-----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, B6QxlrClqASNw29cpW5M0rnWdTCG+MRGAmPDE5YJGDqIXGDBHhlwRaHBgqBmYZzJ 4vGKvfS3LSQfGHCnJ7wGYA== 0000950144-99-006418.txt : 19990519 0000950144-99-006418.hdr.sgml : 19990519 ACCESSION NUMBER: 0000950144-99-006418 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990403 FILED AS OF DATE: 19990518 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: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05315 FILM NUMBER: 99629217 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 April 3, 1999 Commission File Number 1-5315 =========================== S P R I N G S I N D U S T R I E S, I N C. (Exact name of registrant as specified in its charter) SOUTH CAROLINA 57-0252730 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 205 North White Street Fort Mill, South Carolina 29715 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (803) 547-1500 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 May 13, 1999, there were 10,690,342 shares of Class A Common Stock and 7,156,663 shares of Class B Common Stock of Springs Industries, Inc. outstanding. ------------------------------ There are 35 pages in the sequentially numbered, manually signed original of this report. The Index to Exhibits is on Page 21 1 2 TABLE OF CONTENTS TO FORM 10-Q PART I - FINANCIAL INFORMATION
ITEM PAGE - ---- ---- 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 11 FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 17 PART II - OTHER INFORMATION 4. SUBMISSION OF MATTERS TO A VOTE 18 OF SECURITY HOLDERS 6. EXHIBITS 19 SIGNATURES 20 EXHIBIT INDEX 21
2 3 PART I ITEM I - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SPRINGS INDUSTRIES, INC. Condensed Consolidated Statement of Operations and Retained Earnings (In thousands except per share amounts) (Unaudited)
THIRTEEN WEEKS ENDED ------------------------------ APRIL 3, APRIL 4, 1999 1998 --------- ---------- OPERATIONS Net sales..................................................... $ 584,000 $ 556,736 Cost and expenses: Cost of goods sold ......................................... 481,356 455,059 Selling, general and administrative expenses................ 72,819 75,001 Restructuring and realignment expenses...................... -- 24,850 Year 2000 expenses.......................................... 452 1,420 Interest expense............................................ 6,329 5,554 Other (income) expense...................................... (1,527) (144) --------- ---------- Total....................................................... 559,429 561,740 --------- ---------- Income (loss) before income taxes............................. 24,571 (5,004) Income tax provision (benefit)................................ 9,327 (1,905) --------- ---------- Net income (loss)........................................... $ 15,244 $ (3,099) ========= ========== Basic earnings (loss) per common share........................ $ .85 $ (.16) ========= ========== Diluted earnings (loss) per common share. .................... $ .84 $ (.16) ========= ========== Cash dividends declared per common share: Class A common shares....................................... $ .33 $ .33 ========= ========== Class B common shares....................................... $ .30 $ .30 ========= ========== Basic weighted-average common shares outstanding.............. 17,831 19,396 Dilutive effect of stock-based compensation awards............ 258 -- --------- ---------- Diluted weighted-average common shares outstanding............ 18,089 19,396 ========= ========== RETAINED EARNINGS Retained earnings at beginning of period...................... $ 631,943 $ 701,354 Net income (loss)............................................. 15,244 (3,099) Repurchase of Class A common stock............................ -- (29,059) Cash dividends declared....................................... (5,672) (6,188) --------- ---------- Retained earnings at end of period............................ $ 641,515 $ 663,008 ========= ==========
See Notes to Condensed Consolidated Financial Statements. 3 4 SPRINGS INDUSTRIES, INC. Condensed Consolidated Balance Sheet (In thousands except share data) (Unaudited)
APRIL 3, JANUARY 2, 1999 1999 ----------- ----------- ASSETS Current assets: Cash and cash equivalents ............... $ 890 $ 48,127 Accounts receivable, net ................ 328,579 275,144 Inventories, net ........................ 387,671 387,988 Other ................................... 51,676 75,917 ----------- ----------- Total current assets .................. 768,816 787,176 ----------- ----------- Property, plant and equipment ............. 1,391,717 1,350,223 Accumulated depreciation ................ (817,258) (794,827) ----------- ----------- Property, plant and equipment, net .... 574,459 555,396 ----------- ----------- Other assets .............................. 125,397 92,760 ----------- ----------- Total ................................. $ 1,468,672 $ 1,435,332 =========== =========== LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Short-term borrowings ................... $ 7,200 $ -- Current maturities of long-term debt .... 21,551 21,313 Accounts payable ........................ 107,689 104,796 Other accrued liabilities ............... 102,405 106,158 ----------- ----------- Total current liabilities ............. 238,845 232,267 ----------- ----------- Noncurrent liabilities: Long-term debt .......................... 291,548 267,991 Accrued benefits and deferred compensation ........................... 172,200 179,885 Other ................................... 31,005 31,073 ----------- ----------- Total noncurrent liabilities .......... 494,753 478,949 ----------- ----------- Shareowners' equity: Class A common stock- $.25 par value (10,733,503 and 10,728,594 shares issued in 1999 and 1998, respectively) 2,683 2,682 Class B common stock- $.25 par value (7,196,864 shares issued and outstanding in 1999 and 1998) ......... 1,799 1,799 Additional paid-in capital .............. 100,773 100,446 Retained earnings ....................... 641,515 631,943 Cost of Class A common shares in treasury (97,169 and 98,313 shares in 1999 and 1998, respectively) ............... (2,210) (2,230) Accumulated other comprehensive loss .... (9,486) (10,524) ----------- ----------- Total shareowners' equity ............. 735,074 724,116 ----------- ----------- Total ................................. $ 1,468,672 $ 1,435,332 =========== ===========
See Notes to Condensed Consolidated Financial Statements. 4 5 SPRINGS INDUSTRIES, INC. Condensed Consolidated Statement of Cash Flows (In thousands) (Unaudited)
THIRTEEN WEEKS ENDED ----------------------------- APRIL 3, APRIL 4, 1999 1998 -------- ---------- Operating activities: Net income (loss) ............................ $ 15,244 $ (3,099) Adjustments to reconcile net income (loss) to net cash used by operating activities: Depreciation and amortization ............... 25,614 23,266 Provision for restructuring costs ........... -- 23,049 Gains on disposals of property, plant and equipment ................................. (1,133) -- Changes in working capital, net ............. (41,864) (77,608) Other, net .................................. (19,167) (4,318) -------- -------- Net cash used by operating activities .... (21,306) (38,710) -------- -------- Investing activities: Purchases of property, plant and equipment .................................. (33,079) (34,255) Proceeds from sales of property, plant and equipment .................................. 2,641 311 Proceeds from sales of businesses ............ 36,094 -- Business acquisitions ........................ (47,754) -- Principal collected on notes receivable ...... 476 2,002 -------- -------- Net cash used by investing activities .... (41,622) (31,942) -------- -------- Financing activities: Proceeds from (repayments of) short-term borrowings, net .............................. 5,979 54,500 Proceeds from long-term borrowings ........... 25,000 60,000 Repayments of long-term debt ................. (3,949) (517) Repurchase of Class A common shares .......... -- (32,367) Proceeds from exercise of stock options ...... -- 1,600 Cash dividends paid .......................... (11,339) (12,538) -------- -------- Net cash provided by financing activities 15,691 70,678 -------- -------- Increase (decrease) in cash and cash equivalents $(47,237) $ 26 ======== ========
