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Springs Global to be Public

Coteminas Merger Will Result in $2.4 billion Traded Titan

Montes Claros, Brazil — When Coteminas and Springs unite in the coming months as Springs Global S.A., a $2.4 billion textiles titan, they’ll also be creating something once thought to be virtually extinct, at least in the United States — a publicly traded home textiles company.

Gambling that it can parlay a low-cost, formidably efficient and broad-based global operation into the kind of profitable company that rewards investors, Coteminas said the partners intend to make Springs Global S.A. “a public company in the future in the international capital markets, either directly or through a holding company of which Springs Global S.A. will be a wholly owned subsidiary.”

Under the terms of the joint venture, Coteminas will hold a 50 percent stake in Springs Global. The South Carolina-based Close family, which has controlled Springs Industries since 1887, and its silent partner, Heartland Industrial Partners, which bought into Springs when it went private in 2001, will hold the remaining 50 percent stake.

The Close family will control roughly 26 percent of Springs Global, while Heartland holds about a 24 percent stake.

Springs Global will be controlled by an eight-person board of directors. Coteminas said it will name four board members, the Close family will appoint two, and Heartland Industrial Partners will hold two board seats. The venture partners earlier announced that Crandall Bowles, Springs CEO, and Josue Cristiano Gomes da Silva, Coteminas CEO, will work together as co-chairmen.

The umbrella of a public company will provide a potential exit strategy for any of the partners, allowing them to cash out at some point through the sale of stock.

While a substantially smaller company than Springs, Coteminas has established a track record as a strongly profitable and efficiently operated textiles producer. During 2004, the company drove earnings up 5 percent, to $78.3 million, as it pushed sales up even faster, by 16.9 percent, to $583.6 million.

But business was tough during the first half of the year, when Coteminas’ sales and profits came under pressure. During the first six months of the year, profits tumbled 14.1 percent, to $26.3 million from $30.7 million last year. Sales slipped 2.8 percent, to $262 million from $269.5 million last year.

Taking a bite out of the top and bottom lines was a stronger Brazilian real and a weakening American dollar (Springs, a big Coteminas customer, pays in dollars). During the first six months of this year, the Brazilian real was up 16.2 percent against the dollar versus the same period last year, offsetting a 21.3 percent gain, and generating an average price reduction of 4.1 percent.

Coteminas

Qtr. 6/30 (x000) 2005 2004 % change
Results converted from Brazilian reals into U.S. dollars at the rate of exchange in effect Nov. 2, 2005.
a-First quarter results include $3.8 million in income from its share in a subsidiary, compared with a prior-year loss of $4.5 million; and miscellaneous income of $70,583, compared with $1,787 the preceding year.
b-Six month results include $8.3 million in income from its share in subsidiary, compared with a year-before loss of $3.7 million; and miscellaneous income of $73,710, compared with $62,095 a year ago.
Sales $136,493 $141,975 -3.9
Oper. income (EBIT) 25,863 28,663 -9.8
Net income 13,358a 15,337a -12.9
Average gross margin 27.9% 33.4% --
SG&A expenses 11.8% 10.1% --
Six Months
Sales 262,025 269,472 -2.8
Oper. income (EBIT) 109,136 120,968 -9.8
Net income 26,324b 30,660b -14.1
Average gross margin 26.7% 31.6% --
SG&A expenses 11.3% 10.2% --


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