-----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, JElofh52AzazaJ9/GoO2sX+blkGvoX1Jijx390oWYXyC29ZwQPOuMGpz9Cb9TCfH uTAQzO8Sy7+hq8VIYl+mtA== 0000950144-97-008812.txt : 19970813 0000950144-97-008812.hdr.sgml : 19970813 ACCESSION NUMBER: 0000950144-97-008812 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970628 FILED AS OF DATE: 19970812 SROS: CSX SROS: NYSE SROS: PHLX FILER: 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: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05315 FILM NUMBER: 97656440 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 10-Q 1 SPRINGS INDUSTRIES, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------- F O R M 10-Q For the Quarter Ended June 28, 1997 Commission File Number 1-5315 ---------------------------- SPRINGS INDUSTRIES, INC. (Exact name of registrant as specified in its charter) SOUTH CAROLINA 57-0252730 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 205 North White Street Fort Mill, South Carolina 29715 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (803) 547-1500 ---------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days. Yes X No ------- ------- ---------------------------- As of August 5, 1997, there were 12,823,662 shares of Class A Common Stock and 7,337,021 shares of Class B Common Stock of Springs Industries, Inc. outstanding. ---------------------------- There are 14 pages in the sequentially numbered, manually signed original of this report. Page 1 of 14 The Index to Exhibits is on Page 13 2 TABLE OF CONTENTS TO FORM 10-Q PART I - FINANCIAL INFORMATION
ITEM PAGE - ---- ---- 1. FINANCIAL STATEMENTS 3 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 9 FINANCIAL CONDITION AND RESULTS OF OPERATIONS PART II - OTHER INFORMATION - --------------------------- ITEM PAGE - ---- ---- 6. EXHIBITS 11 SIGNATURES 12 EXHIBIT INDEX 13
3 PART I ITEM I - FINANCIAL STATEMENTS SPRINGS INDUSTRIES, INC. Consolidated Statement of Operations and Retained Earnings (In thousands except per share data) (Unaudited)
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED ------------------------ ------------------------ JUNE 28, JUNE 29, JUNE 28, JUNE 29, 1997 1996 1997 1996 ---------- --------- ---------- ---------- OPERATIONS Net sales . . . . . . . . . . . . . $ 528,931 $ 540,243 $1,071,940 $1,119,583 Cost and expenses: Cost of goods sold . . . . . . . . 430,828 439,223 877,585 916,978 Selling, general and administrative expenses . . . . . 68,435 69,809 139,467 144,308 Restructuring and realignment expenses . . . . . . 2,221 30,424 4,984 30,424 Interest expense . . . . . . . . . 4,705 5,538 9,226 13,372 Other (income) expense . . . . . . 300 (42,542) 151 (43,481) --------- --------- ---------- ---------- Total . . . . . . . . . . . . . . 506,489 502,452 1,031,413 1,061,601 --------- --------- ---------- ---------- Income before income taxes and extraordinary item . . . . . . . . 22,442 37,791 40,527 57,982 Income tax provision (benefit) . . . 7,315 (5,193) 14,189 2,692 --------- --------- ---------- ---------- Income before extraordinary item. . 15,127 42,984 26,338 55,290 Extraordinary item: Loss on extinguishment of debt, net of income tax benefit of $2,176 . . . . . . . . . . . . . - 3,552 - 3,552 --------- --------- ---------- ---------- Net income . . . . . . . . . . . . $ 15,127 $ 39,432 $ 26,338 $ 51,738 ========= ========= ========== ========== Per share: Income before extraordinary item . $ .73 $ 2.10 $ 1.28 $ 2.70 Extraordinary loss from extinguishment of debt . . . . . - (.17) - (.17) --------- --------- ---------- ---------- Net income . . . . . . . . . . . . $ .73 $ 1.93 $ 1.28 $ 2.53 ========= ========= ========== ========== Cash dividends declared: Class A shares . . . . . . . . . . $ .33 $ .33 $ .66 $ .66 ========= ========= ========== ========== Class B shares . . . . . . . . . . $ .30 $ .30 $ .60 $ .60 ========= ========= ========== ========== Weighted average shares of common stock . . . . . . . . . . . 20,518 20,441 ========== ========== RETAINED EARNINGS Retained earnings at beginning of period . . . . . . . . . . . . . $ 680,309 $ 622,236 $ 675,533 $ 616,347 Net income . . . . . . . . . . . . . 15,127 39,432 26,338 51,738 Cash dividends declared . . . . . . . (6,436) (6,429) (12,871) (12,846) --------- --------- ---------- ---------- Retained earnings at end of period . . . . . . . . . . . . . . $ 689,000 $ 655,239 $ 689,000 $ 655,239 ========= ========= ========== ==========