See Notes to Condensed Consolidated Financial Statements. 5 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation and Significant Accounting Policies: The accompanying unaudited, condensed, consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the three-month period ended April 3, 1999, are not necessarily indicative of the results that may be expected for the year ending January 1, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the annual report on Form 10-K for the year ended January 2, 1999 (the "1998 Annual Report") of Springs Industries, Inc. ("Springs" or the "Company"). Use of Estimates: Preparation of the Company's condensed consolidated statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures relating to contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results could differ from those estimates. Reclassifications: Certain prior year amounts have been reclassified to conform with the 1999 presentation. Recently Issued Accounting Standards: Effective January 3, 1999, the Company adopted Statement of Position No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This standard revised the accounting for software development costs and requires the capitalization of certain costs which the Company has historically expensed. Adoption of this statement has not had a material impact on the Company's financial position, results of operations, or cash flows. In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities," which is required to be adopted in fiscal years beginning after June 15, 1999. This Statement, which the Company intends to adopt for its year 2000 fiscal year, will require the Company to recognize all derivatives on the balance sheet at fair value and may impact the Company's earnings depending on the instruments held at the time of adoption. The Company has not yet determined the impact FASB Statement No. 133 will have on its financial position, results of operations, or cash flows. 2. Receivables: The Company's reserve for doubtful accounts was $11.2 million at April 3, 1999, compared to $11.7 million at January 2, 1999. During the first quarter of 1999, net write-offs of approximately $2.3 million for previously reserved accounts more than offset the $1.8 million increase in the Company's provision for doubtful accounts. 6 7 3. Inventories: Inventories are valued at the lower of cost or market and are summarized as follows (in thousands):
April 3, January 2, 1999 1999 -------- ----------- Standard cost (which approximates average cost) or average cost: Finished goods ................................ $255,023 $267,143 In process .................................... 166,903 171,438 Raw materials and supplies .................... 66,191 54,965 -------- -------- 488,117 493,546 Less LIFO reserve .............................. (100,446) (105,558) -------- -------- Total ......................................... $387,671 $387,988 ======== ========
4. Restructuring and Realignment Costs: 1996 Restructuring As disclosed in the 1998 Annual Report, in the second quarter of 1996 the Company adopted a restructuring plan to consolidate and realign its fabric manufacturing operations. The restructuring plan was completed during the fourth quarter of 1998. The Company incurred realignment expenses of $1.8 million during the first quarter of 1998 for equipment relocation and other expenses related to the 1996 plan that do not qualify as "exit costs" as defined by Emerging Issues Task Force Issue No. 94-3. 1998 Restructuring As disclosed in the 1998 Annual Report, in the first quarter of 1998, the Company adopted a plan to close one of its facilities, the Rock Hill Printing and Finishing Plant. At that time, the Company recorded a pretax charge of $23.0 million, which included an $11.3 million write-off of plant and equipment, a $4.0 million accrual for anticipated severance costs arising from the elimination of approximately 480 positions, and a $7.7 million accrual primarily for idle plant costs, demolition costs, and costs associated with a defined benefit plan. The restructuring plan was completed during the fourth quarter of 1998. Springs reduced the severance accrual in the third quarter of 1998 due to lower-than-expected costs per associate. In addition, the accrual for other expenses was reduced in the third quarter of 1998, primarily as a result of lower-than-anticipated costs associated with a defined benefit plan and its unexpected sale on September 25, 1998, of the Rock Hill facility. As a result of the sale, the Company reversed accruals relating to idle plant costs and demolition costs of approximately $4.3 million in the third quarter of 1998. 7 8 5. Acquisitions and Divestitures: On January 5, 1999, the Company acquired the remaining 50 percent interest in American Fiber Industries, LLC ("AFI"), a manufacturer and distributor of bed pillows, mattress pads, down comforters and comforter accessories. Springs acquired its original 50 percent interest in AFI in February 1997 and had been accounting for the original investment under the equity method. The purchase price for the remaining interest totaled approximately $15 million. The Company has accounted for the remaining interest as a step-acquisition in accordance with APB Opinion No. 16, "Business Combinations" ("APB 16") whereby the purchase price was allocated to the assets acquired and to the liabilities assumed based on 50 percent of their estimated fair value on the date of acquisition. In addition, AFI's operating results have been included in the Company's consolidated financial statements beginning as of the acquisition date. On January 23, 1999, the Company acquired Regal Rugs, Inc. ("Regal"), a subsidiary of Readicut International plc. Regal manufactures bath and accent rugs for sale to department and specialty stores, national chain stores, and catalog retailers. The purchase price was approximately $35 million, subject to possible adjustments. The acquisition was accounted for as a purchase in accordance with APB 16, and its operating results have been included in the Company's consolidated financial statements beginning as of the acquisition date. The purchase price was allocated to the assets acquired and to the liabilities assumed based on their estimated fair market value at the date of acquisition. The purchase price allocations for both the AFI and Regal acquisitions are expected to be finalized in mid-1999 upon receipt of independent appraisals of the plants and equipment acquired. No material adjustments to the initial purchase price allocations are expected. The excess of the purchase price over the fair value of net assets acquired, which totaled $35.4 million for both transactions, has been recorded as goodwill and is being amortized on a straight-line basis over 20 years. Effective August 7, 1998, the Company sold its UltraSuede business and certain related assets of the UltraFabrics division. Effective December 19, 1998, the Company disposed of its Industrial Products division. Effective January 2, 1999, the Company disposed of the net assets of the Company's Springfield division. Effective March 31, 1999, the Company sold its UltraLeather business, the remaining portion of the UltraFabrics division. The combined sales of these businesses and earnings before interest and taxes included in the Company's first quarter 1998 results were $48.2 million and $4.5 million, respectively. The first quarter 1999 sales and earnings before interest and taxes of the UltraLeather business were not material. 8 9 6. Accrued Benefits and Deferred Compensation: The long-term portion of accrued benefits and deferred compensation were comprised of the following: (in thousands)
April 3, January 2, 1999 1999 --------- ---------- Postretirement medical benefit obligation $ 63,764 $ 65,060 Deferred compensation 62,367 66,640 Other employee benefit obligations 46,069 48,185 -------- --------- $172,200 $ 179,885 ======== =========
7. Comprehensive Income: Comprehensive income (loss) was $16.3 million and $(3.3) million for the three-month periods ended April 3, 1999, and April 4, 1998, respectively. Net income (loss) differed from comprehensive income as a result of foreign currency translation adjustments. 8. Contingencies: As disclosed in the 1998 Annual Report, Springs is involved in certain administrative proceedings governed by environmental laws and regulations, including proceedings under the Comprehensive Environmental Response, Compensation, and Liability Act. In connection with these proceedings, the Company estimates the range of possible losses for such matters to be between $8 million and $13 million and has accrued an undiscounted liability of approximately $11 million as of April 3, 1999, which represents management's best estimate of Springs' probable liability concerning all known environmental matters. Springs is also involved in various 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. Reportable Segment Information: Prior to the first quarter of 1999, Springs had two reportable segments: home furnishings and specialty fabrics. The home furnishings segment manufactures, purchases for resale and markets home furnishings products. The specialty fabrics segment manufactured, finished, purchased for resale and marketed woven and non-woven fabrics. In connection with the Company's recent divestiture of four of its specialty fabrics businesses, including its UltraFabrics Division in March 1999, Springs realigned its organizational structure during the first quarter of 1999 to reflect the Company's strategic focus on the home furnishings market, resulting in one reportable segment. The home furnishings segment's operating results have been restated to include the Company's Retail and Specialty Fabrics unit's operating results, which were previously included in the specialty fabrics segment. 9 10 The home furnishings segment offers a variety of products including sheets, pillowcases, bedspreads, comforters, infant and toddler bedding, shower curtains, accent and bath rugs, towels, other bath fashion accessories, home-sewing fabrics, draperies, drapery hardware, and decorative window furnishings. The operating results of the recently divested specialty fabrics businesses are included in the "other" category for the prior year. The accounting policies of the home furnishings segment are the same as those described in the summary of significant accounting policies. The Company evaluates the segment's performance based on profit or loss from operations before income taxes, unusual items, interest expense, and other (income), net. Its principal markets and operations are in North America. Based on the current organizational structure, sales and profit from operations before unusual items for the home furnishings segment are as follows: (in millions)
