<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
F O R M 10-Q
For the Quarter Ended April 3, 1999 Commission File Number 1-5315
===========================
S P R I N G S I N D U S T R I E S, I N C.
(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 57-0252730
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
205 North White Street
Fort Mill, South Carolina 29715
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(803) 547-1500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days.
Yes X No
----- -----
As of May 13, 1999, there were 10,690,342 shares of Class A Common Stock and
7,156,663 shares of Class B Common Stock of Springs Industries, Inc.
outstanding.
------------------------------
There are 35 pages in the sequentially numbered, manually signed original of
this report.
The Index to Exhibits is on Page 21
1
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TABLE OF CONTENTS TO FORM 10-Q
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C>
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 11
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 17
PART II - OTHER INFORMATION
4. SUBMISSION OF MATTERS TO A VOTE 18
OF SECURITY HOLDERS
6. EXHIBITS 19
SIGNATURES 20
EXHIBIT INDEX 21
</TABLE>
2
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PART I
ITEM I - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SPRINGS INDUSTRIES, INC.
Condensed Consolidated Statement of Operations
and Retained Earnings
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------------
APRIL 3, APRIL 4,
1999 1998
--------- ----------
<S> <C> <C>
OPERATIONS
Net sales..................................................... $ 584,000 $ 556,736
Cost and expenses:
Cost of goods sold ......................................... 481,356 455,059
Selling, general and administrative expenses................ 72,819 75,001
Restructuring and realignment expenses...................... -- 24,850
Year 2000 expenses.......................................... 452 1,420
Interest expense............................................ 6,329 5,554
Other (income) expense...................................... (1,527) (144)
--------- ----------
Total....................................................... 559,429 561,740
--------- ----------
Income (loss) before income taxes............................. 24,571 (5,004)
Income tax provision (benefit)................................ 9,327 (1,905)
--------- ----------
Net income (loss)........................................... $ 15,244 $ (3,099)
========= ==========
Basic earnings (loss) per common share........................ $ .85 $ (.16)
========= ==========
Diluted earnings (loss) per common share. .................... $ .84 $ (.16)
========= ==========
Cash dividends declared per common share:
Class A common shares....................................... $ .33 $ .33
========= ==========
Class B common shares....................................... $ .30 $ .30
========= ==========
Basic weighted-average common shares outstanding.............. 17,831 19,396
Dilutive effect of stock-based compensation awards............ 258 --
--------- ----------
Diluted weighted-average common shares outstanding............ 18,089 19,396
========= ==========
RETAINED EARNINGS
Retained earnings at beginning of period...................... $ 631,943 $ 701,354
Net income (loss)............................................. 15,244 (3,099)
Repurchase of Class A common stock............................ -- (29,059)
Cash dividends declared....................................... (5,672) (6,188)
--------- ----------
Retained earnings at end of period............................ $ 641,515 $ 663,008
========= ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
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SPRINGS INDUSTRIES, INC.
Condensed Consolidated Balance Sheet
(In thousands except share data)
(Unaudited)
<TABLE>
<CAPTION>
APRIL 3, JANUARY 2,
1999 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............... $ 890 $ 48,127
Accounts receivable, net ................ 328,579 275,144
Inventories, net ........................ 387,671 387,988
Other ................................... 51,676 75,917
----------- -----------
Total current assets .................. 768,816 787,176
----------- -----------
Property, plant and equipment ............. 1,391,717 1,350,223
Accumulated depreciation ................ (817,258) (794,827)
----------- -----------
Property, plant and equipment, net .... 574,459 555,396
----------- -----------
Other assets .............................. 125,397 92,760
----------- -----------
Total ................................. $ 1,468,672 $ 1,435,332
=========== ===========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term borrowings ................... $ 7,200 $ --
Current maturities of long-term debt .... 21,551 21,313
Accounts payable ........................ 107,689 104,796
Other accrued liabilities ............... 102,405 106,158
----------- -----------
Total current liabilities ............. 238,845 232,267
----------- -----------
Noncurrent liabilities:
Long-term debt .......................... 291,548 267,991
Accrued benefits and deferred
compensation ........................... 172,200 179,885
Other ................................... 31,005 31,073
----------- -----------
Total noncurrent liabilities .......... 494,753 478,949
----------- -----------
Shareowners' equity:
Class A common stock- $.25 par value
(10,733,503 and 10,728,594 shares
issued in 1999 and 1998, respectively) 2,683 2,682
Class B common stock- $.25 par value
(7,196,864 shares issued and
outstanding in 1999 and 1998) ......... 1,799 1,799
Additional paid-in capital .............. 100,773 100,446
Retained earnings ....................... 641,515 631,943
Cost of Class A common shares in treasury
(97,169 and 98,313 shares in 1999
and 1998, respectively) ............... (2,210) (2,230)
Accumulated other comprehensive loss .... (9,486) (10,524)
----------- -----------
Total shareowners' equity ............. 735,074 724,116
----------- -----------
Total ................................. $ 1,468,672 $ 1,435,332
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
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SPRINGS INDUSTRIES, INC.
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-----------------------------
APRIL 3, APRIL 4,
1999 1998
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<S> <C> <C>
Operating activities:
Net income (loss) ............................ $ 15,244 $ (3,099)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation and amortization ............... 25,614 23,266
Provision for restructuring costs ........... -- 23,049
Gains on disposals of property, plant and
equipment ................................. (1,133) --
Changes in working capital, net ............. (41,864) (77,608)
Other, net .................................. (19,167) (4,318)
-------- --------
Net cash used by operating activities .... (21,306) (38,710)
-------- --------
Investing activities:
Purchases of property, plant and
equipment .................................. (33,079) (34,255)
Proceeds from sales of property, plant and
equipment .................................. 2,641 311
Proceeds from sales of businesses ............ 36,094 --
Business acquisitions ........................ (47,754) --
Principal collected on notes receivable ...... 476 2,002
-------- --------
Net cash used by investing activities .... (41,622) (31,942)
-------- --------
Financing activities:
Proceeds from (repayments of) short-term
borrowings, net .............................. 5,979 54,500
Proceeds from long-term borrowings ........... 25,000 60,000
Repayments of long-term debt ................. (3,949) (517)
Repurchase of Class A common shares .......... -- (32,367)
Proceeds from exercise of stock options ...... -- 1,600
Cash dividends paid .......................... (11,339) (12,538)
-------- --------
Net cash provided by financing activities 15,691 70,678
-------- --------
Increase (decrease) in cash and cash equivalents $(47,237) $ 26
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Significant Accounting Policies:
The accompanying unaudited, condensed, consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) necessary for a fair
presentation have been included. Operating results for the three-month
period ended April 3, 1999, are not necessarily indicative of the
results that may be expected for the year ending January 1, 2000. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the annual report on Form 10-K for the
year ended January 2, 1999 (the "1998 Annual Report") of Springs
Industries, Inc. ("Springs" or the "Company").
Use of Estimates: Preparation of the Company's condensed consolidated
statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosures
relating to contingent assets and liabilities, and the reported amounts
of revenues and expenses. Actual results could differ from those
estimates.
Reclassifications: Certain prior year amounts have been reclassified to
conform with the 1999 presentation.
Recently Issued Accounting Standards: Effective January 3, 1999, the
Company adopted Statement of Position No. 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use."
This standard revised the accounting for software development costs and
requires the capitalization of certain costs which the Company has
historically expensed. Adoption of this statement has not had a
material impact on the Company's financial position, results of
operations, or cash flows.
In June 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which is required to be
adopted in fiscal years beginning after June 15, 1999. This Statement,
which the Company intends to adopt for its year 2000 fiscal year, will
require the Company to recognize all derivatives on the balance sheet
at fair value and may impact the Company's earnings depending on the
instruments held at the time of adoption. The Company has not yet
determined the impact FASB Statement No. 133 will have on its financial
position, results of operations, or cash flows.
