<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
F O R M 10-Q
For the Quarter Ended September 30, 1995 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 November 7, 1995, there were 12,485,456 shares of Class A Common Stock
and 7,650,280 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> 2
TABLE OF CONTENTS TO FORM 10-Q
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM PAGE
- ---- ----
1. FINANCIAL STATEMENTS 3
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION
- ---------------------------
ITEM PAGE
- ---- ----
6. EXHIBITS 11
SIGNATURES 12
EXHIBIT INDEX 13
</TABLE>
<PAGE> 3
PART I
ITEM I - FINANCIAL STATEMENTS
SPRINGS INDUSTRIES, INC.
Consolidated Statements of Operations
and Retained Earnings
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
---------------------- -----------------------
SEPT. 30, OCT. 1, SEPT. 30, OCT. 1,
1995 1994 1995 1994
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
OPERATIONS
Net sales . . . . . . . . . . . . . . . . . . . $ 623,740 $ 535,265 $1,639,548 $1,535,738
Cost of goods sold . . . . . . . . . . . . . 511,818 424,334 1,345,310 1,235,279
Selling, general and
administrative expenses . . . . . . . . . . 68,751 69,748 198,481 212,254
---------- ---------- ---------- ----------
Operating income . . . . . . . . . . . . . 43,171 41,183 95,757 88,205
Interest expense . . . . . . . . . . . . . . 8,778 6,795 23,918 21,228
Other (income) expense . . . . . . . . . . . (230) 530 (3,079) (52)
---------- ---------- ---------- ----------
Income before income taxes . . . . . . . . . . 34,623 33,858 74,918 67,029
Income taxes . . . . . . . . . . . . . . . . . 13,317 14,244 29,352 28,534
---------- ---------- ---------- ----------
Net income . . . . . . . . . . . . . . . . $ 21,306 $ 19,614 $ 45,566 $ 38,495
========== ========== ========== ==========
Per share:
Net income . . . . . . . . . . . . . . . . $ 1.08 $ 1.10 $ 2.41 $ 2.16
========== ========== ========== ==========
Cash dividends declared:
Class A shares . . . . . . . . . . . . . $ .33 $ .30 $ .93 $ .90
========== ========== ========== ==========
Class B shares . . . . . . . . . . . . . $ .30 $ .27 $ .84 $ .81
========== ========== ========== ==========
Weighted average shares of
common stock . . . . . . . . . . . . . . . . 18,944 17,792
========== ==========
RETAINED EARNINGS
Retained earnings at beginning
of period . . . . . . . . . . . . . . . . . . $ 581,808 $ 535,229 $ 568,403 $ 526,428
Net income . . . . . . . . . . . . . . . . . . 21,306 19,614 45,566 38,495
Cash dividends declared . . . . . . . . . . . . (6,410) (5,051) (17,265) (15,131)
---------- ---------- ---------- ----------
Retained earnings at end of period . . . . . . $ 596,704 $ 549,792 $ 596,704 $ 549,792
========== ========== ========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 4
SPRINGS INDUSTRIES, INC.
