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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 0-22580
JPE, INC.
775 Technology Drive, Suite 200, Ann Arbor, MI 48108
(734) 662-2323
Incorporated in Michigan IRS Employer Identification Number 38-2958730
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Title of Class Exchange on Which Registered
Common Stock ___
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 the past 90 days. Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Based on the closing price on March 15, 1999, the aggregate market value of the
Registrant's Common Stock held by non-affiliates of the Registrant was
approximately $1,177,289.
The number of shares of the Registrant's Common Stock outstanding at March 15,
1999 was 4,602,180.
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TABLE OF CONTENTS
Item Page
- ---- ----
PART I
1. Business ........................................................... 3
2. Properties ......................................................... 10
3. Legal Proceedings .................................................. 10
4. Submission of Matters to a Vote of Security Holders ................ 11
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters ............................................... 11
6. Selected Financial Data ............................................ 12
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................... 14
8. Financial Statements and Supplementary Data ........................ 21
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ............................... 46
PART III
10. Directors and Executive Officers of the Registrant ................. 47
11. Executive Compensation ............................................. 50
12. Security Ownership of Certain Beneficial Owners
and Management .................................................... 57
13. Certain Relationships and Related Transactions ..................... 57
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K ....................................................... 58
Signatures ......................................................... 59
FINANCIAL STATEMENT SCHEDULES
JPE, Inc. and Subsidiary Financial Statement Schedules ............. 60
Exhibit Index ...................................................... 62
PART I
ITEM 1. BUSINESS
FORWARD LOOKING INFORMATION
This Annual Report on Form 10-K contains, and from time to time the Company
expects to make, certain forward-looking statements regarding its business,
financial condition and results of operations. In connection with the "Safe
Harbor" provisions of the Private Securities Reform Act of 1995 (the "Reform
Act"), the Company intends to caution investors that there are several important
factors that could cause the Company's actual results to differ materially from
those projected in its forward-looking statements, whether written or oral, made
herein or that may be made from time to time by or on behalf of the Company.
Investors are cautioned that such forward-looking statements are only
predictions and that actual events or results may differ materially. The Company
undertakes no obligation to publicly release the results of any revisions to the
forward-looking statements to reflect events or circumstances or to reflect the
occurrence of unanticipated events.
The Company wishes to ensure that any forward-looking statements are accompanied
by meaningful cautionary statements in order to comply with the terms of the
safe harbor provided by the Reform Act. Accordingly, the Company has set forth a
list of important factors that could cause the Company's actual results to
differ materially from those expressed in forward-looking statements or
predictions made herein and from time to time by the Company. Specifically, the
Company's business, financial condition and results of operations could be
materially different from such forward-looking statements and predictions as a
result, among other things, of (i) customer pressures that could impact sales
levels and product mix, including customer sourcing decisions, customer
evaluation of market pricing on products produced by the Company and customer
cost-cutting programs; (ii) operational difficulties encountered during the
launch of major new OEM programs; (iii) the availability of funds to the Company
to continue operations pending consummation of a sale or an investment in the
Company and a restructuring of the Company's debt; (iv) approval of the court
order for the Plans of Reorganization for the Company's subsidiaries, Starboard
Industries, Inc. and Plastic Trim, Inc.; and (v) the ability to consummate a
transaction which permits restructuring of the Company's debt and infusion of
additional capital (see "Liquidity and Capital Resources").
GENERAL AND RECENT INFORMATION
JPE, Inc. (together with its subsidiaries, the "Company"), through its five
operating subsidiaries, manufactures and distributes automotive and truck
components to original equipment manufacturers ("OEMs") and to the aftermarket.
During 1998 and 1997, the Company experienced financial difficulty resulting in
a strategy to sell certain subsidiaries, obtain additional capital and
restructure its debt.
At December 31, 1998, three of the Company's five operating subsidiaries,
Plastic Trim, Inc. ("PTI"), Starboard Industries, Inc. ("Starboard") and JPE
Canada Inc. ("JPEC"), were operating under court ordered protection. On
September 15, 1998, PTI and Starboard filed voluntary petitions for relief under
Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court
for the Eastern District of Michigan. On August 27, 1998, the Ontario Court
(General Division) Commercial List issued an order to appoint an Interim
Receiver for JPEC pursuant to Section 47 of the Bankruptcy and Insolvency Act of
Canada. Collectively, these companies represent the Company's Trim Group. The
Company's two other operating subsidiaries, Dayton Parts, Inc. ("DPI") and
Industrial & Automotive Fasteners, Inc. ("IAF"), continue to operate without
court protection.
On October 28, 1998, the Company completed the sale of substantially all of the
assets of its wholly-owned subsidiary, Allparts, Inc. ("Allparts"), to R&B, Inc.
for $10.1 million and the assumption of trade payables and accrued liabilities
of $1.5 million, for a total sales price of $11.6 million. The assets of
Allparts on October 28, 1998 totaled $16.6 million, resulting in a loss of $5.2
million. The net proceeds of $9.9 million were used to pay down U.S. Bank debt.
This transaction was reported in the Company's Current Report on Form 8-K filed
on November 12, 1998.
On February 8, 1999, under court order, the Company sold substantially all the
assets of JPEC for approximately Cdn. $21.0 million, which proceeds were used to
pay Canadian bank debt and other secured debt provided by a major customer. In
conjunction with the sale of all of its assets, JPEC filed an assignment in
bankruptcy. JPEC has no assets to pay its unsecured debt and, as such, JPEC will
be dissolved. The Company has provided an unsecured guarantee in the amount of
Cdn. $2.0 million for a portion of the JPEC debt. The proceeds of the sale were
not sufficient to fully pay JPEC's secured lender, and the Company continues to
be indebted to such lender under this guarantee in an amount of approximately
Cdn. $820,000. The Company is negotiating with JPEC's secured lender to settle
amounts due under the guarantee.
On March 26, 1999, the Company sold the stock of IAF for approximately $20.0
million. As part of this transaction, certain vendors of IAF agreed to accept a
30% payment for past due payables and union employees agreed to accept annuity
contracts in lieu of their postretirement health care and life insurance
benefit, which resulted in a forgiveness of liabilities of approximately $3.4
million. The Company will recognize a loss of approximately $4.0 million as a
result of the stock sale. The $19.2 million of net proceeds of this transaction
were used to pay down U.S. Bank debt.
On February 25, 1999, the Company filed Plans of Reorganization for PTI and
Starboard with the United States Bankruptcy Court, pursuant to which those
companies would emerge from pending Chapter 11 bankruptcy proceedings. This
action is dependent on the consummation of an investment in the Company by ASC
Holdings, Inc. described below. As part of the bankruptcy proceedings, unsecured
creditors of PTI and Starboard would forgive 70% of their claims, which will
result in a forgiveness of liabilities of approximately $4.1 million. These
Plans are subject to confirmation by the Bankruptcy Court scheduled for April
16, 1999.
The Company reached an agreement in principal with ASC Holdings, Inc., pursuant
to which a company to be formed would acquire common and preferred stock of the
Company to initially have voting control and an economic interest of 95% of the
Company. The current stockholders of the Company would retain the remaining
equity in the Company, subject to further dilution of 511,353 common stock
warrants, in the event of the exercise of such warrants that will be issued to
the Company's bank lenders in exchange for loan concessions in excess of $12.0
million. In addition, the current stockholders of the Company, and the Company's
bank group would receive warrants that would entitle them to purchase 15% of the
voting power and economic interest in the Company, exercisable two years after
the consummation of the ASC Holdings, Inc. investment, subject to obtaining
prescribed EBITDA levels. As such, current stockholders of the Company would
experience substantial dilution upon the ASC Holdings, Inc. investment, but
would have the potential of increasing their aggregate percentage ownership in
the future. Pursuant to the agreement in principle, ASC Holdings, Inc. would
invest $18.4 million in the Company and would provide or arrange a loan to JPE
in the amount of approximately $51.6 million. The Company and ASC Holdings, Inc.
are continuing to negotiate the final terms and structure of the foregoing
investment by ASC Holdings, Inc. which is subject to a number of conditions,
including execution of a definitive agreement, approval of the bankruptcy courts
having jurisdiction over PTI and Starboard and approval of the Company's bank
group lenders. There can be no assurance that the parties will reach agreement
on mutually satisfactory terms or that the conditions to consummating the
transaction will be satisfied.
If all of the transactions described above are completed, the Company would
consist of three operating subsidiaries, DPI, PTI and Starboard, with estimated
1999 annual revenues of approximately $155 million and total assets of
approximately $75 million.
The following table sets forth information regarding the Company's sales in
certain classes of similar products as percentages of net sales for the periods
indicated.
Percentage of Net Sales(1)
Year ended December 31,
------------------------------
1996 1997 1998(2)
---- ---- ----
OEM:
Trim Products.......................... 46.8% 54.3% 51.8%
Fasteners.............................. 16.2 13.8 14.8
Aftermarket (truck and automotive
replacement parts):
Heavy-duty undercarriage parts......... 30.4 25.7 27.4
Brake systems.......................... 6.6 6.2 6.0
------ ------ ------
100.0% 100.0% 100.0%
====== ====== ======
<FN>
(1) See also Note 15 to the Notes to Consolidated Financial Statements for
additional operating segment information.
(1) Represents actual sales by all of the operating subsidiaries for 1998.
Includes sales of Trim Products segment (18.7%) which have been carried as
an equity investment and sales for Allparts ("Aftermarket-Brake systems")
through its divestiture date of October 28, 1998.
</FN>
ORIGINAL EQUIPMENT
The Company's OEM group consisted of four operations in 1998: Starboard, PTI,
JPEC and IAF. Starboard manufactures and supplies luster, painted and
co-extruded metallic decorative and functional exterior trim parts. PTI
manufactures and supplies decorative extruded plastic exterior trim. JPEC
manufactures, paints and supplies plastic injection-molded exterior trim.
Starboard, PTI and JPEC supply parts directly to OEMs and to suppliers which
sell to OEMs ("Tier 1 suppliers"). All of the parts supplied are utilized in
automotive and light truck applications. These three companies represent the
Trim Products segment.
IAF manufactures and supplies decorative, specialty and standard wheel nuts for
domestic OEMs and certain Japanese transplants for use on automobiles and light
trucks. In addition, IAF uses its proprietary process to manufacture stainless
steel capped wheel nuts. This business represented the Fastener segment.
As previously described, JPEC and IAF have been sold in 1999 as part of the
Company's restructuring.
AFTERMARKET
The Company's aftermarket group consisted of two operations in 1998: DPI and
Allparts. These two businesses represent the Truck and Automotive Replacement
Parts segment. DPI manufactures and distributes springs and spring-related
products and distributes a variety of other undercarriage replacement parts for
trucks and trailers, consisting of suspension, brake, wheel-end and steering
products. Almost all of DPI's springs and spring-related products are
manufactured at its plant in Harrisburg, Pennsylvania. Other products sold by
DPI are purchased from third party manufacturers. DPI sells products to the
truck and trailer parts independent aftermarket under the brand names "Stanley
Springs," "Dayton Parts" and "BATCO."
Allparts distributes hydraulic brake system products for the independent
automotive and light truck aftermarket. Allparts sold its brake parts under the
brand names of "Brakeware" and "Tru-Torque." This business was sold in October
1998.
MANUFACTURING OPERATIONS
ORIGINAL EQUIPMENT
Starboard manufactures decorative exterior trim. Starboard's primary
manufacturing processes include roll forming, bending, pierce and end forming,
and co-extrusion of steel and PVC. Decorative and functional parts produced by
Starboard are often plated, painted or heat treated by third parties before
final shipment to the customer. Decorative products are utilized in fascia, body
side, window trim and reveal, garnish and wheel well trim applications.
PTI manufactures extruded and injection molded plastic exterior trim products.
The extruded products are manufactured primarily from PVC plastic which is
extruded at high temperatures into parts of varying dimensions. The injection
molded parts are produced utilizing TPO plastic compound which is injected into
a product mold at high temperatures. These parts are assembled before being
shipped to the customer. The parts are used primarily for decorative and styling
purposes in the production of passenger cars, light trucks, minivans, and
sport-utility vehicles. PTI manufactures three primary products: (1) body side
moldings, which serve aesthetic and functional purposes and are affixed to the
side of a vehicle; (2) reveal moldings, which surround a vehicle's windshield
and backlight glass and cover the gap between the edge of the glass and the car
body; and (3) bumper fascia moldings, which are bright or colored decorative
inserts attached to plastic bumpers and bumper pads, and are primarily aesthetic
in nature.
There is no discussion of the manufacturing operations of JPEC and IAF as these
businesses have been sold.
AFTERMARKET
DPI manufactures springs, spring assemblies and spring-related products for the
heavy-duty truck and trailer aftermarket. The Company has the capability of
producing more than 17,000 spring types. These products require heating,
trimming, bending and final heat treatment prior to assembly and painting. This
manufacturing process is similar to the methods used by the OEM spring
manufacturers.
MARKETING, DISTRIBUTION AND CUSTOMERS
ORIGINAL EQUIPMENT
The Company's OEM business supplies products to domestic OEMs either directly or
through Tier 1 suppliers. In the year ended December 31, 1998, approximately 52%
of the Company's net sales were to OEM customers. Sales to significant customers
for the year ending December 31, 1998 were as follows:
Actual
------
General Motors 29%
Chrysler Corporation 16%
No other OEM customer accounts for more than 10% of the Company's net sales.
The Company sells its exterior trim products through an exclusive sales agency
that specializes in the Company's products. The Company and its sales agency
work directly with its customers, including the three major U.S. automobile
manufacturers, to design and develop products to satisfy market demands. Most of
the parts the Company produces have lead times of one to four years from product
award to production. The Company has been awarded new business for each of the
1999-2002 model years.
Because the Company's OEM business supplies its customers on a "just-in-time"
basis, it does not currently maintain a backlog.
AFTERMARKET
The Company distributes springs and spring-related products manufactured by DPI,
as well as other undercarriage replacement parts, including wheel-end products
(such as brake drums, cast spoke wheels, rotors and calipers), brake hardware,
suspension parts (such as hangers, bushings, shocks and suspension kits) and
steering components (such as king pin sets, ball joints, drag links and tie rod
ends).
DPI uses its own sales force to sell products for heavy and medium-duty trucks
and trailers throughout the continental United States, Mexico, Central America
and parts of Canada to approximately 1,800 customers. Although most of DPI's
products are for the repair and maintenance needs of heavy and medium-duty
trucks, trailers and mobile equipment, DPI also sells some products for
light-duty trucks. In addition to on-the-road trucks and trailers, DPI
distributes undercarriage replacement parts for specialty vehicles such as
garbage trucks, cement trucks, construction equipment and farm equipment.
DPI sells its products primarily to spring service shops, fleet distributors,
manufacturers of specialty vehicles, warehouse distributors and wheel and rim
distributors. These outlets in turn sell parts to local truck fleets,
redistribute parts to smaller outlets such as local repair garages or install
the parts themselves on the end-users' vehicles.
SEASONALITY
The OEM business experiences seasonal fluctuations that are consistent with
those of other OEM suppliers. The Company typically experiences decreased sales
and operating income from its OEM business during the second half of each year
due to OEM model changeovers and vacation periods.
The aftermarket business is subject to minor seasonal fluctuations, with demand
for aftermarket parts tending to be higher in the second and third quarters
because end-users tend to make more vehicle repairs at those times.
COMPETITION
ORIGINAL EQUIPMENT
The OEM supplier industry is highly competitive and comprised of many companies
of various sizes. Demand for parts and components sold to OEMs is driven by the
demand for sales of new vehicles. The Company believes that the number of such
competitors will decrease in response to the OEMs' pressure for supplier
consolidation. The Company's largest competitors for exterior trim include Magna
International Inc., Decoma, Venture Holdings Trust, Standard Products, LDM and
Guardian Industries Corp. Many of the Company's competitors are divisions or
subsidiaries of companies which are substantially larger and more diversified
than the Company. In addition, many of the Company's competitors have greater
financial and other resources than the Company.
