x 9.76x 10.96x 12.19x 6.49x 4.10x EV/2000 EBITDA 3.48 4.39 4.74 5.10 6.18 3.72 Pro Forma Debt/2000 EBITDA 1.53 3.37 3.59 3.82 4.28 2.89 Pro Forma 2000 EBITDA - CapEx/Int.(3) 4.09 1.55 1.43 1.33 2.36 2.22 Total Debt $391.0 $859.0 $917.0 $976.0 $1,539.8 $319.8 Value of Public Shares $310.1 $452.0 $508.5 $565.0 $ 667.4 $ 95.2 Value of Family Shares 192.1 280.0 315.0 350.0 -- --
(1) $28.38 per share at October 3, 2000. (2) Based on First Union Research dated July 28,2000 (WXS) and July 27, 2000 (DR). (3) Assumes interest expense of LIBOR + 300 on senior debt up to $500 million, and 13% on Sub. Debt amounts hereafter. 5 YEAR RETURN ON EQUITY INVESTMENT
EBITDA VALUATION ROI MULTIPLE TO RECAP AT YEARS INVESTORS -------- --------- 4.0x 33.5% 4.5x 37.6% 5.0x 41.3%
- --------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - --------------- 49 50 SPRINGS INDUSTRIES LBO Model ================================================================================
($ MILLIONS) 2000 2001 2002 2003 2004 -------------------------------------------------------- Revenues $2321 $2422 $2574 $ 2739 $ 2876 EBITDA 258 301 349 408 436 Net Income Base Case $ 73 $ 97 $ 118 $ 151 $ 169 LBO 32 52 73 105 122 EPS Base Case $4.02 $5.29 $6.42 $ 8.07 $ 9.01 LBO 4.37 7.09 9.96 14.32 16.64 Debt / EBITDA Base Case 1.6x 1.2x 1.0x 0.6x 0.2x LBO 3.5x 3.0x 2.5x 1.9x 1.5x Debt/Total Capital Base Case 33% 29% 25% 19% 7% LBO 58% 56% 53% 47% 35%
- --------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - --------------- Source: Base Case - Springs LBO - Morgan Stanley Dean Witter 50 51 SPRINGS INDUSTRIES Potential Share Value vs. Current LBO Values ================================================================================ COMPARATIVE PRICE TO FORWARD EPS Springs Current 5.4x Springs Year End: 1999 9.1x 1998 9.6x 1997 25.3x 1996 12.5x 1995 9.5x WestPoint Current 5.1x Dan River Current 3.4x
Premium of $45 LBO price to: Current ($28.38) 58.6% 60 Day Average ($30.07) 49.7% 120 Day Average ($32.37) 39.5% 360 Day Average ($37.10) 21.3%
[Values for the Years Ending December 31 Line Graph] POTENTIAL SHARE VALUES AT 6 TO 8X FUTURE EARNINGS
2000 2001 2002 2003 2004 $45.0 $50.4 $56.4 $63.2 $70.8 $42.32 $51.36 $64.56 $72.08 $79.78 $31.74 $38.52 $48.42 $54.06 $59.46
Values for the Years Ending December 31 - --------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - --------------- 51 52 SPRINGS INDUSTRIES SECTION 4 REVIEW OF FINANCIAL STRUCTURE ALTERNATIVES ================================================================================ - - ACCESS TO FINANCIAL RESOURCES - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 52 53 SPRINGS INDUSTRIES SPRINGS CURRENT BORROWING FACILITY IS ATTRACTIVE BUT LIMITED IN AMOUNT ================================================================================ ADDITIONAL BORROWING CAPACITY UNDER EXISTING LINE ($ MILLIONS) - - CURRENT BORROWING RATE IS LIBOR PLUS 30 BASIS POINTS - - MARKET RATE FOR MORE LEVERAGED PLATFORM IS @ LIBOR PLUS 300 BASIS POINTS - - SAVINGS ON EXISTING DEBT AS LEVERAGED BASIS IS @ $9.8 MILLION PRE-TAX - - LIMITING TEST IS RATIO OF DEBT TO TOTAL TANGIBLE CAPITAL - - SPRINGS PROBABLY FALLS TO BB DEBT RATING IF IT BORROWS TO MAXIMUM LEVEL UNDER FACILITY. [BAR GRAPH]
2000 2001 ---- ---- For Share Repurchase or Acquisition Having All Goodwill $110 $170 For Cap-Ex or Acquisition Having No Goodwill $231 $348
- - FOR SHARE REPURCHASE OR ACQUISITION HAVING ALL GOODWILL - - FOR CAP-EX OR ACQUISITION HAVING NO GOODWILL - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 53 54 SPRINGS INDUSTRIES SPRINGS MAY REQUIRE NEW CAPITAL TO SUPPORT SELECTIVE GROWTH STRATEGIES ================================================================================ - - SPRINGS IS CONSTRAINED BY CURRENT LENDING ENVIRONMENT - - DIVIDEND WOULD BE AT RISK IN A GROWTH STRATEGY - - ASSUMPTIONS - SENIOR DEBT CONSERVATIVELY LIMITED TO 2X EBITDA - SUB DEBT CONSERVATIVELY LIMITED TO 1X EBITDA - REMAINDER IS SOURCED FROM NEW EQUITY DEBT LEVELS & DEBT/EBITDA [BAR GRAPH]
BASE PLUS MULTIPLE BASE PLUS PILLOWTEX PLUS WESTPOINT SPRINGS BASE PLUS ACQUISITION STRATEGY IN AGGRESSIVE SOURCING STEVENS BASE 2000 PILLOWTEX CORE BED & Bath Investment ------- --------- --------- --------------- ---------- New Equity $250 Subordinated Debt $359 $153 $359 Senior Debt $1,540 $409 $668 $608 $661
BASE PLUS MULTIPLE ACQUISITION STRATEGY IN CORE BED & BATH PLUS AGGRESSIVE SOURCING INVESTMENT ---------- New Equity $ 99 Subordinated Debt $304 Senior Debt $608
- ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 54 55 SPRINGS INDUSTRIES PURSUIT OF GROWTH / ACQUISITION INITIATIVES WOULD PUT CONSIDERABLE PRESSURE ON SPRINGS DEBT RATINGS ================================================================================
RATING PARAMETERS - ----------------------= BBB 46.4% BB 58.5% B 71.4% CCC 79.4%
RATING PARAMETERS - -------------------- BBB 6.3x BB 3.9x B 2.3x CCC 0.2x
TOTAL DEBT/TOTAL CAPITAL ------------------------------------------------------- 2000 2001 2002 2003 ---- ---- ---- ---- Springs Base 33% 29% 25% 19% Springs Plus Pillowtex 55% 52% 48% 43% Springs Plus Aggressive Sourcing Investment 45% 41% 37% 31% Springs Plus Pillowtex Plus Sourcing Investment 60% 58% 54% 49% Springs LBO 58% 56% 53% 47%
EBITDA INTEREST COVERAGE ------------------------------------------------------- 2000 2001 2002 2003 ---- ---- ---- ---- Springs Base 8.1x 10.4x 12.9x 19.4x Springs Plus Pillowtex 2.9x 3.8x 4.8x 5.7x Springs Plus Aggressive Sourcing Investment 4.6x 5.7x 6.8x 9.1x Springs Plus Pillowtex Plus Sourcing Investment 2.4x 3.1x 3.8x 4.5x Springs LBO 2.6x 3.1x 3.4x 4.5x
POTENTIAL RATINGS IMPACT OF SELECTED STRATEGIES ------------------------------------------------------- Springs Base BBB Springs Plus Pillowtex BB- Springs Plus Aggressive Sourcing Investment BB+ Springs Plus Pillowtex Plus Sourcing Investment B+
- ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- Note: Sourcing investment assumes $250 million of debt at 9.5%. 55 56 SPRINGS INDUSTRIES IMPACT OF POTENTIAL DIVESTITURE OF * ON LEVERAGE FOR SELECTED GROWTH STRATEGIES ================================================================================ - - ASSUMES SALE OF * FOR APPROXIMATELY * MILLION. - - * IS NOT STRATEGIC - - DIFFERENT CORE CUSTOMERS *
DEBT LEVELS & DEBT/EBITDA [BAR GRAPH] Pro Forma Base Plus Multiple Base Plus Multiple Acquisition Pro Forma Base Acquisition Strategy in Core Base Plus Plus Pillowtex Post Strategy in Core Bed & Bath Post Pillowtex Sale of Division Bed & Bath Sale of Division --------- ---------------- ---------- ---------------- New Equity Subordinated Debt $353 $146 $147 Senior Debt $668 $600 $614 $486
Pro Forma Base Base Plus Multiple Plus Multiple Acquisition Acquisition Pro Forma Base Strategy in Core Strategy in Core Base Plus Pillowtex Plus Pillowtex Plus Bed & Bath Plus Bed & Bath Plus Plus Aggressive Aggressive Aggressive Sourcing Sourcing Sourcing Post Sale Sourcing Investment Post Investment of Division Investment Sale of Division ---------- ----------- ---------- ---------------- New Equity $250 $105 $90 Subordinated Debt $353 $297 $307 $196 Senior Debt $668 $594 $614 $540
- ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- * Omitted and filed separately with the Commission. 56 57 SPRINGS INDUSTRIES SIGNIFICANT EQUITY WOULD BE REQUIRED TO SUPPORT A BROAD BASED DIVERSIFICATION STRATEGY ================================================================================ - - ASSUMES NO ASSET DIVESTITURES
[DEBT LEVELS & DEBT/EBITDA] [BAR GRAPH] Base + Multiple Base + Multiple Strategy in Core Acquisition Base + Pillowtex + Bed & Bath Plus Strategy in Core Aggressive Aggressive Springs Base Base + Pillowtex Bed & Bath Sourcing Sourcing ------------ ---------------- ---------- -------- -------- New Equity $250 $ 90 Subordinated Debt $359 $153 $353 $307 Senior Debt $410 $668 $614 $668 $614
Broad Based & Base + Pillowtex + Diverse Acquisition Base + Pillowtex + Broad Based & Diverse Acquisition Strategy + Diverse Acquisition Diverse Acquisition + Aggressive Aggressive Strategy Strategy Sourcing Sourcing -------- -------- -------- -------- New Equity $341 $160 $601 $410 Subordinated Debt $414 $389 $414 $389 Senior Debt $828 $775 $828 $775
- ------------ GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 57 58 SPRINGS INDUSTRIES COMPARISON OF ALTERNATIVE GROWTH STRATEGIES ================================================================================ - - SCALE CREATED COULD RESULT IN PURCHASING BENEFITS AND BETTER VISIBILITY IN FINANCIAL MARKETS AS WELL AS SUBSTANTIALLY GREATER PLATFORM TO SUPPORT INVESTMENT
REVENUES -------- 2000 2001 2002 2003 Base $2,331 $2,422 $2,574 $2,739 Base Plus Pillowtex $3,566 $3,747 $3,988 $4,252 Base Plus Pillowtex Plus Diversification $4,312 $4,541 $4,842 $5,166
Debt/EBITDA ----------- 2000 2001 2002 2003 Base 1.59x 1.22x 0.97x 0.06x Base Plus Pillowtex 3.06x 2.35x 1.89x 1.56x Base Plus Pillowtex Plus Diversification 3.78x 2.90x 2.43x 2.04x
EBITDA ------ 2000 2001 2002 2003 Base $ 258 $ 301 $ 349 $ 408 Base Plus Pillowtex $ 334 $ 429 $ 514 $ 585 Base Plus Pillowtex Plus Diversification $ 414 $ 530 $ 617 $ 695
Debt/Total Capital ------------------ 2000 2001 2002 2003 Base 0.33x 0.29x 0.25x 0.19x Base Plus Pillowtex 0.55x 0.52x 0.48x 0.43x Base Plus Pillowtex Plus Diversification 0.60x 0.57x 0.53x 0.48x
- ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 58 59 SPRINGS INDUSTRIES POTENTIAL EQUITY SOURCES ================================================================================ ALTERNATIVE EQUITY SOURCES: - - VESTAR - - KELSO - - FENWAY - - CITICORP VENTURE CAPITAL - - AEA HEARTLAND INDUSTRIAL PARTNERS - - $1.2 billion equity fund - - Founded by David Stockman BUSINESS APPROACH - - Invest in fragmented industries which are ripe for consolidation - - Invest equity to support multi-year consolidation and cap-ex investment - - Seek synergy/savings at all stages of the supply chain through additional scale and breadth of products - - Position platform company to obtain materially better public market valuation due to scale, as well as incremental growth TRANSACTION APPROACH - - Heartland seeks to partner with existing shareholders and management - - Potential equity / quasi equity investment of @ $300 million - - Meaningful board involvement - - Contribution of Heartland management resources - Acquisition expertise - IT expertise - Supply chain expertise - Management expertise - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 59 60 SPRINGS INDUSTRIES Appendix 1 Approach from Heartland Industrial Partners - ------------ GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ------------ 61 HEARTLAND INDUSTRIAL PARTNERS September, 2000 Detroit, Michigan New York, New York Greenwich, Connecticut 62 Section I HEARTLAND INDUSTRIAL PARTNERS 1 63 Heartland Industrial Partners L.P. - Overview - - Heartland is raising a $2 billion fund to consolidate, operationally improve and grow a undervalued industrial companies: - Nearly $1.2 billion committed to date; balance in progress - 7 partners and 20 person organization in place - Our $2 billion MascoTech transaction was announced within 90 days of the first close and was this year's second largest buyout - Several add-on deals for this metal forming and fabrication platform are now in the pipeline - - Heartland's investment strategy is based on a "buy, build and growth" concept which avoids heavy leverage and excessive financial engineering - - In addition to the metals platform already launched, Heartland is well down the road on several additional large, high quality platforms where it has an exclusive or proprietary angle: - Home furnishings and domestics industry - Automotive supply base - Global fastener industry - - Heartland will aggressively and consistently offer co-investment to its Limited Partners at a 1:1 ratio alongside Fund commitments 2 64 FIVE LARGE SCALE PLATFORMS - - Investments will be concentrated in five large scale industrial platform buildups in sectors where Heartland can be the dominant consolidator and growth capital provider - - Heartland and its equity partners and co-investors would typically provide $2-4 4 billion of financing (debt and equity) over 3-5 years to each platform for: - Consolidating acquisitions - Factory floor investments - Product expansion/innovation - Information technology upgrades - E-commerce initiatives - Business model transformation - - Heartland platform buildups will generate strong earnings and cash flow growth due to: - Initial consolidation savings and synergies - Subsequent focus on business model transformation and capture of new sales and value-added content 3 65 HEARTLAND'S ORGANIZATION
PARTNER ROLE EXPERIENCE LOCATION David Stockman Buyout Partner Blackstone Founding Partner, Reagan Budget Director New York Tim Leuliette Industrial Partner CEO/COO Penske Group, ITT, Siemen Detroit Dan Tredwell Financial Partner Chase Managing Director, Leveraged Financings New York Perry Lewis Investment Partner Smith Barney and Morgan, Lewis New York Cindy Hess Operations Partner VP Quality/Engineering DaimlerChrysler Detroit Gary Banks Info. Tech. Partner CIO, Xerox, Monsanto Detroit Gerry McConnell Financing Partner Managing Director, Deutsche/Bankers Trust New York
5 PLATFORM COMPANY CEOS 20 Associates & Support Staff Focused Consultants Advisory Committee Strategic Partners 4 66 OVERVIEW OF EXISTING COMMITMENTS 1. PUBLIC / PRIVATE PENSION FUNDS ( $ 470 Million) * 2. FINANCIAL INSTITUTIONS ( $ 299 Million) * 3. INSURANCE COMPANIES / FOUNDATIONS ( $ 125 Million) * 4. ENTREPRENEURS / BUSINESSMEN ( $ 116 Million) * 5. STRATEGIC PARTNERS / OTHER INVESTORS ( $ 135 Million) * TOTAL COMMITMENTS AS OF 9/20/00 -- $1,145 MILLION * Omitted and filed separately with the Commission. 5 67 INVESTMENT CRITERIA ================================================================================ - - SECTORS TARGETED FOR POTENTIAL INVESTMENT WILL REQUIRE A HIGH QUALITY, SECTOR LEADING COMPANY WHICH: - CAN BE THE KEYSTONE FOR A GROWTH AND CONSOLIDATION PROGRAM - HAS POTENTIAL FOR $4-8 BILLION IN SALES AFTER ACQUISITIONS, OPERATIONAL SCALE-UP AND BUSINESS MODEL TRANSFORMATION - CAN CAPTURE ECONOMIES-OF-SCALE IN SUPPLY BASE MANAGEMENT AND SOURCING, PLANT OPERATIONS, DISTRIBUTION, CUSTOMER SERVICE AND IN APPLICATION OF ADVANCED IT SYSTEMS - HAS THE ABILITY TO ACHIEVE GROWTH OF 2X GDP OR BETTER - CAN ACHIEVE #1 OR #2 MARKET POSITION IN ITS MAJOR PRODUCT LINES - HAS MANAGEMENT TEAMS INCENTIVIZED WITH LARGE NET WORTH OPPORTUNITIES - IS LED BY A WORLD CLASS CEO AND STRONG MANAGEMENT TEAM ================================================================================ 6 68 TARGETED SECTORS ================================================================================ SECTORS INDUSTRIAL LOGIC ------- ---------------- AUTOMOTIVE MODULES/SYSTEMS $650 BILLION MARKET -- RAPID MOVE TO TIER 1 CONSOLIDATION AND MODULE OPPORTUNITIES; OEMS ACCEPT ECONOMIC/TECHNICAL ADVANTAGES. AEROSPACE MATERIAL/COMPONENTS FOLLOWING AUTO INDUSTRY CONSOLIDATION MODEL; BOEING HAS MORE SUPPLIERS THAN GLOBAL AUTO INDUSTRY. METAL FORMING AND FABRICATION GLOBAL OEM'S DESIRE WORLD WIDE MATERIAL SOLUTIONS WHICH INCLUDE MULTI-METAL (IRON, ALUMINUM, STEEL, ETC.) AND MULTI-PROCESS (FORGE, FOUNDRY, FASTENER) CAPABILITIES. SPECIALTY CHEMICALS MAJOR, GLOBAL CHEMICAL COMPANIES HAVE BEEN TRANSFORMED TO "LIFE SCIENCE" FOCUS; LEGACY CHEMICAL BUSINESSES HAVE BEEN SOLD OR SPUN OFF 3/4 LEAVING SUB-SCALE, UNDERVALUED "ORPHANS." HOME TEXTILES/FURNISHINGS IT AND "BIG BOX" RETAIL REVOLUTIONS CREATING NEED FOR LARGE SCALE, BROAD PRODUCT LINE SUPPLIERS. MACHINE TOOLS FACTORY WIDE, FULL SYSTEM/FULL SERVICE PROVIDERS WILL CREATE COMPETITIVE ADVANTAGE. HEAVY EQUIPMENT CONSOLIDATE FRAGMENTED GLOBAL INFRASTRUCTURE INDUSTRY. ================================================================================ 7 69 DEEP VALUATION DISCOUNT FOR INDUSTRIAL COMPANIES ================================================================================
[Line Graph: Annual Change Stock Index 1997-1999 NASDAQ 52% S&P 500 17% Small/Midcap Industrials (6%)]
Small/Midcap Industrials - Deep Valuation Discounts - TRADING @ 50 YEAR LOW RELATIVE PE'S - SUFFERING FROM LIQUIDITY DRAIN TO NEW ECONOMY - "CURRENCY" IS NOW TOO WEAK TO LEAD CONSOLIDATION PROCESS - MUST BE SCALED-UP AND TRANSFORMED WITH PRIVATE EQUITY TO ONCE AGAIN ATTRACT PUBLIC INVESTOR INTEREST ================================================================================ 8 70 TWO TIER EQUITY MARKET ================================================================================ Industrial Company P/E Multiples: 2-Tier Market Based on Capitalization Scale
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 10.8x 10.2x 13.6x 14.3x 15.6x 12.0x 12.3x 13.4x 14.4x 12.8x 13.0x 11.0x 11.1x 15.2x 15.8x 16.6x 13.2x 14.3x 16.6x 16.9x 18.1x 20.7x
- IF INDUSTRIAL COMPANIES DO NOT HAVE AT LEAST $2.5 BILLION EQUITY MARKET CAPS: - LARGE FUNDS CAN NOT INVEST ($25-$50 MILLION "BITE SIZE"). - COMPANIES DO NOT PARTICIPATE IN INDEX FUNDS. - RETAIL INTEREST IS REDUCED. - ANALYST COVERAGE IS MINIMAL. - FURTHER INVESTOR INTEREST IS COMPOUNDED BY ABOVE. - THIS DIVERGENCE IS STRUCTURAL. BOTTOM 300 S&P INDUSTRIAL COMPANIES: MEDIAN CURRENT MARKET CAP.: $768 MM MEDIAN CURRENT 5-YEAR GROWTH RATE: 12.3% TOP 100 S&P INDUSTRIAL COMPANIES: MEDIAN CURRENT MARKET CAP.: $7,956 MM MEDIAN CURRENT 5-YEAR GROWTH RATE: 11.8% ================================================================================ 9 71 HEARTLAND'S INVESTMENT SPACE IS LARGELY UNOCCUPIED ================================================================================ Industrial Company Share of Large LBO Deals (Reported Transactions With TEV in Excess of $200 Million) Megafund Industrial Deals in Heartlands Space* KKR None Warburg Pincus None Greenwich Street None Apollo None T. H. Lee None Welsh Carson None Carlyle Group None Cypress Group None Texas Pacific None Vestar None
1995 1996 1997 1998 1999 East 60% 43% 37% 28% 17%
Megafund Industrial Deals in Heartlands Space* Forstmann Little None Hellman & Friedman None Citicorp Venture None Hicks Muse 1 Blackstone 1 CD&R 1 DLJ Merch. Bank 1 Madison Dearborn 1 Kelso 1 Investcorp 1 * INDUSTRIAL TRANSACTIONS WITH TEV OVER $500 MILLION IN LAST TWO YEARS. ================================================================================ 10 72 SUMMARY OF INVESTMENT PERFORMANCE ================================================================================ The following summary describes the investment performance of the ten Blackstone transactions in which Mr. Stockman had significant principal responsibility. All results and valuations are as of December 31, 1999.