See Notes to Condensed Consolidated Financial Statements. 4 SPRINGS INDUSTRIES, INC. Condensed Consolidated Balance Sheet (In thousands except share data) (Unaudited)
JUNE 28, DECEMBER 28, 1997 1996 ---------- ----------- ASSETS Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . $ 673 $ 30,719 Accounts receivable . . . . . . . . . . . . . . . . . . 326,393 350,830 Inventories . . . . . . . . . . . . . . . . . . . . . . 411,193 370,896 Other . . . . . . . . . . . . . . . . . . . . . . . . . 45,675 37,177 ---------- ---------- Total current assets . . . . . . . . . . . . . . . . 783,934 789,622 ---------- ---------- Property, plant and equipment . . . . . . . . . . . . . . 1,346,467 1,320,400 Accumulated depreciation . . . . . . . . . . . . . . . (816,159) (785,836) ---------- ---------- Property, net . . . . . . . . . . . . . . . . . . . . 530,308 534,564 ---------- ---------- Other assets . . . . . . . . . . . . . . . . . . . . . . 82,809 73,770 ---------- ---------- Total . . . . . . . . . . . . . . . . . . . . . . . . $1,397,051 $1,397,956 ========== ========== LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Short-term borrowings . . . . . . . . . . . . . . . . . $ 10,600 $ - Current maturities of long-term debt . . . . . . . . . 6,773 6,921 Accounts payable . . . . . . . . . . . . . . . . . . . 87,675 103,841 Other accrued liabilities . . . . . . . . . . . . . . . 133,636 141,727 ---------- ---------- Total current liabilities . . . . . . . . . . . . . . 238,684 252,489 ---------- ---------- Noncurrent liabilities: Long-term debt . . . . . . . . . . . . . . . . . . . . 177,022 177,640 Accrued benefits and deferred compensation . . . . . . . . . . . . . . . . . . . . . 163,464 160,535 Deferred income taxes and other deferred credits . . . . . . . . . . . . . . . . . . . . . . . 22,458 26,513 ---------- ---------- Total noncurrent liabilities . . . . . . . . . . . . 362,944 364,688 ---------- ---------- Shareowners' equity: Class A common stock- $.25 par value (12,924,601 and 12,746,374 shares issued in 1997 and 1996, respectively) . . . . . . . 3,231 3,187 Class B common stock- $.25 par value (7,337,021 and 7,508,579 shares issued in 1997 and 1996, respectively) . . . . . . . . . . . 1,834 1,877 Additional paid-in capital . . . . . . . . . . . . . . 110,617 110,352 Retained earnings . . . . . . . . . . . . . . . . . . . 689,000 675,533 Cost of Class A shares in treasury (103,179 and 106,739 shares in 1997 and 1996, respectively) . . . . . . . . . . . (2,316) (2,378) Currency translation adjustment and other . . . . . . . (6,943) (7,792) ---------- ---------- Total shareowners' equity . . . . . . . . . . . . . . 795,423 780,779 ---------- ---------- Total . . . . . . . . . . . . . . . . . . . . . . . . $1,397,051 $1,397,956 ========== ==========
See Notes to Condensed Consolidated Financial Statements. 5 SPRINGS INDUSTRIES, INC. Condensed Consolidated Statement of Cash Flows (In thousands) (Unaudited)
TWENTY-SIX WEEKS ENDED -------------------------------- JUNE 28, JUNE 29, 1997 1996 ---------- --------- Operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,338 $ 51,738 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . . 44,954 50,042 Gain on sale of businesses . . . . . . . . . . . . . . . . . . . - (49,896) Provision for restructuring costs . . . . . . . . . . . . . . . - 30,375 (Gain) loss on disposal of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . (329) 6,241 Extraordinary loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 5,728 Changes in operating assets and liabilities, net of effects of business acquisitions and sale of businesses . . . . . . . . . . . . . . . . . . . . . . (34,053) (56,856) Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,925) (3,100) -------- --------- Net cash provided by operating activities. . . . . . . . . . 31,985 34,272 -------- --------- Investing activities: Purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . (39,796) (35,510) Business acquisitions . . . . . . . . . . . . . . . . . . . . . . (6,429) (1,900) Proceeds from sales of businesses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 913 194,749 Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,789) - -------- --------- Net cash provided (used) by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . (52,101) 157,339 -------- --------- Financing activities: Proceeds (repayments) of short-term borrowings, net . . . . . . . 10,600 (21,900) Proceeds from long-term borrowings . . . . . . . . . . . . . . . - 2,261 Repayment of long-term debt . . . . . . . . . . . . . . . . . . . (1,235) (76,120) Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . (19,295) (19,263) -------- --------- Net cash used by financing activities . . . . . . . . . . . . (9,930) (115,022) -------- --------- Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $(30,046) $ 76,589 ======== =========