The Company competes for new business both at the beginning of the development
of new models and upon the redesign of existing models. Competitive factors in
the market for the Company's OEM products include quality, reliability, cost,
timely delivery, technical expertise and development capability.
AFTERMARKET
The truck parts aftermarket in which DPI operates is highly competitive. DPI has
numerous competitors. However, the product line of DPI is narrow and focuses on
specific markets. There is no one competitor that dominates any product line in
which DPI participates. Some of the Company's more significant competitors are
Triangle Auto Spring Co. and Meritor, Inc. In addition, some of the Company's
competitors are well-established truck or automotive suppliers which have
greater financial and other resources than the Company. Among the primary
competitive factors affecting this market are price, product fill rates, product
quality, breadth of product line and customer service.
SUPPLIERS AND RAW MATERIALS
The principal raw materials used by DPI and Starboard in their manufacturing
operations are various types and grades of steel, all of which are readily
available. The principal raw materials used by PTI are acrylic foam tape, paint,
PVC, and thermo plastic olefin (TPO) compounds, all of which are readily
available.
During 1998, DPI's primary supplier of heavy and medium-duty brake drums decided
to increase pricing significantly. Since the customers of DPI would not accept a
price increase and DPI will not sell these products at a loss, DPI has
temporarily discontinued the sale of these parts. Due to the uncertainty of the
Company's future, DPI has not been able to locate a replacement source for these
parts. DPI believes that these products can be supplied by offshore
manufacturers. These parts represent approximately $10 million of annual sales.
INTELLECTUAL PROPERTY
The Company has a number of patents and patent applications pending in both the
United States and certain foreign jurisdictions for processes related to its
plastic injection molded products. Notwithstanding its patent portfolio, the
Company believes that the design, quality and pricing of its products and its
relations with its customers are substantially more important to its business
than patent protection.
There can be no assurance that patents will be issued from any pending
applications or that any claims allowed from existing or pending patents will be
sufficiently broad to protect the Company's technology. The Company believes
that it is not dependent to any material extent upon any one patent or group of
patents.
Governmental Regulations
The Company is subject to various federal, state, provincial and local laws and
regulations relating to the operation of its businesses and the manufacture of
its products, including those relating to product safety guidelines; generation,
handling and disposal of waste; discharge and emission controls; and protection
of health and the environment. These laws include the Clean Water Act, the Clean
Air Act, the Resource Conservation and Recovery Act ("RCRA") and the
Comprehensive Environmental Response, Compensation and Liability Act in the
United States, together with implementing regulations and similar state laws and
regulations. In part, these laws and regulations govern the manner in which the
Company handles various wastes, discharges, emissions and environmental
conditions at or attributable to its operations or facilities.
Operations at some of the Company's facilities have been and continue to be
sources of emissions and discharges of various materials, including air
emissions from coating and painting operations and discharges of process
wastewaters. For example, various Company facilities have been the sites of
releases of polychlorinated biphenyl-contaminated oil, mineral spirits, fuel and
quench oils and, possibly, other materials. Some of these materials remain at
and about the sites of these facilities. Some of DPI's Harrisburg, Pennsylvania
facilities are believed to be located on a former municipal landfill because
materials associated with municipal landfills have been found at these
facilities. In addition, at various Company facilities, substances have been and
currently are used that are classified as hazardous under RCRA or as pollutants,
contaminants or hazardous, toxic or regulated substances under other applicable
laws. The parties from whom the Company acquired its operations have, to various
degrees, agreed to limited indemnification of the Company against some
environmental claims under the various acquisition agreements with the Company,
but there can be no assurance that these indemnities will be adequate to cover
all liabilities and expenses that may arise. Although the Company does not know
the amounts of any liabilities or expenses it may incur in the future in
connection with the investigation or remediation of materials or conditions in
connection with the control of emissions and discharges at its facilities, it
does not believe that these liabilities and expenses will have a material
adverse effect on its financial condition or results of operations (although
there could be such effects in particular periods).
Developments with regard to laws, regulations and enforcement policies could
result in additional, presently unquantifiable, costs or liabilities to the
Company or might in the future restrict the Company in ways that could require
it to modify, supplement or replace existing equipment and facilities and to
change or cease present methods of operation. Furthermore, laws, regulations and
governmental policies are subject to change and no assurance can be given that
existing laws, regulations and policies will not be amended or that new laws,
regulations and policies will not be adopted that will impose more extensive
regulation, cost or liability on the Company in the future.
EMPLOYEES
The Company had a total of approximately 1,550 employees on December 31, 1998,
approximately 1,050 of whom were located in the United States. Approximately 604
employees were represented by labor unions, at the Company's JPEC, IAF and PTI
operations. The Company will have approximately 925 employees of whom 165 are
represented by labor unions following the sale of JPEC and IAF. Employees at
PTI's Jamestown operations have voted to form a local under the United
Electrical, Radio & Machine Workers of America, and the first contract is
currently under negotiation. This will increase the number of employees
represented by labor unions by 170.
ITEM 2. PROPERTIES
The following list indicates by location the principal manufacturing,
distribution and administrative facilities of the Company following the sale of
the subsidiaries previously described. All owned U.S. facilities are subject to
liens under the Forbearance Agreement:
Building Size
Primary Use (Approximate Owned
of the Facility Location Square Feet) or Leased Segment
--------------- -------- ------------- --------- -------
Corporate headquarters Ann Arbor, MI 5,200 Leased Corporate
Manufacturing and administrative East Tawas, MI 100,000 Owned Trim Products
Manufacturing and administrative Beavercreek, OH 105,000 Owned Trim Products
Finishing and distribution Jamestown, OH 90,000 Owned Trim Products
Manufacturing Harrisburg, PA 100,000 Owned Replacement Parts
Distribution and administrative Harrisburg, PA 150,000 Leased Replacement Parts
The Company's buildings, machinery and equipment are in adequate operating
condition, and are suitable and adequate for current production requirements.
ITEM 3. LEGAL PROCEEDINGS
On September 15, 1998, two of the Company's subsidiaries, PTI and Starboard,
filed voluntary petitions for relief under Chapter 11 of the Federal Bankruptcy
Code in the United States Bankruptcy Court for the Eastern District of Michigan.
PTI and Starboard have filed Plans of Reorganization with the United States
Bankruptcy Court, pursuant to which they would emerge from Chapter 11 bankruptcy
proceedings. These Plans of Reorganization are contingent upon consummation of
an investment in the Company by ASC Holdings, Inc.
(see discussion under "General and Recent Information").
On February 8, 1999, JPEC filed an assignment in bankruptcy pursuant to the
Bankruptcy and Insolvency Act of Canada in the Ontario Court (General Division)
Commercial List. JPEC sold all of its assets under court order and, as such,
will be dissolved by the court.
Other than the bankruptcy matters mentioned above, neither the Company nor any
of its subsidiaries is a party to, nor are any of its properties the subject of,
any pending legal proceedings, other than certain ordinary routine litigation
incidental to their businesses, which in the opinion of management is not
material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Through August 5, 1998, the Company's Common Stock traded on the Nasdaq National
Market tier of The Nasdaq Stock MarketSM under the symbol "JPEI." The Company's
Common Stock continues to trade on the OTC Bulletin Board. The following table
indicates the high and low sale prices for the Company's Common Stock as
reported on the Nasdaq National Market or the OTC Bulletin Board for the last
two years. Such over-the-counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
MARKET PRICE
-------------------------------------------
QUARTER 1997 1998
------- ---- ----
High Low High Low
First $8.50 $6.75 $6.25 $4.19
Second 7.75 6.38 4.88 1.00
Third 7.69 5.44 2.75 0.31
Fourth 8.25 5.25 1.31 0.16
On March 15, 1999, there were approximately 136 holders of record of the
Company's Common Stock and approximately 1,431 beneficial shareholders.
The Company has never declared or paid any dividends on shares of Common Stock
and has no intention of declaring or paying any dividends on shares of Common
Stock in the foreseeable future. The Company intends to retain its earnings, if
any, for the development of its business.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below, as of and for the periods ended
December 31, 1994, 1995, 1996, 1997 and 1998, are derived from the Company's
financial statements, audited by PricewaterhouseCoopers LLP, independent
accountants, and should be read in conjunction with the Company's audited
financial statements and notes thereto included elsewhere in this Report on Form
10-K (the "Company's Financial Statements"). The selected financial data set
forth below should also be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in Item 7 of
this Report on Form 10-K. Certain amounts from prior years have been
reclassified to conform with the 1998 presentation.
Years Ended December 31,
------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(in thousands, except per share data)
Income statement data:
Net sales $70,073 $169,202 $201,453 $287,066 $210,122
Cost of goods sold 51,994 134,156 166,714 246,903 186,657
------- -------- -------- -------- --------
Gross profit 18,079 35,046 34,739 40,163 23,465
Selling, general and administrative
expenses 11,892 21,361 24,600 29,254 27,609
Charge for impairment of goodwill -- -- 4,300 -- --
Charge for subsidiaries under
court-ordered protection -- -- -- -- 28,490
Discontinuance of stamping operations -- -- -- 2,164 --
Loss on sale of subsidiary -- -- -- -- 5,190
Other expense -- -- -- 618 1,983
Loss in affiliate companies -- -- -- -- 1,713
Interest expense, net 1,029 6,456 7,225 10,464 13,085
------- -------- -------- -------- --------
Income (loss) before income taxes 5,158 7,229 (1,386) (2,337) (54,605)
Income tax expense (benefit) 1,968 2,780 203 (194) (1,035)
------- -------- -------- -------- --------
Net income (loss) $ 3,190 $ 4,449 $ (1,589) $ (2,143) $(53,570)
======= ======== ======== ======== ========
Earnings (loss) per common share
assuming dilution $ .83 $1.09 $ (.35) $ (.47) $(11.64)
===== ===== ====== ====== =======
Weighted average shares outstanding
and common stock equivalents 3,865 4,098 4,574 4,602 4,602
===== ===== ===== ===== =====
Years Ended December 31,
-----------------------------------------------------------
1994 1995 1996 1997 1998(2)
---- ---- ---- ---- ----
(in thousands)
Balance sheet data at end of period:
Working capital (deficit) $22,084 $ 39,955 $ 42,138 $(59,181)(1) $(62,815)(1)
Total assets 66,492 145,229 174,725 193,215 76,974
Long-term debt (including current
maturities) 25,973 83,375 110,001 9,272 (1) 50
Total liabilities 40,979 108,482 138,947 159,721 97,115
Total shareholders' equity (deficit) 25,513 36,747 35,778 33,494 (20,141)
<FN>
1. Working capital and long-term debt reflect the classification of the
Company's U.S. and Canadian debt arrangements of $103,875 and $84,492
outstanding as current at December 31, 1997 and 1998, respectively. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Liquidity and Capital Resources."
2. In 1998, the Company has used the equity method of accounting for certain
subsidiaries from the dates of their respective bankruptcy filings. As
such, their assets and liabilities are netted into the balance sheet
caption "Investment in Affiliate Companies" which totaled $14,661 at
December 31, 1998. The details of assets and liabilities are shown in Notes
6 and 7 to the Consolidated Financial Statements.
</FN>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto to assist in understanding the Company's
results of operations, its financial position, cash flows, capital structure and
other relevant financial information.
RECENT INFORMATION
See discussion under "General and Recent Information" under "Item 1 - Business"
of this Form 10-K.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net sales for the year ended December 31, 1998 were $210.1 million compared to
$287.1 million for the previous year, a decrease of 27%. The significant factors
contributing to this decrease are shown in the reconciliation below (in millions
of dollars).
Sales for 1997 $287.1
Less: Trim product sales using the equity method
for 1998 since bankruptcy filing dates (48.3)
No sales for Allparts in November and December
of 1998 due to sale (3.1)
GM strike (8.5)
Closure of Starboard stamping business (7.0)
Reduction in JPEC sales due to lower volumes (10.1)
------
Sales for 1998 $210.1
======
Other offsetting factors influencing sales activity for 1998 include the impact
of the bankruptcy filings on sales for the truck and automotive replacement
segment. The increase in sales which had been anticipated as a result of the
purchase of BATCO in April of 1997 was offset by the loss in sales due to the
bankruptcy filings.
Gross profit decreased to $23.5 million for the year ended December 31, 1998
compared with $40.2 million for the year ended December 31, 1997. The factors
contributing to this decrease consist of the following items (in millions of
dollars).
Gross profit for 1997 $ 40.2
Less: Trim product on equity method (3.8)
Lost margin due to sale of Allparts (1.1)
Impact of GM strike (1.0)
Lower sales volume for JPEC (1.0)
Launch costs and other manufacturing
inefficiencies (8.0)
Write down of PTI inventory to net
realizable value (1.8)
------
Gross profit for 1998 $ 23.5
======
The launch costs and other manufacturing inefficiencies occurred in the first
half of 1998 relating to the launch of the YC-7 trim program by JPEC, the GMT
800 program by PTI, and the high stress spring line at DPI. The $8 million
amount also includes the impact of pricing pressures in the truck and automotive
replacement parts segment as well as a product mix change at PTI as certain high
margin jobs were replaced with lower margin jobs. The Company has obtained some
pricing relief from the OEM's to partially offset the lower margins at PTI
effective March 1, 1999.
Selling, general and administrative expenses for the year ended December 31,
1998 total $27.6 million or 13.1% of sales. This percentage is 11.8% adjusting
for the impact of equity accounting for subsidiaries under court ordered
protection. This compares to $29.3 million or 10.2% of sales for the year ended
December 31, 1997. The increase in this percentage is partially attributable to
additional bad debt expense whereby the major customers of PTI and Starboard
were only required to pay 85% of their outstanding receivables at the filing
date. The remaining portion of the increase is attributable to the truck and
automotive replacement parts business and relates to servicing the BATCO product
line which was acquired in April 1997, additional bad debt expense and to a
large worker's compensation claim which was settled.
The charge for subsidiaries under court ordered protection for the year ended
December 31, 1998 totaled $28.5 million. This charge related to the impairment
of long-term assets in PTI, Starboard and JPEC as shown in Note 5 to the
consolidated financial statements. The Company believes that the charge reduces
the assets of such businesses to net realizable value in accordance with
generally accepted accounting principles. This charge has no impact on the
Company's cash flow. Since the bankruptcy filings, the Company has recognized
the financial results of these subsidiaries on the equity method. The net loss
in these affiliate companies for the period September 16, 1998 to December 31,
1998 was $1.7 million. Included in this loss are reorganization expenses for PTI
and Starboard of $723,000.
On October 28, 1998, the Company completed the sale of substantially all the
assets of its subsidiary, Allparts, Inc. The sales price was approximately $11.6
million, consisting of cash of $10.1 million and assumption of accounts payable
and accrued liabilities of approximately $1.5 million. The assets on October 28,
1998 were approximately $16.6 million and expenses related to this transaction
were $242,000, resulting in a net loss on the sale of $5.2 million.
Other expense for the year ended December 31, 1998 primarily represents costs
associated with the bankruptcy filings and the Forbearance Agreement for legal,
professional and financial advisors. Other expense for the year ended December
31, 1997 was primarily foreign exchange transaction losses associated with JPEC.
Interest expense for the year ended December 31, 1998 was $13.1 million compared
to $10.5 million for the year ended December 31, 1997. Included in interest
expense are facility fees and amendment fees of $1.4 million and $376,000 for
1998 and 1997, respectively. The additional increase in interest expense is due
to higher interest rates caused by the default on the U.S. bank debt.