Three Months Ended ---------------------------- April 3, April 4, 1999 1998 -------- -------- Trade sales: Home furnishings ............................. $ 584.0 $ 508.5 Other ........................................ -- 48.2 -------- -------- Total ........................................ $ 584.0 $ 556.7 ======== ======== Profit from operations before unusual items: Home furnishings ............................. $ 29.8 $ 22.2 Other ........................................ -- 4.5 -------- -------- Total ........................................ 29.8 26.7 Unusual items (1) ............................ 0.4 26.3 Interest expense ............................. 6.3 5.5 Other (income), net .......................... (1.5) (0.1) -------- -------- Income (loss) before income taxes ............ $ 24.6 $ (5.0) ======== ========
(1) Unusual items for the first quarter of 1999 represent Year 2000 expenses. In 1998, unusual items included restructuring and realignment expenses and Year 2000 expenses of which $26.2 million was charged to the home furnishings segment. Total assets for the home furnishings segment were $1,468.7 million and $1,396.4 million at April 3, 1999, and January 2, 1999, respectively. 10 11 ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Prior to the first quarter of 1999, Springs had two reportable segments: home furnishings and specialty fabrics. The home furnishings segment manufactures, purchases for resale and markets home furnishings products. The specialty fabrics segment manufactured, finished, purchased for resale and marketed woven and non-woven fabrics. In connection with the Company's recent divestiture of four of its specialty fabrics businesses, including its UltraFabrics Division in March 1999, Springs realigned its organizational structure during the first quarter of 1999 to reflect the Company's strategic focus on the home furnishings market, resulting in one reportable segment. The home furnishings segment's operating results have been restated to include the Retail and Specialty Fabrics unit's operating results, which were previously included in the specialty fabrics segment. The home furnishings segment offers a variety of products including sheets, pillowcases, bedspreads, comforters, infant and toddler bedding, shower curtains, accent and bath rugs, towels, other bath fashion accessories, home-sewing fabrics, draperies, drapery hardware, and decorative window furnishings. During the first quarter of 1999, the Company acquired two home furnishings businesses. On January 5, 1999, the Company acquired the remaining 50 percent interest in American Fiber Industries, a manufacturer and distributor of bed pillows, mattress pads, down comforters and comforter accessories. The purchase price of the remaining interest totaled approximately $15 million. The Company has accounted for the remaining interest as a purchase with the operating results included in the Company's consolidated financial statements beginning as of the acquisition date. On January 23, 1999, the Company acquired Regal Rugs, Inc. Regal Rugs manufactures bath and accent rugs for sale to department and specialty stores, national chain stores, and catalog retailers. The purchase price was approximately $35 million, subject to possible adjustments. The acquisition was accounted for as a purchase and its operating results have been included in the Company's consolidated financial statements beginning as of the acquisition date. The excess of the purchase price over the fair value of net assets acquired, which totaled $35.4 million for both transactions, has been recorded as goodwill and is being amortized on a straight-line basis over 20 years. 11 12 RESULTS OF OPERATIONS Sales Net sales for the first quarter of 1999 were $584.0 million, up 4.9 percent from the first quarter of 1998, which included sales from the divested specialty fabrics businesses. The home furnishings segment's sales (as restated) were up 14.8 percent from last year. The increase in home furnishings sales (as restated) was principally attributable to the first-quarter acquisitions of American Fiber Industries and Regal Rugs and stronger sales of bed and bath fashions. The increased bed and bath volume was associated with the initial shipments of significant new programs brought to market during the quarter. Continued weakness in baby products and licensed juvenile bed and bath products partially offset the progress in other bed and bath categories. Earnings Net income for the first quarter was $15.2 million, or $0.84 per diluted share, after taking into account the expense of Year 2000 systems remediation. Last year's net loss of $3.1 million, or $0.16 per diluted share, was caused by three unusual items: a pretax charge of $23.0 million associated with the closing of the Company's Rock Hill, South Carolina, plant, realignment expenses arising from the restructuring of fabric manufacturing operations, and Year 2000 expenses. First-quarter income before unusual items was $15.5 million, or $0.86 per diluted share, compared to $13.2 million, or $0.66 per diluted share, a year ago. The Company's pretax operating profit for the first quarter of 1999 increased by $29.0 million from the comparable period in 1998 (which included pretax operating profit from the divested specialty fabrics businesses), after taking into account the net effects of restructuring and realignment expenses in the prior year and Year 2000 expenses in both years. Similarly, the home furnishings segment's pretax operating profit (as restated) increased by $33.4 million. Excluding the effects of unusual items, the home furnishings segment's pretax operating profit (as restated) for the first quarter increased by $7.6 million compared to the first quarter of 1998. The profit improvement was attributable principally to increased bed and bath sales volume. RESTRUCTURING AND REALIGNMENT COSTS 1996 Restructuring As disclosed in the 1998 Annual Report, in the second quarter of 1996, the Company adopted a restructuring plan to consolidate and realign its fabric manufacturing operations. The plan benefited operating results by reducing the volume of linear yards and second-quality units produced, by reducing the complexity of the finishing process, and by increasing manufacturing flexibility with respect to the use of finished roll stock. The restructuring plan was completed during the fourth quarter of 1998. The Company incurred realignment expenses of $1.8 million during the first quarter of 1998 for equipment relocation and other expenses related to the 1996 plan that do not qualify as "exit costs" as defined by Emerging Issues Task Force Issue No. 94-3. 12 13 1998 Restructuring As disclosed in the 1998 Annual Report, in the first quarter of 1998, the Company adopted a plan to close one of its facilities, the Rock Hill Printing and Finishing Plant. At that time, the Company recorded a pretax charge of $23.0 million, which included an $11.3 million write-off of plant and equipment, a $4.0 million accrual for anticipated severance costs arising from the elimination of approximately 480 positions, and a $7.7 million accrual primarily for idle plant costs, demolition costs, and costs associated with a defined benefit plan. The benefits derived from this restructuring plan have been lower product costs and better utilization of existing capacity in other facilities. The restructuring plan was completed during the fourth quarter of 1998. Springs reduced the severance accrual in the third quarter of 1998 due to lower-than-expected costs per associate. In addition, the accrual for other expenses was reduced in third quarter of 1998, primarily as a result of lower-than-anticipated costs associated with a defined benefit plan and its unexpected sale on September 25, 1998, of the Rock Hill facility. As a result of the sale, the Company reversed accruals relating to idle plant costs and demolition costs of approximately $4.3 million in the third quarter of 1998. CAPITAL RESOURCES AND LIQUIDITY The Company expects capital expenditures for 1999 to approximate $170 million. Management believes that