See Notes to Condensed Consolidated Financial Statements. 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Significant Accounting Policies: The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements presented in the Springs Industries, Inc. ("Springs" or "the Company") 1996 Annual Report on Form 10-K. In the opinion of the management of Springs, these unaudited condensed consolidated financial statements contain all adjustments of a normal recurring nature necessary for their fair presentation. The results for interim periods reflect estimates for certain items which can be definitively determined only on an annual basis. These items include the valuation of a substantial portion of inventories on a LIFO cost basis and the provision for income taxes. These interim financial statements reflect applicable portions of the estimated annual amounts for such items. The results of operations for interim periods are not necessarily indicative of operating results to be expected for the remainder of the year. 2. Inventory: Inventories are summarized as follows (in thousands):
June 28, Dec. 28, 1997 1996 --------- --------- Standard cost (which approximates average cost) or average cost: Finished goods . . . . . . . . . . . . . . . . . . . $ 278,571 $ 242,650 In process . . . . . . . . . . . . . . . . . . . . . . 192,832 185,307 Raw materials and supplies . . . . . . . . . . . . . 60,960 67,925 --------- --------- 532,363 495,882 Less LIFO reserve . . . . . . . . . . . . . . . . . . (121,170) (124,986) --------- --------- Total . . . . . . . . . . . . . . . . . . . . . . . . $ 411,193 $ 370,896 ========= =========
3. Reclassification: Certain prior-year amounts have been reclassified to conform with the 1997 presentation, including classification in net sales of certain promotional costs which were previously included in selling, general and administrative expenses. 4. Commitments: The Company enters into forward delivery contracts and futures contracts for raw material purchases, consistent with the size of its business, to reduce the Company's exposure to price volatility. Management assesses these contracts on a continuous basis to determine if contract prices will be recovered through subsequent sales. 7 5. Divestiture: On April 17, 1996, the Company sold Clark-Schwebel, Inc., a business in the specialty fabrics segment, for $193 million in cash. A gain of $50.1 million was included in other (income) expense for the second quarter of 1996. Through the date of sale, Clark-Schwebel, Inc. had 1996 sales of $68.9 million and earnings before interest expense and taxes of $11.3 million. During the five years ended in 1995, Clark-Schwebel's average contribution was 13 percent of Springs' sales and 9 percent of its earnings before interest expense and taxes. 6. Restructuring and Realignment Costs: During the second quarter of 1996, the Company adopted a plan to consolidate and realign its fabric manufacturing operations. In connection with this plan, the Company closed three fabric manufacturing plants, added production in other plants, and increased outside purchases of grey fabric. A pretax restructuring charge of $30.4 million was recorded during the second quarter of 1996, which included a $16.3 million write-off of plant and equipment, a $6.6 million accrual for anticipated severance expense arising from the elimination of approximately 850 positions, and a $7.5 million accrual for certain other anticipated expenses associated with the plan. Through June 28, 1997, the Company has recorded cash expenditures of approximately $3.5 million against the severance expense accrual and $4.3 million against the accrual for certain other expenses associated with the plan. In addition, through June 28, 1997, the Company has incurred expenses of $8.5 million, including $2.2 million during the second quarter, for equipment relocation and other realignment expenses and has made capital investments of $3.9 million related to the plan. 7. Impact of Recently Issued Accounting Standards: In February of 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share," which is required to be adopted for both interim and year-end financial statements ending after December 15, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. The Company does not expect Statement 128 to have a material effect on its financial statements. 