Income tax benefit for the year ended December 31, 1998 was $1.0 million
compared to $194,000 for the year ended December 31, 1997. The Company has
provided a valuation reserve of $4.2 million against net deferred taxes. JPE,
Inc. has not recognized any tax benefit associated with a loss carryforward of
approximately $15.0 million, of which $1.9 million relates to the Company's 1997
purchase of BATCO. This loss carryforward may be utilized to offset gains if the
Company is successful in restructuring its debts as described in Note 13 to the
consolidated financial statements.
The net loss for the year ended December 31, 1998 totals $53.6 million or $11.64
per share assuming dilution. The net loss for the year ended December 31, 1997
was $2.1 million or $0.47 per share assuming dilution. The change in net loss is
explained by the factors described above.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net sales for the year ended December 31, 1997 were $287 million compared to
$201 million for the previous year. The net sales increase of 43% is principally
attributable to the full year effect of the acquisition of JPEC completed in
December 1996 and the acquisition of BATCO in April 1997. For the year ended
December 31, 1997, net sales for the Company were 68% to OEM customers and 32%
to aftermarket customers. (See Note 15 to the consolidated financial statements
for segment information.)
Gross profit increased to $40.2 million for the year ended December 31, 1997
compared with $34.7 million for the prior year. The gross margin percentages
were 14.0% and 17.2% for 1997 and 1996, respectively. The decline in gross
margin is a result of production difficulties at the Company's JPEC operation
which was purchased out of bankruptcy in December 1996. JPEC's gross profit for
1997 was $1.5 million on sales of $61.4 million. Based on unaudited financial
data for 1996, the operations of Pebra Inc. (now JPEC) would have reported a
gross loss of $2.3 million on sales of $68.9 million. Excluding JPEC's results,
the gross margin for 1997 would have been 17.1%. The gross margin for the
Company's OEM businesses, without JPEC, in 1997 was 11.1% compared to 12.4% and
16.4% for the years ended 1996 and 1995, respectively. This gross margin
percentage decline is attributable to additional production costs incurred by
Starboard in connection with implementing its plan to exit the stamping business
and excessive launch costs and scrap at PTI.
During the third quarter of 1997, management discontinued Starboard's stamping
operations, which resulted in the resourcing of stamped parts to other
third-party suppliers, the sale of Starboard's stamping assets, a reduction in
the workforce and a major re-layout of Starboard's East Tawas, Michigan
production facility to improve productivity of its roll-forming and co-extrusion
operations. Management made this decision based on the negative impact the
stamping business had on the operating results of Starboard and the OEM Trim
Group as a whole. As a result of this discontinuance of stamping operations, the
Company recorded a charge of $2.25 million relating to the loss on disposal of
assets, employee severances and other costs directly related to the stamping
business.
Selling, general and administrative expenses increased 19% to $29.3 million for
the year ended December 31, 1997 compared to $24.6 million for 1996. The
increase in spending is a result of the full year impact of the JPEC acquisition
made in December 1996 and the acquisition of BATCO in April 1997. Selling,
general and administrative expense as a percentage of sales was 10.2% and 12.2%
for the years ending December 31, 1997 and 1996, respectively. The decline in
this percentage is attributable to management efforts to contain costs in its
Aftermarket and OEM businesses and the increasing significance of the OEM
business to the Company. Amortization of goodwill for the year ended December
31, 1997 was $1.4 million versus $1.3 million for the same period in 1996. The
increase in goodwill amortization expense is attributable to the acquisition of
BATCO, partially offset by the reduction in goodwill due to the impairment
charge recorded in 1996.
Other non-operating expense in 1997 consists principally of foreign currency
transaction losses of $468,000 incurred by JPEC related to its net U.S. dollar
liability position. The functional currency for JPEC is the Canadian dollar
which weakened from Cdn. $1.365 to Cdn. $1.43 per U.S. dollar.
Interest expense increased to $10.5 million in 1997 compared to $7.2 million for
the year ended December 31, 1996. The increase is a result of funds borrowed to
finance the acquisitions of JPEC in December 1996 and BATCO in April 1997 and a
slightly higher debt level as a result of capital additions to enhance existing
production technologies and capabilities. The average borrowing rates for 1997
and 1996 were 8.2% and 7.8%, respectively. Interest expense includes facility
fees and debt agreement amendment fees of $376,000 for 1997 compared to $293,000
for 1996.
The effective tax rate for the year ended December 31, 1997 was a benefit of 8%
compared to a tax rate of 15% for the year ended December 31, 1996. The unusual
tax rate relationship for 1997 is attributable to non-deductible goodwill and
losses that occurred in Michigan, whose tax is not income based, which are
offset by a foreign tax benefit associated with JPEC's losses. There was only a
nominal foreign tax benefit in 1996.
Net loss for the year ended December 31, 1997 was $2.1 million compared to a net
loss of $1.6 million for the year ended December 31, 1996. Loss per share
assuming dilution for the year ended December 31, 1997 was $0.47 per share as
compared to a loss per share assuming dilution of $0.35 for the same period in
1996. These changes are a result of the factors mentioned above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are its U.S. and Canadian credit
agreements and its debtor-in-possession financing agreements for Starboard and
PTI.
The Company's principal source of liquidity for its U.S. companies is the
Forbearance Agreement dated August 10, 1998, as amended by First Amendment dated
August 31, 1998, Second Amendment dated September 4, 1998, Third Amendment dated
September 16, 1998, Fourth Amendment dated October 1, 1998, Fifth Amendment
dated December 1, 1998 and Sixth Amendment dated March 26, 1999 (the
"Forbearance Agreement"). The Forbearance Agreement is collateralized by all of
the Company's assets, with the exception of JPEC's assets, the inventories of
Starboard and PTI, and the post-petition accounts receivable of Starboard and
PTI. At December 31, 1998, borrowings outstanding under the Forbearance
Agreement totaled $84.5 million.
The Company's Third Amended and Restated Credit Agreement dated December 31,
1996, as amended by Amendment No. 1 dated as of April 16, 1997, Amendment No. 2
dated as of August 14, 1997 (effective June 30, 1997), Amendment No. 3 dated as
of February 13, 1998 and Amendment No. 4 dated as of May 15, 1998 (the "Credit
Agreement") expired on October 27, 1998.
Pursuant to the Forbearance Agreement, the lender agreed to grant certain
accommodations and to forbear from taking action to collect the indebtedness
outstanding under the Credit Agreement until January 1, 2000. The Forbearance
Agreement provides for financing based on an asset formula with maximum
borrowings ranging from a low of $86.5 million in January 1999 to a high of
$89.7 million in November 1999 plus an over-formula ranging from a low of $42.7
million in November 1998 to a high of $48.2 million in December 1999. With the
sale of IAF, the over-formula amount has been reduced to a low of $38.5 million
in April 1999 with a maximum borrowing of $68.3 million at April 30, 1999.
During 1998, the U.S. lenders have received significant payments originating
from the sale of Allparts in October 1998 in the amount of $9.9 million and from
Starboard's and PTI's collection of pre-petition receivables, refinancing of
inventory and other payments totaling $11.0 million. Subsequent to year end, the
sale of IAF resulted in a payment of $19.2 million and additional collections
have reduced the debt outstanding under the Forbearance Agreement to $67.4
million at March 31, 1999.
At December 31, 1998, Current Liabilities exceeded Current Assets by $62.8
million, reflecting the classification of the amount outstanding to the Bank
Group pursuant to the Forbearance Agreement of $84.5 million as a current
liability. Excluding the amount outstanding to the Bank Group pursuant to the
Forbearance Agreement, working capital at December 31, 1998 would have been
$21.7 million as compared to $44.7 million at December 31, 1997. The decrease in
working capital also reflects the classification change for the assets and
liabilities of subsidiaries being reported under the equity method of
accounting. The working capital of those entities, excluding bank debt and
debtor-in-possession financing, is $16.6 million. The remaining decrease in
working capital is attributed to the sale of Allparts. As described in Note 19
to the consolidated financial statements and below, the Company's liquidity and
capital resources are dependent on consummation of certain transactions. Cash
used by operations was $1 million for the year ended December 31, 1998.
During 1997, the Company acquired all of the outstanding capital stock of BATCO
for total consideration of $5.5 million plus a five year earn-out not to exceed
$3.9 million based on achieving certain sales levels. The acquisition was
financed from borrowings under the Credit Agreement. There was no payout in 1998
under the earn-out formula.
On December 20, 1996, JPEC entered into a Cdn. $28.7 million credit agreement
with a Canadian bank (the "Canadian Credit Facility"), primarily to fund the
acquisition of Pebra Inc. In addition to funding the acquisition of Pebra Inc.,
the Canadian Credit Facility permitted JPEC to borrow funds in the form of
advances for operating requirements and capital expenditures. Repayment terms of
borrowings under the facility varied based on the nature of the advance.
Advances under the Canadian Credit Facility were collateralized by substantially
all of the assets of JPEC. JPEC defaulted under the Canadian Credit Facility in
1998. The Canadian bank had a trustee appointed which sold substantially all of
the assets of JPEC on February 8, 1999. The sale proceeds were insufficient to
retire all secured debt and JPEC filed for bankruptcy, which will eliminate all
unpaid debts of JPEC; however, the Company had provided a guarantee of the JPEC
debt in the amount of $2.0 million to the Canadian bank. After application of
the sale proceeds, the amount owed under the guarantee is approximately Cdn.
$820,000. The Company is in discussions with the Canadian bank to resolve this
outstanding amount.
In connection with the filing for protection from creditors under Chapter 11 of
the U.S. Bankruptcy Code for Starboard and PTI (the "debtor companies"), the
debtor companies entered into separate debtor-in-possession financing agreements
to provide for post-petition financing (the "DIP financing") which expires on
September 15, 2000. There is a prepayment penalty of 3% of the commitment amount
if the debt is paid off before September 15, 1999, unless payment is the result
of a sale of debtor's assets. This debt is not shown on the Company's
consolidated balance sheet as these subsidiaries are reported under the equity
method.
PTI obtained DIP financing which provides for up to $21 million in asset based
loans with an out-of-formula allowance not to exceed $6 million. PTI paid
closing fees in the amount of $110,000 and monthly service fees of $3,500. At
December 31, 1998, borrowings outstanding under PTI's DIP financing totaled
$14.2 million.
Starboard obtained DIP financing which provides for up to $6 million in asset
based loans with an out-of-formula allowance not to exceed $2 million. Starboard
paid closing fees in the amount of $35,000 and monthly service fees of $1,000.
At December 31, 1998, borrowings outstanding under Starboard's DIP financing
totaled $3.9 million.
On February 18, 1999, the Company reached an agreement in principle with ASC
Holdings, Inc., pursuant to which a company to be formed would acquire common
and preferred stock of the Company to initially have voting control and an
economic interest of 95% of the Company. The current stockholders of JPE, Inc.
would retain the remaining equity in the Company, subject to further dilution of
511,353 common stock warrants, in the event of the exercise of such warrants
that will be issued to the Company's bank lenders in exchange for loan
concessions in excess of $12.0 million. In addition, the current stockholders of
the Company and the Company's bank group would receive warrants that would
entitle them to purchase 15% of the voting power and economic interest in the
Company, exercisable two years after the consummation of the ASC Holdings, Inc.
investment, subject to obtaining prescribed EBITDA levels. As such, current
stockholders of the Company would experience substantial dilution upon the ASC
Holdings, Inc. investment, but would have the potential of increasing their
aggregate percentage ownership in the future. Pursuant to the agreement in
principle, ASC Holdings, Inc. would invest $18.4 million in the Company and
would provide or arrange a loan to JPE in the amount of approximately $51.6
million. The Company and ASC Holdings, Inc. are continuing to negotiate the
final terms and structure of the foregoing investment by ASC Holdings, Inc.
which is subject to a number of conditions, including execution of a definitive
agreement, approval of the bankruptcy courts having jurisdiction over PTI and
Starboard and approval of the Company's bank group lenders. There can be no
assurance that the parties will reach agreement on mutually satisfactory terms
or that the conditions to consummating the transaction will be satisfied.
PTI and Starboard have filed reorganization plans with the Bankruptcy Court that
are subject to a confirmation hearing scheduled for April 16, 1999. Under these
plans, PTI's and Starboard's unsecured creditors as of September 15, 1998 will
be paid 30% of their pre-petition claims. This will result in a forgiveness of
liabilities of approximately $4.1 million.
There can be no assurance that a transaction with ASC Holdings, Inc. can be
consummated on terms that are adequate to restructure the Company's obligations
to its bank group, to meet its obligations to the Canadian lender and which are
satisfactory under the terms of the Reorganization Plans which remain to be
approved by the Bankruptcy Court. If the transaction with ASC Holdings, Inc. is
not consummated, the Company's ability to continue as a going concern is
uncertain.
YEAR 2000
PTI's and Starboard's business systems require updating to become Year 2000
compliant. DPI's business system has been updated and will be Year 2000
compliant in April 1999. The Company's manufacturing operations do not rely on
highly sophisticated date driven processes and, as such, compliance with Year
2000 requirements is not significant in the manufacturing area. Each of the
Company's business systems is being updated or a replacement system is being
purchased. The Company estimates that the total cost to be spent in 1999 to
become Year 2000 compliant is approximately $355,000 relating to new hardware
and software programs. In addition, there will be costs for training employees
on the new systems which will be accounted for as operating expense.
The Company has also been in contact with its customers and suppliers and has
requested that they complete questionnaires to determine any impact on the
Company's operations. In general, the suppliers and customers have developed or
are in the process of developing plans to address Year 2000 issues. The Company
will continue to monitor and evaluate the progress of suppliers and customers on
this critical matter.
Based on the progress the Company has made in addressing its Year 2000 issues
and the plans and timelines to complete this project, the Company does not
foresee significant risks associated with its Year 2000 compliance at this time.
The Company has not developed a detailed contingency plan, but given the current
status of its progress, it appears that all systems will be compliant. However,
if the Company identifies significant risks related to its Year 2000 compliance
or its progress deviates from the anticipated timeline, the Company will develop
contingency plans as deemed necessary at that time.
RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," becomes effective for all fiscal
quarters for all fiscal years beginning after June 15, 1999 (effective January
1, 2000 for the Company).
SFAS No. 133 is not currently applicable to the Company.
The American Institute of Certified Public Accountants' Statement of Position
No. 98-5, "Reporting on the Costs of Start-Up Activities," is effective for
fiscal years beginning after December 15, 1998 and will not have a material
effect on the Company's financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JPE, INC.
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Accountants 22
Consolidated Balance Sheets as of December 31,
1997 and 1998 23
Consolidated Statements of Operations and
Comprehensive Income for the Years Ended
December 31, 1996, 1997 and 1998 24
Consolidated Statements of Shareholders'
Equity for the Years Ended December 31,
1996, 1997 and 1998 25
Consolidated Statements of Cash Flows for
the Years Ended December 31, 1996, 1997
and 1998 26
Notes to Consolidated Financial Statements 27-45
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of JPE, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and comprehensive income, of cash flows,
and of changes in shareholders' equity present fairly, in all material respects,
the financial position of JPE, Inc. and its subsidiaries at December 31, 1998
and 1997, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule listed in Item 14(a)(2) of this Form 10-K presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. At December 31, 1998, current
liabilities exceed current assets by $63 million which reflects the current
classification of the revolving credit agreement of $84 million which has been
in default since June 1998. The Company incurred net losses in 1996, 1997, and
1998 and has negative cash flow from operations of $1 million in 1998. As
discussed in Notes 5, 6 and 7 to the consolidated financial statements, three of
the Company's subsidiaries were under court ordered protection in 1998. As
discussed in Note 19 to the consolidated financial statements, the Company has
entered into a letter of intent pursuant to which a substantial investment would
be made in the Company in exchange for a voting and equity interest of 95%,
certain subsidiaries would concurrently emerge from bankruptcy and the Company's
bank debt would be restructured subject, in each case, to the satisfaction of
several conditions. These uncertainties raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
/s/ PricewaterhouseCoopers LLP
--------------------------
April 1, 1999
JPE, INC.