Transaction Date Date Realized/ Blackstone Realized/ ($ in millions) Size Acquired Valued Equity Invested Unrealized Value(1) - --------------- ---- -------- ------ --------------- ------------------- COMPANY Realized and/or Publicly Traded Investments Aristech Chemical Corporation $1,000 3/90 3/95 $3 $8 DeBartolo Corporation 110 12/93 4/94-5/97 108 222 LaSalle Re Holdings Limited 378 11/93 5/97-10/97 51 96 UCAR International, Inc. 1,230 1/95 3/96-4/97 187 862 American Axle and Manufacturing Inc. 928 10/97 9/99 113 353(3) Collins & Aikman Group, Inc. 2,650 12/88 (4) 122 133(5) SUBTOTAL $6,296 $584 $1,673 Unrealized Investments at Cost Clark USA, Inc. $1,920(6) (6) NA $263 $263 Haynes International 241 1/97 NA 54 54 Republic Technologies International 1,100 (7) NA 172 172 Imperial Home Decor Group 418 3/98 NA 85 0(8) SUBTOTAL $3,679 $574 $489
Gross Multiple of ($ in millions) IRR(2) Equity Invested - --------------- ------ --------------- COMPANY Realized and/or Publicly Traded Investments Aristech Chemical Corporation 22% 2.7X DeBartolo Corporation 35 2.1 LaSalle Re Holdings Limited 25 1.9 UCAR International, Inc. 198 4.6 American Axle and Manufacturing Inc. 69 3.1 Collins & Aikman Group, Inc. 1 1.1 SUBTOTAL 78%* 2.9X Unrealized Investments at Cost Clark USA, Inc. NA NA Haynes International NA NA Republic Technologies International NA NA Imperial Home Decor Group NA NA SUBTOTAL NA NA
(1) Realized investments include investments that were sold, distributed or taken public. Unrealized investments have been valued at cost. (2) Individual deal IRRs are calculated based on daily cash flows with the returns annualized, before carried interest and management fees. (3) Valued at the 90-day average trading price ending December 31, 1999 of $13.32 per share. (4) Dates of realization/valuation are 12/89, 1/90, 3/90, 7/91 and 9/99. (5) Valued at the 90-day average trading price ending December 31, 1999 of $5.89 per share less $56 million margin loan. (6) Includes follow-on $235 million investment in Lima, OH refinery (8/98) and $833 million committed and funded investment in Port Arthur coker project (8/99). Dates of acquisition and follow-on investments are 11/97, 8/98 and 8/99. (7) Dates of acquisition and follow-on investments are 4/96, 9/97, 9/98 and 8/99. (8) Due to recent weak results and a liquidity squeeze, Imperial filed for bankruptcy under Chapter 11 on January 5, 2000. As of December 31, 1999, Blackstone had written off its investment in Imperial Home Decor Group. ================================================================================ 11 73 Executive Summary - - Heartland believes the home textile sector may be ideal for its "buy, build, and growth" investment model because: - Two of the three largest companies in the industry are currently not positioned to be aggressive consolidators or growth capital providers. - The next tier of 12 companies are narrow in product line and sub-scale. - Much of the industry is debt-burdened and has an all-time historical low P/E, which has shut the door to new public equity capital. TOP THREE COMPANIES West Point Stevens: Failed Sale / LBO Springs: Strong, consistent operating performance and balance sheet, best positioned consolidator Pillowtex: Massive debt and management turmoil NEXT 12 COMPANIES Sales Range: $136 - 471 MM $175 MM average Frequency among top 5 suppliers in major product lines (15): 1 company..... 0/15 3 companies... 1/15 4 companies... 2/15 4 companies... 3/15 LOW P/ES (1) Springs .................... 7.1x Dan River .................. 5.2x Pillowtex................... 2.0x(?) WestPoint Stevens .......... 5.1x (1) 2001 IBES estimates. 1 74 Executive Summary - - Heartland has fashioned a multi-year consolidation and investment scenario which would: - Create a $4 to $6 billion mega-supplier --- capable of dominating the $17 billion home textile sector and growing to 3X the size of existing industry leaders. - Aggregate a broad portfolio of Home Textile products, ranking #1 in 8 of the 15 product categories and ranking among the top three in 75% of the product categories. - - The resulting company would be driven by INDUSTRIAL AND COMMERCIAL LOGIC and capture substantial cost savings and earnings synergies. - - Upon completion of the consolidation and build-up, the resulting platform would have a $3 to $4 billion public equity market capitalization plus a strong growth / sector dominance story. It should attract an active investor base and broad equity research coverage, and also earn a reasonable PE multiple (i.e. 10X or higher). 2 75 Executive Summary - - The mega-supplier consolidation scenario is driven by industrial and commercial logic providing the potential for synergy gains at all stages of the supply chain: - Purchasing leverage in the fibers, market yarns, dyes, chemicals, and other inputs. - Consolidation, re-loading, and targeted re-investment to achieve "best-in-class" yarn mills and weaving, dyeing, and finishing facilities from among selective assets of building block companies. - Aggressive shift to off-shore sourcing of high labor-content items with increased competence, clout, and efficiency. - Full product-line and comprehensive price point range supplier to all channels of trade. - Supplier of choice to big box mass discounters, and national specialty and department store chains. - Systematic upgrade and scale-up of Information Technology (IT) systems from cotton receiving docks to customer store doors. - Investment in "state-of-the-art" distribution facilities and customer service infrastructure for all models of product delivery including customer DC's, retail store doors and consumer direct. - Vendor of choice for designer and licensed product. 3 76 Executive Summary - - Heartland has developed an illustrative consolidation scenario, which is open for extensive discussion and revision, but which also embodies key ingredients and directions necessary for a viable transaction and investment strategy: - Springs and its management team would provide the FOUNDATION PLATFORM. - In phase I, Heartland would infuse $400 million of common equity (or more) into the "New Springs" in connection with: - A negotiated transaction or pre-pack with PTX stakeholders, which would permit a "New Springs" takeover of its assets and operations. - Provide an exit opportunity at a significant premium to the current share price for those Springs shareholders who choose to exit (illustrative model assumes 40% share buy-in at $40 per share via dutch tender). - Agreement with Springs management on the general content and strategy of a follow-on "phase II" consolidation plan involving multiple acquisitions of additional smaller industry suppliers. - Establishment of a "private equity" type option plan for the "New Springs" to provide management incentives and rewards for successful execution of a huge, challenging, and multi-year undertaking. 4 77 Executive Summary - - "New Springs" stock would be issued to Heartland at a dutch tender price (for illustrative purposes --- $40 per share). - - The consolidation plan must be accretive for Springs shareholders after year #1, and STRONGLY ACCRETIVE in out-years. - - The phase II consolidation plan would be drawn from a menu of 20 or more acquisition candidates, and also involve a commitment to significant investment in targeted upgrades of factory floor equipment, IT systems, and distribution facilities. - - Phase II acquisitions would be funded with modest incremental leverage. - - The end game objective would be to build a dominant Home Textile mega- supplier with: - $4 to $6 billion in sales. - Ability to capture at least $200 million (3% of sales or 170 basis points of market share) in synergies over five years. - Post-synergy operating margins and ROCE at world class levels. - - Mechanisms for orderly exit via secondary stock offering by Heartland after buildup completed and "New Springs" hits financial performance target levels. 5 78 Executive Summary Home Textiles Served Market USA MARKET BY PRODUCT LINE ($ millions)
Trend 1999 Shipments(1) Growth Product Line Amount % Total Rate - ------------ ------ ------- ---- 1 Bath Towels .................. $ 2,482 14.6% 4.3% 2 Sheets / pillowcases ......... 2,463 14.5 3.5 3 Comforters / bedspreads ...... 1,717 10.1 5.0 4 Area scatter rugs ............ 1,487 8.7 7.0 5 Table linen .................. 1,352 8.0 4.0 6 Sleep pillows ................ 1,133 6.7 3.0 7 Ready-made window coverings .. 1,025 6.0 4.0 8 Bath rugs .................... 961 5.7 4.0 9 Blankets ..................... 739 4.3 4.0 10 Shower curtains ............. 589 3.5 3.0 11 Kitchen textiles ............ 540 3.2 3.0 12 Decorative pillows .......... 522 3.1 6.0 13 Down comforters ............. 432 2.5 5.0 14 Throws ...................... 350 2.1 0.0 15 Mattress pads ............... 341 2.0 4.0 ------- ----- --- sub total ............ 16,134 94.9 4.2 Other home textile products .... 866 5.1 4.0 ------- ----- --- TOTAL SERVED MARKET ....... $17,000 100% 4.2% ======= ===== ===
TOTAL HOME TEXTILE MARKET GROWTH(2) 1998 - 2005 CAGR 4.2%
1998 1999 2000 2001 2002 2003 2004 2005 ---- ---- ---- ---- ---- ---- ---- ---- ($ BILLIONS) $16.3 $17.0 $17.7 $18.5 $19.2 $20.1 $20.9 $21.8
(1) Wholesale value including imports. Data estimates by KSA. (2) KSA estimated growth rates. 79 Executive Summary Industry Structure: Most of the industry is sub-scale(1) (1999 Sales in Millions)
TIER I TIER II - ---------------------------------------------------------------------------------------------------------------------------------- Springs WestPoint Pillowtex Mohawk Dan River Crown Craft Burlington Croscill PCF Glenoit Hollander Maples - ------- --------- --------- ------ --------- ----------- ---------- -------- --- ------- --------- ------ $2,220 $1,868 $1,552 $470 $432 $310 $300 $283 $230 $222 $201 $160 TIER II ------------------------------- Louisville Revman Sunbeam ---------- ------ ------- $156 $141 $136
(1) Home textile sales only, as per Home Textiles Today. 7 80 Executive Summary Industry Structure: Tier I companies have moderate shares in narrow product portfolios --- with limited leverage on the total home textile market.
WESTPOINT STEVENS SPRINGS ------- ------- Home Textile Sales $ 1,868 $ 2,220 Share Total of Home Textile Market..... 11% 13% - ------------------------------------------------------------------------------------------------------------------- Among Top 5 Suppliers / # of Markets(1).. 4/15 5/15 - ------------------------------------------------------------------------------------------------------------------- "Top 5" Markets (ranking) Sheets / pillowcases (# 1) Comforters / bedspreads (# 1) Bath towels (# 2) Shower curtains (# 1) Comforters / bedspreads (# 3) Bath rugs (# 2) Blankets (# 3) Sheets / pillowcases (# 2) Bath towels (# 3) Combined Share in "Top 5" Market: Market Size $ 7,401 $ 8,212 Company Sales 1,628 1,415 - ------------------------------------------------------------------------------------------------------------------- % Share 22% 17% - ------------------------------------------------------------------------------------------------------------------- Textile Markets Not Included Above: Market Size $ 9,599 $ 8,788 Company Sales 240 805 - ------------------------------------------------------------------------------------------------------------------- % Share 3% 9% - -------------------------------------------------------------------------------------------------------------------
PILLOWTEX --------- Home Textile Sales $ 1,552 Share Total of Home Textile Market..... 9% - ------------------------------------------------------------------------------ Among Top 5 Suppliers / # of Markets(1).. 8/15 - ------------------------------------------------------------------------------ "Top 5" Markets (ranking) Bath towels (# 1) Blankets (# 1) Down comforters (# 1) Sleep pillows (# 1) Mattress pads (# 2) Bath rugs (# 3) Sheets / pillowcases (# 3) Comforters / bedspreads (# 5) Combined Share in "Top 5" Market: Market Size $ 10,268 Company Sales 1,552 - ------------------------------------------------------------------------------ % Share 15% - ------------------------------------------------------------------------------ Textile Markets Not Included Above: Market Size $ 15,448 Company Sales -- - ------------------------------------------------------------------------------ % Share 0% - ------------------------------------------------------------------------------
- ------------- (1) Among Top 15 Home Textile Product Lines. 8 81 Executive Summary INDUSTRY STRUCTURE: TIER II COMPANIES HAVE NARROW PRODUCT PORTFOLIOS AND A TINY PRESENCE IN THE TOTAL HOME TEXTILE INDUSTRY.
Market Share in Top 5 Ranking ----------------------------- Company Industry # of Top 5 Product Lines With Top 5 Ranking Industry Company Share Ranking Rankings Sales Sales % Mohawk Rug # 4 3/15 Area / scatter rugs (# 1), Bath rugs (# 1), $ 2,788 $ 488 17% Throws (# 3) Dan River # 5 2/15 Comforters / bedspreads (# 2), 4,180 395 9% Sheets / pillowcases (# 4) Crown Craft # 6 2/15 Comforters / bedspreads (# 4), Throws (# 1) 2,068 278 13% Burlington Rug / Dom. # 7 2/15 Area / scatter rugs (# 4), 2,514 210 8% Ready-made window coverings (# 1) Croscill # 8 1/15 Ready-made window coverings (# 5) 1,027 67 7% Pacific Coast Feather # 9 3/15 Down comforters (# 2), Mattress pads (# 4), 1,906 196 10% Sleep pillows (# 2) Glenoit # 10 3/15 Decorative pillows (# 4), Shower curtains (# 3), 2,463 105 4% Table linen (# 5) Hollander # 11 3/15 Down comforters (# 3), Mattress pads (# 5), 1,906 154 8% Sleep pillows (# 3) Maples Rugs # 12 2/15 Area / scatter rugs (# 3), Bath rugs (# 4), 2,448 160 7% Louisville Bedding # 13 1/15 Mattress pads (# 1) 341 86 25% Revman # 14 0/15 Sunbeam # 15 1/15 Blankets (# 2) 739 180 16%
Share of Company Total Home Textiles Mohawk Rug 2.7% Dan River 2.5% Crown Craft 1.8% Burlington Rug / Dom. 1.7% Croscill 1.6% Pacific Coast Feather 1.4% Glenoit 1.3% Hollander 1.1% Maples Rugs 0.9% Louisville Bedding 0.9% Revman 0.8% Sunbeam 0.8%
9 82 Executive Summary Illustrative New Springs: Key Consolidation Principles - - Initial New Springs / Pillowtex platform would create dominant market shares over WestPoint Stevens in core sheets, sleep pillows, towels, bath rugs, blankets and down comforter markets. - - Add-on acquisitions should also provide New Springs with enhanced presence in other home textile product lines --- area rugs, window coverings, table linens, decorative pillows, etc. - - Broad line home textile product portfolio should be positioned with a wide range of price points and merchandise mix --- with capacity to serve each channel including specialty stores, big box mass merchants, national chains, etc. with appropriate product. - - Expected sales and cost synergies (see below) should dramatically exceed potential market push-back. - - Target acquisition list should reflect: - Strong commercial and industrial logic - Primary targets that have plausible basis for a transaction at reasonable valuations. - Product markets and operational strategy, which could be achieved with "second best" acquisition candidates, if necessary. 10 83 Executive Summary New Springs Platform Build-up: Illustrative Acquisitions CORE PLATFORM ------------- SPRINGS PILLOWTEX POTENTIAL ACQUISITIONS WHICH ADD MARKET SHARE AND NEW PRODUCT LINES Crown Craft Maples CHF Industries Pacific Coast Feather Croscill Burlington House S. Lichtenberg Perfect Fit Louisville Bedding Glenoit Allure Home Creation Thomaston Mills Hollander Georgia Tufters Bardwill Industries Decorator Industries Charles Owen Mfg. Barth & Dreyfuss Brentwood Originals Creative Bath Products
11 84 Executive Summary New Springs: Impact On home Textile Industry Structure (1999 Sales in Millions)
Current ------- Springs $2,220 13% WestPoint Stevens $1,868 11% All Others + Imports $8,319 49% Pillowtex $1,552 9% Next 12 $3,041 18%
1999 Pro Forma New Springs -------------------------- NEW SPRINGS (1) $4,741 28% All Others + Imports $8,319 49% WestPoint Stevens $1,868 11% Next 8 $2,072 12%
(1) Springs, Pillowtex plus four follow-on acquisitions: Croscill, Glenoit, Maples Rugs, and Pacific Coast Feather. 12 85 Executive Summary New Springs: Impact On Product Line Market Shares ($ Millions) COMFORTERS / BEDSPREADS
1999 Sales --------------------- Current Pro Forma ------- --------- New Springs ......... -- $ 699 Springs Industries .. 350 -- Dan River ........... 185 185 Westpoint Stevens ... 180 180 Crown Craft ......... 160 160 Pillowtex ........... 150 -- Croscill ............ 129 -- Glenoit ............. 70 -- Other Companies ..... 493 493 ------ ------ Total ............. $1,717 $1,717
PRO FORMA MARKET SHARE New Springs ..................... 41% Dan River ....................... 11% Westpoint Stevens ............... 10% Others + Imports ................ 29% ------ Total ......................... 91%
SHEETS / PILLOWCASES
1999 Sales ------------------- Current Pro Forma ------- --------- New Springs ......... -- $910 Westpoint Stevens ... 698 698 Springs Industries .. 650 -- Pillowtex ........... 260 -- Dan River ........... 210 210 Thomaston Mills ..... 90 90 Crown Craft ......... 60 60 Other Companies ..... 495 495 ------ ---- Total ............ $2,463 $2,463 PRO FORMA MARKET SHARE New Springs ..................... 37% Westpoint Stevens ............... 28% Dan River ....................... 9% Thomaston Mills ................. 4% Others + Imports ................ 20% ---- Total ......................... 98%
BATH TOWELS
1999 Sales --------------------- Current Pro Forma ------- --------- New Springs ............. -- $ 875 Pillowtex ............... 660 -- Westpoint Stevens ....... 650 650 Springs Industries ...... 215 -- Santens of America ...... 45 45 1888 Group-Southern Terry 26 26 Other Companies ......... 886 886 ------ ------ Total .................. $2,482 $2,482
PRO FORMA MARKET SHARE New Springs ............. 35% Westpoint Stevens ....... 26% Santens of America ...... 2% 1888 Group-Southern Terry 1% Others + Imports ........ 36% ------ Total ................. 100%
13 86 Executive Summary New Springs: Impact On Product Line Market Shares ($ Millions) DOWN COMFORTERS
1999 Sales -------------------- Current Pro Forma ------- --------- New Springs ......... -- $150 Pillowtex ........... 76 -- Pacific Coast Feather 74 -- Hollander ........... 40 40 Phoenix Down ........ 24 24 United Feather & Down 21 21 Other Companies ..... 197 197 ---- ---- Total ............. $432 $432
PRO FORMA MARKET SHARE New Springs ..................... 35% Hollander ....................... 9% Phoenix Down .................... 6% Others + Imports ................ 50% ---- Total ......................... 100%
MATTRESS PADS
1999 Sales ------------------- Current Pro Forma ------- --------- Louisville Bedding .. $ 86 $102 New Springs ......... -- 71 Pillowtex ........... 71 -- Perfect Fit ......... 65 65 Pacific Coast Feather 16 -- Hollander ........... 14 14 Other Companies ..... 89 89 ---- ---- Total ............. $341 $341
PRO FORMA MARKET SHARE Louisville Bedding .............. 30% New Springs ..................... 21% Perfect Fit ..................... 19% Others + Imports ................ 30% ---- Total ......................... 100%
SLEEP PILLOWS
1999 Sales --------------------- Current Pro Forma ------- --------- New Springs ......... -- $ 271 Pillowtex ........... 165 -- Pacific Coast Feather 106 -- Hollander ........... 100 100 American Fiber ...... 71 71 Liebhardt Mills ..... 51 51 Louisville Bedding .. 50 50 Other Companies ..... 590 590 ------ ------ Total ............. $1,133 $1,133
PRO FORMA MARKET SHARE New Springs ..................... 24% Hollander ....................... 9% American Fiber .................. 6% Liebhardt Mills ................. 5% Others + Imports ................ 56% ------ Total ......................... 100%
14 87 Executive Summary New Springs: Impact On Product Line Market Shares ($ Millions) AREA / SCATTER RUGS
1999 Sales ---------------------- Current Pro Forma ------- --------- Mohawk Rug & Textiles ........ $ 237 $ 237 New Springs .................. -- 170 Beaulieu ..................... 120 120 Maples Industries ............ 115 -- Burlington House Floor Accents 90 90 Oriental Weavers ............. 60 60 Glenoit ...................... 55 -- Other Companies .............. 810 810 ------ ------ Total ...................... $1,487 $1,487
PROFORMA MARKET SHARE Mohawk Rug & Textiles ........ 16% New Springs .................. 11% Beaulieu ..................... 8% Burlington House Floor Accents 6% Others + Imports ............. 59% ------ Total ...................... 100%
BATH RUGS
1999 Sales -------------------- Current Pro Forma ------- --------- New Springs ..................... -- $230 Mohawk Rug & Textiles ........... 190 190 Springs Industries .............. 130 -- Pillowtex ....................... 55 -- Maples .......................... 45 -- Georgia Tufters ................. 35 35 Burlington House Floor Accents .. 25 25 Other Companies ................. 481 481 ---- ---- Total ......................... $961 $961
PROFORMA MARKET SHARE New Springs ..................... 24% Mohawk Rug & Textiles ........... 20% Georgia Tufters ................. 4% Others + Imports ................ 53% ---- Total ......................... 100%
READY-MADE WINDOW COVERINGS
1999 Sales --------------------- Current Pro Forma ------- --------- Burlington Industries $ 120 $ 120 S. Lichtenberg ...... 115 115 CHF Industries ...... 97 97 Miller Curtain ...... 93 93 New Springs ......... -- 67 Croscill ............ 67 -- Other Companies ..... 535 535 ------ ------ Total ............. $1,027 $1,027
PRO FORMA MARKET SHARE Burlington Industries 12% S. Lichtenberg ...... 11% CHF Industries ...... 9% Miller Curtain ...... 9% New Springs ......... 7% Others + Imports .... 52% ------ Total ............. 100%
15 88 Executive Summary New Springs: Impact On Product Line Market Shares ($ Millions) BLANKETS
Pro forma ---------------- Market Sales Share ----- ------ New Springs ............. $121 16% Sunbeam ................. 120 16% Westpoint Stevens ....... 97 13% Charles D. Owen Mfg. .... 90 12% Chatham Consumer Products 20 3% Other Companies ......... 291 39% ---- --- Total ................. $739 100%
THROWS
Pro forma ---------------- Market Sales Share ----- ------ Crown Crafts ............... 98 28% Manual Woodworkers & Weavers 71 20% Mohawk Rug & Textiles, GA .. 52 15% Mohawk Rug & Textiles, MD .. 43 12% The Northwest Co. .......... 21 6% Other Companies ............ 65 19% ---- --- Total .................... $350 100%
SHOWER CURTAINS
Pro forma --------------- Market Sales Share ----- ------ New Springs .......... $129 22% Allure Home Creation . 65 11% Creative Bath Products 29 5% Maytex Mills ......... 25 4% Other Companies ...... 341 58% ---- --- Total .............. $589 100%
DECORATIVE PILLOWS
Pro forma ----------------- Market Sales Share ----- ----- Brentwood Originals $100 19% Arlee ............. 50 10% New Springs ....... 21 4% Newport ........... 21 4% Fashion Pillows ... 21 4% Other Companies ... 309 59% ---- --- Total ........... $522 100%
TABLE LINEN
Pro forma ------------------ Market Sales Share ----- ----- Town & Country Living $ 90 7% Bardwil Industries .. 50 4% Avon Home Fashions .. 35 3% Elrene Manufacturing 35 3% New Springs ......... 25 2% Other Companies ..... 1,117 83% ------ --- Total ............. $1,352 100%
KITCHEN TEXTILES
Pro forma ----------------- Market Sales Share ----- ------ Barth & Dreyfuss $ 59 11% Franco Mfg. ..... 45 8% Cecil Saydah .... 44 8% Charles Craft ... 18 3% John Ritzenthaler 18 3% Other Companies . 356 66% ---- --- Total ......... $540 100%
16 89 Executive Summary New Springs: Illustrative Acquisition Sequence ($ Millions)
Total Current Pre-Synergy Enterprise Year Purchase Initial Platform: Year-end Value EBITDA Multiple ---------------------------------------------- Pillowtex Recapitalization ... 2000 $ 822 $138 6.0x Subsequent Acquisitions: Glenoit....................... 2001 * * * Croscill...................... 2001 * * * Maples Rugs................... 2002 * * * Pacific Coast Feather......... 2002 * * * - ---------------------------------------------------------------------------------- Total New Springs Acquisitions -- $ * $ * * - ----------------------------------------------------------------------------------
* Omitted and filed separately with the Commission. 17 90 Executive Summary New Springs: Standalone Sales Growth and Margin Assumptions ($ Millions)
Historical Projected Standalone Case CAGR -------------------------------- --------------------------------------------------- ---------------- Company .............. 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1996-99 1999-05 - --------------------------------------------------------------------------------------------------------------------------------- Springs ............... $2,221 $2,226 $2,181 $2,220 $2,307 $2,388 $2,484 $2,583 $2,686 $2,794 0.0% 3.9% Pillowtex ............. 491 580 1,510 1,552 1,434 1,435 1,464 1,522 1,583 1,647 46.8% 1.0% Croscill .............. 173 193 214 283 300 315 329 344 360 376 17.8% 4.8% Glenoit ............... 122 147 172 296 305 308 309 312 285 299 34.5% 0.2% Maples Rugs ........... 60 85 110 160 185 196 208 220 234 248 38.7% 7.6% Pacific Coast Feather.. 125 150 175 230 250 270 290 310 325 342 22.5% 6.8% - --------------------------------------------------------------------------------------------------------------------------------- Total Standalone Sales $3,192 $3,381 $4,361 $4,742 $4,781 $4,912 $5,084 $5,291 $5,473 $5,705 14.1% 3.1% Gross Profit ......... 695 755 976 1,028 1,067 1,109 1,152 1,202 1,242 1,298 13.9% 4.0% SG&A ................. 380 414 506 559 544 552 573 596 619 643 13.7% 2.4% - --------------------------------------------------------------------------------------------------------------------------------- EBITDA ............... 315 338.1 461.5 480.2 523.1 556.8 579.3 605.8 622.8 654.6 15.1% 5.3% - --------------------------------------------------------------------------------------------------------------------------------- Margins Gross Profit ......... 21.8% 22.3% 22.4% 21.7% 22.3% 22.6% 22.7% 22.7% 22.7% 22.7% -- -- SG&A ................. 11.9% 12.2% 11.6% 11.8% 11.4% 11.2% 11.3% 11.3% 11.3% 11.3% -- -- - --------------------------------------------------------------------------------------------------------------------------------- EBITDA ............... 9.9% 10.0% 10.6% 10.1% 10.9% 11.3% 11.4% 11.4% 11.4% 11.5% -- -- - ---------------------------------------------------------------------------------------------------------------------------------
20 91 Executive Summary New Springs: Key Cost Savings and Synergy Assumptions - - After New Springs negotiated takeover of PTX in year 2001 --- 2 acquisitions each year beginning in 2002 and 2003. - - Sales Synergy: 170 bp of market share by year 5 (28.9% vs 27.2%). - - Manufacturing / COGS Savings : 2.5% cost reduction by year 5 ($122 MM or 2% of sales). - - Selling Expense & Marketing: No savings from standalone level --- but better deployment and leverage contribute to sales gains. - - General and Administrative Expense: 20% savings from standalone level ($64 MM or 1.1% of Sales). - - Working Capital: 20 day reduction in inventory (102 days to 82 days) and small improvement in payable leverage. - - Capex: $175 million added capex for consolidation, equipment upgrades, and IT system modernization; $80 million 5 year savings for reduced capex in closed facilities and out-sourcing. - - Combined Synergy Impact: Year 5 EBITDA improvement by $220 million (3.5% of Sales) and cash flow improved by $372 million (including capex and w/c savings). 21 92 Executive Summary New Springs: Sales Synergy Considerations ($ Millions) Rationale for Market Share Gain ------------------------------- -Full line supplier / shelf space leverage with chains. -Superior IT and distribution systems. -Enhanced capability for improved, innovative customer service support. -Low cost supplier in nearly all product categories. -Wide range at price points and product mix. Sales Synergy Impact 2001 - 2006 CAGR - ---------------- Standalone......10.5% Post Synergy.....9.2% [BAR CHART]
2001 2002 2003 2004 2005 2006 ---- ---- ---- ---- ---- ---- $3,823 $4,586 $5,292 $5,473 $5,704 $5,931 $ 0 $ 39 $ 100 $ 167 $ 262 $ 371 $3,823 $4,624 $5,392 $5,641 $5,966 $6,302