2. Receivables:
The Company's reserve for doubtful accounts was $11.2 million at April
3, 1999, compared to $11.7 million at January 2, 1999. During the first
quarter of 1999, net write-offs of approximately $2.3 million for
previously reserved accounts more than offset the $1.8 million increase
in the Company's provision for doubtful accounts.
6
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3. Inventories:
Inventories are valued at the lower of cost or market and are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
April 3, January 2,
1999 1999
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<S> <C> <C>
Standard cost (which approximates
average cost) or average cost:
Finished goods ................................ $255,023 $267,143
In process .................................... 166,903 171,438
Raw materials and supplies .................... 66,191 54,965
-------- --------
488,117 493,546
Less LIFO reserve .............................. (100,446) (105,558)
-------- --------
Total ......................................... $387,671 $387,988
======== ========
</TABLE>
4. Restructuring and Realignment Costs:
1996 Restructuring
As disclosed in the 1998 Annual Report, in the second quarter of 1996
the Company adopted a restructuring plan to consolidate and realign its
fabric manufacturing operations. The restructuring plan was completed
during the fourth quarter of 1998.
The Company incurred realignment expenses of $1.8 million during the
first quarter of 1998 for equipment relocation and other expenses
related to the 1996 plan that do not qualify as "exit costs" as defined
by Emerging Issues Task Force Issue No. 94-3.
1998 Restructuring
As disclosed in the 1998 Annual Report, in the first quarter of 1998,
the Company adopted a plan to close one of its facilities, the Rock
Hill Printing and Finishing Plant. At that time, the Company recorded a
pretax charge of $23.0 million, which included an $11.3 million
write-off of plant and equipment, a $4.0 million accrual for
anticipated severance costs arising from the elimination of
approximately 480 positions, and a $7.7 million accrual primarily for
idle plant costs, demolition costs, and costs associated with a defined
benefit plan.
The restructuring plan was completed during the fourth quarter of 1998.
Springs reduced the severance accrual in the third quarter of 1998 due
to lower-than-expected costs per associate. In addition, the accrual
for other expenses was reduced in the third quarter of 1998, primarily
as a result of lower-than-anticipated costs associated with a defined
benefit plan and its unexpected sale on September 25, 1998, of the Rock
Hill facility. As a result of the sale, the Company reversed accruals
relating to idle plant costs and demolition costs of approximately $4.3
million in the third quarter of 1998.
7
<PAGE> 8
5. Acquisitions and Divestitures:
On January 5, 1999, the Company acquired the remaining 50 percent
interest in American Fiber Industries, LLC ("AFI"), a manufacturer and
distributor of bed pillows, mattress pads, down comforters and
comforter accessories. Springs acquired its original 50 percent
interest in AFI in February 1997 and had been accounting for the
original investment under the equity method.
The purchase price for the remaining interest totaled approximately $15
million. The Company has accounted for the remaining interest as a
step-acquisition in accordance with APB Opinion No. 16, "Business
Combinations" ("APB 16") whereby the purchase price was allocated to
the assets acquired and to the liabilities assumed based on 50 percent
of their estimated fair value on the date of acquisition. In addition,
AFI's operating results have been included in the Company's
consolidated financial statements beginning as of the acquisition date.
On January 23, 1999, the Company acquired Regal Rugs, Inc. ("Regal"), a
subsidiary of Readicut International plc. Regal manufactures bath and
accent rugs for sale to department and specialty stores, national chain
stores, and catalog retailers. The purchase price was approximately $35
million, subject to possible adjustments. The acquisition was accounted
for as a purchase in accordance with APB 16, and its operating results
have been included in the Company's consolidated financial statements
beginning as of the acquisition date. The purchase price was allocated
to the assets acquired and to the liabilities assumed based on their
estimated fair market value at the date of acquisition.
The purchase price allocations for both the AFI and Regal acquisitions
are expected to be finalized in mid-1999 upon receipt of independent
appraisals of the plants and equipment acquired. No material
adjustments to the initial purchase price allocations are expected. The
excess of the purchase price over the fair value of net assets
acquired, which totaled $35.4 million for both transactions, has been
recorded as goodwill and is being amortized on a straight-line basis
over 20 years.
Effective August 7, 1998, the Company sold its UltraSuede business and
certain related assets of the UltraFabrics division. Effective December
19, 1998, the Company disposed of its Industrial Products division.
Effective January 2, 1999, the Company disposed of the net assets of
the Company's Springfield division. Effective March 31, 1999, the
Company sold its UltraLeather business, the remaining portion of the
UltraFabrics division. The combined sales of these businesses and
earnings before interest and taxes included in the Company's first
quarter 1998 results were $48.2 million and $4.5 million, respectively.
The first quarter 1999 sales and earnings before interest and taxes of
the UltraLeather business were not material.
8
<PAGE> 9
6. Accrued Benefits and Deferred Compensation:
The long-term portion of accrued benefits and deferred compensation
were comprised of the following: (in thousands)
<TABLE>
<CAPTION>
April 3, January 2,
1999 1999
--------- ----------
<S> <C> <C>
Postretirement medical benefit obligation $ 63,764 $ 65,060
Deferred compensation 62,367 66,640
Other employee benefit obligations 46,069 48,185
-------- ---------
$172,200 $ 179,885
======== =========
</TABLE>
7. Comprehensive Income:
Comprehensive income (loss) was $16.3 million and $(3.3) million for
the three-month periods ended April 3, 1999, and April 4, 1998,
respectively. Net income (loss) differed from comprehensive income as a
result of foreign currency translation adjustments.
8. Contingencies:
As disclosed in the 1998 Annual Report, Springs is involved in certain
administrative proceedings governed by environmental laws and
regulations, including proceedings under the Comprehensive
Environmental Response, Compensation, and Liability Act. In connection
with these proceedings, the Company estimates the range of possible
losses for such matters to be between $8 million and $13 million and
has accrued an undiscounted liability of approximately $11 million as
of April 3, 1999, which represents management's best estimate of
Springs' probable liability concerning all known environmental matters.
Springs is also involved in various legal proceedings and claims
incidental to its business. Springs is protecting its interests in all
such proceedings.
In the opinion of management, based on the advice of counsel, the
likelihood that the resolution of the above matters would have a
material adverse impact on either the financial condition or the future
results of operations of Springs is remote.
9. Reportable Segment Information:
Prior to the first quarter of 1999, Springs had two reportable
segments: home furnishings and specialty fabrics. The home furnishings
segment manufactures, purchases for resale and markets home furnishings
products. The specialty fabrics segment manufactured, finished,
purchased for resale and marketed woven and non-woven fabrics. In
connection with the Company's recent divestiture of four of its
specialty fabrics businesses, including its UltraFabrics Division in
March 1999, Springs realigned its organizational structure during the
first quarter of 1999 to reflect the Company's strategic focus on the
home furnishings market, resulting in one reportable segment. The home
furnishings segment's operating results have been restated to include
the Company's Retail and Specialty Fabrics unit's operating results,
which were previously included in the specialty fabrics segment.
9
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The home furnishings segment offers a variety of products including
sheets, pillowcases, bedspreads, comforters, infant and toddler
bedding, shower curtains, accent and bath rugs, towels, other bath
fashion accessories, home-sewing fabrics, draperies, drapery hardware,
and decorative window furnishings. The operating results of the
recently divested specialty fabrics businesses are included in the
"other" category for the prior year.