CONSOLIDATED BALANCE SHEETS
at December 31,
(amounts in thousands, except share data)
ASSETS
1997 1998
---- ----
Current assets:
Cash and cash equivalents $ 29 $ 394
Accounts receivable, net of
allowance for doubtful accounts
of $374 and $684 at December 31,
1997 and 1998, respectively 37,997 12,151
Inventory 39,412 18,572
Other current assets 8,375 1,413
-------- --------
Total current assets 85,813 32,530
Investment in affiliate companies -- 14,661
Property, plant and equipment, net 72,981 20,963
Goodwill, net 31,962 7,458
Other assets 2,459 1,362
-------- --------
Total assets $193,215 $ 76,974
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $105,402 $ 84,492
Short term debt 7,723 --
Accounts payable 25,219 8,273
Accrued liabilities 6,336 1,931
Income taxes 314 14
Loan guaranty -- 635
-------- --------
Total current liabilities 144,994 95,345
Deferred income taxes 3,804 157
Other liabilities 1,651 1,563
Long-term debt, non-current 9,272 50
-------- --------
Total liabilities 159,721 97,115
-------- --------
Commitments and contingencies -- --
Shareholders' equity:
Preferred stock, no par value,
3,000,000 authorized, no shares
issued and outstanding -- --
Common stock, no par value,
15,000,000 authorized, 4,602,180
issued and outstanding at December 31,
1997 and 1998 28,051 28,051
Accumulated other comprehensive loss (271) (336)
Retained earnings (accumulated deficit) 5,714 (47,856)
-------- --------
Total shareholders' equity (deficit) 33,494 (20,141)
-------- --------
Total liabilities and
shareholders' equity $193,215 $ 76,974
======== ========
The accompanying notes are an integral part
of the consolidated financial statements.
JPE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
for the years ended December 31,
(amounts in thousands, except per share data)
1996 1997 1998
---- ---- ----
Net sales $201,453 $287,066 $210,122
Cost of goods sold 166,714 246,903 186,657
-------- -------- --------
Gross profit 34,739 40,163 23,465
Selling, general and
administrative expenses 24,600 29,254 27,609
Charge for subsidiaries under
court ordered protection -- -- 28,490
Charge for impairment of goodwill 4,300 -- --
Loss on sale of Allparts, Inc. -- -- 5,190
Discontinuance of stamping operations -- 2,164 --
Other expenses -- 618 1,983
Affiliate companies' losses -- -- 1,713
-------- -------- --------
Income (loss) before interest and taxes 5,839 8,127 (41,520)
Interest expense, net 7,225 10,464 13,085
-------- -------- --------
Loss before taxes (1,386) (2,337) (54,605)
Income tax expense (benefit) 203 (194) (1,035)
-------- -------- --------
Net loss $ (1,589) $ (2,143) $(53,570)
======== ======== ========
Other comprehensive expense
Foreign currency translation adjustment -- (271) (65)
-------- -------- --------
Comprehensive loss $ (1,589) $ (2,414) $(53,635)
======== ======== ========
Basic loss per common share $ (.35) $ (.47) $(11.64)
====== ====== =======
Weighted average shares outstanding 4,574 4,602 4,602
===== ===== =====
Loss per common share
assuming dilution $ (.35) $ (.47) $(11.64)
====== ====== =======
Weighted average shares outstanding
and common stock equivalents 4,574 4,602 4,602
===== ===== =====
The accompanying notes are an integral part
of the consolidated financial statements.
JPE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended December 31
(amounts in thousands, except share data)
Accumulated
Common Stock Other
Shares Comprehensive Retained
Outstanding Amount Loss Earnings Total
----------- ------ ------------- -------- -----
Balances, January 1, 1996 4,473,930 $27,301 -- $ 9,446 $ 36,747
Employee Stock Plan 108,550 410 410
Tax benefit from exercised
stock options 210 210
Net loss (1,589) (1,589)
--------- ------- ------ -------- --------
Balances, December 31, 1996 4,582,480 27,921 -- 7,857 35,778
Employee Stock Plan 19,700 77 77
Options granted for
consulting services 25 25
Tax benefit from exercised
stock options 28 28
Foreign currency translation
adjustment (271) (271)
Net loss (2,143) (2,143)
--------- ------- ------ -------- --------
Balances, December 31, 1997 4,602,180 28,051 (271) 5,714 33,494
Foreign currency translation
adjustment (65) (65)
Net loss (53,570) (53,570)
--------- ------- ------ -------- --------
Balances, December 31, 1998 4,602,180 $28,051 $ (336) $(47,856) $(20,141)
========= ======= ====== ======== ========
The accompanying notes are an integral part
of the consolidated financial statements.
JPE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31,
(amounts in thousands)
1996 1997 1998
---- ---- ----
Cash flows from operating activities:
Net loss $ (1,589) $ (2,143) $(53,570)
Depreciation and amortization 7,416 10,412 8,669
Loss on sale of Allparts, Inc. -- -- 5,190
Discontinuance of stamping operations -- 2,250 --
Write-down of assets related to subsidiaries
under court ordered protection -- -- 31,855
Charge for impairment of goodwill 4,300 -- --
Disposal of property and equipment 98 1,296 --
Affiliate companies' losses -- -- 1,713
Adjustments to reconcile net loss to net
cash provided by (used for)
operating activities:
Changes in operating assets and
liabilities:
Accounts receivable (936) (9,109) 8,020
Inventory 729 (1,322) 3,586
Other current assets (1,534) 1,898 1,072
Accounts payable 2,487 4,260 (5,254)
Accrued liabilities and income taxes (1,168) (4,140) 1,095
Deferred income taxes 257 620 (3,487)
-------- -------- --------
Net cash provided by (used for)
operating activities 10,060 4,022 (1,111)
-------- -------- --------
Cash flows from investing activities:
Acquisition of Pebra Inc. (JPE Canada Inc.) (21,662) -- --
Purchase of property and equipment (13,150) (13,172) (3,071)
Cash proceeds from sale of property and
equipment -- 1,200 --
Acquisition of Brake, Axle and Tandem
Company -- (5,518) --
Purchase of patent (1,466) -- --
Cash proceeds from sale of Allparts, Inc. -- -- 9,891
Cash received from equity investees -- -- 11,037
-------- -------- --------
Net cash provided by (used for)
investing activities (36,278) (17,490) 17,857
-------- -------- --------
Cash flows from financing activities:
Sale of common stock 410 102 --
Repayments of other debt (10,100) (1,727) (427)
Net borrowings (payments) under
revolving loan 19,270 11,675 (19,389)
Net borrowings under Canadian
credit facility 17,456 1,059 3,983
Borrowings (repayments) under
capital lease -- 1,555 (195)
Tax benefit from options 210 28 --
-------- -------- --------
Net cash provided by (used for)
financing activities 27,246 12,692 (16,028)
-------- -------- --------
Effect of currency translation on cash -- (511) (353)
-------- -------- --------
Cash and cash equivalents:
Net increase (decrease) in cash 1,028 (1,287) 365
Cash, beginning of period 288 1,316 29
-------- -------- --------
Cash, end of period $ 1,316 $ 29 $ 394
======== ======== ========
The accompanying notes are an integral part
of the consolidated financial statements
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FINANCIAL STATEMENT PRESENTATION - The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Certain financial
statement items have been reclassified to conform to the current year's
format.
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial
statements include the accounts of JPE, Inc. (the "Company"), and its
wholly-owned subsidiaries, Dayton Parts, Inc. ("Dayton Parts"), Allparts,
Inc. ("Allparts"), SAC Corporation ("Starboard"), Industrial & Automotive
Fasteners, Inc. ("IAF"), Plastic Trim, Inc. ("PTI") and JPE Canada Inc.
("JPEC"), from the dates of acquisition (the "Acquisitions"), December 31,
1992, July 31, 1994, September 30, 1994, February 28, 1995, March 31, 1995,
and December 23, 1996, respectively. During the third quarter of 1998,
three of the Company's subsidiaries were placed under court ordered
protection. On September 15, 1998, PTI and Starboard filed voluntary
petitions for relief under Chapter 11 of the Federal Bankruptcy Code in the
United States Bankruptcy Court for the Eastern Division of Michigan. On
August 27, 1998, the Ontario Court (General Division) Commercial List
issued an order to appoint an Interim Receiver for JPEC pursuant to Section
47 of the Bankruptcy and Insolvency Act of Canada. Under these conditions,
generally accepted accounting principles do not allow the Company to
consolidate these subsidiaries from the dates of their respective filings.
The Company has utilized the equity method of accounting in preparing the
financial statements for the year ended December 31, 1998. All significant
intercompany accounts and transactions with the consolidated subsidiaries
have been eliminated in the preparation of the consolidated financial
statements.
BUSINESS - JPE, Inc. is a manufacturer and distributor of automotive and
truck components for the original equipment manufacturers and the
replacement parts markets principally in North America. Total sales for the
year ended December 31, 1998 were approximately 41% for trim products, 18%
for fasteners and 41% to the replacement parts markets, excluding sales of
trim products by subsidiaries that are being accounted for using the equity
method.
CONCENTRATION OF CREDIT RISK - Accounts receivable of the Company, which
represent the principal concentration of credit risk, result from sales to
companies in the automotive, light truck and heavy duty truck original
equipment and aftermarket industries. Credit is extended based upon an
evaluation of the customer's financial condition and collateral is not
required from customers.
INVENTORY - Inventory is valued at the lower of cost or market using the
first-in, first-out ("FIFO") cost method.
FOREIGN CURRENCY TRANSLATION - Transaction gains and losses arising from
the settlement of foreign currency transactions and the increase or
decrease in recorded functional currency amounts are charged to the related
period's statement of operations. Included in other expense are foreign
currency transaction losses of $91 and $468 in 1998 and 1997, respectively.
Translation adjustments arising from the translation of foreign subsidiary
financial statements are recorded as a separate component of stockholders'
equity and as other comprehensive income or loss.
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION - Property, plant and
equipment are recorded at cost. Costs assigned to property, plant, and
equipment purchased as part of an acquisition are based on the fair value
of such assets on the date of the acquisition or an allocation of total
purchase price if the fair value of assets acquired exceeds the purchase
price. Improvements are capitalized, and expenditures for maintenance and
repairs are charged to operations as incurred. Gains or losses on sales and
retirements of properties are included in the determination of the results
of operations. Provisions for depreciation of property, plant, and
equipment have been computed using the straight-line method based on
estimated useful lives of the related assets.
GOODWILL - Costs in excess of net assets of acquired companies are
amortized over 25 years using the straight-line method. Accumulated
amortization at December 31, 1997 and 1998 was $3,699 and $1,032,
respectively. The recoverability of goodwill is evaluated annually.
DEFERRED FINANCING COSTS - Deferred financing costs associated with
borrowings are being amortized over their respective periods. Accumulated
amortization at December 31, 1997 and 1998 was $466 and $563, respectively.
At December 31, 1998, all deferred financing costs have been fully
amortized to expense.
EARNINGS PER COMMON SHARE - The Company has adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share." In accordance with the
pronouncement, basic earnings per share is computed by dividing earnings by
the sum of the weighted average number of common shares outstanding during
the period. Diluted earnings per share includes common stock equivalents
(options and warrants) outstanding during the year. Common stock
equivalents would increase the weighted average shares outstanding by
12,058, 4,439 and 28,034 shares, respectively, for the years ended December
31, 1996, 1997 and 1998. These shares are not included in the computation
in any year there is a loss.
STOCK BASED COMPENSATION - Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," encourages, but does not
require companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has elected to continue to
measure compensation costs using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. Accordingly, compensation cost for
stock options is measured as the excess of the quoted market price of the
Company's stock at the date of grant over the amount an employee must pay
to acquire the stock.
CASH AND CASH EQUIVALENTs - Cash and cash equivalents include investments
in highly liquid instruments with a maturity of three months or less.
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
2. INVENTORY:
Inventory consisted of the following at December 31:
1997 1998
---- ----
Raw materials $15,211 $ 1,606
Work in process and components 2,435 1,411
Finished goods 19,309 13,291
Tooling 2,457 2,264
------- -------
$39,412 $18,572
======= =======
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following at December 31:
1997 1998
---- ----
Land $ 2,838 $ 1,123
Buildings 15,967 4,823
Machinery and equipment 68,978 24,345
Furniture and fixtures 5,866 4,338
------- -------
93,649 34,629
Less accumulated depreciation (20,668) (13,666)
------- -------
$72,981 $20,963
======= =======
4. ACCRUED LIABILITIES:
Accrued liabilities consisted of the following at December 31:
1997 1998
---- ----
Accrued compensation $ 1,254 $ 415
Accrued interest 817 767
Accrued employee benefits 1,458 193
Accrued taxes 566 20
Other 2,241 536
------- -------
$ 6,336 $ 1,931
======= =======
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
5. CHARGES FOR SUBSIDIARIES UNDER COURT ORDERED PROTECTION:
During the third quarter of 1998, three of JPE's subsidiaries were placed
under court ordered protection. On September 15, 1998, PTI and Starboard
filed voluntary petitions for relief under Chapter 11 of the Federal
Bankruptcy Code in the United States Bankruptcy Court for the Eastern
District of Michigan. On August 27, 1998, the Ontario Court (General
Division) Commercial List issued an order to appoint an Interim Receiver
for JPEC pursuant to Section 47 of the Bankruptcy and Insolvency Act of
Canada. JPE has applied the accounting treatment of various Financial
Accounting Standards to write down the assets of these subsidiaries to
their estimated net realizable value. The following adjustments were
recorded to these balance sheet accounts:
PTI Starboard JPEC Total
--- --------- ---- -----
Goodwill $13,222 $5,333 -- $18,555
Fixed assets 8,000 -- -- 8,000
Accounts receivable 1,156 350 -- 1,506
Inventory 1,759 -- -- 1,759
Patents -- -- $1,300 1,300
Loan guarantee -- -- 635 635
Other assets -- -- 100 100
------- ------ ------ -------
Total $24,137 $5,683 $2,035 $31,855
======= ====== ====== =======
These charges have been reflected on the income statement in the following
captions:
Cost of sales $ 1,759 -- -- $ 1,759
Selling, general and
administrative 1,156 $ 350 $ 100 1,606
Charge for subsidiaries
under court ordered
protection 21,222 5,333 1,935 28,490
------- ------ ------ -------
Total $24,137 $5,683 $2,035 $31,855
======= ====== ====== =======
6. INVESTMENT IN U.S. AFFILIATE COMPANIES:
JPE's subsidiaries, PTI and Starboard, are debtors-in-possession under
Chapter 11 of the Federal Bankruptcy Code. Under these conditions,
generally accepted accounting principles do not allow the Company to
consolidate these subsidiaries from the date of filing their voluntary
petitions with the Bankruptcy Court. On February 25, 1999, both
subsidiaries filed a Plan of Reorganization and Disclosure Statement with
the Court. These plans are subject to confirmation by the Bankruptcy Court
scheduled for April 16, 1999. If the plans are approved, these two
subsidiaries will emerge from Chapter 11. Note 19 describes details of the
plans in conjunction with a proposed investment into JPE.