cash flow from operations, cash received from completed sales of assets and businesses, and borrowings from committed bank lines and commercial paper will adequately provide for the Company's cash needs during 1999. YEAR 2000 COMPUTER ISSUE Overview The "Year 2000 Computer Issue" arises because many computer programs use only two digits to refer to a year. If uncorrected, these computer programs may not be able to distinguish between the years 1900 and 2000 and consequently may fail to operate or may produce unpredictable results. Springs has been addressing the Year 2000 Computer Issue within its information technology and non-information technology systems through a Company-wide Year 2000 Project. Non-information technology systems typically include embedded technology such as computer chips within manufacturing equipment and building security systems. (Information technology and non-information technology systems are hereinafter referred to as "information systems.") The Company's Year 2000 Project commenced in 1996 and is directed by an internal Program Management Office. In general, Springs' Year 2000 Project is proceeding on or ahead of schedule. In addition, in 1993, the Company began a series of capital investment projects to improve internal operations and customer service by consolidating and replacing certain information systems. As part of these capital projects, the Company has been replacing certain older, non-compliant information systems with Year 2000 compliant information systems. These capital projects are expected to be completed by the end of the second quarter of 1999. 13 14 Year 2000 Project The Company organized its Year 2000 Project into six broad phases: (1) development of a Company-wide inventory of information systems, (2) development of Company-wide standards, processes and guidelines for remediation, testing and certification, (3) remediation, (4) testing, (5) certification, and (6) development of contingency plans, as necessary. The Company will certify an information system as Year 2000 compliant only after the information system satisfies the Company's established test criteria. The Company completed the inventory of its information systems in 1997. The Company divided the remediation of information systems which would not be replaced through a capital project into two major efforts (business applications and process logic controllers) and also undertook a project to contact certain key trading partners. (a) Business Applications: This project addresses all Company business applications, such as general ledger, accounts receivable, order fulfillment and payroll, and the technical infrastructure which supports them. As of April 3, 1999, the Company has certified approximately 98% of its business applications' lines of code as Year 2000 compliant. The Company expects to certify all business applications and supporting technical infrastructure as Year 2000 compliant by the end of the second quarter of 1999, except as disclosed below for recently acquired businesses. (b) Process Logic Controllers: This project addresses the hardware, software and associated embedded chips that are used in the operation of all facilities and manufacturing equipment used by the Company. As of April 3, 1999, approximately 95% of the Company's process logic controllers are Year 2000 compliant. The Company projects that the rest will be repaired or replaced by the end of the second quarter of 1999, except as disclosed below for recently acquired businesses. (c) Trading Partners: This project involves identifying critical vendors and customers and communicating with them about their compliance status and plans. The Company contacted all trading partners with which it does over $100,000 in business annually, all electronic data interchange trading partners, any other critical trading partner that did not otherwise meet the criteria, and all utilities which serve the Company in order to request written information regarding each trading partner's Year 2000 compliance status. The Company has been receiving written responses which indicate whether its trading partners are or plan to become Year 2000 compliant. The Company is aware that these written responses may not accurately represent the Year 2000 compliance status of its trading partners. The Company is continuing to follow up with its trading partners and will develop contingency plans as necessary. Costs The total cost of the Company's Year 2000 Project is not expected to be material to the Company's financial position. The Company presently expects to incur approximately $13 million of pretax expense in connection with its Year 2000 Project. Approximately $2.8 million of pretax expense was incurred in fiscal 1997, the first year in which the Company incurred Year 2000 expenses. In addition, expenses totaling approximately $7.1 million were incurred during 1998 related to this effort. During the first quarter of 1999, the Company incurred $0.5 million of Year 2000 expenses. The funds to 14 15 complete the remediation efforts are expected to be provided from cash flow from operations. Acquisitions The Company plans to remediate or replace all non-compliant information systems at its recently acquired businesses by the end of the fourth quarter of 1999. Risks Due to the numerous uncertainties inherent in the Year 2000 Computer Issue, the Company cannot ensure, despite its ongoing communications with its trading partners, that its most important suppliers and customers will be Year 2000 compliant on time. The failure of critical suppliers or customers to timely correct their Year 2000 Computer Problems could materially and adversely affect the Company's operations and financial condition, even resulting in interruption of normal business operations. The Company has implemented and certified a contingency plan to continue transacting business with electronic data interchange trading partners who do not implement the Year 2000 version of the electronic data interchange software. The Company has not completed written contingency plans for the complete business failure of any of its key trading partners, which at this point appears to be unlikely. The Company believes it would be able to identify alternative raw materials suppliers in the event a critical supplier could not supply raw materials to the Company because of a Year 2000 problem. The failure on the part of the Company to timely complete a Year 2000 remediation project or capital project in one or more of its divisions also could result in an interruption in, or failure of, normal business operations and could materially and adversely affect the Company's financial condition. At the end of first quarter, all projects are proceeding substantially according to plan. The Company believes that all projects will be completed prior to the end of 1999. The Company will continue to monitor all Year 2000 projects and capital projects, including related capital projects, and will develop contingency plans for specific business divisions, if required. The Company is preparing contingency plans to address the possibility of information systems failures at each of its facilities. The Company expects to complete the majority of these contingency plans during the second quarter of 1999 and will continue to evaluate the need to prepare additional contingency plans. At this point, the Company cannot determine whether any other contingency plans are necessary or whether any such plan could completely alleviate the risk to the Company of its own or a key trading partner's failure to timely become Year 2000 compliant. Forward-looking statements contained in this Year 2000 Computer Issue section should be read in conjunction with the Company's disclosures under the heading "FORWARD LOOKING INFORMATION" beginning on page 16. MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS Interest Rate Risk: Springs is exposed to interest rate volatility with regard to existing issuances of variable rate debt. The Company uses interest rate swaps to reduce interest rate volatility and funding costs associated with certain debt issues and to achieve a desired proportion of variable versus fixed-rate debt, based on current and projected market 15 16 conditions. The fair value of the Company's derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations, has not changed materially at April 3, 1999, relative to the fair value of such instruments at January 2, 1999. Commodity Price Risk: The Company is exposed to price fluctuations related to anticipated purchases of certain raw materials, primarily cotton fiber. Springs uses a combination of forward delivery contracts and exchange-traded futures contracts, 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. The fair value of futures contracts held at April 3, 1999, was not material, and near-term changes in commodity prices are not expected to have a material impact on the Company's future earnings or cash flows. NEW PRONOUNCEMENTS Effective January 3, 1999, the Company adopted Statement of Position No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This