8. Other: The second quarter 1996 results also included an extraordinary charge of $3.5 million, net of an income tax benefit of $2.2 million, incurred as a result of the early extinguishment of $68.7 million of senior notes payable. The notes had an effective interest rate of 10 percent. Also included in other (income) expense in the second quarter of 1996 were asset write-downs totaling approximately $5 million. 9. Legal and Environmental: As disclosed in the 1996 Annual Report on Form 10-K, Springs is involved in certain administrative proceedings alleging violations of environmental laws and regulations, including proceedings under the Comprehensive Environmental Response, Compensation, and Liability Act. In connection with these proceedings, the Company has accrued an amount which represents management's best estimate of Springs' probable liability. 8 Springs is also involved in various other legal proceedings and claims incidental to its business. Springs is protecting its interests in all such proceedings. In the opinion of management, based on the advice of counsel, the likelihood that the resolution of the above matters would have a material adverse impact on either the financial condition or the future results of operations of Springs is remote. 9 ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS GENERAL During the second quarter of 1996, the Company adopted a plan to consolidate and realign its fabric manufacturing operations. In connection with this plan, the Company closed three fabric manufacturing plants, added production in other plants, and increased outside purchases of grey fabric. A pretax restructuring charge of $30.4 million was recorded during the second quarter of 1996, which included a $16.3 million write-off of plant and equipment, a $6.6 million accrual for anticipated severance expense arising from the elimination of approximately 850 positions, and a $7.5 million accrual for certain other anticipated expenses associated with the plan. Through June 28, 1997, the Company has recorded cash expenditures of approximately $3.5 million against the severance expense accrual and $4.3 million against the accrual for certain other expenses associated with the plan. In addition, through June 28, 1997, the Company has incurred expenses of $8.5 million, including $2.2 million during the second quarter, for equipment relocation and other realignment expenses and has made capital investments of $3.9 million related to the plan. Over the next 30 months, Springs plans to make future capital investments of $13.4 million and incur future expenses of approximately $14.6 million for equipment relocation and other realignment costs which do not qualify as "exit costs." On April 17, 1996, the Company sold Clark-Schwebel, Inc., a business in the specialty fabrics segment, for $193 million in cash. A gain of $50.1 million was included in other (income) expense for the second quarter of 1996. Through the date of sale, Clark-Schwebel, Inc. had 1996 sales of $68.9 million and earnings before interest expense and taxes of $11.3 million. During the five years ended in 1995, Clark-Schwebel's average contribution was 13 percent of Springs' sales and 9 percent of its earnings before interest expense and taxes. RESULTS OF OPERATIONS Sales Net sales for the second quarter of 1997 were $528.9 million, down 2 percent from the second quarter of 1996. Excluding the results of Clark-Schwebel, Inc., net sales for the quarter approximated last year's. The home furnishings segment produced a second-quarter net sales increase of 2 percent. Second-quarter net sales for the specialty fabrics segment were 20 percent lower than a year ago due to weak market demand for certain products of the segment and due to the sale of Clark-Schwebel, Inc. Year-to-date net sales were $1,071.9 million, down 4 percent compared to the first six months of 1996. Adjusting for the sale of Clark-Schwebel, Inc., net sales for the first six months of 1997 were 2 percent higher than during the first half of 1996. Home furnishings' year-to-date sales