Condensed Consolidated Balance Sheet
(In thousands except share data)
(Unaudited)
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31,
1995 1994
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . $ 1,480 $ 769
Accounts receivable . . . . . . . . . . . . . . . . . . 400,194 312,739
Inventories . . . . . . . . . . . . . . . . . . . . . . 382,219 264,161
Other . . . . . . . . . . . . . . . . . . . . . . . . . 34,828 39,335
---------- ----------
Total current assets . . . . . . . . . . . . . . . . 818,721 617,004
---------- ----------
Property, plant and equipment . . . . . . . . . . . . . . 1,368,951 1,253,060
Accumulated depreciation . . . . . . . . . . . . . . . (753,498) (697,810)
---------- ----------
Property, plant, and equipment, net . . . . . . . . . 615,453 555,250
---------- ----------
Other assets and deferred charges . . . . . . . . . . . . 133,434 116,789
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . $1,567,608 $1,289,043
========== ==========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term borrowings . . . . . . . . . . . . . . . . . $ 27,800 $ 11,100
Current maturities of long-term debt . . . . . . . . . 17,535 21,318
Accounts payable . . . . . . . . . . . . . . . . . . . 95,702 83,232
Other accrued liabilities . . . . . . . . . . . . . . . 153,597 128,306
---------- ----------
Total current liabilities . . . . . . . . . . . . . . 294,634 243,956
---------- ----------
Noncurrent liabilities:
Long-term debt . . . . . . . . . . . . . . . . . . . . 357,257 265,384
Deferred compensation and benefit plans. . . . . . . . 152,283 144,967
Deferred income taxes and other deferred
credits . . . . . . . . . . . . . . . . . . . . . . . 49,707 50,645
---------- ----------
Total noncurrent liabilities . . . . . . . . . . . . 559,247 460,996
---------- ----------
Shareowners' equity:
Class A common stock- $.25 par value
(12,596,658 and 9,884,143 shares issued
in 1995 and 1994, respectively) . . . . . . . . . . . 3,149 2,471
Class B common stock- $.25 par value
(7,650,280 and 7,830,375 shares issued
in 1995 and 1994, respectively) . . . . . . . . . . . 1,913 1,958
Additional paid-in capital . . . . . . . . . . . . . . 109,832 11,413
Retained earnings . . . . . . . . . . . . . . . . . . . 596,704 568,403
Cost of Class A shares in treasury
(September 30, 1995-110,648 shares;
December 31, 1994 - 119,585 shares) . . . . . . . . . (2,450) (2,602)
Currency translation adjustment . . . . . . . . . . . . 4,579 2,448
---------- ----------
Shareowners' equity . . . . . . . . . . . . . . . . . 713,727 584,091
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . $1,567,608 $1,289,043
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 5
SPRINGS INDUSTRIES, INC.
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
----------------------------------
SEPT. 30, OCT. 1,
1995 1994
---------- ---------
<S> <C> <C>
CASH PROVIDED (USED) BY:
Operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,566 $ 38,495
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . 73,528 68,974
Changes in operating assets and liabilities,
net of effects of business acquisitions and
sale of business . . . . . . . . . . . . . . . . . . . . . . . . (25,166) (27,545)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,407) (54)
--------- ---------
Net cash provided by operating activities . . . . . . . . . . . 86,521 79,870
--------- ---------
Investing activities:
Purchases of property, plant and
equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56,070) (66,439)
Business acquisitions, net of stock issued and
cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . (79,225) -
Proceeds from sales of assets . . . . . . . . . . . . . . . . . . . 1,013 387
Proceeds from sale of business . . . . . . . . . . . . . . . . . . - 17,813
--------- ---------
Net cash (used) by investing activities . . . . . . . . . . . . (134,282) (48,239)
--------- ---------
Financing activities:
Proceeds from short-term borrowings . . . . . . . . . . . . . . . . 16,700 9,480
Proceeds from long-term
borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,556 1,158
Payments of long-term debt. . . . . . . . . . . . . . . . . . . . . (45,394) (24,407)
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . (22,390) (20,170)
--------- ---------
Net cash provided (used) by
financing activities . . . . . . . . . . . . . . . . . . . . 48,472 (33,939)
--------- ---------
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . $ 711 $ (2,308)
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies:
These condensed consolidated financial statements should be read in
conjunction with the financial statements presented in the Springs
Industries, Inc. ("Springs" or "the Company") 1994 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.
In the first quarter of 1995, the Company completed an evaluation of
indirect manufacturing costs that in 1994 and prior years were classified
as selling, general and administrative expenses. As a result of that
evaluation, the Company has made an accounting change to include in
inventoriable costs certain indirect manufacturing and
manufacturing-related information services costs. No material effect on
inventory or net income resulted from the accounting change. Certain
other costs relating to designs have been reclassified from selling,
general and administrative expenses to cost of goods sold in the current
and prior years.
2. Inventory:
Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1995 1994
--------- ------------
<S> <C> <C>
Standard cost (which approximates
average cost) or average cost:
Finished goods . . . . . . . . . . . . . . . . . . . $ 244,949 $ 173,729
In process . . . . . . . . . . . . . . . . . . . . . 217,541 166,347
Raw materials and supplies . . . . . . . . . . . . . 71,503 56,553
--------- ---------
533,993 396,629
--------- ---------
Less LIFO reserve . . . . . . . . . . . . . . . . . . . (151,774) (132,468)
--------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 382,219 $ 264,161
========= =========
</TABLE>
<PAGE> 7
3. Commitments:
The Company enters into forward delivery 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. At September 30, 1995, the market
value of the contracts exceeded the contract price.