standard revised the accounting for software development costs and requires the capitalization of certain costs which the Company has historically expensed. Adoption of this statement has not had a material impact on the Company's financial position, results of operations, or cash flows. In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement, which addresses accounting for derivative instruments, and which the Company plans to adopt for its year 2000 fiscal year, will be effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The Company has not determined the impact of this standard on its financial position, results of operations, or cash flows. FORWARD LOOKING INFORMATION This Form 10-Q report contains forward-looking statements that are based on management's expectations, estimates, projections, and assumptions. Words such as "expects," "believes," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements which include but are not limited to projections of expenditures, savings, completion dates, cash flows, and operating performance. Such forward-looking statements are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guaranties of future performance; instead, they relate to situations with respect to which certain risks and uncertainties are difficult to predict. Actual future results and trends, therefore, may differ materially from what is forecast in forward-looking statements due to a variety of factors, including: the ability of the Company and its suppliers and customers to bring their information systems to readiness for the Year 2000; the health of the retail economy in general, competitive conditions, and demand for the Company's products; progress toward the Company's cost-reduction goals; unanticipated natural disasters; legal proceedings; labor matters; and the availability and price of raw materials which could be affected by weather, disease, energy costs, or other factors. 16 17 ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The information called for by this item is incorporated by reference from this Form 10-Q under the caption "Market Risk Sensitive Instruments and Positions" of Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations." 17 18 PART II - OTHER INFORMATION ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The annual meeting of the security holders of the Company was held on April 19, 1999. (b) During the annual meeting, the security holders of the Company elected the following directors to hold office until the next annual meeting of the security holders and until a successor is duly elected and qualified: John F. Akers John H. McArthur Crandall C. Bowles Aldo Papone John L. Clendenin Robin B. Smith Leroy S. Close Sherwood H. Smith, Jr. Charles W. Coker Stewart Turley (c)
Description of Matter Voted Upon For Against or Withheld Abstentions (i) Annual election of directors: John F. Akers 36,426,012 113,417 Crandall C. Bowles 36,422,455 116,974 John L. Clendenin 36,429,160 110,269 Leroy S. Close 36,417,120 122,309 Charles W. Coker 36,426,285 113,144 John H. McArthur 36,428,852 110,577 Aldo Papone 36,425,056 114,373 Robin B. Smith 36,425,131 114,298 Sherwood H. Smith, Jr. 36,425,489 113,940 Stewart Turley 36,425,262 114,167 (ii) Ratification of the appointment of 36,317,694 186,516 35,219 Deloitte & Touche as the Company's auditors (iii) Adoption of the Company's 1999 31,691,211 3,623,456 158,016 Incentive Stock Plan (d) N/A
18 19 ITEM 6 - EXHIBITS The following exhibits are filed as part of this report: (10) Material Contracts-Executive Compensation Plans and Arrangements (a) 1999 Deferred Compensation Plan for Outside Directors of Springs Industries, Inc. (b) Springs Industries, Inc., Achievement Incentive Plan (27) Financial Data Schedule 19 20 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: May 17, 1999 20 21 EXHIBIT INDEX
Item Page Number ---- ----------- (10) (a) 1999 Deferred Compensation Plan for Outside Directors 22 of Springs Industries, Inc. effective April 19, 1999, filed herein (10 pages) (b) Springs Industries, Inc. Achievement Incentive Plan, 32 effective January 3, 1999, filed herein (3 pages) (27) Financial Data Schedule (for SEC purposes) 35
21 EX-10.(A) 2 1999 DEFERRED COMPENSATION PLAN 1 Exhibit 10(a) 1999 DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS OF SPRINGS INDUSTRIES, INC. Article 1 Introduction 1.1 Recitals. (a) Whereas, effective April 30, 1984, the Board of Directors (the "Board") of Springs Industries, Inc., a South Carolina corporation (the "Corporation"), approved and adopted the Deferred Compensation Plan for Outside Directors for the purpose of allowing Directors [as defined in Section 1.3(n) below] to elect to defer the receipt of fees owing to them for service on, and attending meetings of, the Board and committees thereof, to fix the date(s) of receipt thereof, and to assist the Corporation in attracting and retaining qualified individuals to serve as directors; (b) Whereas, the Deferred Compensation Plan for Outside Directors was amended by the Board effective February 26, 1987 (the "Amended and Restated Deferred Compensation Plan for Outside Directors"); (c) Whereas, the Amended and Restated Deferred Compensation Plan for Outside Directors was again amended and restated on August 18, 1994 (the "Second Amended and Restated Deferred Compensation Plan for Outside Directors"); (d) Whereas, the Second Amended and Restated Deferred Compensation Plan for Outside Directors was amended effective October 29, 1995, and again amended effective November 1, 1996 (as so amended, the "Prior Plan"); (e) Whereas, the Outside Directors COLI Deferred Compensation Plan was adopted with respect to deferrals by Directors during the four-year period from May 1, 1986, to April 30, 1990 (the "COLI Plan"); and (f) Whereas the Board desires to adopt a new deferred compensation plan which shall be known as the 1999 Deferred Compensation Plan for Outside Directors; NOW, THEREFORE, the 1999 Deferred Compensation Plan for Outside Directors hereby is adopted effective April 19, 1999. 1.2 Name and Purpose. The name of this plan is the "1999 Deferred Compensation Plan for Outside Directors of Springs Industries, Inc." (the "Plan"). The purpose of the Plan is to enable the Corporation to obtain and retain the services of directors by permitting the deferment of their fees until their services with the Corporation have 22 2 terminated while at the same time giving the Corporation the present use of the compensation so deferred. 1.3 Definitions. Whenever used in the Plan, the following terms shall have the meaning set forth or referenced below: (a) "Account" means a Cash Account or a Stock Account. (b) "Board" has the meaning set forth in Section 1.1(a) above. (c) "Business Day" means a day except for a Saturday, Sunday or a legal holiday. (d) "Cash Account" means an Account which reflects the Compensation deferred by a Participant pursuant to Section 2.4 and shall include any Interest Account or COLI Account transferred from the Prior Plan or the COLI Plan pursuant to Section 2.6(d). (e) "Cash Compensation" means Compensation paid in the form of cash. (f) "Cash Credit" means a credit to a Cash Account, expressed in whole dollars and fractions thereof. (g) "Closing Price" means the closing price of the Common Stock as reported in the New York Stock Exchange Composite Transactions published in The Wall Street Journal. (h) "COLI Account" means the account of a Participant under the COLI Plan. (i) "COLI Plan" means the Outside Directors COLI Deferred Compensation Plan which was adopted with respect to deferrals by Directors during the period May 1, 1986, to April 30, 1990. (j) "Committee" means the Management Compensation and Organization Committee of the Board (or any successor Committee). (k) "Common Stock" means (i) the Class A Common Stock, $.25 par value per share, of the Corporation, adjusted as provided in Section 2.10, or (ii) if there is a merger or consolidation and the Corporation is not the surviving corporation thereof, the capital stock of the surviving corporation given in exchange for such common stock of the Corporation. (l) "Compensation" means all remuneration (whether paid in cash or in the form of Common Stock or any derivatives thereof) paid to a Director for services to the Corporation as a director, other than reimbursement for expenses, and shall include 23 3 retainer fees for service on, and fees for attendance at meetings of, the Board and any Committees thereof. (m) "Corporation" has the meaning set forth in Section 1.1(a) above. (n) "Director" means any individual serving on the Board who is not an employee of the Corporation or any of its subsidiaries. (o) "Dividend Account" means the Dividend Account of a Participant under the Prior Plan. (p) "Interest Account" means the Interest Account of a Participant under the Prior Plan. (q) "Measuring Fund Account" means the Measuring Fund Account of a Participant under the Prior Plan. (r) "Participant" means a Director who has filed an election to participate in the Plan under Section 2.2 with regard to any Plan Year or a Director whose Interest Account or Stock Account under the Prior Plan or whose COLI Account under the COLI Plan is transferred to the Cash Account or the Stock Account of the Plan pursuant to Section 2.6(d). (s) "Plan" has the meaning set forth in Section 1.2 above. (t) "Plan Year" means the period beginning the first day of the month following the Corporation's annual meeting of shareholders in April 1999 through December 31, 1999, and thereafter shall be the applicable calendar year. (u) "Prior Plan" means the Corporation's Deferred Compensation Plan as amended and restated on August 18, 1994, and as subsequently amended effective October 29, 1995, and November 1, 1996. (v) "Retire" or "Retires" shall mean the ending of a Director's service as a member of the Board, but shall not include the ending of such service by reason of death. (w) "Secretary" means the corporate secretary of the Corporation. (x) "Stock Account" means an Account which reflects the Compensation deferred by a Participant pursuant to Section 2.3. (y) "Stock Compensation" means Compensation paid in the form of Common Stock or any derivative thereof. 