The accounting policies of the home furnishings segment are the same as
those described in the summary of significant accounting policies. The
Company evaluates the segment's performance based on profit or loss
from operations before income taxes, unusual items, interest expense,
and other (income), net. Its principal markets and operations are in
North America.
Based on the current organizational structure, sales and profit from
operations before unusual items for the home furnishings segment are as
follows: (in millions)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
April 3, April 4,
1999 1998
-------- --------
<S> <C> <C>
Trade sales:
Home furnishings ............................. $ 584.0 $ 508.5
Other ........................................ -- 48.2
-------- --------
Total ........................................ $ 584.0 $ 556.7
======== ========
Profit from operations before unusual items:
Home furnishings ............................. $ 29.8 $ 22.2
Other ........................................ -- 4.5
-------- --------
Total ........................................ 29.8 26.7
Unusual items (1) ............................ 0.4 26.3
Interest expense ............................. 6.3 5.5
Other (income), net .......................... (1.5) (0.1)
-------- --------
Income (loss) before income taxes ............ $ 24.6 $ (5.0)
======== ========
</TABLE>
(1) Unusual items for the first quarter of 1999 represent Year 2000 expenses. In
1998, unusual items included restructuring and realignment expenses and Year
2000 expenses of which $26.2 million was charged to the home furnishings
segment.
Total assets for the home furnishings segment were $1,468.7 million and $1,396.4
million at April 3, 1999, and January 2, 1999, respectively.
10
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ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Prior to the first quarter of 1999, Springs had two reportable segments: home
furnishings and specialty fabrics. The home furnishings segment manufactures,
purchases for resale and markets home furnishings products. The specialty
fabrics segment manufactured, finished, purchased for resale and marketed woven
and non-woven fabrics. In connection with the Company's recent divestiture of
four of its specialty fabrics businesses, including its UltraFabrics Division in
March 1999, Springs realigned its organizational structure during the first
quarter of 1999 to reflect the Company's strategic focus on the home furnishings
market, resulting in one reportable segment. The home furnishings segment's
operating results have been restated to include the Retail and Specialty Fabrics
unit's operating results, which were previously included in the specialty
fabrics segment.
The home furnishings segment offers a variety of products including sheets,
pillowcases, bedspreads, comforters, infant and toddler bedding, shower
curtains, accent and bath rugs, towels, other bath fashion accessories,
home-sewing fabrics, draperies, drapery hardware, and decorative window
furnishings. During the first quarter of 1999, the Company acquired two home
furnishings businesses. On January 5, 1999, the Company acquired the remaining
50 percent interest in American Fiber Industries, a manufacturer and distributor
of bed pillows, mattress pads, down comforters and comforter accessories. The
purchase price of the remaining interest totaled approximately $15 million. The
Company has accounted for the remaining interest as a purchase with the
operating results included in the Company's consolidated financial statements
beginning as of the acquisition date. On January 23, 1999, the Company acquired
Regal Rugs, Inc. Regal Rugs manufactures bath and accent rugs for sale to
department and specialty stores, national chain stores, and catalog retailers.
The purchase price was approximately $35 million, subject to possible
adjustments. The acquisition was accounted for as a purchase and its operating
results have been included in the Company's consolidated financial statements
beginning as of the acquisition date. The excess of the purchase price over the
fair value of net assets acquired, which totaled $35.4 million for both
transactions, has been recorded as goodwill and is being amortized on a
straight-line basis over 20 years.
11
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RESULTS OF OPERATIONS
Sales
Net sales for the first quarter of 1999 were $584.0 million, up 4.9 percent from
the first quarter of 1998, which included sales from the divested specialty
fabrics businesses. The home furnishings segment's sales (as restated) were up
14.8 percent from last year. The increase in home furnishings sales (as
restated) was principally attributable to the first-quarter acquisitions of
American Fiber Industries and Regal Rugs and stronger sales of bed and bath
fashions. The increased bed and bath volume was associated with the initial
shipments of significant new programs brought to market during the quarter.
Continued weakness in baby products and licensed juvenile bed and bath products
partially offset the progress in other bed and bath categories.
Earnings
Net income for the first quarter was $15.2 million, or $0.84 per diluted share,
after taking into account the expense of Year 2000 systems remediation. Last
year's net loss of $3.1 million, or $0.16 per diluted share, was caused by three
unusual items: a pretax charge of $23.0 million associated with the closing of
the Company's Rock Hill, South Carolina, plant, realignment expenses arising
from the restructuring of fabric manufacturing operations, and Year 2000
expenses. First-quarter income before unusual items was $15.5 million, or $0.86
per diluted share, compared to $13.2 million, or $0.66 per diluted share, a year
ago.
The Company's pretax operating profit for the first quarter of 1999 increased by
$29.0 million from the comparable period in 1998 (which included pretax
operating profit from the divested specialty fabrics businesses), after taking
into account the net effects of restructuring and realignment expenses in the
prior year and Year 2000 expenses in both years. Similarly, the home furnishings
segment's pretax operating profit (as restated) increased by $33.4 million.
Excluding the effects of unusual items, the home furnishings segment's pretax
operating profit (as restated) for the first quarter increased by $7.6 million
compared to the first quarter of 1998. The profit improvement was attributable
principally to increased bed and bath sales volume.
RESTRUCTURING AND REALIGNMENT COSTS
1996 Restructuring
As disclosed in the 1998 Annual Report, in the second quarter of 1996, the
Company adopted a restructuring plan to consolidate and realign its fabric
manufacturing operations. The plan benefited operating results by reducing the
volume of linear yards and second-quality units produced, by reducing the
complexity of the finishing process, and by increasing manufacturing flexibility
with respect to the use of finished roll stock. The restructuring plan was
completed during the fourth quarter of 1998.
The Company incurred realignment expenses of $1.8 million during the first
quarter of 1998 for equipment relocation and other expenses related to the 1996
plan that do not qualify as "exit costs" as defined by Emerging Issues Task
Force Issue No. 94-3.
12
<PAGE> 13
1998 Restructuring
As disclosed in the 1998 Annual Report, in the first quarter of 1998, the
Company adopted a plan to close one of its facilities, the Rock Hill Printing
and Finishing Plant. At that time, the Company recorded a pretax charge of $23.0
million, which included an $11.3 million write-off of plant and equipment, a
$4.0 million accrual for anticipated severance costs arising from the
elimination of approximately 480 positions, and a $7.7 million accrual primarily
for idle plant costs, demolition costs, and costs associated with a defined
benefit plan. The benefits derived from this restructuring plan have been lower
product costs and better utilization of existing capacity in other facilities.
The restructuring plan was completed during the fourth quarter of 1998. Springs
reduced the severance accrual in the third quarter of 1998 due to
lower-than-expected costs per associate. In addition, the accrual for other
expenses was reduced in third quarter of 1998, primarily as a result of
lower-than-anticipated costs associated with a defined benefit plan and its
unexpected sale on September 25, 1998, of the Rock Hill facility. As a result of
the sale, the Company reversed accruals relating to idle plant costs and
demolition costs of approximately $4.3 million in the third quarter of 1998.
CAPITAL RESOURCES AND LIQUIDITY
The Company expects capital expenditures for 1999 to approximate $170 million.
Management believes that cash flow from operations, cash received from completed
sales of assets and businesses, and borrowings from committed bank lines and
commercial paper will adequately provide for the Company's cash needs during
1999.
YEAR 2000 COMPUTER ISSUE
Overview
The "Year 2000 Computer Issue" arises because many computer programs use only
two digits to refer to a year. If uncorrected, these computer programs may not
be able to distinguish between the years 1900 and 2000 and consequently may fail
to operate or may produce unpredictable results.
