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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 28, 1996
[NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
[ ] TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Transition period from ________ to ___________
Commission File No. 1-5315
SPRINGS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 57-0252730
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
205 NORTH WHITE STREET
FORT MILL, SOUTH CAROLINA 29715
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(803) 547-1500
Securities registered pursuant to Section 12(b) of the Act
Name of each exchange
Title of each class on which registered
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Class A Common Stock; $.25 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act
None
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the file such reports), and (2) has been
subject to such filing requirements for at least the past 90 days.
Yes [X] No [ ]
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Securities Exchange Act of 1934 during the preceding 12 months (or such shorter
period that the Registrant was required to Indicate by check mark if disclosure
of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. (X)
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Aggregate market value of Springs Industries, Inc. Common Stock, excluding
treasury shares, held by nonaffiliates as of March 20, 1997, was $586,268,365.
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As of March 20, 1997, there were 12,757,460 shares of Class A Common Stock and
7,395,615 shares of Class B Common Stock of Springs Industries, Inc.
outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
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Specified Portions of Annual Report to Security Holders for Fiscal Year Ended
December 28, 1996 (Parts I & II)
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Specified Portions of Proxy Statement to Security Holders dated March 7, 1997
(Parts III & IV)
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC
FORM 10-K ANNUAL REPORT
SPRINGS INDUSTRIES, INC.
TABLE OF CONTENTS TO FORM 10-K
PART I
ITEM
1. BUSINESS
2. PROPERTIES
3. LEGAL PROCEEDINGS
4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
PART II
5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
6. SELECTED FINANCIAL DATA
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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PART II
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
11. EXECUTIVE COMPENSATION
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
SIGNATURES
EXHIBIT INDEX
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC
FORM 10-K ANNUAL REPORT
SPRINGS INDUSTRIES, INC.
PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS.
Springs Industries, Inc., a corporation organized under the laws of the
State of South Carolina, began its operations in 1888. Springs' principal
executive offices are located at 205 North White Street, Fort Mill, South
Carolina 29715 (telephone number: 803/547-1500). The Company's operations are
engaged principally in the manufacturing, marketing and sale of packaged textile
and nontextile home furnishing products, and secondarily in the manufacturing,
marketing and sale of fabrics for apparel, consumer and industrial markets.
These operations are conducted by various divisions and subsidiaries, each of
which operates within either the home furnishings or specialty fabrics industry
segment.
Through both internal development and acquisitions of complementary
businesses, Springs has emerged as one of the most significant manufacturers and
marketers of home furnishings in the United States. Among the factors
contributing to Springs' industry position are its highly automated
manufacturing facilities, its well-known brands, and its commitments to fashion
design and diverse product offerings in the home furnishings field.
The term "Springs" or "the Company" as used herein means Springs
Industries, Inc., and its subsidiaries unless clearly indicated otherwise.
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(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
Financial information for the home furnishings and specialty fabrics
segments is incorporated by reference from the Springs Industries, Inc. 1996
Annual Report to Shareholders ("Annual Report") under the caption "Industry
Segment Information," page 14.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
HOME FURNISHINGS SEGMENT - Home furnishings is the larger segment of
Springs' business, with sales of $1.831 billion in 1996 and operating income of
$52.0 million. The home furnishings segment manufactures, purchases for resale
and markets home furnishings products, including sheets, pillowcases,
bedspreads, comforters, infant and toddler bedding, curtains, towels, shower
curtains, bath and accent rugs, other bath fashion accessories, knitted infant
apparel, baby and health care products, juvenile novelties, drapery hardware and
hard and soft decorative window furnishings.
Springs' home furnishings products are sold primarily to retail
customers and are varied in design, styling and color to appeal to a broad
spectrum of consumers. The Company's retail customers include department stores,
specialty stores, national chains, mass merchandisers and catalog operations.
Springs also sells bed and bath products directly to institutional customers,
and sells decorative window products directly to large-scale contractors and
distributor/fabricators.
The Company has a wholly-owned Canadian subsidiary that markets and
distributes bedding and bath products in that country. This subsidiary allows
the Company to better serve Canadian home furnishings customers and to expand
the Company's presence in the Canadian market.
The Company acquired three home furnishings businesses during 1995. In
May, 1995, the Company purchased all of the outstanding stock of Dundee Mills,
Incorporated, a leading manufacturer of towels, infant and toddler bedding,
knitted infant apparel, and health care products, and the Company purchased
substantially all of the assets of Dawson Home Fashions, Inc., a leading
manufacturer of shower curtains and bath fashions accessories. In July, 1995,
the Company purchased from Apogee Enterprises, Inc., substantially all of the
assets of its Nanik Window Coverings Group, a leading manufacturer of wood
window blinds and interior shutters.
During the second quarter of 1996, the Company adopted a plan to
consolidate and realign its fabric manufacturing operations. In connection with
this plan, the Company closed three fabric manufacturing plants, added
production in other plants, and increased outside purchases of grey fabric.
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Subsequent to year end, the Company also acquired a 50% interest in
American Fiber Industries, LLC, a manufacturer of bed pillows.
SPECIALTY FABRICS SEGMENT - The specialty fabrics segment manufactures,
finishes, purchases for resale and markets a wide variety of fabrics and in 1996
generated sales of $412.7 million and operating income of $27.8 million.
Specialty fabrics products include finished fabrics for industrial, apparel and
specialty end uses.
More specifically, the specialty fabrics segment produces and markets
finished fabrics in a broad range of colors, weights, fibers, finishes and
printed designs and sells them principally to manufacturers of apparel and
decorative home furnishings, and to retailers of home sewing fabrics. This
segment also produces and sells protective and fire-retardant fabrics for
industrial and commercial applications.
The Company has sold three of its specialty fabrics businesses since
early 1994. In June, 1994, the Company sold all of the stock of Clark-Schwebel
Distribution Corp., a subsidiary that operated within the specialty fabrics
segment. The Company received $19.1 million in connection with this sale. The
gain on this transaction is included in other income. In December, 1995, the
Company sold the assets of its Intek office panel fabrics business. In
connection with this sale, the Company received a cash payment of $13.2 million.
The gain on this transaction is included in other income. In April, 1996, the
Company sold its Clark-Schwebel, Inc., subsidiary, a business in the specialty
fabrics segment, for $193 million in cash. A gain of $50.1 million was included
in other income for 1996. Through the date of sale Clark-Schwebel, Inc., had
1996 sales of $68.9 million and earnings before interest and taxes of $11.3
million. In 1995, Clark-Schwebel, Inc., contributed about ten percent of the
Company's sales of $2.233 billion and had record earnings representing about 24
percent of Springs' earnings before interest expense and taxes of $143 million.
During the five years ended in 1995, Clark-Schwebel, Inc.'s average contribution
was 13 percent of Springs' sales and nine percent of its earnings before
interest and taxes.
PRINCIPAL PRODUCTS -- Textile home furnishings products represented
69.0%, 61.5%, and 62.3% of consolidated revenues for each of 1996, 1995, and
1994, respectively. No other product or class of products exceeded 10% of
consolidated revenues for 1996, 1995, or 1994.
RAW MATERIALS -- Raw materials used by the Company include cotton,
polyester, and other natural and manmade fibers, fiber glass and aramid yarns,
fabrics formed from natural and manmade yarns, dyes and chemicals, aluminum,
plastic, and steel. Such raw materials are generally readily available; and,
with the exception of certain aramid fibers and yarns (which are used by the
specialty fabrics segment in some of its products), the Company is not dependent
on any one supplier as a source for raw materials. Any shortage in the cotton
supply by reason of weather, disease or
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other factors, or significant increases in the price of cotton or polyester,
however, could adversely affect the Company's results of operations.
TRADEMARKS -- The Company considers its trademarks to be materially
important to its business.
The home furnishings segment sells its bed and bath products under the
Wamsutta(R), Springmaid(R), Performance(TM), and Dundee(R) brands, and its
decorative window products under the Graber(R), Bali(R), Nanik(R),
FashionPleat(R) and CrystalPleat(R) brands. This segment also uses the
Wabasso(R) and Texmade(R)brands on bed products sold in Canada.
The home furnishings segment also uses certain licensed designs and
trademarks which may be considered to be of material importance to this segment.
These include a license agreement with each of Bill Blass, Ltd., and Liz
Claiborne, Inc., and multiple license agreements with The Walt Disney Company.
The specialty fabrics segment uses the Springmaid(R), Wamsutta(R),
UltraSuede(R), Firegard(R), Firewear(R) and Synergy(R) brands on home sewing and
other specialty fabrics.
The trademarks are protected, in part, through United States and
foreign trademark registrations.
WORKING CAPITAL -- The Company's working capital requirements are
funded by its operating cash flow, commercial paper borrowings and short-term
bank borrowings. Trade receivables are, in the main, collectible in 60 days or
less.
CUSTOMERS -- In 1996, sales to Wal-Mart Stores, Inc. equaled 13.6% of
Springs' total sales; no other single customer accounted for ten percent or more
of Springs' total sales.
BACKLOG ORDERS -- The Company's unfilled order position at December 28,
1996, amounted to approximately $178 million. The unfilled order position at
December 30, 1995, was approximately $175 million.
COMPETITIVE CONDITIONS -- The markets in which the principal products
of the Company are sold are highly competitive as to price, quality, customer
service and product design.
ENVIRONMENTAL EXPENDITURES -- The Company spent approximately $1.5
million on environmental and related projects in 1996 and expects to spend
approximately $2.0 million in 1997.
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ASSOCIATES -- Approximately 20,700 associates were employed by Springs
and its subsidiaries at the end of 1996.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.
International sales of home furnishings and specialty fabric products
are made through Springs' divisions and its subsidiaries. International sales
accounted for approximately 6.6% of total sales in 1996, 6.6% in 1995, and 6.7%
in 1994.
ITEM 2. PROPERTIES
The Company owns its Executive Office Building and its Research and
Development Center in Fort Mill, South Carolina, and the twenty-one story
Springs Building at 104 West 40th Street, New York City, New York. The Springs
Building contains a sales showroom for the Bath Fashions Group, the sales
headquarters of the Baby Products Division, both parts of the home furnishings
segment, and the sales headquarters for the Springfield and UltraFabrics
Divisions, both parts of the specialty fabrics segment, and certain staff
support offices. Most of the Springs Building is leased to other businesses.
The Bed Fashions Group leases offices in New York City, New York, and
in Charlotte, North Carolina. This group and other divisions lease additional
space in other cities for administration and sales offices and distribution
centers.
The Company also owns a customer service center located near Lancaster,
South Carolina. This facility houses customer service operations, computer and
data processing operations and accounting offices.
Springs has forty-three manufacturing plants. Seventeen plants are grey
fabric manufacturing plants; six are dyeing, printing and finishing plants;
twelve are fabricating plants; four plants perform both dyeing, printing,
finishing and fabricating operations; and four plants manufacture decorative
window products. Of these plants, nineteen are in South Carolina, thirteen in
Georgia, two in each of North Carolina, Alabama, and Wisconsin, and one in each
of California, Mississippi, Pennsylvania, Tennessee, and Nevada.
The home furnishings segment uses thirty-six of these plants and the
specialty fabrics segment uses four. The two segments share another three
plants. All of the plants are owned by Springs and are unencumbered, except for
four which are subject to mortgages and five which are leased either through
industrial revenue bond financing or through other leases.
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Springs considers all plants to be well maintained and generally in
good operating condition.
ITEM 3. LEGAL PROCEEDINGS
Information required by this Item is contained in Notes to Consolidated
Financial Statements, Note 10. - Other Matters, found on page 25 of the Annual
Report and incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None reportable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to Instruction #3 to Paragraph (b) of Item 401 of Regulation
S-K, the following information is provided on the Company's Executive Officers.
Position and Business
Name Age Experience
Crandall C. Bowles 49 President and Chief Operating Officer -
Springs (January 1997 to present). Executive
Vice President - Springs (April 1992 to
January 1997). President - Bath Fashions
Group (May 1995 to January 1997). President
- Textile Manufacturing Group (March 1993 to
May 1995). Executive Vice President - Growth
and Development (April 1992 to February
1993). Director (1978 to present).
President - The Springs Company (1982 to
April 1992).
C. Powers Dorsett 52 Senior Vice President - General Counsel and
Secretary (February 1996 to present). Vice
President - General Counsel and Secretary
(February 1990 to January 1996).
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Walter Y. Elisha 64 Chairman of the Board (October 1983 to
present) and Chief Executive Officer (1981
to present). President (December 1989 to
January 1997). Director (February 1980 to
present).
William K. Easley 53 Senior Vice President - Springs (February
1996 to present). President - Bedding
Manufacturing (May 1995 to present).
President - Performance Home Fashions
Division, Home Furnishings Group (October
1993 - May 1995). Senior Vice President -
Bed and Bath Group (August 1992 - October
1993). President - Grey Manufacturing
Division (June 1989 - August 1992).
Samuel J. Ilardo 41 Treasurer (May 1995 to present). Assistant
Treasurer (March 1994 to April 1995). Tax
Director (November 1992 to February 1994).
Chief Financial Officer and Treasurer - STC
Holdings, Inc. (January 1989 to October
1992).
Stephen P. Kelbley 54 Executive Vice President - Springs
(September 1991 to present). President -
Diversified Home Products Group (January
1997 to present). President - Diversified
Products Group (May 1995 to January 1997).
President - Specialty Fabrics Group (March
1994 to April 1995). Chief Financial Officer
(September 1991 to March 1994).
Charles M. Metzler 44 Vice President - Controller (February 1996
to present). Controller - Springs Canada,
Inc. (September 1992 to January 1996).
Director, Production Planning - Springmaid
Home Fashions Division (April 1989 to August
1992).
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Robert W. Moser 58 Executive Vice President - Springs (July
1989 to present). President - Fabrics Group
(January 1997 to present). President - Bath
Manufacturing (May 1995 to January 1997).
President - Specialty Fabrics Group (March
1993 to March 1994). President - Finished
Fabrics Group and Windows (September 1991 to
March 1993). President - Finished Fabrics
Group (July 1989 to August 1991).
Thomas P. O'Connor 51 Executive Vice President - Springs (August
1992 to present). President - Bed Fashions
Group (May 1995 to present). President -
Home Fashions Group (March 1993 to April
1995). Senior Vice President - Springs
(September 1991 to August 1992). President -
Bed and Bath Group (September 1991 to
February 1993).
Robert L. Thompson 60 Vice President - Public Affairs (September
1986 to present).
J. Spratt White 55 Senior Vice President - Human Resources (May
1996 to present). Senior Vice President -
Growth and Development, and Human Resources
(June 1995 to May 1996). Senior Vice
President - Growth and Development (March
1993 to May 1995). Senior Vice President -
Springs and President - Diversified Products
Group (February 1990 to March 1993).
James F. Zahrn 46 Senior Vice President and Chief Financial
Officer (March 1995 to present). Vice
President - Finance and Treasurer (March
1994 to March 1995). Vice President and
Treasurer (May 1993 to March 1994).
Treasurer (August 1986 to May 1993).
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- ---------------------------------------
Crandall Close Bowles, President and Chief Operating Officer and director of the
Company, and Leroy S. Close, a director of the Company, are siblings. There are
no other family relationships within the director and Executive Officer group.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Class A Common Stock of Springs is traded on the New York Stock
Exchange. As of March 20, 1997, there were approximately 2,867 holders of record
of Class A Common Stock, and approximately 77 holders of Class B Common Stock.
No established trading market exists for Class B Common Stock. Class B Common
Stock may, however, at the election of the holder, be exchanged on a one-for-one
basis at any time for Class A Common Stock.
Information required by this Item on the sales prices and dividends of
the Common Stock of Springs is incorporated by reference from page 29 of the
Annual Report under the caption "Quarterly Financial Data (Unaudited)."
ITEM 6. SELECTED FINANCIAL DATA
Information required by this Item is incorporated by reference from
pages 30 and 31 of the Annual Report under the caption "Selected Financial
Data."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis of financial condition and results
of operations required by this Item is incorporated by reference from pages 27
and 28 of the Annual Report under the caption "Management's Discussion and
Analysis of Operations and Financial Condition."
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements, including the report of independent certified
public accountants, and supplementary data required by this Item are
incorporated by reference from the Annual Report. See Item 14 for a list of
financial statements and the pages of the Annual Report from which they are
incorporated. Supplementary data is incorporated by reference from page 29 of
the Annual Report under the caption "Quarterly Financial Data (Unaudited)."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information about directors required by this Item is incorporated by
reference from the Company's Proxy Statement to Security Holders dated March 7,
1997 (the "Proxy Statement") under the captions "Directors, Nominees, and
Election of Directors" and "Information Regarding the Board of Directors" on
pages 2 through 6 of the Proxy Statement. The information on Executive Officers
is provided at the end of Part I of this Form 10-K under the caption "Executive
Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item is incorporated by reference from the
Proxy Statement under the captions "Executive Officer Compensation and Related
Information," "Management Compensation and Organization Committee Report,"
"Employment Agreements" and "Performance Graph" on pages 7 through 15 of the
Proxy Statement.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item is incorporated by reference from the
Proxy Statement under the caption "Security Ownership of Certain Beneficial
Owners and Management" on pages 17 and 18 of the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item is incorporated by reference from the
Proxy Statement under the caption "Compensation Committee Interlocks and Insider
Participation" and "Transactions With Certain Persons" on pages 14, 18, and 19
of the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. The following financial statements and independent auditors'
report are incorporated by reference from the Annual Report as a part
of this Report:
(i) Consolidated Balance Sheet as of December 28, 1996,
and December 30, 1995 (Annual Report page 16).
(ii) Consolidated Statement of Operations and Retained
Earnings for the fiscal years ended December 28,
1996, December 30, 1995, and December 31, 1994
(Annual Report page 15).
(iii) Consolidated Statement of Cash Flows for the fiscal
years ended December 28, 1996, December 30, 1995, and
December 31, 1994 (Annual Report page 17).
(iv) Notes to Consolidated Financial Statements (Annual
Report pages 18 through 25).
(v) Independent Auditors' Report (Annual Report page 26).
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2. Financial statement schedules are not shown here because,
under applicable rules, they are not required, are inapplicable, or the
information required is included in the Financial Statements or in the
Notes thereto.
3. Exhibits required to be listed by Item 601 of Regulation
S-K are listed (and, where applicable, attached) in the Exhibit Index
attached hereto, which is incorporated herein by this reference.
(b) Reports on Form 8-K: No 8-K's were filed during the last
quarter of the period covered by this report.
[SIGNATURES ON NEXT PAGE]
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the 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
Date: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By: /s/John F. Akers By: /s/Crandall C. Bowles
- ------------------------------------ ------------------------------------
John F. Akers, Director Crandall C. Bowles, Director
Date: March 26, 1997 Date: March 26, 1997
By: /s/John L. Clendenin By: /s/Leroy S. Close
- ------------------------------------ ------------------------------------
John L. Clendenin, Director Leroy S. Close, Director
Date: March 26, 1997 Date: March 26, 1997
By: /s/Charles W. Coker By: /s/Walter Y. Elisha
- ------------------------------------ ------------------------------------
Charles W. Coker, Director Walter Y. Elisha, Chairman,
Date: March 26, 1997 Chief Executive Officer
and Director
(Principal Executive Officer)
Date: March 26, 1997
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By: /s/John H. McArthur By: /s/Aldo Papone
- ------------------------------------ ------------------------------------
John H. McArthur, Director Aldo Papone, Director
Date: March 26, 1997 Date: March 26, 1997
By: /s/Donald S. Perkins By: /s/Robin B. Smith
- ------------------------------------ ------------------------------------
Donald S. Perkins, Director Robin B. Smith, Director
Date: March 26, 1997 Date: March 26, 1997
By: /s/Sherwood H. Smith, Jr. By: Stewart Turley
- ------------------------------------ ------------------------------------
Sherwood H. Smith, Jr. Stewart Turley
Date: March 26, 1997 Date: March 26, 1997
By: /s/James F. Zahrn By: /s/Charles M. Metzler
- ------------------------------------ ------------------------------------
James F. Zahrn Charles M. Metzler,
Senior Vice President and Vice President and Controller
Chief Financial Officer (Principal Accounting Officer)
(Principal Financial Officer)
Date: March 26, 1997 Date: March 26, 1997
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
---------------------------------
EXHIBITS
---------------------------------
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EXHIBIT INDEX
Item
(2) Agreement and Plan of Merger among Springs Industries, Inc.,
Fort Mill A Inc., Vestar/CS Holding Company, L.L.C., and
Clark-S Acquisition Corporation dated as of February 24, 1996,
together with a list identifying the schedules and exhibits to
the Agreement, incorporated by reference from Form 10-K filed
March 21, 1996 (76 pages).
(3) (a) Springs' Restated Articles of Incorporation, amended and
restated as of April 18, 1994, incorporated by reference from
Form 10-Q filed August 15, 1994 (16 pages).
(b) Springs' Bylaws, amended as of December 12, 1996, filed herein
(1 page).
(10) Material Contracts - Executive Compensation Plans and Arrangements
(a) Springs' Deferred Unit Stock Plan, amended and restated
effective February 22, 1990, incorporated by reference from
Form 10-K, filed March 26, 1990 (15 pages). Amendment
effective December 10, 1990, incorporated by reference from
Form 10-K, filed March 25, 1991 (1 page). Amendment effective
August 16, 1990, incorporated by reference from Form 10-Q,
filed November 12, 1991 (1 page). Amendment effective as of
November 1, 1996, filed herein (1 page).
(b) Springs' Restricted Stock Plan, incorporated by reference from
Form 10-K, filed March 19, 1982 (6 pages). Amendment dated
August 19, 1983, incorporated by reference from Form 10-K,
filed March 16, 1984 (1 page).
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(c) Employment Agreement dated July 1, 1985, between Springs and
Walter Y. Elisha, incorporated by reference from Form 10-K,
filed March 14, 1986 (9 pages).
(d) Springs' Deferred Compensation Plan, as amended and restated
on August 18, 1994, incorporated by reference from Form 10-Q,
filed November 14, 1994 (28 pages).
(e) Springs' Senior Executive Supplemental Retirement Plan,
incorporated by reference from Form 10-K, filed March 19,
1982, (11 pages). Amendment dated February 26, 1987,
incorporated by reference from From 10-K, filed March 27,
1987 (4 pages). Amendment dated June 20, 1991, incorporated
by reference from Form 10-K, filed March 25, 1992 (1 page).