Pro forma Market Share --------------------- [LINE CHART]
2001 2002 2003 2004 2005 2006 ---- ---- ---- ---- ---- ---- Standalone 26.3% 26.2% 26.2% 26.2% 26.2% 27.2% Post Synergy 26.3% 26.4% 26.7% 27.0% 27.4% 28.9%
Actual Market Share With Build-up --------------------------------- [LINE CHART]
2001 2002 2003 2004 2005 2006 ---- ---- ---- ---- ---- ---- Standalone 20.7% 23.8% 26.4% 26.2% 26.2% 27.2% Post Synergy 20.7% 24.0% 26.9% 27.0% 27.4% 28.9%
22 93 Executive Summary New Springs: Manufacturing And COGS Cost Savings ($ Millions) Rationale For COGS Savings -------------------------- - -Increased material purchasing and supplier base leverage. - -Systematic "make" vs "buy" analysis and improved off-shore sourcing. - -Triage of "efficient" vs "obsolete" facilities and equipment from 5 acquired companies. - -Re-loading and specialization of mills to lower unit cost. - -Common, upgraded IT platform to reduce infrastructure support cost and improve mill scheduling. - -Sharp reduction in handling and distribution costs due to substantial new capex in world-scale facilities. COGS Synergy Savings -------------------- COGS Savings % of Sales - ---------- 2001......0.0% 2002......1.0% 2003......1.5% 2004......2.0% 2005......2.5% 2006......2.5% [BAR CHART]
2001 2002 2003 2004 2005 2006 ---- ---- ---- ---- ---- ---- $0.0 $35.8 $62.5 $87.2 $115.2 $121.7
COGS % of Sales --------------- [LINE CHART]
2001 2002 2003 2004 2005 2006 Post Synergy 78.6% 76.7% 76.1% 75.8% 75.3% 75.3% Standalone 78.6% 77.5% 77.3% 77.3% 77.3% 77.3%
23 94 EXECUTIVE SUMMARY NEW SPRINGS: G&A COST SYNERGIES ($ MILLIONS) Key Assumptions 1. Historical sales expense, marketing, trade promotional, etc. maintained at 8.0% of sales. 2. G&A expense at about 3% of sales would total about $190 million per year by 2006 for the 6 companies on a standalone basis. Model assumes 20% cut ($64 million) due to: - Single headquarters and one senior executive team. - Financial function consolidation, commonalization, and downsizing (with significant IT investment). - Sharply reduced corporate office space and associated support cost. - Consolidation of H.R., M.I.S., and other support functions. - Improved corporate goods, and services "buy" --- i.e. insurance, office equipment, lease, etc... % Savings SG&A Savings --------- ------------ 2001 0.0% 2002 6.9% 2003 7.7% 2004 8.4% 2005 9.2% 2006 9.1% [BAR CHART]
2001 2002 2003 2004 2005 2006 ---- ---- ---- ---- ---- ---- $0.0 $35.8 $46.2 $52.9 $61.2 $63.5
Pro Forma SG&A Margin --------------------- [LINE CHART]
2001 2002 2003 2004 2005 2006 ---- ---- ---- ---- ---- ---- Post Synergy 10.3% 10.4% 10.3% 10.3% 10.1% 10.0% Standalone 10.3% 11.2% 11.3% 11.3% 11.3% 11.2%
24 95 Executive Summary New Springs: Total Synergies Summary ($ Millions)
2001 2002 2003 2004 2005 2006 ---- ---- ---- ---- ---- ---- Synergy Impact: --------------- Incremental Contribution - Added Sales (1) $ 0.0 $ 5.6 $ 14.8 $ 24.5 $ 38.7 $ 54.5 Manufacturing / COGS Savings ............. 0.0 35.8 62.5 87.2 115.2 121.7 SG&A Savings ............................. 0.0 35.9 46.2 52.8 61.2 63.6 Total Synergy Benefit .................... $ 0.0 $ 77.3 $ 123.5 $ 164.5 $ 215.1 $ 239.8 Post Synergy EBITDA ...................... $ 422.7 $ 597.8 $ 729.3 $ 787.5 $ 869.6 $ 921.5 Margin: Synergy % of Sales ....................... 0.0% 1.7% 2.3% 2.9% 3.6% 3.8% Post Synergy EBITDA % of Sales ........... 11.1% 12.9% 13.5% 14.0% 14.6% 14.6%
- ------------------ (1) Incremental sales less average COGS margin less 8% sales and marketing margin. 96 EXECUTIVE SUMMARY NEW SPRINGS: WORKING CAPITAL SAVINGS ($ MILLIONS)
2000 New Springs Post Synergy Case ----------------------------- Operating Working Capital: Standalone 2001 2002 2003 2004 2005 2006 - -------------------------- ---------- ---- ---- ---- ---- ---- ---- Days Inventory in COGS ............. 103.8 98.1 95.4 91.4 86.4 81.5 81.5 Days Receivables in Sales .......... 53.2 53.9 52.7 52.9 53.1 53.1 53.1 Days Payables in COGS .............. 27.1 26.6 27.3 28.7 29.8 29.8 29.8 Operating W/C DS % of Sales ........ 30.9% 30.2% 28.9% 27.8% 26.5% 25.5% 25.5% Working Capital Savings ($ millions) Pre-Synergy W/C .................... -- $1,170.5 $1,383.0 $1,604.5 $1,661.8 $ 1,731 $1,801.0 Synergy Savings .................... -- $ 16.4 $ 47.2 $ 106.6 $ 164.3 $ 211.0 $ 194.2 -------- -------- -------- -------- -------- -------- -------- Post Synergy W/C ................... -- 1,154.1 1,335.8 1,497.9 1,497.5 1,520.3 1,606.8 Memo: Synergy Savings as a % of W/C. -- 1.4% 3.4% 6.6% 9.9% 12.2% 10.8%
26 97 EXECUTIVE SUMMARY NEW SPRINGS: CAPITAL EXPENDITURES INVESTMENT AND SAVINGS ($ MILLIONS)
Standalone New Springs Synergy Case ------------------------ 2000 2001 2002 2003 2004 2005 2006 ---- ---- ---- ---- ---- ---- ---- Standalone CAPEX ................. $185.0 $155.0 $179.7 $210.3 $217.9 $227.1 $236.2 % of Sales ....................... 4.9% 4.1% 3.9% 3.9% 3.9% 3.8% 3.7% Synergy Case Front End Investment in .......... -- 20.0 40.0 30.0 10.0 0.0 0.0 IT and Equipment Reduced Maintenance and .......... -- 0.0 (9.0) (15.8) (17.4) (18.2) (18.9) Replacement CAPEX Due to Facility Consolidation Net Change ....................... -- $ 20.0 $ 31.0 $ 14.2 ($ 7.4) ($18.2) ($18.9) ------ ------ ------ ------ ------ ------ ------ Post Synergy CAPEX ............... 185.0 175.0 210.7 224.5 210.5 208.9 217.3 % of Sales ....................... 4.9% 4.6% 4.6% 4.2% 3.7% 3.5% 3.4% Memo: Reduced Maintenance / ...... 0.0% 5.0% 7.5% 8.0% 8.0% 8.0% 8.0% Replacement CAPEX Savings (%)
27 98 EXECUTIVE SUMMARY NEW SPRINGS: POST SYNERGY FINANCIAL STATEMENT SUMMARY
New Springs Post Synergy CAGR -------------------------------------------------------------------------- 2001 2002 2003 2004 2005 2006 2001 - 2006 --------- --------- --------- --------- --------- --------- --------- Net Sales $ 3,823.0 $ 4,624.3 $ 5,391.9 $ 5,640.6 $ 5,966.1 $6,301.6 10.5% Gross Profit 817.8 1,078.1 1,286.7 1,366.8 1,472.2 1,553.6 13.7% SG&A 395.1 480.3 557.5 579.3 602.6 632.1 9.9% --------- --------- --------- --------- --------- --------- --------- EBITDA(1) 421.7 596.8 728.3 786.5 868.6 921.5 16.9% --------- --------- --------- --------- --------- --------- --------- Depreciation and Amortization(2) 149.2 165.5 192.6 193.9 196.3 199.6 6.0% EBIT 272.5 431.3 535.7 592.6 672.3 721.9 21.5% Net Interest Expense 106.3 122.8 149.9 140.7 106.1 74.1 -7.0% Taxable Income 164.9 307.2 384.5 450.6 564.9 646.5 31.4% Taxable Provision 63.0 118.9 150.7 175.9 219.3 250.4 31.8% Net Income 101.9 188.3 233.8 274.7 345.6 396.1 31.2% Preferred Dividends 0.0 0.0 0.0 0.0 0.0 0.0 --------- --------- --------- --------- --------- --------- --------- Net Income to Common $ 101.9 $ 188.3 $ 233.8 $ 274.7 $ 345.6 $ 396.1 31.2% --------- --------- --------- --------- --------- --------- --------- Fully Diluted Shares 23.0 23.2 23.5 23.7 23.9 23.9 EPS $ 4.43 $ 8.12 $ 9.95 $ 11.59 $ 14.46 $ 16.57 30.2% Implied Share Price at 10.0x $ 81.16 $ 99.49 $ 115.91 $ 144.60 $ 165.73 $184.10 17.8% Forward P/E Net Debt and Credit Statistics Senior Debt (Revolver and A&B Loans) 933.5 933.5 884.5 616.3 296.1 0.0 -- Acquisition Facility 0.0 319.3 576.1 576.1 576.1 569.9 -- Sub Debt / Other 19.7 19.7 19.7 19.7 19.7 19.7 -- --------- --------- --------- --------- --------- --------- --------- Total Debt 953.2 1,272.5 1,480.3 1,212.1 891.9 589.6 -- --------- --------- --------- --------- --------- --------- --------- Total Debt / EBITDA 2.3x 2.1x 2.0x 1.5x 1.0x 0.6x -- --------- --------- --------- --------- --------- --------- ---------
- ---------- (1) EBITDA is less $1 million in non-compete expense per year from 2001 to 2005. (2) Includes amortization of goodwill and transaction expense. 28 99 EXECUTIVE SUMMARY NEW SPRINGS: ACCRETION / DILUTION IMPACT ON EXISTING SPRINGS SHAREHOLDERS IMPLIED NEW SPRINGS SHARE PRICE PRICE AT 10X FORWARD P/E 6 YEAR CAGR VS $32.00/SHARE 34 % [BAR GRAPH]
2000 Actual 2001 2002 2003 2004 2005 2006 ------ ---- ---- ---- ---- ---- ---- $ 32.00 $ 81.11 $ 99.49 $115.91 $144.60 $165.73 $184.10
ACCRETION / DILUTION VS. SPRINGS STANDALONE (MANAGEMENT PROJECTIONS) [LINE GRAPH]
% Accretion/Dilution -------------------- 2001 (2.5%) 2002 65.1% 2003 88.7% 2004 104.6% 2005 137.3% 2006 155.7%
2001 2002 2003 2004 2005 2006 ---- ---- ---- ---- ---- ---- SPRINGS STANDALONE $ 4.55 $ 4.91 $ 5.28 $ 5.67 $ 6.08 $ 6.47 NEW SPRINGS CASE $ 4.43 $ 8.11 $ 9.96 $11.59 $14.43 $16.55
29 100 SPRINGS INDUSTRIES APPENDIX 2 PILLOWTEX RESEARCH ================================================================================ - ------------ GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ------------ 61 101 CREDIT RESEARCH & TRADING LLC PILLOWTEX CORP. Research Note Update -- April 28, 2000 Ethan Schwartz Vice President (203) 629-6461 eschwartz@crtllc.com I. DESCRIPTION OF SECURITIES ($'s in millions except per share data)(1)
Market ----------------------- Security Maturity Ratings Amount Bid/Ask Value YTM - -------- -------- ------- ---------- -------- --------- ------- Libor + 300 Rev. Credit Facility(2) 12/31/03 $ 259.8 85-8 $ 224.7 13.9% Libor + 300 Term Loan(3) 12/31/03 120.0 85-8 103.8 16.3 Libor + 350 Term Loan(4) 12/31/03 221.5 85-8 191.6 14.9 Libor + 400 Promissory Note(5) 3/31/00 35.0 NA --------- Total Secured Debt 636.3 9% Senior Subordinated Notes(6) 12/15/07 Ca/CC 185.0 39-41 $ 74.0 28.8% 10% Senior Subordinated Notes(7) 11/15/06 Ca/CC 125.0 39-41 50.0 32.8 6% Convertible Subord. Debentures(8) 100.2 28-30 29.1 25.4 Industrial Revenue Bonds 17.9 NA Other 4.5 NA --------- Total Debt Outstanding $ 1,068.9 ========= Convertible Preferred(9) $ 74.0
Common Stock 14.2 million shares 5 1/16-5 1/8 $ 72.3
- ----------- (1) Estimated as of January 1, 2000. (2) Fully secured by all Pillowtex domestic assets and 65% of stock in foreign subsidiaries. Covenant waiver to 3/31/00. Face amount excludes estimated $34.8 under letter of credits. Availability estimated at $55.4 million on January 1, 2000. (3) Fully secured by all Pillowtex domestic assets and 65% of stock in foreign subsidiaries. Covenant waiver to 3/31/00. Amortizing $3.75 million per quarter in 2000, $6.25 million per quarter in 2001, $8.75 million per quarter in 2002 and $11.25 million per quarter in 2003. Payments due on 3/31, 6/30, 9/30 and 12/31. (4) Fully secured by all Pillowtex domestic assets and 65% of stock in foreign subsidiaries. Covenant waiver to 3/31/00. Amortizing $562.5 thousand per quarter through 12/31/03, $53.13 million per quarter thereafter. Payments due on 3/31, 6/30, 9/30 and 12/31. (5) Originally $20 million maximum advance, expanded to $35 million in July, 1999. Granted security interest in December. (6) Guaranteed by Pillowtex and its domestic subsidiaries, including Fieldcrest Cannon. Subordinate to senior indebtedness, including credit facilities. Coupon June and December. Callable 12/15/02 @ 104.50. (7) Guaranteed by Pillowtex and its domestic subsidiaries, including Fieldcrest Cannon. Subordinate to senior indebtedness, including credit facilities. Coupon May and November. Callable 11/15/01 at 105.00. (8) $1,000 face amount convertible into 61% cash + 6.08 shares of PTX common stock. Obligation of Fieldcrest Cannon subsidiary. Subordinate to Fieldcrest guarantee of 9% and 10% Pillowtex Senior Subordinated Notes. However, 61% cash obligation may be a general unsecured claims of Fieldcrest upon conversion. (9) 10% dividend payable in kind as of 1/1/00, due to failure to meet EPS targets. Convertible into common at $24/share. The information in this report has been obtained from sources which Credit Research & Trading LLC ("CRT") believes to be reliable. However, CRT does not guarantee its accuracy, and such information may be incomplete or condensed. Opinions in this report represent CRT's position as of this date and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation in regard to the purchase or sale of any security. CRT and/or its officers and employees may from time to time acquire, hold, or sell a position in the securities mentioned herein. Upon request, CRT will furnish specific information in this regard. If CRT is involved in the purchase or sale of any security, CRT may act as principal for its own account or as agent for both the buyer and the seller. 102 Pillowtex Corp. - April 28, 2000 II. DISCUSSION AND RECOMMENDATION In our March 2, 2000 report on Pillowtex Corp. ("Pillowtex" or the "Company"), we reviewed what we believe to be the important internal difficulties and external pressures that have severely hampered Pillowtex's performance over the past year. These pressures are likely to continue, we asserted, making it extremely difficult for Pillowtex to achieve the working capital and margin improvements necessary for the Company to perform through 2000 within the constraints of available liquidity. We therefore presented our view that Pillowtex is likely to file for a financial restructuring before year-end. We have not changed this core point of view, and still find a filing for bankruptcy protection by year end to be the most likely scenario, as a result of operational and liquidity pressures. However, we have modified our views somewhat regarding the optimal strategy that should be pursued by holders of Pillowtex's 6% Convertible Subordinated Debentures due March 15, 2012. In our March 2, 2000 report, we suggested that holders of the 6% Convertibles should submit them for conversion, despite the company's refusal to remit the associated cash component. Our logic was that the terms of the Convertibles' indenture suggest that if the instruments are presented for conversion and a bankruptcy scenario ensues, the unpaid 60% cash claim held by the Convertibles' holder upon conversion could be lifted to the general unsecured class. That would contrast with the subordinate status of the Convertibles themselves. Given our belief that minimal value would be available for the subordinate class upon a restructuring of Pillowtex - but that some value (on the order of 35% of principal claim) could be available to the general unsecured class, WE CONCLUDED THAT IT WOULD BE ADVANTAGEOUS FOR THE CONVERTIBLES HOLDERS TO CONVERT IN ANTICIPATION OF BANKRUPTCY. WE ALSO NOTED THAT GIVEN THEN-MARKET LEVELS, CONVERTIBLES HOLDERS SHOULD ALSO MAINTAIN A HEDGED POSITION IN WHICH THEY ARE SHORT THE UNDERLYING EQUITY. WE CONTINUE TO BELIEVE THAT HOLDERS OF THE CONVERTIBLES SHOULD MAINTAIN A HEDGED POSITION AGAINST THE UNDERLYING EQUITY. However, further review of the Convertibles' indenture has alerted us to some of the difficulties that Convertibles holders could face if, following conversion of their securities, they were to attempt to assert a general unsecured claim for the unpaid cash portion of their claim. Specifically, we note the potential counter-arguments that other creditor classes could assert by citing Section 1415(2) of the indenture, which is embedded within the indenture's article on subordination. Section 1415(2) states that "[f]or purposes of this Article [i.e., Article 14, Subordination] only...the payment of cash...upon conversion of a [debenture] shall be deemed to constitute payment on account of the principal of such [debenture]." If, as this passage suggests, a right to payment of cash upon conversion is in fact treated as a right to payment of principal under the debenture, such right to payment of cash could be deemed to be subject to the Article 14 subordination provisions governing payments of principal under the debentures. While we are in no way offering a legal opinion on the issue, WE DO BELIEVE THAT THE COMPLEXITY OF THE MATTER, AND OUR INABILITY TO PREDICT THE LIKELY LEGAL OUTCOME, WOULD MAKE (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 2 103 Pillowtex Corp. - April 28, 2000 IT PRUDENT FOR CONVERTIBLE HOLDERS NOT TO CONVERT IN ANTICIPATION OF A RESTRUCTURING, BUT RATHER TO MAINTAIN A HEDGED POSITION. There are, we believe, two optimal outcomes from the standpoint of a Convertible holder. First, the Convertible holders could negotiate a settlement with the Company whereby the Company would significantly increase the number of shares received upon conversion, and hence, at current market value, the value received by Convertible holders upon conversion. Such shares received as part of a settlement could be used to close out an existing hedged position. In the alternative, Convertible holders could short shares prior to conversion under the terms of a settlement (particularly if an averaging period were used to determine the Convertibles' exchange rate, as part of the settlement) or sell shares immediately upon conversion. Second, Convertible holders could maintain a hedged position going into a restructuring, at which point we believe that Pillowtex shares would fall to minimal value, allowing Convertible holders to recoup from the short position any losses suffered regarding the Convertible position. Our modified recommendation for Convertibles holders has two important ramifications. First, to the extent that a high volume of conversions of the Convertibles could have acted as a near-term trigger for a bankruptcy filing, that risk may now be minimized if such conversions do not take place. However, our belief that a restructuring will likely occur because of operational and working capital pressures remains unchanged. Second, our worst case scenario for the Senior Subordinate Notes - that they would receive only 35% future value or 24% present value in a bankruptcy scenario, given a lifting of the Convertibles to general unsecured status - now appears more questionable. As we did in the March 2nd report, we continue to find a present value of 28-to-29% for the Senior Subordinate Notes to be the most likely outcome, based on a future recovery value of 40-to-42%. We therefore continue to find the Senior Subordinate Notes overvalued at current market prices. We continue to find no inherent value in Pillowtex equity. A hedged position by Convertible holders, therefore, could ensure some value obtained regardless of whether a settlement is reached prior to restructuring or not. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 3 104 CREDIT RESEARCH & TRADING LLC ================================================================================ SPECIAL SITUATIONS RESEARCH PILLOWTEX CORP. Fixed Income, Convertible Debt and Equity Research Report March 2, 2000 Ethan Schwartz Vice President (203) 629-6461 eschwartz@crtllc.com ================================================================================ ONE FAWCETT PLACE GREENWICH, CT 06830 TEL: 203-629-6400 FAX: 203-629-6499 105 PILLOWTEX CORP. I. DESCRIPTION OF SECURITIES ($'s in millions except per share data)(1)
Market ------------------- Security Maturity Ratings Amount Bid/Ask Value YTM - --------------------------------- -------- ------- -------- ------- -------- ---- Libor + 300 Rev. Credit Facility(2) 12/31/03 $ 259.8 85-8 $ 224.7 13.9% Libor + 300 Term Loan(3) 12/31/03 120.0 85-8 103.8 16.3 Libor + 350 Term Loan(4) 12/31/03 221.5 85-8 191.6 14.9 Libor + 400 Promissory Note(5) 3/31/00 35.0 NA -------- Total Secured Debt 636.3 9% Senior Subordinated Notes(6) 12/15/07 Ca/CC 185.0 38-40 $ 72.2 29.2% 10% Senior Subordinated Notes(7) 11/15/06 Ca/CC 125.0 39-41 50.0 32.4 6% Convertible Subord. Debentures(8) 100.2 29-31 30.0 20.0 Industrial Revenue Bonds 17.9 NA Other 4.5 NA -------- Total Debt Outstanding $1,068.9 ======== Convertible Preferred(9) $ 74.0 Common Stock 14.2 million shares 4 1/2-4 5/8 $ 64.8
(1) Estimated as of January 1, 2000. (2) Fully secured by all Pillowtex domestic assets and 65% of stock in foreign subsidiaries. Covenant waiver to 3/31/00. Face amount excludes estimated $34.8 under letter of credits. Availability estimated at $55.4 million on January 1, 2000. (3) Fully secured by all Pillowtex domestic assets and 65% of stock in foreign subsidiaries. Covenant waiver to 3/31/00. Amortizing $3.75 million per quarter in 2000, $6.25 million per quarter in 2001, $8.75 million per quarter in 2002 and $11.25 million per quarter in 2003. Payments due on 3/31, 6/30, 9/30 and 12/31. (4) Fully secured by all Pillowtex domestic assets and 65% of stock in foreign subsidiaries. Covenant waiver to 3/31/00. Amortizing $562.5 thousand per quarter through 12/31/03, $53.13 million per quarter thereafter. Payments due on 3/31, 6/30, 9/30 and 12/31. (5) Originally $20 million maximum advance, expanded to $35 million in July, 1999. Granted security interest in December. (6) Guaranteed by Pillowtex and its domestic subsidiaries, including Fieldcrest Cannon. Subordinate to senior indebtedness, including credit facilities. Coupon June and December. Callable 12/15/02 @ 104.50. (7) Guaranteed by Pillowtex and its domestic subsidiaries, including Fieldcrest Cannon. Subordinate to senior indebtedness, including credit facilities. Coupon May and November. Callable 11/15/01 at 105.00. (8) $1,000 face amount convertible into 61% cash + 6.08 shares of PTX common stock. Obligation of Fieldcrest Cannon subsidiary. Subordinate to Fieldcrest guarantee of 9% and 10% Pillowtex Senior Subordinated Notes. However, 61% cash obligation may be a general unsecured claims of Fieldcrest upon conversion. (9) 10% dividend payable in kind as of 1/1/00, due to failure to meet EPS targets. Convertible into common at $24/share. II. CONCLUSION This report presents the following core point of view: (a) we do not expect Pillowtex to file for bankruptcy court protection within the next 5-to-6 months; (b) we believe it likely that a filing and financial restructuring will occur before year-end; and (c) our estimate of the Company's total enterprise value approximates $870 million. Our base scenario and valuation would leave (d) the senior secured tier largely unimpaired; (e) the senior subordinated debt and trade claim tiers deeply impaired (and fully equitized upon reorganization); (f) the convertible subordinated debt tier with value only if submitted for conversion prior to a bankruptcy filing (and then deeply impaired and fully equitized upon reorganization); and (g) the preferred and common equity tier with no allocated value. We find the subordinated debt securities to be unattractive at current price levels, offering a positive risk/reward investment profile at prices closer to 30% of par for the senior subordinated debt issues and 13% of par for the convertible subordinated debt issue (presuming they are submitted for conversion prior to a bankruptcy filing and successfully argue for general unsecured status on their 60% cash claim). - -------------------------------------------------------------------------------- The information in this report has been obtained from sources which Credit Research & Trading LLC ("CRT") believes to be reliable. However, CRT does not guarantee its accuracy, and such information may be incomplete or condensed. Opinions in this report represent CRT's position as of this date and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation in regard to the purchase or sale of any security. CRT and/or its officers and employees may from time to time acquire, hold, or sell a position in the securities mentioned herein. Upon request, CRT will furnish specific information in this regard. If CRT is involved in the purchase or sale of any security, CRT may act as principal for its own account or as agent for both the buyer and the seller. 106 Pillowtex Corp. - March 2, 2000 Investors should recognize that the Pillowtex case presents a far greater opportunity of varying from the core pathway outlined above than in the typical situation - with that variance coming on both sides of the investment equation. Active bankruptcy triggers do very much exist, posing the credible potential for an accelerated filing over the near term. And, given certain inherent strengths within the Company (e.g., it being in far sounder market and manufacturing condition than, say, Fruit of the Loom) as well as certain operational and capital structure considerations (e.g., with many of its past problems being remediable; and with the secured banks being adequately secured and the lead bank having a sizable additional exposure), a plausible scenario can be reasonably drawn that would allow the Company to overcome the crisis in liquidity and confidence we think likely later this year, materially delaying or avoiding a financial restructuring. However, we believe our case does represent the most likely pathway and, importantly, that the presence of the more adverse accelerated bankruptcy scenario greatly diminishes the option value offered by the most positive scenario. III. SUMMARY AND INVESTMENT RECOMMENDATION Pillowtex Corp. ("Pillowtex" or the "Company") is the second largest producer of home fabrics in the United States. The Company is the leading maker of bath towels (approximately 45% of sales) and, along with Westpoint Stevens, Inc. ("Westpoint") and Springs Industries, Inc. ("Springs"), accounts for approximately three-quarters of domestic bath towel sales by value, ranks third in sheets and pillowcases (approximately 18% of sales), and is a leader, if not the top supplier, in several other home textile segments including sleep pillows (approximately 10% of sales), blankets (9%), comforters and bedspreads (11%) and kitchen towels (7%). Following a disastrous operating performance in 1999, Pillowtex is facing severe liquidity pressures. Current waivers on the Company's recently amended $650-plus million secured bank debt facility, set to expire on February 15th, have been extended and are now set to expire on March 31st. A $35 million secured Promissory Note, also due on February 15th following an extension received in December, now matures on March 31st. Pillowtex has, to date, refused to honor the cash obligation associated with the conversion of the approximately $100 million outstanding of 6% Convertible Subordinated Debentures (full conversion would require a $60 million cash payment to holders). In our view, that refusal leaves Pillowtex vulnerable to a declaration by holders of an event of default and commencement of an involuntary bankruptcy proceeding. Pillowtex has approximately $55 million available under its revolver. Capital spending levels have been sharply reduced to conserve liquidity, though Pillowtex has spent only approximately two-thirds of what the Company originally estimated to be some $300 million needed to upgrade facilities. After having benefited from a seasonal work down of inventory over recent months - and a radical effort to clear inventory over Q4 - we anticipate associated cash demands to begin to be felt by late Q2-early Q3 as Pillowtex builds inventory for the autumn selling season. With operating cash flow by our forecast insufficient to support the pending inventory cycle, we believe that new funding sources will be required. OVER THE NEAR TERM. We believe PILLOWTEX HAS A REASONABLE LIKELIHOOD OF AVOIDING A BANKRUPTCY FILING OVER THE NEXT 5-TO-6 MONTHS. Pillowtex is now in the cash positive portion of its working capital cycle, and could benefit from a $17 million positive cash swing over this (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 2 107 Pillowtex Corp. - March 2, 2000 quarter, by our estimate. Moreover, Pillowtex's secured lenders appear to be comfortably over-secured, increasing the likelihood that they give Pillowtex additional time so long as cash movements are positive. We emphasize that Pillowtex's ability to avoid bankruptcy in the near-term depends, in our view, on the successful negotiation of some form of standstill or exchange offer with the approximately $100 million outstanding of 6% Convertible Subordinate Debentureholders. While certain of the holders of the Convertibles have requested conversion and to date the cash component of the conversion has not been distributed to any such holder, conversations with major holders are underway. We also believe, however, that a financial and legal argument can be made that the Convertible holders would be better off converting prior to bankruptcy, given that we believe conversion would give them a $60 million general unsecured claim against the Fieldcrest subsidiary (along with an equity claim against the parent) rather than a $100 million deeply subordinated claim. Given our view that Convertible holders do structurally