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
6. INVESTMENT IN U.S. AFFILIATE COMPANIES, CONTINUED:
The Investment in U.S. affiliate companies on the Consolidated Balance
Sheet at December 31, 1998 is comprised of the following (amounts in
thousands):
PTI Starboard Total
--- --------- -----
Cash $ 196 $ 522 $ 718
Receivables 12,176 3,992 16,168
Inventory 5,322 514 5,836
Other current assets 353 1,370 1,723
Property, plant and equipment, net 16,228 4,356 20,584
------- ------- -------
Total Assets $34,275 $10,754 $45,029
------- ------- -------
Liabilities not subject to compromise:
Current liabilities
Accounts payable $ 260 $ 272 $ 532
Accrued liabilities 1,729 875 2,604
Other liabilities 100 368 468
Debtor-in-possession financing 14,194 3,874 18,068
Liabilities subject to compromise 4,566 1,270 5,836
------- ------- -------
Total Liabilities $20,849 $ 6,659 $27,508
------- ------- -------
Net Equity $13,426 $ 4,095 $17,521
======= ======= =======
The results of operations for these subsidiaries since their filing date
has been recorded on the equity method. Summarized statements of operations
from September 16, 1998 to December 31, 1998 are as follows (amounts in
thousands):
PTI Starboard Total
--- --------- -----
Sales $22,658 $ 6,422 $29,080
Cost of sales 20,924 5,241 26,165
------- ------- -------
Gross profit 1,734 1,181 2,915
Selling, general and
administrative expense 1,936 328 2,264
Other reorganization expenses 386 337 723
------- ------- -------
Income (loss) before interest
and taxes (588) 516 (72)
Interest expense 319 81 400
------- ------- -------
Income (loss) before taxes (907) 435 (472)
Income tax expense (benefit) (20) 88 68
------- ------- -------
Net income (loss) $ (887) $ 347 $ (540)
======= ======= =======
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
7. INVESTMENT IN JPE CANADA INC.:
At December 31, 1998, JPE Canada Inc. ("JPEC") was under the control of an
Interim Receiver appointed pursuant to Section 47 of the Bankruptcy and
Insolvency Act of Canada. The duties of the Interim Receiver included
commencing the process of realizing value of the assets for the benefit of
The Bank of Nova Scotia, the secured lender. On December 8, 1998, The Bank
of Nova Scotia, the Interim Receiver, General Motors Corporation and
General Motors of Canada Limited entered into an agreement to sell
substantially all the assets of JPEC to the Ventra Group, Inc. This
agreement required that JPEC make an assignment in bankruptcy prior to
closing. On February 8, 1999, JPEC filed an assignment in bankruptcy with
the Ontario Court (General Division) Commercial List and substantially all
the assets of JPEC were sold for approximately $13.7 million. The secured
bank loans of JPEC were approximately $14.8 million at closing. The balance
sheet and income statement for JPEC have been recorded on the equity method
from the appointment of the Interim Receiver on August 27, 1998. The unpaid
liabilities of JPEC at closing will be eliminated through the bankruptcy
proceeding, resulting in a gain of approximately $2.9 million to be
recognized in the first quarter of 1999.
The following is a summary of JPEC's Balance Sheet at December 31, 1998 and
Statement of Operations from August 28 to December 31, 1998 (amounts in
thousands):
Receivables $ 4,390
Inventory 3,709
Other assets 703
Fixed assets 14,839
-------
Total Assets 23,641
-------
Bank debt 19,251
Accounts payable 5,421
Accrued liabilities 1,085
Other liabilities 744
-------
Total Liabilities 26,501
-------
Net Deficit $(2,860)
=======
Sales $19,194
Cost of sales 18,304
-------
Gross profit 890
Selling, general and administrative expense 709
Other expense 1,082
-------
Loss before interest and taxes (901)
Interest expense 342
-------
Loss before taxes (1,243)
Tax benefit 70
-------
Net Loss $(1,173)
=======
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
8. SALE OF ALLPARTS, INC.:
On October 28, 1998, JPE sold substantially all of the assets of its
wholly-owned subsidiary, Allparts, Inc., to R&B, Inc. for $10.1 million and
the assumption of trade payables and accrued liabilities of $1.5 million,
for a total sales price of $11.6 million. The expenses related to this
transaction totaled $0.2 million. The assets of Allparts, Inc. on October
28, 1998 totaled $16.6 million. The loss on the sale of Allparts, Inc. was
$5.2 million. The net proceeds of $9.9 million were used to pay down U.S.
Bank debt.
9. SUBSEQUENT EVENT - SALE OF IAF:
On March 26, 1999, JPE sold the stock of IAF to MacLean-Fogg Corporation
for $20.0 million. The sale agreement required certain vendors to
compromise their accounts receivable from IAF to 30% of the outstanding
balance and union employees to accept annuity contracts in lieu of their
postretirement health care and life insurance benefits. JPE will record a
gain in the first quarter of 1999 for the forgiveness of these liabilities
of approximately $3.4 million, offset by a loss on the sale of stock of
approximately $4.0 million. The net proceeds of $19.2 million were used to
pay down U.S. Bank debt.
10. FINANCING:
JPE is in default under its credit agreement with its U.S. bank group. JPE
has a Forbearance Agreement under which the lender agreed to grant certain
accommodations and to forbear until January 1, 2000. This Agreement
provides financing based on an asset formula. The Forbearance Agreement is
collateralized by all of the Company's assets, with the exception of JPEC's
assets, the inventories of Starboard and PTI, and the post-petition
accounts receivable of Starboard and PTI. At December 31, 1998, the
borrowings under the Forbearance Agreement totaled $84.5 million. This
Agreement provides continued financing for the Company and its subsidiaries
that have not filed for bankruptcy. The Agreement provides that any
proceeds from pre-petition inventory and receivables will be used to
permanently reduce debt under the Forbearance Agreement. From their filing
date to December 31, 1998, these subsidiaries made total payments of
approximately $11 million. In addition, under the Bankruptcy Court order,
any sale of pre-petition collateral other than inventory and receivables
will first reduce debt under the Forbearance Agreement for PTI of $8.4
million and Starboard of $3.6 million and then be used to reduce
post-petition debt, with any remaining proceeds to be applied to debt under
the Forbearance Agreement subject to certain offsets. At December 31, 1998,
the Company has classified the amount owed on the Forbearance Agreement as
current portion of long-term debt.
PTI and Starboard have post-petition loans as provided by a financing
order, which are collateralized by post-petition receivables and
inventories. The debtor-in-possession financing agreements provide for up
to $21 million for PTI and up to $6 million for Starboard with interest at
8.75%. These debt instruments are reflected on the consolidated balance
sheet through investment in affiliate companies (see Note 6).
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
10. FINANCING, CONTINUED:
At December 31, 1997, the Company had borrowings consisting of the
following:
December 31, 1997
-----------------
Revolving credit agreement with banks due
October 1998. $103,875
Credit agreement between JPE Canada Inc.
and a Canadian bank 16,422
Other 2,100
--------
Total Debt $122,397
========
At December 31, 1997 and 1998, the average effective borrowing rate was
8.2% and 9.75%, respectively. The credit agreement provides for a facility
fee which is payable quarterly in arrears. Facility and amendment fees were
$293 in 1996, $376 in 1997, $1,440 in 1998, and are included as interest
expense.
11. STOCK OPTIONS AND WARRANTS:
The Company has granted certain officers, directors, key employees and
consultants stock options under the 1993 Stock Incentive Plan for Key
Employees of JPE, Inc. The options granted under this plan give the bearer
the right to purchase stock at a fixed price, determined at the date of
grant.
Under the JPE Stock Incentive Plan for Key Employees (the "Plan"), the
total number of shares of common stock that may be granted is 732,608. The
Plan provides that shares granted come from the Company's authorized but
unissued common stock and that the price of the options granted qualifying
as incentive options will not be less than 100 percent of the fair market
value of the shares on the date of the grant. Substantially all options
that have been granted under the Plan vest equally over a four year period
and expire on various dates, typically ten years after the date of grant.
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
11. STOCK OPTIONS AND WARRANTS, CONTINUED:
Information regarding the Plan, the prior plan and the JPE Director Stock
Option Plan for 1996, 1997 and 1998 is as follows:
Weighted Weighted
Average Average
Exercise Options Exercise
Shares Price Exercisable Price
------ -------- ----------- --------
Balance, January 1, 1996 649,578 $10.26 191,198 $ 6.33
Options exercised (108,550) $ 3.78
Options terminated and expired (597,418) 11.24
Options granted 537,000 7.67
-------
Balance, December 31, 1996 480,610 $ 7.61 168,981 $ 8.26
Options exercised (19,700) $ 3.87
Options terminated and expired (130,910) 9.07
Options granted 86,750 7.09
-------
Balance, December 31, 1997 416,750 $ 7.22 178,500 $ 7.25
Options exercised -- --
Options terminated and expired (243,250) $ 6.86
Options granted 359,000 1.59
-------
Balance, December 31, 1998 532,500 $ 3.58 187,188 $ 6.86
=======
1996 1997 1998
---- ---- ----
Options available for grant at end of year 294,640 323,814 200,108
Option price range at end of year $3.26-$13.50 $6.625-$8.00 $0.30-$8.00
Option price range for exercised shares $3.26-$4.01 $3.26-$7.25 --
Weighted average grant date fair value
of options granted $4.44 $3.61 $0.66
Weighted average remaining contractual
life 8 years 7.5 years 8.5 years
On December 16, 1996, the Company elected to reprice 415,000 of the
outstanding options to the then fair market value of $7.25.
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
11. STOCK OPTIONS AND WARRANTS, CONTINUED:
During 1994, the Company granted warrants to purchase 100,000 shares of
common stock at $9.50 per share. The warrants were exercisable on the grant
date and expire ten years from the date of grant.
The Company has elected to adopt the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation." Accordingly, no compensation cost has been recognized
for the stock option plan. Had compensation cost for the Company's plan
been determined based on the fair value at the grant date for awards in
1996, 1997 and 1998 consistent with the provisions of SFAS No. 123, the
Company's net loss and loss per share would have changed to the pro forma
amounts indicated below:
1996 1997 1998
---- ---- ----
Net loss - as reported $(1,589) $(2,143) $(53,570)
Net loss - pro forma $(1,810) $(2,380) $(53,336)
Loss per share assuming dilution - as reported $(.35) $(.47) $(11.64)
Loss per share assuming dilution - pro forma $(.40) $(.52) $(11.59)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996, 1997 and 1998: dividend yield of 0%;
expected volatility of 56%; risk-free interest rate of 6.3%; and expected
lives of 6 years.
The pro forma disclosures may not be representative of the effects on
reported net income and earnings per share because only stock options
granted beginning in 1995 are reflected in the pro forma amounts. Other
factors that may impact pro forma disclosures in future years include the
vesting period of stock options, timing of additional grants and number of
additional shares granted.
12. EMPLOYEE BENEFIT PLANS:
The Company has several different defined contribution plans consisting of
a 40l(k) plan and profit sharing plans which cover substantially all U.S.
based non-union employees. The Company's contribution is discretionary. The
charges to operations for the years ended December 31, 1996, 1997 and 1998
were $1,639, $1,258 and $567, respectively.
The Company contributes to a multiemployer defined benefit plan for the IAF
employees covered under its collective bargaining agreement. This plan is
composed of hundreds of different participating employers and many
international and local unions. Pension benefits are determined on a
formula basis which recognize length of service and benefit units. One
benefit unit is credited for each 1,800 hours of service in covered
employment. The Company has charged to expense $122, $151 and $176 for the
years ended December 31, 1996, 1997 and 1998, respectively.
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
12. EMPLOYEE BENEFIT PLANS, CONTINUED:
The Company also provides health care and life insurance benefits for the
union employees of IAF. These employees become eligible for benefits if
they qualify for retirement while working for the Company. The following
table presents the plan's status at December 31:
1997 1998
---- ----
Accumulated postretirement
benefit obligation $(1,368) $ (964)
Unrecognized prior service cost -- (403)
Unrecognized net loss (gain) 119 (48)
------- -------
Recorded accumulated postretirement
benefit obligation $(1,249) $(1,415)
======= =======
The following table presents net periodic benefit cost for the year ended
December 31:
1996 1997 1998
---- ---- ----
Service cost $117 $171 $128
Interest cost 72 95 77
Amortization of prior service cost -- -- (24)
---- ---- ----
Net periodic benefit cost $189 $266 $181
==== ==== ====
The accumulated postretirement benefit obligation was determined using an
assumed discount rate of 7.0% and 6.5% in 1997 and 1998, respectively. The
assumed annual health care cost trend rate was 8.0% and 7.5% for 1997 and
1998, respectively, decreasing to 5% in 2001. A one percentage point
increase in the assumed health care cost trend rate would have increased
the 1998 accumulated postretirement cost by $51 and would have increased
the accumulated postretirement benefit obligation by $203. On March 26,
1999, the Company sold the stock of IAF, and this liability was forgiven by
the union in exchange for annuity contracts to be provided by the new
owner.
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
13. INCOME TAXES:
Income tax expense (benefit) at December 31, 1996, 1997 and 1998 is as
follows:
1996 1997 1998
---- ---- ----
Income (loss) before income tax:
U.S. $(1,301) $ 63 $(48,544)
Foreign (85) (2,400) (6,061)
------- ------- --------
(1,386) (2,337) (54,605)
Current payable (refundable):
Federal $ (395) (456) (366)
State 378 333 441
Foreign -- 43 (19)
------- ------- --------
Total current payable (refundable) (17) (80) 56
------- ------- --------
Deferred:
Federal 96 606 (1,649)
State 157 88 (283)
Foreign (33) (808) 841
------- ------- --------
Total deferred 220 (114) (1,091)
------- ------- --------
Total income tax expense (benefit) $ 203 $ (194) $ (1,035)
======= ======= ========
The 1996, 1997 and 1998 provision for income taxes differs from the amount
of income tax determined by applying the statutory U. S. federal income tax
rate to pretax income as a result of the following:
1996 1997 1998
---- ---- ----
Statutory U. S. federal tax rate (34%) (34%) (34%)
State taxes, net of federal tax benefit 26 12 --
Non-deductible write-off of equity investment 10 -- --
Goodwill amortization 14 10 --
Foreign tax rate in excess of U.S. federal tax rate -- 2 --
Establishment of valuation reserve -- -- 32
All other (1) 2 --
---- ---- ----
Effective tax rate 15% ( 8%) ( 2%)
==== ==== ====
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
13. INCOME TAXES, CONTINUED:
Deferred income taxes reflect the estimated future tax effect of temporary
differences between the amount of the assets and liabilities for financial
reporting purposes and such amounts as measured by tax laws and
regulations. At December 31, 1998, the Company's taxable net operating loss
carryover amounted to $15.0 million of which $1.9 million relates to the
Company's 1997 purchase of BATCO. The Company's utilization of this net
operating loss carryover is limited to future years' taxable income. A
valuation reserve at 100% was provided against net deferred tax assets to
reflect the Company's limited use of net operating loss carryovers and
future tax deductions for U.S. Federal tax purposes. At December 31, 1997
and 1998, deferred tax assets and liabilities are as follows:
1997 1998
---- ----
Deferred tax assets:
Goodwill $ 827 $ 780
Inventory 551 527
Allowance for doubtful accounts 243 380
Employee benefits 800 522
AMT tax credit 357 78
Net operating loss 1,461 2,904
All other 117 275
Patents -- 442
------- -------
Total deferred tax assets 4,356 5,908
------- -------
Deferred tax liabilities:
Property and equipment 5,065 1,819
LIFO inventory 183 --
Accrued liabilities 274 --
------- -------
Total deferred tax liabilities 5,522 1,819
------- -------
Net deferred tax assets (liabilities) (1,166) 4,089
Valuation reserve -- (4,164)
------- --------
Net deferred tax liabilities $(1,166) $ (75)
======= =======
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
14. SUPPLEMENTAL CASH FLOW INFORMATION:
Selected cash payments and noncash activities for the years ended December
31, 1996, 1997 and 1998 were as follows:
1996 1997 1998
---- ---- ----
Cash paid for interest $6,780 $10,226 $12,978
Cash paid for income taxes 83 535 275
Noncash investing and
financing activities:
Increase in fixed assets for
revised allocation of purchase
price of JPE Canada -- 2,070 --
15. SEGMENT INFORMATION:
In 1998, JPE, Inc. adopted FAS 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company manages and reports its
operating activities under three segments: Trim Products, Fasteners, and
Truck and Automotive Replacement Parts. The Trim Products segment consists
of decorative and functional exterior trim sold to Original Equipment
Manufacturers ("OEM's"). Fasteners are decorative, specialty and standard
wheel nuts sold to the OEM's and to the replacement market. The Truck and
Automotive Replacement Parts segment consists of heavy-duty vehicle
undercarriage parts and brake systems for the automotive industry. JPE,
Inc. sold its brake systems segment during 1998 (see Note 8). In 1999, JPE,
Inc. also sold a portion of its Trim Products segment (see Note 7) and its
Fasteners segment (see Note 9).