(f) Springs' Shadow Retirement Plan, incorporated by reference
from Form 10-K, filed March 19, 1982 (6 pages). Amendment
adopted October 18, 1990, incorporated by reference from Form
10-K, filed March 25, 1991 (3 pages).
(g) Springs' Deferred Compensation Plan for Outside Directors, as
amended and restated on August 18, 1994, incorporated by
reference from Form 10-Q, filed November 14, 1994 (24 pages).
Amendments adopted as of October 29, 1995, and as of
November 1, 1996, filed herein (3 pages).
(h) Springs' Outside Directors COLI Deferred Compensation Plan
adopted December 12, 1985, incorporated by reference from Form
10-K, filed March 14, 1986 (10 pages).
(i) Springs' Senior Management COLI Deferred Compensation Plan
adopted December 12, 1985, incorporated by reference from Form
10-K, filed March 14, 1986 (11 pages).
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(j) Springs' 1991 Incentive Stock Plan, as approved by
shareholders on April 15, 1991, incorporated by reference from
the Company's Proxy Statement to Shareholders dated February
27, 1991, under the caption "Exhibit A" on pages A-1 through
A-12 of such Proxy Statement. Amendments approved by
shareholders on April 29, 1996, incorporated by reference from
Form 10-Q filed May 14, 1996 (2 pages). Amendments as of
November 1, 1996, filed herein (2 pages).
(k) Springs' 1991 Restricted Stock Plan for Outside Directors, as
approved by the Company's shareholders on April 15, 1991,
incorporated by reference from the Company's Proxy Statement
to Shareholders dated February 27, 1991, under the caption
"Exhibit B" on pages B-1 through B-4 of such Proxy Statement.
(l) Springs' Amended and Restated Achievement Incentive Plan, as
approved by the Board of Directors on April 13, 1992,
incorporated by reference from Form 10-Q, filed May 11, 1992
(12 pages). Amendment approved by the Board of Directors on
February 18, 1993, incorporated by reference from Form 10-K,
filed March 31, 1993 (10 pages).
(m) Springs' Contingent Compensation Plan adopted by the Board of
Directors on June 20, 1991, incorporated by reference from
Form 10-Q, filed November 12, 1991 (6 pages).
(n) Springs' Excess Benefits Plan adopted by the Board of
Directors on August 18, 1994, and amended and restated
effective March 1, 1996, filed herein (7 pages).
21
<PAGE> 22
(10) Material Contracts - Other
(a) Long-term revolving credit agreements among Springs and
several banks, dated February 1 or 2, 1990, as back-up for
Springs' commercial paper program; commercial paper issuing
and paying agency agreement between Springs and Morgan
Guaranty Trust Company of New York dated February 5, 1990,
incorporated by reference from Form 10-K, filed March 26, 1990
(52 pages). Amendment effective December 27, 1990,
incorporated by reference from Form 10-K, filed March 25, 1991
(10 pages). Amendment effective June 3, 1992, incorporated by
reference from Form 10-K, filed March 31, 1993 (5 pages).
Amendment effective March 27, 1993, incorporated by reference
from Form 10-K, filed March 30, 1994 (3 pages).
(b) Note Agreement for 9.60% Senior Notes Due July 1, 2006, dated
as of May 29, 1991, incorporated by reference from Form 10-K,
filed March 25, 1992 (47 pages). Amendment effective March 29,
1992, incorporated by reference from Form 10-K, filed March
31, 1993 (1 page). Amendment effective March 27, 1993,
incorporated by reference from Form 10-K, filed March 30,
1994 (3 pages).
(c) Springs' Commercial paper issuing and paying agency agreement
between Springs and Chemical Bank dated July 17, 1992;
Commercial paper dealer agreement between Springs and Goldman
Sachs Money Markets, L.P. dated July 16, 1992; Long-term
revolving credit agreements among Springs and several banks,
dated July 10-21, 1992, as back-up for Springs' commercial
paper program; all of which are incorporated by reference from
Form 10-Q, filed July 31, 1992 (49 pages). Amendment effective
March 27, 1993, incorporated by reference from Form 10-K,
filed March 30, 1994 (4 pages).
22
<PAGE> 23
(d) Long-Term revolving credit agreement between Springs and Trust
Company Bank, dated April 1, 1993, as back-up for Springs'
commercial paper program, incorporated by reference from Form
10-Q, filed May 17, 1993 (4 pages).
(e) Term loan agreement dated as of March 31, 1995, among Springs
Industries, Inc., Wachovia Bank of North Carolina, N.A., and
Wachovia Bank of Georgia, N.A., as agent, incorporated by
reference from Form 10-Q, filed May 16, 1995; Assignment and
Acceptance document dated March 31, 1995, incorporated by
reference from Form 10-K filed March 21, 1996 (3 pages);
Assignment and Acceptance document dated June 30, 1995,
incorporated by reference from Form 10-K filed March 21, 1996
(4 pages); First Amendment effective January 18, 1996,
incorporated by reference from Form 10-K filed March 21, 1996
(4 pages); Second Amendment effective February 13, 1996,
incorporated by reference from Form 10-K filed March 21, 1996
(7 pages); Third Amendment effective November 19, 1996, filed
herein (17 pages); Fourth Amendment dated March 20, 1997,
filed herein (7 pages).
(f) Swap Agreement between Springs and Wachovia Bank of Georgia,
N.A., dated May 18, 1995, and related Schedule and
Confirmation, incorporated by reference from Form 10-K filed
March 21, 1996 (41 pages); Related Swap Transaction
Confirmation dated September 7, 1995, filed herein (5 pages).
(g) $100,000,000 Wachovia Bank of Georgia, N.A., Term Loan Credit
Agreement dated August 12, 1996 incorporated by reference from
Form 10-Q filed November 12, 1996 (70 pages); First Amendment
dated March 20, 1997, filed herein (7 pages).
23
<PAGE> 24
(13) Portions of the 1996 Annual Report to Shareholders, which have been
expressly incorporated by reference, filed herein (18 pages).
(21) List of Subsidiaries of Springs, filed herein (1 page).
(23) Consent of expert for Form S-8 Registration Statement for 1991
Incentive Stock Plan and 1991 Restricted Stock Plan for Outside
Directors filed herein (1 page).
(27) Financial Data Schedule (for SEC purposes)
24
<PAGE> 1
AMENDMENT TO
SPRINGS INDUSTRIES, INC.
BYLAWS
Pursuant to action of the Board of Directors on December 12, 1996, the
Bylaws of Springs Industries, Inc., are hereby amended effective December 12,
1996, by deleting the last sentence of Section 2, Article IV, and substituting
therefor the following:
"No person who has attained the age of 72 years shall be eligible to
be elected or appointed to the Board of Directors."
IN WITNESS WHEREOF, Springs Industries, Inc., has executed this
Amendment as of the 12th day of December, 1996.
SPRINGS INDUSTRIES, INC.,
By: /s/Walter Y. Elisha
-------------------------------------
Walter Y. Elisha
Chairman and Chief Executive Officer
25
<PAGE> 1
SECOND AMENDMENT TO RESTATED AND AMENDED
SPRINGS INDUSTRIES, INC. DEFERRED UNIT STOCK PLAN
1. Section 2.4 is amended effective November 1, 1996, by deleting the
reference to "Disinterested Person" and substituting in lieu thereof
"Non-Employee Director."
2. Sections 6.1.1, 6.1.2, and 6.3.1 are each amended effective November
1, 1996, by deleting each reference to "the Company's option" and substituting
in lieu thereof "the Committee's option."
3. Section 6.7.1 is amended effective November 1, 1996, by deleting
Section 6.7.1 in its entirety and substituting in lieu thereof the following new
Section 6.7.1, as follows:
"6.7.1 A Participant who is a holder of one or more awards of
Incremental Stock Equivalents issued prior to February 1, 1991, may
file a written request with the Committee giving notice of his desire
to convert a specified number of such Incremental Stock Equivalents to
Primary Stock Equivalents under this Plan and/or to convert a specified
number of such Incremental Stock Equivalents to Restricted Stock under
the Company's Restricted Stock Plan."
4. Section 6.7.2 is amended effective November 1, 1996, by deleting
Section 6.7.2 in its entirety and substituting in lieu thereof the following new
Section 6.7.2, as follows:
"6.7.2 Following receipt of such request, the Company shall, if
approved by the Committee, delete from the Participant's award of
Incremental Stock Equivalents the number of such Stock Equivalents
specified in the request and shall credit the Participant with Primary
Stock Equivalents or issue Restricted Stock, or both, as the case may
be, in such amounts that the Market Value of a corresponding number of
shares of Common Stock measured as provided in Section 2.6 would equal
the amount of cash that would have been distributed in respect of such
Incremental Stock Equivalents had they been distributed on the date of
receipt of such written request."
5. Section 6.7.3 is amended effective November 1, 1996, by deleting
Section 6.7.3 in its entirety and substituting in lieu thereof the following new
Section 6.7.3, as follows:
"6.7.3 No conversion request affecting the Incremental Stock
Equivalents of any Participant shall be effective unless the
Participant's right to such Incremental Stock Equivalent shall be
vested at the time such written request is received."
IN WITNESS WHEREOF, this Amendment has been executed pursuant
to resolutions adopted by the Board of Directors of the Company on October 20,
1996.
SPRINGS INDUSTRIES, INC.
By: /s/J. Spratt White
-----------------------------------------
J. Spratt White
Senior Vice President-Human Resources
26
<PAGE> 1
FIRST AMENDMENT
SPRINGS INDUSTRIES, INC.
DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS
This Amendment dated as of October 29, 1995, to the Deferred
Compensation Plan for Outside Directors (the "Plan") as adopted and restated on
August 18, 1994 by Springs Industries, Inc. ("Springs");
WHEREAS, Springs has adopted and maintains the Plan to provide fee
deferral elections by Outside Directors; and
WHEREAS, Article XII of the Plan authorizes the amendment of the terms
of the Plan by Springs.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Effective October 29, 1995, paragraph (c) of Article V in its
entirety and the following language is substituted in lieu thereof:
(c) Subject to such limitations as the Committee may impose, a
Director electing to defer hereunder prior to May 1, 1996 shall also
elect, either (A) a fixed period commencing in the January following
the Director's Termination Date over which the balance in his Account
shall be paid to him in annual installments and a fixed period (which
may be a different period) over which the balance in his Account shall
be paid to his Beneficiary or estate in annual installments in the
event of his death before receiving such balance (an election under
this clause (A) being referred to as a "Fixed Period Election"); or (B)
an After Retirement Election.
2. Effective October 29, 1995, paragraph (h) is hereby deleted in its
entirety and the following language is substituted in lieu thereof:
Any Director electing to defer hereunder with respect to
compensation paid after April 30, 1996, shall be deemed to have made an
After Retirement Election.
The officers of Springs are authorized and directed to insert copies of
this amendment in the file copy of the Plan available for inspection by
participants upon request.
27
<PAGE> 2
IN WITNESS WHEREOF, the Employer has caused this amendment to be
executed as of the day and year written above.
SPRINGS INDUSTRIES, INC.
By: /s/J. Spratt White
-----------------------------------------
Its: Senior Vice President
ATTEST:
/s/Robert W. Sullivan
- ------------------------------
Assistant Secretary
28
<PAGE> 3
SECOND AMENDMENT TO AMENDED AND RESTATED
SPRINGS INDUSTRIES, INC.
DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS
1. Article V(a) is amended effective November 1, 1996, by deleting the
first sentence of Article V(a) in its entirety and substituting in lieu thereof
the following new sentence:
"Subject to the provisions of paragraph (b) below, each
Director may elect, within fifteen days following his election
as a Director at an annual meeting of shareholders, in writing
addressed to the Plan Administrator to defer receipt of all or
a portion of any cash fees payable for the period set forth in
the following sentence."
2. Article V(b) is amended effective November 1, 1996, by adding the
following new sentence to the end of Article V(b):
"All elections made after January 1, 1997, to credit the
deferred payment of fees to the Stock Equivalent Account shall
be subject to the approval of the Committee."
3. Article X(c)(1)(i) is amended effective November 1, 1996, by
deleting the second sentence of Article X(c)(1)(i) in its entirety and
substituting in lieu thereof the following new sentence:
"At the Committee's option, 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 Equivalents distributable
in such installment, provided that if cash is to be
distributed, such Director shall be notified in writing not
later than the last of the three days specified in the next
sentence."
IN WITNESS WHEREOF, this Amendment has been executed pursuant
to resolutions adopted by the Board of Directors of the Company on October 20,
1996.
SPRINGS INDUSTRIES, INC.
By: /s/J. Spratt White
-----------------------------------------
J. Spratt White
Senior Vice President-Human Resources
29
<PAGE> 1
FIRST AMENDMENT TO AMENDED AND RESTATED
SPRINGS INDUSTRIES, INC.
1991 INCENTIVE STOCK PLAN
1. Section 2(e) is amended effective November 1, 1996, by deleting the
reference to "Disinterested Person" and substituting in lieu thereof
"Non-Employee Director."
2. Section 2(i) is amended effective November 1, 1996, by deleting
Section 2(i) in its entirety and substituting in lieu thereof the following new
Section 2(i):
"(i) 'Non-Employee Director' shall have the meaning set forth
in Rule 16b-3(b)(3), promulgated under the Act, or any
successor definition promulgated by the Securities and
Exchange Commission under the Act."
3. Section 7(e) is amended effective November 1, 1996, by deleting
Section 7(e) in its entirety and substituting in lieu thereof the following new
Section 7(e):
"(e) Transferability. Except as otherwise provided in this
Section 7(e), no Stock Option shall be transferable by the
optionee other than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable,
during the optionee's lifetime, only by the optionee or the
guardian or legal representative of the optionee. The
Committee may, in its discretion, authorize all or a portion
of Non-Qualified Stock Options to be granted to an optionee to
be on terms which permit transfer by such optionee to (i) the
spouse, parents, children, grandchildren, stepchildren,
stepgrandchildren, siblings, mothers- and fathers-in law,
sons- and daughters-in-law, or brothers- and sisters-in-law,
including relationships arising from legal adoption, of the
optionee ("Immediate Family Members"), or (ii) a trust or
trusts for the exclusive benefit of such Immediate Family
Members; provided that (x) there may be no payment of
consideration for any such transfer, (y) the stock option
agreement pursuant to which such options are granted must be
approved by the Committee and must expressly provide for
transferability in a manner consistent with this Section, and
(z) subsequent transfer of transferred options shall be
prohibited other than by will or the laws of descent and
distribution. The Committee may also amend outstanding
Non-Qualified Stock Options to provide for such
transferability. A transfer of a Non-Qualified Option pursuant
to this Section may only be effected by the Company at the
written request of an optionee and shall become effective only
when recorded in the Company's record of outstanding
Non-Qualified Options. In the event a Non-Qualified Option is
transferred as contemplated hereby, such Non-Qualified Option
will continue to be governed by and
30
<PAGE> 2
subject to the terms of this Plan and the relevant grant, and
the transferee shall be entitled to the same rights as the
optionee thereunder, as if no transfer had taken place"
4. Section 7(j) is amended effective November 1, 1996, by deleting the
last sentence of Section 7(j) in its entirety and substituting in lieu thereof
the following new sentence:
"In the case of any such settlements of Non-Qualified Stock
Options held by optionees who are actually or potentially
subject to Section 16(b) of the Act, the Committee may
determine Fair Market Value under the pricing rule set forth
in Section 8(e) below."
5. Section 15(ii) is deleted in its entirety effective November 1,
1996.
6. Section 15(iv) is amended effective November 1, 1996, by deleting
such section in its entirety and substituting in lieu thereof the following
Section 15(iv):
"(iv) If a recipient is subject to Section 16 of the Act, or
any successor law, such person must make any Stock Surrender
Withholding Election more than six months after the date of
grant of the Award with respect to which such election is made
(except whenever such election is made by a disabled recipient
or the estate or personal representative of a deceased
recipient)."
7. Sections 15(iii), 15(iv), 15(v), and 15(vi) are renumbered effective
November 1, 1996, as 15(ii), 15(iii), 15(iv), and 15(v), respectively.
IN WITNESS WHEREOF, this Amendment has been executed pursuant
to resolutions adopted by the Board of Directors of the Company on October 20,
1996.
SPRINGS INDUSTRIES, INC.
By: /s/J. Spratt White
-----------------------------------------
J. Spratt White
Senior Vice President-Human Resources
31
<PAGE> 1
SPRINGS INDUSTRIES, INC.
SPRINGS OF ACHIEVEMENT EXCESS BENEFITS PARTNERSHIP PLAN
Section I
Introduction
1.1 The Plan and Its Effective Date. This Springs of Achievement Excess
Benefits Partnership Plan (the "Plan") has been established by Springs
Industries, Inc., a South Carolina corporation (the "Company"), effective as of
January 1, 1994 (the "Effective Date").
1.2 Purpose. The purpose of the Plan is to provide retirement benefits
in conjunction with the Company's Springs of Achievement Partnership Plan ("The
Qualified Plan") for associates who have Eligible Compensation in excess of the
limit on compensation that can be taken into account under a qualified plan
under ss. 401(a) of the Code (the "Compensation Limit"), which in 1994 was
$150,000, as necessary to provide total retirement benefits that are equivalent
to the retirement benefits the associates would have received but for the
Compensation Limit. "Eligible Compensation" means "Compensation" as defined in
the Qualified Plan, but without regard to any limitations under Section 401(a)
of the Code.
1.3 Administration. The Management Compensation and Organization
Committee of the Board of Directors of the Company (the "Committee") shall be
responsible for the operation, construction, and interpretation of the Plan.
Administration of the Plan, however, is delegated to the vice president of the
Company who is primarily responsible for executive compensation (the "Plan
Administrator"). The Plan Administrator shall adopt such rules of procedure and
regulations as may be necessary or desirable for the administration of the Plan
and consistent with the Plan and applicable law. Any rules of procedure and
regulations adopted by the Plan Administrator shall at all times be applied in a
uniform, consistent, and nondiscriminatory manner.
No Member of the Committee nor the Plan Administrator shall be
liable for any act or acts done, or any determination or determinations made, in
good faith.
Any decision or action by the Committee or Plan Administrator
in connection with the operation, administration, construction or interpretation
of this Plan or of the rules and regulations adopted by the Plan Administrator
hereunder shall be final, conclusive and binding upon all persons having any
interest in the Plan.
32
<PAGE> 2
1.4 Definitions. Capitalized terms in the Plan shall have the same
meaning as defined terms in the Qualified Plan unless otherwise defined herein.
1.5 Source of Benefits. Benefits payable under this Plan shall be paid
directly by the Company out of its general assets. This Plan shall be unfunded,
and the Company shall not be required to segregate on its books, or otherwise,
any amount to be used for the payment of benefits under this Plan.
Section II
Eligibility for Participation and Retirement
2.1 Eligibility. Each participant of the Qualified Plan who has
Eligible Compensation in excess of the Compensation Limit shall be a participant
of this Plan ("Participant"), provided, however, no participant in the Company's
Senior Executive Supplemental Retirement Plan (adopted as of January 1, 1982),
as amended, shall participate under this Plan. Excess Compensation is defined as
the difference between Eligible Compensation for a Plan Year and the
Compensation Limit.
2.2 Retirement Under the Plan. A Participant shall retire on the date
of his retirement under the Qualified Plan.
Section III
Retirement Benefit
3.1 Accounts. The Company shall establish the following two accounts
for each Participant of the Plan:
(1) A Profit Sharing Equivalent Account
(2) A Company Matching Equivalent Account
3.2 Credits to Accounts.
(a) As of the same date as the Company's profit sharing
contribution to the Qualified Plan for a fiscal year, the
Company shall credit to each Participant's Profit Sharing
Equivalent Account an amount equal to the same percentage of
the Participant's Excess Compensation as the percentage
contributed to the Qualified Plan's profit sharing fund for
the year with respect to the Participant's Compensation in
excess of 50% of the Taxable Wage Base.
(b) Each month at the time the Company makes a matching
contribution under the Qualified Plan, the Company shall
credit to the Participant's Company Matching Equivalent
Account an amount equal to two percent
33
<PAGE> 3
(2%) of the Participant's Excess Compensation; provided the
Participant has elected to participate in the Savings Fund
under the Qualified Plan for the month.
3.3 Adjustments to Accounts.
(a) For the period commencing January 1, 1994 and ending February
28, 1996, each Participant's Profit Sharing Equivalent Account
shall be adjusted monthly to reflect the same adjustment for
gain or loss as the Participant's Profit Sharing Contribution
Account under the Qualified Plan is adjusted for the
respective month.
(b) For the period commencing January 1, 1994, and ending February
28, 1996, the Company Matching Equivalent Account shall be
adjusted monthly to reflect the same adjustment for gain or
loss as the separate investment account or accounts elected by
the Participant for the Participant's Matching Contribution
Account under the Qualified Plan is adjusted for the
respective month, assuming for each Plan Year that the
Participant's investment election at the beginning of the year
did not change during the year; provided, however, a
Participant who is considered to be an executive officer of
the Company for purposes of Section 16(a) of the Securities
Exchange Act of 1934 shall be treated as having elected the
balanced fund under the Qualified Plan.
(c) For periods after February 28, 1996, each Participant shall be
provided the opportunity to elect to have the amounts credited
to the Participant's Profit Sharing Equivalent Account and
Company Matching Equivalent Account credited to an Interest
Sub-Account or to a Measuring Fund Sub-Account (or
Sub-Accounts). This election must be made (i) on such forms as
the Plan Administrator may prescribe and (ii) within 30 days
after notice from the Plan Administration of eligibility to
participate in the Plan. The Election shall apply to all
credits to the Participant's accounts for Excess Compensation
during the Plan Year and shall be irrevocable with respect to
such credits. A Participant's first election hereunder shall
also apply to all amounts credited to the Participant's
accounts during the period beginning March 1, 1996 and ending
on the effective date of the election. A Participant may
allocate amounts between the Interest Sub-Account and the
Measuring Fund Sub-Accounts in increments of ten percent
(10%). If a Participant fails to make an election hereunder,
the Participant will be deemed to have elected an Interest
Sub-Account for the applicable period.