24 4 (z) "Stock Credit" means a credit to a Stock Account established pursuant to Section 2.3, and calculated pursuant to Section 2.5. (aa) "Stock Equivalents Account" means the Stock Equivalent Account of a Participant under the Prior Plan. ARTICLE 2 Participation in the Plan 2.1 Eligibility. Any Director serving on to the Board subsequent to April 19, 1999, may participate in the Plan. 2.2 Election to Participate. (a) Each Director, and each first time nominee for Director, may elect to defer payment of all or any portion of his Compensation that is payable with respect to services performed during any Plan Year. Such election must be made prior to the date that services are rendered in the Plan Year in which such Compensation otherwise would be paid and shall be irrevocable thereafter for such Plan Year; provided, however, a newly-elected Director may deliver a deferral election to the Corporation within 30 days after his election, which deferral election shall be effective for Compensation for services performed subsequent to the date the deferral election is delivered to the Corporation; provided further, however, that an election by a Director or nominee pursuant to this paragraph (a) for any Plan Year (or portion thereof) shall be valid and effective for all purposes for all succeeding Plan Years, unless and until such election is revoked or modified by such Director prior to the date that services are rendered in such succeeding Plan Year(s); and, provided further, that no such election, revocation or modification may be made if the exemption afforded by Rule 16b-3 under Section 16 of the Securities Exchange Act of 1934 (or any successor statute), as constituted from time to time, or the rules or regulations promulgated thereunder, would not be available as a result thereof. (b) An election to defer any Compensation under the Plan shall: (i) be in writing; (ii) be delivered to the Secretary of the Corporation; (iii) contain, or be deemed to contain, the matters set forth in Section 2.3 below, in accordance with the terms thereof; and (iv) be irrevocable in all respects with respect to the Plan Year or Plan Years to which the election relates. If a Director does not elect to defer Compensation payable to him during a Plan Year, all such Compensation shall be paid directly to such Director in accordance with resolutions adopted by the Board or by the shareholders of the Corporation from time to time. 2.3 Mode of Deferral. A Participant may elect to defer all or a portion of his Cash Compensation for a Plan Year to a Cash Account, a Stock Account, or a combination of both such Accounts and to defer all or a portion of his Stock Compensation for a Plan 25 5 Year to a separate Stock Account. The Corporation shall maintain such Accounts in the name of the Participant. Any such election with respect to the Account or Accounts to which his Compensation for a Plan Year shall be deferred shall be specified in the election referred to in Section 2.2(b) above that is delivered by the Director to the Secretary, and shall be irrevocable. If a Participant fails to elect the Account to which deferral of Cash Compensation shall be made, he shall be deemed to have irrevocably elected deferral to the Cash Account. Compensation deferred to a Cash Account or Stock Account shall result in Cash Credits or Stock Credits, respectively. 2.4 Cash Account. The Cash Account of a Participant established with respect to a Plan Year shall be credited, as of the day the Compensation would have been paid had it not been deferred, with Cash Credits equal to the dollar amount of such deferred Compensation. As of the last day of each calendar quarter, or as of the date the Account is distributed, if earlier, such Cash Accounts shall be credited with interest in the form of additional Cash Credits. Interest shall be at such rate as is determined from time to time by the Committee. Initially, the rate of interest under the Cash Account shall be the Lehman Brothers Corporate Bond Long-Term Baa Index except that interest with respect to a Participant's COLI Account transferred to a separate Cash Account pursuant to Section 2.6(d) below shall continue initially to be determined in accordance with the COLI Plan. 2.5 Stock Account. (a) The Stock Accounts of a Participant established with respect to a Plan Year shall be credited, as of the day the Compensation would have been paid had it not been deferred, with Stock Credits equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased with the amount of such deferred Compensation at the average of the Closing Prices of shares of Common Stock for the last five (5) trading days immediately preceding the day in which such Stock Accounts are so credited. As of the date any dividend is paid to holders of shares of Common Stock, such Stock Accounts shall be credited with additional Stock Credits equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased, at the Closing Price of shares of Common Stock on such date, with the amount which would have been paid as dividends on that number of shares (including fractions of a share) of Common Stock which is equal to the number of Stock Credits then attributed to such Stock Accounts. In the case of dividends paid in property other than cash, the amount of the dividend shall be deemed to be the fair market value of the property at the time of the payment of the dividend, as determined in good faith by the Committee. (b) To the extent a Participant's separate Stock Account has been credited with Stock Credits as a result of a Participant's election to defer receipt of remuneration under the Corporation's 1991 Restricted Stock Plan for Outside Directors, or any successor plan, such Stock Credits (but not Stock Credits arising from the payment of dividends on Common Stock with respect to such deferrals) shall be subject to forfeiture as provided in such plan. 26 6 2.6 Distribution of a Cash Account or a Stock Account. (a) Distribution of all Cash Accounts and Stock Accounts of a Participant shall commence as of January 15 of the Plan Year following the Plan Year in which such Participant Retires. If the date for commencement of such distribution is not a Business Day, such distribution shall commence on the next succeeding Business Day. (b) A Participant may elect the number of annual installments (not to exceed 15) in which the Participant's Cash Accounts and Stock Accounts (including accounts transferred from the Prior Plan and the COLI Plan pursuant to Section 2.6(d) below) maintained on his behalf under the Plan shall be distributed. A Participant's Cash Accounts and Stock Account shall both be distributed in the same number of annual installments, except that a Participant may elect to have his Cash Account for the COLI Plan distributed over fifteen (15) annual installments regardless of the Participant's distribution election for his other Accounts. If no such election is made by such Director with respect to such Accounts, the number of annual installments for all Accounts shall be ten (10). Such payment or payments shall be in amounts determined pursuant to Section 2.8 below, and shall be made on the date set forth in Section 2.6(a) above, and such date of each succeeding Plan Year as applicable. (c) A Participant's installment election referred to in paragraph (b) above is not effective unless made more than six months prior to the date the Participant Retires. Once made, such election shall apply for all succeeding Plan Years unless modified thereafter. A Participant who has made a deferral election may make an additional election to change the form of distribution of the balance in his Account (a "Change-of-Form Election"). Only a total of three (3) Change-of-Form Elections may be made by any Participant and only one such Change-of-Form-Election may be made by any Participant during any three (3) calendar years; provided, however, that no such Change-of-Form-Election will be effective unless made more than six (6) months prior to the date the Participant Retires. (d) Effective July 1, 1999, (i) the Interest Accounts and Dividend Accounts in the Prior Plan of Directors eligible to participate in the Plan shall be transferred to the respective Director's Cash Account under the Plan, (ii) the Measuring Fund Accounts and Stock Equivalents Account of such Directors shall be transferred to the respective Director's Stock Account in the Plan, and (iii) the COLI Accounts of such Directors shall be transferred to a separate Cash Account for the respective Director under the Plan. Furthermore, each Participant who has a Measuring Fund Account under the Prior Plan may elect (which election shall be irrevocable) prior to May 15, 1999, to transfer, effective July 1, 1999, all or a portion of the Participant's account balance in the Measuring Fund under the Prior Plan to his Cash Account rather than solely to his Stock Account. All accounts transferred from the Prior Plan and the COLI Plan to the Plan as specified in this Section shall be based on the valuation of such accounts as of June 30, 1999. 