The accounting policies for the segments are the same as those presented in
Note 1. There are no inter-segment sales and management does not allocate
interest or corporate expenses to the segments. The Company evaluates the
performance of its segments and allocates resources to them based on
Operating Income. Segment profit (loss) is defined as sales minus cost of
goods sold and selling, general and administrative expenses. Other items
relate to non-recurring transactions, such as bankruptcy-related
transactions or sales of portions of segments.
Information by operating segment is summarized below:
Trim Replacement
Products Fasteners Parts Total
-------- --------- ----------- -----
Sales to unaffiliated customers
1998 $ 85,671 $38,342 $86,109 $210,122
1997 155,964 39,527 91,575 287,066
1996 94,197 33,805 73,451 201,453
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
15. SEGMENT INFORMATION, CONTINUED:
Trim Replacement
Products Fasteners Parts Total
-------- --------- ----------- -----
Segment profit (loss)
1998 $ (8,218) $ 1,460 $ 5,509 $ (1,249)
1997 3,677 1,473 8,706 13,856
1996 6,456 (400) 6,698 12,754
Other charges
1998 $ 26,704 $ 58 $ 5,243 $ 32,005
1997 2,782 -- -- 2,782
1996 -- 4,300 -- 4,300
Affiliate companies' losses
1998 $ 1,713 -- -- $ 1,713
1997 -- -- -- --
1996 -- -- -- --
Depreciation and amortization
1998 $ 4,744 $ 1,574 $ 1,996 $ 8,314
1997 6,305 1,624 2,165 10,094
1996 3,797 1,540 1,875 7,212
Segment assets
1998 -- * $23,479 $37,642 $ 61,121
1997 104,661 24,368 60,771 189,800
1996 102,012 24,930 42,123 169,065
Expenditures for segment assets
1998 $ 1,613 $ 458 $ 994 $ 3,065
1997 8,963 1,543 8,099 18,105
1996 31,050 2,295 1,324 34,669
<FN>
* Trim Products segment is being recognized through Investment in
Affiliates of $14,661. Total assets for the Trim Products segment at
December 31, 1998 were $68,671.
</FN>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
15. SEGMENT INFORMATION, CONTINUED:
A reconciliation of segment profit (loss) for reportable segments to
consolidated loss before taxes is as follows:
1996 1997 1998
---- ---- ----
Segment profit (loss) $ 12,754 $ 13,856 $ (1,249)
Other charges (4,300) (2,782) (32,005)
Equity net loss -- -- (1,713)
Corporate expense (2,615) (2,947) (2,895)
Costs related to bankruptcy
and forbearance agreements -- -- (3,658)
Interest expense (7,225) (10,464) (13,085)
-------- -------- --------
Loss before taxes $ (1,386) $ (2,337) $(54,605)
======== ======== ========
A reconciliation of segment assets to consolidated assets is as follows:
1996 1997 1998
---- ---- ----
Segment Assets $169,065 $189,800 $ 61,121
Corporate Assets 5,660 3,415 1,192
Investment in Affiliates -- -- 14,661
-------- -------- --------
$174,725 $193,215 $ 76,974
======== ======== ========
The Company's sales to individual customers in excess of 10% of total
revenue were:
1996 1997 1998
---- ---- ----
General Motors Corporation 36% 44% 29%
Chrysler Corporation 14% 11% 16%
The Company had export sales of approximately $26.5, $29.0 and $29.2
million, principally to Canada and Central America, for the years ended
December 31, 1996, 1997 and 1998, respectively. The Company operates in the
North American geographic area.
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
16. ACQUISITIONS:
On April 16, 1997, DPI acquired all of the issued and outstanding capital
stock of Brake, Axle and Tandem Company ("BATCO"). This acquisition has
been accounted for as a purchase. The purchase price of $5,518 was
allocated to the assets acquired and liabilities assumed. The values of the
assets acquired and liabilities assumed with the purchase of BATCO were
based on the fair values at the date of acquisition. In 1998, BATCO was
merged into DPI with no change of assets or liabilities from this
transaction.
The value of assets and liabilities assumed for the purchase of BATCO was
comprised of the following on April 16, 1997.
BATCO
-----
Accounts receivable and other assets $ 2,020
Inventory 1,770
Property, plant and equipment 293
Goodwill 6,263
Deferred tax asset 653
-------
Total 10,999
Accounts payable and accrued
expenses (5,481)
-------
Total, net $ 5,518
=======
The following unaudited pro forma summary for the year ended December 31,
1997 assumes that the acquisition of BATCO had occurred on January 1, 1997.
The significant adjustments relate to the inclusion of amortization of
goodwill, an increase in interest expense based on an increase in long-term
obligations, and the related income tax effects.
1997
----
Revenues $292,576
Operating profit 8,474
Loss before income taxes (2,769)
Net loss (2,393)
Loss per common share - assuming dilution ($0.52)
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
17. GOODWILL IMPAIRMENT:
During the third quarter of 1996, management identified that a significant
change had occurred in the product mix of its IAF subsidiary since its
purchase in March 1995. In accordance with SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of," management recorded a $4.3 million impairment writedown of the
goodwill associated with the acquisition of IAF. The goodwill was
originally valued at $6.8 million when IAF was acquired and, subsequent to
the adjustment, had a net unamortized carrying value of approximately $2.1
million as of December 31, 1996. The writedown of $4.3 million was
calculated based on the then estimated fair market value of the IAF
business of $21.3 million.
18. DISCONTINUANCE OF STAMPING OPERATIONS:
During the third quarter of 1997, management discontinued the production of
Starboard's stamping operations. This resulted in resourcing the stamped
parts to other third-party suppliers, the sale of Starboard's stamping
assets, reducing the workforce and a major re-layout of Starboard's East
Tawas, Michigan production facility to improve productivity of its
roll-forming and co-extrusion operations. Management made this decision
based on the negative impact the stamping business had on the operating
results of Starboard and the OEM Trim Group as a whole. As a result of this
discontinuance of stamping operations, the Company recorded a charge of
$2.25 million relating to the loss on disposal of assets, employee
severances and other costs directly related to the stamping business.
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
19. SUBSEQUENT EVENT - RESTRUCTURING OF JPE, INC.:
On February 18, 1999, the Company reached an agreement in principle with ASC
Holdings, Inc., pursuant to which a company to be formed would acquire
common and preferred stock of the Company to initially have voting control
and an economic interest of 95% of the Company. The current stockholders of
JPE, Inc. would retain the remaining equity in the Company, subject to
further dilution of 511,353 common stock warrants, in the event of the
exercise of such warrants that will be issued to the Company's bank lenders
in exchange for loan concessions in excess of $12.0 million. In addition,
the current stockholders of the Company and the Company's bank group would
receive warrants that would entitle them to purchase 15% of the voting
power and economic interest in the Company, exercisable two years after the
consummation of the ASC Holdings, Inc. investment, subject to obtaining
prescribed EBITDA levels. As such, current stockholders of the Company
would experience substantial dilution upon the ASC Holdings, Inc.
investment, but would have the potential of increasing their aggregate
percentage ownership in the future. Pursuant to the agreement in principle,
ASC Holdings, Inc. would invest $18.4 million in the Company and would
provide or arrange a loan to JPE in the amount of approximately $51.6
million. The Company and ASC Holdings, Inc. are continuing to negotiate the
final terms and structure of the foregoing investment by ASC Holdings, Inc.
which is subject to a number of conditions, including execution of a
definitive agreement, approval of the bankruptcy courts having jurisdiction
over PTI and Starboard and approval of the Company's bank group lenders.
There can be no assurance that the parties will reach agreement on mutually
satisfactory terms or that the conditions to consummating the transaction
will be satisfied.
PTI and Starboard have filed reorganization plans with the Bankruptcy Court
that are subject to a confirmation hearing scheduled for April 16, 1999.
Under these plans, PTI's and Starboard's unsecured creditors as of
September 15, 1998 will be paid 30% of their pre-petition claims. This will
result in a forgiveness of liabilities of approximately $4.1 million.
JPE, Inc. would consist of three manufacturing facilities, Dayton Parts,
Inc., Plastic Trim Inc. and Starboard Industries, Inc., with 1999 annual
revenues of approximately $155 million and total assets of approximately
$75 million. The forgiveness of bank debt would be recognized as a gain in
the second quarter of 1999. This transaction and the ASC investment is
expected to increase Shareholders' Equity to approximately $10 million.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
---------
Percent of
Total Shares of
Shares of Common Stock
Positions and Offices Common Stock of the Company
with the Company Beneficially Beneficially Term
and Other Owned as of Owned as of to
Name of Director Age Principal Occupations March 15, 1999 March 15, 1999 Expire
- ---------------- --- --------------------- -------------- --------------- ------
Richard P. Eidswick (1)(2) 62 Chairman of the Board and 90,000 1.9 2000
(September 1998) Director of the Company;
Partner in Arbor Partners,
LLC
Richard R. Chrysler (3) 56 President, Chief Executive -- * 2000
(November 1998) Officer and Director of the
Company
David E. Cole (4) 60 Director of the Company; 3,000 * 2001
(May 1997) Director of Office for the
Study of Automotive
Transportation at University
of Michigan's Transportation
Research Institute
Otto Gago (5) 63 Director of the Company 37,462 * 2000
(May 1993) Thoracic and Cardiovascular
Surgeon
Other Executive Officers
------------------------
James J. Fahrner (6) 47 Executive Vice President and 78,250 1.7 --
Chief Financial Officer
All Directors and
Executive Officers as a
Group (5 persons) (7) 208,712 4.5
<FN>
* Less than 1%.
(1) Consists of (a) 40,000 shares owned by Mr. Eidswick jointly with his wife
and (b) 50,000 shares held in Mr. Eidswick's individual retirement account.
Does not include 4,100 shares held in Mrs. Eidswick's individual retirement
account.
(2) Does not include 50,000 shares subject to stock options exercisable on the
earlier of January 1, 2000 or the month end at which the Company reports a
positive net worth for such month.
(3) Does not include 200,000 shares subject to stock options exercisable on the
earlier of January 1, 2000 or the month end at which the Company reports a
positive net worth for such month.
(4) Consists of (a) 500 shares owned by Dr. Cole jointly with his wife and (b)
2,500 shares subject to stock options exercisable within 60 days of March
15, 1999.
(5) Consists of (a) 27,962 shares held in Dr. Gago's individual retirement
account and (b) 9,500 shares subject to stock options exercisable within 60
days of March 15, 1999. Does not include (a) 215,627 shares held by Dr.
Gago's wife and (b) 15,000 shares held by a charitable foundation
established by Dr. and Mrs. Gago.
(6) Consists of (a) 3,000 shares owned by a trust of which Mr. Fahrner is
trustee and a beneficiary and (b) 75,250 shares subject to stock options
exercisable within 60 days of March 15, 1999.
(7) Includes 87,250 shares subject to stock options exercisable within 60 days
of March 15, 1999 by the Company's directors and executive officers as a
group.
</FN>
Information Relating to Directors
---------------------------------
Following each director's name is a brief account of his business
experience during the past five years.
Richard P. Eidswick
- -------------------
Mr. Richard P. Eidswick has been a Managing Director of Arbor Partners,
LLC, a venture capital firm, since 1997. Mr. Eidswick founded Network Express in
1990 and served as that company's President and CEO until its sale in 1996. Mr.
Eidswick is a director of Steeplechase Software, Inc.; CMS Technologies and
Genitor Corporation. Mr. Eidswick became a Director of the Company and Chairman
of the Board in September 1998.
Richard R. Chrysler
- -------------------
Mr. Richard R. Chrysler has been President and Chief Executive Officer of
the Company since November 1998. Prior to joining the Company, he was president
of R.C.I., a worldwide supplier of automotive and electronic related components.
Mr. Chrysler also served as a member of the U.S. House of Representatives from
1994 to 1996. Mr. Chrysler became a Director of the Company in November 1998.
David E. Cole
- -------------
Dr. David E. Cole has been the Director of the Office for the Study of
Automotive Transportation (OSAT) at the University of Michigan's Transportation
Research Institute since 1978. He has worked extensively on internal combustion
engines, vehicle design, and overall automotive industry trends. Dr. Cole is a
director of the Automotive Hall of Fame and is on the Board of Trustees of Hope
College. Dr. Cole became a Director of the Company in May 1997.
Otto Gago
- ---------
Dr. Otto Gago has been a thoracic and cardiovascular surgeon since 1967. He
currently practices in Ann Arbor, Michigan. Dr. Gago is also an investor in new
businesses and real estate ventures. Dr. Gago became a Director of the Company
in May 1993.
During the fiscal year ended December 31, 1998, the Board of Directors of
the Company held twenty-six meetings.
Executive Officers
------------------
The current executive officers of the Company are identified below. Officers are
appointed by the Board of Directors and serve at its discretion.
Name Age Position
Richard R. Chrysler 56 President, Chief Executive Officer
and Director
James J. Fahrner 47 Executive Vice President and Chief
Financial Officer
Richard R. Chrysler has been President, Chief Executive Officer and a Director
of the Company since November 1998. Prior to joining the Company, Mr. Chrysler
was president of R.C.I., a worldwide supplier of automotive and electronic
related components. Mr. Chrysler also served as a member of the U.S. House of
Representatives from 1994 to 1996.
James J. Fahrner has been Executive Vice President and Chief Financial Officer
of the Company since November 1998. He has been with the Company since June
1995, serving as Vice President and Chief Financial Officer from June 1995 to
May 1997, as Senior Vice President and Chief Financial Officer from May 1997 to
January 1998, and as Executive Vice President - OEM Group of the Company from
January 1998 to November 1998. From November 1990 until June 1995, Mr. Fahrner
served as Vice President-Chief Financial Officer, Treasurer of Gelman Sciences
Inc., a manufacturer of microfiltration products.
Section 16(a) Beneficial Ownership Compliance
---------------------------------------------
Section 16(a) of the Securities and Exchange Act of 1934 generally requires
the Company's Directors and Executive Officers and persons who own more than 10%
of a registered class of the Company's equity securities ("10% owners") to file
with the Securities and Exchange Commission and, prior to August 1998, the
Nasdaq Stock Market, Inc. initial reports of ownership and reports of changes in
ownership of common stock of the Company. Directors, Executive Officers and 10%
owners are required by Securities and Exchange Commission regulation to furnish
the Company with copies of all Section 16(a) forms they file. To the Company's
knowledge, based solely on review of copies of such reports furnished to the
Company and written representations that no other reports were required to be
filed during the 1998 fiscal year, all Section 16(a) filing requirements
applicable to its Directors, Executive Officers and 10% owners were met.