3.4 Interest Sub-Account. The Interest Sub-Account shall be credited
quarterly with interest at the prime rate of interest per annum publicly
announced and charged by Wachovia Bank of North Carolina, N.A. or any successor
to its existing
34
<PAGE> 4
customers, or in the absence of such public announcement, the prime rate quoted
in the Wall Street Journal's "Money Rates" column as of the last day of the
quarter.
3.5 Measuring Fund Sub-Account.
(a) As soon as practicable after receiving elections from
Participant hereunder, the Company shall establish with a
federal or state chartered bank or trust or investment company
(hereinafter called the "Custodian"), as selected by the
officers of the Company, a custodial and agency account in its
name. The assets of the account are referred to hereinafter as
the "Measuring Fund." For the period March 1, 1996 to the date
of establishment of the Measuring Fund, the accounts of
Participants who have elected to have their accounts credited
to a Measuring Fund Sub-Account shall be adjusted monthly by
the same factor used under the Company's Deferred Compensation
Plan with respect to measuring fund accounts for the
applicable period.
All monies or assets placed in the Measuring Fund by the
Company shall at all times remain the property of the Company
subject to the claims of its general creditors, and no
Participant or Beneficiary shall have any right to or interest
in such monies or assets or any claims against them superior
to the claims of any general creditor of the Company. The
Measuring Fund shall serve the sole purpose of being the means
of adjusting amounts credited to Participants' Measuring Fund
Sub-Accounts. The Measuring Fund shall not constitute a trust
fund or escrow account in which Participants or their
Beneficiaries have any interest.
(b) Upon the establishment of the custodial and agency account,
the Company will deposit in the Measuring Fund an amount equal
to the aggregate of all amounts credited to the Measuring Fund
Sub-Accounts of Participants at such time. Thereafter, on or
before the last business day of each calendar month, the
Company will deposit in the Measuring Fund an amount equal to
the aggregate of all amounts credited to Measuring Fund
Sub-Accounts during such month less an amount equal to all
payments made during such month in satisfaction of the
Measuring Fund Sub-Accounts of persons whose services have
terminated. If such payments in satisfaction of Measuring Fund
Sub-Accounts exceed such aggregate of amounts credited in a
month, an amount equal to such excess shall be withdrawn by
the Company from the Measuring Fund.
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<PAGE> 5
(c) The Custodian will be directed by the Company to invest the
Measuring Fund as agent for the Company in common or preferred
stocks, bonds, other securities, and short term investments.
The Company shall determine whether investments of the
Measuring Fund will be managed by the Company, the Custodian
or one or more investment managers. Neither the Company, the
Custodian nor any investment manager shall be liable to any
Participant for any decision made or action with respect to
such investments.
(d) As of the last day of each calendar quarter ("Valuation
Date"), an amount equal to the net amount of dividends,
interest, other current income, and gains or losses realized
on the sale or exchange of assets in the Measuring Fund during
the calendar quarter in which such Valuation Date occurs,
received by the Custodian for a Measuring Fund during such
quarter, all as determined by the Custodian in its absolute
discretion, shall be allocated by the Company among and
credited or debited to the respective Measuring Fund
Sub-Accounts of Participants as of such Valuation Date in the
proportion that the average credit balance (calculated as
hereinafter provided) in the Measuring Fund Sub-Account of
each Participant during the calendar quarter in which such
Valuation Date occurs, bears to the aggregate of such average
credit balances in all Measuring Fund Sub-Accounts during such
quarter. The average credit balance in a Measuring Fund
Account during a calendar quarter shall be determined in
accordance with such uniform rules applied in a
nondiscriminatory manner as the Plan Administrator may adopt
to take into account the effect of credits to, distributions
from, or transactions in, such Account since the preceding
Valuation Date.
(e) As of each Valuation Date, the Measuring Fund shall be valued
by the Custodian at the fair market values of the assets in
the Fund as of the close of business on such Valuation Date.
The Custodian shall certify the results of such valuation to
the Company. As soon as practicable after each Valuation Date,
the Company shall determine the amount by which the value of
the net assets in the Measuring Fund, as of the close of
business on such Valuation Date, as certified by the
Custodian, exceeds or is less than the aggregate of the credit
balances in all Measuring Fund Accounts as of said Valuation
Date, prior to making any adjustments to accounts to be made
as of said Valuation Date under this paragraph (e). The amount
so determined shall be credited or debited by the Company, as
appropriate, as of said Valuation Date, to the Measuring Fund
Sub-Accounts of persons having a credit balance as of said
Valuation Date, in the proportion that the
36
<PAGE> 6
average credit balance, computed as provided in paragraph (d),
in the Measuring Fund Sub-Account of each person during the
calendar quarter in which such Valuation Date occurs, bears to
the aggregate of such average credit balances in the Measuring
Fund Sub-Accounts of all such persons during such quarter.
(f) Notwithstanding any other provision of this plan, the Board of
Directors of the Company may at any time direct that all
assets in the Measuring Fund be withdrawn from the custodial
and agency account for use for any corporate purpose
whatsoever and that the custodial and agency account with the
Custodian be discontinued. The date on which such withdrawal
occurs shall be deemed to be a Valuation Date, and adjustments
to Measuring Fund Sub-Accounts shall be made as of such date
as provided in paragraph (d) and paragraph (e) of this Section
3.5, except that in making such determinations it shall be
deemed that all assets in the Measuring Fund were converted
into cash on the date on which such withdrawal occurs.
Following such withdrawal, and until the re-establishment of a
Measuring Fund, each Participant's Measuring Fund Sub-Account,
adjusted as aforesaid, shall be deemed to be an Interest
Account.
(g) The Committee may direct the Company to establish one or more
sub-accounts under the Measuring Fund. If separate
sub-accounts are established under the Measuring Fund, then
the procedures set forth in subparagraphs (b) through (f) of
this Section 3.5 shall be applied separately as to each
sub-account.
3.6 Method of Payment and Forfeiture. To the extent vested, the Plan
Benefit shall be paid at the same time and in the same manner and shall be
subject to the same elections as benefits under the Qualified Plan. Any benefit
credited under the Plan shall be forfeited if a Participant has not completed
five continuous years of service with the Company or its subsidiaries at the
time of the Participant's termination of employment.
Section IV
General Provisions
4.1 Interests Not Transferable. Except as may be required by any
applicable tax withholding provisions of the laws of the United States or any
State, no interest of, or benefit payable to, a Participant shall be subject, in
any manner, to the claims of any creditors, and any such interest or benefit
payable may not be voluntarily or involuntarily transferred, assigned,
alienated, or encumbered.
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<PAGE> 7
4.2 Rights and Employment. No person shall have any legal or equitable
rights or interests in this Plan except as expressly granted hereunder.
Participation in the Plan shall not be deemed to give a Participant any right to
be retained in the employment of the Company and the right and power of the
Company to dismiss or discharge any Participant is expressly reserved.
4.3 Controlling Law. The laws of the State of South Carolina shall be
controlling and shall govern in all matters relating to the Plan (except as and
to the extent that such laws are preempted by the Employee Retirement Income
Security Act of 1974, as amended).
Section V
Amendment and Termination
The Company hereby expressly reserves the right to amend the Plan, in
whole or in part, from time to time or to terminate the Plan, in whole or in
part, at any time, subject to the following:
(a) No amendment may reduce the benefits of a Participant to whom
benefits became payable under the Plan prior to the date such
amendment becomes effective.
(b) If the Plan is terminated, the benefits which became payable
under this Plan to a Participant prior to the date of
termination of the Plan shall continue to be paid by the
Company in accordance with the provisions of the Plan as in
effect immediately prior to the date of the termination.
(c) An amendment to, or termination of, the Plan shall be made
pursuant to resolution of the Board of Directors, or its
designated Committee, and shall be set forth in a written
instrument executed by an authorized officer.
Established and adopted by Springs Industries, Inc., as of the 1st day
of January 1994 and restated as of March 1, 1996.
/s/ J. Spratt White
----------------------------
Senior Vice President
38
<PAGE> 1
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated as
of the 19th day of November, 1996 among SPRINGS INDUSTRIES, INC. (the
"Borrower"), WACHOVIA BANK OF GEORGIA, N.A., as Agent (the "Agent") and WACHOVIA
BANK OF NORTH CAROLINA, N.A., SUNTRUST BANK, ATLANTA, and NATIONSBANK, N.A.
(CAROLINAS) (collectively, the "Banks");
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Banks are parties to that
certain Credit Agreement, dated as of the 31st day of March, 1995, as amended by
that certain First Amendment to Credit Agreement dated as of January 18, 1996,
and that certain Second Amendment to Credit Agreement dated as of February 13,
1996 (as so amended, the "Credit Agreement");
WHEREAS, the Borrower has requested and the Agent and the Banks have
agreed to certain amendments to the Credit Agreement, subject to the terms and
conditions hereof;
NOW, THEREFORE, for and in consideration of the above premises and
other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged by the parties hereto, the Borrower, the Agent and the
Banks hereby covenant and agree as follows:
1. Definitions. Unless otherwise specifically defined herein, each term
used herein which is defined in the Credit Agreement shall have the meaning
assigned to such term in the Credit Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Credit Agreement shall from and after the date hereof refer to the Credit
Agreement as amended hereby.
2. Amendments. (a) Section 1.01 is hereby amended by deleting the
definition of "Consolidated Net Income Available for Restricted Payments" and
substituting the following in lieu thereof:
"Consolidated Net Income Available for Restricted Payments"
means, on any date, an amount equal to the sum of: (i) $40,000,000;
plus (or minus, in case of a deficit) (ii) 100% of Consolidated Net
Income for the period (taken as one accounting period) commencing on
April 1, 1995 and terminating at the end of the last Fiscal Quarter
preceding the date of any proposed Restricted Payment; less (iii) the
aggregate amount of all Dividends paid or declared after April 1, 1995,
by the Borrower on any of its Capital Stock; and less (iv) the excess
of (A) the aggregate amount expended, directly or indirectly, after
April
39
<PAGE> 2
1, 1995, for redemption, purchase, retirement or other acquisition of
any shares of its Capital Stock over (B) the aggregate amount received
after April 1, 1995, from sales of Capital Stock.
(b) Section 2.02(a) is hereby deleted and substituted in lieu thereof
is the following:
(a) If the Borrower desires that any portion of the initial
Term Loan Advance be made as Euro-Dollar Loans on the Drawdown Date,
the Borrower shall execute and deliver to the Agent a Funding
Indemnification Letter and the Banks and the Borrower shall agree on
the interest rates, amounts and Interest Periods with respect thereto
not later than 3 Euro-Dollar Business Days prior to the Drawdown Date
for such initial Term Loan Advance. If and to the extent that no
Funding Indemnification Letter has been so delivered or such agreement
as to interest rates, amounts and Interest Periods has not been reached
within such time, the funding of the initial Term Loan Advance, as well
as all subsequent Term Loan Advances and all Refunding Loans, shall be
made as provided below. The Borrower shall give the Agent notice (a
"Notice of Borrowing"), which shall be substantially in the form of
Exhibit E (unless such Borrowing consists solely of a Refunding Loan,
in which case such notice may be telephonic), prior to 11:00 A.M.
(Atlanta, Georgia time) at least 1 Domestic Business Day before each
Base Rate Borrowing and at least 3 Euro-Dollar Business Days before
each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Base Rate Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to be
Base Rate Loans or Euro-Dollar Loans, and
(iv) in the case of a Euro-Dollar Borrowing, the duration of
the Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
(c) Section 2.02(f) is hereby deleted.
(d) The third paragraph of Section 2.09(c) is hereby deleted and
substituted in lieu thereof is the following:
In the event that the Borrower seeks a refund of any Taxes
paid by the Borrower pursuant to this Section 2.09(c), the applicable
Bank shall use its reasonable efforts to assist the Borrower in
connection therewith, at the Borrower's expense. In the event any Bank
receives a refund of any Taxes paid by the Borrower pursuant to this
Section 2.09(c), it will pay to the Borrower the amount of such refund
promptly upon receipt
40
<PAGE> 3
thereof; provided that if at any time thereafter it is required to
return such refund, the Borrower shall promptly repay to it the amount
of such refund.
(e) The last sentence of Section 3.02 is hereby deleted and substituted
in lieu thereof is the following:
Each Borrowing hereunder shall be deemed to be a representation and
warranty by the Borrower on the date of such Borrowing as to the truth
and accuracy of the facts specified in paragraphs (b), (c) and (d) of
this Section; provided that if such Borrowing consists solely of a
Refunding Loan, such Borrowing shall not be deemed to be such a
representation and warranty.
(f) Section 5.05 is hereby deleted and substituted in lieu thereof is
the following:
SECTION 5.05. Minimum Consolidated Tangible Net Worth.
Consolidated Tangible Net Worth will at no time be less than
$475,000,000, plus the sum of (i) 25% of the cumulative Consolidated
Net Income of the Borrower and its Consolidated Subsidiaries for the
period from April 1, 1995 through and including the last Fiscal Quarter
just ended (taken as one accounting period), calculated quarterly but
excluding from such calculations of Consolidated Net Income for
purposes of this clause (i), any quarter in which the Consolidated Net
Income of the Borrower and its Consolidated Subsidiaries is negative,
(ii) 100% of the cumulative Net Proceeds of Capital Stock received
during any period after April 1, 1995, less the amount of any Capital
Stock repurchased by the Borrower during any period after April 1, 1995
and (iii) 100% of the amount of any Debt converted to equity in the
Borrower during any period after April 1, 1995, calculated quarterly.
(g) Section 5.07 is hereby deleted and substituted in lieu thereof is
the following:
SECTION 5.07. Loans or Advances. Neither the Borrower nor any
of its Subsidiaries shall make loans or advances to any Person except:
(i) loans or advances to employees not exceeding $1,500,000 in the
aggregate principal amount outstanding at any time, in each case made
in the ordinary course of business and consistent with practices
existing on April 1, 1995; and (ii) deposits required by government
agencies or public utilities; (iii) loans and advances not in excess of
an aggregate amount of $10,000,000 consisting of trade accounts
receivable, the payment terms of which have been altered by virtue of
the bankruptcy of the account debtor; (iv) loans and advances (a) from
the Borrower to any Guarantor (b) from any Guarantor to any other
Guarantor or (c) from any Subsidiary to the Borrower; (v) loans and
advances from the Borrower to any Foreign Subsidiary not exceeding at
any time an amount which, together with the aggregate amount of
Investments in Foreign Subsidiaries permitted by clause (C) of Section
5.08, is equal to 15% of Consolidated Tangible Net Worth at such time;
and (vi) other
41
<PAGE> 4
loans and advances, not exceeding at any time an amount which, together
with the aggregate amounts of Investments permitted by clause (D) of
Section 5.08, is equal to 10% of Consolidated Tangible Net Worth at
such time; provided that after giving effect to the making of any
loans, advances or deposits permitted by this Section, the Borrower
will be in full compliance with all the provisions of this Agreement.
(h) Section 5.12 is hereby deleted and substituted in lieu thereof is
the following:
SECTION 5.12. Consolidations, Mergers and Sales of Assets. The
Borrower will not, nor will it permit any Subsidiary to, consolidate or
merge with or into, or sell, lease or otherwise transfer all or any
substantial part of its assets to, any other Person, or discontinue or
eliminate. any business line or segment, provided that (a) the Borrower
may merge with another Person if (i) such Person was organized under
the laws of the United States of America or one of its states, (ii) the
Borrower is the corporation surviving such merger and (iii) immediately
after giving effect to such merger, no Default shall have occurred and
be continuing, (b) Subsidiaries of the Borrower may merge with one
another, and (c) the foregoing limitation on the sale, lease or other
transfer of assets and on the discontinuation or elimination of a
business line or segment shall not prohibit, during any Fiscal Year, a
transfer of assets or the discontinuance or elimination of a business
line or segment (in a single transaction or in a series of related
transactions) unless the aggregate assets to be so transferred or
utilized in a business line or segment to be so discontinued, when
combined with all other assets transferred, and all other assets
utilized in all other business lines or segments discontinued, during
such Fiscal Year constituted more than 10% of Consolidated Tangible Net
Worth; provided, however, solely for the Fiscal Year 1996, the sale of
the stock of Clark-Schwebel, Inc. shall be excluded from the
calculation of assets transferred hereunder with respect to the 10% of
Consolidated Tangible Net Worth limitation.
(i) Exhibit F to the Credit Agreement is hereby deleted and substituted
in lieu thereof is Exhibit F in the form attached to this Amendment as Exhibit
F.
3. Effect of Amendment. Except as set forth expressly hereinabove, all
terms of the Credit Agreement and the other Loan Documents shall be and remain
in full force and effect, and shall constitute the legal, valid, binding-and
enforceable obligations of the Borrower. The amendments contained herein shall
be deemed to have prospective application only, unless otherwise specifically
stated herein.
4. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be
42
<PAGE> 5
deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same instrument.
5. Section References. Section titles and references used in this
Amendment shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto evidenced hereby.
6. No Default. To induce the Agent and the Banks to enter into this
Amendment and to continue to make advances pursuant to the Credit Agreement, the
Borrower hereby acknowledges and agrees that, as of the date hereof, and after
giving effect to the terms hereof, there exists (i) no Default or Event of
Default and (ii) no right of offset, defense, counterclaim, claim or objection
in favor of the Borrower arising out of or with respect to any of the Loans or
other obligations of the Borrower owed to the Banks under the Credit Agreement.
7. Further Assurances. The Borrower agrees to take such further actions
as the Agent shall reasonably request in connection herewith to evidence the
amendments herein contained to the Borrower.
8. Governing Law. This Amendment shall be governed by and construed and
interpreted in accordance with, the laws of the State of Georgia.
9. Conditions Precedent. This Amendment shall become effective only
upon (i) execution and delivery of this Amendment by each of the parties hereto,
and (ii) execution and delivery of the Consent and Reaffirmation of Guarantors
at the end hereof by each of the Guarantors.
43
<PAGE> 6
IN WITNESS WHEREOF, the Borrower, the Agent and each of the Banks has
caused this Amendment to be duly executed, under seal, by its duly authorized
officer as of the day and year first above written.
SPRINGS INDUSTRIES, INC.,
as Borrower (SEAL)
By: /s/Samuel J. Ilardo
-----------------------------------------
Title: Treasurer
WACHOVIA BANK OF GEORGIA, N.A.,
as Agent (SEAL)
By: /s/Mark D. Abrahm
-----------------------------------------
Title: Vice President
WACHOVIA BANK OF NORTH CAROLINA, N.A.,
as a Bank (SEAL)
By: /s/Sarah T. Warren
-----------------------------------------
Title: Vice President
SUNTRUST BANK, ATLANTA,
as a Bank (SEAL)
By: /s/Jeffrey D. Drucker
-----------------------------------------
Title: Banking Officer
By: /s/R. B. King
-----------------------------------------
Title: Vice President
NATIONSBANK, N.A.
as a Bank (SEAL)
By: /s/E. Phifer Helms
-----------------------------------------
Title: Senior Vice President
44
<PAGE> 7
CONSENT AND REAFFIRMATION OF GUARANTORS
Each of the undersigned (i) acknowledges receipt of the foregoing
Amendment to Credit Agreement (the "Amendment"), (ii) consents to the execution
and delivery of the Amendment by the parties thereto and agrees to all of the
terms of the foregoing Amendment, and (iii) reaffirms all of its obligations and
covenants, respectively, as a Guarantor under the Guaranty dated as of March 31,
1995 executed and delivered by Springs Window Fashions Division, Inc., and under
the Guaranty dated as of May 27, 1995 executed and delivered by Dundee Mills,
Incorporated, and as a Contributing Party under the Contribution Agreement dated
as of March 31, 1995, and agrees that none of such obligations and covenants
shall be affected by the execution and delivery of the Amendment. This Consent
and Reaffirmation may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same instrument.
SPRINGS WINDOW FASHIONS DIVISION,
INC. (SEAL)
By: /s/Samuel J. Ilardo
-------------------------------------
Title: Treasurer
DUNDEE MILLS, INCORPORATED (SEAL)
By: /s/Samuel J. Ilardo
-------------------------------------
Title: Treasurer
45
<PAGE> 8
EXHIBIT F
COMPLIANCE CERTIFICATE
Reference is made to the Credit Agreement dated as of March 31, 1995
(as modified and supplemented and in effect from time to time, the "Credit
Agreement") among Springs Industries, Inc., the Banks from time to time parties
thereto, and Wachovia Bank of Georgia, N.A., as Agent. Capitalized terms used
herein shall have the meanings ascribed thereto in the Credit Agreement.
Pursuant to Section 5.01(c) of the Credit Agreement, ________________,
the duly authorized ________________ of Springs Industries, Inc., hereby
certifies to the Agent and the Banks that the information contained in the
Compliance Check List attached hereto is true, accurate and complete as of
____________, ____, and that no Default is in existence on and as of the date
hereof.
SPRINGS INDUSTRIES, INC.
By:
-------------------------------------
Title:
46
<PAGE> 9
COMPLIANCE CHECK LIST
SPRINGS INDUSTRIES, INC.
1. Leverage Ratio (Section 5.03)
The Leverage ratio will not at any time exceed 4.5 to 1.00, calculated
at the end of each Fiscal Quarter.
<TABLE>
<S> <C> <C> <C>
(a) Consolidated Debt Schedule - 3 $
----------
(b) EBITDA Schedule - 2 $
----------
Actual Ratio of (a) to (b)
----------
Maximum Ratio 4.5 to 1.0
</TABLE>
2. Ratio of Consolidated Debt to Consolidated Total Tangible Capital
(Section 5.04), calculated at the end of each Fiscal Quarter
The ratio of Consolidated Debt to Consolidated Total Tangible Capital
will not at any time exceed 0.5 to 1.00.