were 4 percent higher compared to those of the first six months of 1996. Year-to-date net sales for the specialty fabrics segment were 34 percent lower than a year ago due to weak market demand for certain products of the segment and due to the sale of Clark-Schwebel, Inc. 10 Earnings Net income for the second quarter of 1997 was $15.1 million, or $.73 per share, after the effect of realignment expenses associated with the Company's restructuring of its fabric manufacturing operations announced in June of 1996. Net income for the second quarter of 1996 was $39.4 million, or $1.93 per share, and included a gain on the sale of Clark-Schwebel, Inc. of $50.1 million, or $2.45 per share, and a restructuring charge and other write-offs which reduced net income by $26.6 million, or $1.30 per share. Without these unusual items, net income for the second quarter of 1997 would have been $16.5 million, or $.80 per share, compared to $15.9 million, or $.78 per share, for the second quarter of 1996. The home furnishings segment achieved a significant increase in operating earnings compared to last year. On a comparable basis, without the restructuring and realignment expenses, operating earnings for the home furnishings segment increased by more than 25 percent over the prior year. Operating earnings for the specialty fabrics segment declined precipitously compared to the second quarter of 1996. Weak market demand affecting certain portions of the specialty fabrics segment, along with certain recent customer bankruptcy filings, contributed to the decline. Earnings for the six months ended June 28, 1997, were $26.3 million, or $1.28 per share, compared to $51.7 million, or $2.53 per share, for the first six months of 1996. Excluding the aforementioned unusual items, net income for the six months ended June 28, 1997 would have been $29.4 million, or $1.43 per share, compared to $28.2 million, or $1.38 per share, for the six months ended June 29, 1996. In the home furnishings segment, earnings were higher than a year ago due to improved volume and margin expansion in bed, bath and window fashions. Year-to-date operating earnings for the specialty fabrics segment were lower than the prior year due to weak market demand for certain portions of its business, certain recent customer bankruptcy filings, and the sale of Clark-Schwebel, Inc., in April of 1996. CAPITAL RESOURCES AND LIQUIDITY A normal seasonal increase in working capital since year-end resulted in increased short-term borrowings. Management expects to spend more than $60 million on capital expenditures during the last six months of 1997. These investments will focus on manufacturing equipment, distribution facilities and information systems. Management expects that cash flow from operations and borrowings from commercial paper and committed short-term bank lines will adequately provide for the Company's 1997 operating cash needs. The second quarter of 1996 results included an extraordinary charge of $3.5 million, net of an income tax benefit of $2.2 million, as a result of a commitment to extinguish $68.7 million of senior notes payable on July 1, 1996. The notes had an effective interest rate of 10 percent. OTHER Certain prior year amounts have been reclassified to conform with the 1997 presentation, including classification in net sales of certain promotional costs which were previously included in selling, general and administrative expenses. 11 ITEM 6 - EXHIBITS The following exhibits are filed as part of this report: (27) Financial Data Schedule (for SEC use only) 12 SIGNATURES Pursuant to the requirements of Securities Exchange Act of 1934, Springs Industries, Inc. has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. SPRINGS INDUSTRIES, INC. By: /s/James F. Zahrn -------------------------------- James F. Zahrn Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) DATED: August 11, 1997 13 EXHIBIT INDEX
Item Page - ---- ---- (27) Financial Data Schedule (for SEC purposes) 14
EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF SPRINGS INDUSTRIES, INC., FOR THE QUARTER ENDED JUNE 28, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS JAN-03-1998 DEC-29-1996 JUN-28-1997 673 0 326,393 0 411,193 783,934 1,346,467 816,159 1,397,051 238,684 177,022 0 0 5,065 790,358 1,397,051 1,071,940 1,071,940 877,585 877,585 0 0 9,226 40,527 14,189 26,338 0 0 0 26,338 1.28 1.28
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