Springs Restructures Business Units

Don Hogsett, September 26, 2005

Fort Mill, S.C. — In a sweeping overhaul of the way it does business, and perhaps dropping a hint about what the future may hold, Springs Industries Inc. said it will split itself into two separate, free-standing companies — the textile home fashions business, and the window and drapery hardware business.

Each of the two separate companies will be owned by current shareholders of the privately owned Springs.

In a tumultuous era of rapid change, global competition and the continuing consolidation of the American textiles industry, such a move could conceivably make it easier for Springs to sell itself off in pieces, allowing the controlling investors, the Close family and Heartland Industrial Partners, a private equity company, to cash out. Since going private in September 2001, Springs, like all other American home fashions companies, has been severely challenged by a flood of low-cost imports, and by retailers bypassing American suppliers to buy product directly from off-shore suppliers.

With sales and profits under pressure, Springs has been overhauling operations, shutting down plants and laying off white-collar and blue-collar workers. In July 2003, Springs announced the closing of its White and Lancaster bedding plants, affecting about 500 jobs.

In December, 2004, Springs said it was closing two South Carolina bedding facilities, the Lyman and Wamsutta plants, affecting another 540 workers. The down-sizing hit the terry business earlier this year, when Springs shut a towel weaving plant in Griffin, Ga. and a towel finishing plant in Hartwell, Ga. The two plants employed about 850 workers.

While Springs no longer publicly reports its financial or operating results, the numbers are still circulated among investors and current shareholders, and the word in the industry has Springs losing money during the first quarter and projecting a substantial loss for all of 2005.

Crandall Bowles, Springs chairman and CEO, said, “Operating textile home furnishings and Springs Window Fashions as separate companies will improve access to equity financing, strengthen management focus, enhance strategic opportunities and add flexibility for each business.”

Bowles said the two operations are “distinctly different businesses with unique products, distribution channels and strategies.”

Importantly, she said, a restructuring would allow each business to use its stock to make acquisitions, obtain equity financing, provide incentives to key management “and pursue other growth strategies more effectively.”

Bowles said Springs employees were told of the restructuring plans last May, and said she expects the separation will be complete by the end of the year.

Tom O'Connor, executive vice president and head of the home fashions business, said, “The press release is very straightforward and means exactly what it says.”

O'Connor emphasized, “In no way does the press release suggest there is any interest in selling the company. It says there are several reasons to separate the company. But it does not say that Crandall, her family, or Heartland are at all interested in selling out.”

It's important to note, said O'Connor, that after the split the two companies “will have the same shareholder structure and the same operational and management structure. These are two entirely distinct product lines, each with its own channels of distribution and its own needs.”

After the split, O'Connor said, the home furnishings operation's management structure will remain in place under his leadership. Ron Zabel will continue to lead the window business, which manufactures blinds and shutters, as well as drapery hardware, under the Graber, Bali and Nanik nameplates.

While privately held Springs no longer reports sales or earnings numbers, a recent company fact sheet said total sales are about $2.7 billion. Home Textiles Today, in its ranking of the Top 125 home fashions suppliers, estimated home fashions sales, excluding window, of about $2.4 billion, which would suggest window sales in the range of $300 million.

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