possess the ability to trigger an event of default, and that it could be in their interest to convert and demand their cash prior to default, we believe that an event of default and consequent filing for bankruptcy remains a fully available pathway as long as the conversion issue remains in limbo. OVER THE MEDIUM TERM. Looking out beyond six months, WE BELIEVE THERE IS A SIGNIFICANT LIKELIHOOD THAT PILLOWTEX WILL BE REQUIRED TO COMMENCE A SUBSTANTIVE FINANCIAL RESTRUCTURING BEFORE YEAR-END. As detailed in the report, WHILE WE DO BELIEVE THAT SOME OF 1999'S ABYSMAL PERFORMANCE STEMMED FROM ONE-OFF EVENTS, WE DO NOT EXPECT PILLOWTEX TO BE ABLE TO SHOW THE KIND OF NEAR-TO-MEDIUM TERM OPERATING IMPROVEMENTS NEEDED TO MAINTAIN THE CURRENT CAPITAL STRUCTURE OVER THE LONG-TERM. The cash flow margins anticipated by many creditors and investors will not prove to be, in our judgement, achievable. We believe that Pillowtex continues to face significant Company-specific hurdles including: - loss of certain accounts with important customers, - continued manufacturing weaknesses, - financing constraints that leave Pillowtex unable to complete a planned investment program (through Pillowtex has said upgrades are now complete), - significant management difficulties, - an apparent greater dependence on mass-market discounters than its competitors, - a greater array of disparate products than its competitors, - what we believe to be an inherently less efficient operating base than competitors such as Westpoint, and - higher exposure than competitors to certain low-margin products (such as kitchen materials). Underpinning our conclusion regarding the likelihood of a bankruptcy filing is our view that Pillowtex's "normalized" EBITDA margin - barring significant incremental capital expenditures -- is only in the 9.5-to-10.0% range. WE DO NOT BELIEVE THE 13%-PLUS EBITDA MARGIN PILLOWTEX SHOWED IN 1998, JUST ONE YEAR AFTER ACQUIRING FIELDCREST CANNON, INC. ("FIELDCREST") AND THE LESHNER CORP. ("LESHNER"), IS A CREDIBLE INDICATOR OF TRUE PERFORMANCE. We are concerned that the eventual recognition of this lower performance capacity may act to (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 3 108 Pillowtex Corp. - March 2, 2000 erode the confidence of and support provided by key creditors, with the loss of such support contributing to the pressures pushing the Company toward a financial restructuring. IMPORT AND PRICE PRESSURE. Additionally, while to date home fabric manufacturers have been spared much of the severe import and pricing pressure now seen in several apparel segments, WE BELIEVE THERE IS SIGNIFICANT EVIDENCE THAT IMPORT PRICING AND DEMAND PRESSURE IS AFFECTING HOME FABRIC COMPANIES' MARGINS AND THAT SUCH PRESSURE COULD SOON INCREASE TO A SIGNIFICANT DEGREE. Specifically: - Imports have surged in key product segments such as sheets and towels, and the latest government data suggest that trend is unabated and may be accelerating. This supports what we have heard from a wide array of retailers. - There is significant evidence that a pricing squeeze is occurring in towels and sheeting - not so much through a reduction in nominal unit sales prices, but rather through a race by U.S. manufacturers to move upstream and offer higher thread-count sheet and towel products, which are more expensive to produce, for the same price as lower-count offerings. - According to government statistics, growth in home fabric consumption appears to be weak, and may in fact be slipping for key products on which Pillowtex depends, such as bathroom towels. - Pillowtex's two main competitors, Springs and Westpoint, both entered 2000 with significant inventory builds, suggesting oversupply may dampen price in quarters to come. As the limitations on Pillowtex's medium-term performance become apparent to creditors and investors - as we believe they will - it could become increasingly difficult for Pillowtex to find ways to fund what we believe will be a liquidity shortfall in the $50-to-$60 million range over the third quarter (excluding needs associated with the maturity of the Promissory Note and the conversion of the 6% Debentures), as Pillowtex enters the inventory-building portion of its selling cycle. The critical extension of waivers and debt maturities, as well as the essential ongoing support of vendors, would also be expected to become increasingly difficult to maintain. Vendors, suppliers and factors, groups who have already been hit hard over recent months by sizable failures in the industry may well prove to be far more cautious, restricting credit exposure both more quickly and more sharply than might typically be the case. WHILE WE BELIEVE A MEDIUM-TERM BANKRUPTCY FILING TO BE MORE LIKELY THAN NOT, INVESTORS SHOULD NOT LOSE SIGHT OF THE FACT THAT PILLOWTEX IS MEANINGFULLY BETTER POSITIONED FROM A FUNDAMENTAL POINT OF VIEW THAN WERE OTHER TEXTILE COMPANIES WHICH HAVE RECENTLY BEEN FORCED TO RESTRUCTURE, SUCH AS FRUIT OF THE LOOM. Pillowtex over the past several quarters has spent significant sums of money to improve its manufacturing base, and those efforts have born fruit. While we believe that deficiencies still persist, they pale compared to those at companies that had neglected manufacturing upgrades. While home textiles are facing import and margin pressures, the pressures are to date not nearly as severe as in the apparel sector. Despite what we believe are Pillowtex's inherent cost and product-line disadvantages relative to its direct com- (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 4 109 Pillowtex Corp. - March 2, 2000 petitors, a significant portion of Pillowtex's 1999 difficulties stemmed from relatively correctable issues - such as poor logistical and inventory planning, management decisions, and the computer snafus. The Company does possess the capacity to operationally perform over the longer term, it does possess competitively attractive brands, and it does possess considerable inherent enterprise value. The questions are, first, can that performance attain levels sufficient to support the cash obligations associated with the business' needs and the established capital structure? and, second, how well does that inherent enterprise value match that capital structure? Pillowtex's bank facility appears to be comfortably over-secured, and participants may therefore be content to continue tightening covenants and raising interest rates so long as interest payments remain current and operational and cash flow expectations are satisfied. Meanwhile, Nationsbank, as Administrative Agent on the bank facilities, has a powerful incentive to attempt to keep the current capital structure sustainable in the hope of achieving a paydown of its $35 million Promissory Note. Finally, several of Pillowtex's competitors have made no secret of their interest in acquiring pieces of Pillowtex's business. Pillowtex has discrete product lines that could be sold, though not without significant antitrust hurdles and potential harm to the Company's valuation as an integrated home fabrics vendor. For all of the above reasons, WE CAN ENVISION A "BEST CASE" SCENARIO UNDER WHICH PILLOWTEX DOES MANAGE TO AVOID A BANKRUPTCY FILING FOR THE FORESEEABLE FUTURE. Such a scenario would entail: - marked improvement in working capital controls such that average balances are reduced by $50-to-$60 million on a consistent basis; - marked improvement in operating performance to support the conclusion that double digit EBITDA margins can be attained on a sustained basis; - recovery of sales to above $1.5 billion historic levels, with signs of consistent growth; - receipt of amendments on the bank debt facility which would both eliminate default risks and provide continued access to working capital, - completion of an exchange offer with the great majority of the 6% Convertible Subordinated Debenture issue which would eliminate the conversion overhang and near-term default trigger. Other factors that could enhance Pillowtex's ability to avoid a filing include: - potential sale of certain product lines and associated manufacturing facilities, closing near-term liquidity gaps, - evidence that growth in imports is likely to continue at only a gradual pace, or that Pillowtex can beneficially transition toward greater reliance on foreign sourcing and manufacturing, - continued solid growth in domestic consumption of home fabrics. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 5 110 Pillowtex Corp. - March 2, 2000 WHILE THERE IS SOME REAL PROBABILITY THAT PILLOWTEX CAN OVERCOME ALL OF THESE HURDLES, WE BELIEVE IT TO BE SIGNIFICANTLY MORE LIKELY THAT PILLOWTEX WILL NOT. As detailed elsewhere in this report, we estimate the total enterprise value of Pillowtex to approximate $870 million. While in the event of a bankruptcy filing, adequate protection would likely be available to the senior secured bank facility, subordinated debt would be deeply impaired - and would be subject to full equitization in a financial restructuring. NO VALUE ON A STRICT PRIORITY BASIS WOULD BE AVAILABLE TO THE $100 MILLION CONVERTIBLE SUBORDINATED DEBENTURE ISSUE AS CURRENTLY CONFIGURED UNLESS THEY HAD CONVERTED PRIOR TO BANKRUPTCY AND SUCCESSFULLY ARGUED THAT THEIR $60 MILLION CASH CLAIM REPRESENTED, IN FACT, A GENERAL UNSECURED CLAIM. THE $72 MILLION CONVERTIBLE PREFERRED ISSUE AND THE COMMON STOCK, NOW TRADING WITH A MARKET VALUE OF NEARLY $70 MILLION, WOULD BE EXPECTED TO BE ALLOCATED NO VALUE UNDER A BANKRUPTCY SCENARIO. Based upon our analysis, WE BELIEVE THE SENIOR SUBORDINATED NOTES WOULD OFFER AN ATTRACTIVE RISK/REWARD INVESTMENT PROFILE AT A PRICE APPROXIMATING 30% OF PAR. WITH A CURRENT MARKET PRICE OF THESE SECURITIES OF 40%, WE BELIEVE THE SENIOR SUBORDINATED NOTES DO NOT OFFER ATTRACTIVE INVESTMENT VALUE. In our view, the estimated value to be available to holders of the 6% Convertible Subordinated Debentures falls within a very wide range, with the specific available value being a function of the pathway followed. In a scenario in which Pillowtex files for bankruptcy court protection and holders of the Convertible Debentures have not submitted holdings to the Company for conversion, that available value is estimated to be zero (reflecting the deep impairment of the subordinated debt class and the subordination agreement which exists between the Senior Subordinated Notes and the Convertible Debenture issue). In a scenario in which Pillowtex files for bankruptcy but holders have presented securities for conversion, the present value of the distribution made to a Convertible Debentureholder (presumed to be new common stock) is esti- mated to be equal to 13% of the principal amount (reflecting a full loss associated with the 6.08 shares of common stock received upon conversion and the lifting of the 60% cash claim to the general unsecured class having no subordination agreement with the Senior Subordinated Notes). The third, and most optimistic, case involves an exchange negotiated with the Company in an effort to stave off bankruptcy in which a holder of the current Convertible Debenture issue receives a security (e.g. common shares) which may then be liquidated into the public market. Presumably the securities received would have a current market value greater than today's market value of the Convertible of roughly 30%. Given this range of alternatives, prudence would seem to suggest that holders submit the 6% Convertibles for conversion; if a bankruptcy filing ensues, a non-subordinated position is captured; if an exchange offer ensues, such holder may withdraw the securities from the conversion process and participate in the exchange. At current market levels, however, the risk/reward profile of this investment strategy remains adverse. AS A RESULT, THE ONLY POSITIVE INVESTMENT RECOMMENDATION WHICH CAN BE OFFERED IS A HEDGED POSITION IN WHICH THE INVESTOR IS LONG THE CONVERTIBLE SECURITY AND SHORT THE UNDERLYING EQUITY SECURITY. In light of the belief that an exchange offer would need to extract a high proportion of the current market value of the common stock away from stockholders, such a hedged position is viewed positively. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 6 111 Pillowtex Corp. - March 2, 2000 While we believe the bank debt is oversecured, Pillowtex will continue to face operating risks and market pressure throughout the bankruptcy process and beyond. WE THEREFORE BELIEVE THAT A RATE OF RETURN IN THE HIGH-TEENS IS APPROPRIATE FOR THE BANK DEBT. Current market levels in the mid-to-high 80s imply a rate of return that could exceed 20% (given our assumption that the bank facility is rolled into a debtor-in-possession facility, that the revolver will be fully drawn at the time of filing, that there could be some pay-down of the DIP toward the end of the bankruptcy, and that the Company takes only one year to emerge from bankruptcy). WE THEREFORE FIND THE BANK DEBT ATTRACTIVE AT THESE PRICE LEVELS. IV. DISCUSSION Pillowtex has grown by a factor of three over the past four years through several acquisitions. A manufacturer of pillows and mattress pads with $490 million of sales in 1996, the Company added approximately $1.1 billion in annual sales in 1997 when it acquired towel and sheet giant Fieldcrest Cannon, Inc. ("Fieldcrest"), a new industry segment for Pillowtex. The Company layered on The Leshner Corporation ("Leshner"), a $100 million/year kitchen towel producer, in 1998. Fieldcrest was a large, troubled behemoth when Pillowtex bought it, generally characterized as having outdated and poorly-designed manufacturing sites (chiefly Kannapolis, North Carolina and Fieldale, Virginia), and a history of EBITDA margins in only the mid-single digits - some 5-to-10 percentage points behind competitors. Investment in Fieldcrest facilities had lagged for years. On the sheeting side, Fieldcrest mills had not received significant new equipment since the early 1980s, and were still operating looms only half as fast as the air-jet machines that had become the industry norm. Towel manufacturing was somewhat better, with one new mill - Phenix City, Alabama - having been built in 1996 to produce lower end product for the mass merchant channel. Pillowtex Chairman and CEO Chuck Hansen vowed he would "fix" Fieldcrest by both slashing costs and non-core operations and plowing $300 million of new equipment into the antiquated Fieldcrest facilities. At first the turnaround seemed to work. The merged Pillowtex-Fieldcrest entity attained an 11.3% EBITDA margin for 1Q 98, compared to a pro-forma estimated 8.2% combined margin for the two companies in 1997. With Leshner added in mid-1998, Pillowtex reached a full-year EBITDA margin of 13.1% - roughly five percentage points higher than the pro forma margin of the companies in the year before the mergers (as estimated by CRT). Pillowtex, meanwhile, raised capital expenditures to 8.8% of sales, nearly twice the combined pro-forma rate for the prior year, or $133.6 million compared to a pro forma level of approximately $84 million in the prior year. The situation began to deteriorate rapidly, however, beginning in 1Q 99. EBITDA margins slid from 11.3% in the first quarter to 6.3% by the third. Working capital swung out of control, with days payables outstanding jumping to 53 days for 2Q compared to 26 in the prior year's period, accounts receivable rising to 71 days in 3Q as compared to 60 in 3Q 1998, and days inventory soaring by $100 million over the prior year's level, to 154 days of sales v. 135 days for the second quarter, then falling dramatically to 113 days in the third quarter. Retailers (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 7 112 Pillowtex Corp. - March 2, 2000 began reporting severe fulfillment and delivery problems, with orders going unmet and the billing and fulfillment processes bogging down. THE COMPANY'S EXPLANATION. Pillowtex has attributed the terrible 1999 performance to a variety of discrete one-time events: an unusual buildup in blanket inventory; the failure of a contractor in Pakistan to deliver sheeting; integration problems associated with new equipment; and Wal-Mart's decision to eliminate Pillowtex's $40 million/year Sahara line of towels. However, the Company has put the lion's share of the blame on what it says was a faulty transition to a new computer system, a transition which purportedly wreaked havoc on the Company's sourcing, manufacturing, inventory management, and financial operations. For over a year Pillowtex management has asserted that there is nothing fundamentally wrong with its manufacturing and fulfillment operations - other than the computer snafus - and that the Company will be returning to normalized performance and working capital management shortly. The chief questions facing investors are: i) can one reasonably rely on management's claims that the 1999 performance is attributable to one-off issues (including the computer problems) and that a return to "normalized" performance will be forthcoming very shortly?; ii) if so, what is the level of "normalized" performance to which the Company can rapidly return? Would such performance likely prove sufficient to permit the Company to avoid a financial restructuring; iii) if not, what is a reasonable estimate of the inherent enterprise value which would be available to investors upon a financial restructuring of Pillowtex?; and iv) does the risk/reward profile created by the answers to these questions provide investors with a positive or a negative investment opportunity at current market levels? After extensive interviews with Pillowtex equipment vendors, former engineering and management executives, and customers, WE FIND LARGELY CREDIBLE MANAGEMENT'S CLAIM THAT THE PAST YEAR WAS SOMETHING OF AN ABERRATION, AND THAT THERE ARE NO SEVERE MANUFACTURING ISSUES THAT EITHER WOULD REQUIRE HIGH LEVELS OF REMEDIAL CAPITAL SPENDING OR WOULD KEEP MARGINS AT DEPRESSED, SINGLE-DIGIT LEVELS LONG-TERM. Importantly, we have also heard from a number of key Pillowtex retail customers that, while fulfillment remains problematic, service has improved noticeably from the severe weaknesses of the past year. On the other hand, WE DO NOT FIND CREDIBLE THE VIEW THAT 1998'S 13% EBITDA MARGIN IS INDICATIVE OF NORMALIZED PERFORMANCE FOR THE COMPANY. RATHER, LEVELS CLOSER TO SPRING INDUSTRIES' 10% EBITDA MARGIN RANGE WOULD SEEM TO BE MORE REASONABLY ATTAINABLE without inordinate amounts of additional capital expenditures or a significant re-alignment of Pillowtex's operations. We have reached that conclusion based on a variety of factors, including: - OPERATIONAL AND PERFORMANCE WEAKNESSES DO REMAIN IN THE OLD FIELDCREST FACILITIES DESPITE THE HEIGHTENED CAPITAL EXPENDITURE PROGRAM. While roughly 80% of (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 8 113 Pillowtex Corp. - March 2, 2000 towel looms have been upgraded to rapid air-jet technology, we believe that only about 20% of sheeting looms have been so replaced. Certain yarn-spinning facilities, such as those at Kannapolis, are also older generation and less automated than state-of-the-art facilities. KANNAPOLIS ALSO RECENTLY BECAME ONE OF THE FEW UNIONIZED HOME FABRIC PLANTS IN THE NATION. We estimate that the new settlement should cost Pillowtex between $5-to-10 million a year in additional wages and benefits. - THE VERY REAL LIQUIDITY CONSTRAINTS NOW BEING FACED IMPEDE THE COMPLETION BY PILLOWTEX OF ITS ORIGINAL CAPITAL EXPENDITURE PROGRAM. The Company has pledged to hold capital spending down to $47 million in 2000, though the Company remains some $75 to $100 million short of the $300 million Mr. Hansen believed necessary to fix Fieldcrest when he bought it in 1997. - Company officials, however, assert that the original $300 million target turned out to have been overstated. - CERTAIN INHERENT DEFICIENCIES IN THE MANUFACTURING BASE ACQUIRED FROM FIELDCREST PROBABLY CANNOT BE REPAIRED IN THE NEAR-TERM given the cash constraints and grave shortness of time. Kannapolis and Fieldale, for example, is a sprawling, multi-level plant that is inherently complex to operate. - Company officials describe Kannapolis and Fieldale as "among the best mills of that age", though not as efficient as newer facilities. - WEAKNESSES PRESENT IN PILLOWTEX BUSINESS SEGMENTS WHICH ARE NOT SHARED BY WESTPOINT AND SPRINGS, INCLUDING THE KITCHEN PRODUCTS SEGMENT ACQUIRED FROM LESHNER, WILL ADVERSELY AFFECT COMPARISONS WITH THOSE COMPANIES and would be expected to limit the level of financial performance achieved over the intermediate term. - PILLOWTEX'S APPARENTLY HIGHER RELIANCE ON LOW-MARGIN MASS RETAILERS THAN WESTPOINT STEVENS AND, TO A LESSENED DEGREE, SPRINGS WILL FURTHER DAMPEN COMPETITIVE MARGIN COMPARISONS. For example, Wal-Mart accounted for 24% of Pillowtex sales in 1998 compared to only 15% for Springs. Kmart took only 11% of Westpoint Stevens' sales in 1998, though Westpoint sold 13% of its product to Dayton Hudson, including Target. - It should be noted that Pillowtex officials dispute assertions that mass retailers offer lower profit margins, claiming long product runs recoup through efficiency any losses in price. - CONTRACTS LOST OVER THE PAST YEAR WILL IMPEDE PILLOWTEX'S RECOVERY. In addition to cutting Pillowtex's Sahara line, Wal-Mart recently decided to replace its Select Editions line - formerly supplied by both Springs and Pillowtex - with Springs' Springmaid brand. Dan River was recently awarded an $80 million/year portion of K-Mart's Martha Stewart line, formerly produced by both Pillowtex and Springs. - Pillowtex asserts it will recoup business with these retailers in other programs so that sales to K-Mart will show single-digit growth in 2000, while sales to Wal-Mart will be flat to only slightly down. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 9 114 Pillowtex Corp. - March 2, 2000 - PILLOWTEX RELIES MORE HEAVILY THAN COMPETITORS ON TOWEL PRODUCTS, WHERE U.S. CONSUMPTION MAY BE WEAKENING. Bath towels make up approximately 46% of Pillowtex's revenue versus approximately 36% for Westpoint and approximately 10% for Springs. According to Commerce Department figures reported with a two quarter lag, U.S. TOWEL CONSUMPTION HAS FALLEN SIGNIFICANTLY, ON A YEAR-OVER-YEAR BASIS, FOR THREE QUARTERS IN A ROW. A leading industry consultant asserts that, while towel sales did grow by 7% in 1999, that rate of growth will be cut in half this year. Pillowtex expects towel sales to be flat at best in FY2000. - Pillowtex's comparatively more complex and varied product line may impose higher normalized operating costs relative to those faced by competitors. Finally, while not embedded within the manufacturing base itself, THERE ARE A SERIES OF ADDITIONAL FACTORS AT HAND WHICH WE BELIEVE RESTRICT THE LIKELIHOOD THAT PILLOWTEX'S PERFORMANCE CAN SNAP BACK TO NORMALIZED LEVELS RAPIDLY ENOUGH TO AVOID A CONTINUATION OF THE LIQUIDITY CRISIS. Pillowtex continues to face very real problems as it struggles to return to normal - most notably: - PILLOWTEX CONTINUES TO FACE IMPORTANT MANAGEMENT WEAKNESSES. Though a superb salesman and enthusiastic leader, Chairman and CEO Chuck Hansen had never run a Company as large as the current Pillowtex before acquiring Fieldcrest and Leshner. There are indications that over the past 2 years he has overruled experienced executives regarding many critical decisions, and fired or lost key executives who challenged his plans and expectations, including President of Manufacturing Christopher Baker, head of towel manufacturing at Phenix City, Bill Mooring, President and COO Jeff Cordesman, CFO Ron Wehtje, as well as key members of the old Fieldcrest MIS team. One bright-spot is that Joe McHugh, Pillowtex's acting CFO, earned a solid reputation at the helm of Triangle Pacific. - PILLOWTEX MAY CONTINUE TO EXPERIENCE DIFFICULTIES IN ABSORBING SIGNIFICANT AMOUNTS OF MANUFACTURING EQUIPMENT INSTALLED OVER THE PAST YEAR, particularly at the Phenix City, Alabama and Kannapolis, North Carolina plants. Such difficulties may lead to continued product shortfalls and working capital difficulties. - THE ONGOING FINANCIAL SQUEEZE IS LIKELY TO CONTINUE TO HAMPER OPERATIONAL RECOVERY. For example, we know of several key vendors who have significantly tightened terms-of-payment for Pillowtex or are holding up shipments, as well as industry factors who have ceased supporting suppliers to the Company. WERE PILLOWTEX'S REPORTED 1998 RESULTS REAL? If 9.5%-to-10% is Pillowtex's normalized EBITDA margin, how did the Company suddenly surge to 13% in 1998? It is difficult to believe that that the old Pillowtex plus a troubled Fieldcrest (before the capex program on the old Fieldcrest facilities had truly begun), could have improved EBITDA margins by some 300 basis points, or by nearly $15 million per quarter, over the first three months following the merger. 1998's EBITDA margins may have, in fact, been inflated well beyond sustainable levels. Such excess over any short-term period could have been the result of the accumulated effect of any number of factors. For instance, based on flexibility in general accounting practices, costs tradi- (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 10 115 Pillowtex Corp. - March 2, 2000 tionally classified by Fieldcrest before the merger as operating expenses could legitimately have been capitalized by Pillowtex following the merger. In addition, we continue to have questions regarding how Pillowtex accounts for doubtful accounts and for "deductions" - meaning returns and allowances, as well as advertising discounts taken by customers, and deducted from gross revenue to arrive at reported net revenue. Reserves for doubtful accounts slipped from 7.5% of receivables to 5.1% of receivables from July 1998 to the end of the fiscal year - a $6.2 million swing. Allowances rose back to 7.9% through the third quarter of 1999. Meanwhile, deductions were some $25 million higher than Company projections in 1999 - with some portion of that attributable to unauthorized advertising, and some portion attributable to unforeseen returns and allowances claimed by customers for incorrect shipments. Pillowtex management has said that it intends to clamp down on customer deductions, but only 45% of protested deductions are normally taken as a reserve to receivables. We therefore believe that Pillowtex could remain exposed to receivables writedowns if the Company loses a greater percentage of disputes than anticipated. Whether because of the above accounting issues or other concerns, the secured bank lenders are conducting an independent examination of Pillowtex accounting practices. V. INDUSTRY DYNAMICS IMPORT PRESSURE. Historically, home textiles have not faced the same degree of import pressure as has apparel - the difference being attributed to quality constraints, shipping costs, and the fact that developing countries are only beginning to adopt the large furniture, bed, and towel sizes that Americans favor - and therefore are only beginning to invest in wide-loom equipment. We believe the latter factor may have been the key brake on development of competitive home fabric production in developing countries, meaning that such producers can become competitive once they undertake required investments. While import pressure in home textiles may have been relatively weak in the past, trade figures and industry data now suggest HOME TEXTILE IMPORT PRESSURE IS MOUNTING. The surge seems to be strongest in key bath and kitchen towel areas upon which Pillowtex depends the most. - U.S. Government trade data shows IMPORTS OF TOWELS GREW AN AVERAGE OF 24% ANNUALLY BY VALUE FROM 1995 THROUGH 1999, AND 17% BY QUANTITY. IMPORTS OF SHEETS GREW 24% BY VALUE AND 18% BY QUANTITY ANNUALLY THROUGH 1998, and a further 23% year-over-year by both value and by quantity over the first half of 1999. - The share of total U.S. towel consumption held by imports has risen from 15% in 1995 to 31% by value over the first half of 1999, and from 37% to 56% by quantity over that period. The corresponding rise for sheets was 12% to 21% and 15% to 23%. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 11 116 Pillowtex Corp. - March 2, 2000 [BAR CHART: Towel Consumption and Imports by Quantity] [BAR CHART: Towel Consumption and Imports by Value] [BAR CHART: Linen Consumption and Imports by Quantity] [BAR CHART: Linen Consumption and Imports by Value] It appears direct import pressure to date has been strongest on lower-end products. One major retailer, for example, told us that Chinese sheet imports now account for 15%-to-18% of their sales, up from 5% three years ago. Several mid-size, lower-end retailers told us they would increasingly source terry and sheeting products in India and Pakistan if Pillowtex cannot correct fulfillment problems shortly. Pillowtex's higher dependence on mass marketers may increase its susceptibility to the pressures coming from imports, even on the lower end. Exposure to this pressure may explain management's rush to convert Phenix City from a mass market to a higher end plant - problems flowing from this rush represent one of the forces underlying the Company's operating and financial problems over recent quarters. IMPORTANTLY, AVAILABLE TRADE STATISTICS ALSO SUGGEST THAT IMPORTS ARE MAKING INROADS INTO THE MID AND UPPER-TIER SEGMENTS OF THE SHEET AND TOWEL MARKET - segments that were once the exclusive province of U.S. manufacturers: - THE AVERAGE VALUE PER TOWEL IMPORTED HAS RISEN BY 60%, VERSUS ONLY A 20% RISE IN THE VALUE PER TOWEL CONSUMED IN THE U.S. FROM 1994 THROUGH H1 OF 1999. THAT SUGGESTS THAT IMPORTS ARE INCREASINGLY COMING IN THE FORM OF HIGHER-QUALITY, HIGHER-MARGIN PRODUCTS. Similarly, the value of sheets imported has risen 16% per unit, versus only an 8% rise in the value per unit of sheets consumed. The statistics support much anecdotal evidence that import pressure is spreading to value-added products. One major catalog vendor recently dropped Pillowtex's upper tier Royal Velvet towels from its product offering, replacing the line with high quality towels produced in Turkey for greater profit margin. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 12 117 Pillowtex Corp. - March 2, 2000 PRICING PRESSURE. While not as clear-cut as with apparel, there is evidence that unit prices are trending lower in key home textile categories. A leading industry consultant has for several months cited dozens of categories in which competition is pushing prices lower, including cotton "Bed in the Bag" sets that once sold for $150 but recently broke under the $100 mark. Wal-Mart, typically a price-leader, has been implementing significant reductions on its Jubilee towels, with bath prices falling to $3.50 from $3.88, and a $2.96 towel scheduled for 2000. Wal-Mart 200 blend twin sheets are today priced at $3.77, compared to $4.99 18 months ago. Macy's recently advertised Springs' Wamsutta blended sheets for $9.99 per twin set, significantly below national retail prices, "a sign that mill authority is lacking" according to one industry observer. THERE IS AN ADDITIONAL ADVERSE FORCE AT HAND ACTING TO COMPOUND THE MARGIN PRESSURES COMING FROM UNIT PRICE DECLINES. OVER THE PAST YEAR, THE BIG THREE HOME FABRIC MANUFACTURERS HAVE ENGAGED IN A RACE TO ESCAPE LOW-END IMPORTS BY ELIMINATING LOW THREAD-COUNT PRODUCTS IN FAVOR OF HIGHER-COUNT, COTTON-RICH LINES. But the higher-count lines, which are more expensive to produce, are often selling near the old, lower-count prices. One retailer is now selling 220-count Egyptian cotton Pillowtex sheets for $7.99, $2 less than Springs' old 200-count sold recently. J.C. Penney recently closed out a 200-count cotton-polyester blend line to replace it with a 230-count line containing more cotton, to be sold at similar price points. We believe that THIS COMBINATION OF IMPORT PRESSURE ON THE LOWER END AND THE CONSEQUENCE OF "MORE QUALITY FOR LESS" ON THE HIGHER END WILL RESULT IN PERCEPTIBLE REVENUE AND MARGIN PRESSURE FOR ALL BED AND BATH TEXTILE MAKERS IN COMING MONTHS. PILLOWTEX REMAINS PARTICULARLY EXPOSED TO THESE BROAD INDUSTRY-BASED STANDARDS. CAPITAL STRUCTURE AND LIQUIDITY As of January 1, 2000 Pillowtex had an estimated $1,069 million in debt, or 8.4x LTM EBITDA, excluding $74 million in Convertible Preferred Stock. Availability under a $350 million secured Revolver was $55.5 million (with $259.8 million drawn and an estimated $34.8 million outstanding under Letters of Credit). The Revolver, a $120.0 million Tranche A Term Loan and a $221.5 million Tranche B Term Loan are secured by all of Pillowtex's domestic assets and 65% of the stock in foreign subsidiaries, as is a $35 million Promissory Note due March 31. Pillowtex has two Senior Subordinated Note issues guaranteed by subsidiaries: $185 million 9% Senior Subordinated Notes due in 2007, with coupons payable in June and December, and a $125 million 10% Senior Subordinated Notes due in 2006, with coupons payable in May and November. Pillowtex will enjoy some easing of liquidity pressure over Q1, with only $20.5 million required for cash interest payments and amortizations (compared to $33.5 million in Q4) and a relatively small incremental reduction in payables needed to bring Pillowtex current (compared to $64 million needed last quarter). The Company faces an additional potential cash need of $60.1 million associated with the conversion of the estimated $100.2 million in outstanding 6% Convertible Subordinated Debentures, convertible into 60.1% cash and 6.08 shares of Pillowtex per $1,000 face amount. Fearful that a conversion by the 6% Convertible Subordinated Debentures could exhaust the Company's liquidity and push it into bankruptcy, Pillowtex sent a letter to Debentureholders on November (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 13 118 Pillowtex Corp. - March 2, 2000 16th stating that, in the Company's view, the 6% Debentureholders would be better off not converting even if the Company did subsequently go into bankruptcy. Pillowtex argued that an unpaid 6% Debenture holder would have a claim of 100% of principal against Fieldcrest, but that following submission of the Debentures for conversion, the claim would consist of only a 60% claim against Fieldcrest for the cash owed and 6.08 common shares of Pillowtex per $1,000 original face. The Company has refused to pay a handful of 6% Debentureholders who have submitted Debentures for conversion. The 6% Debenture Trustee has argued that, under the Indenture, the Debentureholders are no longer Debentureholders following such submission and, therefore, possess no rights under the Indenture, including any right to compel the Trustee to declare a default by Pillowtex. We believe that Pillowtex is not correct in its argument that a holder of the 6% Convertible Subordinated Debenture issue would be better off in a bankruptcy scenario if such holder had not previously sought conversion - i.e. that one is better off retaining a 100% subordinated debt claim rather than a 60% debt claim and common stock. We certainly do agree that transferring any part of a debt claim to common stock is structurally adverse - indeed, we believe the equity in a Pillowtex bankruptcy is likely to be attributed no residual value in a reorganization. The difference in point of view is that we believe the remaining 60% claim will actually increase in attributed recoverable value, because the subordination agreement in place today between the senior subordinated tier and convertible subordinated tier falls away upon submission of a holding to the Company, and the 60% cash claim is lifted to the general unsecured class, having no subordination agreement with the Senior Subordinated Notes. We further believe that holders who have submitted Convertible Subordinated Debentures to the Company for conversion, having followed a series of appropriate steps, do possess the ability to declare that an event of default has occurred if the cash portion of the conversion is not paid, effectively pushing Pillowtex into bankruptcy. VI. COMPARABLE COMPANIES AND TRADING MULTIPLES Three public companies dominate the towel and sheet home textile segments in the United States - Pillowtex, Westpoint, and Springs (see Exhibit C). Pillowtex and Westpoint are #1 and #2 with $700 million and $640 million, respectively, in 1998 bath towel sales, accounting for approximately two-thirds of U.S. sales. Springs, having entered the towel market late through its acquisition of Dundee Mills, Inc. in 1995, is a distant third, with $192 million of sales in 1998. The next closest was Santens of America, Inc., with $40 million of sales. The dominance is similar in sheeting, with Westpoint and Springs #1 and #2 with $670 million and $625 million in 1998 sales, respectively, or some 30% of the market, and Pillowtex a more distant third at $280 million, or approximately a 10% share. Dan River was fourth with $210 million, followed by Thomaston Mills, Inc. with $90 million. For several years, Westpoint has been considered the standout performer in the towel and sheet segments, attaining EBITDA margins in the high teens that routinely have run 8-to-9 percentage points ahead of Springs, the second most profitable of the group. Westpoint's higher performance would appear to be, at least in part, a reflection of its higher capital spending as a (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 14 119 Pillowtex Corp. - March 2, 2000 percent of sales. Westpoint averaged 9.1% from 1996 through 1998, versus only 4.5% for Springs and, pro-forma for the mergers, 5.7% for Pillowtex over that period (including 8.8% of sales in 1998). Of the "big three" home fabric companies, Westpoint maintains the most concentrated product line, with approximately one-third of revenue in sheets and pillowcases, one-third in towels, and the remainder spread between non-down comforters, blankets, and other items. The company acquired a small pillow manufacturer, Liebhardt Mills, in 1999. Springs' product line is somewhat more diverse, with significant bath rug output (increased by the acquisition of Regal Rugs, Inc. in January 1999), as well as non-down comforter and bedspread output which is some one-and-a-half times larger than that of Pillowtex. Springs also increased its sleep pillow output in 1999 by purchasing the remaining 50% of American Fiber Industries, LLC not already own. Springs has retained a small specialty fabrics business. Of the majors, Pillowtex maintains the broadest product line, with sleep-pillow sales some three times those of each of Springs and Westpoint after their 1999 acquisitions, down comforter sales that neither of the other two have, significant mattress pad sales, and a presence in the kitchen through the acquisition of Leshner. Despite its origins as a pillow and "on the bed" company, Pillowtex remains weaker in basic sheeting and pillow cases, both as a proportion of revenue and in the quality of its manufacturing. VII. VALUATION Pillowtex has given investors initial targets for 2000 performance of 2% sales growth, a 10% EBITDA margin (approximately $160 to $170 million), and inventory control that would keep inventory no higher than $450 million (some $60 million below peak 1999 levels). The Company has given no precise explanation for how performance could improve so dramatically over 1999 results. In-fact, on a recent conference call, Pillowtex officials said they could not "normalize" Q4 results, given the long-list of operational issues, working capital adjustments, and other special events. Given the challenges facing Pillowtex, we have constructed a model producing what we believe is attainable performance for Pillowtex: - We project EBITDA margins of 8.1% on revenue of $1,544 million in FY 2000, with weakness concentrated in Q1 and Q2 of the year. EBITDA would be down slightly from full year 1999 but up sharply compared to the second half of 1999. Revenue would be down slightly compared to 1999. We project EBITDA rising to a more normalized 10.1% of $1,559 million in revenue the following year. - We believe that working capital management can be improved compared to 1999, but that the Company still requires an inventory build - to 135 days of sales in Q2 of 2000 and 2001, returning to 112 by the end of the fiscal year. We would project inventory peaking at $499 in Q3 of 2000, or roughly $50 million above Pillowtex projections. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 15 120 Pillowtex Corp. - March 2, 2000 - We assume payables are held at 30 days, and that days receivables are cut to the low 60 days range. Based on these parameters, we believe Pillowtex will be fully drawn on its revolver by the end of Q2 2000, and will face a $57 million shortfall in Q3 - - assuming that the $35 million Promissory Note is rolled over yet again through that period, and that the Convertible Subordinated Debentureholders do not seek to convert and obtain up to $60 million in cash payments. Given the need to find additional liquidity even with a rollover of the Promissory Note, and the continual threat that the convert holders will try to remove $60 million of cash from the Company, we think there is a high likelihood that Pillowtex will have to file for bankruptcy by the end of this year. That likelihood could be increased if, as we believe is likely, more negative news were to emerge - either through the accounting analysis underway, because of continued difficulties in righting the errors made by management over the past several quarter, or because of general retail pressures. Should Pillowtex file for bankruptcy, we believe the secured debt would be rolled into a debtor-in-possession facility. We project a one-year bankruptcy. It is appropriate to value the Company, in our view, based on a multiple of 2001 projected EBITDA ($158.2 million). Springs currently trades at an LTM EBITDA multiple of only 4.1x, a function of Springs' flat sales trajectory over the past several years and uninspiring EBITDA margin. Westpoint has enjoyed consistent sales growth for several years, as well as an EBITDA margin some 500-to-800 basis points higher than Springs. Westpoint trades at a 6.6x multiple of LTM EBITDA. Dan River is trading at what we believe is a depressed multiple of 4.9x LTM EBITDA because of limited liquidity and continued doubts regarding the wisdom of its Bibb acquisition (see Exhibit B). We believe a range of 5x-to-6x 2001 EBITDA is therefore appropriate for valuing Pillowtex when it emerges from restructuring, closer to the multiple applied to Springs, rather than a segment-leading company such as Westpoint. At a 5.5x multiple, Pillowtex would have a future enterprise value upon emergence from bankruptcy of $870 million. While we believe the bank debt is oversecured, Pillowtex will continue to face operating risks and market pressure throughout the bankruptcy process and beyond. WE THEREFORE BELIEVE THAT A RATE OF RETURN IN THE HIGH-TEENS IS APPROPRIATE FOR THE BANK DEBT. Current market levels in the mid-to-high 80s imply a rate of return that could exceed 20% (given our assumption that the bank facility is rolled into a debtor-in-possession facility, that the revolver will be fully drawn at the time of filing, that there could be some pay-down of the DIP toward the end of the bankruptcy, and that the Company takes only one year to emerge from bankruptcy). WE THEREFORE FIND THE BANK DEBT ATTRACTIVE AT THESE PRICE LEVELS. Given our projections for $712 million in DIP debt after bankruptcy, some $158 million would be available for distribution to remaining impaired creditors and equity claimants. We envision three scenarios: i) Assuming that the Convertible Subordinated Debentures were to remain outstanding (either due to the failure of holders to submit the securities for conversion, or because they were exchanged in the interim for new convertible debentures to escape today's conversion (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 16 121 Pillowtex Corp. - March 2, 2000 overhang), that $158 million would be shared by the $491 million of unsecured claims (consisting of $310 Senior Subordinated Notes, $81 million of trade claims, and $100 million of Convertible Subordinated Debentures), implying a recovery of $0.32 per dollar of claim. Assuming strict priority due to the subordination agreement between the Senior Subordinated Notes and the Convertible Subordinated Debentures (which would remain in force), the value attributed to the Convertible class would revert to the Senior Subordinated Notes, providing the senior issues with $0.42 of value per principal dollar, and the convertible issue with no available value. We believe that distribution would take the form of equity which we discount at 35%, yielding a present value of 27% of claim. Assuming one more coupon payment is made on each of the Senior Subordinated issues (in May and June), they would each have an additional 2 cents in value (net of accrued interest), for a total present value of approximately 29 percent of principal amount. ii) Should the 6% Convertibles not remain outstanding at the time of bankruptcy (due to an exchange offer that allowed them to convert into equity at an increased rate, for example), the present value received by the Senior Subordinated issues would be reduced to 28 percent of principal amount. iii) finally, should the 6% Convertible Debentures convert, and their 60% claim be adjudged a general unsecured claim, the distribution to the unsecured claims would be $0.35 cents per principal dollar of claim, yielding a present fair value (with coupon payment) of 24 percent of principal amount for the Senior Subordinate issues. The Debentures would receive $0.35 cents per principal dollar of their 60% claim, or 21 cents in future value per dollar principal, and fair present value of 13 cents per principal dollar. (We are assuming that although the Debentures claim is against Fieldcrest, a very large portion of Pillowtex's overall value lies in the Fieldcrest subsidiary, so that the distinction is not of great importance). No value remains under our model for lower portions of the capital structure, including the preferred and common equity. We note that even if one accepts Pillowtex management's estimate of $170 million in potential EBITDA for 2000, and applies Westpoint's premium multiple of 6.6x LTM EBITDA, no value would remain available for Pillowtex common stock given the $1.1 billion in debt and preferred stock outstanding. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 17 122 Pillowtex Corp. - March 2, 2000 VALUATION
CRT Projected FYR 2001 Sales $1,559.3 EBITDA 158.2 Margin 10.1%
EBITDA Multiple ---------------------------- 5x 5.5x 6x ------ ------ ------ Enterprise Value $791.2 $870.4 $949.5 Secured Debt 712.8 712.8 712.8 ------ ------ ------ Remaining Value $ 78.5 $157.6 $236.7 ====== ====== ====== SCENARIO I: CONVERTIBLES REMAIN OUTSTANDING Senior Sub Notes $310.0 $310.0 $310.0 6% Convertibles 100.2 100.2 100.2 Trade Debt 81.3 81.3 81.3 ------ ------ ------ Total Unsecured Debt $491.5 $491.5 $491.5 ====== ====== ====== Future Recovery Value to Unsec'd Claims 16% 32% 48% Value from Cvts. To Sr. Sub 5 10 15 ------ ------ ------ Future Recovery Senior Sub Notes 21% 42% 63% ====== ====== ====== Present Value Discounted @ 35% 13% 27% 40% Present Value of May/June Coupons 2% 2% 2% Present Value per Sr. Subordinate Note 15% 29% 42% SCENARIO II: CONVERTIBLES EXCHANGED FOR EQUITY Senior Sub Notes $310.0 $310.0 $310.0 Trade Debt 81.3 81.3 81.3 ------ ------ ------ Total $391.3 $391.3 $391.3 ====== ====== ====== Future Recovery Value to Unsec'd. Claims 20% 40% 60% Present Value Discounted @ 35% 13 26 39 Present Value of May/June Coupons 2% 2% 2% Present Value per Senior Subordinate Note 15% 28% 41% SCENARIO III: CONVERTIBLES CONVERTED Senior Sub Notes $310.3 $310.3 $310.3 6% Convertibles-Gen'l Unsec'd. Claim 60.1 60.1 60.1 Trade Debt 81.3 81.3 81.3 ------ ------ ------ Total $451.7 $451.7 $451.7 ====== ====== ====== Future Recovery Value to Unsec'd. Claims 17% 35% 52% Present Value Discounted @ 35% 11 22 33 Present Value of May/June Coupons 2% 2% 2% Present Value per Senior Subordinated Note 13% 24% 35% Future Value to Convert 10% 21% 31% Present Value Discounted @ 35% 6 13 20
(C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 18 123 Pillowtex Corp. - March 2, 2000 EXHIBIT A ($'s in millions except per share)
Historical CRT Projections --------------------------------------------------------------- ------------------------ Fiscal Years Ended Fiscal Year --------------------------------------------------------------- ------------------------ 12/28/96 1/3/98(1) 1/3/98PF(2) 1/2/99(3) 1/1/00 2000 2001 --------- --------- ----------- --------- --------- --------- --------- OPERATING RESULTS: Net Sales $ 490.7 $ 580.0 $ 1,785.1 $ 1,509.8 $ 1,552.1 $ 1,543.9 $ 1,559.3 Cost of Goods Sold 411.0 485.7 1,524.4 1,234.9 1,354.1 1,365.1 1,361.5 --------- --------- --------- --------- --------- --------- --------- Gross Profit 79.6 94.3 260.7 275.0 198.0 178.7 197.8 S,G&A 41.4 52.1 175.5 130.8 131.3 128.4 124.7 --------- --------- --------- --------- --------- --------- --------- EBIT 38.2 42.2 85.2 144.2 66.7 50.3 73.0 Interest Expense 14.0 22.5 50.3 72.3 87.3 85.6 62.2 Restruct. Chg., Other Unusual Exp. -- 6.0 8.5 1.5 6.9 10.0 20.0 --------- --------- --------- --------- --------- --------- --------- EBT 24.2 13.8 43.3 70.2 (27.4) (45.3) (9.2) Income Tax 9.5 5.5 13.7 27.4 (7.9) (14.5) (2.9) Extraordinary Item (after tax) (0.6) (0.9) (0.9) -- 0.0 0.0 0.0 --------- --------- --------- --------- --------- --------- --------- Net Earnings 14.1 7.3 30.6 42.9 (19.5) (30.8) (6.3) Preferred Dividends -- 0.1 (4.5) 2.1 12.3 7.7 8.5 --------- --------- --------- --------- --------- --------- --------- Earnings Avail. for Common $ 14.1 $ 7.2 $ 26.1 $ 40.8 $ (31.8) $ (38.5) $ (14.7) ========= ========= ========= ========= ========= ========= ========= Weighted Avg. Com. 10.6 10.8 NMF 14.1 14.2 14.2 14.2 Weighted Avg. Com., Diluted 10.6 11.1 NMF 17.7 14.2 14.2 14.2 EPS Fully-Diluted $ 1.33 $ 0.65 NMF $ 2.31 $ (2.25) $ (2.71) $ (1.04) MARGINS: Gross Margin 16.2% 16.3% 14.6% 18.2% 12.8% 11.6% 12.7% S,G&A % of Sales 8.4 9.0 9.8 8.7 8.5 8.3 8.0 EBIT Margin 7.8 7.3 4.8 9.5 4.3 3.3 4.7 EBITDA Margin 10.4 10.1 7.9 13.1 8.2 8.1 10.1 Capital Expen. % of Sales 4.3 3.5 4.7 8.8 5.8 3.0 4.5 EBIT $ 38.2 $ 42.2 $ 85.2 $ 144.1 $ 66.7 $ 50.3 $ 73.0 Deprec. & Amort. 12.8 16.1 56.4 54.0 60.1 74.2 85.2 --------- --------- --------- --------- --------- --------- --------- EBITDA 50.9 58.3 141.6 198.1 126.8 124.6 158.2 Capital Expenditures 21.0 20.6 84.1 133.6 89.8 46.7 70.2 --------- --------- --------- --------- --------- --------- --------- Free Cash Flow $ 29.9 $ 37.7 $ 57.5 $ 64.5 $ 37.0 $ 77.9 $ 88.1 ========= ========= ========= ========= ========= ========= ========= INTEREST COVERAGE: EBIT/Interest 2.7x 1.9x 1.7x 2.0x 0.8x 0.6x 1.2x EBITDA/Interest 3.6 2.6 2.8 2.7 1.5 1.5 2.5 FCF/Interest 2.1 1.7 1.1 0.9 0.4 0.9 1.4 WORKING CAPITAL: Days Payable 40 84 NMF 38 32 31 31 Days Receivables 58 139 NMF 60 63 64 62 Days Inventory 119 270 NMF 129 114 116 116
(1) Fiscal 1997 results include portion of Fieldcrest Cannon, Inc., acquired in December 1997. (2) Pro forma as if acquisitions of Fieldcrest Cannon, Inc. and The Leshner Corporation had occurred on 12/29/96, as estimated by CRT. (3) Fiscal 1998 results include portion of The Leshner Corporation, Inc., acquired in July, 1998. Fiscal 1998 unaudited results were restated by PTX, increasing Cost of Goods sold and decreasing S,G&A by $8.6 million. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 19 124 Pillowtex Corp. - March 2, 2000 EXHIBIT A (CONTINUED) QUARTERLY HISTORICAL RESULTS ($ in millions except per share data)
Three Months Ended ------------------------------------------------------------------------------------------- 4/4/98 7/4/98 10/3/98 1/2/99 4/3/99 7/3/99 10/2/99 1/3/00 ------- ------- ------- ------- ------- ------- ------- ------- Net Sales $ 366.3 $ 332.0 $ 419.8 $ 391.7 $ 368.5 $ 362.5 $ 415.8 $ 405.3 COGs 304.8 275.3 339.9 314.9 312.3 300.9 371.6 369.3 ------- ------- ------- ------- ------- ------- ------- ------- Gross Profit 61.5 56.7 79.9 76.8 56.2 61.6 44.3 36.0 S,G&A 33.7 28.2 36.3 32.6 28.1 31.1 33.2 38.8 ------- ------- ------- ------- ------- ------- ------- ------- EBIT 27.8 28.6 43.6 44.1 28.1 30.5 11.0 (2.8) Interest Expense 16.8 17.0 19.1 19.4 19.5 19.7 21.3 26.8 Restruct. Charge, Other Unusual 1.5 0.0 0.0 0.0 0.0 0.0 6.9 0.0 Other Income 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ------- ------- ------- ------- ------- ------- ------- ------- EBT 9.5 11.6 24.4 24.8 8.6 10.7 (17.1) (29.6) Income Tax 3.8 4.5 9.4 9.7 3.4 3.9 (6.1) (9.2) Extraordinary Item (aft tax) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ------- ------- ------- ------- ------- ------- ------- ------- Net Earnings 5.6 7.1 15.0 15.1 5.3 6.8 (11.0) (20.5) Preferred Dividends 0.5 0.5 0.5 0.5 0.5 0.5 9.6 1.7 ------- ------- ------- ------- ------- ------- ------- ------- Earnings for Common $ 5.2 $ 6.6 $ 14.5 $ 14.6 $ 4.7 $ 6.2 $ (20.6) $ (22.2) ======= ======= ======= ======= ======= ======= ======= ======= Weighted Avg. Common 14.0 14.1 14.1 14.1 14.2 14.2 14.2 14.2 Weighted Avg. Common, Diluted 17.0 17.1 17.6 17.6 16.9 16.9 14.2 14.2 EPS - Diluted $ 0.30 $ 0.38 $ 0.82 $ 0.89 $ 0.28 $ 0.37 $ (1.45) $ (1.56) Yr.-Over-Yr. Change Sales 0.6% 9.2% (1.0)% 3.5% Gross Margin 16.8% 17.1% 19.0% 19.6% 15.3 17.0 10.6 8.9 S,G&A% of Sales 9.2 8.5 8.6 10.0 7.6 8.6 8.0 9.6 EBIT Margin 7.6 8.6 10.4 11.3 7.6 8.4 2.7 (0.7) EBITDA Margin 11.4 12.9 13.2 14.8 11.3 12.3 6.3 3.5 Capex % of Sales 6.2 9.2 8.7 11.2 7.6 6.4 5.4 4.0 Allow. for Doubtful A/R% of A/R 6.2 7.5 5.8 5.1 7.6 7.8 7.9 NA EBIT $ 27.8 $ 28.6 $ 43.6 $ 44.1 $ 28.1 $ 30.5 $ 11.0 $ (2.8) Deprec. & Amort. 14.0 14.2 12.0 13.8 13.6 14.3 15.3 16.9 ------- ------- ------- ------- ------- ------- ------- ------- EBITDA 41.8 42.8 55.5 58.0 41.7 44.7 26.3 14.1 Capex 22.6 30.4 36.6 44.0 28.0 23.1 22.5 16.1 ------- ------- ------- ------- ------- ------- ------- ------- Free Cash Flow $ 19.2 $ 12.4 $ 18.9 $ 14.0 $ 13.7 $ 21.6 $ 3.8 $ (2.1) ======= ======= ======= ======= ======= ======= ======= ======= EBIT/Int. 1.7x 1.7x 2.3x 2.3x 1.4x 1.5x 0.5x (0.1)x EBITDA/Int. 2.5 2.5 2.9 3.0 2.1 2.3 1.2 0.5 Free Cash Flow/Int. 1.1 0.7 1.0 0.7 0.7 1.1 0.2 (0.1) Days Payable (COGs) 29 26 30 38 40 53 45 30 Days Receivable (Net) 58 57 60 57 64 66 71 60 Days Inventory (COGs) 115 135 112 128 141 154 113 105
(1) Numbers may not sum due to rounding. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 20 125 Pillowtex Corp. - March 2, 2000 EXHIBIT B COMPARABLE COMPANY ANALYSIS ($ in millions, except per share data)
WESTPOINT(3) SPRINGS PILLOWTEX(1) STEVENS INDUSTRIES ------------ ------------ ---------- Ticker Symbol PTX WXS SMI LTM Period Ended 1/3/00 12/31/99 1/1/00 Stock Price as of 2/28/00 $4 5/8 $17 1/4 $34 52-week High/Low $ 25 3/4/ 2 3/4 $37 9/16/ 13 3/4 $44 1/2/ 27 1/16 Shares Outstanding (mm's) 14.2 49.4 17.9 CAPITALIZATION: Cash & Equivalents $ 6.0 $ 0.2 $ 4.21 Total Debt 1,068.9 1,469.1 340.6 Equity Value 139.7 852.2 608.6 --------------- ---------------- ---------------- Total Enterprise Value ("TEV") $ 1,202.6 $ 2,321.1 $ 945.0 =============== ================ ================ REVENUES: LTM $ 1,552.1 $ 1,883.3 $ 2,220.4 1998 1,509.8 1,779.0 2,180.5 1997 580.0 1,657.5 2,226.1 1996 490.7 1,501.8 2,221.0 EBITDA/MARGIN: LTM $ 126.8 8.2% $ 352.1 18.7% $ 231.8 10.4% 1998 198.1 13.1 328.9 18.5 191.5 8.8 1997 58.3 10.1 292.1 17.6 213.6 9.6 1996 50.9 10.4 265.5 17.7 203.2 9.1 CAPITAL EXP./% OF SALES: LTM $ 89.8 5.8% $ 148.6 7.9 $ 155.0(4) 7.0% 1998 133.6 8.8 147.5 8.3 120.5 5.5 1997 84.1(2) 4.7(2) 152.1 9.2 99.3 4.5 EARNINGS PER SHARE (FY ENDING): LTM EPS $ (2.25) $ 1.84 $ 3.80 I/B/E/S Projected FY 2000 EPS 1.09 2.17 4.52 I/B/E/S Projected FY 2001 EPS 1.15 2.52 5.00 MARKET VALUATION: TEV/LTM Revenue 0.8x 1.2x 0.4x TEV/LTM EBITDA 9.5 6.6 4.1 LTM PRICE TO EARNINGS NMF 9.4x 8.9x FY 2000E P/E 4.2x 7.9 7.5 FY 2001E P/E 4.0 6.8 6.8 Largest bathtowel and Largest sheet and pil- Second largest sheet third largest sheet and lowcase producer and and pillowcase pro- pillowcase producer in #2 bathtowel maker. ducer and #3 bathtowel U.S. Also #1 in pil- Each line accounts for maker. Also bathrugs, lows, mattress pads, one-third of sales. pillows (with acquisi- blankets, down com- Also produces blan- tion of AFI), and other forters and kitchen kets, comforters. products. Divested towels, and #3 in several industrial bathrugs. product and apparel lines, but retains minor non-home textile prod- uct segment.