4. Financial Instruments:
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Springs uses
interest rate swap agreements to reduce the potential impact of increases
in interest rates on floating-rate long-term debt. The Company is exposed
to credit loss in the event of nonperformance by the counterparties to the
interest rate swap agreements. However, the Company does not anticipate
nonperformance by the counterparties.
5. Acquisitions:
The Company has acquired three business during 1995. On May 27, 1995,
the Company purchased all of the outstanding stock of Dundee Mills,
Incorporated, a leading manufacturer of towels, infant and toddler
bedding, knitted infant apparel, and healthcare products. The purchase
price was approximately $120 million, $21.2 million of which was paid in
cash and the remainder through the issuance of 2,514,113 shares of
Springs Class A common stock with a fair value of $98.4 million. Effective
May 28, 1995, the Company also purchased substantially all of the assets
of Dawson Home Fashions, Inc., a leading manufacturer of shower curtains
and bath fashions accessories. Springs paid approximately $39 million in
cash for the business. On August 3, 1995, the Company purchased
substantially all of the assets of the Nanik Window Coverings Group of
Apogee Enterprises, Incorporated, a leading manufacturer of wood window
blinds and interior shutters.
The Company funded the cash payments for the businesses acquired with
proceeds from a new debt issue. The acquisitions have been accounted for
using the purchase method of accounting. The estimated costs of the
businesses acquired have been allocated on the basis of the estimated fair
value of the assets acquired and liabilities assumed. The Company expects
to finalize the purchase price allocation during the fourth quarter. The
operating results of Dundee, Dawson and Nanik are included in the
Company's consolidated results of operations from the dates of
acquisition.
The following summary of unaudited pro forma results of operations
presents information as if the acquisitions had occurred at the beginning
of each fiscal year. The pro forma earnings-per-share calculation treats
the Springs Class A common shares issued in the Dundee acquisition as being
outstanding during all of 1994 and 1995. The 1994 pro forma amounts
include the results of Clark-Schwebel Distribution Corporation through
June of 1994, at which time it was sold to a third party. The pro forma
information is provided for informational purposes only and is not
indicative of results which would have occurred or which may occur in the
future (in thousands, except per share amounts):
<PAGE> 8
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended
------------------------------------
Sept. 30, Oct. 1,
1995 1994
---------- ----------
<S> <C> <C>
Net sales $1,793,761 $1,819,760
Net income 39,778 34,064
Earnings per share 1.96 1.68
</TABLE>
6. Legal and Environmental:
As disclosed in the 1994 Annual Report on Form 10-K, Springs is involved
in certain administrative proceedings alleging violations of environmental
laws and regulations, including proceedings under the Comprehensive
Environmental Response, Compensation, and Liability Act. In connection
with these proceedings, the Company has accrued an amount which represents
management's best estimate of Springs' probable liability.
Springs is also involved in various other legal proceedings and claims
incidental to its business. Springs is defending its position in all such
proceedings.
In the opinion of management, based on the advice of counsel, the
resolution of the above matters should not have a material adverse impact
on the financial condition nor the future results of operations of
Springs.
<PAGE> 9
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The Company achieved record sales and net income despite higher raw material
and supply costs. Price increases on bedding products, announced in March of
1995, became effective during the third quarter.
RESULTS OF OPERATIONS
Sales
Net sales for the third quarter were 16 percent greater than net sales reported
in the third quarter of 1994. The home furnishings segment produced a
third-quarter sales increase of 20 percent over the prior year, largely as a
result of the acquisitions, effective May 27, 1995, of Dundee Mills,
Incorporated and the principal assets of Dawson Home Fashions, Inc. In the
third quarter of 1995, the specialty fabrics segment's sales were seven percent
higher than in the third quarter of 1994. This improvement resulted from
stronger demand for woven fiberglass fabrics and other industrial textiles.
Year-to-date net sales improved seven percent compared to the first nine months
of 1994. The Dundee and Dawson acquisitions, which occurred in the second
quarter of 1995, substantially contributed toward a nine-month sales increase
of 12 percent in the home furnishings segment over last year. Year-to-date
specialty fabrics sales, excluding the effect of Clark-Schwebel Distribution
Corporation, which was sold in June 1994, increased three percent over the
first nine months of 1994. This improvement was due to increased volume in
industrial fabrics.
