<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
F O R M 10-Q
For the Quarter Ended April 4, 1998 Commission File Number 1-5315
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S P R I N G S I N D U S T R I E S, I N C.
(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 57-0252730
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
205 North White Street
Fort Mill, South Carolina 29715
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(803) 547-1500
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days.
Yes X No
----- -----
-----------------------
As of May 8, 1998, there were 11,804,379 shares of Class A Common Stock and
7,270,921 shares of Class B Common Stock of Springs Industries, Inc.
outstanding.
-----------------------
There are 16 pages in the sequentially numbered, manually signed original of
this report.
Page 1 of 16
The Index to Exhibits is on Page 15
<PAGE> 2
TABLE OF CONTENTS TO FORM 10-Q
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM PAGE
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<S> <C> <C>
1. FINANCIAL STATEMENTS 3
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 9
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
4. SUBMISSION OF MATTERS TO A VOTE 12
OF SECURITY HOLDERS
6. EXHIBITS 13
SIGNATURES 14
EXHIBIT INDEX 15
</TABLE>
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<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
-----------------------
APRIL 4, MARCH 29,
1998 1997
--------- ---------
<S> <C> <C>
OPERATIONS
Net sales ...................................... $ 556,736 $ 543,009
Cost and expenses:
Cost of goods sold ........................... 455,059 446,757
Selling, general and
administrative expenses .................... 75,001 70,753
Restructuring and
realignment expenses ....................... 24,850 2,763
Year 2000 expenses ........................... 1,420 279
Interest expense ............................. 5,554 4,521
Other income ................................. (144) (149)
--------- ---------
Total ...................................... 561,740 524,924
--------- ---------
Income (loss) before income taxes .............. (5,004) 18,085
Income tax provision (benefit) ................. (1,905) 6,874
--------- ---------
Net income (loss) ............................ $ (3,099) $ 11,211
========= =========
Earnings per common share - basic:
Net income (loss) ............................ $ (.16) $ .56
========= =========
Earnings per common share - diluted:
Net Income (loss) ........................... $ (.16) $ .54
========= =========
Cash dividends declared:
Class A shares ............................... $ .33 $ .33
========= =========
Class B shares ............................... $ .30 $ .30
========= =========
RETAINED EARNINGS
Retained earnings at beginning
of period .................................... $ 701,354 $ 675,533
Net income (loss) .............................. (3,099) 11,211
Repurchase of Class A common stock ............. (29,059) -
Cash dividends declared ........................ (6,188) (6,435)
--------- ---------
Retained earnings at end of period ............. $ 663,008 $ 680,309
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
-3-
<PAGE> 4
SPRINGS INDUSTRIES, INC.
Condensed Consolidated Balance Sheet
(In thousands except share data)
(Unaudited)
<TABLE>
<CAPTION>
APRIL 4, JANUARY 3,
1998 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................. $ 399 $ 373
Accounts receivable ....................... 347,697 317,702
Inventories, net .......................... 457,066 420,295
Other ..................................... 52,296 48,309
----------- -----------
Total current assets .................... 857,458 786,679
----------- -----------
Property, plant and equipment ............... 1,355,824 1,340,154
Accumulated depreciation .................. (816,055) (799,623)
----------- -----------
Property, plant and equipment, net ...... 539,769 540,531
----------- -----------
Other assets ................................ 81,963 81,533
----------- -----------
Total ................................... $ 1,479,190 $ 1,408,743
=========== ===========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term borrowings ..................... $ 61,950 $ 7,450
Current maturities of long-term debt ...... 17,793 14,452
Accounts payable .......................... 97,586 92,135
Accrued restructuring costs ............... 15,890 4,647
Other accrued liabilities ................. 99,666 121,409
----------- -----------
Total current liabilities ............... 292,885 240,093
----------- -----------
Noncurrent liabilities:
Long-term debt ............................ 220,429 164,287
Accrued benefits and deferred
compensation ............................. 175,339 173,681
Other ..................................... 25,501 26,084
----------- -----------
Total noncurrent liabilities ............ 421,269 364,052
----------- -----------
Shareowners' equity:
Class A common stock- $.25 par value
(12,062,582 and 12,601,757 shares
issued in 1998 and 1997, respectively) .. 3,016 3,150
Class B common stock- $.25 par value
(7,270,921 shares issued and
outstanding in 1998 and 1997) ........... 1,818 1,818
Additional paid-in capital ................ 107,748 108,684
Retained earnings ......................... 663,008 701,354
Cost of Class A shares in treasury
(100,203 and 101,091 shares in 1998
and 1997, respectively) ................. (2,263) (2,276)
Currency translation adjustment and other . (8,291) (8,132)
----------- -----------
Total shareowners' equity ............... 765,036 804,598
----------- -----------
Total ................................... $ 1,479,190 $ 1,408,743
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE> 5
SPRINGS INDUSTRIES, INC.