DAN RIVER --------- Ticker Symbol DRF LTM Period Ended 1/1/00 Stock Price as of 2/28/00 $5 1/2 52-week High/Low $10 7/16/ 4 3/8 Shares Outstanding (mm's) 23.2 CAPITALIZATION: Cash & Equivalents $ 2.1 Total Debt 314.8 Equity Value 127.6 --------------- Total Enterprise Value ("TEV") $ 440.3 =============== REVENUES: LTM $ 628.9 1998 517.4 1997 476.4 1996 379.6 EBITDA/MARGIN: LTM $ 89.5 14.2% 1998 82.6 16.0 1997 77.6 16.3 1996 47.3 12.5 CAPITAL EXP./% OF SALES: LTM $ 36.7 5.8% 1998 39.5 6.0 1997 35.7 5.1 EARNINGS PER SHARE (FY ENDING): LTM EPS $ 0.51(5) I/B/E/S Projected FY 2000 EPS 1.01 I/B/E/S Projected FY 2001 EPS 1.15 MARKET VALUATION: TEV/LTM Revenue 0.7x TEV/LTM EBITDA 4.9 LTM PRICE TO EARNINGS 10.8x FY 2000E P/E 5.4 FY 2001E P/E 4.8 Fourth largest sheet producer. No towel produc- tion. Also some apparel and in- dustrial fabrics.
(1) Equity value for Pillowtex includes $74.0 million of convertible preferred stock. Cash is estimated. (2) Pro forma including Leshner and Fieldcrest revenue and capital expenditures. (3) Management has proposed a levered buyout at $21/share. (4) LTM through 10/2/99. (5) Excludes 12 cents non-recurring gain. (C) 2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 21 126 Pillowtex Corp. -- March 2, 2000 EXHIBIT C BATH RUGS ($ in millions)
1998 Sales ----- 1. Mohawk Industries $ 205 2. Springs Industries(1) 160 3. Pillowtex 45 4. Maples Industries 40 5. Georgia Tufters 30
(1) Includes Regal Rugs, acquired in 1999. BLANKETS ($ in millions)
1998 Sales ----- 1. Pillowtex $ 155 2. Sunbeam 119 3. Charles D. Owen, Mfg. 84 4. Westpoint Stevens 80 5. Chatham Consumer Products 19
DOWN COMFORTERS ($ in millions)
1998 Sales ----- 1. Pillowtex $ 67 2. Pacific Coast Feather 50 3. Hollander 39 4. Phoenix Down 17 5. California Feather & Down 16 6. United Feather & Down 16
BATH TOWELS ($ in millions)
1998 Sales ----- 1. Pillowtex $ 700 2. Westpoint Stevens 640 3. Springs Industries 192 4. Santens of America 40 5. 1888 Group-Southern Terry 25 ------ Total U.S. Consumption $1,987 ======
NON-DOWN COMFORTERS/BEDSPREADS ($ in millions)
1998 Sales ----- 1. Springs Industries $ 290 2. Dan River 185 3. Westpoint Stevens 170 4. Pillowtex 120 5. Croscill 90
KITCHEN TEXTILES ($ in millions)
1998 Sales ----- 1. Pillowtex(1) $ 55 2. Barth & Dreyfuss 54 3. Franco Mfg. 40 4. Cecil Saydah 38 5. Town & Country 15
(1) Includes Leshner from July on. SOURCE: HOME TEXTILES TODAY, U.S. CENSUS BUREAU (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 22 127 Pillowtex Corp. - March 2, 2000 EXHIBIT C (CONTINUED) MATTRESS PADS ($ in millions)
1998 Sales ----- 1. Louisville Bedding $ 78 2. Pillowtex 70 3. Perfect Fit 60 4. Hollander 14 5. Pacific Coast Feather 11
SHOWER CURTAINS ($ in millions)
1998 Sales ----- 1. Springs Industries $ 75 2. Ex-Cell Home Fashions 55 3. Allure Home Creation 48 4. Maytex Mills 32 5. Creative Bath Products 24
SHEETS/PILLOWCASES ($ in millions)
1998 Sales ----- 1. Westpoint Stevens $ 670 2. Springs Industries 625 3. Pillowtex 280 4. Dan River 210 5. Thomaston Mills 90 ------ Total U.S. Consumption 1998 $2,182 ======
SLEEP PILLOWS ($ in millions)
1998 Sales ----- 1. Pillowtex $ 155 2. Hollander 92 2. Pacific Coast Feather 92 3. Spring Industries(1) 57 4. Westpoint Stevens(2) 43
(1) 1998 sales of AFI, purchased by Springs in 1999. (2) 1998 sales of Liebhardt purchased by Westpoint in Mills 1999. THROWS ($ in millions)
1998 Sales ----- 1. Crown Crafts $ 107 2. Manual Woodworkers & Weavers 66 3. Biederlack of America 43 4. American Weavers 40 5. Pillowtex 25
SOURCE: HOME TEXTILES TODAY, U.S. CENSUS BUREAU (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 23 128 SPRINGS INDUSTRIES APPENDIX 3 GLENOIT RESEARCH - ----------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - ----------- 62 129 CREDIT RESEARCH & TRADING LLC GLENOIT CORPORATION Research Notes - April 19, 2000 Ethan Schwartz Vice President (203) 629-6461 eschwartz@crtllc.com I. DESCRIPTION OF SECURITIES ($'s in millions except per share data)
Market ------ Security Maturity Ratings Amount Bid/Ask Value YTM -------- -------- ------- ------ ------- ----- --- Libor+350 Working Capital(1)(2) 12/31/03 Caa1/D $ 48.0 68/78 $ 35.0 20.3% Libor+350 Term A(1)(3) 12/31/03 Caa1/D 36.9 68/78 26.9 26.5 Libor+425 Term B(1)(4) 6/30/04 Caa1/D 68.2 68/78 49.8 20.1 --------- Total Secured Debt 153.1 11% Senior Sub. Notes(5) 4/15/07 Ca/D 95.0 5/10 $ 7.1 151.6% --------- Total Debt Outstanding $ 248.1 ==========
(1) Estimated as of April 17, 2000. Secured by most of Glenoit's assets. (2) $65 million commitment, reduced to $48.3 million (including $3.3 million for letters of credit) on March 16, 2000 with availability limited by a borrowing base of inventory and receivables, prior to default. (3) Amortizes at $1.5 million per quarter in 2000, $1.75 million in 2001, $2.250 in 2002, and $3.75 million in 2003. (4) Amortizes at 0.175 million per quarter through 2003, and $3.75 million in Q1 2004, terminating in Q2, 2004. (5) Guaranteed by Glenoit and most of its operating subsidiaries, including APE and Ex-Cell. Coupons April 15th and November 15th. II. SUMMARY AND INVESTMENT RECOMMENDATION Glenoit Corporation's very highly levered capital structure (total debt stands at some 7.5x LTM EBITDA) is in a state of collapse. After having amended the terms of its bank debt facility five times over recent periods, the Company failed to make a $2 million amortization payment to its bank group on February 23rd. The Company subsequently failed to make the April 15th cash coupon payment due on its $95 million 11% Senior Subordinated Note issue, due 4/15/07 (the "Notes"). We anticipate a bankruptcy filing to be made very shortly. The Company is a designer, marketer and manufacturer of textile products operating in two relatively distinct business segments: apparel fabrics and home furnishing products. These two segments have experienced sharply divergent fortunes over the past two years. Faced with a surge in imports of inexpensive Asian polar-fleece and fleece garments, the apparel fabric segment has seen sales and profit levels plummet. Largely reflecting the acquisitions in late-1998 and early-1999 of two companies specializing in the import and marketing of home furnishing items from low-cost countries, the home furnishing segment has gained scale and has demonstrated positive performance and improving levels of profitability. Importantly, we believe Glenoit's two business segments should not only be evaluated and valued separately, but are, in fact, operationally separable. The information in this report has been obtained from sources which Credit Research & Trading LLC ("CRT") believes to be reliable. However, CRT does not guarantee its accuracy, and such information may be incomplete or condensed. Opinions in this report represent CRT's position as of this date and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation in regard to the purchase or sale of any security. CRT and/or its officers and employees may from time to time acquire, hold, or sell a position in the securities mentioned herein. Upon request, CRT will furnish specific information in this regard. If CRT is involved in the purchase or sale of any security, CRT may act as principal for its own account or as agent for both the buyer and the seller. 130 Glenoit Corporation - April 19, 2000 In our view, Glenoit's comparatively sound and attractive home furnishings business segment holds a capable competitive profile and meaningful enterprise value - although the 2001 enterprise value we assign that segment ($140 million - - utilizing a 5.5x multiple of projected EBITDA) falls well short of the balance of total debt anticipated to be outstanding (in excess of $250 million). Indeed, absent the addition of the cash build projected to occur during the antici- pated one-year reorganization period ($17 million), the enterprise value we assign to the home furnishings business is less than the balance of the debt projected to be outstanding under the Company's senior secured bank debt facility ($153 million, plus accrued interest of approximately $15.0 million during restructuring). The future and valuation of Glenoit's apparel fabrics business is far more problematic. Given the severe competitive pressures facing, and small scale (projected 2001 sales of $75 million) of, that segment, the scenario we believe to have the greatest probability of occurring entails either its closing (exerting a somewhat negative effect on total enterprise value) or its sale (exerting at best a neutral effect on total enterprise value). We can assign only a one-in-three probability that the apparel fabrics segment will be operating profitably as a part of Glenoit in 2001, and, even then, only marginally so with a continued adverse view of its prospects over the intermediate and longer term. As a result of our views of the prospects and values of the two business segments, we are left evaluating the merits of an investment in Glenoit's various tiers of securities based on the projected core enterprise value of the home furnishings segment, with the apparel fabrics segment providing only an element of speculative option value within that evaluation process. Three considerations add significant adverse pressure to our investment view and valuation of the outstanding senior secured bank debt. First, given questions which could reasonably arise as to the adequacy of the security supporting the senior secured facilities and the degree of impairment which could occur, there is a notable risk that the senior facility may not be allowed to accrue post-petition interest (much less receive adequate protection payments along the way). Second, the senior facility is likely to be converted as a result of the restructuring into a package of senior debt (35% of the recovery), longer-dated subordinated debt (15%), and common equity (50%). And, third, given the view that every tier of securities below the senior secured tier may be extinguished without attributed value of any real consequence, the reorganization process could prove to be a more difficult and protracted one than the one-year period envisioned here. The consequence of these considerations on the estimation of current investment value is the ap- plication of a particularly high overall discount rate to projected enterprise value (40% on the equity component; 30% on the subordinated debt component; and 20% on the senior debt component; produces a blended rate of return of 32%). THE SUM OF OUR BASIC ASSESSMENTS IS THAT THE SENIOR BANK FACILITY PRESENTS A POSITIVE RISK/REWARD INVESTMENT PROFILE ONLY WHEN PRICED AT OR BELOW THE MID-70S, AND ONLY FOR THOSE (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 2 131 Glenoit Corporation - April 19, 2000 WILLING TO RECEIVE HIGHLY ILLIQUID EQUITY IN A RESTRUCTURING. THE SENIOR SUBORDINATE TIER HAS, AT BEST, HIGHLY SPECULATIVE OPTION VALUE IN THE SINGLE DIGITS. The option value associated with the Notes, for those speculative investors willing to pursue it, stems from four principal sources of opportunity. FIRST, A STRONG PERFORMANCE IN THE INTERIM BY THE APPAREL FABRICS SEGMENT COULD ESTABLISH A POSITIVE ENTERPRISE VALUATION TO BE ASSIGNED TO THAT SEGMENT IN 2001 OF, ON THE HIGH SIDE, SOME $30 MILLION. As noted above, we think that outcome is, at best, a one-in-three possibility. Second, Citicorp Venture Capital, Glenoit's equity sponsor, could seek to overcome (or materially offset the impact of) the pending financial collapse by injecting a significant new equity investment sufficient to stabilize the bank debt facility and buyout the Notes at a price level above their intrinsic worth on a stand alone basis. Such a step by Citicorp Venture would boost the value of both the outstanding bank debt (by reducing the degree of both impairment and equitization - and, thereby, reduce the risk adjusted time value discount being applied) and the Notes. Third, it would appear likely that the Notes would receive some level of "performance equity" (e.g., warrants) designed to capture a degree of value if the Company's restructured operation(s) were to perform at well above expected levels over the long term. And, fourth, some level of "nuisance" value could well reside with the subordinated debt tier - to the detriment of the senior tier. There is also some possibility that the home furnishing segment could be sold as a part of the restructuring process. If such a sale were to occur anywhere in the neighborhood of our enterprise estimate, the consequence on the current value of the bank debt could be notably positive due to the potential elimination or reduction of the severe discount rates being applied to assess the package of securities expected to makeup the tier's investment value. While it is hard to argue against the view that a certain level of investment value resides in the bank debt and the Notes due to the above "options", in whatever combination, we believe such value, at best, is very speculative in nature and has little measurable present value, perhaps cents on the dollar for the Notes. At the end of the day, the detrimental prospects of a more contentious reorganization process and far longer restructuring window than those envisioned outweigh the positive prospects associated with these options. III. COMPANY OVERVIEW AND DISCUSSION FABRIC PRODUCTS. Until late 1998, Glenoit was known predominantly as a producer of knit pile fabrics made from sliver, or loose bundles of fibers formed in a stage prior to fiber's conversion into yarn. Glenoit uses predominantly acrylic slivers to produce berber-style pile fabrics for outerwear and sportswear. Glenoit's fabrics compete with "polar"-style fleece such as Polartec, produced by Malden Mills Industries, Inc., and fleece products from Dyersburg Corporation. The surge in the popularity of polar fleece helped Glenoit's fabric sales grow from $79.4 million in 1997 to $107.1 million the following year. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 3 132 Glenoit Corporation - April 19, 2000 In addition to polar-style pile fabrics, Glenoit also produces a wide-range of imitation fur fabrics and higher-end synthetic fabrics for fashion apparel, uniforms, and other apparel. Glenoit's fabric sales hit a wall in 1998 - holding roughly flat at $106.7 million, with EBITDA margins deteriorating by 4 percentage points, to 23.1% from 27.4% in 1997. Sales dropped to $74.6 million for 1999, with EBITDA margins falling further to 17.7% (excluding $13.1 million in restructuring charges). Chief factors underpinning the fabric segment's difficulties include: - - A SURGE IN LESS EXPENSIVE IMPORTS FROM ASIA: In only two years, Asian imports arriving both as raw fabric and finished goods have come to dominate the U.S. polar-fleece market. Several apparel manufacturers and importers who were significant customers of Glenoit's in prior years told us that they now purchase predominantly from Taiwanese and other Asian manufacturers, whose products can cost up to 75% less than those from U.S. producers such as Glenoit, Dyersburg, or Malden Mills. - One fleecewear producer laid out swatches of polar-style fleece made in mainland China next to Glenoit and Dyersburg swatches, and asked us to tell the difference. We could not. - - LOSS OF DESIGN AND TECHNOLOGICAL ADVANTAGE FOR PERFORMANCE AND ACTIVEWEAR: As little as nine months ago, U.S. firms such as Dyersburg and Glenoit asserted that they could protect market share against Asian firms through innovation. That view has changed following the 1999-2000 winter. Recently, an executive at one major U.S. fleecewear producer told us that there was "nothing more" that his or other U.S. firms could do to their poly-fleece to distinguish it from Asian product for the vast majority of activewear end-uses. - - FASHION MOVEMENT AWAY FROM GLENOIT'S BERBER-STYLE OF FLEECE: Glenoit has a somewhat distinct line of "berber" style pile fabrics that can be distinguished from Polartec-style fleece, and that in the past enjoyed some fashion appeal. We've heard from several Glenoit customers that this appeal has faded, as evidenced by The Gap's decision to downplay berber-style products in this past winter's fashion lines. - - NO BRAND-NAME ADVANTAGE BY GLENOIT: Glenoit's fabrics lack the brand-recognition and advantage enjoyed by Malden Mills' Polartec line, and have therefore been more easy to replace with generic, low-cost fleece products. Glenoit's Chief Executive, Tom O'Gorman, has acknowledged that the influx of commodity fleece for most activewear garments is irreversible, and that revenue is unlikely to climb back to levels enjoyed in 1998. In recognition of the permanent impairment to fabric revenue, the Company in 1999 closed its Tennessee production facility and reduced capacity by 1/3rd, a move that is expected to yield approximately $5 million in annual savings, by Company esti- mates. While EBITDA margins in the high 20s such as those enjoyed during berber's hey-day appear very unlikely to repeat, the Company believes that cost-cutting measures could allow the (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 4 133 Glenoit Corporation - April 19, 2000 fabric business to continue to enjoy mid-teen EBITDA margins. Q3 and Q4 1999 EBITDA margins did improve over fiscal 1998, despite the deterioration in sales, following restructuring charges in Q1. Glenoit asserts that after losing a large-slice of its activewear fleece business, Glenoit can retain approximately $75 million in annual sales of faux fur and other, more fashion-oriented sliver-pile fabrics. The argument is that apparel manufacturers who work with these fabrics are less price-sensitive and more reliant on design innovation and close collaboration with U.S.-based fabric suppliers for continual fashion updates. We have spoken with several Glenoit customers who believe that garment makers could continue to purchase a core quantity of fabric from Glenoit for certain fashion products, particularly for products for which response times are compressed and seasonal and design needs change several times a year. The question is whether sales have now fallen to that core level, or will continue to deteriorate to the point at which Gle- noit's fabric business is no longer viable. HOME PRODUCTS Through Q3 of 1998, Glenoit had only about $40 million in annual home product sales, largely of printed area rugs and mats - many of which were and still are printed on Glenoit-manufactured fabric. In October of 1998, the Company made the first of two acquisitions of businesses with product lines and operating models that were very new for Glenoit. American Pacific Enterprises, Inc. ("APE"), purchased for $57.8 million plus earn outs of $12 million in 1998, or approximately 1.0 x 1997 sales and 6.7 x EBITDA, is a designer, sourcer, and distributor of an array of mostly "top of the bed" home products including quilts, comforters, shams and pillowcases. Almost 100% of APE's product lines are imported from Asia. In February of 1999 Glenoit purchased Ex-Cell Home Fashions, Inc. ("Ex-Cell") for $50 million, or approximately 0.7x FY1998 sales and 6.4x EBITDA. Ex-Cell is the #2 distributor of shower curtains in the U.S. behind Springs Industries, Inc., and is also a major vendor of decorative pillows and table linens. Pro-forma for the acquisitions, Glenoit's home furnishing sales grew 16% to $229 million in 1999 from $198 million the year earlier. We believe that both Ex-Cell and APE are positioned for continued growth in sales, profitability and return on invested capital over the next few years, for a variety of reasons: - - APE AND EX-CELL ARE BOTH PREDOMINANTLY IMPORTERS OF PRODUCT: Among Ex-Cell's and APE's greatest competitive advantage is that they are both predominantly importers, rather than domestic producers, of the products they sell. APE sources nearly all the quilts, bed-items and other products that it distributes from low-cost Asian manufacturing facilities; Ex-Cell imports some 60% of the value of its products from Asia and Eastern Europe, sourcing in the U.S. only those items which are costly to transport - such as heavy stuffing for decorative pillowcovers produced in India, in order to complete production in the U.S. The specialization in imports means that both companies are able to (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 5 134 Glenoit Corporation - April 19, 2000 take advantage of the surge in low-priced overseas goods that has driven home textile prices down and threatened the margins available on U.S. produced goods. Most participants in the home textile trade believe that import specialists such as Ex-Cell and APE will take an ever greater share of the U.S. textile market by matching their design and distribution skills to overseas manufacturing resources in order to offer items at prices that U.S. makers will have difficulty matching. Some of the home textile indus- try's most-respected businessmen, such as Bob Gehm, formerly President of Domestic Sales at Westpoint Stevens, Inc., and Jim Fitzgibbons, formerly Chairman and CEO of Fieldcrest, have recently left established U.S. manufacturers to join smaller import specialists that follow business models closer to APE's and Ex-Cell's. - - APE AND EX-CELL MAINTAIN RELATIVELY FEW MANUFACTURING ASSETS: Both APE and Ex-Cell are predominantly designers and distributors of product, sourcing the items in their collections from overseas manufacturers. As such, they concentrate on marketing and design strengths, which are their core talents. They also operate with relatively low capital invested in their businesses, avoiding some of the dangers of stranded assets and shifts in market-share that have plagued U.S. home and apparel textile firms. Capital expenditures have run just under 1% of sales for APE, and near 1.5% for Ex-Cell. - In essence, both companies follow the "de-integrated" model that the largest apparel firms, such as Sara Lee (Hanes) have pursued in response to import and other challenges. Such challenges have to date afflicted the apparel side of the textile business, but are beginning to appear in home textiles. - - HIGHLY RESPECTED MANAGEMENT TEAMS AND ORGANIZATIONS: Customers, former employees and competitors with whom we have spoken have described both APE and Ex-Cell as highly respected businesses which have pioneered profitable shifts toward sophisticated U.S. design coupled with overseas sourcing. Tom O'Gorman, Glenoit's Chairman and CEO, is also well respected. - A key issue is whether Glenoit can retain key personnel in a restructuring, or whether key personnel would remain with APE and Ex-Cell if they were acquired. - - APE AND EX-CELL ARE STEADILY ADVANCING THE QUALITY AND BREADTH OF THEIR PRODUCTS: While originally focussed on more basic products, both companies have shown an ability to develop mid-tier licensed product lines and more substantial programs for important retailers. APE recently undertook to provide the BEYOND private label program for Bed Bath & Beyond, and has begun shipping the MATCHED LIVING program to Linen 'N Things. APE also has penetrated Mervyn's, a unit of Target, with a "shabby chic" program, and holds the license for Nautica bed products. Ex-Cell holds the license to produce matching table linens for china manufacturer Pfaltzgraff. In sum, APE and Ex-Cell have pioneered a nimble and flexible business model - one that has attracted some of the industry's most savvy business people over the past several years. De- (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 6 135 Glenoit Corporation - April 19, 2000 spite the successes achieved to date, the radical changes underway in the textile industry