27 7 2.7 Form of Distribution. Distribution of a Participant's Cash Accounts shall be made only in cash. Distribution of a Participant's Stock Accounts shall be made in the form of an equivalent number of shares of Common Stock; provided, however, at the option of the Committee the distribution may be in the form of cash in the amount of the cash value on the date of distribution of the number of Stock Credits distributable in the installment. For purposes of determining such cash value, the Corporation shall use the average of the closing prices of the Common Stock for the last five (5) trading days immediately preceding the date of distribution. 2.8 Installment Amount. The amount of each installment with respect to a Cash Account of a Participant shall be equal to the product of the current balance in such Cash Account and a fraction, the numerator of which is one and the denominator of which is the number of installments yet to be paid. The number of Stock Credits attributable to an installment with respect to a Stock Account (unless otherwise specified in the Plan) shall be equal to the product of the current number of Stock Credits attributed to such Stock Account and a fraction, the numerator of which is one and the denominator of which is the number of installments yet to be paid. 2.9 Hardship Withdrawals. In case of an unforeseeable emergency, a Participant may request the Committee, on a form to be provided by the Committee or its delegate, that payment be made earlier than the date to which it was deferred. For purposes of this Section 2.9, an "unforeseeable emergency" shall be limited to a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent [as defined in Section 152(a) of the Internal Revenue Code] of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The circumstances that will constitute an unforeseeable emergency will depend upon the facts of each case; but, in any case, payment may not be made to the extent that such hardship is or may be relieved: (i) through reimbursement or compensation by available insurance or otherwise; (ii) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship; or (iii) by cessation of deferrals under the Plan. 2.10 Adjustment. If at any time the number of outstanding shares of Common Stock shall be increased as the result of any stock dividend, stock split, subdivision or reclassification of shares, the number of Stock Credits with which each Stock Account of a Participant is credited shall be increased in the same proportion as the outstanding number of shares of Common Stock is increased. If the number of outstanding shares of Common Stock shall at any time be decreased as the result of any combination, reverse stock split or reclassification of shares, the number of Stock Credits with which each Stock Account of a Participant is credited shall be decreased in the same proportion as the outstanding number of shares of Common Stock is decreased. In the event the Corporation shall at any time be consolidated with or merged into any other corporation and holders of shares of Common Stock receive shares of the capital stock 28 8 of the resulting or surviving corporation, there shall be credited to each Stock Account of a Participant, in place of the Stock Credits then credited thereto, new Stock Credits in an amount equal to the product of the number of shares of capital stock exchanged for one share of Common Stock upon such consolidation or merger and the number of Stock Credits with which such Account then is credited. If in such a consolidation or merger holders of shares of Common Stock shall receive any consideration other than shares of the capital stock of the resulting or surviving corporation or its parent corporation, the Committee, in its sole discretion, shall determine the appropriate change in Participants' Accounts. 2.11 Distribution upon Death. (a) A Participant may deliver a beneficiary election to the Secretary of the Corporation electing that, in the event the Participant should die before full payment of all amounts credited to the Participant's Cash Accounts and Stock Accounts, the balance shall be paid in either one payment or in some other number of approximately equal annual installments [not exceeding five (5)] to such person or persons designated in the beneficiary election, except that a Participant may elect to have his Cash Account for the COLI Plan distributed in the number of installments determined with respect to such Cash Account under Section 2.6(b) above in the event of death of the Participant prior to commencement of distribution or over the balance of such period if the Participant dies after commencement of such distribution. A Participant may from time to time revoke or change any such designation by written notice to the Secretary. If there is no designation on file with the Secretary at the time of the Participant's death, or if the person or persons designated therein shall have all predeceased the Participant, such distributions shall be made in one (1) payment to the executor or administrator of the Participant's estate. Any distribution under this Section 2.11(a) shall be made or commence as soon as practicable following the end of the fiscal quarter in which the Secretary is notified of the Participant's death or is satisfied as to the identity of the appropriate payee, whichever is later. 2.12 Withholding Taxes. The Corporation shall deduct from all distributions under the Plan any taxes required to be withheld by federal, state, or local governments. ARTICLE 3 The Committee 3.1 Authority. The Committee shall have full power and authority to administer the Plan, including the power to (a) promulgate forms to be used with respect to the Plan, (b) promulgate rules of Plan administration, (c) settle any disputes as to rights or benefits arising from the Plan, (d) interpret the terms of the Plan, (e) amend, modify or terminate the Plan as provided in Section 4.5 below and (e) make such decisions or take such action as the Committee, in its sole discretion, deems necessary or advisable 29 9 to aid in the proper administration of the Plan; provided, however that the Committee cannot change or modify any of the irrevocable elections made by a Participant under Section 2.2(b) above. Any decision made by the Committee shall be final and binding on the Corporation, Participants and their heirs or successors. 3.2 Elections, Notices. All elections, notices and designations required or permitted to be provided to the Committee under the Plan must be in such form or forms prescribed by, and contain such information as is required by, the Committee. ARTICLE 4 Miscellaneous 4.1 Funding. No promise hereunder shall or may be secured by any assets of the Corporation, and no assets of the Corporation shall otherwise be designated as attributable or allocated to the satisfaction of such promises. The Participants have the status of general unsecured creditors of the Corporation hereunder. 4.2 Non-alienation of Benefits. No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to do so shall be void. No such benefit, prior to receipt thereof pursuant to the provisions of the Plan, shall be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant. 4.3 Delegation of Administrative Duties. The Committee may delegate to officers and employees of the Corporation from time to time the power and authority to carry out and effect the decisions and rules of the Committee. Any such delegation shall be in writing. 4.4 Governing Law. This Plan shall be governed by and construed in accordance with the laws of the State of South Carolina. 4.5 Amendment, Modification and Termination of the Plan. The Board or the Committee at any time may terminate and in any respect amend or modify the Plan. 4.6 Successors and Heirs. The Plan and any properly executed elections hereunder shall be binding upon the Corporation and Participants, and upon any assignee or successor in interest to the Corporation and upon the heirs, legal representatives and beneficiaries of any Participant. 