<TABLE>
<S> <C> <C> <C>
(a) Consolidated Debt Schedule - 3 $
----------
(b) Consolidated Tangible Net
Worth Schedule - 1 $
----------
(c) sum of (a) plus (b) $
----------
Actual Ratio of (a) to (c)
----------
Maximum Ratio 0.5 to 1.0
</TABLE>
3. Minimum consolidated Tangible Net Worth (Section 5.05)
Consolidated Tangible Net Worth will at no time be less than
$475,000,000, plus the sum of (i) 25% of the cumulative Consolidated
Net Income of the Borrower and its Consolidated Subsidiaries for the
period from April 1, 1995 through and including the last Fiscal Quarter
just ended (taken as one accounting period), calculated quarterly but
excluding from such calculations of Consolidated Net Income for
purposes of this clause (i), any quarter in which the Consolidated Net
Income of the Borrower and its Consolidated Subsidiaries is negative,
(ii) 100% of the cumulative Net Proceeds of Capital Stock received
during any period after April 1, 1995, less the amount of any Capital
Stock repurchased by the Borrower during any period
47
<PAGE> 10
COMPLIANCE CHECK LIST
SPRINGS INDUSTRIES, INC.
after April 1, 1995 and (iii) 100% of the amount of any Debt converted to equity
in the Borrower during any period after April 1, 1995, calculated quarterly.
<TABLE>
<S> <C> <C>
(a) $475,000,000
(b) 25% of positive Consolidated
Net Income after April 1, 1995 $
----------
(c) 100% of cumulative Net Proceeds
of Capital Stock after April 1, 1995 $
----------
(d) Amount of Capital Stock repurchased
after April 1, 1995 $
----------
(e) 100% of amount of Debt converted
to equity after April 1, 1995 $
----------
Actual Consolidated Tangible
Net Worth Schedule - 1 $
----------
Required Consolidated Tangible Net
Worth (sum of (a) plus (b) plus (c)
less (d) plus (e) $
----------
</TABLE>
4. Restricted Payments (Section 5.06)
The Borrower will not declare or make any Restricted Payment during any
Fiscal Year except from Consolidated Net Income Available for
Restricted Payments; provided that after giving effect to the payment
of any such Restricted Payments, the Borrower will be in full
compliance with all of the provisions of this Agreement.
<TABLE>
<S> <C>
Total Restricted Payments during
Fiscal Year $
----------
(a) $40,000,000
(b) Consolidated Net Income
after April 1, 1995 $
----------
(c) Dividends after April 1, 1995 $
----------
</TABLE>
48
<PAGE> 11
COMPLIANCE CHECK LIST
SPRINGS INDUSTRIES, INC.
<TABLE>
<S> <C> <C>
(d) Excess of expenditures after Closing
Date for redemption, purchase,
retirement or other acquisition of
shares of Capital Stock over amount
received after April 1, 1995 $
----------
(e) Maximum Restricted Payments made
after April 1, 1995 (sum of (a)
[plus] [minus] (b) less (c) less (d) $
----------
</TABLE>
5. Loans and Advances (Section 5.07)
Neither the Borrower nor any of its Subsidiaries shall make loans or
advances to any Person except: (i) loans or advances to employees not
exceeding $1,500,000 in the aggregate principal amount outstanding at
any time, in each case made in the ordinary course of business and
consistent with practices existing on April 1, 1995; and (ii) deposits
required by government agencies or public utilities; (iii) loans and
advances not in excess of an aggregate amount of $10,000,000 consisting
of trade accounts receivable, the payment terms of which have been
altered by virtue of the bankruptcy of the account debtor; (iv) loans
and advances (a) from the Borrower to any Guarantor (b) from any
Guarantor to any other Guarantor or (c) from any Subsidiary to the
Borrower; (v) loans and advances from the Borrower to any Foreign
Subsidiary not exceeding at any time an amount which, together with the
aggregate amount of Investments in Foreign Subsidiaries permitted by
clause (C) of Section 5.08, is equal to 15% of Consolidated Tangible
Net Worth at such time; and (vi) other loans and advances, not
exceeding at any time an amount which, together with the aggregate
amounts of Investments permitted by clause (D) of Section 5.08, is
equal to 10% of Consolidated Tangible Net Worth at such time; Provided
that after giving effect to the making of any loans, advances or
deposits permitted by this Section, the Borrower will be in full
compliance with all the provisions of this Agreement.
<TABLE>
<S> <C> <C>
(a) To Employees $
----------
Limitation $
----------
Excess over Limitation $ (1)
----------
</TABLE>
- ---------------
(1) Any positive amount on this line shall be included in amounts permitted in
Paragraph 6(b) below.
49
<PAGE> 12
COMPLIANCE CHECK LIST
SPRINGS INDUSTRIES, INC.
<TABLE>
<S> <C> <C>
(b) trade payables of bankrupt account
debtors $
----------
Limitation $10,000,000
----------
Excess over Limitation $ (2)
----------
</TABLE>
(c) To Foreign Subsidiaries--See Paragraph 6(a) below
(c) Other loans and advances--See Paragraph 6(b) below
6. Investments (Section 5.08)
Except for the existing Investments listed on Schedule 5.08, neither
the Borrower nor any of its Subsidiaries shall make Investments in any
Person except as permitted by Section 5.07 and except (A) Investments
in (i) direct obligations of the United States of Government maturing
within one year, (ii) certificates of deposit issued by a commercial
bank whose credit is satisfactory to the Agent, (iii) commercial paper
rated Al or the equivalent thereof by Standard & Poor's Corporation or
P1 or the equivalent thereof by Moody's Investors Service, Inc. and in
either case maturing within 6 months after the date of acquisition,
(iv) tender bonds the payment of the principal of and interest on which
is fully supported by a letter of credit issued by a United States bank
whose long-term certificates of deposit are rated at least AA or the
equivalent thereof by Standard & Poor's Corporation and Aa or the
equivalent thereof by Moody's Investors Service, Inc. and/or (v) other
short term Investments in accordance with company policy of the
Borrower in effect as of the date of this Agreement, a written copy of
which has been provided to the Banks, which policy may not be changed
without the Required Banks' prior written consent, (B) Investments by
the Borrower in a Guarantor or by any Guarantor in another Guarantor,
(C) Investments by the Borrower in Foreign Subsidiaries not exceeding
at any time an amount which, together with loans and advances to
Foreign Subsidiaries permitted by clause (v) of Section 5.07, is equal
to 15% of Consolidated Tangible Net Worth at such time; and (D) other
Investments not exceeding at any time an amount which, together with
the aggregate amounts of loans and advances permitted by clause (vi) of
Section 5.07, is equal to 10% of Consolidated Tangible Net Worth at
such time.
- --------------
(2) Any positive amount on this line shall be included in amounts permitted in
Paragraph 6(b) below.
50
<PAGE> 13
COMPLIANCE CHECK LIST
SPRINGS INDUSTRIES, INC.
<TABLE>
<S> <C> <C>
(a) To Foreign Subsidiaries
Loans and advances $
----------
Investments $
----------
Subtotal $
----------
Limitation $ (3)
----------
Excess over Limitation $ (4)
----------
(b) Other
Loans and advances permitted by
clause (vi) of Section 5.07 $
----------
Investments permitted by clause
(D) of Section 5.08 $
----------
Limitation $ (5)
----------
</TABLE>
7. Negative Pledge (Section 5.09)
None of the Borrower's or any Consolidated Subsidiary's property is
subject to any Lien securing Debt, except for:
<TABLE>
<CAPTION>
Description of Lien and Property Amount of Debt
subject to same Secured
-------------------------------- --------------
<S> <C>
a. $
--------------------------- -------------
b. $
--------------------------- -------------
c. $
--------------------------- -------------
d. $
--------------------------- -------------
</TABLE>
- --------------
(3) 15% of Consolidated Tangible Net Worth
(4) Any positive amount on this line shall be included in amounts permitted in
Paragraph (b) below.
(5) 10% of Consolidated Tangible Net Worth
51
<PAGE> 14
COMPLIANCE CHECK LIST
SPRINGS INDUSTRIES, INC.
<TABLE>
<S> <C>
e. $
--------------------------- -------------
f. $
--------------------------- -------------
g. $
--------------------------- -------------
Total $
=============
10% of Consolidated Tangible Net Worth $
-------------
15% of Consolidated Tangible Net Worth $
-------------
</TABLE>
8. Consolidations, Mergers and Sales of Assets. (Section 5.12.)
The Borrower will not, nor will it permit any Subsidiary to,
consolidate or merge with or into, or sell, lease or otherwise transfer
all or any substantial part of its assets to, any other Person, or
discontinue or eliminate any business line or segment, provided that
(a) the Borrower may merge with another Person if (i) such Person was
organized under the laws of the United States of America or one of its
states, (ii) the Borrower is the corporation surviving such merger and
(iii) immediately after giving effect to such merger, no Default shall
have occurred and be continuing, (b) Subsidiaries of the Borrower may
merge with one another, and (c) the foregoing limitation on the sale,
lease or other transfer of assets and on the discontinuation or
elimination of a business line or segment shall not prohibit, during
any Fiscal Year, a transfer of assets or the discontinuance or
elimination of a business line or segment (in a single transaction or
in a series of related transactions) unless the aggregate assets to be
so transferred or utilized in a business line or segment to be so
discontinued, when combined with all other assets transferred, and all
other assets utilized in all other business lines or segments
discontinued, during such Fiscal Year constituted more than 10% of
Consolidated Tangible Net Worth.
<TABLE>
<S> <C>
Value of assets transferred or business
lines or segments discontinued $
-------------
Limitation (not more than 10% of
Consolidated Tangible Net Worth--see
Schedule - 1) $
-------------
Excess over limitation $
-------------
</TABLE>
52
<PAGE> 15
COMPLIANCE CHECK LIST
SPRINGS INDUSTRIES, INC.
<TABLE>
<CAPTION>
Schedule - 1
Consolidated Tangible Net Worth
<S> <C>
Stockholders' Equity $
-------------
Less:
Surplus from write-up of assets subsequent
to January 1, 1994 $
-------------
Intangibles $
-------------
Loans to stockholders, directors
officers or employees $
-------------
Capital Stock shown as assets $
-------------
Deferred expenses 1 $
-------------
Consolidated Tangible Net Worth $
=============
Intangibles Description
- -----------------------
(a) $
----------------------------------- -------------
(b) $
----------------------------------- -------------
(c) $
----------------------------------- -------------
Other $
-------------
Total $
=============
</TABLE>
- -------------
(1) To the extent not included as an intangible.
53
<PAGE> 16
COMPLIANCE CHECK LIST
SPRINGS INDUSTRIES, INC.
Schedule - 2
EBITDA
<TABLE>
<S> <C> <C>
Consolidated Net Income for:
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
Total $
--------------
Income taxes for:
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
Total $
--------------
Consolidated Interest Expense for:
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
Total $
--------------
Depreciation for:
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
Total $
--------------
Amortization for:
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
Total $
------ --------------
Other non-cash charges for:
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
quarter - $
---- ---- --- --------------
Total $
------ --------------
Total EBITDA $
--------------
</TABLE>
54
<PAGE> 17
COMPLIANCE CHECK LIST
SPRINGS INDUSTRIES, INC.
Schedule - 3
<TABLE>
<CAPTION>
Consolidated Debt
- -----------------
INTEREST
RATE MATURITY TOTAL
-------- -------- -----
<S> <C> <C> <C>
Secured
- -------
$
- ----------------------------------- -------- -------- --------------
$
- ----------------------------------- -------- -------- --------------
$
- ----------------------------------- -------- -------- --------------
$
- ----------------------------------- -------- -------- --------------
Total Secured $
--------------
Unsecured
- ---------
$
- ----------------------------------- -------- -------- --------------
$
- ----------------------------------- -------- -------- --------------
$
- ----------------------------------- -------- -------- --------------
$
- ----------------------------------- -------- -------- --------------
Total Unsecured $
--------------
Guarantees
- ----------
$
- ----------------------------------- -------- -------- --------------
$
- ----------------------------------- -------- -------- --------------
Total $
--------------
Redeemable Preferred Stock $
--------------
Total $
--------------
Other Debt
$
- ----------------------------------------------------------- --------------
$
- ----------------------------------------------------------- --------------
$
- ----------------------------------------------------------- --------------
Total Consolidated Debt $
==============
</TABLE>
55
<PAGE> 18
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated
as of the 20th day of March, 1997 among SPRINGS INDUSTRIES, INC. (the
"Borrower"), WACHOVIA BANK OF GEORGIA, N.A., as Agent (the "Agent") and WACHOVIA
BANK OF NORTH CAROLINA, N.A., SUNTRUST BANK, ATLANTA, and NATIONSBANK, N.A.
(CAROLINAS) (collectively, the "Banks");
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Banks are parties to that
certain Credit Agreement, dated as of the 31st day of March, 1995, as amended by
that certain First Amendment to Credit Agreement dated as of January 18, 1996,
that certain Second Amendment to Credit Agreement dated as of February 13, 1996,
and that certain Third Amendment to Credit Agreement dated as of December 31,
1996 (as so amended, the "Credit Agreement");
WHEREAS, the Borrower has requested and the Agent and the Banks have
agreed to the waiver of certain defaults under and certain amendments to the
Credit Agreement, subject to the terms and conditions hereof;
NOW, THEREFORE, for and in consideration of the above premises and
other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged by the parties hereto, the Borrower, the Agent and the
Banks hereby covenant and agree as follows:
1. Definitions. Unless otherwise specifically defined herein, each term
used herein which is defined in the Credit Agreement shall have the meaning
assigned to such term in the Credit Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Credit Agreement shall from and after the date hereof refer to the Credit
Agreement as amended hereby.
2. Waiver. The Borrower represents and warrants to the Agent and the
Banks that the Borrower has entered into agreements with the South Carolina
Counties of Chester, York, Lancaster and Spartanburg (each a "SC County,"
collectively, the "SC Counties") for the purpose of obtaining a
fee-in-lieu-of-tax characterization with respect to such transaction whereby
(the following transactions are referred to herein as the "Bond
Transaction(s)"): (i) the Borrower has sold or will sell certain real and
personal property (the "Property") located in each of the SC Counties to the
respective SC County in which such Property is located; (ii) the Borrower has
leased-back or will lease-back the Property from each respective SC County;
(iii) each of the SC Counties has assigned or will assign such lease (the
56
<PAGE> 19
"Lease(s)") to certain trustees (the "Trustee(s)"); (iv) each of the Trustees
has sold or will sell a bond (the "Bond(s)") issued by the respective SC County
to the Borrower, the payment of which is secured by the Property in such SC
County and the respective Lease, and the Bond proceeds are loaned to the
Borrower in return for the Borrower's issuance of a promissory note therefor;
(v) each Bond and the collateral security therefor shall be freely assignable,
provided, however, the Borrower shall not encumber, transfer or otherwise
dispose of the Bond or any collateral security therefor and shall remain the
sole holder thereof; (vi) each Bond Transaction shall be entered into, performed
and terminated (including, without limitation, all payments of any loans, rent,
and purchase price by Borrower, any County or any Trustee at the consummation of
any Bond Transaction, during the performance of any Bond Transaction, and at the
termination of any Bond Transaction) in accordance with its terms and without
(x) the transfer of or obligation to transfer any funds between the parties to
the Bond Transactions except for mutual offsetting book entries and fees paid or
to be paid to any SC County in lieu of taxes, or (y) any effect under GAAP (as
currently in effect) on the Borrower's financial statements; (vii) at any time
the Borrower may terminate any Lease and title to the respective Property
subject to such Lease shall be automatically transferred back to the Borrower;
and (viii) at the end of the term of any lease and upon payment of the
respective Bond in full, title to the respective Property subject to such lease
shall be automatically transferred back to the Borrower. In reliance upon the
foregoing, the Agent and the Banks hereby waive any Default or Event of Default
under Sections 5.08 and 5.12 of the Credit Agreement arising from any Bond
Transaction entered into prior to the date of this Amendment; provided, however,
no such waiver set forth in this paragraph 2 shall constitute a waiver of any
other Default or Event of Default under the Financing Agreement.
3. Amendments. (a) A new definition "Permitted Sale-Lease Back/Bond
Transaction" is hereby added to Section 1.01 of the Credit Agreement as follows
in alphabetical order:
"Permitted Sale-Lease Back/Bond Transaction" shall mean a
transaction entered into by the Borrower with any of the South Carolina
Counties of Chester, York, Lancaster and Spartanburg (each an "SC
County", collectively, the "SC Counties") for the purpose of obtaining
a fee-in-lieu-of-tax characterization with respect to such transaction,
whereby (the following transactions are referred to in this definition
as the "Bond Transaction(s)"): (i) the Borrower has sold or will sell
certain real and personal property (the "Property") located in each of
the SC Counties to the respective SC County in which such Property is
located; (ii) the Borrower has leased-back or will lease-back the
Property from each respective SC County; (iii) each of the SC counties
has assigned or will assign such lease (the "Lease(s)") to certain
trustees (the "Trustee(s)"); (iv) each of the Trustees has sold or will
sell a bond (the "Bond(s)") issued by the respective SC County to the
Borrower, the payment of which is secured by the Property in such SC
County and the respective Lease, and the Bond proceeds are
57
<PAGE> 20
loaned to the Borrower in return for the Borrower's issuance of a
promissory note therefor; (v) each Bond and the collateral security
therefor shall be freely assignable, provided, however, the Borrower
shall not enter, transfer or otherwise dispose of the Bond or any
collateral security therefor and shall remain the sole holder thereof;
(vi) each Bond Transaction shall be entered into, performed and
terminated (including, without limitation, all payments of any loans,
rent, and purchase price by Borrower, any County or any Trustee at the
consummation of any Bond Transaction, during the performance of any
Bond Transaction, and at the termination of any Bond Transaction) in
accordance with its terms and without (x) the transfer of or obligation
to transfer any funds between the parties to the Bond Transactions
except for mutual offsetting book entries and fees paid or to be paid
to any SC County in lieu of taxes, or (y) any effect under GAAP (as
currently in effect) on the Borrower's financial statements; (vii) at
any time the Borrower may terminate any Lease and title to the
respective Property subject to such Lease shall be automatically
transferred back to the Borrower; and (viii) at the end of the term of
any Lease and upon payment of the respective Bond in full, title to the
respective Property subject to such Lease shall be automatically
transferred back to the Borrower.
(b) The word "and" located after the semicolon in Section 5.01(h) is
hereby deleted and Section 5.01(i) is hereby deleted and substituted in lieu
thereof is the following:
(i) thirty (30) days prior to the consummation thereof a
written summary of the terms and conditions of any Permitted Sale-Lease
Back/Bond Transaction, and promptly thereafter, copies of any documents
to be executed in connection therewith reasonably requested by the
Agent and the Banks; and
(j) from time to time such additional information regarding
the financial position or business of the Borrower and its Subsidiaries
as the Agent, at the request of any Bank, may reasonably request.
(c) Section 5.08 is hereby deleted and substituted in lieu thereof is
the following:
SECTION 5.08. Investment. Except for the existing Investments
listed on Schedule 5.08, neither the Borrower nor any of its
Subsidiaries shall make Investments in any Person except as permitted
by Section 5.07 and except (A) Investments in (i) direct obligations of
the United States Government maturing within one year, (ii)
certificates of deposit issued by a commercial bank whose credit is
satisfactory to the Agent, (iii) commercial paper rated Al or the
equivalent thereof by Standard & Poor's Corporation or P1 or the
equivalent thereof by Moody's Investors Service, Inc. and in either
case maturing within 6 months after the date of acquisition, (iv)
tender bonds the payment of the principal of and interest on which is
fully
58
<PAGE> 21
supported by a letter of credit issued by a United States bank whose
long-term certificates of deposit are rated at least AA or the
equivalent thereof by Standard & Poor's Corporation and Aa or the
equivalent thereof by Moody's Investors Service, Inc. and/or (v) other
short term Investments in accordance with company policy of the
Borrower in effect as of the date of this Agreement, a written copy of
which has been provided to the Banks, which policy may not be changed
without the Required Banks' prior written consent, (B) Investments by
the Borrower in a Guarantor or by any Guarantor in another Guarantor,
(C) Investments by the Borrower in Foreign Subsidiaries not exceeding
at any time an amount which, together with loans and advances to
Foreign Subsidiaries permitted by clause (v) of Section 5.07, is equal
to 15% of Consolidated Tangible Net Worth at such time; (D) other
Investments not exceeding at any time an amount which, together with
the aggregate amounts of loans and advances permitted by clause (vi) of
Section 5.07, is equal to l0% of consolidated Tangible Net Worth at
such time, and (E) investments in the bond issued pursuant to a
Permitted Sale-Lease Back/Bond Transaction.
(d) Section 5.12 is hereby deleted and substituted in lieu thereof is
the following:
SECTION 5.12. Consolidations, Mergers and Sales of Assets. The
Borrower will not, nor will it permit any subsidiary to, consolidate or
merge with or into, or sell, lease or otherwise transfer all or any
substantial part of its assets to, any other Person, or discontinue or
eliminate any business line or segment, provided that (a) the Borrower
may merge with another Person if (i) such Person was organized under
the laws of the United States of America or one of its states, (ii) the
Borrower is the corporation surviving such merger and (iii) immediately
after giving effect to such merger, no Default shall have occurred and
be continuing, (b) Subsidiaries of the Borrower may merge with one
another, and (c) the foregoing limitation on the sale, lease or other
transfer of assets and on the discontinuation or elimination of a
business line or segment shall not prohibit, during any Fiscal Year,
(A) a transfer of assets or the discontinuance or elimination of a
business line or segment (in a single transaction or in a series of
related transactions) unless the aggregate assets to be so transferred
or utilized in a business line or segment to be so discontinued, when
combined with all other assets transferred, and all other assets
utilized in all other business lines or segments discontinued, during
such Fiscal Year constituted more than 10% of Consolidated Tangible Net
Worth, or (B) a transfer of assets as a part of a Permitted Sale-Lease
Back/Bond Transaction.
(e) A New Section 5.23 is hereby added to the Credit Agreement as
follows:
SECTION 5.23 Ownership of Bonds. The Borrower shall be the
sole holder of each bond issued pursuant to a Permitted
59
<PAGE> 22
Sale-Lease Back/Bond Transaction and shall not encumber, transfer or
otherwise dispose of such bond without the prior written consent of all
Banks.
4. Effect of Amendment. Except as set forth expressly hereinabove, all
terms of the Credit Agreement and the other Loan Documents shall be and remain
in full force and effect, and shall constitute the legal, valid, binding and
enforceable obligations of the Borrower. The amendments contained herein shall
be deemed to have prospective application only, unless otherwise specifically
stated herein.
5. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
6. Section References. Section titles and references used in this
Amendment shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto evidenced hereby.
7. No Default. To induce the Agent and the Banks to enter into this
Amendment and to continue to make advances pursuant to the Credit Agreement, the
Borrower hereby acknowledges and agrees that, as of the date hereof, and after
giving effect to the terms hereof, there exists (i) no Default or Event of
Default and (ii) no right of offset, defense, counterclaim, claim or objection
in favor of the Borrower arising out of or with respect to any of the Loans or
other obligations of the Borrower owed to the Banks under the Credit Agreement.
8. Further Assurances. The Borrower agrees to take such further actions
as the Agent shall reasonably request in connection herewith to evidence the
amendments herein contained to the Borrower.
9. Governing Law. This Amendment shall be governed by and construed and
interpreted in accordance with, the laws of the State of Georgia.
10. Conditions Precedent. This Amendment shall become effective only
upon (i) execution and delivery of this Amendment by each of the parties hereto,
(ii) execution and delivery of the Consent and Reaffirmation of Guarantors at
the end hereof by each of the Guarantors, and (iii) the delivery of a copy of
the Lease to the Agent and the Banks and the terms and conditions of the Lease
being satisfactory to the Agent and the Banks in all respects.
60
<PAGE> 23
IN WITNESS WHEREOF, the Borrower, the Agent and each of the Banks has
caused this Amendment to be duly executed, under seal, by its duly authorized
officer as of the day and year first above written.
SPRINGS INDUSTRIES, INC.,
as Borrower (SEAL)
By: /s/Samuel J. Ilardo
------------------------------
Title: Treasurer
WACHOVIA BANK OF GEORGIA, N.A.,
as Agent (SEAL)
By: /s/Barry K. Love
------------------------------
Title: Senior Vice President
WACHOVIA BANK OF NORTH CAROLINA, N.A.,
as a Bank (SEAL)
By: /s/Paul G. Grube
------------------------------
Title: Senior Vice President
SUNTRUST BANK, ATLANTA,
as a Bank (SEAL)
By: /s/Jeffrey D. Drucker
------------------------------
Title: Banking Officer
By: /s/R. B. King
------------------------------
Title: Vice President
NATIONSBANK, N.A.
as a Bank (SEAL)
By: /s/David H. Dinkins
------------------------------
Title: Vice President
61
<PAGE> 24
CONSENT AND REAFFIRMATION OF GUARANTORS
Each of the undersigned (i) acknowledges receipt of the foregoing
Amendment to Credit Agreement (the "Amendment"), (ii) consents to the execution
and delivery of the Amendment by the parties thereto and agrees to all of the
terms of the foregoing Amendment, and (iii) reaffirms all of its obligations and
covenants, respectively, as a Guarantor under the Guaranty dated as of March 31,
1995 executed and delivered by Springs Window Fashions Division, Inc., and under
the Guaranty dated as of May 27, 1995 executed and delivered by Dundee Mills,
Incorporated, and as a Contributing Party under the Contribution Agreement dated
as of March 31, 1995, and agrees that none of such obligations and covenants
shall be affected by the execution and delivery of the Amendment. This Consent
and Reaffirmation may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same instrument.
SPRINGS WINDOW FASHIONS DIVISION,
INC. (SEAL)
By: /s/Robert W. Sullivan
------------------------------
Title: Vice President
DUNDEE MILLS, INCORPORATED (SEAL)
By: /s/Robert W. Sullivan
------------------------------
Title: Vice President
62
<PAGE> 1
SWAP TRANSACTION CONFIRMATION
(REVISED)
TO: Springs Industries, Inc.
ATTN: Mr. Samuel J. Ilardo
FAX: (803) 547-3707
FROM: Betty A. Scott
Wachovia Bank of Georgia
Derivatives Processing Unit
DATE: September 7, 1995
The purpose of this letter agreement is to confirm the terms and conditions of
the Swap Transaction entered into between Wachovia Bank of Georgia, N.A.
("Wachovia") and Springs Industries, Inc. ("Company") on the Trade Date
specified below (the "Swap Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the Agreement (as defined below).
The definitions and provisions contained in the 1991 ISDA Definitions published
by the International Swap Dealers Association, Inc. (the "Definitions") are
incorporated into this confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern.
1. This Confirmation supplements, forms part of, and is subject to the
Master Agreement dated as of May 18, 1995, as amended and supplemented
from time to time (the "Agreement") between you and us. All provisions
contained in the Agreement will govern this Confirmation except as
expressly modified below.
2. The terms of the particular Swap Transaction to which this Confirmation
relates are as follows:
A. TRADE DETAILS
INITIAL NOTIONAL AMOUNT: $20,000,000
(See Attached Schedule)
TRADE DATE: September 5, 1995
EFFECTIVE DATE: September 8, 1994
TERMINATION DATE: September 8, 2005
63
<PAGE> 2
FIXED AMOUNTS:
Fixed Rate Payer: Springs Industries, Inc.
Fixed Rate Payer Payment Dates: Each December 8, March 8, June 8,
and September 8, commencing
December 8, 1995, up to and
including the Termination Date
subject to adjustment in accordance
with the Modified Following
Business Day Convention
Fixed Rate: 6.39%
Fixed Rate Day Count Fraction: Actual / 360
FLOATING AMOUNTS:
Floating Rate Payer: Wachovia
Floating Rate Payer
Payment Dates: Each December 8, March 8, June 8,
and September 8, commencing
December 8, 1995, up to and
including the Termination Date
subject to adjustment in accordance
with the Modified Following
Business Day Convention
Floating Rate for Initial
Calculation Period: 5.9141%
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: Three Month
Floating Rate Day Count Fraction: Actual / 360
Reset Dates: Each December 8, March 8, June 8,
and September 8, commencing
December 8, 1995, and ending on
the Termination Date
BUSINESS DAYS: New York and London
CALCULATION AGENT: Wachovia Bank of Georgia, N.A.
64
<PAGE> 3
B. ACCOUNT DETAILS
PAYMENTS TO WACHOVIA:
Payments to Wachovia: Wachovia Bank of Georgia, N.A.
Fed Routing No.: ABA No: 061-000010
For the Account of a/c no: 18171498
Account Number: Money Transfer Suspense
Attention: Betty Scott
PAYMENTS TO SPRINGS INDUSTRIES, INC.:
Payments to the Company Wachovia Bank of North Carolina, N.A.
Fed Routing No.: 053100494
For the Account of: Springs Industries, Inc.
Account Number: 1866148975
Attention: Ms. Ruby Hinson
C. OFFICES
WACHOVIA BANK OF GEORGIA, N.A.: 191 Peachtree Street
Atlanta, Georgia 30303
Telephone (404) 332-6970
Fax (404) 332-1354
SPRINGS INDUSTRIES, INC.: P.O. Box 70
Fort Mill, South Carolina 29716
Telephone (803) 547-1577
Fax (803) 547-3707
3. THE COMPANY HAS CONSULTED, TO THE EXTENT IT HAS DEEMED NECESSARY, WITH
ITS LEGAL, TAX AND FINANCIAL ADVISORS REGARDING ITS DECISION TO ENTER
INTO THE SWAP TRANSACTION AND HAS HAD AN OPPORTUNITY TO ASK QUESTIONS
OF, AND HAS OBTAINED ALL REQUESTED INFORMATION FROM, WACHOVIA
CONCERNING THE SWAP TRANSACTION. THE COMPANY HAS MADE ITS OWN
INDEPENDENT DECISION TO ENTER INTO THE SWAP TRANSACTION BASED UPON IT
OWN JUDGMENT, WITH FULL UNDERSTANDING OF THE ECONOMIC, LEGAL AND OTHER
RISKS ASSOCIATED WITH THE SWAP TRANSACTION (WHICH RISKS IT IS WILLING
TO ASSUME) AND IS ENTERING INTO THE SWAP TRANSACTION WITHOUT RELYING
UPON ANY ADVICE (ORAL OR WRITTEN) OR PROJECTIONS PROVIDED BY WACHOVIA.
THE COMPANY UNDERSTANDS THAT WACHOVIA IS RELYING ON THE STATEMENTS MADE
BY THE COMPANY IN THIS PARAGRAPH IN ENTERING INTO THE SWAP TRANSACTION.
65
<PAGE> 4
Please confirm that the foregoing correctly sets out the terms of our agreement
by signing a copy of this Confirmation and returning it to us within two
Business Days.
Wachovia Bank of Georgia, N.A. Springs Industries, Inc.
By: /s/Richard A. Oglesby, Jr. By: /s/Samuel J. Ilardo
------------------------------- -------------------------------------
Name: Richard A. Oglesby, Jr. Name: Samuel J. Ilardo
Title: Vice President Title: Treasurer
66
<PAGE> 5
Wachovia Capital Markets
Amortization Schedule
8-Dec-95 $20,000,000.00
8-Mar-96 20,000,000.00
8-Jun-96 20,000,000.00
8-Sep-96 20,000,000.00
8-Dec-96 20,000,000.00
8-Mar-97 20,000,000.00
8-Jun-97 20,000,000.00
8-Sep-97 20,000,000.00
8-Dec-97 20,000,000.00
8-Jun-98 20,000,000.00
8-Sep-98 20,000,000.00
8-Dec-98 19,285,714.29
8-Mar-99 18,571,428.58
8-Jun-99 17,857,142.87
8-Sep-99 17,142,857.16
8-Dec-99 16,428,571.45
8-Mar-00 15,714,285.74
8-Jun-00 15,000,000.03
8-Sep-00 14,285,714.32
8-Dec-00 13,571,428.61
8-Mar-01 12,857,142.90
8-Jun-01 12,142,857.19
8-Sep-01 11,428,571.48
8-Dec-01 10,714,285.77
8-Mar-02 10,000,000.06
8-Jun-02 9,285,714.35
8-Sep-02 8,571,428.64
8-Dec-02 7,857,142.93
8-Mar-03 7,142,857.22
8-Jun-03 6,428,571.51
8-Sep-03 5,714,285.80
8-Dec-03 5,000,000.09
8-Mar-04 4,285,714.38
8-Jun-04 3,571,428.67
8-Sep-04 2,857,142.96
8-Dec-04 2,142,857.25
8-Mar-05 1,428,571.54
8-Jun-05 714,285.83
8-Sep-05
67
<PAGE> 1
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated as
of the 20th day of March, 1997 among SPRINGS INDUSTRIES, INC. (the "Borrower"),
WACHOVIA BANK OF GEORGIA, N.A., as Agent (the "Agent") and WACHOVIA BANK OF
NORTH CAROLINA, N.A., SUNTRUST BANK, ATLANTA, and NATIONSBANK, N.A. (CAROLINAS)
(collectively, the "Banks");
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Banks are parties to that
certain Credit Agreement, dated as of the 12th day of August, 1996, as amended
from time to time (the "Credit Agreement");
WHEREAS, the Borrower has requested and the Agent and the Banks have
agreed to the waiver of certain defaults under and certain amendments to the
Credit Agreement, subject to the terms and conditions hereof;
NOW, THEREFORE, for and in consideration of the above premises and
other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged by the parties hereto, the Borrower, the Agent and the
Banks hereby covenant and agree as follows:
1. Definitions. Unless otherwise specifically defined herein, each term
used herein which is defined in the Credit Agreement shall have the meaning
assigned to such term in the Credit Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Credit Agreement shall from and after the date hereof refer to the Credit
Agreement as amended hereby.
2. Waiver. The Borrower represents and warrants to the Agent and the
Banks that the Borrower has entered into agreements with the South Carolina
Counties of Chester, York, Lancaster and Spartanburg (each a "SC County,"
collectively, the "SC Counties") for the purpose of obtaining a
fee-in-lieu-of-tax characterization with respect to such transaction whereby
(the following transactions are referred to herein as the "Bond
Transaction(s)"): (i) the Borrower has sold or will sell certain real and
personal property (the "Property") located in each of the SC Counties to the
respective SC County in which such Property is located; (ii) the Borrower has
leased-back or will lease-back the Property from each respective SC County;
(iii) each of the SC Counties has assigned or will assign such lease (the
"Lease(s)") to certain trustees (the "Trustee(s)"); (iv) each of the Trustees
has sold or will sell a bond (the "Bond(s)") issued by the respective SC County
to the Borrower, the payment of which is secured
68
<PAGE> 2
by the Property in such SC County and the respective Lease, and the Bond
proceeds are loaned to the Borrower in return for the Borrower's issuance of a
promissory note therefor; (v) each Bond and the collateral security therefor
shall be freely assignable, provided, however, the Borrower shall not encumber,
transfer or otherwise dispose of the Bond or any collateral security therefor
and shall remain the sole holder thereof; (vi) each Bond Transaction shall be
entered into, performed and terminated (including, without limitation, all
payments of any loans, rent, and purchase price by Borrower, any County or any
Trustee at the consummation of any Bond Transaction, during the performance of
any Bond Transaction, and at the termination of any Bond Transaction) in
accordance with its terms and without (x) the transfer of or obligation to
transfer any funds between the parties to the Bond Transactions except for
mutual offsetting book entries and fees paid or to be paid to any SC County in
lieu of taxes, or (y) any effect under GAAP (as currently in effect) on the
Borrower's financial statements; (vii) at any time the Borrower may terminate
any Lease and title to the respective Property subject to such Lease shall be
automatically transferred back to the Borrower; and (viii) at the end of the
term of any lease and upon payment of the respective Bond in full, title to the
respective Property subject to such lease shall be automatically transferred
back to the Borrower. In reliance upon the foregoing, the Agent and the Banks
hereby waive any Default or Event of Default under Sections 5.08 and 5.12 of the
Credit Agreement arising from any Bond Transaction entered into prior to the
date of this Amendment; provided, however, no such waiver set forth in this
paragraph 2 shall constitute a waiver of any other Default or Event of Default
under the Financing Agreement.
3. Amendments. (a) A new definition "Permitted Sale-Lease Back/Bond
Transaction" is hereby added to Section 1.01 of the Credit Agreement as follows
in alphabetical order:
"Permitted Sale-Lease Back/Bond Transaction" shall mean a
transaction entered into by the Borrower with any of the South Carolina
Counties of Chester, York, Lancaster and Spartanburg (each an "SC
County", collectively, the "SC Counties") for the purpose of obtaining
a fee-in-lieu-of-tax characterization with respect to such transaction,
whereby (the following transactions are referred to in this definition
as the "Bond Transaction(s)"): (i) the Borrower has sold or will sell
certain real and personal property (the "Property") located in each of
the SC Counties to the respective SC County in which such Property is
located; (ii) the Borrower has leased-back or will lease-back the
Property from each respective SC County; (iii) each of the SC counties
has assigned or will assign such lease (the "Lease(s)") to certain
trustees (the "Trustee(s)"); (iv) each of the Trustees has sold or will
sell a bond (the "Bond(s)") issued by the respective SC County to the
Borrower, the payment of which is secured by the Property in such SC
County and the respective Lease, and the Bond proceeds are loaned to
the Borrower in return for the Borrower's issuance of a promissory note
therefor; (v) each Bond and the collateral security therefor shall be
freely assignable, provided, however,
69
<PAGE> 3
the Borrower shall not enter, transfer or otherwise dispose of the Bond
or any collateral security therefor and shall remain the sole holder
thereof; (vi) each Bond Transaction shall be entered into, performed
and terminated (including, without limitation, all payments of any
loans, rent, and purchase price by Borrower, any County or any Trustee
at the consummation of any Bond Transaction, during the performance of
any Bond Transaction, and at the termination of any Bond Transaction)
in accordance with its terms and without (x) the transfer of or
obligation to transfer any funds between the parties to the Bond
Transactions except for mutual offsetting book entries and fees paid or
to be paid to any SC County in lieu of taxes, or (y) any effect under
GAAP (as currently in effect) on the Borrower's financial statements;
(vii) at any time the Borrower may terminate any Lease and title to the
respective Property subject to such Lease shall be automatically
transferred back to the Borrower; and (viii) at the end of the term of
any Lease and upon payment of the respective Bond in full, title to the
respective Property subject to such Lease shall be automatically
transferred back to the Borrower.
(b) The word "and" located after the semicolon in Section 5.01(h) is
hereby deleted and Section 5.01(i) is hereby deleted and substituted in lieu
thereof is the following:
(i) thirty (30) days prior to the consummation thereof a
written summary of the terms and conditions of any Permitted Sale-Lease
Back/Bond Transaction, and promptly thereafter, copies of any documents
to be executed in connection therewith reasonably requested by the
Agent and the Banks; and
(j) from time to time such additional information regarding
the financial position or business of the Borrower and its Subsidiaries
as the Agent, at the request of any Bank, may reasonably request.
(c) Section 5.08 is hereby deleted and substituted in lieu thereof is
the following:
SECTION 5.08. Investment. Except for the existing Investments
listed on Schedule 5.08, neither the Borrower nor any of its
Subsidiaries shall make Investments in any Person except as permitted
by Section 5.07 and except (A) Investments in (i) direct obligations of
the United States Government maturing within one year, (ii)
certificates of deposit issued by a commercial bank whose credit is
satisfactory to the Agent, (iii) commercial paper rated Al or the
equivalent thereof by Standard & Poor's Corporation or P1 or the
equivalent thereof by Moody's Investors Service, Inc. and in either
case maturing within 6 months after the date of acquisition, (iv)
tender bonds the payment of the principal of and interest on which is
fully supported by a letter of credit issued by a United States bank
whose long-term certificates of deposit are rated at least AA or the
equivalent thereof by Standard & Poor's Corporation and Aa
70
<PAGE> 4
or the equivalent thereof by Moody's Investors Service, Inc. and/or (v)
other short term Investments in accordance with company policy of the
Borrower in effect as of the date of this Agreement, a written copy of
which has been provided to the Banks, which policy may not be changed
without the Required Banks' prior written consent, (B) Investments by
the Borrower in a Guarantor or by any Guarantor in another Guarantor,
(C) Investments by the Borrower in Foreign Subsidiaries not exceeding
at any time an amount which, together with loans and advances to
Foreign Subsidiaries permitted by clause (v) of Section 5.07, is equal
to 15% of Consolidated Tangible Net Worth at such time; (D) other
Investments not exceeding at any time an amount which, together with
the aggregate amounts of loans and advances permitted by clause (vi) of
Section 5.07, is equal to l0% of consolidated Tangible Net Worth at
such time, and (E) investments in the bond issued pursuant to a
Permitted Sale-Lease Back/Bond Transaction.
(d) Section 5.12 is hereby deleted and substituted in lieu thereof is
the following:
SECTION 5.12. Consolidations, Mergers and Sales of Assets. The
Borrower will not, nor will it permit any subsidiary to, consolidate or
merge with or into, or sell, lease or otherwise transfer all or any
substantial part of its assets to, any other Person, or discontinue or
eliminate any business line or segment, provided that (a) the Borrower
may merge with another Person if (i) such Person was organized under
the laws of the United States of America or one of its states, (ii) the
Borrower is the corporation surviving such merger and (iii) immediately
after giving effect to such merger, no Default shall have occurred and
be continuing, (b) Subsidiaries of the Borrower may merge with one
another, and (c) the foregoing limitation on the sale, lease or other
transfer of assets and on the discontinuation or elimination of a
business line or segment shall not prohibit, during any Fiscal Year,
(A) a transfer of assets or the discontinuance or elimination of a
business line or segment (in a single transaction or in a series of
related transactions) unless the aggregate assets to be so transferred
or utilized in a business line or segment to be so discontinued, when
combined with all other assets transferred, and all other assets
utilized in all other business lines or segments discontinued, during
such Fiscal Year constituted more than 10% of Consolidated Tangible Net
Worth, or (B) a transfer of assets as a part of a Permitted Sale-Lease
Back/Bond Transaction.
(e) A New Section 5.23 is hereby added to the Credit Agreement as
follows:
SECTION 5.23 Ownership of Bonds. The Borrower shall be the
sole holder of each bond issued pursuant to a Permitted Sale-Lease
Back/Bond Transaction and shall not encumber, transfer or otherwise
dispose of such bond without the prior written consent of all Banks.
71
<PAGE> 5
4. Effect of Amendment. Except as set forth expressly hereinabove, all
terms of the Credit Agreement and the other Loan Documents shall be and remain
in full force and effect, and shall constitute the legal, valid, binding and
enforceable obligations of the Borrower. The amendments contained herein shall
be deemed to have prospective application only, unless otherwise specifically
stated herein.
5. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
6. Section References. Section titles and references used in this
Amendment shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto evidenced hereby.
7. No Default. To induce the Agent and the Banks to enter into this
Amendment and to continue to make advances pursuant to the Credit Agreement, the
Borrower hereby acknowledges and agrees that, as of the date hereof, and after
giving effect to the terms hereof, there exists (i) no Default or Event of
Default and (ii) no right of offset, defense, counterclaim, claim or objection
in favor of the Borrower arising out of or with respect to any of the Loans or
other obligations of the Borrower owed to the Banks under the Credit Agreement.
8. Further Assurances. The Borrower agrees to take such further actions
as the Agent shall reasonably request in connection herewith to evidence the
amendments herein contained to the Borrower.
9. Governing Law. This Amendment shall be governed by and construed and
interpreted in accordance with, the laws of the State of Georgia.
10. Conditions Precedent. This Amendment shall become effective only
upon (i) execution and delivery of this Amendment by each of the parties hereto,
(ii) execution and delivery of the Consent and Reaffirmation of Guarantors at
the end hereof by each of the Guarantors, and (iii) the delivery of a copy of
the Lease to the Agent and the Banks and the terms and conditions of the Lease
being satisfactory to the Agent and the Banks in all respects.
72
<PAGE> 6
IN WITNESS WHEREOF, the Borrower, the Agent and each of the Banks has
caused this Amendment to be duly executed, under seal, by its duly authorized
officer as of the day and year first above written.