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------
APRIL 4, MARCH 29,
1998 1997
-------- ---------
<S> <C> <C>
Operating activities:
Net income (loss) ................................... $ (3,099) $ 11,211
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation and amortization ...................... 23,266 22,721
Provision for restructuring costs .................. 23,049 -
Changes in operating assets and liabilities,
net of effects of business acquisitions ........... (77,608) (52,778)
Other, net ......................................... (5,274) (4,799)
-------- --------
Net cash used by operating activities ........... (39,666) (23,645)
-------- --------
Investing activities:
Purchases of property, plant and
equipment ......................................... (33,299) (15,465)
Business acquisitions ............................... - (6,400)
Principal collected on notes receivable ............. 2,002 600
Notes receivable funded ............................. - (8,000)
Proceeds from sales of assets ....................... 311 378
-------- --------
Net cash used by investing activities ............ (30,986) (28,887)
-------- --------
Financing activities:
Proceeds (repayments) from short-term
borrowings, net ................................... 54,500 36,800
Proceeds from long-term borrowings .................. 60,000 -
Repayments of long-term debt ........................ (517) (557)
Repurchase of Class A shares ........................ (32,367) -
Proceeds from exercise of stock options ............. 1,600 -
Cash dividends paid ................................. (12,538) (12,859)
-------- --------
Net cash provided by financing activities ....... 70,678 23,384
-------- --------
Increase (decrease) in cash and cash
equivalents .......................................... $ 26 $(29,148)
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<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") 1997 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. Inventories:
Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
April 4, Jan. 3,
1998 1998
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<S> <C> <C>
Standard cost (which approximates
average cost) or average cost:
Finished goods........................... $ 313,345 $ 280,316
In process............................... 205,651 199,600
Raw materials and supplies............... 59,924 59,381
--------- ---------
578,920 539,297
Less LIFO reserve......................... (121,854) (119,002)
--------- ---------
Total.................................... $ 457,066 $ 420,295
========= =========
</TABLE>
3. Restructuring and Realignment Costs:
During the first quarter of 1998, the Company adopted a plan to close
the Company's Rock Hill Printing and Finishing Plant. The phase-down of
the facility is expected to begin in May of 1998 and to take
approximately five months. A pretax charge of $23.0 million was
recorded in the first quarter of 1998, including $11.3 million for
write-offs of plant and equipment, $4.0 million for severance arising
from the elimination of approximately 480 positions, and $7.7 million
for certain other expenses associated with the closing of the facility.
No cash expenditures were recorded against the accruals in the first
quarter. In connection with the closing of this plant, the Company
expects to incur approximately $8.0 million for equipment relocation
and other realignment expenses which do not qualify as "exit costs."
-6-
<PAGE> 7
In the second quarter of 1996, the Company adopted a plan to
consolidate and realign its fabric manufacturing operations. A pretax
restructuring charge of $30.4 million was recorded in 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 arising
from the elimination of approximately 850 positions, and a $7.5 million
accrual for certain other anticipated expenses associated with the
plan. Through April 4, 1998, the Company has recorded cash expenditures
of approximately $4.2 million against the severance accrual and $5.5
million against the accrual for certain other expenses associated with
the plan. In addition, the Company has incurred expenses of $16.7
million, including $1.8 million in 1998, for equipment relocation and
other realignment expenses related to the plan.
4. Other:
The Company presently expects to spend approximately $15 million during
1998 and 1999 to modify its computer information systems to ensure the
proper processing of transactions relating to Year 2000 and beyond.
This "Year 2000 Computer Problem" creates risk for the Company from
unforeseen problems in its own computer systems and those of third
parties with whom the Company conducts business transactions. Year
2000-related failures of the Company's and/or third parties' computer
systems could have a material impact on the Company's ability to
conduct its business. Management currently believes that Company
information systems affected by the Year 2000 issues have been
identified and that its implementation plans will ensure compliance for
its systems by the Year 2000. The pretax amount expensed in the first
quarter of 1998 in connection with these efforts was $1.4 million,
compared to $0.3 million in the first quarter of 1997.