mean that their ongoing success is not assured. We would note several risks: - - REDUCTIONS IN QUOTAS AND TARIFFS COULD INCREASE COMPETITION: As quotas in products from WTO member countries are eliminated in 2004, more U.S. firms may begin to develop low-cost overseas product, devaluing APE's and Ex-Cell's import capabilities. A myriad of small, nimble firms specializing in imports have cropped up in recent years - such as Davidson Cotton Company, Franco Manufacturing (which holds the Hanes home textile license) and Haywin Textile Products (which distributes product sourced predominantly in Mexico under the Fruit of the Loom label). So far, these firms appear to be taking market share away from higher-cost U.S. manufacturers, rather than from one another. - - CHALLENGE TO MAJOR U.S. PRODUCERS COULD BACKFIRE: Faced with an onslaught of imported product, major U.S. producers have themselves begun to turn increasingly to imports to fill in their product lines. Springs Industries, Inc. has begun sourcing some of its Springmaid towels for Wal-Mart in India, for example, and Dan River, Inc. recently acquired an Asian import specialist similar to APE. Most industry observers believe it is inevitable that the majors' reliance on imports will accelerate as quotas are removed and tariffs come down further. While that could lead to more acquisitions of companies such as APE and Ex-Cell by the large U.S. producers, it could also convince the larger firms to develop import capacity on their own, and bring their scale and weight to bear against smaller competitors. - - QUOTAS AND TRADE BARRIERS CONTINUE TO POSE CHALLENGES: While quotas are scheduled to come down for WTO member countries in 2004, the landscape is not without risks. Where quotas remain, the right to use a quota to export to the United States remains a hotly contested privilege. APE, for example, has shifted some of its sourcing to Bangladesh from China because of a loss of quota rights apportioned to the Chinese firms on which APE had relied for product. As more U.S. firms import from countries facing quotas, quota rights in those countries may become scarcer and more difficult to obtain. - Glenoit suffered some deterioration in its EBITDA margin over Q4 1999 due to the shift in sourcing to Bangladesh. - - HOME TEXTILES REMAIN HIGHLY CYCLICAL: APE and Ex-Cell face all the risks borne by most home textile companies associated with the fact that spending on home textile items remains highly tied to the economic cycle. In addition, to the extent that APE and Ex-Cell purchase most of their product in foreign currencies, they could be exposed to any sharp appreciation of Asian currencies. - - UNCLEAR HOW APE AND EX-CELL WILL BE INTEGRATED WITHIN GLENOIT: To date, Glenoit has taken an almost wholly hands-off approach to APE and Ex-Cell, allowing each of them to be run almost entirely as separate operating entities. Both APE and Ex-Cell have their own offices, showrooms, and teams. It would seem inevitable that APE and Ex-Cell (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 7 136 Glenoit Corporation - April 19, 2000 would be integrated at some point to seize operating and strategic synergies. How that could occur (and how an integrated business could retain key personnel, including some of the businesses' founders) is unclear. IV. CAPITAL STRUCTURE AND LIQUIDITY As of January 2, 2000 Glenoit had some $237.7 million in debt, or 7.5x LTM EBITDA (excluding restructuring charges). LTM EBITDA excludes about one-month of earnings from Ex-Cell. We estimate that $37.6 million was outstanding under the Working Capital Facility, with $36.9 million outstanding under Term A and $68.2 million under Term B. A total of $142.7 million outstanding under these facilities was secured by most of Glenoit's assets and those of its subsidiaries, with the exclusion of certain Canadian assets. The Working Capital Commitment and the Term A Loan were priced at Libor + 350; the Term B Loan is at Libor + 425. Officials at Glenoit have told us that borrowings stood at roughly $153 million on April 15, 2000, with $48 million outstanding under the Working Capital Facility. Glenoit failed to make a $2 million amortization payment on February 23, 2000, causing an event of default. The default was waived through April 10th. The facility had already been amended five times, mostly recently in November, due to repeated violations of leverage, coverage and other ratios. The coupons on Glenoit's $95 million 11% Senior Sub Notes due April 15th, 2007 are payable each April and November 15th. The Notes are guaranteed by Glenoit and most of its operating subsidiaries, including APE and Ex-Cell. Glenoit failed to make a coupon payment on April 15, 2000, and is now within a 30-day grace period. Glenoit is currently in discussions with its bank facility lenders regarding the default. We understand that the bank group would like Citicorp Venture Capital, Glenoit's principal equity sponsor, to contribute additional equity in order to help Glenoit meet working capital needs for the second and third quarter inventory build. Glenoit's high degree of debt leverage (total debt stands at some 6.9x our projected $35.2 million of FY2000 EBITDA if fabric remains a going concern) would be expected to make the pending restructuring a difficult and painful undertaking. Citicorp's chief remaining investment in Glenoit, other than equity in a holding company that we believe has no value, is a $12 million junior preferred instrument from the holding company. We believe that preservation of that investment does not give Citicorp the incentive to inject additional capital into the Company. The bank group is led by Banque Nationale de Paris which, unlike other banks involved in textile lending, such as Nationsbank or First Union, has little exposure to the textile business and, therefore, little franchise to protect and incentive to help sustain Glenoit. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 8 137 Glenoit Corporation - April 19, 2000 V. COMPARABLE COMPANIES AND TRADING MULTIPLES Glenoit's home furnishings operations - APE, Ex-Cell, and the original printed rug business - compete broadly against smaller product lines embedded within the large, public home textile companies - Springs Industries, Inc., Westpoint Stevens, Inc., Dan River, Inc., Pillowtex Corporation, and to some degree both Burlington Industries and Mohawk Industries in rugs. However, the large companies are of a vastly larger scale than Glenoit, and have a sharply differing operating model - relying to a far greater degree on U.S.-based manufacturing. Glenoit's closest comparables on the home side are several smaller companies that, like Glenoit, focus on niche product segments which they source in part through imports. These include Davidson Cotton, Franco Manufacturing, Haywin Textiles, Croscill, Veritex, and Crown Craft. On the apparel side, Glenoit's closest competitor is Dyersburg Corporation, which produces a polyester fleece product that competes with Glenoit's berber lines. Dyersburg does not provide a clear multiple comparison because it too faces a potential restructuring, with its equity trading below $1 per share and debt priced in the high 30s% to low 40s% of par. Broadly speaking, Glenoit could also be compared to U.S.-based textile manufacturers such as Galey & Lord, Inc. which produces denim, cotton casual, and other fabrics, and Cone Mills Corporation, which produces denim and other fabrics. Burlington Industries produces both apparel fabrics such as denim and worsteds, and a broad array of home fabrics, including rugs and some bedding products which compete with Glenoit. Several of Glenoit's comparable companies - most noteably Pillowtex, Galey & Lord, Cone Mills, and Burlington Industries, are trading at stressed or distressed levels with deep discounts on their debt securities. Such anticipation of restructuring makes direct valuation comparisons difficults. Relatively healthy home textiles companies such as Springs, Westpoint and Dan River are trading at an average 5.3x LTM EBITDA multiple, or 0.8x LTM Revenue. Cone, Burlington and Galey are trading at an average 7.3x LTM EBITDA multiple if debt is valued at par. However, given that much of Cone and Galey's capital structures are trading at 30-40% of par value, actual market valuations would be closer to 5.0x LTM EBITDA or lower. VI. VALUATION Our valuation assumes that Glenoit will be forced to file for a financial restructuring shortly. Such a restructuring would take approximately one year, by our estimate. We assume that special charges during that period would equal approximately $17 million. We also project that working capital balances would be sufficient to establish an adequate Debtor-in-Possession facility and that cash flow during the period would be sufficient to allow the DIP to be worked back to zero by the end of the restructuring and still leave a cash build of some $17 million upon emergence from a restructuring. Given the difficulties facing the fabric division, for our base case valuation we assume that only the home division will continue to function as a going concern upon emergence from bankruptcy. Our projections call for the home division to produce $28.7 million in EBITDA in FY2000. The division would also absorb some $3.4 million in corporate expenses, roughly half (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 9 138 Glenoit Corporation - April 19, 2000 the current level. We would value the division based on a 5.5x 2001 projected EBITDA multiple. Enterprise value, before any cash build, would come to $139.2 million. Including our projected cash build, total value available for distribution to the prepetition secured debt would be $156.2 million, or roughly equal to repetition secured debt of $153.1 million. Accrued interest to the restructuring date would be approximately $15 million. We would discount the distribution at 31%, to yield a fair present value of approximately $112.7, or 77.8% of estimated outstanding principal (31% represents the blended return for a 20% discount on 35% secured debt received, 30% discount on 15% subordinated debt received, and 40% on 50% equity received). While we could envision a scenario under which the fabric business continues as a going concern, the rapid fall-off in sales coupled with the speed with which other fabric producers have disappeared over the past year makes such an outcome difficult to predict, in our view. Were the fabric division to continue to produce some $13.2 million in EBITDA, and after absorption of an additional $3.4 million in corporate expenses, the division could add some $9.8 million in EBITDA to a post-restructured Glenoit. Valuing that EBITDA at a depressed 3.5x EBITDA multiple yields an enterprise value of $34.3 million. Some $5 million in debt at the non-guarantor subsidiary level would have to be deducted from that figure, leaving $29.3 million in value for distribution to the $95 million in Senior Subordinate Notes and an estimated $20 million in additional trade debt. Discounting that value to the present at 40% yields a fair value of $20.9 million, or roughly 18% of principal on the Senior Subordinate Notes. That recovery represents the very top-end of possible outcomes for the Senior Subordinate Notes, in our view. It is equally likely that the business will not be able to continue as a going concern. We therefore believe that at best, the Senior Subordinate Notes possess only a few cents of essentially option value. There is both downside and upside potential to our evaluation. Our base case valuation assumes that the fabric business can be shut down essentially without incurring liabilities that exceed liquidation value. That may be overly optimistic. On the other hand, it could be the case that the home furnishings business would be an attractive acquisition for one of the larger home furnishings manufacturers. The business could therefore have an acquisition value somewhat greater than the multiple we have accorded to it, given likely synergies from the elimination of corporate and other costs. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 10 139 Glenoit Corporation - April 19, 2000 VALUATION ANALYSIS I. BASE CASE Home EBITDA $ 28.7 Corp. EBITDA (3.4) Multiple 5.5x Enterprise Value $ 139.2 Plus Cash Build 17.0 ------------ Total $ 156.2 Discount Rate 31.0% Present Value $ 119.2 Outstanding Bank Facility 153.1 Percent of Principal 77.8%
II. HIGH CASE: FABRIC CONTINUES Fabric EBITDA $ 13.2 Corp. EBITDA (3.4) Multiple 3.5x Enterprise Value $ 34.3 Subsidiary Debt (5.0) ------------ Remaining Value $ 29.3 Discount Rate 40.0% Present Value $ 20.9 Outstanding Sr. Sub Notes + Trade 115.0 Percent of Principal 18.2%
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WESTPOINT(3) PILLOWTEX(1)* STEVENS** ------------ ------- Ticker Symbol PTX WXS LTM Period Ended 1/3/00 12/31/99 Stock Price as of 4/13/00 $4 1/16 $17 1/16 52-week High/Low $19 7/16 /2 3/4 $37 9/16 /13 3/4 Shares Outstanding (mm's) 14.2 49.4 CAPITALIZATION: Cash & Equivalents $ 6.0 $ 0.2 Total Debt 1,068.9 1,469.1 Equity Value 131.7 842.9 ------------ -------- Total Enterprise Value ("TEV") $ 1,200.6 $2,311.8 ============ ======== REVENUES: LTM $ 1,552.1 $1,883.3 1998 1,509.8 1,779.0 1997 580.0 1,657.5 1996 490.7 1,501.8 EBITDA/MARGIN: LTM $ 126.8 8.2% $ 352.1 18.7% 1998 198.1 13.1 328.9 18.5 1997 58.3 10.1 292.1 17.6 1996 50.9 10.4 265.5 17.7 CAPITAL EXP./% OF SALES: LTM $ 89.8 5.8% $ 148.6 7.9 1998 133.6 8.8 147.5 8.3 1997 84.1(2) 4.7(2) 152.1 9.2 MARKET VALUATION: TEV/LTM Revenue 0.8x 1.2x TEV/LTM EBITDA 9.5 6.6
SPRINGS INDUSTRIES*** DAN RIVER**** ---------- --------- Ticker Symbol SMI DRF LTM Period Ended 1/1/00 1/1/00 Stock Price as of 4/13/00 $38 15/16 $ 5 3/8 52-week High/Low $44 1/2 / 28 11/16 $10 7/16 /4 3/8 Shares Outstanding (mm's) 17.9 23.2 CAPITALIZATION: Cash & Equivalents $ 4.21 $ 2.1 Total Debt 340.6 314.8 Equity Value 697.0 124.7 ---------- --------- Total Enterprise Value ("TEV") $ 1,033.3 $ 437.4 ========== ========= REVENUES: LTM $ 2,220.4 $ 628.9 1998 2,180.5 517.4 1997 2,226.1 476.4 1996 2,221.0 379.6 EBITDA/MARGIN: LTM $ 231.8 10.4% $ 89.5 14.2% 1998 191.5 8.8 82.6 16.0 1997 213.6 9.6 77.6 16.3 1996 203.2 9.1 47.3 12.5 Capital Exp./% of Sales: LTM $ 155.0(4) 7.0% $ 36.7 5.8% 1998 120.5 5.5 39.5 6.0 1997 99.3 4.5 35.7 5.1 MARKET VALUATION: TEV/LTM Revenue 0.5x 0.7x TEV/LTM EBITDA 4.5 4.9
* Largest bath towel and third largest sheet and pillowcase producer in U.S. Also #1 in pillows, mattress pads, blankets, down comforters and kitchen towels, and #3 in bath rugs. ** Largest sheet and pillowcase producer and #2 bathtowel maker. Each line accounts for one-third of sales. Also produces blankets, comforters. *** Second largest sheet and pillowcase producer and #3 bathtowel maker. Also bathrugs, pillows (with acquisition of AFI), and other products. Divested several industrial product and apparel lines, but retains minor non-home textile product segment. **** Fourth largest sheet producer. No towel production. Also some apparel and industrial fabrics. (1) Equity value for Pillowtex includes $74.0 million of convertible preferred stock. Cash is estimated. (2) Pro forma including Leshner and Fieldcrest revenue and capital expenditures. (3) Management has proposed a levered buyout at $21/share. (4) LTM through 10/2/99. (5) Excludes 12 cents non-recurring gain. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 12 141 Glenoit Corporation - April 19, 2000 EXHIBIT A (Continued) COMPARABLE COMPANY ANALYSIS: APPAREL TEXTILES ($'s in millions, except per share data)
GALEY & BURLINGTON LORD* INDUSTRIES** CONE MILLS(1)*** ---- ---------- ------------- Ticker Symbol GNL/NYSE BUR/NYSE COE/NYSE LTM Period Ended 1/1/00 1/1/00 1/2/00 Stock Price as of 4/13/00 1 15/16 3 6/8 4 3/8 52-Week High/Low $5.50/1.25 $10.25 / 2 9/16 $7 3/16 / 3 3/16 Shares Outstanding 11.9 53.2 25.5 CAPITALIZATION: Cash & Equivalents $ (14.0) $ (32.4) $ (1.3) Total Debt 668.1 904.9 179.8 Mkt. Equity Value 23.1 195.5 111.5 -------- ------------- -------------- Total Enterprise Value ("TEV") $ 677.2 $ 1,068.0 $ 290.0(1) ======== ============= ============== REVENUES: LTM $ 908.3 $ 1,615.6 $ 616.3 1999 953.1 1,651.7 616.3 1998 902.7 2,010.4 728.6 1997 493.4 2,090.7 716.9 EBITDA/Margin: LTM $ 81.6 8.9% $ 153.6 9.5% $ 36.7(1) 5.8% 1999 88.6 9.2 168.9 10.2 36.7 5.8 1998 111.1 12.3 269.6 13.4 39.8 5.5 1997 49.8 10.1 249.7 11.9 25.6 3.6 MARKET VALUATION: TEV/Revenue 0.75x 0.66x 0.47x TEV/LTM EBITDA 8.3 6.95 7.9(1)
* 2d largest denim maker in world, and largest U.S. cotton casual fabric maker. Also workwear plants in Europe & U.S., Mexican garment sewing. ** 3d largest denim manufacturer, also has significant worsted wool and synthetic fabric divisions. Home fabric accounts for nearly 50% of revenue. *** Largest denim manufacturer, also produces cotton casual fabrics, commissioned fabrics. Was the exclusive provider of fabric for Levi's 501 jeans. (1) Cone LTM EBITDA includes $1.7 million in earnings from ParrasCone. Subtracting approximately $20mm from Cone TEV for 18% ownership of Parras, Cone's TEV/LTM EBITDA would be 7.4x. Yarn-dyed products had negative $4.8 million EBITDA for FY99. Excluding $4.8 million in losses from Cone's LTM EBITDA (including ParrasCone) would result in a TEV/LTM EBITDA of 6.5x. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 13 142 Glenoit Corporation - April 19, 2000 EXHIBIT B AMERICAN PACIFIC ENTERPRISES, INC. ($'s in millions)
FISCAL YEAR ENDED 9 MONTHS --------------------------- ENDED 1995 1996 1997 10/02/98 ---- ---- ---- -------- Net Sales $ 56.5 $ 50.8 $57.9 $ 53.3 Cost of Sales 36.9 34.7 34.7 33.5 --------- -------- ----- ------------ Gross Profit 19.7 16.1 23.2 19.8 Operating Expenses 14.1 13.7 15.0 12.3 --------- -------- ----- ------------ EBIT 5.6 2.4 8.2 7.5 Interest Expense 1.7 0.9 0.7 0.6 Tax Expense 0.1 0.1 0.1 0.1 --------- -------- ----- ------------ Net Income $ 3.7 $ 1.4 $7.4 $ 6.7 ======== ======= ==== =========== EBIT $ 5.6 $ 2.4 $8.2 $ 7.5 Deprec. & Amort. 0.6 0.4 0.3 0.2 --------- -------- ----- ------------ EBITDA 6.2 2.8 8.5 7.7 CapEx 0.2 0.4 0.6 0.4 --------- -------- ----- ------------ Free Cash Flow $ 6.0 $ 2.4 $7.9 $ 7.3 ======== ======= ==== =========== EBITDA % of Sales 10.9% 5.5% 14.7% 14.5% CapEx 0.3 0.7 1.1 0.7 FCF % of Sales 10.6 4.8 13.6 13.7
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6 Months Year Ended Ended 6/30/98 12/31/98 ------- -------- Net Sales $78.7 $44.1 Cost of Goods Sold 53.6 30.4 ----- ----- Gross Profit 25.1 13.6 Marketing & Design 12.7 7.4 S,G&A 5.3 1.8 ----- ----- EBIT 7.2 4.4 Interest & Financial Exp. 2.3 1.2 Tax Expense 1.8 1.2 ----- ----- Net Income $ 3.0 $ 2.1 ===== ===== EBIT $ 7.2 $ 4.4 Deprec. & Amort. 1.6 0.8 ----- ----- EBITDA 8.7 5.2 CapEx 1.2 0.7 ----- ----- Free Cash Flow $ 7.5 $ 4.5 ===== ===== EBITDA % of Sales 11.1% 11.9% CapEx % of Sales 1.5 1.6 FCF % of Sales 9.6 10.3
(C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 15 144 Glenoit Corporation - April 19, 2000 EXHIBIT D GLENOIT CORPORATION ($'s in millions)
Quarters Ended -------------- 4/4/98 7/4/98 10/3/98 1/2/99 4/3/99 7/3/99 10/3/99 1/2/00 ------ ------ ------- ------ ------ ------ ------- ------ Net Sales $38.8 $49.2 $ 45.1 $ 39.0 $ 54.9 $81.3 $86.0 $72.6 Cost of Sales 27.2 31.9 31.9 32.6 40.5 56.5 60.1 55.2 ----- ----- ------ ------- ------ ----- ----- ----- Gross Profit 11.5 17.2 13.2 6.4 14.4 24.8 25.9 17.4 Selling Profit 3.4 3.8 3.9 3.9 4.9 6.6 6.5 5.9 Admin. Exp. 2.4 2.6 2.0 5.6 7.7 9.6 9.0 8.7 R&D 0.4 0.5 0.6 0.3 0.6 1.4 1.1 0.9 ----- ----- ------ ------- ------ ----- ----- ----- Operating Profit, Cont. Op. 5.3 10.4 6.7 (3.4) 1.2 7.2 9.3 1.9 Restruc. Charge 0.0 0.0 0.0 3.5 13.1 0.0 0.0 0.0 Interest Exp. 3.0 3.3 3.3 4.3 5.1 6.3 6.6 7.1 Amort. of Def. Fin. 0.2 0.2 0.2 0.2 0.3 0.4 0.5 0.5 Other 0.0 0.0 0.2 0.2 1.0 (0.2) (1.0) (0.8) ----- ----- ------ ------- ------ ----- ----- ----- EBT 2.2 6.9 3.1 (11.7) (18.4) 0.7 3.2 (4.9) Income Tax 0.8 2.5 1.1 (4.2) (6.8) 0.3 1.4 (0.9) ----- ----- ------ ------- ------ ----- ----- ----- Net Income, Cont. Op. $ 1.4 $ 4.4 $ 2.0 $ (7.4) $(11.6) $ 0.5 $ 1.8 $(4.0) ===== ===== ====== ======= ====== ===== ===== ===== Gross Margin 29.8% 35.1% 29.3% 16.3% 26.3% 30.5% 30.1% 24.0% S,G&A % of Sales 15.0 13.0 13.1 24.4 23.0 19.9 18.0 20.1 R&D % of Sales 1.1 1.0 1.2 0.6 1.2 1.7 1.3 1.3 EBIT Margin 13.7 21.1 14.9 (8.7) 2.1 8.9 10.8 2.6 EBITDA Margin 16.6 24.0 18.3 (4.6) 6.7 12.7 14.2 7.7 CapEx % of Sales 16.1 9.5 5.0 12.1 4.8 2.2 2.4 1.5 EBIT 5.3 10.4 6.7 (3.4) 1.2 7.2 9.3 1.9 Deprec. & Amort. 1.1 1.5 1.5 1.6 2.5 3.1 2.9 3.7 ----- ----- ------ ------- ------ ----- ----- ----- EBITDA 6.4 11.8 8.3 (1.8) 3.7 10.4 12.2 5.6 CapEx 6.2 4.7 2.2 4.7 2.6 1.8 2.1 1.1 ----- ----- ------ ------- ------ ----- ----- ----- Free Cash Flow $ 0.2 $ 7.1 $ 6.0 $ (6.5) $ 1.1 $ 8.6 $10.2 $ 4.5 ===== ===== ====== ======= ====== ===== ===== ===== EBIT/Interest 1.8x 3.1x 2.0x (0.8)x 0.2x 1.2x 1.4x 0.3x EBITDA/Interest 2.1 3.6 2.5 (0.4) 0.7 1.7 1.8 0.8 FCF/Interest 0.1 2.2 1.8 (1.5) 0.2 1.4 1.5 0.6 Day Trade Rec. 82.3 81.9 106.9 69.5 54.9 54.0 51.3 34.7 Days Inventory 32.8 31.6 80.1 55.2 104.9 89.4 86.4 84.3 Days Acct. Payable 31.1 27.0 17.5 8.1 21.6 21.3 19.0 16.6
Fiscal Years Ended Projected(1) ------------------ ------------ 1/4/97 1/3/98 1/2/99 1/2/00 FY2000 ------ ------ ------ ------ ------ Net Sales $121.8 $146.9 $172.0 $294.7 $239.5 Cost of Sales 86.5 98.1 123.7 212.2 168.1 ------ ------ ------ ------ ----- Gross Profit 35.2 48.9 48.3 82.6 71.4 Selling Profit 10.3 12.3 15.0 23.8 20.0 Admin. Exp. 5.6 8.8 12.6 35.1 31.0 R&D 2.1 1.8 1.7 4.1 2.0 ------ ------ ------ ------ ----- Operating Profit, Cont. Op. 17.2 25.9 19.0 19.6 18.4 Restruc. Charge 0.0 0.0 3.5 13.1 17.0 Interest Exp. 9.1 10.9 13.9 25.1 2.0 Amort. of Def. Fin 0.6 0.6 0.7 1.7 1.7 Other (0.1) 4.5 0.3 (0.9) (0.9) ------ ------ ------ ------ ----- EBT 7.5 9.9 0.5 (19.3) (1.3) Income Tax 3.4 3.9 0.2 (6.0) (0.4) ------ ------ ------ ------ ------ Net Income, Cont. Op. $ 4.1 $ 6.0 $ 0.3 $(13.3) $ (0.9) ====== ====== ====== ====== ====== Gross Margin 28.9% 33.3% 28.1% 28.0% 29.8% S,G&A % of Sales 13.1 14.4 6.1 20.0 21.3 R&D % of Sales 1.8 1.3 1.0 1.4 0.8 EBIT Margin 14.1 17.6 11.0 6.7 7.7 EBITDA Margin 16.1 19.8 14.4 10.8 10.6 CapEx % of Sales 1.4 13.3 10.4 2.6 3.3 EBIT 17.2 25.9 19.0 19.6 18.4 Deprec. & Amort. 2.5 3.2 5.7 12.3 7.0 ------ ------ ------ ------ ----- EBITDA 19.6 29.1 24.7 31.9 25.4 CapEx 1.7 19.6 17.9 7.5 8.0 ------ ------ ------ ------ ----- Free Cash Flow $ 17.9 $ 9.5 $ 6.8 $ 24.4 $ 17.4 ====== ====== ====== ====== ===== EBIT/Interest 1.9x 2.4x 1.4x 0.8x 9.2x EBITDA/Interest 2.2 2.7 1.8 1.3 12.7 FCF/Interest 2.0 0.9 0.5 1.0 8.7 Day Trade Rec. 55.8 52.7 62.9 34.2 34.2 Days Inventory 31.8 25.8 58.2 87.7 87.7 Days Acct. Payable 12.6 22.2 8.5 17.3 17.3
(1) Assumes restructuring and discontinuation of the fabric division. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 16 145 Glenoit Corporation - April 19, 2000 EXHIBIT D (Continued) GLENOIT CORPORATION ($'s in millions)
Quarters Ended -------------- 4/4/98 7/4/98 10/3/98 1/2/99 4/3/99 7/3/99 10/3/99 1/2/00 ------ ------ ------- ------ ------ ------ ------- ------ SEGMENT RESULTS(1) Home Sales $10.3 $11.3 $15.1 $ 28.6 $40.4 $56.4 $63.8 $61.2 Home EBIT 1.5 1.9 2.6 (3.3) 4.0 5.0 6.3 4.2 EBIT Margin 14.4% 17.2% 17.1% (11.5)% 10.0% 8.9% 9.9% 6.8% Home D&A 0.2 0.2 0.2 0.6 0.9 1.6 1.7 1.7 Home EBITDA 1.7 2.2 2.8 (2.7) 5.0 6.6 8.0 5.8 EBITDA Margin 16.4% 19.0% 18.6% (9.6)% 12.3% 11.7% 12.6% 9.5% Fabric Sales 28.5 37.9 30.0 10.3 14.5 25.6 22.8 11.7 Fabric EBIT 6.1 10.6 6.0 (1.6) (0.3) 4.6 5.2 (0.4) EBIT Margin 21.3% 28.0% 20.1% (15.0)% (1.7)% 17.9% 22.7% (3.1)% Fabric D&A 0.7 0.9 1.0 0.9 1.2 1.1 1.0 0.9 Fabric EBITDA 6.8 11.5 7.0 (0.7) 0.9 5.6 6.2 0.5 EBITDA Margin 23.9% 30.3% 23.3% (6.5)% 6.3% 22.0% 27.1% 4.4%