Springs has been addressing the Year 2000 Computer Issue within its information
technology and non-information technology systems through a Company-wide Year
2000 Project. Non-information technology systems typically include embedded
technology such as computer chips within manufacturing equipment and building
security systems. (Information technology and non-information technology systems
are hereinafter referred to as "information systems.") The Company's Year 2000
Project commenced in 1996 and is directed by an internal Program Management
Office. In general, Springs' Year 2000 Project is proceeding on or ahead of
schedule.
In addition, in 1993, the Company began a series of capital investment projects
to improve internal operations and customer service by consolidating and
replacing certain information systems. As part of these capital projects, the
Company has been replacing certain older, non-compliant information systems with
Year 2000 compliant information systems. These capital projects are expected to
be completed by the end of the second quarter of 1999.
13
<PAGE> 14
Year 2000 Project
The Company organized its Year 2000 Project into six broad phases: (1)
development of a Company-wide inventory of information systems, (2) development
of Company-wide standards, processes and guidelines for remediation, testing and
certification, (3) remediation, (4) testing, (5) certification, and (6)
development of contingency plans, as necessary. The Company will certify an
information system as Year 2000 compliant only after the information system
satisfies the Company's established test criteria. The Company completed the
inventory of its information systems in 1997. The Company divided the
remediation of information systems which would not be replaced through a capital
project into two major efforts (business applications and process logic
controllers) and also undertook a project to contact certain key trading
partners.
(a) Business Applications: This project addresses all Company business
applications, such as general ledger, accounts receivable, order fulfillment and
payroll, and the technical infrastructure which supports them. As of April 3,
1999, the Company has certified approximately 98% of its business applications'
lines of code as Year 2000 compliant. The Company expects to certify all
business applications and supporting technical infrastructure as Year 2000
compliant by the end of the second quarter of 1999, except as disclosed below
for recently acquired businesses.
(b) Process Logic Controllers: This project addresses the hardware,
software and associated embedded chips that are used in the operation of all
facilities and manufacturing equipment used by the Company. As of April 3, 1999,
approximately 95% of the Company's process logic controllers are Year 2000
compliant. The Company projects that the rest will be repaired or replaced by
the end of the second quarter of 1999, except as disclosed below for recently
acquired businesses.
(c) Trading Partners: This project involves identifying critical
vendors and customers and communicating with them about their compliance status
and plans. The Company contacted all trading partners with which it does over
$100,000 in business annually, all electronic data interchange trading partners,
any other critical trading partner that did not otherwise meet the criteria, and
all utilities which serve the Company in order to request written information
regarding each trading partner's Year 2000 compliance status. The Company has
been receiving written responses which indicate whether its trading partners are
or plan to become Year 2000 compliant. The Company is aware that these written
responses may not accurately represent the Year 2000 compliance status of its
trading partners. The Company is continuing to follow up with its trading
partners and will develop contingency plans as necessary.
Costs
The total cost of the Company's Year 2000 Project is not expected to be material
to the Company's financial position. The Company presently expects to incur
approximately $13 million of pretax expense in connection with its Year 2000
Project. Approximately $2.8 million of pretax expense was incurred in fiscal
1997, the first year in which the Company incurred Year 2000 expenses. In
addition, expenses totaling approximately $7.1 million were incurred during 1998
related to this effort. During the first quarter of 1999, the Company incurred
$0.5 million of Year 2000 expenses. The funds to
14
<PAGE> 15
complete the remediation efforts are expected to be provided from cash flow from
operations.
Acquisitions
The Company plans to remediate or replace all non-compliant information systems
at its recently acquired businesses by the end of the fourth quarter of 1999.
Risks
Due to the numerous uncertainties inherent in the Year 2000 Computer Issue, the
Company cannot ensure, despite its ongoing communications with its trading
partners, that its most important suppliers and customers will be Year 2000
compliant on time. The failure of critical suppliers or customers to timely
correct their Year 2000 Computer Problems could materially and adversely affect
the Company's operations and financial condition, even resulting in interruption
of normal business operations. The Company has implemented and certified a
contingency plan to continue transacting business with electronic data
interchange trading partners who do not implement the Year 2000 version of the
electronic data interchange software. The Company has not completed written
contingency plans for the complete business failure of any of its key trading
partners, which at this point appears to be unlikely. The Company believes it
would be able to identify alternative raw materials suppliers in the event a
critical supplier could not supply raw materials to the Company because of a
Year 2000 problem.
The failure on the part of the Company to timely complete a Year 2000
remediation project or capital project in one or more of its divisions also
could result in an interruption in, or failure of, normal business operations
and could materially and adversely affect the Company's financial condition. At
the end of first quarter, all projects are proceeding substantially according to
plan. The Company believes that all projects will be completed prior to the end
of 1999. The Company will continue to monitor all Year 2000 projects and capital
projects, including related capital projects, and will develop contingency plans
for specific business divisions, if required.
The Company is preparing contingency plans to address the possibility of
information systems failures at each of its facilities. The Company expects to
complete the majority of these contingency plans during the second quarter of
1999 and will continue to evaluate the need to prepare additional contingency
plans.
At this point, the Company cannot determine whether any other contingency plans
are necessary or whether any such plan could completely alleviate the risk to
the Company of its own or a key trading partner's failure to timely become Year
2000 compliant.
Forward-looking statements contained in this Year 2000 Computer Issue section
should be read in conjunction with the Company's disclosures under the heading
"FORWARD LOOKING INFORMATION" beginning on page 16.
MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS
Interest Rate Risk: Springs is exposed to interest rate volatility with regard
to existing issuances of variable rate debt. The Company uses interest rate
swaps to reduce interest rate volatility and funding costs associated with
certain debt issues and to achieve a desired proportion of variable versus
fixed-rate debt, based on current and projected market
15
<PAGE> 16
conditions. The fair value of the Company's derivative financial instruments and
other financial instruments that are sensitive to changes in interest rates,
including interest rate swaps and debt obligations, has not changed materially
at April 3, 1999, relative to the fair value of such instruments at January 2,
1999.
Commodity Price Risk: The Company is exposed to price fluctuations related to
anticipated purchases of certain raw materials, primarily cotton fiber. Springs
uses a combination of forward delivery contracts and exchange-traded futures
contracts, consistent with the size of its business, to reduce the Company's
exposure to price volatility. Management assesses these contracts on a
continuous basis to determine if contract prices will be recovered through
subsequent sales. The fair value of futures contracts held at April 3, 1999, was
not material, and near-term changes in commodity prices are not expected to have
a material impact on the Company's future earnings or cash flows.
NEW PRONOUNCEMENTS
Effective January 3, 1999, the Company adopted Statement of Position No. 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." This standard revised the accounting for software development
costs and requires the capitalization of certain costs which the Company has
historically expensed. Adoption of this statement has not had a material impact
on the Company's financial position, results of operations, or cash flows.
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement, which addresses accounting
for derivative instruments, and which the Company plans to adopt for its year
2000 fiscal year, will be effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The Company has not determined the impact of this
standard on its financial position, results of operations, or cash flows.
FORWARD LOOKING INFORMATION
This Form 10-Q report contains forward-looking statements that are based on
management's expectations, estimates, projections, and assumptions. Words such
as "expects," "believes," "estimates," and variations of such words and similar
expressions are intended to identify such forward-looking statements which
include but are not limited to projections of expenditures, savings, completion
dates, cash flows, and operating performance. Such forward-looking statements
are made pursuant to the safe-harbor provisions of the Private Securities
Litigation Reform Act of 1995. These statements are not guaranties of future
performance; instead, they relate to situations with respect to which certain
risks and uncertainties are difficult to predict. Actual future results and
trends, therefore, may differ materially from what is forecast in
forward-looking statements due to a variety of factors, including: the ability
of the Company and its suppliers and customers to bring their information
systems to readiness for the Year 2000; the health of the retail economy in
general, competitive conditions, and demand for the Company's products; progress
toward the Company's cost-reduction goals; unanticipated natural disasters;
legal proceedings; labor matters; and the availability and price of raw
materials which could be affected by weather, disease, energy costs, or other
factors.