In 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income," which was required to be adopted
for fiscal years beginning after December 15, 1997. This Statement
establishes standards for reporting and display of comprehensive
income. Comprehensive income (loss) was ($3.2) million for the first
quarter of 1998 and $11.3 million for the first quarter of 1997. The
difference between net income and comprehensive income was accumulated
translation adjustments of $(99) thousand for the first quarter of 1998
and $54 thousand for the first quarter of 1997.
5. Legal and Environmental:
As disclosed in the 1997 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.
-7-
<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.
-8-
<PAGE> 9
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
During the first quarter of 1998 the Company announced a $67.0 million plan to
modernize and expand its towel manufacturing. Nearly $40.0 million is expected
to be spent in Hartwell, Georgia, to build a new weaving plant and to modernize
a yarn manufacturing facility, nearly doubling the capacity of that plant. Over
$26.0 million is expected to be spent to modernize terry manufacturing
facilities in Griffin, Georgia. The plan is expected to be completed in
approximately 15 months.
In addition, the Company adopted a plan in the first quarter of 1998 to close
the Company's Rock Hill Printing and Finishing Plant. The phase-down of the
facility is expected to begin in May of 1998 and to take approximately five
months. A pretax charge of $23.0 million was recorded in the first quarter of
1998, including $11.3 million for write-offs of plant and equipment, $4.0
million for severance arising from the elimination of approximately 480
positions, and $7.7 million for certain other expenses associated with the
closing of the facility. No cash expenditures were recorded against the accruals
in the first quarter. In connection with the closing of this plant, the Company
expects to incur approximately $8.0 million for equipment relocation and other
realignment expenses which do not qualify as "exit costs."
RESULTS OF OPERATIONS
Sales
Net sales for the first quarter of 1998 were $556.7 million, up about 3 percent
from the first quarter of 1997. Springs' 1997 first-quarter results reflected
its participation in the largest retail rollouts of new home furnishings
programs in industry history. Nevertheless, the home furnishings segment, in
1998, generated record first-quarter sales, up 2 percent from last year. The
specialty fabrics segment's first-quarter sales increased by 4 percent compared
to 1997.
Earnings
The Company reported a net loss of $3.1 million, or $.16 per diluted share, for
the first quarter of 1998, compared to net income of $11.2 million, or $.54 per
diluted share, for 1997. The loss was caused by three unusual items: the $23.0
million pretax charge associated with the planned closing of the Rock Hill
Printing and Finishing Plant, realignment expenses associated with the
restructuring of fabric manufacturing operations, and charges incurred for Year
2000 modifications to information systems. Without these unusual items, net
income for the first quarter of 1998 would have been $13.2 million, or $.66 per
diluted share, compared to $13.1 million, or $0.64 per diluted share, for 1997.
In the home furnishings segment, profits were slightly below last year. Profits
for the specialty fabrics segment were significantly below last year due to the
restructuring charge recorded in the first quarter of 1998. Excluding the
restructuring charge and Year 2000 expenses, profits for the specialty fabrics
segment showed improvement compared to last year.
-9-
<PAGE> 10
CAPITAL RESOURCES AND LIQUIDITY
Increases in accounts receivable and inventory resulted in a first-quarter
increase in short-term borrowings. Proceeds from long-term debt were used to
finance purchases of equipment and Class A shares during the first quarter of
1998. The Company expects capital expenditures for 1998 to approximate $150
million. The focus of the Company's investments will be on new state-of-the-art
manufacturing, distribution and information technology.
In October of 1997, the Company's Board of Directors approved the purchase of up
to 2 million shares of the Company's Class A common stock. The Company had
repurchased 988,500 shares through the first quarter of 1998.
The Company presently expects to spend approximately $15 million during 1998 and
1999 to modify its computer information systems to ensure the proper processing
of transactions relating to Year 2000 and beyond. This "Year 2000 Computer
Problem" creates risk for the Company from unforeseen problems in its own
computer systems and those of third parties with whom the Company conducts
business transactions. Year 2000-related failures of the Company's and/or third
parties' computer systems could have a material impact on the Company's ability
to conduct its business. Management currently believes that Company information
systems affected by the Year 2000 issues have been identified and that its
implementation plans will ensure compliance for its systems by the Year 2000.
The pretax amount expensed in the first quarter of 1998 in connection with these
efforts was $1.4 million, compared to $0.3 million in the first quarter of 1997.