Earnings
Third-quarter net income of $21.3 million increased nine percent from last
year's net income of $19.6 million, though earnings per share declined slightly
to $1.08 from last year's record of $1.10 due to an increased number of shares
outstanding. Third-quarter operating income for the home furnishings segment
was somewhat higher than last year's in spite of significantly higher raw
material and supply costs in 1995. The specialty fabrics segment produced a
moderate improvement in third-quarter operating income over last year as the
strength of its industrial fabrics businesses more than offset the effect of
sluggish markets for finished fabrics for home sewing and apparel.
Year-to-date earnings of $45.6 million, or $2.41 per share, represented an 18
percent increase from net income of $38.5 million, or $2.16 per share, in 1994.
The home furnishings segment's operating income improved substantially over
last year. This improvement was due to higher average selling prices and cost
reductions as well as the Dundee and Dawson acquisitions, which occurred in the
second quarter of 1995. In the specialty fabrics segment, operating income was
lower than a year ago due to sales weakness and lower margins in finished
fabrics.
<PAGE> 10
CAPITAL RESOURCES AND LIQUIDITY
During the second quarter, the Company purchased all of the outstanding stock
of Dundee Mills, Incorporated, a leading manufacturer of towels, infant and
toddler bedding, knitted infant apparel and healthcare products. The purchase
price was approximately $120 million, which was funded by a cash payment of
$21.2 million and the issuance of approximately 2.5 million shares of Springs
Class A common stock with a fair value of $98.4 million. In addition, the
Company also purchased substantially all of the assets of Dawson Home Fashions,
Inc., a leading manufacturer of shower curtains and bath fashions accessories.
Springs paid approximately $39 million in cash for the business. In the third
quarter, the Company purchased substantially all of the assets of the Nanik
Window Coverings Group of Apogee Enterprises, Inc., a leading manufacturer of
wood window blinds and interior shutters.
The Company funded the cash payments for the businesses acquired with proceeds
from a new debt issue. In spite of the addition of approximately $111 million
of new debt in connection with the acquisitions ($77 million to fund cash
payments and $34 million of debt assumed), total debt increased only $41
million from September 1994 due to improved operating cash flow. Capital
expenditures for 1995 are expected to be somewhat lower than 1994 levels. Cash
needs for the remainder of 1995 are expected to be provided from operations and
commercial paper and short-term bank borrowings.
OTHER
During the first quarter of 1995, the Company completed an evaluation of
indirect manufacturing costs that in 1994 and prior years were classified as
selling, general and administrative expenses. As a result of that evaluation,
the Company has made an accounting change to include in inventoriable costs
certain indirect manufacturing and manufacturing-related information services
costs. No material effect on inventory or net income resulted from the
accounting change. Certain other costs relating to designs have been
reclassified from selling, general and administrative expenses to cost of goods
sold in the current and prior years.
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS
The following exhibits are filed as part of this report:
(27) Financial Data Schedule (for SEC use only)
<PAGE> 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
Senior Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
DATED: November 14, 1995
<PAGE> 13
EXHIBIT INDEX
Item
- ----
PAGE
----
(27) Financial Data Schedule (for SEC use only) 14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SPRINGS INDUSTRIES, INC. FOR THE QUARTER ENDED SEPTEMBER
30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,480
<SECURITIES> 0
<RECEIVABLES> 400,194
<ALLOWANCES> 0
<INVENTORY> 382,219
<CURRENT-ASSETS> 818,721
<PP&E> 1,368,951
<DEPRECIATION> 753,498
<TOTAL-ASSETS> 1,567,608
<CURRENT-LIABILITIES> 294,634
<BONDS> 357,257
<COMMON> 5,062
0
0
<OTHER-SE> 708,665
<TOTAL-LIABILITY-AND-EQUITY> 1,567,608
<SALES> 1,639,548
<TOTAL-REVENUES> 1,639,548
<CGS> 1,345,310
<TOTAL-COSTS> 1,345,310
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,918
<INCOME-PRETAX> 74,918
<INCOME-TAX> 29,352
<INCOME-CONTINUING> 45,566
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,566
<EPS-PRIMARY> 2.41
<EPS-DILUTED> 2.41
</TABLE>