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Directors
-------------------------
Each director who is not also an officer or employee of the Company
receives a semi-annual director's fee of $3,000 and is reimbursed for expenses
of attending Board of Directors and committee meetings.
In addition, non-employee directors receive grants for stock options
pursuant to the JPE, Inc. Director Stock Option Plan (the "Director Plan"). Each
non-employee director of the Company who was a member of the Board on April 27,
1995, the date the Director Plan was adopted by the Board, was granted an option
to purchase 5,000 shares of Common Stock of the Company and each non-employee
director who is subsequently first elected or appointed to serve as a member of
the Board is automatically granted on the date of such election an option to
purchase 5,000 shares of Common Stock of the Company at an exercise price equal
to the fair market value of the Company's Common Stock on the date of such
grant. On the date of each annual meeting of shareholders subsequent to April
27, 1995, each non-employee director serving on or elected to the Board on such
date shall receive an option to purchase 3,000 shares of Common Stock of the
Company at an exercise price equal to the fair market value of the Company's
Common Stock on the date of such grant.
In recognition of the added responsibilities of overseeing the
restructuring and/or sale of the Company, Richard P. Eidswick, Chairman of the
Board of Directors, is a party to a consulting agreement, dated November 9,
1998, with the Company pursuant to which he will be paid the sum of $4,166.67
per month, plus reimbursement of expenses, for these duties. The agreement may
be terminated by either party upon not less than seven days' notice. In
connection with the consulting agreement, Mr. Eidswick was also granted options
to purchase 50,000 shares of the Company's Common Stock under the JPE, Inc. 1993
Stock Incentive Plan at an exercise price equal to the fair market value of the
Company's Common Stock on the date of such grant. The options vest on the
earlier of January 1, 2000 or the month end at which the Company's financial
reporting for such month reports a positive net worth.
Summary Compensation Table
--------------------------
The following table sets forth information for the fiscal years ended
December 31, 1996, 1997 and 1998 concerning compensation of the Company's Chief
Executive Officer and each of the Company's executive officers whose total
annual salary and bonus exceeded $100,000 in 1998:
Long-Term
Compensation
Annual Compensation Awards
------------------- ------------
Fiscal Other Annual Stock Option All Other
Name and Position Year Salary (1) Bonus Compensation (2) Shares (#) Compensation (3)
- ----------------- ------ ---------- ----- ---------------- ---------- ----------------
Richard R. Chrysler (4) 1998 $ 36,112 -0- -- 200,000 -0-
President, Chief
Executive Officer
and Director
James J. Fahrner 1998 $201,877 -0- (5) -- 30,000 $5,425
Executive Vice 1997 160,563 -0- -- -0- 9,550
President and 1996 153,125 $40,000 -- 95,000 (6) 9,250
Chief Financial
Officer
John Psarouthakis (7) 1998 $177,089 -0- -- -0- $6,875
Former Chairman of 1997 250,008 -0- -- -0- 9,550
the Board, President 1996 233,333 $50,000 -- 110,000 (8) 9,250
Chief Executive
Officer and Director
Donna L. Bacon (9) 1998 $191,877 -0- -- 40,000 $5,450
Former Executive 1997 165,988 -0- -- -0- 9,550
Vice President, 1996 152,500 $40,000 -- 75,000 (10) 9,250
Secretary and
General Counsel
<FN>
(1) Amounts represent the dollar value of base salary earned by the named
executive officer during the fiscal year covered as reported on the
officer's W-2.
(2) The dollar value of perquisites provided to each of the named executive
officers does not exceed the lesser of $50,000 or 10% of the total of
annual salary and bonus reported for the named executive officer.
(3) Represents the amount contributed to an account for the employee's benefit
by the Company under the Company's 401(k) Savings Plan, unless otherwise
indicated.
(4) Mr. Chrysler was hired on November 9, 1998 as President, Chief Executive
Officer and Director at an annual salary of $250,000.
(5) Mr. Fahrner was entitled to a $175,000 payment under his Stay Bonus
Agreement at December 31, 1998 which has been deferred to June 30, 1999 as
described below.
(6) Includes options to purchase 25,000 shares of the Company's Common Stock
that were canceled in connection with the December 16, 1996 repricing of
options. See "Ten-Year Option/SAR Repricings" below.
(7) Dr. Psarouthakis resigned as Chairman of the Board, President, Chief
Executive Officer and Director of the Company effective September 11, 1998.
(8) Represents options granted as replacement options in connection with the
December 16, 1996 repricing of options. See "Ten-Year Option/SAR
Repricings" below.
(9) Ms. Bacon resigned as Executive Vice President, Secretary and General
Counsel of the Company effective as of December 15, 1998.
(10) Includes options to purchase 15,000 shares of the Company's Common Stock
that were canceled in connection with the December 16, 1996 repricing of
options. See "Ten-Year Option/SAR Repricings" below.
</FN>
Stay Bonus Agreement
--------------------
James J. Fahrner and Registrant entered into a Stay Bonus Agreement
pursuant to which Mr. Fahrner is entitled to receive a stay bonus of $525,000
payable upon the earlier of (i) December 31, 1998 (in the amount of ($175,000
followed by two additonal equal installments on dates certain ending on January
1, 2000), and (ii) the occurrence of any of the following: (x) the completion of
Registrant's debt restructuring, (y) the emergence of Reistrant from a
bankruptcy proceeding, or (z) a change of control (as defined in the Stay Bonus
Agreement). Mr. Fahrner has agreed that if the December 31, 1998 installment is
paid by June 30, 1999 in the total amount of $175,000, he will waive any claim
for the balance under the Stay Bonus Agreement. See Exhibit 10.8 to Registrant's
Form 10-Q for the quarter ended September 30, 1998 and Exhibit 10.44 to this
Form 10-K.
Aggregated Option Exercises in the Last Fiscal Year
and Fiscal Year End Option Values
---------------------------------------------------
The following table sets forth information concerning (i) each exercise of
stock options during the fiscal year ended December 31, 1998 by each named
executive officer of the Company and (ii) the value of unexercised stock options
held by such persons as of December 31, 1998:
Value of
Unexercised
Number of In-the-Money
Unexercised Options Options at
Shares at December 31, 1998 December 31, 1998
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable (1)
- ---- ----------- -------- -------------------- -----------------
Richard R. Chrysler -- -- 0/200,000 $0/40,000
James J. Fahrner -- -- 60,250/38,750 0/0
John Psarouthakis -- -- 0/0 0/0
Donna L. Bacon (2) -- -- 66,750/0 0/0
<FN>
(1) In calculating the value of unexercised in-the-money options at December
31, 1998, the Company used a market value of $0.50 per share, the closing
price for shares of Common Stock on the OTC Bulletin Board on December 31,
1998.
(2) These options terminated March 15, 1999 and were not exercised.
</FN>
Option Grants in Last Fiscal Year
---------------------------------
The following table sets forth information concerning grants of stock
options to the Company's named executive officers during the fiscal year ended
December 31, 1998:
Option Grants in Last Fiscal Year
% of Total Potential Realizable Value
Options at Assumed Annual Rates
Number of Granted to Exercise of Stock Price Appreciation
Options Employees in Price Per Expiration For Option Term (3)
Name Granted Fiscal Year Share (1) Date (2) 5% 10%
- ---- --------- ------------ --------- ---------- -- ---
Richard R. Chrysler 200,000 (4) 56% $0.3000 11/9/08 $ 37,733 $ 95,625
James J. Fahrner 30,000 (5) 8% $5.1875 1/21/08 $ 97,871 $248,026
Donna L. Bacon 40,000 (5) 11% $5.1875 1/21/08 $130,496 $330,702
<FN>
(1) The exercise price is to be paid in full in cash or, with the consent of
the Compensation Committee, in Common Stock or by a promissory note payable
to the order of the Company which is acceptable to the Compensation
Committee.
(2) The options may expire earlier in certain circumstances such as the
executive's death or permanent disability or the termination of his
employment with the Company.
(3) The dollar amounts under these columns assume a compounded annual market
price increase for the underlying shares of Common Stock from the date of
grant to the end of the option term of 5% and 10%. This format is
prescribed by the Commission and is not intended to forecast future
appreciation of shares of Common Stock. The actual value, if any, an
executive may realize will depend on the excess of the market price for
shares of Common Stock on the date the option is exercised over the
exercise price. Accordingly, there is no assurance that the value realized
by an executive will be at or near the value estimated above. Potential
Realizable Value is not calculated for options that were replaced during
the fiscal year ended December 31, 1996.
(4) The options become exercisable on the earlier of January 1, 2000 or the
month end at which the Company's financial reporting for such month reports
a positive net worth.
(5) The options become exercisable as to up to 25% of the underlying shares of
Common Stock on the first anniversary date of the date of grant and 25%
each year thereafter.
</FN>
Ten-Year Option/SAR Repricings
------------------------------
On December 16, 1996, the Board of Directors of JPE, Inc. acknowledged the
effort that would be required from its key employees to implement changes at the
Company's operations and to effect a successful turnaround of Pebra Inc., that
was acquired on December 23, 1996. The Board of Directors determined that the
most effective and economical method to motivate and reward such employees would
be to reprice all outstanding options of then current, active employees.
Therefore, the Board of Directors approved an option exchange for then current,
active employees entitling such employees to cancel their outstanding options in
exchange for new options with an exercise price of $7.25 per share, the fair
market value of the Company's stock on the date of exchange. The new options
were subject to the same vesting schedule as the canceled options, including the
same vesting commencement date, with the same termination date; provided that if
the canceled option was an incentive stock option, it became a non-qualified
option.
By the JPE, Inc. Board of Directors
Length of
Number of Market Original
Securities Price of Exercise Option Term
Underlying Stock at Price at Remaining
Options/ Time of Time of at Date of
SARs Repricing Repricing New Repricing
Repriced or or Exercise or
Name Date or Amended Amendment Amendment Price Amendment
---- ---- ---------- --------- --------- -------- -----------
James J. Fahrner 12/16/96 30,000 $7.25 $14.00 $7.25 8.58 years
15,000 7.25 10.50 7.25 8.92 years
15,000 7.25 9.875 7.25 9.67 years
10,000 7.25 7.75 7.25 9.92 years
John Psarouthakis 12/16/96 20,000 7.25 12.65 7.25 1.92 years
23,678 7.25 11.55 7.25 3.92 years
66,322 7.25 10.50 7.25 8.92 years
Donna L. Bacon 12/16/96 30,000 7.25 10.75 7.25 7.83 years
15,000 7.25 10.50 7.25 8.92 years
15,000 7.25 7.75 7.25 9.92 years
Tax Deductibility of Executive Compensation
-------------------------------------------
During 1993, Section 162(m) of the Internal Revenue Code was enacted to
limit the corporate deduction for compensation paid to each of the five most
highly compensated executive officers of a publicly-held corporation to $1
million per year, unless certain requirements are met. The Compensation
Committee has reviewed the impact of this legislation on the Company's executive
compensation plans and concluded that this legislation should not apply to limit
the deduction for executive compensation paid by the Company in 1998.
Report of Compensation Committee
--------------------------------
The report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this Form 10-K
into any filing under the Securities Act of 1933 or under the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporates
this information by reference, and shall not be deemed filed under such Acts.
Introduction and Organization
-----------------------------
The Compensation Committee of the Board of Directors, composed of
non-employee directors, reviews and develops compensation programs for key
management, evaluates executive performance, administers the Company's
compensation programs and makes recommendations as to compensation matters to
the Board of Directors.
General Policies
----------------
The Compensation Committee's overall compensation policy with regard to
executive officers is to provide a compensation package that is intended to
attract and retain qualified executives and to provide incentives to achieve the
Company's goals and increase shareholder value. The Compensation Committee
implements this policy through base salaries, bonuses and grants of stock
options, stock appreciation rights and restricted stock.
Base Salaries
-------------
Base salary is determined for each of the Company's key executives by the
Compensation Committee based upon recommendations of the Company's Chief
Executive Officer. Factors affecting executive salary determinations include
experience, leadership, the Company's performance and achievements, individual
initiative, performance and achievements and an evaluation of the
responsibilities of the position held by the executive. No specific weighting of
factors is used.
Bonuses
-------
The Company awards its executive officers discretionary bonuses deemed
appropriate by the Compensation Committee. Bonuses are intended to provide
incentives to achieve the Company's financial and operational goals and increase
shareholder value, as well as to recognize an executive's individual
contributions to the Company. Factors affecting executive bonus determinations
include an evaluation of the Company's results and the executive's initiative,
performance and achievements, and the executive's salary. The Compensation
Committee does not use any specific weighting of factors. The Compensation
Committee obtains recommendations from the Chief Executive Officer as to
executive officer bonuses based on an evaluation of each individual executive's
performance during the year.
Long-Term Incentives
--------------------
The Compensation Committee believes that executive ownership of the
Company's stock, together with compensation plans that foster the alignment of
management's interests with those of the Company's shareholders, are in the best
interests of shareholders and management. Under the Company's 1993 Stock
Incentive Plan, the Compensation Committee approved grants of stock options to
executive officers and to other key employees. Awards under the 1993 Stock
Incentive Plan are intended to provide participants with an increased incentive
to make significant contributions to the long-term performance and growth of the
Company, to join the interests of participants with the interests of
shareholders of the Company and to facilitate attracting and retaining key
employees of exceptional ability.
The Compensation Committee's policy is to award stock options in amounts
reflecting the participant's position and the ability to influence the Company's
overall performance. In determining the size of individual awards, the
Compensation Committee also considers the amounts of options outstanding and
previously granted both in the aggregate and with respect to the optionee, the
amount of shares remaining available for grant under the Company's stock
incentive plan, the amount of stock owned by the executive and the aggregate
amount of the current awards. Generally, the exercise price for stock options
will be at or above the fair market value of the underlying shares on the date
of the grant.
Other Compensation
------------------
The Company has adopted certain employee benefit plans, including its
401(k) savings plan and health benefit plans, in which executive officers have
been permitted to participate. Benefits under these plans are not directly or
indirectly tied to the Company's performance.
Chief Executive Officer Compensation
------------------------------------
The compensation of the Chief Executive Officer is determined based upon
the same criteria as are used for other executive officers. The Chief Executive
Officer does not participate in the approval of his own compensation, but does
participate in the discussion of the Company's performance and makes
recommendations concerning the compensation of executives reporting to him.
By the Compensation Committee
Richard P. Eidswick
David E. Cole
Otto Gago
Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------
The Company's Compensation Committee was established in May 1993 and
currently consists of Messrs. Eidswick, Cole and Gago. None of these directors
has ever been an officer or employee of the Company or any of its subsidiaries.
Stock Performance Graph
-----------------------
The following table compares the cumulative return since December 31, 1993
on a hypothetical investment in JPE, Inc. (JPEI), the Nasdaq National Market
(U.S.) Index and other motor vehicle equipment manufacturers and distributors.
The stock price performance shown on the graph is not necessarily indicative of
future price performance.
COMPARISON OF 50 MONTH CUMULATIVE TOTAL RETURN*
Among JPE, Inc., The Nasdaq Stock Market-US Index
and a Peer Group
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
JPE, Inc. 100 78 80 58 45 4
Peer Group 100 65 58 78 81 81
Nasdaq Stock Market (U.S.) 100 98 138 170 208 294
<FN>
* $100 invested on 12/31/93 in stock or Index - including reinvestment of
dividends. Fiscal year ending December 31.
</FN>
Assumes $100 invested on December 31, 1993 in JPE, Inc., Nasdaq National
Market (U.S.) Index and other motor vehicle equipment manufacturers and
distributors (APS Holding Corp., Excel Industries, Hahn Automotive Warehouse,
MascoTech, Inc., Simpson Industries, Inc., Standard Products Co. and Tower
Automotive), weighted for market capitalization.