Fiscal Years Ended Projected ------------------ --------- 1/4/97 1/3/98 1/2/99 1/2/00 FY2000 ------ ------ ------ ------ ------ SEGMENT RESULTS(1) Home Sales $42.3 $ 39.8 $ 65.3 221.8 $239.5 Home EBIT 8.2 6.8 2.7 19.5 22.8 EBIT Margin 19.3% 17.0% 4.2% 8.8% 9.5% Home D&A 0.6 0.7 1.2 5.9 5.9 Home EBITDA 8.8 7.5 3.9 25.5 28.7 EBITDA Margin 20.7% 18.8% 6.0% 11.5% 12.0% Fabric Sales 79.4 107.1 106.7 74.7 0.0x Fabric EBIT 15.1 27.8 21.2 9.2 0.0 EBIT Margin 19.0% 26.0% 19.8% 12.3% 0.0% Fabric D&A 1.0 1.5 3.5 4.1 0.0 Fabric EBITDA 16.1 29.4 24.6 13.2 0.0 EBITDA Margin 20.3% 27.4% 23.1% 17.7% 0.0%
(1) Segment results exclude corporate expenses and restructuring charges. (C)2000 Credit Research & Trading LLC. All rights reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all or a portion of this issue except with permission of the publisher. One Fawcett Place, Greenwich, CT 06830. 17 146 SPRINGS INDUSTRIES Appendix 4 Supporting Information ================================================================================ - --------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - --------------- 63 147 SPRINGS INDUSTRIES Impact of Acquisitions - Hypothetical $200 Million Revenue Transaction ================================================================================ - - NOT MEANINGFULLY ACCRETIVE UNTIL YEAR 3, MEANINGFULLY DILUTIVE YEAR 1 - -------------------------------------------------------------------------------- ASSUMPTIONS REGARDING TARGET - -------------------------------------------------------------------------------- 2000 Revenues - $200 million 12% EBITDA Margin PRICE of 6.0x EBITDA (6x$24 million = $144 MILLION) Book Value Equals 50% of Purchase Price Lose 5% of Revenues due to Merger w/Impact of 18% EBITDA Margin Spend 5% of Acquisition to Effect Synergies (2% expressed, 3% capitalized) Save 2% in SG&A Margin First Year Save 1% in COGS Margin Second Year Revenue Growth to Gain 200 basis pts From 5% to 7% Cost of Borrowing -- Libor plus 300 pts. 15 Year Amortization of Goodwill 3% Transaction Fees
Year Year Year Year 1 2 3 4 ---------------------------------------- Base Revenues $200.0 Loss due to Merger (10.0) Pro forma Revenue 190.0 203.3 217.5 232.5 EBITDA Margin 12% 14% 15% 16% Base EBITDA 24.0 Lost Revenue 1.8 Cost of Rationalization 2.9 ---- 19.3 28.5 32.6 34.9 Depreciation 5.0 5.0 5.0 5.0 Interest 14.5 14.3 14.0 13.5 ---- ---- ---- ---- EBT (0.2) 9.2 13.6 16.4 Taxes (38%) (0.1) 3.5 5.2 6.2 Goodwill 4.8 4.8 4.8 4.8 ---- ---- ---- ---- Net Income ($4.9) $ 0.9 $ 3.6 $ 5.4 ===== ====== ====== ====== Change in W/C* 2.0 (2.3) (2.4) (2.6) Capex 5.0 5.0 5.0 5.0 Change in Cash 1.9 3.4 6.0 7.6
- --------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - --------------- 64 148 SPRINGS INDUSTRIES Potential Returns from Investments in Sourcing Capacity ================================================================================ RETURN ON INVESTMENT IN NEW SOURCING CAPABILITY - PAYBACK OF 4.5 YEARS 12% RETURN ON INVESTMENT FIRST YEAR 24% RETURN ON INVESTMENT FOLLOWING YEARS HYPOTHETICAL RETURNS FROM $100 MILLION INVESTED
2001 2002 2003 2004 2005 ---- ---- ---- ---- ---- INVESTMENT: $100 MILLION ($millions) Impact on EBITDA 00.0 $12.0 $24.0 $24.0 $24.0 Depreciation(1) 10.0 10.0 10.0 10.0 Cost of Debt 9.5 9.1 7.8 6.4 Pre-tax Income Effect (7.5) 4.9 6.3 7.6 Net Income Effect (5.4) 3.5 4.5 5.5 Cash Flow Effect 4.6 13.5 14.5 15.5
- --------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - --------------- (1) Weighted average depreciation life of 10 years 65 149 SPRINGS INDUSTRIES Product Portfolio Competitive Product Mix
Dan Crown Springs WPS PTX River Croscill Craft Burlington Sheets & P/C(1) $544 $648 $235 $247 $ $ 34 $ Comforters & Bedspreads 275 210 117 40 96 BIAB * 48 151 Subtotal * 906 352 438 133 130 80 Down Comforters 70 Mattress Pads 3 70 Sleep Pillows * 54 160 Blankets 121 100 Throws 80 Decorative Pillows 60 Total Bath Bath Towels * 650 700 20 Bath Rugs * 50 70 Scatter and Area Rugs * Shower Curtains & Access. * Window Coverings 34 67 120 Window Hardware 350 Table Linen Kitchen Textiles 50 Infant Products 75 118 Carpet 253 Upholstery 115 Mattress Ticking 80 Fabrics 140 191 914 Other 140 152 23 Total 2,220 1,883 1,552 629 283 328 1,652 ====== ====== ====== ==== ==== ==== ======
Maples MOH Glenoit PCF Hollander Louisville Keeco Sheets & P/C(1) $ $ $ $ $ $ $ 9 Comforters & Bedspreads 76 BIAB Subtotal 0 66 0 46 0 84 Down Comforters 74 40 Mattress Pads 16 14 86 Sleep Pillows 106 100 44 Throws 52 Decorative Pillows 21 10 Total Bath Bath Towels 45 135 Bath Rugs 115 237 55 Scatter and Area Rugs Shower Curtains & Access. 75 Window Coverings 21 Window Hardware Table Linen 25 Kitchen Textiles 11 Infant Products 1 Carpet 2,659 Upholstery Mattress Ticking Fabrics 75 Other 34 26 5 Total 160 3,083 317 230 200 156 133 ==== ====== ==== ==== ==== ==== ====
SOURCES: HTT, ED HAYES, SPRINGS (1) Springs numbers include estimate for wholesale, institutional and Custom Designs. Canada is excluded. - --------------- GREENWICH CREDIT RESEARCH & TRADING CONNECTICUT - --------------- * Omitted and filed separately with the Commission. 66 150 PROJECT SNUG Recapitalization Transaction Summary ($ in millions) Post Meeting Case 3.5x Debt to EBITDA
Acquisition Price Per Share - ----------------------------------------- Stock Price 10/03/00 $ 27.88 Acquisition Premium 61.4% Acquisition Price/Share $ 45.00 Total Shares plus Options (MM) 17.92 Implied Equity Value $ 806.6 Shares Purchased 10.77 Equity Purchase Price 484.6
Rate Spreads - ------------------------------------------ 3-Month LIBOR 6.656% 10-Year Treasury 5.829% Revolver 2.750% Bank Debt 2.750% Other Debt 0.000% High Yield 13.000%
Sources & Uses - ------------------------------------------------------------------------------------- Sources Uses - ------------------------------------------------------------------------------------- Amount % Rate Amount % Revolver $ 0.0 0.0% 0.000% Purchase Equity 484.6 40.8% Bank Debt $ 500.0 42.1% 9.406% Option Proceeds 0.0 0.0% Other Debt $ 0.0 0.0% 0.000% Retire Existing Debt 302.0 25.4% High Yield $ 366.0 30.8% 13.000% Retire Revolver 56.4 4.7% -------- Cash 0.0 0.0% Total Debt 866.0 Rollover Equity 322.0 27.1% Rollover Eq.(1) 322.0 27.1% Fees 23.0 1.9% New Equity 0.0 0.0% ---------------- --------------- Total $1,188.0 100% Total $1,188.0 100% ---------------- --------------
5-Year Return on Equity Investment - --------------------------------------------------------- Trailing EBITDA Aggregate Equity Multiple Value Value Returns - -------- --------- ------ ------- 6.0 $2,718.0 $2,269.3 47.8% 5.5 2,491.5 2,042.8 44.7% 5.0 2,265.0 1,816.3 41.3% 4.5 2,038.5 1,589.8 37.6% 4.0 1,812.0 1,363.3 33.5%
Acquisition EBITDA Multiples - ------------------------------------------ Implied Equity Value 806.6 Implied Aggregate Value 1,165.0 Aggregate Value/2000 EBITDA 4.6x
Debt Paydown - ------------------------------------------------ Parity Check Balanced 8-Year Cum. Free Cash Flow $1,038.4 85% 8-Year Cum. Free Cash Flow $ 882.6 Senior Debt Paid Down 6 years Bond Debt Paid Down + 7 years
Actual PF Mgmt. Projections - -------------------------------------------------------------------------------------------------------------------------- 1998 1999 2000 2000 2001 2002 2003 2004 2005 - -------------------------------------------------------------------------------------------------------------------------- 1 2 3 4 5 Operating Statistics Sales $2,180.5 $2,220.4 $2,331.0 $2,331.0 $2,421.9 $2,574.5 $2,739.3 $2,876.2 $3,020.0 % Growth -- 1.8% 5.0% 5.0% 3.9% 6.3% 6.4% 5.0% 5.0% EBITDA 207.9 242.6 256.0 256.0 295.5 342.4 399.9 425.7 453.0 % Margin 9.5% 10.9% 11.0% 11.0% 12.2% 13.3% 14.6% 14.8% 15.0% EBIT 120.9 141.3 152.0 152.0 182.1 213.6 257.9 273.5 291.6 % Margin 5.5% 6.4% 6.5% 6.5% 7.5% 8.3% 9.4% 9.5% 9.7% Net Income 74.4 72.5 73.7 32.4 51.6 72.8 104.6 121.3 141.7 % Growth -- -2.5% 1.7% -55.4% -30.0% 41.1% 43.7% 15.9% 16.8% % Margin 3.4% 3.3% 3.2% 1.4% 2.1% 2.8% 3.8% 4.2% 4.7% CapEx 115.0 166.8 145.0 145.0 157.4 141.6 131.5 106.4 106.9 % Sales 5.3% 7.5% 6.2% 6.2% 6.5% 5.5% 4.8% 3.7% 3.5% Dividends 24.3 22.7 23.0 0.0 0.0 0.0 0.0 0.0 0.0 Credit Statistics - ------------------------------------------------------------------------------------------------------------------ Cash Interest EBITDA/Interest 2.64x 3.06x 3.63x 4.53x 5.50x 7.18x EBITDA-CapEx/Interest 1.14 1.43 2.13 3.04 4.13 5.49 EBITDA-CapEx-WC/Int. 0.41 1.41 1.86 2.74 3.73 4.93 EBIT/Interest 1.57 1.89 2.26 2.92 3.54 4.62 Total Interest EBITDA/Interest 2.54x 2.95x 3.50x 4.35x 5.26x 6.80x EBITDA-CapEx/Interest 1.10 1.38 2.05 2.92 3.94 5.19 EBITDA-CapEx-WC/Int. 0.39 1.36 1.79 2.63 3.56 4.67 EBIT/Interest 1.51 1.82 2.18 2.81 3.38 4.38 Coverage Senior Deta/EBITDA 1.95x 1.66x 1.32x 0.90x 0.52x 0.12x Total Debt/EBITDA 3.50 3.00 2.48 1.89 1.45 1.00 Total Debt/Book Capitalization 58.3% 56.2% 52.6% 46.5% 38.3% 28.5% FFO/Total Debt 15.5% 19.0% 24.2% 33.1% 45.0% 67.9% Paydown Funds from Operations $ 138.7 $168.5 $205.3 $250.2 $207.1 $306.7 Free Operating Cash Flow NA 9.0 38.2 91.9 139.8 164.6 Cumulative Free Operating Cash Flow NA 9.0 47.2 139.1 278.9 443.4
MSDW Projections '00-'05 '05-'10 - --------------------------------------------------------------------------------------- 2006 2007 2008 2009 2010 CAGR CAGR - ---------------------------------------------------------------------------------------------------------------- 6 7 8 9 10 Operating Statistics Sales $3,155.9 $3,297.9 $3,446.4 $3,601.4 $3,763.5 5.3% 4.5% % Growth 4.5% 4.5% 4.5% 4.5% 4.5% EBITDA 492.3 514.5 537.6 561.8 587.1 12.1% 5.3% % Margin 15.6% 15.6% 15.6% 15.6% 15.6% EBIT 306.3 320.1 334.5 349.5 365.3 13.9% 4.6% % Margin 9.7% 9.7% 9.7% 9.7% 9.7% Net Income 160.3 186.3 208.4 225.1 242.5 14.0% 11.3% % Growth 13.1% 16.2% 11.8% 8.0% 7.8% % Margin 5.1% 5.7% 6.0% 6.2% 6.4% CapEx 143.1 149.5 156.3 163.3 170.7 % Sales 4.5% 4.5% 4.5% 4.5% 4.5% Dividends 0.0 0.0 0.0 0.0 0.0 Credit Statistics - ---------------------------------------------------------------------------------------- Cash Interest EBITDA/Interest 10.81x 22.37x 220.53x NM NM EBITDA-CapEx/Interest 7.67 15.86 156.43 NM NM EBITDA-CapEx-WC/Int. 7.00 14.30 141.04 NM NM EBIT/Interest 6.72 13.91 137.20 NM NM Total Interest EBITDA/Interest 9.50x 21.17x 143.91x NM NM EBITDA-CapEx/Interest 6.74 15.02 102.08 NM NM EBITDA-CapEx-WC/Int. 6.15 13.54 92.04 NM NM EBIT/Interest 5.91 13.17 89.53 NM NM Coverage Senior Deta/EBITDA NM NM NM NM NM Total Debt/EBITDA 0.55 0.15 NM NM NM Total Debt/Book Capitalization 17.4% 4.9% NM NM NM FFO/Total Debt 129.5% 504.9% NM NM NM Paydown Funds from Operations $352.6 $ 382.0 $ 412.8 $439.7 $ 464.6 Free Operating Cash Flow 179.3 196.6 219.0 237.2 253.0 Cumulative Free Operating Cash Flow 622.7 819.3 1,038.4 1,275.6 1,528.6 - ---------------------------------------------------------------------------------------- Notes (1)Roll Equity calculated as 39.9% of implied equity value SOURCE: MORGAN STANLEY DEAN WITTER
151 PROJECT SNUG - ------------------------------------------------------------------------------- RECAPITALIZATION TRANSACTION SUMMARY ($ IN MILLIONS) POST MEETING CASE 3.5x DEBT TO EBITDA ACQUISITION PRICE PER SHARE - --------------------------------------- Stock Price 10/03/00 $27.88 Acquisition Premium 61.4% Acquisition Price/Share $45.00 Tool Shares plus Options (MM) 17.92 Implied Equity Value $806.6 Shares Purchased 10.77 Equity Purchase Price 484.6 - ---------------------------------------
RATE SPREADS - --------------------------------------- 3-Month LIBOR 6.656% 10-Year Treasury 5.829% Revolver 2.750% Bank Debt 2.750% Other Debt 0.000% High Yield 13.000% - ---------------------------------------
SOURCES OF USES
- --------------------------------------------------------------------------------------------------------- SOURCES USES - ----------------------------------------------------- ------------------------------------------------- AMOUNT % RATE AMOUNT % -------- ----- -------- -------- ------ Revolver $0.0 0.0% 0.000% Purchase Equity $484.6 40.9% Bank Debt $862.2 72.8% 9.406% Option Proceeds 0.0 0.0% Other Debt $0.0 0.0% 0.000% Retire Existing Debt 302.0 25.5% High Yield $0.0 0.0% 13.000% Retire Revolver 56.4 4.8% ------ ----- ------- Cash 0.0 0.0% Total Debt 862.2 Rollover Equity 322.0 27.2% Fees 19.2 1.6% Rollover Eq.(1) 322.0 27.2% New Equity 0.0 0.0% -------- ----- -------- -------- ------ Total $1,184.2 100% Total $1,184.2 100% ======== ===== ======== ======== ====== - ---------------------------------------------------------------------------------------------------------
5-YEAR RETURN ON EQUITY INVESTMENT
- ------------------------------------------------------- TRAILING EBITDA AGGREGATE EQUITY MULTIPLE VALUE VALUE RETURNS - -------- --------- -------- ------- 6.0 $2,718.0 $2,321.9 48.5% 5.5 2,491.5 2,095.4 45.4% 5.0 2,265.0 1,868.9 42.2% 4.5 2,038.5 1,642.4 38.5% 4.0 1,812.0 1,415.8 34.5% - -------------------------------------------------------
ACQUISITION EBITDA MULTIPLES - --------------------------------------- Implied Equity Value 806.6 Implied Aggregate Value 1,165.0 Aggregate Value/2000 EBITDA 4.6x - ---------------------------------------
DEBT PAYDOWN - ------------------------------------------- Parity Check Balanced 8 Year Cum. Free Cash Flow $1,109.5 85% 8 Year Cum. Free Cash Flow $943.1 Senior Debt Paid Down 8 years Bond Debt Paid Down + 0 years - -------------------------------------------
ACTUAL PF MGMT. PROJECTIONS ---------------------------- -------- ------------------------------------------------ 1998 1999 2000 2000 2001 2002 2003 2004 2005 -------- -------- -------- -------- -------- -------- -------- -------- -------- 1 2 3 4 5 Operating Statistics Sales $2,180.5 $2,220.4 $2,331.0 $2,331.0 $2,421.9 $2,574.5 $2,739.3 $2,876.2 $3,020.0 % of Growth -- 1.8% 5.0% 5.0% 3.9% 6.3% 6.4% 5.0% 5.0% EBITDA 207.9 242.6 256.0 256.0 295.5 342.4 399.9 425.7 453.0 % Margin 9.5% 10.9% 11.0% 11.0% 12.2% 13.9% 14.6% 14.8% 15.0% EBIT 120.9 141.3 152.0 152.0 182.1 213.6 257.9 273.5 291.6 % Margin 5.5% 6.4% 6.5% 6.5% 7.5% 8.3% 9.4% 9.5% 9.7% Net Income 74.4 72.5 73.7 41.1 60.6 82.4 114.7 132.0 151.0 % Growth -- -2.5% 1.7% -43.3% -17.8% 35.0% 39.3% 15.1% 15.9% % Margin 3.4% 3.3% 3.2% 1.8% 2.5% 3.2% 4.2% 4.6% 5.1% CapEx 115.0 166.8 145.0 145.0 157.4 141.6 131.5 106.4 106.9 % Sales 5.3% 7.9% 6.2% 6.2% 6.5% 5.5% 4.8% 3.7% 3.5% Dividends 24.3 22.7 23.0 0.0 0.0 0.0 0.0 0.0 0.0 Credit Statistics - ------------------------------------------------------------------------------------------------------------------------------------ Cash Interest EBITDA/Interest 3.07x 3.57x 4.30x 5.51x 7.00x 9.96x EBITDA-CapEx/Interest 1.33 1.67 2.52 3.70 5.25 7.61 EBITDA-CapEx-W/Int. 0.47 1.64 2.80 3.33 4.74 6.84 EBIT/Interest 1.82 2.20 2.68 3.56 4.50 6.41 Total Interest EBITDA/Interest 2.95x 3.44x 4.13x 5.27x 6.65x 9.31x EBITDA-CapEx/Interest 1.28 1.61 2.42 3.54 4.99 7.11 EBITDA-CapEx-W/Int. 0.46 1.58 2.12 3.19 4.51 6.39 EBIT/Interest 1.75 2.12 2.58 3.40 4.27 5.99 Coverage Senior Debt/EBITDA 3.37x 2.86x 2.33x 1.7x 1.28x 0.82x Total DEBT/EBITDA 3.48 2.96 2.41 1.81 1.35 0.83 Total Debt/Book Capitalization 52.2% 55.9% 51.3% 44.7% 35.8% 25.2% FFO/Total Debt 16.9% 20.3% 26.0% 35.9% 50.0% 79.6% Paydown Funds from Operations $147.0 $177.2 $214.4 $259.9 $287.4 $317.7 Free Operating Cash Flow NA 17.6 47.4 101.6 180.1 173.5 Cumulative Free Operating Cash Flow NA 17.6 65.0 166.6 316.7 492.2 - ------------------------------------------------------------------------------------------------------------------------------------
Notes (1) Roll Equity calculated as 39.9% of implied equity value
MSDW PROJECTIONS ------------------------------------------------ '00-'05 '05-'10 2006 2007 2008 2009 2010 CAGR CAGR -------- -------- -------- -------- -------- -------- -------- 6 7 8 9 10 Operating Statistics Sales $3,155.9 $3,297.9 $3,446.4 $3,601.4 $3,763.5 5.3% 4.5% % of Growth 4.5% 4.5% 4.5% 4.5% 4.5% EBITDA 492.3 514.5 537.6 561.8 587.1 12.1% 5.3% % Margin 15.6% 15.6% 15.6% 15.6% 15.6% EBIT 306.3 320.1 334.5 349.5 365.3 13.9% 4.6% % Margin 9.7% 9.7% 9.7% 9.7% 9.7% Net Income 173.7 193.8 209.7 228.3 244.5 15.7% 9.8% % Growth 13.5% 11.6% 8.2% 8.9% 7.1% % Margin 5.5% 5.9% 6.1% 6.3% 6.5% CapEx 143.1 149.5 156.3 163.3 170.7 % Sales 4.5% 4.5% 4.5% 4.5% 4.5% Dividends 0.0 0.0 0.0 0.0 0.0 Credit Statistics - ---------------------------------------------------------------------------------------------------------------- Cash Interest EBITDA/Interest 17.15x 48.61x NM NM NM EBITDA-CapEx/Interest 12.16 34.48 NM NM NM EBITDA-CapEx-W/Int. 11.11 31.09 NM NM NM EBIT/Interest 10.67 30.24 NM NM NM Total Interest EBITDA/Interest 16.07x 41.13x 320.16x NM NM EBITDA-CapEx/Interest 11.40 29.18 227.10 NM NM EBITDA-CapEx-W/Int. 10.41 26.31 204.76 NM NM EBIT/Interest 10.00 25.59 119.18 NM NM Coverage Senior Debt/EBITDA 0.43x 0.01x NM NM NM Total DEBT/EBITDA 0.43 0.01 NM NM NM Total Debt/Book Capitalization 13.4% 0.4% NM NM NM FFO/Total Debt 171.6% 6,413.3% NM NM NM Paydown Funds from Operations $361.6 $390.1 $418.2 $440.8 $466.5 Free Operating Cash Flow 188.3 204.7 224.4 238.2 254.9 Cumulative Free Operating Cash Flow 680.5 885.1 1,109.5 1,247.9 1,602.8 - ----------------------------------------------------------------------------------------------------------------
Notes (1) Roll Equity calculated as 39.9% of implied equity value SOURCE: MORGAN STANLEY DEAN WITTER EX-99.D.3 9 y51534ex99-d_3.txt A#1 TO THE RECAPITALIZATION AGREEMENT 1 Exhibit 99(d)(3) AMENDMENT NO. 1 TO THE RECAPITALIZATION AGREEMENT BY AND BETWEEN SPRINGS INDUSTRIES, INC. AND HEARTLAND SPRINGS INVESTMENT COMPANY DATED AS OF JULY 31, 2001 2 This AMENDMENT NO. 1 to the Recapitalization Agreement (this "Amendment No. 1") is entered into as of this 31st day of July, 2001 by and between Springs Industries, Inc., a South Carolina corporation (the "Company"), and Heartland Springs Investment Company, a South Carolina corporation ("Merger Subsidiary" and, together with the Company, the "Parties"). WHEREAS, the Parties have entered into a Recapitalization Agreement, dated as of April 24, 2001 (together with the Company Disclosure Schedule and the Merger Subsidiary Disclosure Schedule, the "Original Recapitalization Agreement" and, as amended by this Amendment No. 1, the "Recapitalization Agreement"); WHEREAS, the Parties desire to make certain amendments to the Original Recapitalization Agreement; WHEREAS, the Parties desire that, except as set forth herein, the Original Recapitalization Agreement shall remain in full force and effect; and WHEREAS, capitalized terms used herein and not defined herein shall have the respective meanings given in the Original Recapitalization Agreement; NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained herein, the Parties agree as follows: SECTION 1. The term "Conversion Time" corresponding to section "2.05" is hereby added to the table in Section 1.01(b). SECTION 2. Subsection 2.05(a)(2) is hereby deleted in its entirety and Subsection 2.05(a)(3) is hereby renumbered Subsection 2.05(a)(2). SECTION 3. Section 2.05(b)(ii) is hereby deleted in its entirety and replaced with the following language: (ii) Cash-Out of Options. Any In-the-Money Option with respect to which a Cash-Out Election is made or deemed made shall be converted at the time established by the Company (the "CONVERSION TIME") into the right to receive from the Surviving Corporation (subject to any applicable withholding taxes) an amount equal to the product of (A) the excess of the Cash Merger Consideration over the exercise price per Class A Share of such In-the-Money Option times (B) the number of Class A Shares subject to such In-the-Money Option (the "CASH-OUT PAYMENT"), and such In-the-Money Option shall be canceled at the Conversion Time. The Cash-Out Payment shall be due and paid at (or as soon as practicable following) the Conversion Time. SECTION 4. Section 2.05(b)(iii) is hereby deleted in its entirety and replaced with the following language: (iii) Rollover of Options. Any In-the-Money Option with respect to which a Rollover Election is made or deemed made and each option with an exercise price per Class A Share that exceeds the Cash Merger Consideration (an "OUT-OF-THE-MONEY -2- 3 OPTION") shall be retained after the Conversion Time on such terms and conditions as are specified in the Management Equity Schedule or otherwise determined pursuant to the terms of the Rollover Election. Any such retained option held by a Management Shareholder shall vest and be fully exercisable immediately following the Conversion Time. Such option shall also include an Appreciation Right after the Conversion Time, unless it was converted from an In-the-Money Option held by a person who is not a Management Shareholder. An "APPRECIATION RIGHT" means the right to receive upon exercise of such option, in lieu of Class A Shares, a cash payment from the Surviving Corporation (subject to any applicable withholding taxes) equal to the product of (I) the excess of the fair market value (to be determined based on a reasonable methodology to be developed by the Company, with the consent of Merger Subsidiary) of a Class A Share at the time of exercise over the exercise price per Class A Share of such option times (II) the number of Class A Shares as to which such option is exercised, subject to such other terms and conditions as may be provided in the Management Equity Schedule. SECTION 5. Section 2.05(d) is hereby deleted in its entirety and replaced with the following language: (d) Performance Units. With respect to all outstanding performance unit award agreements, the performance cycle (as defined in such agreements) shall be deemed to have terminated 10 Business Days prior to the Company Shareholders Meeting; provided that the Merger is consummated. The determination of the Company's performance for the applicable performance cycle shall be made by the Management Compensation and Organization Committee of the Company's Board of Directors prior to the Effective Time and, if the Merger is consummated, any cash amounts payable with respect to such performance unit awards shall be paid as soon as practicable thereafter. Class A Shares payable following the Effective Time with respect to any such performance unit awards shall be paid in accordance with the terms and conditions set forth in the Management Equity Schedule. SECTION 6. Section 2.05(f) is hereby deleted in its entirety and replaced with the following language: (f) Notwithstanding any provision of this Agreement, if Merger Subsidiary and the Chief Executive Officer of the Company determine that it would be desirable to provide for an extension of the deadline for delivering the Management Equity Schedule, then they may agree to extend any such deadline. SECTION 7. Except as set forth herein, the Original Recapitalization Agreement shall remain in full force and effect. All references to "this Agreement" in the Original Recapitalization Agreement shall be references to the Original Recapitalization Agreement as amended pursuant to this Amendment No. 1. -3- 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed by their respective authorized officers as of the day and year first above written. SPRINGS INDUSTRIES, INC. By: /s/ Crandall C. Bowles --------------------------------- Name: Crandall C. Bowles Title: Chairman and CEO HEARTLAND SPRINGS INVESTMENT COMPANY By: /s/ W. Gerald McConnell --------------------------------- Name: W. Gerald McConnell Title: Vice President and Secretary -4- -----END PRIVACY-ENHANCED MESSAGE-----