SPRINGS INDUSTRIES, INC.,
as Borrower (SEAL)
By: /s/Samuel J. Ilardo
---------------------------------
Title: Treasurer
WACHOVIA BANK OF GEORGIA, N.A.,
as Agent (SEAL)
By: /s/Barry K. Love
---------------------------------
Title: Senior Vice President
WACHOVIA BANK OF NORTH CAROLINA, N.A.,
as a Bank (SEAL)
By: /s/Paul G. Grube
---------------------------------
Title: Senior Vice President
SUNTRUST BANK, ATLANTA,
as a Bank (SEAL)
By: /s/Jeffrey D. Drucker
---------------------------------
Title: Banking Officer
By: /s/R. B. King
---------------------------------
Title: Vice President
NATIONSBANK, N.A.
as a Bank (SEAL)
By: /s/David H. Dinkins
---------------------------------
Title: Vice President
73
<PAGE> 7
CONSENT AND REAFFIRMATION OF GUARANTORS
Each of the undersigned (i) acknowledges receipt of the foregoing
Amendment to Credit Agreement (the "Amendment"), (ii) consents to the execution
and delivery of the Amendment by the parties thereto and agrees to all of the
terms of the foregoing Amendment, and (iii) reaffirms all of its obligations and
covenants, respectively, as a Guarantor under the Guaranty dated as of March 31,
1995 executed and delivered by Springs Window Fashions Division, Inc., and under
the Guaranty dated as of May 27, 1995 executed and delivered by Dundee Mills,
Incorporated, and as a Contributing Party under the Contribution Agreement dated
as of March 31, 1995, and agrees that none of such obligations and covenants
shall be affected by the execution and delivery of the Amendment. This Consent
and Reaffirmation may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same instrument.
SPRINGS WINDOW FASHIONS DIVISION,
INC. (SEAL)
By: /s/Robert W. Sullivan
-------------------------------
Title: Vice President
DUNDEE MILLS, INCORPORATED (SEAL)
By: /s/Robert W. Sullivan
-------------------------------
Title: Vice President
74
<PAGE> 1
14 INDUSTRY SEGMENT INFORMATION(1)
Springs Industries, Inc.
[SALES PER INDUSTRY
SEGMENT (In percent) PIE GRAPH]
<TABLE>
<S> <C>
Home Furnishings 82%
Specialty Fabrics 18%
</TABLE>
<TABLE>
<CAPTION>
[PROFIT FROM OPERATIONS
PER INDUSTRY SEGMENT (2) (In percent)
PIE GRAPH]
<S> <C>
Home Furnishings 65%
Specialty Fabrics 35%
</TABLE>
(In millions)
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
TRADE SALES:
Home furnishings................. $ 1,830.6 $ 1,642.4 $ 1,460.1
Specialty fabrics................ 412.7 590.7 608.8
----------------------------------------------------------------------
TOTAL......................... $ 2,243.3 $ 2,233.1 $ 2,068.9
======================================================================
PROFIT FROM OPERATIONS:(2)
Home Furnishings................. $ 52.0 $ 89.6 $ 97.5
Specialty Fabrics................ 27.8 43.9 38.3
----------------------------------------------------------------------
TOTAL ........................ 79.8 133.5 135.8
----------------------------------------------------------------------
Interest expense ................... 22.1 32.0 29.2
Other income, net .................. (46.8) (9.4) (0.1)
----------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM............ $ 104.5 $ 110.9 $ 106.7
======================================================================
IDENTIFIABLE ASSETS AT YEAR END:
Home furnishings ................ $ 1,310.7 $ 1,263.1 $ 990.4
Specialty fabrics ............... 181.6 394.6 430.3
LIFO reserve .................... (125.0) (132.8) (132.5)
Corporate ....................... 30.7 2.6 .8
----------------------------------------------------------------------
TOTAL ........................ $ 1,398.0 $ 1,527.5 $ 1,289.0
======================================================================
CAPITAL EXPENDITURES:
Home furnishings ................ $ 66.3 $ 56.8 $ 69.1
Specialty fabrics ............... 8.8 18.4 23.5
----------------------------------------------------------------------
TOTAL ........................ $ 75.1 $ 75.2 $ 92.6
======================================================================
DEPRECIATION AND AMORTIZATION:
Home furnishings ................ $ 76.9 $ 77.5 $ 67.6
Specialty fabrics ............... 12.5 21.0 22.7
----------------------------------------------------------------------
TOTAL ........................ $ 89.4 $ 98.5 $ 90.3
======================================================================
</TABLE>
(1) This schedule provides consolidated financial information by segment, but
not financial information of the segments as separate entities. See
the notes to the financial statements for further comments regarding
industry segments.
(2) Profit from operations represents sales less cost of goods sold, selling,
general and administrative expenses, and restructuring and realignment
expenses. Profit from operations for 1996 is net of a $33.9 million charge
for restructuring and realignment expenses, of which $33.3 million was
charged to the home furnishings segment and $.6 million to the specialty
fabrics segment.
<PAGE> 2
CONSOLIDATED STATEMENT 15
OF OPERATIONS AND RETAINED EARNINGS
Springs Industries, Inc.
[DISTRIBUTION OF
THE SALES DOLLAR(1) (In percent)
PIE GRAPH]
<TABLE>
<S> <C>
Raw materials and purchased goods 31.3%
Wages, salaries and benefits 31.5%
Income taxes 1.4%
Cash dividends and retained earnings 2.9%
Other manufacturing, selling, general 32.9%
and administrative expenses
</TABLE>
(1) Excludes restructuring and realignment expenses, a gain on the sale of
Clark-Schwebel, Inc., an extraordinary loss, and other write-offs.
(In thousands except per share data)
For the Fiscal Years Ended December 28, 1996,
December 30, 1995, and December 31, 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
OPERATIONS
NET SALES.............................. $2,243,327 $2,233,053 $2,068,911
- -------------------------------------------------------------------------
Cost and expenses:
Cost of goods sold ................. 1,830,249 1,828,542 1,650,743
Selling, general and
administrative expenses .......... 299,326 270,989 282,326
Restructuring and
realignment expenses.............. 33,926 - -
Interest expense.................... 22,064 32,035 29,253
Other income, net................... (46,757) (9,446) (123)
- -------------------------------------------------------------------------
Total .......................... 2,138,808 2,122,120 1,962,199
- -------------------------------------------------------------------------
Income before income taxes
and extraordinary item .............. 104,519 110,933 106,712
Income tax provision .................. 16,086 39,307 44,485
- -------------------------------------------------------------------------
Income before extraordinary item ...... 88,433 71,626 62,227
Extraordinary item:
Loss on extinguishment of debt, net
of income tax benefit of $2,176 .. 3,552 - -
- -------------------------------------------------------------------------
NET INCOME ..................... $ 84,881 $ 71,626 $ 62,227
=========================================================================
Per share:
Income before extraordinary item ...... $ 4.32 $ 3.71 $ 3.50
Extraordinary loss .................... .17 - -
- -------------------------------------------------------------------------
NET INCOME ..................... $ 4.15 $ 3.71 $ 3.50
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
RETAINED EARNINGS
<S> <C> <C> <C>
RETAINED EARNINGS
AT BEGINNING OF YEAR .................. $ 616,347 $ 568,403 $ 526,428
Net income ............................ 84,881 71,626 62,227
Class A cash dividends declared ....... (16,650) (14,840) (11,758)
Class B cash dividends declared ....... (9,045) (8,842) (8,494)
- -------------------------------------------------------------------------
RETAINED EARNINGS
AT END OF YEAR.................. $ 675,533 $ 616,347 $ 568,403
=========================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 3
16 CONSOLIDATED BALANCE SHEET
Springs Industries, Inc.
<TABLE>
<CAPTION>
(In thousands except share data)
December 28, 1996, and December 30, 1995
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................ $ 30,719 $ 2,606
Accounts receivable .................................................. 350,830 351,669
Inventories .......................................................... 370,896 384,730
Other. ............................................................... 37,177 30,300
- -------------------------------------------------------------------------------------------------
Total current assets .............................................. 789,622 769,305
- -------------------------------------------------------------------------------------------------
PROPERTY (AT COST):
Land and improvements ................................................ 18,559 18,723
Buildings ............................................................ 238,861 257,883
Machinery and equipment .............................................. 1,062,980 1,104,053
- -------------------------------------------------------------------------------------------------
Total ............................................................. 1,320,400 1,380,659
Accumulated depreciation ............................................. (785,836) (766,700)
- -------------------------------------------------------------------------------------------------
Property, net ..................................................... 534,564 613,959
OTHER ASSETS ............................................................ 73,770 144,280
- -------------------------------------------------------------------------------------------------
TOTAL ............................................................. $1,397,956 $1,527,544
=================================================================================================
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings ................................................ $ - $ 21,900
Current maturities of long-term debt ................................. 6,921 13,078
Accounts payable ..................................................... 103,841 103,737
Accrued wages and salaries ........................................... 21,827 10,407
Accrued incentive pay and benefit plans 31,771 34,051
Other accrued liabilities. ........................................... 88,129 79,817
- -------------------------------------------------------------------------------------------------
Total current liabilities ......................................... 252,489 262,990
- -------------------------------------------------------------------------------------------------
NONCURRENT LIABILITIES:
Long-term debt ....................................................... 177,640 326,949
Accrued benefits and deferred compensation ........................... 160,535 154,673
Deferred income taxes ................................................ 5,495 26,608
Other ................................................................ 21,018 21,802
- -------------------------------------------------------------------------------------------------
Total noncurrent liabilities ...................................... 364,688 530,032
- -------------------------------------------------------------------------------------------------
SHAREOWNERS' EQUITY:
Class A common stock- $.25 par value (12,746,374 and 12,642,903 shares
issued in 1996 and 1995, respectively)............................... 3,187 3,161
Class B common stock- $.25 par value (7,508,579 and 7,604,579 shares
issued in 1996 and 1995, respectively) .............................. 1,877 1,901
Additional paid-in capital ........................................... 110,352 109,840
Retained earnings .................................................... 675,533 616,347
Cost of Class A shares in treasury (106,739 and 110,526 shares
in 1996 and 1995, respectively) ..................................... (2,378) (2,449)
Currency translation adjustment and other ............................ (7,792) 5,722
- -------------------------------------------------------------------------------------------------
Total shareowners' equity ......................................... 780,779 734,522
- -------------------------------------------------------------------------------------------------
TOTAL ............................................................. $1,397,956 $1,527,544
=================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 4
CONSOLIDATED STATEMENT OF CASH FLOWS 17
Springs Industries, Inc.
<TABLE>
<CAPTION>
(In thousands)
For the Fiscal Years Ended December 28, 1996,
December 30, 1995, and December 31, 1994
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income ....................................................... $ 84,881 $ 71,626 $ 62,227
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................................ 89,422 98,514 90,290
Gain on sales of businesses .................................. (50,127) (4,296) (4,167)
Deferred income taxes ........................................ (13,738) 7,837 1,409
Provision for restructuring .................................. 30,375 - -
Loss on disposal of property, plant, and equipment ........... 6,179 1,012 3,139
Extraordinary loss on extinguishment of debt ................. 5,728 - -
Changes in operating assets and liabilities, excluding effects
of business acquisitions and sales of businesses:
Accounts receivable ....................................... (29,609) 20,906 (6,632)
Inventories ............................................... (17,840) (24,765) (5,556)
Accounts payable and other accrued liabilities ............ 21,081 (16,459) 37,709
Accrued restructuring costs ............................... (4,137) - (10,317)
Other, net (5,820) (16,867) (228)
- -----------------------------------------------------------------------------------------------------
Net cash provided by operating activities .................... 116,395 137,508 167,874
- -----------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment ....................... (75,131) (75,175) (92,642)
Business acquisitions, net of stock issued
and cash acquired, and other investments ....................... (1,900) (82,557) -
Proceeds from sales of businesses and other assets ............... 195,371 14,183 20,069
- -----------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities ............. 118,340 (143,549) (72,573)
- -----------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds (repayments) of short-term borrowings ................... (21,900) 10,800 (50,320)
Proceeds from long-term borrowings ............................... 2,834 99,719 1,896
Repayments of long-term debt ..................................... (161,861) (80,332) (28,732)
Cash dividends paid .............................................. (25,695) (22,309) (20,166)
- -----------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities ............. (206,622) 7,878 (97,322)
- -----------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................... 28,113 1,837 (2,021)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ...................... 2,606 769 2,790
- -----------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR ..................... $ 30,719 $ 2,606 $ 769
=====================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 5
18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Springs Industries, Inc.
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial
statements include the accounts of Springs Industries, Inc. and its
subsidiaries (Springs or the Company). Intercompany balances and transactions
are eliminated in consolidation. Investments in 20 to 50 percent owned
companies are accounted for using the equity method of accounting.
USE OF ESTIMATES: Preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosures relating to contingent assets and
liabilities, and the reported amounts of revenues and expenses.
REVENUE RECOGNITION: Revenue from product sales is recognized at the time
ownership of the goods transfers to the customer.
CASH EQUIVALENTS: Cash equivalents consist of liquid investments with original
maturities of three months or less when purchased.
ACCOUNTS RECEIVABLE: The company performs ongoing credit evaluations of its
customers' financial conditions and, generally, requires no collateral from its
customers. The reserve for doubtful accounts to provide for expected credit
losses was approximately $13,105,000 in 1996 and $9,904,000 in 1995.
<TABLE>
<CAPTION>
INVENTORIES: Inventories are summarized as follows:
(in thousands)
1996 1995
<S> <C> <C>
Standard cost (which approximates
average cost) or average cost:
Finished goods ............... $ 242,650 $ 251,277
In process ................... 185,307 192,094
Raw materials and supplies ... 67,925 74,195
- -------------------------------------------------------------------------
495,882 517,566
Less LIFO reserve ............... (124,986) (132,836)
- -------------------------------------------------------------------------
Total ...................... $ 370,896 $ 384,730
=========================================================================
</TABLE>
Inventories are valued at the lower of cost or market. Cost is determined using
the last-in, first-out method (LIFO) for approximately 84 percent of
inventories and the average cost method for all other inventories. Average
cost approximates current cost.
During 1996, certain inventory quantities were reduced resulting in a
liquidation of LIFOinventory quantities carried at higher costs prevailing in
1995. The effect of these reductions was to reduce net income by approximately
$1.3 million, or $.06 per share.
PROPERTY: Depreciation is computed for financial reporting purposes on a
straight-line basis over the estimated useful lives of the related assets,
ranging from 10 to 20 years for land improvements, 20 to 40 years for
buildings, and 3 to 11 years for machinery and equipment. Certain of the
Company's fixed assets are leased through Industrial Revenue Bond financings
and similar arrangements.
INCOME TAXES: The provision for income taxes includes federal, state, and
foreign taxes currently payable and deferred taxes. Deferred taxes were
determined using the liability approach, which considers future tax
consequences associated with differences between financial accounting and tax
bases of assets and liabilities and gives immediate effect to changes in income
tax laws upon enactment.
EARNINGS PER SHARE: Per share amounts are based on the weighted average number
of shares of Class A and Class B common stock and common stock
equivalents outstanding. Such averages totaled 20,460,000 in 1996, 19,300,000
in 1995 and 17,793,000 in 1994. Certain common stock equivalents are not
included in the calculations because they are antidilutive.
RECLASSIFICATION: Certain prior year amounts have been reclassified to conform
with the 1996 presentation.
- --------------------------------------------------------------------------------
NOTE 2. INDUSTRY SEGMENT INFORMATION:
Springs operates in two industry segments: home furnishings and
specialty fabrics. The home furnishings segment manufactures, purchases for
resale, and markets home furnishing products, including sheets, pillowcases,
bedspreads, comforters, infant and toddler bedding, curtains, shower curtains
and accent bath rugs, towels, other bath fashion accessories, baby and health
care products, juvenile novelties, drapery hardware and decorative window
furnishings to all major channels of retail distribution and to institutional
customers. The specialty fabrics segment manufactures, finishes, purchases for
resale, and markets woven and non-woven fabrics, including apparel fabrics,
home-sewing fabrics, industrial fabrics, specialty fabrics, and protective and
fire retardant fabrics to manufacturers for use in a variety of end products.
Summarized segment information appears on page 14 and is an integral part of the
financial statements.
Sales for 1996, 1995, and 1994 include sales of $306.2 million, $266.9 million,
and $258.4 million, respectively, to one customer. The home furnishings segment
had sales of $248.4 million, $210.2 million, and $202.8 million for 1996, 1995,
and 1994, respectively, to this customer. Sales to this customer of $57.8
million, $56.7 million, and $55.6 million for 1996, 1995, and 1994,
respectively, are included in the specialty fabrics segment. Accounts
receivable at December 28, 1996, and December 30, 1995, included receivables
from this customer totaling $41.4 million and $41.5 million, respectively.
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19
Springs Industries, Inc.
- --------------------------------------------------------------------------------
NOTE 3. ACQUISITIONS AND DIVESTITURES:
On April 17, 1996, the Company sold Clark-Schwebel, Inc., a business in the
specialty fabrics segment, for $193 million in cash. A gain of $50.1 million
was included in other income for 1996. Through the date of sale,
Clark-Schwebel, Inc. had 1996 sales of $68.9 million and earnings before
interest and taxes of $11.3 million. In 1995, Clark-Schwebel, Inc. contributed
about 10 percent of the Company's sales of $2.233 billion and had record
earnings representing about 24 percent of Springs' earnings before interest
expense and taxes of $143 million. During the five years ended in 1995,
Clark-Schwebel, Inc.'s average contribution was 13 percent of Springs' sales
and 9 percent of its earnings before interest and taxes.
During 1995, the Company acquired three businesses in the home furnishings
segment. Effective May 27, 1995, the Company purchased all of the outstanding
stock of Dundee Mills, Incorporated, a leading manufacturer of towels, infant
and toddler bedding, knitted infant apparel, and health care products. The
purchase price was $119.6 million, $21.2 million of which was paid in cash and
the remainder through the issuance of approximately 2.5 million shares of
Springs Class A common stock with a fair value as of the acquisition date of
$98.4 million. Effective May 28, 1995, the Company purchased substantially all
of the assets of Dawson Home Fashions, Inc., a leading manufacturer of shower
curtains and bath fashions accessories. Springs paid $39 million in cash for the
business. On July 28, 1995, the Company purchased from Apogee Enterprises, Inc.,
substantially all of the assets of its Nanik Window Coverings Group, a leading
manufacturer of wood window blinds and interior shutters.
The acquisitions were accounted for as purchases, with the costs
allocated on the basis of the fair values of the assets acquired and liabilities
assumed. Liabilities assumed totaled $66.3 million, including $33.9 million of
long-term debt. The operating results of Dundee, Dawson and Nanik were included
in the Company's consolidated results of operations from their respective dates
of acquisition.
The following summary of unaudited pro forma results of operations presents
information as if the acquisitions had occurred at the beginning of 1995 and
1994. The pro forma earnings per share calculation treats the Springs Class A
common shares issued in the Dundee acquisition as having been outstanding
during all of 1994 and 1995. The pro forma information is provided for
informational purposes only and is not indicative of results which would have
occurred or which may occur in the future:
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended Year Ended
Dec. 30, 1995 Dec. 31, 1994
------------- -------------
<S> <C> <C>
Net sales ........... $2,387,266 $2,450,964
Net income .......... 69,574 57,102
Earnings per share .. 3.42 2.82
===================================================
</TABLE>
On December 29, 1995, the Company sold the assets of its Intek office panel
fabrics business. In connection with this sale, the Company received cash of
$13.2 million. On June 24, 1994, the Company sold all of the stock of
Clark-Schwebel Distribution Corp., a subsidiary of Clark-Schwebel, Inc. In
connection with this sale, the Company received cash of $19.1 million. The
gains on these transactions were included in other income.
- --------------------------------------------------------------------------------
NOTE 4. RESTRUCTURING AND REALIGNMENT EXPENSES:
During the second quarter of 1996, the Company adopted a plan to consolidate
and realign its fabric manufacturing operations. In connection with this plan,
the Company closed three fabric manufacturing plants, added production in other
plants, and increased outside purchases of grey fabric. A pretax charge of
$30.4 million was recorded in the second quarter, which included $6.6 million
for severance expense arising from the elimination of approximately 850
positions, $16.3 million for write-offs of plant and equipment, and $7.5
million for certain other expenses associated with the plan. Over the next
three years, Springs plans to make capital investments of approximately $15.9
million and incur future expenses of approximately $19.5 million for equipment
relocation and other realignment expenses which do not qualify as "exit costs."
As of December 28, 1996, the Company has recorded approximately $4.1 million of
actual cash expenditures against the restructuring accrual, including $1.1
million of severance expense and $3.0 million for certain other expenses
associated with the plan. In addition, the Company has incurred $3.5 million
for equipment relocation and other realignment expenses and $1.4 million of
capital expenditures related to the plan.
<PAGE> 7
20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Springs Industries, Inc.
NOTE 5. LONG-TERM DEBT:
Long-term debt consists of: (in thousands)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Commercial paper, average interest rate 6.1% in 1995 ................ $ - $ 69,825
Senior notes payable, effective interest rate of 10.0% .............. - 81,250
Notes payable at a variable market rate, 6.2% at December 30, 1995 .. - 5,218
Senior notes payable in annual installments of $5,000 in years 1997
through 2006, interest at 9.6% .................................... 50,000 50,000
Notes payable in quarterly installments of $2,857 from August
1998 through May 2005, effective interest rate of 6.7% ............ 80,000 80,000
Notes payable in quarterly installments of $714 from December
1998 through September 2005, effective interest at 6.7% ........... 20,000 20,000
Industrial Revenue Bond Obligations, payable in varying annual
amounts to 2019, interest at rates ranging from 2.5% to 8.3% ...... 31,456 32,243
Other ............................................................... 3,105 1,491
- -----------------------------------------------------------------------------------------
Total ............................................................. 184,561 340,027
Current maturities .................................................. (6,921) (13,078)
- -----------------------------------------------------------------------------------------
LONG-TERM DEBT .................................................... $177,640 $326,949
=========================================================================================
</TABLE>
The Company recorded in 1996 an extraordinary charge of $3.5 million, net of an
income tax benefit of $2.2 million, incurred as a result of the early
extinguishment of $68.7 million of senior notes payable. The notes were due in
varying amounts through 2003 and had an effective interest rate of 10 percent.
The Company's access to the commercial paper market is facilitated by
committed long-term revolving credit agreements provided by several banks,
totaling $100.0 million. These revolving credit agreements carry no specific
expiration dates but would terminate thirteen months after notice from banks.
The Company pays an annual commitment fee on the unused portion of these
agreements.