16
<PAGE> 17
ITEM 3. - QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK
The information called for by this item is incorporated by reference from this
Form 10-Q under the caption "Market Risk Sensitive Instruments and Positions" of
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations."
17
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of the security holders of the Company was held
on April 19, 1999.
(b) During the annual meeting, the security holders of the Company
elected the following directors to hold office until the next annual meeting of
the security holders and until a successor is duly elected and qualified:
John F. Akers John H. McArthur
Crandall C. Bowles Aldo Papone
John L. Clendenin Robin B. Smith
Leroy S. Close Sherwood H. Smith, Jr.
Charles W. Coker Stewart Turley
(c)
<TABLE>
<CAPTION>
Description of Matter Voted Upon For Against or Withheld Abstentions
<S> <C> <C> <C>
(i)
Annual election of directors:
John F. Akers 36,426,012 113,417
Crandall C. Bowles 36,422,455 116,974
John L. Clendenin 36,429,160 110,269
Leroy S. Close 36,417,120 122,309
Charles W. Coker 36,426,285 113,144
John H. McArthur 36,428,852 110,577
Aldo Papone 36,425,056 114,373
Robin B. Smith 36,425,131 114,298
Sherwood H. Smith, Jr. 36,425,489 113,940
Stewart Turley 36,425,262 114,167
(ii)
Ratification of the appointment of 36,317,694 186,516 35,219
Deloitte & Touche as the Company's
auditors
(iii)
Adoption of the Company's 1999 31,691,211 3,623,456 158,016
Incentive Stock Plan
(d) N/A
</TABLE>
18
<PAGE> 19
ITEM 6 - EXHIBITS
The following exhibits are filed as part of this report:
(10) Material Contracts-Executive Compensation Plans and Arrangements
(a) 1999 Deferred Compensation Plan for Outside Directors of
Springs Industries, Inc.
(b) Springs Industries, Inc., Achievement Incentive Plan
(27) Financial Data Schedule
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, Springs
Industries, Inc. has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPRINGS INDUSTRIES, INC.
By: /s/ James F. Zahrn
----------------------------------
James F. Zahrn
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
DATED: May 17, 1999
20
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Item Page Number
---- -----------
<S> <C> <C>
(10) (a) 1999 Deferred Compensation Plan for Outside Directors 22
of Springs Industries, Inc. effective April 19, 1999,
filed herein (10 pages)
(b) Springs Industries, Inc. Achievement Incentive Plan, 32
effective January 3, 1999, filed herein (3 pages)
(27) Financial Data Schedule (for SEC purposes) 35
</TABLE>
21
<PAGE> 1
Exhibit 10(a)
1999 DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS
OF
SPRINGS INDUSTRIES, INC.
Article 1
Introduction
1.1 Recitals.
(a) Whereas, effective April 30, 1984, the Board of Directors (the
"Board") of Springs Industries, Inc., a South Carolina corporation (the
"Corporation"), approved and adopted the Deferred Compensation Plan for Outside
Directors for the purpose of allowing Directors [as defined in Section 1.3(n)
below] to elect to defer the receipt of fees owing to them for service on, and
attending meetings of, the Board and committees thereof, to fix the date(s) of
receipt thereof, and to assist the Corporation in attracting and retaining
qualified individuals to serve as directors;
(b) Whereas, the Deferred Compensation Plan for Outside Directors was
amended by the Board effective February 26, 1987 (the "Amended and Restated
Deferred Compensation Plan for Outside Directors");
(c) Whereas, the Amended and Restated Deferred Compensation Plan for
Outside Directors was again amended and restated on August 18, 1994 (the "Second
Amended and Restated Deferred Compensation Plan for Outside Directors");
(d) Whereas, the Second Amended and Restated Deferred Compensation Plan
for Outside Directors was amended effective October 29, 1995, and again amended
effective November 1, 1996 (as so amended, the "Prior Plan");
(e) Whereas, the Outside Directors COLI Deferred Compensation Plan was
adopted with respect to deferrals by Directors during the four-year period from
May 1, 1986, to April 30, 1990 (the "COLI Plan"); and
(f) Whereas the Board desires to adopt a new deferred compensation plan
which shall be known as the 1999 Deferred Compensation Plan for Outside
Directors;
NOW, THEREFORE, the 1999 Deferred Compensation Plan for Outside
Directors hereby is adopted effective April 19, 1999.
1.2 Name and Purpose. The name of this plan is the "1999 Deferred Compensation
Plan for Outside Directors of Springs Industries, Inc." (the "Plan"). The
purpose of the Plan is to enable the Corporation to obtain and retain the
services of directors by permitting the deferment of their fees until their
services with the Corporation have
22
<PAGE> 2
terminated while at the same time giving the Corporation the present use of the
compensation so deferred.
1.3 Definitions. Whenever used in the Plan, the following terms shall
have the meaning set forth or referenced below:
(a) "Account" means a Cash Account or a Stock Account.
(b) "Board" has the meaning set forth in Section 1.1(a) above.
(c) "Business Day" means a day except for a Saturday, Sunday or a legal
holiday.
(d) "Cash Account" means an Account which reflects the Compensation
deferred by a Participant pursuant to Section 2.4 and shall include any Interest
Account or COLI Account transferred from the Prior Plan or the COLI Plan
pursuant to Section 2.6(d).
(e) "Cash Compensation" means Compensation paid in the form of cash.
(f) "Cash Credit" means a credit to a Cash Account, expressed in whole
dollars and fractions thereof.
(g) "Closing Price" means the closing price of the Common Stock as
reported in the New York Stock Exchange Composite Transactions published in The
Wall Street Journal.
(h) "COLI Account" means the account of a Participant under the COLI
Plan.
(i) "COLI Plan" means the Outside Directors COLI Deferred Compensation
Plan which was adopted with respect to deferrals by Directors during the period
May 1, 1986, to April 30, 1990.
(j) "Committee" means the Management Compensation and Organization
Committee of the Board (or any successor Committee).
(k) "Common Stock" means (i) the Class A Common Stock, $.25 par value
per share, of the Corporation, adjusted as provided in Section 2.10, or (ii) if
there is a merger or consolidation and the Corporation is not the surviving
corporation thereof, the capital stock of the surviving corporation given in
exchange for such common stock of the Corporation.
(l) "Compensation" means all remuneration (whether paid in cash or in
the form of Common Stock or any derivatives thereof) paid to a Director for
services to the Corporation as a director, other than reimbursement for
expenses, and shall include
23
<PAGE> 3
retainer fees for service on, and fees for attendance at meetings of, the Board
and any Committees thereof.
(m) "Corporation" has the meaning set forth in Section 1.1(a) above.
(n) "Director" means any individual serving on the Board who is not an
employee of the Corporation or any of its subsidiaries.
(o) "Dividend Account" means the Dividend Account of a Participant
under the Prior Plan.
(p) "Interest Account" means the Interest Account of a Participant
under the Prior Plan.
(q) "Measuring Fund Account" means the Measuring Fund Account of a
Participant under the Prior Plan.
(r) "Participant" means a Director who has filed an election to
participate in the Plan under Section 2.2 with regard to any Plan Year or a
Director whose Interest Account or Stock Account under the Prior Plan or whose
COLI Account under the COLI Plan is transferred to the Cash Account or the Stock
Account of the Plan pursuant to Section 2.6(d).
(s) "Plan" has the meaning set forth in Section 1.2 above.
