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