In August 1996, the Company signed a one-year option agreement for an
additional $100 million long-term loan facility, which may be used to refinance
existing debt and for general corporate purposes. As of December 28, 1996, no
borrowings were outstanding under this agreement. The company incurred an
initial fee to enter into this agreement.
Certain long-term debt agreements contain requirements concerning, among other
things, the maintenance of working capital and tangible net worth, limitations
on the incurrence of indebtedness, and restrictions on the payment of dividends
and/or redemption of stock. At December 28, 1996, under the most restrictive
of such requirements, retained earnings of approximately $142,000,000 were
available for dividends and/or the redemption of stock.
Scheduled annual maturities of long-term debt are: 1997 - $6,921,000; 1998 -
$13,897,000; 1999 - $20,857,000; 2000 -$20,514,000; 2001 - $20,207,000 and
varying amounts thereafter through 2019. Total interest payments in 1996,
1995, and 1994 were $23,973,000, $31,357,000 and $29,837,000, respectively.
The Company enters into interest rate swap agreements to reduce the potential
impact of increases in interest rates on floating-rate long-term debt. The
Company is exposed to credit loss in the event of nonperformance by the
counterparty to the interest rate swap agreements; however, the Company
believes its counterparty will perform. At December 28, 1996, and December 30,
1995, the notional amount of these agreements totaled $105,000,000 and
$113,000,000, respectively. The estimated fair value of these agreements at
December 28, 1996, was an unrealized gain of $1,655,000 based on market prices
for similar instruments.
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 21
Springs Industries, Inc.
NOTE 6. SHAREOWNERS' EQUITY:
Changes in shareowners' equity, exclusive of retained earnings, are: (in
thousands)
<TABLE>
<CAPTION>
Class A Class B Class A Currency
Common Stock Issued Common Stock Issued Additional Stock Held in Treasury Translation
-------------------- ------------------- ---------- ---------------------- -----------
Number Par Number Par Paid-In Number Adjustment
Of Shares Value Of Shares Value Capital Of Shares Cost And Other
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 ....... 9,858 $2,465 7,853 $1,963 $ 11,144 129 $2,785 $ 3,978
Exchange of Class B common stock
for Class A common stock ........ 23 5 (23) (5) - - - -
Shares awarded under various
employee plans .................. 3 1 - - 269 (9) (183) -
Currency translation adjustment .. - - - - - - - (1,530)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 ..... 9,884 $2,471 7,830 $1,958 $ 11,413 120 $2,602 $ 2,448
Exchange of Class B common stock
for Class A common stock ........ 225 57 (225) (57) - - - -
Shares awarded under various
employee plans .................. 20 5 - - 691 (9) (153) -
Shares issued in acquisition of
Dundee Mills, Incorporated ...... 2,514 628 - - 97,736 - - -
Currency translation adjustment .. - - - - - - - 4,801
Other ............................ - - - - - - - (1,527)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 30, 1995 ..... 12,643 $3,161 7,605 $1,901 $109,840 111 $2,449 $ 5,722
Exchange of Class B common stock
for Class A common stock ........ 96 24 (96) (24) - - - -
Shares awarded under various
employee plans .................. 7 2 - - 512 (4) (71) -
Effect of Clark-Schwebel, Inc.
disposition ..................... - - - - - - - (10,938)
Currency translation adjustment .. - - - - - - - (2,310)
Other ............................ - - - - - - - (266)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 28, 1996..... 12,746 $3,187 7,509 $1,877 $110,352 107 $2,378 $ (7,792)
====================================================================================================================================
</TABLE>
As of December 28, 1996, Springs had authorized 1,000,000 shares of
$1.00 par value, voting preferred stock, none of which was outstanding.
Authorized common stock consisted of 40,000,000 shares of $.25 par value Class A
stock and 20,000,000 shares of $.25 par value Class B stock. Subject to certain
exceptions, holders of Class B stock are entitled to four votes per share on
matters brought before shareowners of the Company, while holders of Class A
stock are entitled to one vote per share. Holders of Class A stock are entitled
to cash dividends which are at least 10 percent greater than cash dividends paid
on Class B stock.
The Company has an incentive stock plan ("The Plan") designed to achieve the
objectives of the long-term component of the Company's compensation program.
The Plan provides for awards of stock options, deferred stock, performance
units, and stock appreciation rights. Each such stock appreciation right is to
terminate upon the forfeiture or exercise of any accompanying option. No stock
appreciation rights were awarded in 1996 or 1995.
Non-transferable restricted Class A common stock may also be awarded under the
Plan, subject to the conditions and restrictions as determined by the Company's
Management Compensation and Organization Committee ("Compensation Committee").
The purchase price, if any, of shares of restricted stock shall be determined
by the Company's Compensation Committee; however, if any purchases are payable
in an amount other than the par value of the shares, the purchase price shall
be equal to at least 50 percent of the fair market value of the common stock on
the award date.
Non-transferable stock options to purchase Class A shares of common stock may
be granted in accordance with the provisions of the Plan. The option price may
not be less than the fair market value of the shares on the date of grant, and
no portion of the grant may be exercised beyond ten years from
that date. Options become exercisable on the third anniversary of the grant
date or ratably over a two- to four-year period thereafter.
<PAGE> 9
22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Springs Industries, Inc.
- --------------------------------------------------------------------------------
The table below is a summary of changes in Class A
common stock options:
<TABLE>
<CAPTION>
Number Exercise Price Weighted Average
Of Shares Per Share Exercise Price
--------- --------- --------------
<S> <C> <C> <C>
Outstanding
at Jan.1, 1994 .... 439,000 $29.00-46.38 $31.34
Granted ............ 62,000 34.33 34.33
Forfeited .......... (129,000) 29.00-46.38 31.21
------------------------------------------------------------------------
Outstanding
at Dec. 31, 1994 .. 372,000 29.00-46.38 31.88
Granted ............ 608,000 39.13-41.88 41.21
Forfeited .......... (40,000) 29.00-46.38 33.07
Exercised .......... (14,000) 29.00 29.00
------------------------------------------------------------------------
Outstanding
at Dec. 30, 1995 .. 926,000 29.00-46.38 37.99
Granted ............ 15,000 47.25 47.25
Forfeited .......... (58,500) 29.00-46.38 36.41
------------------------------------------------------------------------
Outstanding
at Dec. 28, 1996 .. 882,500 $29.00-47.25 $38.26
========================================================================
</TABLE>
The following table summarizes information about the
fixed-price stock options outstanding at December 28, 1996:
<TABLE>
<CAPTION>
Range Options Weighted Avg. Weighted Shares Weighted
of Outstanding Remaining Average Exercisable Average
Exercise at Contractual Exercise at Exercise
Prices 12/28/96 Life Price 12/28/96 Price
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 29.00 215,000 4.9years $29.00 129,000 $29.00
$ 34.33 42,500 7.3years $34.33 - -
$39.13-41.88 573,000 8.6years $41.26 - -
$46.38-47.25 52,000 7.2years $46.63 12,333 $46.38
</TABLE>
At December 28, 1996, options for 141,333 shares were exercisable at a
weighted-average exercise price of $30.52. As of December 30, 1995, 94,000
options at an exercise price of $29.00 were exercisable.
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" in accounting for its stock-based
awards. The Company granted 15,000 options in 1996 and 608,000 options in 1995
with weighted-average grant-date fair values of $17.79 per share and $13.56 per
share, respectively. Deferred stock awards and performance units of 117,483
units and 69,636 units at weighted-average grant-date fair values of $44.81 and
$37.51 were granted during 1996 and 1995, respectively. Compensation cost
charged against income for such awards totaled approximately $1,098,000 and
$968,000 for the years ended December 28, 1996, and December 30, 1995,
respectively. Had compensation cost for the Company's stock-based compensation
awards been determined at the grant dates based on the fair value method
described in the Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," the Company's pro forma net income
would have been $83.5 million, or $4.08 per share, for 1996 and $71.2 million,
or $3.69 per share, for 1995.
The fair value of each option was estimated on the date of grant using the
Black-Scholes option-pricing model. The following assumptions were used for the
grant in 1996: dividend rate of $1.32; expected volatility of 30.0 percent;
risk-free interest rate of 6.9 percent; and an expected life of 10 years. For
1995, the weighted-average assumptions used were: dividend rate of $1.32;
expected volatility of 30.7 percent; risk-free interest rate of 6.4 percent;
and expected lives of 8 years.
- --------------------------------------------------------------------------------
NOTE 7. INCOME TAXES:
The following tables present the components of the provision for income taxes,
a reconciliation of the statutory U.S. income tax rate to the effective income
tax rate, and the principal items of deferred income taxes at the end of 1996
and 1995.
<TABLE>
<CAPTION>
INCOME TAX PROVISION:
(in thousands)
1996 1995 1994
<S> <C> <C> <C>
Current. .............. $ 29,824 $31,470 $43,076
Deferred .............. (13,738) 7,837 1,409
-----------------------------------------------------------
Total tax provision
on income before
extraordinary
item ............... $ 16,086 $39,307 $44,485
===========================================================
</TABLE>
RECONCILIATION TO EFFECTIVE TAX RATES:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Provision at statutory
U.S. tax rate ........ 35.0% 35.0% 35.0%
Effective state income
tax rate (excluding
sale of subsidiary) .. 2.6 3.9 4.6
Effect of sale of
subsidiary (including
state tax) ............ (18.2) 0.3 0.3
Changes in valuation
allowance ............ (1.4) (2.0) 0.1
Other ................. (2.6) (1.8) 1.7
----------------------------------------------------------
Total effective tax
rate on income before
extraordinary item .. 15.4% 35.4% 41.7%
==========================================================
</TABLE>
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 23
Springs Industries, Inc.
- --------------------------------------------------------------------------------
Temporary differences which give rise to deferred income taxes and the
resulting assets and liabilities are as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
<S> <C> <C>
Employee benefit accruals ........... $ 38,871 $ 40,233
Deferred compensation ............... 28,282 26,420
Restructuring reserves .............. 11,631 2,035
Equity investments .................. - 2,232
Accounts receivable reserves ........ 7,676 4,580
Environmental accruals .............. 5,041 5,594
Other items ......................... 16,751 15,161
----------------------------------------------------------
Subtotal. ......................... 108,252 96,255
Less valuation allowance ............ - (3,399)
----------------------------------------------------------
Total deferred tax assets ......... 108,252 92,856
----------------------------------------------------------
Property ............................ (76,290) (82,351)
Inventories ......................... (7,320) (11,610)
Equity investments .................. - (9,287)
Intangibles ......................... (1,331) (1,665)
Other items ......................... (5,335) (1,554)
----------------------------------------------------------
Total deferred tax liabilities .... (90,276) (106,467)
----------------------------------------------------------
Net deferred tax asset (liability) .. $ 17,976 $ (13,611)
==========================================================
</TABLE>
Income before income taxes includes foreign income of $4,855,000 and $6,932,000
in 1996 and 1995, respectively. Foreign losses for 1994 were $295,000. The
provision for income taxes includes state income taxes of $1,482,000 in 1996,
$6,513,000 in 1995, and $7,711,000 in 1994. Springs made income tax payments of
approximately $32,226,000, $47,691,000, and $32,907,000 in 1996, 1995, and
1994, respectively.
NOTE 8. EMPLOYEES' BENEFIT PLANS:
EMPLOYEES' PROFIT SHARING AND RETIREMENT PLANS
Substantially all associates of Springs are covered by defined
contribution plans or defined benefit plans. The Company makes contributions to
defined contribution plans, and these contributions are computed as a percentage
of each participant's base pay. In addition, in the event that eligible
participants contribute a percentage of their compensation to defined
contribution plans, the Company matches a portion of their contributions.
Company contributions to defined benefit plans are made in accordance with
ERISA, and benefits are generally based upon years of service. Assets in
defined benefit plans are invested in money market and other fixed income
securities (including United States government obligations) and in diversified
equity securities.
Defined contribution plan expenses for 1996, 1995, and 1994 were $22,334,000,
$22,538,000, and $24,721,000, respectively. The net assets available for
benefits under defined contribution plans had a market value of approximately
$601 million as of December 31, 1996.
Defined benefit retirement plan expenses were $3,240,000 in 1996, $2,772,000 in
1995, and $1,703,000 in 1994.
The following assumptions and components were used to develop the net pension
expense:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
ASSUMPTIONS:
Discount rate for obligations ................... $ 7.25% 7.00% 7.75%
Assumed rate of compensation increases (1) ...... 4.00 4.50 -
Expected long-term rate of return on assets ..... 7.50 7.50 7.50
COMPONENTS OF NET PENSION EXPENSE: (IN THOUSANDS)
Service cost .................................... $ 1,988 $ 1,598 $ 824
Interest cost on Projected Benefit Obligations .. 5,413 3,728 1,331
Actual return on assets ......................... (4,909) (3,737) 80
Net amortization and deferral ................... 748 1,183 (532)
- ------------------------------------------------------------------------------
Pension expense, net ............................ $ 3,240 $ 2,772 $1,703
==============================================================================
</TABLE>
(1) Applicable only to certain plans of businesses acquired during 1995.
<PAGE> 11
24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Springs Industries, Inc.
- --------------------------------------------------------------------------------
The following table sets forth the funding status of Springs' defined benefit
pension plans: (in thousands)
<TABLE>
<CAPTION>
1996 1995
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets
------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated Benefit Obligation:
Vested .................................. $(29,602) $(25,462) $(22,435) $(45,841)
Non-vested .............................. (755) (52) (19) (1,731)
- --------------------------------------------------------------------------------------------------
Accumulated Benefit Obligation ........... $(30,357) $(25,514) $(22,454) $(47,572)
==================================================================================================
Effect of projected future compensation .. (6,682) (2,157) (2,014) (6,142)
Projected Benefit Obligation ............. (37,039) (27,671) (24,468) (53,714)
Plan assets at fair value ................ 42,576 4,704 26,526 31,039
- --------------------------------------------------------------------------------------------------
Excess (deficiency) of assets over
Projected Benefit Obligation ............ 5,537 (22,967) 2,058 (22,675)
Unrecognized (gain) loss and effects
of changes in assumptions ............... (4,938) 2,107 (402) 1,735
Additional minimum liability ............. - (2,011) - (2,363)
- --------------------------------------------------------------------------------------------------
Prepaid (accrued) pension cost recognized
in the balance sheet .................... $ 599 $(22,871) $1,656 $(23,303)
==================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company sponsors a defined benefit postretirement medical plan which covers
substantially all salaried and nonsalaried associates. The plan provides
medical benefits and is contributory, with retiree contributions adjusted
periodically.
Net postretirement medical benefit cost consisted of the following components:
(in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost -
benefits earned ........... $ 1,825 $1,145 $1,374
Interest cost on Accumulated
Postretirement Benefit
Obligation (APBO).......... 4,304 4,666 4,577
Amortization of
actuarial gain ............ (247) (768) (477)
Amortization of prior
service cost .............. 8 - -
Curtailment/settlement
gain from the sale
of a subsidiary ............ (4,452) - -
- ----------------------------------------------------------
Net postretirement
benefit cost ............... $ 1,438 $5,043 $5,474
==========================================================
</TABLE>
The following table sets forth the status of Springs' obligation under its
postretirement medical plan at December 28, 1996, and December 30, 1995: (in
thousands)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Retirees ......................... $(30,295) $(46,009)
Fully eligible active plan
participants .................... (10,133) (4,934)
Other active plan participants ... (24,008) (22,326)
-------------------------------------------------------
APBO ............................. (64,436) (73,269)
-------------------------------------------------------
Unrecognized prior service cost .. 132 885
Unrecognized effects of
changes resulting from
experience different
from that assumed ............... (9,875) (7,102)
-------------------------------------------------------
Accrued Postretirement
Benefit Obligation recognized
in the balance sheet ............ $(74,179) $(79,486)
=======================================================
</TABLE>
Net unrecognized actuarial gains at December 28, 1996, and December 30, 1995,
primarily resulted from lower health care cost inflation than assumed and
changes in the discount rate.
For measurement purposes, a 10.6 percent annual rate of increase in the
per capita cost of covered health care benefits was assumed for 1997; this 10.6
percent rate is assumed to decrease gradually to 5.5 percent by the year 2006
and remain at that level thereafter. If the health care cost trend rate were
increased by one percent, the APBO would increase by 9 percent and the aggregate
of the service and interest cost components of net postretirement medical
benefit cost would increase by 12 percent. The discount rates used in
determining the APBO at December 28, 1996, and December 30, 1995, were 7.25
percent and 7 percent, respectively.
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 25
Springs Industries, Inc.
- --------------------------------------------------------------------------------
NOTE 9. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company has estimated the fair values of financial instruments using
available market information and appropriate valuation methodologies. However,
considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company would realize in a
current market exchange.
The carrying amounts of cash and cash equivalents, accounts receivable,
certain other assets, accounts payable, and short-term borrowings are
reasonable estimates of their fair value at December 28, 1996, and December 30,
1995. The estimated fair value of long-term debt at December 28, 1996,
approximated its carrying value. The estimated fair value of long-term debt at
December 30, 1995, was $358 million, compared to a carrying value of $340
million. Fair value was estimated using interest rates that were available to
the Company at those dates for issuance of debt with similar terms and remaining
maturities. See Note 5 for comments regarding the fair value of interest rate
swap agreements.
- --------------------------------------------------------------------------------
NOTE 10. OTHER MATTERS:
TRANSACTIONS WITH RELATED PARTIES: Two members of the Board of Directors,
their family and related entities own approximately 99 percent of Springs'
Class B common stock. Springs transacts business with certain companies that
are controlled by these persons and related entities. In the opinion of
Springs' management, the cost of services provided by these companies is not
material, and the services have been obtained at competitive prices or rates.
Management annually reviews its conclusions with the Audit Committee of the
Board of Directors.
CONTINGENCIES: Springs is involved in certain administrative proceedings
governed by environmental laws and regulations, including proceedings under the
Comprehensive Environmental Response, Compensation, and Liability Act. The
potential costs to the Company related to all of these environmental matters
are uncertain due to such factors as: the unknown magnitude of possible
pollution and cleanup costs; the complexity and evolving nature of governmental
laws and regulations and their interpretations; the timing, varying costs and
effectiveness of alternative cleanup technologies; the determination of the
Company's liability in proportion to other potentially responsible parties; and
the extent, if any, to which such costs are recoverable from insurers or other
parties.
The Company has accrued an undiscounted liability of approximately $13
million, which represents management's best estimate of Springs' probable
liability concerning all known environmental matters. Management believes the
$13 million will be paid out over the next 10 years. This accrual has not been
reduced by any potential insurance recovery to which the Company may be entitled
regarding environmental matters. A significant component of the Company's
accrued liability for environmental matters involves a site listed on the United
States Environmental Protection Agency's ("EPA") National Priority List where
Springs is the sole responsible party. Springs, the EPA and the United States
Department of Justice have executed a consent decree related to this site. Soil
cleanup was completed in 1993, subject to final approval by the EPA, and the
approved EPA groundwater remedy began in 1996.
Springs is also involved in various other legal proceedings
and claims incidental to its business. Springs is protecting its interests in
all such proceedings.
In the opinion of management, based on the advice of counsel, the likelihood
that the resolution of the above matters would have a material adverse impact
on either the financial condition or the future results of operations of
Springs is remote.
COMMITMENTS: The Company enters into forward delivery contracts and futures
contracts for the purchase of certain raw materials, 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.
<PAGE> 13
26 MANAGEMENT'S REPORT ON
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The management of the Company is responsible for the preparation of the
consolidated financial statements and related financial information included in
this annual report. The statements, which include amounts based on
management's estimates, have been prepared in conformity with generally
accepted accounting principles.
In fulfilling the Company's responsibilities for maintaining the integrity of
financial information and for safeguarding assets, Springs relies upon internal
control systems designed to provide reasonable assurance that the Company's
records properly reflect business transactions and that these transactions are
in accordance with management's authorization. There are limitations inherent
in all systems of internal accounting controls based on the recognition that
the cost of such systems should not exceed the benefits to be derived. Springs
believes its systems provide this appropriate balance. An internal audit staff
tests, evaluates, and reports on the adequacy and effectiveness of internal
control systems and procedures.
Management also recognizes its responsibility for conducting the
Company's affairs in an ethical and socially responsible manner. Springs has
communicated to its associates its intentions to maintain high standards of
ethical business conduct in all of its activities. Ongoing review programs are
carried out to monitor compliance with this policy.
The Board of Directors pursues its oversight responsibility with respect to the
Company's systems of internal control and financial statements through its
Audit Committee, which is composed solely of outside directors. The Audit
Committee meets regularly with Springs' management, internal auditors, and
independent auditors. Both the independent auditors and internal auditors have
access to and meet privately with this Committee without the presence of
management.
The Company's independent auditors, Deloitte & Touche LLP, rely on the
Company's internal control structure to the extent they deem appropriate and
perform tests and other procedures they deem necessary to express an opinion on
the fairness of the presentation of the financial statements, which management
believes provide an objective assessment of the degree to which management
meets its responsibility for fairness of financial reporting.
/s/ James F. Zahrn
- ----------------------------------------------
James F. Zahrn
Senior Vice President--Chief Financial Officer
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Springs Industries, Inc.
We have audited the accompanying consolidated balance sheet of Springs
Industries, Inc. as of December 28, 1996 and December 30, 1995, and the related
consolidated statements of operations and retained earnings and of cash flows
for each of the three fiscal years in the period ended December 28, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Springs Industries, Inc. at
December 28, 1996 and December 30, 1995, and the results of its operations and
its cash flows for each of the three fiscal years in the period ended December
28, 1996, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Charlotte, North Carolina
January 27, 1997
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 27
OPERATIONS AND FINANCIAL CONDITION
- --------------------------------------------------------------------------------
A ten-year summary of Selected Financial Data appears on pages 30 through 31. A
three-year analysis of industry segment information appears on page 14.
RESULTS OF OPERATIONS
GENERAL
During the three years ended 1996, the Company acquired three home furnishings
businesses and sold three businesses in the specialty fabrics segment.