(t) "Plan Year" means the period beginning the first day of the month
following the Corporation's annual meeting of shareholders in April 1999 through
December 31, 1999, and thereafter shall be the applicable calendar year.
(u) "Prior Plan" means the Corporation's Deferred Compensation Plan as
amended and restated on August 18, 1994, and as subsequently amended effective
October 29, 1995, and November 1, 1996.
(v) "Retire" or "Retires" shall mean the ending of a Director's service
as a member of the Board, but shall not include the ending of such service by
reason of death.
(w) "Secretary" means the corporate secretary of the Corporation.
(x) "Stock Account" means an Account which reflects the Compensation
deferred by a Participant pursuant to Section 2.3.
(y) "Stock Compensation" means Compensation paid in the form of Common
Stock or any derivative thereof.
24
<PAGE> 4
(z) "Stock Credit" means a credit to a Stock Account established
pursuant to Section 2.3, and calculated pursuant to Section 2.5.
(aa) "Stock Equivalents Account" means the Stock Equivalent Account of
a Participant under the Prior Plan.
ARTICLE 2
Participation in the Plan
2.1 Eligibility. Any Director serving on to the Board subsequent to
April 19, 1999, may participate in the Plan.
2.2 Election to Participate.
(a) Each Director, and each first time nominee for Director, may elect
to defer payment of all or any portion of his Compensation that is payable with
respect to services performed during any Plan Year. Such election must be made
prior to the date that services are rendered in the Plan Year in which such
Compensation otherwise would be paid and shall be irrevocable thereafter for
such Plan Year; provided, however, a newly-elected Director may deliver a
deferral election to the Corporation within 30 days after his election, which
deferral election shall be effective for Compensation for services performed
subsequent to the date the deferral election is delivered to the Corporation;
provided further, however, that an election by a Director or nominee pursuant to
this paragraph (a) for any Plan Year (or portion thereof) shall be valid and
effective for all purposes for all succeeding Plan Years, unless and until such
election is revoked or modified by such Director prior to the date that services
are rendered in such succeeding Plan Year(s); and, provided further, that no
such election, revocation or modification may be made if the exemption afforded
by Rule 16b-3 under Section 16 of the Securities Exchange Act of 1934 (or any
successor statute), as constituted from time to time, or the rules or
regulations promulgated thereunder, would not be available as a result thereof.
(b) An election to defer any Compensation under the Plan shall: (i) be
in writing; (ii) be delivered to the Secretary of the Corporation; (iii)
contain, or be deemed to contain, the matters set forth in Section 2.3 below, in
accordance with the terms thereof; and (iv) be irrevocable in all respects with
respect to the Plan Year or Plan Years to which the election relates. If a
Director does not elect to defer Compensation payable to him during a Plan Year,
all such Compensation shall be paid directly to such Director in accordance with
resolutions adopted by the Board or by the shareholders of the Corporation from
time to time.
2.3 Mode of Deferral. A Participant may elect to defer all or a portion of
his Cash Compensation for a Plan Year to a Cash Account, a Stock Account, or a
combination of both such Accounts and to defer all or a portion of his Stock
Compensation for a Plan
25
<PAGE> 5
Year to a separate Stock Account. The Corporation shall maintain such Accounts
in the name of the Participant. Any such election with respect to the Account or
Accounts to which his Compensation for a Plan Year shall be deferred shall be
specified in the election referred to in Section 2.2(b) above that is delivered
by the Director to the Secretary, and shall be irrevocable. If a Participant
fails to elect the Account to which deferral of Cash Compensation shall be made,
he shall be deemed to have irrevocably elected deferral to the Cash Account.
Compensation deferred to a Cash Account or Stock Account shall result in Cash
Credits or Stock Credits, respectively.
2.4 Cash Account. The Cash Account of a Participant established with
respect to a Plan Year shall be credited, as of the day the Compensation would
have been paid had it not been deferred, with Cash Credits equal to the dollar
amount of such deferred Compensation. As of the last day of each calendar
quarter, or as of the date the Account is distributed, if earlier, such Cash
Accounts shall be credited with interest in the form of additional Cash Credits.
Interest shall be at such rate as is determined from time to time by the
Committee. Initially, the rate of interest under the Cash Account shall be the
Lehman Brothers Corporate Bond Long-Term Baa Index except that interest with
respect to a Participant's COLI Account transferred to a separate Cash Account
pursuant to Section 2.6(d) below shall continue initially to be determined in
accordance with the COLI Plan.
2.5 Stock Account.
(a) The Stock Accounts of a Participant established with respect to a
Plan Year shall be credited, as of the day the Compensation would have been paid
had it not been deferred, with Stock Credits equal to the number of shares of
Common Stock (including fractions of a share) that could have been purchased
with the amount of such deferred Compensation at the average of the Closing
Prices of shares of Common Stock for the last five (5) trading days immediately
preceding the day in which such Stock Accounts are so credited. As of the date
any dividend is paid to holders of shares of Common Stock, such Stock Accounts
shall be credited with additional Stock Credits equal to the number of shares of
Common Stock (including fractions of a share) that could have been purchased, at
the Closing Price of shares of Common Stock on such date, with the amount which
would have been paid as dividends on that number of shares (including fractions
of a share) of Common Stock which is equal to the number of Stock Credits then
attributed to such Stock Accounts. In the case of dividends paid in property
other than cash, the amount of the dividend shall be deemed to be the fair
market value of the property at the time of the payment of the dividend, as
determined in good faith by the Committee.
(b) To the extent a Participant's separate Stock Account has been
credited with Stock Credits as a result of a Participant's election to defer
receipt of remuneration under the Corporation's 1991 Restricted Stock Plan for
Outside Directors, or any successor plan, such Stock Credits (but not Stock
Credits arising from the payment of dividends on Common Stock with respect to
such deferrals) shall be subject to forfeiture as provided in such plan.
26
<PAGE> 6
2.6 Distribution of a Cash Account or a Stock Account.
(a) Distribution of all Cash Accounts and Stock Accounts of a
Participant shall commence as of January 15 of the Plan Year following the Plan
Year in which such Participant Retires. If the date for commencement of such
distribution is not a Business Day, such distribution shall commence on the next
succeeding Business Day.
(b) A Participant may elect the number of annual installments (not to
exceed 15) in which the Participant's Cash Accounts and Stock Accounts
(including accounts transferred from the Prior Plan and the COLI Plan pursuant
to Section 2.6(d) below) maintained on his behalf under the Plan shall be
distributed. A Participant's Cash Accounts and Stock Account shall both be
distributed in the same number of annual installments, except that a Participant
may elect to have his Cash Account for the COLI Plan distributed over fifteen
(15) annual installments regardless of the Participant's distribution election
for his other Accounts. If no such election is made by such Director with
respect to such Accounts, the number of annual installments for all Accounts
shall be ten (10). Such payment or payments shall be in amounts determined
pursuant to Section 2.8 below, and shall be made on the date set forth in
Section 2.6(a) above, and such date of each succeeding Plan Year as applicable.
(c) A Participant's installment election referred to in paragraph (b)
above is not effective unless made more than six months prior to the date the
Participant Retires. Once made, such election shall apply for all succeeding
Plan Years unless modified thereafter. A Participant who has made a deferral
election may make an additional election to change the form of distribution of
the balance in his Account (a "Change-of-Form Election"). Only a total of three
(3) Change-of-Form Elections may be made by any Participant and only one such
Change-of-Form-Election may be made by any Participant during any three (3)
calendar years; provided, however, that no such Change-of-Form-Election will be
effective unless made more than six (6) months prior to the date the Participant
Retires.