RESTRUCTURING AND REALIGNMENT
During the second quarter of 1996, the Company adopted a plan to consolidate and
realign its fabric manufacturing operations. A pretax restructuring charge of
$30.4 million was recorded in 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 arising from the elimination of approximately 850 positions, and a
$7.5 million accrual for certain other anticipated expenses associated with the
plan. Through April 4, 1998, the Company has recorded cash expenditures of
approximately $4.2 million against the severance accrual and $5.5 million
against the accrual for certain other expenses associated with the plan. In
addition, the Company has incurred expenses of $16.7 million, including $1.8
million in 1998, for equipment relocation and other realignment expenses related
to the plan. Over the next 8 months, Springs plans to incur expenses of
approximately $5.2 million for equipment relocation and other realignment costs
related to the plan which do not qualify as "exit costs."
As noted above, the Company adopted a plan in the first quarter of 1998 to close
the Rock Hill Printing and Finishing Plant. A pretax charge of $23.0 million was
recorded during the first quarter of 1998.
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<PAGE> 11
FORWARD LOOKING INFORMATION
This Form 10-Q report contains forward-looking statements that reflect
management's expectations, estimates, projections, and assumptions of future
performance and economic conditions. Words such as "expects," "anticipates,"
"plans," "believes," "estimates," and variations of such words and similar
expressions are intended to identify such forward-looking statements which
include but are not limited to projections of expenditures, cash flows, and
operating performance. The Company cautions investors that any forward-looking
statement is subject to risks and uncertainties that may cause actual results to
vary significantly from those projected, stated, or implied by the
forward-looking statement. Factors that could cause actual results to differ are
discussed in the Company's most recently filed 10-K.
-11-
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of the security holders of the Company was held
on April 20, 1998.
(b) During the annual meeting, the security holders of the Company
elected the following directors to hold office until the next annual meeting of
the security holders and until a successor is duly elected and qualified:
John F. Akers Aldo Papone
Crandall Close Bowles Donald S. Perkins
John L. Clendenin Robin B. Smith
Leroy S. Close Sherwood H. Smith, Jr.
Charles W. Coker Stewart Turley
John H. McArthur
(c)
<TABLE>
<CAPTION>
Description of Matter Voted Upon For Against or Abstentions
Withheld
<S> <C> <C>
(i)
Annual election of
directors:
John F. Akers 38,405,246 285,334
Crandall Close Bowles 38,622,779 67,801
John L. Clendenin 38,640,341 50,239
Leroy S. Close 38,662,789 67,791
Charles W. Coker 38,642,147 48,433
John H. McArthur 38,640,535 50,045
Aldo Papone 38,640,645 49,935
Donald S. Perkins 38,641,209 49,371
Robin B. Smith 38,640,163 50,417
Sherwood H. Smith, Jr. 38,639,992 50,588
Stewart Turley 38,642,455 48,125
(ii)
Ratification of the 38,659,236 19,585 11,759
appointment of Deloitte &
Touche as the Company's
auditors
</TABLE>
(d) N/A
-12-
<PAGE> 13
ITEM 6 - EXHIBITS
The following exhibits are filed as part of this report:
(27) Financial Data Schedule
-13-
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, Springs
Industries, Inc. has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPRINGS INDUSTRIES, INC.
By: /s/ James F. Zahrn
---------------------------------
James F. Zahrn
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
DATED: May 19, 1998
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<PAGE> 15
EXHIBIT INDEX
Item
- ----
(27) Financial Data Schedule (for SEC purposes)
-15-
<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
APRIL 4, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> APR-04-1998
<CASH> 399
<SECURITIES> 0
<RECEIVABLES> 347,697
<ALLOWANCES> 0
<INVENTORY> 457,066
<CURRENT-ASSETS> 857,458
<PP&E> 1,355,824
<DEPRECIATION> 816,055
<TOTAL-ASSETS> 1,479,190
<CURRENT-LIABILITIES> 292,885
<BONDS> 220,429
0
0
<COMMON> 4,834
<OTHER-SE> 760,202
<TOTAL-LIABILITY-AND-EQUITY> 1,479,190
<SALES> 556,736
<TOTAL-REVENUES> 556,736
<CGS> 455,059
<TOTAL-COSTS> 455,059
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,554
<INCOME-PRETAX> (5,004)
<INCOME-TAX> (1,905)
<INCOME-CONTINUING> (3,099)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,099)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