Effective May 27, 1995, the Company purchased all of the outstanding stock of
Dundee Mills, Incorporated, a leading manufacturer of towels, infant and
toddler bedding, knitted infant apparel, and health care products. The purchase
price was $119.6 million, $21.2 million of which was paid in cash and the
remainder through the issuance of approximately 2.5 million shares of Springs
Class A common stock with a fair value as of the acquisition date of $98.4
million. The Company purchased on May 28, 1995, substantially all of the assets
of Dawson Home Fashions, Inc., a leading manufacturer of shower curtains and
bath fashions accessories. Springs paid $39 million in cash for the business.
On July 28, 1995, the Company purchased from Apogee Enterprises, Inc.,
substantially all of the assets of Nanik Window Coverings Group, a leading
manufacturer of wood window blinds and interior shutters. The operating
results of Dundee, Dawson and Nanik were included in the Company's consolidated
results of operations from the dates of the acquisitions.
On April 17, 1996, the Company sold Clark-Schwebel, Inc., a business in the
specialty fabrics segment, for $193 million in cash. A gain of $50.1 million
was included in other income for 1996. Through the date of sale Clark-Schwebel,
Inc. had 1996 sales of $68.9 million and earnings before interest and taxes of
$11.3 million. In 1995, Clark-Schwebel, Inc. contributed about 10 percent of
the Company's sales of $2.233 billion and had record earnings representing
about 24 percent of Springs' earnings before interest expense and taxes of $143
million. During the five years ended in 1995, Clark-Schwebel, Inc.'s average
contribution was 13 percent of Springs' sales and 9 percent of its earnings
before interest and taxes. Effective December 29, 1995, the Company sold the
assets of its Intek office panel fabrics business and received cash of $13.2
million. On June 24, 1994, the Company sold all of the stock of Clark-Schwebel
Distribution Corp., a subsidiary of Clark-Schwebel, Inc. In connection with
this sale, the Company received cash of $19.1 million. Gains on these
transactions were included in other income.
During the second quarter of 1996, the Company adopted a plan to
consolidate and realign its fabric manufacturing operations. In connection with
this plan, the Company closed three fabric manufacturing plants, added
production in other plants, and increased outside purchases of grey fabric. A
pretax charge of $30.4 million was recorded in the second quarter, which
included $6.6 million for severance expense arising from the elimination of
approximately 850 positions, $16.3 million for write-offs of plant and
equipment, and $7.5 million for certain other expenses associated with the plan.
Over the next three years, Springs plans to make capital investments of
approximately $15.9 million and incur future expenses of approximately $19.5
million for equipment relocation and other realignment expenses which do not
qualify as "exit costs."
As of December 28, 1996, the Company has incurred approximately $4.1 million of
actual cash expenditures against the restructuring accrual, including $1.1
million of severance expense and $3.0 million for certain other expenses
associated with the plan. In addition, the Company has incurred $3.5 million
for equipment relocation and other realignment expenses and $1.4 million of
capital expenditures related to the plan.
- --------------------------------------------------------------------------------
1996 Compared with 1995
SALES
Annual sales in 1996 of $2.243 billion exceeded the previous year's record mark
of $2.233 billion by less than one percent. Increased home furnishings sales
were partially offset by a reduction in specialty fabrics sales.
Home furnishings sales reached a record $1.831 billion for 1996, up 11 percent
over the previous year's sales of $1.642 billion. The increase from 1995 is a
result of three acquisitions completed in mid-1995 and internal growth in each
of the principal home furnishings businesses.
Sales for the specialty fabrics segment were $412.7 million for 1996, down
30 percent from the prior year. Excluding the sales of Clark-Schwebel, Inc.
from both years, specialty fabrics sales rose one percent.
EARNINGS
Net income for 1996 was $84.9 million, or $4.15 per share, and included an
after-tax gain on the sale of Clark-Schwebel, Inc. of $50.1 million, or $2.45
per share, as well as a restructuring charge, realignment expenses, and other
write-offs, which collectively reduced net income by $29.8 million, or $1.46
per share. Excluding these unusual items, net income for 1996 would have been
$64.6 million, or $3.16 per share, compared to $71.6 million, or $3.71 per
share, for 1995.
Operating profits of $79.8 million in 1996 were substantially lower than in
1995. Excluding the restructuring and realignment expenses and Clark-Schwebel,
Inc.'s results from both years, operating profits would have been $104.0
million in 1996 and $104.6 million in 1995. The home furnishings segment
reported operating profits of $52.0 million, substantially below the level
achieved in 1995. Excluding the restructuring and realignment expenses recorded
in 1996, operating profits for the home furnishings segment would have been
$85.3 million, compared to $89.6 million in 1995. Operating earnings of the
segment were adversely affected in
<PAGE> 15
28 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
- --------------------------------------------------------------------------------
the fourth quarter by a highly promotional mix of shipments as well as
inefficiencies connected with major systems conversions and with ongoing
consolidations of facilities.
The specialty fabrics segment reported a substantial reduction in operating
earnings for 1996. Excluding the results of Clark-Schwebel, Inc. from both
years, the segment's operating earnings improved moderately over the prior
year.
The decrease in the effective income tax rate to 15.4 percent in 1996 compared
to 35.4 percent in 1995 is primarily the result of the absence of taxes
associated with the gain on sale of a subsidiary. A lower state effective
income tax rate also contributed to the reduction. See Note 7 to the
Consolidated Financial Statements.
- --------------------------------------------------------------------------------
1995 Compared with 1994
SALES
Record annual sales in 1995 of $2.233 billion exceeded the previous year's
record mark of $2.069 billion by eight percent. Increased home furnishings
sales were partially offset by a decline in specialty fabrics sales volume.
Home furnishings sales improved 12 percent to $1.642 billion as a result of the
three acquisitions completed during the year. Without the acquisitions, the
full year's sales of home furnishings would have been about equal to the prior
year in spite of a weakening of retail demand in November and December of 1995.
Sales for the specialty fabrics segment reached $590.7 million for 1995. This
represented a decline of three percent from the prior year. Adjusting for the
absence of Clark-Schwebel Distribution Corp., sold in June 1994, the 1995
specialty fabrics sales showed a gain of four percent over 1994 as a result of
strong demand for industrial fabrics.
EARNINGS
Net income for 1995 increased to $71.6 million, a 15 percent improvement over
1994 net income of $62.2 million. Earnings per share in 1995 rose six percent
to $3.71 from the $3.50 reported for 1994.
Operating income of $133.5 million in 1995 was slightly below the prior year's
level of $135.8 million. A decline in the operating income of the home
furnishings segment was nearly offset by an increase in specialty fabrics
profits.
The home furnishings segment reported operating income of $89.6 million, which
was eight percent below the $97.5 million reported for 1994. The results of
the home furnishings segment reflected increased raw material and supply costs
as well as a weakening of retail demand in November and December of 1995.
Despite lower sales, the specialty fabrics segment reported operating income of
$43.9 million compared to $38.3 million in 1994. The strength of the segment's
industrial fabrics businesses more than offset the effect of sluggish markets
for finished fabrics for home sewing and apparel.
Other income benefited from higher equity investment income, interest income,
and a gain on the sale of the Company's Intek office panel fabrics business.
Lower effective state income tax rates and a reduction in the valuation
allowance associated with one of the company's foreign equity investments
contributed to a decrease in the effective tax rate to 35.4 percent in 1995
compared to 41.7 percent in 1994.
- --------------------------------------------------------------------------------
INFLATION AND CHANGING PRICES
The replacement cost of property, plant and equipment is generally greater than
the historical cost shown on the Balance Sheet due to inflation that has
occurred since the property was placed in service.
Springs uses the LIFO method of accounting for approximately 84 percent of its
inventories. Under this method, the cost of goods sold reported in the
Statement of Operations generally
reflects current costs.
- --------------------------------------------------------------------------------
CAPITAL RESOURCES AND LIQUIDITY
The Company's overall cash needs for 1996 were provided from operations. The
Company had short-term and commercial paper borrowings totaling approximately
$92 million at December 30, 1995, which were repaid in the second quarter of
1996 using proceeds from the sale of Clark-Schwebel, Inc. In addition, on July
1, 1996, the Company extinguished $68.7 million of senior notes having an
effective interest rate of 10 percent. In connection with this debt
extinguishment, the Company recorded an extraordinary charge of $3.5 million,
net of an income tax benefit of $2.2 million. In August 1996, the Company
signed a one-year option agreement for an additional $100 million long-term
loan facility, which may be used to refinance existing debt and for general
corporate purposes. As of December 28, 1996, no borrowings were outstanding
under this term loan agreement. Debt, net of cash, as a percent of total
capital was 21.7 percent at December 28, 1996, compared to 35.6 percent at
December 30, 1995. Expenditures for property, plant and equipment totaling $75
million were made in 1996.
The Company expects capital expenditures for 1997 to approximate $110 million.
Springs believes its 1997 cash needs will be adequately provided from
operations and borrowings from commercial paper and committed short-term lines.
- --------------------------------------------------------------------------------
OTHER
The Company enters into forward delivery contracts and futures contracts for
the purchase of certain raw materials, consistent with the size of its
business, to hedge the Company's exposure to price volatility. Management
assesses these contracts on a continuous basis to determine if contract prices
will be recovered through subsequent sales.
<PAGE> 16
QUARTERLY FINANCIAL DATA (UNAUDITED) 29
<TABLE>
<CAPTION>
(In millions except per share data)
--------------------- 1996 ---------------------- --------------- 1995 ----------------------
QUARTER 1ST 2ND 3RD 4TH YEAR 1ST 2ND 3RD 4TH YEAR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales. ............. $583.5 $545.0 $569.2 $545.6 $2,243.3 $483.1 $532.7 $623.8 $593.5 $2,233.1
Gross profit ........... 105.7 105.8 113.6 88.0 413.1 87.1 95.2 111.9 110.3 404.5
Income before
extraordinary item .... 12.3 43.0 22.6 10.5 88.4 9.9 14.4 21.3 26.0 71.6
Net income ............. 12.3 39.5 22.6 10.5 84.9 9.9 14.4 21.3 26.0 71.6
Net income,
as adjusted (1) ....... $ 12.3 $ 15.9 $ 22.8 $ 13.6 $ 64.6 $ 9.9 $ 14.4 $ 21.3 $ 26.0 $ 71.6
==========================================================================================================================
Per share:
Income before
extraordinary item ... $ .60 $ 2.10 $ 1.11 $ .51 $ 4.32 $ .55 $ .78 $ 1.08 $ 1.30 $ 3.71
Extraordinary loss from
extinguishment of debt - .17 - - .17 - - - - -
- --------------------------------------------------------------------------------------------------------------------------
Net Income ............. .60 1.93 1.11 .51 4.15 .55 .78 1.08 1.30 3.71
Net income,
as adjusted (1) ...... $ .60 $ .78 $ 1.11 $ .67 $ 3.16 $ .55 $ .78 $ 1.08 $ 1.30 $ 3.71
==========================================================================================================================
</TABLE>
(1) Net income for 1996, adjusted to exclude the effects of restructuring and
realignment expenses, an after-tax gain on the sale of Clark-Schwebel, Inc.,
an extraordinary loss, and other write-offs.
<TABLE>
DIVIDENDS AND PRICE RANGE OF COMMON STOCK
------------------------- 1996 ------------------------- -------------------- 1995 ------------------------
QUARTER 1ST 2ND 3RD 4TH YEAR 1ST 2ND 3RD 4TH YEAR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share:
Class A dividends
declared .......... $.33 $.33 $.33 $.33 $1.32 $.30 $.30 $.33 $.33 $1.26
Class B dividends
declared .......... .30 .30 .30 .30 1.20 .27 .27 .30 .30 1.14
====================================================================================================================================
Common stock prices:
High .............. 47 1/8 50 1/2 50 1/4 48 1/8 50 1/2 40 1/4 40 1/2 44 3/4 44 1/2 44 3/4
Low ............... 38 3/8 42 3/8 41 3/8 41 5/8 38 3/8 35 1/4 36 3/8 35 3/4 39 35 1/4
</TABLE>
[PRICE RANGE OF COMMON STOCK
(by quarter) LINE GRAPH]
Line graph showing the high and low price of the Company's common stock by
quarter for 1995 and 1996.
[QUARTERLY INCOME COMPARISON
(per share) (1) BAR GRAPH]
Bar graph showing a quarterly comparison of earnings per share for 1995 and
1996.
(1) Net income for 1996, adjusted to exclude the effects of restructuring and
realignment expenses, an after-tax gain on the sale of Clark-Schwebel,
Inc. , an extraordinary loss, and other write-offs.
<PAGE> 17
30 SELECTED FINANCIAL DATA
Springs Industries, Inc.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992(c)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS: (in millions)
Net sales .......................................... $2,243.3 $2,233.1 $2,068.9 $2,022.8 $1,975.7
Income (loss) from continuing operations ........... 88.4(i) 71.6 62.2 47.2 44.5
Net income (loss) .................................. 84.9(d) 71.6 62.2 (25.3)(h) 44.5
Class A cash dividends declared. ................... 16.7 14.8 11.8 11.6 11.5
Class B cash dividends declared .................... 9.0 8.9 8.5 8.5 8.6
- ------------------------------------------------------------------------------ ----------- -------------------------
PER SHARE OF COMMON STOCK:
Income (loss) from continuing operations ........... 4.32(i) 3.71 3.50 2.65 2.50
Net income (loss) .................................. 4.15(d) 3.71 3.50 (1.42)(h) 2.50
Class A cash dividends declared .................... 1.32 1.26 1.20 1.20 1.20
Class B cash dividends declared .................... 1.20 1.14 1.08 1.08 1.08
Shareowners' equity ................................ 38.75 36.48 33.20 30.90 33.47
Class A stock price range:
High ............................................. 50 1/2 44 3/4 41 49 43 7/8
Low .............................................. 38 3/8 35 1/4 29 1/4 33 1/2 30 1/2
- -----------------------------------------------------------------------------------------------------------------------
STATISTICAL DATA:
Net income (loss) to net sales ..................... 3.8%(d) 3.2% 3.0% (1.3)%(h) 2.3%
Net income (loss) to average shareowners' equity. .. 11.1%(d) 10.8% 11.2% (4.7)%(h) 7.7%
Operating return on assets employed (e) ............ 8.8% 9.8% 10.4% 8.8 % 8.7%
Inventory turnover (f) ............................. 4.8 5.3 5.8 5.6 6.0
Accounts receivable turnover (g) ................... 6.5 6.6 6.5 6.5 6.5
Net sales divided by average assets ................ 1.6 1.5 1.6 1.6 1.6
Current ratio ...................................... 3.1 2.9 2.5 2.3 2.2
Capital expenditures (in millions) ................. $ 75.1 $ 75.2 $ 92.6 $ 88.3 $ 80.3
Depreciation (in millions) ......................... $ 80.8 $ 84.6 $ 79.7 $ 78.1 $ 77.7
Approximate number of shareowners .................. 3,000 3,200 3,200 3,200 3,300
Average number of associates ....................... 21,700 22,600 20,300 20,300 20,900
- ----------------------------------------------------------------------------------------------------------------------
SELECTED BALANCE SHEET DATA: (in millions)
Net working capital ................................ $ 537.1 $506.3 $ 373.0 $ 353.5 $ 328.2
Net property ....................................... 534.6 614.0 555.3 549.9 559.3
Total assets ....................................... 1,398.0 1,527.5 1,289.0 1,292.1 1,250.3
Long-term debt ..................................... 177.6 326.9 265.4 293.0 273.6
Shareowners' equity ................................ 780.8 734.5 584.1 543.2 588.1
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Net of $70.0 million charge ($43.9 million after tax, or $2.46 per share)
for restructuring.
(b) Net of $18.0 million charge ($11.2 million after tax, or $.63 per share)
for restructuring.
(c) Fifty-three weeks.
(d) Net of restructuring and realignment expenses of $33.9 million, an
after-tax gain of $50.1 million on the sale of Clark-Schwebel, Inc.,
an extraordinary loss of $3.6 million, and other write-offs. Without these
unusual items, net income would have been $64.6 million,
or $3.16 per share, and the return on average shareowners' equity would have
been 8.5 percent.
(e) Pretax income before interest expense divided by average of month-end total
assets used in operations. For 1996, pretax income was net of restructuring
and realignment expenses, an after-tax gain on the sale of
Clark-Schwebel, Inc., and other write-offs. Without these unusual items,
operating return on assets employed would have been 8.3%.
(f) Cost of goods sold divided by average of month-end inventories.
(g) Net sales divided by average of month-end receivables.
(h) Net of a charge of $72.5 million, net of income taxes, or $4.07 per share,
for cumulative effect of adoption of SFAS Nos. 106 & 109.
(i) Differs from net income by an extraordinary loss of $3.6 million, or $.17
per share.
<PAGE> 18
SELECTED FINANCIAL DATA 31
Springs Industries, Inc.
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS: (in millions)
Net sales .......................................... $1,890.4 $1,878.0 $1,909.3 $1,824.8 $1,661.1
Income (loss) from continuing operations ........... 27.1 (6.8)(a) 64.9 52.8(b) 55.7
Net income (loss) .................................. 27.1 (6.8)(a) 64.9 52.8(b) 55.7
Class A cash dividends declared. ................... 11.4 11.6 11.5 14.7 14.5
Class B cash dividends declared .................... 8.7 8.7 8.7 2.8 -
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK:
Income (loss) from continuing operations ........... 1.53 (0.39)(a) 3.64 2.98(b) 3.13
Net income (loss) .................................. 1.53 (0.39)(a) 3.64 2.98(b) 3.13
Class A cash dividends declared .................... 1.20 1.20 1.20 1.01 0.82
Class B cash dividends declared .................... 1.08 1.08 1.08 0.27 -
Shareowners' equity ................................ 32.39 32.05 33.08 30.67 28.64
Class A stock price range:
High ............................................. 36 1/4 39 1/2 45 1/4 38 3/4 38 1/4
Low .............................................. 21 1/4 16 7/8 30 1/2 27 20 3/4
- ------------------------------------------------------------------------------------------------------------------------------------
STATISTICAL DATA:
Net income (loss) to net sales ..................... 1.4% (0.4)%(a) 3.4% 2.9%(b) 3.4%
Net income (loss) to average shareowners' equity. .. 4.9% (1.2)%(a) 11.6% 10.2%(b) 11.5%
Operating return on assets employed (e) ............ 6.6% 1.9 %(a) 11.2% 10.3%(b) 12.3%
Inventory turnover (f) ............................. 6.0 5.6 5.8 6.2 5.8
Accounts receivable turnover (g) ................... 6.3 6.2 6.4 6.4 6.5
Net sales divided by average assets ................ 1.5 1.6 1.7 1.7 1.6
Current ratio ...................................... 2.2 2.5 2.4 2.7 3.0
Capital expenditures (in millions) ................. $115.9 $117.8 $108.3 $77.1 $ 69.9
Depreciation (in millions) ......................... $75.2 $72.6 $67.5 $62.1 $ 57.8
Approximate number of shareowners .................. 3,500 3,400 3,500 3,700 3,400
Average number of associates ....................... 21,700 23,200 24,100 23,400 23,100
- ------------------------------------------------------------------------------------------------------------------------------------
SELECTED BALANCE SHEET DATA: (in millions)
Net working capital ................................ $329.7 $356.5 $354.9 $389.8 $ 428.1
Net property ....................................... 572.1 524.2 475.0 424.5 393.1
Total assets ....................................... 1,251.3 1,201.1 1,188.4 1,118.3 1,083.7
Long-term debt ..................................... 287.8 260.4 227.5 238.5 256.8
Shareowners' equity ................................ 568.9 560.9 585.1 541.6 505.0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Selected Financial Data includes the following since their respective
dates of acquisition: Uniglass, February 1988; Andre Richard, March
1988; Carey-McFall, March 1989; C. S. Brooks, April 1991; C. S. Brooks
Canada, August 1992; Griffiths-Kerr, October 1992; Dundee Mills,
Incorporated, May 1995; the principal assets of Dawson Home Fashions,
Inc., May 1995; and Nanik Window Coverings Group, July 1995. Selected
Financial Data also includes the following until their respective dates
of disposition: Clark-Schwebel Distribution Corp., June 1994; the
Company's Intek office panel fabrics business, December 1995; and
Clark-Schwebel, Inc., April 1996.
<PAGE> 1
SUBSIDIARIES
OF
SPRINGS INDUSTRIES, INC.
Name of Subsidiary Place of
Incorporation
1. Catawba, Inc. Nevada
2. Catawba Trucking, Inc. South Carolina
3. Dundee Mills, Incorporated Georgia
4. Lancaster International Sales Corporation South Carolina
5. Springmaid International, Inc. South Carolina
6. Springs Canada, Inc. Ontario
7. Springs de Mexico, S.A. de C.V. Mexico
8. Springs Industries (Asia) Inc. Delaware
9. Springs Management Company, Inc. South Carolina
10. Springs Sales Corporation U.S. Virgin Islands
11. Springs Window Fashions Division, Inc. Delaware
12. Warbird Corporation Delaware
75
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-46260 and No. 33-46261 of Springs Industries, Inc., on Form S-8 of our report
dated January 27, 1997, incorporated by reference in this Annual Report on Form
10-K of Springs Industries, Inc., for the year ended December 28, 1996.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
March 25, 1997
76
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SPRINGS INDUSTRIES, INC., FOR THE FISCAL YEAR ENDED
DECEMBER 28, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1996
<PERIOD-END> DEC-28-1996
<CASH> 30,719
<SECURITIES> 0
<RECEIVABLES> 350,830
<ALLOWANCES> 0
<INVENTORY> 370,896
<CURRENT-ASSETS> 789,622
<PP&E> 1,320,400
<DEPRECIATION> 785,836
<TOTAL-ASSETS> 1,397,956
<CURRENT-LIABILITIES> 252,489
<BONDS> 177,640
0
0
<COMMON> 5,064
<OTHER-SE> 775,715
<TOTAL-LIABILITY-AND-EQUITY> 1,397,956
<SALES> 2,243,327
<TOTAL-REVENUES> 2,243,327
<CGS> 1,830,249
<TOTAL-COSTS> 1,830,249
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,064
<INCOME-PRETAX> 104,519
<INCOME-TAX> 16,086
<INCOME-CONTINUING> 88,433
<DISCONTINUED> 0
<EXTRAORDINARY> (3,552)
<CHANGES> 0
<NET-INCOME> 84,881
<EPS-PRIMARY> 4.15
<EPS-DILUTED> 4.15
</TABLE>