(d) Effective July 1, 1999, (i) the Interest Accounts and Dividend
Accounts in the Prior Plan of Directors eligible to participate in the Plan
shall be transferred to the respective Director's Cash Account under the Plan,
(ii) the Measuring Fund Accounts and Stock Equivalents Account of such Directors
shall be transferred to the respective Director's Stock Account in the Plan, and
(iii) the COLI Accounts of such Directors shall be transferred to a separate
Cash Account for the respective Director under the Plan. Furthermore, each
Participant who has a Measuring Fund Account under the Prior Plan may elect
(which election shall be irrevocable) prior to May 15, 1999, to transfer,
effective July 1, 1999, all or a portion of the Participant's account balance in
the Measuring Fund under the Prior Plan to his Cash Account rather than solely
to his Stock Account. All accounts transferred from the Prior Plan and the COLI
Plan to the Plan as specified in this Section shall be based on the valuation of
such accounts as of June 30, 1999.
27
<PAGE> 7
2.7 Form of Distribution. Distribution of a Participant's Cash Accounts
shall be made only in cash. Distribution of a Participant's Stock Accounts shall
be made in the form of an equivalent number of shares of Common Stock; provided,
however, at the option of the Committee the distribution may be in the form of
cash in the amount of the cash value on the date of distribution of the number
of Stock Credits distributable in the installment. For purposes of determining
such cash value, the Corporation shall use the average of the closing prices of
the Common Stock for the last five (5) trading days immediately preceding the
date of distribution.
2.8 Installment Amount. The amount of each installment with respect to a
Cash Account of a Participant shall be equal to the product of the current
balance in such Cash Account and a fraction, the numerator of which is one and
the denominator of which is the number of installments yet to be paid. The
number of Stock Credits attributable to an installment with respect to a Stock
Account (unless otherwise specified in the Plan) shall be equal to the product
of the current number of Stock Credits attributed to such Stock Account and a
fraction, the numerator of which is one and the denominator of which is the
number of installments yet to be paid.
2.9 Hardship Withdrawals. In case of an unforeseeable emergency, a
Participant may request the Committee, on a form to be provided by the Committee
or its delegate, that payment be made earlier than the date to which it was
deferred.
For purposes of this Section 2.9, an "unforeseeable emergency"
shall be limited to a severe financial hardship to the Participant resulting
from a sudden and unexpected illness or accident of the Participant or of a
dependent [as defined in Section 152(a) of the Internal Revenue Code] of the
Participant, loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. The circumstances that will
constitute an unforeseeable emergency will depend upon the facts of each case;
but, in any case, payment may not be made to the extent that such hardship is or
may be relieved: (i) through reimbursement or compensation by available
insurance or otherwise; (ii) by liquidation of the Participant's assets, to the
extent the liquidation of such assets would not itself cause severe financial
hardship; or (iii) by cessation of deferrals under the Plan.
2.10 Adjustment. If at any time the number of outstanding shares of Common
Stock shall be increased as the result of any stock dividend, stock split,
subdivision or reclassification of shares, the number of Stock Credits with
which each Stock Account of a Participant is credited shall be increased in the
same proportion as the outstanding number of shares of Common Stock is
increased. If the number of outstanding shares of Common Stock shall at any time
be decreased as the result of any combination, reverse stock split or
reclassification of shares, the number of Stock Credits with which each Stock
Account of a Participant is credited shall be decreased in the same proportion
as the outstanding number of shares of Common Stock is decreased. In the event
the Corporation shall at any time be consolidated with or merged into any other
corporation and holders of shares of Common Stock receive shares of the capital
stock
28
<PAGE> 8
of the resulting or surviving corporation, there shall be credited to each
Stock Account of a Participant, in place of the Stock Credits then credited
thereto, new Stock Credits in an amount equal to the product of the number of
shares of capital stock exchanged for one share of Common Stock upon such
consolidation or merger and the number of Stock Credits with which such Account
then is credited. If in such a consolidation or merger holders of shares of
Common Stock shall receive any consideration other than shares of the capital
stock of the resulting or surviving corporation or its parent corporation, the
Committee, in its sole discretion, shall determine the appropriate change in
Participants' Accounts.
2.11 Distribution upon Death.
(a) A Participant may deliver a beneficiary election to the Secretary
of the Corporation electing that, in the event the Participant should die before
full payment of all amounts credited to the Participant's Cash Accounts and
Stock Accounts, the balance shall be paid in either one payment or in some other
number of approximately equal annual installments [not exceeding five (5)] to
such person or persons designated in the beneficiary election, except that a
Participant may elect to have his Cash Account for the COLI Plan distributed in
the number of installments determined with respect to such Cash Account under
Section 2.6(b) above in the event of death of the Participant prior to
commencement of distribution or over the balance of such period if the
Participant dies after commencement of such distribution. A Participant may from
time to time revoke or change any such designation by written notice to the
Secretary. If there is no designation on file with the Secretary at the time of
the Participant's death, or if the person or persons designated therein shall
have all predeceased the Participant, such distributions shall be made in one
(1) payment to the executor or administrator of the Participant's estate. Any
distribution under this Section 2.11(a) shall be made or commence as soon as
practicable following the end of the fiscal quarter in which the Secretary is
notified of the Participant's death or is satisfied as to the identity of the
appropriate payee, whichever is later.
2.12 Withholding Taxes. The Corporation shall deduct from all distributions
under the Plan any taxes required to be withheld by federal, state, or local
governments.
ARTICLE 3
The Committee
3.1 Authority. The Committee shall have full power and authority to
administer the Plan, including the power to (a) promulgate forms to be used with
respect to the Plan, (b) promulgate rules of Plan administration, (c) settle any
disputes as to rights or benefits arising from the Plan, (d) interpret the terms
of the Plan, (e) amend, modify or terminate the Plan as provided in Section 4.5
below and (e) make such decisions or take such action as the Committee, in its
sole discretion, deems necessary or advisable
29
<PAGE> 9
to aid in the proper administration of the Plan; provided, however that the
Committee cannot change or modify any of the irrevocable elections made by a
Participant under Section 2.2(b) above. Any decision made by the Committee shall
be final and binding on the Corporation, Participants and their heirs or
successors.
3.2 Elections, Notices. All elections, notices and designations required or
permitted to be provided to the Committee under the Plan must be in such form or
forms prescribed by, and contain such information as is required by, the
Committee.
ARTICLE 4
Miscellaneous
4.1 Funding. No promise hereunder shall or may be secured by any assets of
the Corporation, and no assets of the Corporation shall otherwise be designated
as attributable or allocated to the satisfaction of such promises. The
Participants have the status of general unsecured creditors of the Corporation
hereunder.
4.2 Non-alienation of Benefits. No benefit under the Plan shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to do so shall be void. No such benefit,
prior to receipt thereof pursuant to the provisions of the Plan, shall be in any
manner liable for or subject to the debts, contracts, liabilities, engagements
or torts of the Participant.
4.3 Delegation of Administrative Duties. The Committee may delegate to
officers and employees of the Corporation from time to time the power and
authority to carry out and effect the decisions and rules of the Committee. Any
such delegation shall be in writing.
4.4 Governing Law. This Plan shall be governed by and construed in
accordance with the laws of the State of South Carolina.
4.5 Amendment, Modification and Termination of the Plan. The Board or the
Committee at any time may terminate and in any respect amend or modify the Plan.
4.6 Successors and Heirs. The Plan and any properly executed elections
hereunder shall be binding upon the Corporation and Participants, and upon any
assignee or successor in interest to the Corporation and upon the heirs, legal
representatives and beneficiaries of any Participant.
4.7 Status of Participants. Stock Credits are not, and do not constitute,
shares of Common Stock, and no right as a holder of shares of Common Stock shall
devolve upon a Participant by reason of his participation in the Plan.