Total return equals price appreciation plus dividends and assumes
reinvestment of dividends.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is information relating to the beneficial ownership of
outstanding shares of Common Stock by each person who is known to the Company to
be the beneficial owner of more than 5% of the outstanding shares of Common
Stock as of March 15, 1998:
Shares Beneficially Owned
-------------------------
Name and Address Percent
of Beneficial Owner Number of Class (3)
- ------------------- ------ ------------
Dr. John Psarouthakis (1) 683,012 (2) 14.8%
c/o Ferguson & Widmayer, P.C.
538 N. Division
Ann Arbor, Michigan 48104
<FN>
(1) Former Chairman of the Board, President, Chief Executive Officer and a
Director of the Company.
(2) Consists of (a) 643,012 shares owned by a trust of which Dr. Psarouthakis
is trustee and a beneficiary and (b) 40,000 shares held by a charitable
foundation established by Dr. Psarouthakis.
(3) On March 15, 1998, the Company had issued and outstanding 4,602,180 shares
of Common Stock.
</FN>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES And Reports on Form 8-K
(a) Listing of Documents
(1) Financial Statements
The Company's Consolidated Financial Statements included in Item
8 hereof, as required at December 31, 1997 and 1998, and for the
years ended December 31, 1996, 1997 and 1998, consist of the
following:
o Report of Independent Accountants
o Consolidated Balance Sheets
o Consolidated Statements of Operations and Comprehensive Income
o Consolidated Statements of Shareholders' Equity
o Consolidated Statements of Cash Flows
o Notes to Consolidated Financial Statements
(2) Financial Statement Schedule
The financial statement schedule of the Company appended hereto,
as required for the years ended December 31, 1996, 1997 and 1998,
consists of the following:
VIII. Valuation and Qualifying Accounts
(3) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
On November 12, 1998, Registrant filed a report on Form 8-K reporting
that substantially all of the assets of its wholly-owned subsidiary,
Allparts, Incorporated, had been sold to R&B, Inc., on October 28,
1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf on April 15, 1999 by the undersigned, thereunto duly authorized.
JPE, INC.
By: /s/ Richard R. Chrysler
-------------------------------
Richard R. Chrysler
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
/s/ Richard P. Eidswick Chairman of the Board April 15, 1999
- ------------------------------ and Director
Richard P. Eidswick
/s/ Richard R. Chrysler President, Chief Executive April 15, 1999
- ------------------------------ Officer and Director
Richard R. Chrysler (Principal Executive Officer)
/s/ James J. Fahrner Executive Vice President April 15, 1999
- ------------------------------ and Chief Financial Officer
James J. Fahrner (Principal Financial Officer
and Principal Accounting
Officer)
/s/ David E. Cole Director April 15, 1999
- ------------------------------
David E. Cole
/s/ Otto Gago Director April 15, 1999
- ------------------------------
Otto Gago
JPE, INC.
FINANCIAL STATEMENT SCHEDULES
PURSUANT TO ITEM 14(a)(2) OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
The schedule, as required, for the years ended December 31, 1996, 1997 and 1998:
Page
----
VIII. Valuation and Qualifying Accounts 61
JPE, INC.
SCHEDULE VIII - VALUATION ACCOUNTS
for the years ended December 31, 1996, 1997 and 1998
Column A Column B Column C Column D Column E
- -------- -------- ----------------------- -------- --------
Balance at Charges to Charges Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions of Period
- ----------- --------- -------- -------- ---------- ---------
Accounts receivable, allowance
for doubtful accounts:
January 1, 1996 through
December 31, 1996 $369,000 $ 104,000 $ -- $ (211,000) $262,000
======== ========== ======== =========== ========
January 1, 1997 through
December 31, 1997 $262,000 $ 165,000 $160,000 $ (213,000) $374,000
======== ========== ======== =========== ========
January 1, 1998 through
December 31, 1998 $374,000 $1,951,000 $ (3,000) $(1,638,000)(1) $684,000
======== ========== ======== =========== ========
<FN>
1. The adjustment in Column D is to reduce the valuation account for Starboard
and PTI allowance for doubtful accounts that is recognized under the equity
method of accounting utilized for these subsidiaries.
</FN>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
2.1 Asset Purchase Agreement dated December 31, 1992, among Varity
Corporation, a subsidiary of Varity Corporation formerly known as
Dayton Parts, Inc., the Registrant and JPE Acquisition I, Inc.,
incorporated by reference to Exhibit 2 to the Registrant's
Registration Statement on Form S-1 (File No. 33-68544).
2.2 Stock Purchase Agreement dated December 13, 1994 by and among JPE,
Inc. and the Shareholders of SAC Corporation, incorporated by
reference to Registrant's Current Report on Form 8-K dated December
28, 1994.
2.3 Asset Purchase Agreement dated February 28, 1995 among JPE Acquisition
II, Inc., Key Manufacturing Group Limited Partnership and TTD
Management, Inc., incorporated by reference to Exhibit 2 to
Registrant's Current Report on Form 8-K dated March 14, 1995.
2.4 Acquisition Agreement dated as of April 6, 1995 among JPE, Inc., PTI
Acquisition Corp. and Plastic Trim, Inc., incorporated by reference to
Exhibit 2 to Registrant's Current Report on Form 8-K dated April 24,
1995.
2.5 Agreement of Purchase and Sale dated November 15, 1996 between JPE,
Inc., in trust for 1203462 Ontario Inc., and Pebra Inc., incorporated
by reference to Registrant's Current Report on Form 8-K dated January
6, 1997.
2.6 Stock Purchase Agreement dated April 16, 1997 among JPE, Inc., Dayton
Parts, inc. and the Stockholders of Brake, Axle and Tandem Company,
incorporated by reference to Registrant's Current Report on Form 8-K
dated April 30, 1997.
2.7 Asset Purchase Agreement, dated as of August 28, 1998, by and between
R&B, Inc. and Allparts, Inc., incorporated by reference to Exhibit 2.1
to Registrant's Current Report on Form 8-K dated November 12, 1998.
2.8 Amendment No. 1, dated October 15, 1998, to Asset Purchase Agreement,
dated as of August 28, 1998, by and between R&B, Inc. and Allparts,
Inc., incorporated by reference to Exhibit 2.2 to Registrant's Current
Report on Form 8-K dated November 12, 1998.
2.9 Agreement dated December 8, 1998 between The Bank of Nova Scotia,
Ventra Group Inc., General Motors Corporation, General Motors of
Canada Limited and Grant Thornton Limited, filed with this report.
2.10 Stock Purchase Agreement dated as of March 26, 1999 by and among JPE,
Inc., Industrial & Automotive Fasteners, Inc. and MacLean Acquisition
Company, filed with this report.
3.1 Articles of Incorporation, incorporated by reference to Exhibit 3.1 to
the Registrant's Registration Statement on Form S-1 (File No.
33-68544).
3.2 Bylaws, amended as of February 5, 1999, filed with this report.
4 Form of Certificate for Shares of the Common Stock, incorporated by
reference to Exhibit 4 to the Registrant's Registration Statement on
Form S-1 (File No. 33-68544).
10.1 Shareholder Agreement (Conformed Copy), incorporated by reference to
Exhibit 10.6 to the Registrant's Registration Statement on Form S-1
(File No. 33-68544).
10.2 Indemnification Agreement dated September 1, 1993, between the
Registrant and Dr. John Psarouthakis, incorporated by reference to
Exhibit 10.7 to the Registrant's Registration Statement on Form S-1
(File No. 33-68544).
10.3 Indemnification Agreement dated September 1, 1993, between the
Registrant and Dr. Otto Gago, incorporated by reference to Exhibit
10.8 to the Registrant's Registration Statement on Form S-1 (File No.
33-68544).
10.4 Indemnification Agreement dated September 1, 1993, between the
Registrant and John F. Daly, incorporated by reference to Exhibit 10.9
to the Registrant's Registration Statement on Form S-1 (File No.
33-68544).
10.5 Indemnification Agreement dated September 1, 1993, between the
Registrant and Donald R. Mandich, incorporated by reference to Exhibit
10.10 to the Registrant's Registration Statement on Form S-1 (File No.
33-68544).
10.6 JPE, Inc. Warrant to Purchase Common Stock issued by the Registrant in
favor of Roney & Co., incorporated by reference to Exhibit 10.11 to
the Registrant's Registration Statement on Form S-1 (File No.
33-68544). Pursuant to its terms, the foregoing Warrant was
surrendered and exchanged for substitute Warrants identical to the
foregoing Warrant in all respects except for the name of the
substitute Warrant holder and the number of shares of the Registrant's
Common Stock for which the substitute Warrants are exercisable, which
terms are as follows:
Number of Shares
of Common Stock for
Warrant Holder which Warrant is Exercisable
-------------- ----------------------------
Roney & Co. 10,000
John C. Donnelly 6,250
James C. Penman 6,250
Dan B. French, Jr. 2,500
10.7 Exclusive Distributor Agreement dated December 31, 1992, between
Dayton Walther Corporation ("DWC") and Dayton Parts, incorporated by
reference to Exhibit 10.14 to the Registrant's Registration Statement
on Form S-1 (File No. 33-68544).
10.8 Exclusive Distributor Agreement dated December 31, 1992, between DWC
and Dayton Parts, incorporated by reference to Exhibit 10.15 to the
Registrant's Registration Statement on Form S-1 (File No. 33-68544).
10.9 Letter Agreement dated December 31, 1992, from Kelsey-Hayes Company to
JPE Acquisition I, Inc. (now known as Dayton Parts), incorporated by
reference to Exhibit 10.16 to the Registrant's Registration Statement
on Form S-1 (File No. 33-68544).
10.10 Lease Agreement dated May 3, 1993, between Central Storage & Transfer
Company of Harrisburg, Inc. ("CSTCH") and Dayton Parts, as amended by
First Addendum to Lease dated May 3, 1993, between CSTCH and Dayton
Parts, incorporated by reference to Exhibit 10.17 to the Registrant's
Registration Statement on Form S-1 (File No. 33-68544).
10.11 JPE, Inc. 1993 Stock Incentive Plan for Key Employees, as amended,
incorporated by reference to Exhibit 28 to the Registrant's
Registration Statement on Form S-8 (File No. 33-92236).
10.12 Form of JPE, Inc. Warrant to purchase an aggregate of 100,000 shares
of Common Stock at $9.50 per share issued by the Registrant in favor
of the sellers of SAC Corporation, incorporated by reference to
Exhibit 4.a. to the Registrant's Form 8-K dated December 28, 1994.
10.13 Third Amendment to JPE, Inc. 1993 Stock Incentive Plan for Key
Employees, incorporated by reference to Exhibit 10.14 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995.
*10.14 JPE, Inc. Director Stock Option Plan, incorporated by reference to
Exhibit 28 to the Registrant's Registration Statement on Form S-8
(File No. 33-93328).
10.15 Form of Indemnification Agreement dated February 8, 1995, between the
Registrant and Donna L. Bacon, incorporated by reference to Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995.
10.16 Form of Indemnification Agreement between the Registrant and James J.
Fahrner, incorporated by reference to Exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.
10.17 Form of Indemnification Agreement between Registrant and C. William
Mercurio, incorporated by reference to Exhibit 10.19 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1996.
10.18 Third Amended and Restated Credit Agreement dated as of December 31,
1996, by and among Comerica Bank, other participants and JPE, Inc.
(the "Credit Agreement"), incorporated by reference to Exhibit 10.20
to Registrant's Annual Report on Form 10-K for the year ended December
31, 1996.
10.19 Credit Agreement dated as of December 20, 1996 between JPE Canada
Inc. and The Bank of Nova Scotia, incorporated by reference to Exhibit
10.21 to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996.
10.20 Form of Indemnification Agreement between the Registrant and David E.
Cole, filed, incorporated by reference to Exhibit 10.22 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1997.
10.21 Amendment 1 dated April 16, 1997 to the Credit Agreement, incorporated
by reference to Exhibit 10.23 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1997.
10.22 Amendment 2 dated August 14, 1997, effective June 30, 1997, to the
Credit Agreement, incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
10.23 Amendment 3 dated February 13, 1998 to the Credit Agreement,
incorporated by reference to Exhibit 10.25 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1997.
10.24 Amendment 4 and Limited Waiver, dated as of May 15, 1998, to the
Credit Agreement, incorporated by reference to Exhibit 10.4 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998.
10.25 Letter Agreement (the "Forbearance Agreement"), dated August 10, 1998
among the Banks, Comerica Bank, as Agent, JPE, Inc. and its
subsidiaries, incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998.
10.26 First Amendment dated August 31, 1998 to Forbearance Agreement,
incorporated by reference to Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1998.
10.27 Second Amendment dated September 4, 1998 to Forbearance Agreement,
incorporated by reference to Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1998.
10.28 Third Amendment dated September 16, 1998 to Forbearance Agreement,
incorporated by reference to Exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1998.
10.29 Fourth Amendment dated October 1, 1998 to Forbearance Agreement,
incorporated by reference to Exhibit 10.4 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1998.
10.30 Final Order Authorizing Postpetition Financing and Providing Adequate
Protection for Plastic Trim, Inc. dated October 29, 1998, incorporated
by reference to Exhibit 10.5 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998.
10.31 Final Order Authorizing Postpetition Financing and Providing Adequate
Protection for Starboard Industries, Inc. dated October 29, 1998,
incorporated by reference to Exhibit 10.6 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1998.
*10.32 Executive Severance Agreement dated February 20, 1998 between
Registrant and Donna L. Bacon, incorporated by reference to Exhibit
10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998.
*10.33 Amendment No. 1, dated May 21, 1998, to Executive Severance Agreement
between Registrant and Donna L. Bacon, incorporated by reference to
Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998.
*10.34 Executive Severance Agreement dated February 20, 1998 between
Registrant and James J. Fahrner, incorporated by reference to Exhibit
10.2 to Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998.
*10.35 Amendment No. 1, dated May 21, 1998, to Executive Severance Agreement
between Registrant and James J. Fahrner, incorporated by reference to
Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998.
*10.36 Stay Bonus Agreement, dated as of September 1, 1998, between JPE,
Inc. and Donna L. Bacon, incorporated by reference to Exhibit 10.7 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998.
*10.37 Stay Bonus Agreement, dated as of September 21, 1998, between JPE,
Inc. and James J. Fahrner, incorporated by reference to Exhibit 10.8
to Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998.
*10.38 Stay Bonus Agreement, dated as of September 30, 1998, between JPE,
Inc. and Karen A. Radtke, incorporated by reference to Exhibit 10.9 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998.
10.39 Fifth Amendment, dated December 1, 1998, to Forbearance Agreement,
filed with this report.
10.40 Sixth Amendment, dated March 26, 1999, to Forbearance Agreement,
filed with this report.
10.41 Form of Indemnification Agreement, dated as of September 30, 1998,
between the Registrant and Richard P. Eidswick, filed with this
report.
10.42 Form of Indemnification Agreement, dated as of November 9, 1998,
between the Registrant and Richard R. Chrysler, filed with this
report.
10.43 Form of letter dated November 28, 1998 from Dr. John Psarouthakis
terminating Shareholder Agreement, filed with this report.
*10.44 Letter dated February 5, 1999 amending terms of Stay Bonus Agreement
between the Registrant and James J. Fahrner, filed with this report.
*10.45 Letter dated February 5, 1999 amending terms of Stay Bonus Agreement
between the Registrant and Karen A. Radtke, filed with this report.
21 Subsidiaries of the Registrant, filed with this report.
23 Consent of PricewaterhouseCoopers LLP
* Indicates management contract or compensatory plan or arrangement.