4.7 Status of Participants. Stock Credits are not, and do not constitute, shares of Common Stock, and no right as a holder of shares of Common Stock shall devolve upon a Participant by reason of his participation in the Plan. 30 10 4.8 Use of Terms. The masculine includes the feminine and the plural includes the singular, unless the context clearly indicates otherwise. 4.9 Statement of Accounts. No later than February of each Plan Year, each Participant in the Plan during the immediately preceding Plan Year shall receive a statement of his Accounts under the Plan as of December 31 of such preceding Plan Year and of the amount deferred during the Plan Year. Such statement shall be in a form and contain such information as is deemed appropriate by the Committee. 31 EX-10.(B) 3 1999 ACHIEVEMENT INCENTIVE PLAN 1 Exhibit 10(b) SPRINGS INDUSTRIES, INC. ACHIEVEMENT INCENTIVE PLAN 1. PURPOSE. The purpose of the Achievement Incentive Plan (the "Plan") is to provide key employees of Springs Industries, Inc. (the "Company") and its affiliates with incentive compensation based upon level of achievement of financial and other performance criteria. The Company believes the Plan will enhance the ability of the Company and its affiliates to attract individuals of exceptional managerial and administration talent upon whom, in large measure, the sustained progress, growth and profitability of the Company depends. 2. DEFINITIONS. As used in the Plan, the following terms shall have the meanings set forth below: (a) "Award" shall mean a cash payment. (b) "Board" shall mean the Board of Directors of the Company. (c) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time and any successor thereto. (d) "Compensation Committee" shall mean the Management Compensation and Organization Committee of the Board (or any successor committee). (e) "CMC" shall mean the Corporate Management Committee of the Company. (f) "Key Employee" shall mean any exempt salaried employee of the Company or any affiliate in a salary grade of 11 or higher. (g) "Participant" shall mean any person selected by the Compensation Committee to participate in the Plan. (h) "Performance Year" shall mean the fiscal year in which a Participant provides services on account of which the Award is made. (i) "Salary Committee" shall mean the Salary Committee of the CMC. (j) "Target Award" shall mean an Award level that may be paid if certain performance criteria are achieved in the Performance Year. 3. ELIGIBILITY. Key Employees employed in active service by the Company or by any of its subsidiaries or affiliates, if designated by the Salary Committee, during a Performance Year are eligible to be Participants under the Plan for such Performance Year. 4. AWARDS-GENERAL. The Salary Committee shall establish Target Awards at the beginning of each Performance Year for Participants who are not members of the CMC. The Compensation Committee will establish Target Awards at the beginning of each Performance Year for Participants who are members of the CMC and shall establish the corporate financial performance criteria to be applicable to Awards for such Performance Year. The corporate financial performance criteria utilized by the Compensation Committee may be 32 2 based on earnings per share; other corporate financial objectives, such as return on assets or profits from operations; customer satisfaction indicators; operational efficiency measures; and other measurable objectives tied to the Company's success or such other criteria as the Compensation Committee shall determine. A Participant must be employed by the Company or its subsidiary or affiliate on the last day of a Performance Year to be eligible to receive an Award for the year except in the case of termination of employment during the Performance Year for death, retirement, total disability, as defined in the Company's Long Term Disability Plan, or economic termination, as defined in the Company's Springs of Achievement Partnership Plan. The Award amount with respect to a Participant may be determined entirely on achievement of corporate financial performance targets established by the Compensation Committee or in part on achievement of financial performance targets and in part on achievement of personal objectives (including business unit financial objectives) as determined by the Compensation Committee or, in the case of Participants who are not members of the Corporate Management Committee, as determined by the Salary Committee. Awards will be made following the end of each Performance Year. Awards shall be paid as soon as practicable after the Performance Year, except to the extent that a Participant has made an election to defer the receipt of such Award pursuant to the Company's Deferred Compensation Plan. The determination of the Award amount for each Participant shall be made at the end of each Performance Year and may be less than (including no Award) or greater than the Target Award, subject to limitations established by the Compensation Committee. The Salary Committee may in special circumstances make bonus awards to Participants who are not members of the CMC from time to time in its sole discretion, and the Compensation Committee may in special circumstances make bonus awards to CMC members from time to time in its sole discretion. 5. OTHER CONDITIONS. (a) No person shall have any claim to an Award under the Plan and there is no obligation for uniformity of treatment of Participants under the Plan. Awards under the Plan may not be assigned or alienated. (b) Neither the Plan nor any action taken hereunder shall be construed as giving to any Participant the right to be retained in the employ of the Company or any affiliate. (c) The Company or any affiliate shall have the right to deduct from any Award to be paid under the Plan any federal, state or local taxes required by law to be withheld with respect to such payment. 6. DESIGNATION OF BENEFICIARIES. A participant may, if the Compensation Committee permits, designate a beneficiary or beneficiaries to receive all or part of the Award which may be made to the Participant, or may be payable, after such Participant's death. A designation of beneficiary shall be made in accordance with procedures specified by the Company and may be replaced by a new designation or may be revoked by the Participant at any time. In case of the Participant's death, an Award with respect to which a designation of beneficiary has been made (to the extent it is valid and enforceable under the applicable law) shall be paid to the designated beneficiary or beneficiaries. Any Award granted or payable to a Participant who is deceased and not subject to such a designation shall be distributed to the Participant's estate. If there shall be any question as to the legal right of any beneficiary to 33 3 receive an Award under the Plan, the amount in question may be paid to the estate of the Participant, in which event the Company or its affiliates shall have no further liability to anyone with respect to such amount. 7. PLAN ADMINISTRATION. (a) The Compensation Committee shall have full discretionary power to administer and interpret the Plan and to establish rules for its administration (including the power to delegate authority to others to act for and on behalf of the Compensation Committee). In making any determinations under or referred to in the Plan, the Compensation Committee (and its delegates, if any) shall be entitled to rely on opinions, reports or statements of employees of the Company and its affiliates and of counsel, public accountants and other professional or expert persons. (b) The Plan shall be governed by the laws of the State of South Carolina and applicable Federal law. 8. MODIFICATION OR TERMINATION OF PLAN. The Compensation Committee may modify or terminate the Plan at any time, effective at such date as the Compensation Committee may determine. The Senior Vice President - Human Resources of the Company or her delegate with the concurrence of the General Counsel of the Company or his delegate (or, in each case, any successor to either of such officer's responsibilities), shall be authorized to make minor or administrative changes in the Plan or changes required by or made desirable by law or government regulation. Such a modification may affect present and future Participants. For purposes of this Section, a change to the Plan that affects any Award to a Covered Employee shall not be a minor or administrative change. 9. ADOPTION AND EFFECTIVE DATE. This Plan was adopted by the Board of Directors of the Company at a meeting held on February 11, 1999, effective January 3, 1999. 34 EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF SPRINGS INDUSTRIES, INC., FOR THE QUARTER ENDED APRIL 3, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-01-2000 JAN-03-1999 APR-03-1999 890 0 328,579 0 387,671 768,816 1,391,717 817,258 1,468,672 238,845 291,548 0 0 4,482 730,592 1,468,672 584,000 584,000 481,356 481,356 0 0 6,329 24,571 9,327 15,244 0 0 0 15,244 0.85 0.84
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