30
<PAGE> 10
4.8 Use of Terms. The masculine includes the feminine and the plural
includes the singular, unless the context clearly indicates otherwise.
4.9 Statement of Accounts. No later than February of each Plan Year, each
Participant in the Plan during the immediately preceding Plan Year shall receive
a statement of his Accounts under the Plan as of December 31 of such preceding
Plan Year and of the amount deferred during the Plan Year. Such statement shall
be in a form and contain such information as is deemed appropriate by the
Committee.
31
<PAGE> 1
Exhibit 10(b)
SPRINGS INDUSTRIES, INC. ACHIEVEMENT INCENTIVE PLAN
1. PURPOSE. The purpose of the Achievement Incentive Plan (the "Plan") is
to provide key employees of Springs Industries, Inc. (the "Company") and its
affiliates with incentive compensation based upon level of achievement of
financial and other performance criteria. The Company believes the Plan will
enhance the ability of the Company and its affiliates to attract individuals of
exceptional managerial and administration talent upon whom, in large measure,
the sustained progress, growth and profitability of the Company depends.
2. DEFINITIONS. As used in the Plan, the following terms shall have the
meanings set forth below:
(a) "Award" shall mean a cash payment.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time and any successor thereto.
(d) "Compensation Committee" shall mean the Management Compensation and
Organization Committee of the Board (or any successor committee).
(e) "CMC" shall mean the Corporate Management Committee of the Company.
(f) "Key Employee" shall mean any exempt salaried employee of the
Company or any affiliate in a salary grade of 11 or higher.
(g) "Participant" shall mean any person selected by the Compensation
Committee to participate in the Plan.
(h) "Performance Year" shall mean the fiscal year in which a
Participant provides services on account of which the Award is made.
(i) "Salary Committee" shall mean the Salary Committee of the CMC.
(j) "Target Award" shall mean an Award level that may be paid if
certain performance criteria are achieved in the Performance Year.
3. ELIGIBILITY. Key Employees employed in active service by the Company
or by any of its subsidiaries or affiliates, if designated by the Salary
Committee, during a Performance Year are eligible to be Participants under the
Plan for such Performance Year.
4. AWARDS-GENERAL. The Salary Committee shall establish Target Awards at
the beginning of each Performance Year for Participants who are not members of
the CMC. The Compensation Committee will establish Target Awards at the
beginning of each Performance Year for Participants who are members of the
CMC and shall establish the corporate financial performance criteria to be
applicable to Awards for such Performance Year. The corporate financial
performance criteria utilized by the Compensation Committee may be
32
<PAGE> 2
based on earnings per share; other corporate financial objectives, such as
return on assets or profits from operations; customer satisfaction indicators;
operational efficiency measures; and other measurable objectives tied to the
Company's success or such other criteria as the Compensation Committee shall
determine.
A Participant must be employed by the Company or its subsidiary or
affiliate on the last day of a Performance Year to be eligible to receive an
Award for the year except in the case of termination of employment during the
Performance Year for death, retirement, total disability, as defined in the
Company's Long Term Disability Plan, or economic termination, as defined in the
Company's Springs of Achievement Partnership Plan.
The Award amount with respect to a Participant may be determined
entirely on achievement of corporate financial performance targets established
by the Compensation Committee or in part on achievement of financial performance
targets and in part on achievement of personal objectives (including business
unit financial objectives) as determined by the Compensation Committee or, in
the case of Participants who are not members of the Corporate Management
Committee, as determined by the Salary Committee.
Awards will be made following the end of each Performance Year. Awards
shall be paid as soon as practicable after the Performance Year, except to the
extent that a Participant has made an election to defer the receipt of such
Award pursuant to the Company's Deferred Compensation Plan. The determination of
the Award amount for each Participant shall be made at the end of each
Performance Year and may be less than (including no Award) or greater than the
Target Award, subject to limitations established by the Compensation Committee.
The Salary Committee may in special circumstances make bonus awards to
Participants who are not members of the CMC from time to time in its sole
discretion, and the Compensation Committee may in special circumstances make
bonus awards to CMC members from time to time in its sole discretion.
5. OTHER CONDITIONS.
(a) No person shall have any claim to an Award under the Plan and there
is no obligation for uniformity of treatment of Participants under the Plan.
Awards under the Plan may not be assigned or alienated.
(b) Neither the Plan nor any action taken hereunder shall be construed
as giving to any Participant the right to be retained in the employ of the
Company or any affiliate.
(c) The Company or any affiliate shall have the right to deduct from
any Award to be paid under the Plan any federal, state or local taxes required
by law to be withheld with respect to such payment.
6. DESIGNATION OF BENEFICIARIES. A participant may, if the Compensation
Committee permits, designate a beneficiary or beneficiaries to receive all or
part of the Award which may be made to the Participant, or may be payable, after
such Participant's death. A designation of beneficiary shall be made in
accordance with procedures specified by the Company and may be replaced by a new
designation or may be revoked by the Participant at any time. In case of the
Participant's death, an Award with respect to which a designation of beneficiary
has been made (to the extent it is valid and enforceable under the applicable
law) shall be paid to the designated beneficiary or beneficiaries. Any Award
granted or payable to a Participant who is deceased and not subject to such a
designation shall be distributed to the Participant's estate. If there shall be
any question as to the legal right of any beneficiary to
33
<PAGE> 3
receive an Award under the Plan, the amount in question may be paid to the
estate of the Participant, in which event the Company or its affiliates shall
have no further liability to anyone with respect to such amount.
7. PLAN ADMINISTRATION.
(a) The Compensation Committee shall have full discretionary power to
administer and interpret the Plan and to establish rules for its administration
(including the power to delegate authority to others to act for and on behalf of
the Compensation Committee). In making any determinations under or referred to
in the Plan, the Compensation Committee (and its delegates, if any) shall be
entitled to rely on opinions, reports or statements of employees of the Company
and its affiliates and of counsel, public accountants and other professional or
expert persons.
(b) The Plan shall be governed by the laws of the State of South
Carolina and applicable Federal law.
8. MODIFICATION OR TERMINATION OF PLAN. The Compensation Committee may
modify or terminate the Plan at any time, effective at such date as the
Compensation Committee may determine. The Senior Vice President - Human
Resources of the Company or her delegate with the concurrence of the General
Counsel of the Company or his delegate (or, in each case, any successor to
either of such officer's responsibilities), shall be authorized to make minor or
administrative changes in the Plan or changes required by or made desirable by
law or government regulation. Such a modification may affect present and future
Participants. For purposes of this Section, a change to the Plan that affects
any Award to a Covered Employee shall not be a minor or administrative change.
9. ADOPTION AND EFFECTIVE DATE. This Plan was adopted by the Board of
Directors of the Company at a meeting held on February 11, 1999, effective
January 3, 1999.
34
<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
3, 1999, 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-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> APR-03-1999
<CASH> 890
<SECURITIES> 0
<RECEIVABLES> 328,579
<ALLOWANCES> 0
<INVENTORY> 387,671
<CURRENT-ASSETS> 768,816
<PP&E> 1,391,717
<DEPRECIATION> 817,258
<TOTAL-ASSETS> 1,468,672
<CURRENT-LIABILITIES> 238,845
<BONDS> 291,548
0
0
<COMMON> 4,482
<OTHER-SE> 730,592
<TOTAL-LIABILITY-AND-EQUITY> 1,468,672
<SALES> 584,000
<TOTAL-REVENUES> 584,000
<CGS> 481,356
<TOTAL-COSTS> 481,356
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,329
<INCOME-PRETAX> 24,571
<INCOME-TAX> 9,327
<INCOME-CONTINUING> 15,244
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,244
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.84
</TABLE>
