AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 8, 1998
REGISTRATION NO. 333-38261
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
----------------
JPS TEXTILE GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2221 57-0868166
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
555 N. PLEASANTBURG DRIVE, SUITE 202
GREENVILLE, SOUTH CAROLINA 29607
(864) 239-3900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DAVID H. TAYLOR
C/O JPS TEXTILE GROUP, INC.
555 N. PLEASANTBURG DRIVE, SUITE 202
GREENVILLE, SOUTH CAROLINA 29607
(864) 239-3900
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
COPY TO:
SIMEON GOLD, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153
(212) 310-8000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: From time to time after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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PROSPECTUS
JPS TEXTILE GROUP, INC.
10,000,000 SHARES OF COMMON STOCK,
$.01 PAR VALUE PER SHARE
----------------
This Prospectus relates to the offering from time to time (the "Offering")
by certain selling stockholders (the "Selling Stockholders") of shares of
common stock, $.01 par value (the "Common Stock", of JPS Textile Group, Inc.,
a Delaware corporation ("JPS"). The shares of Common Stock being registered
hereunder were issued by JPS under the Joint Plan of Reorganization, as
amended (the "Plan of Reorganization"), proposed by JPS and JPS Capital Corp.,
a Delaware corporation and a wholly-owned subsidiary of JPS ("JPS Capital"),
under chapter 11, title 11 of the United States Code (the "Bankruptcy Code").
The Plan of Reorganization was confirmed by the United States Bankruptcy Court
for the Southern District of New York (the "Bankruptcy Court") on September 9,
1997 and was substantially consummated on October 9, 1997 (the "Effective
Date"). See "THE COMPANY--The 1997 Restructuring".
All shares of Common Stock being offered for resale hereby are being so
offered for the accounts of the Selling Stockholders. JPS will not receive any
proceeds from any resale of the Common Stock offered or sold pursuant hereto.
The Common Stock was approved for listing and trading on the Nasdaq National
Market System under the trading symbol "JPST" effective January 30, 1998.
----------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS THAT SHOULD
BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES OFFERED
HEREBY.
----------------
The Selling Stockholders directly, through agents designated from time to
time, or through dealers or underwriters to be designated, may sell the Common
Stock from time to time on terms to be determined at the time of sale. To the
extent required, the specific amount of Common Stock to be sold, the names of
the Selling Stockholders, the purchase price and public offering price, the
names of any resale agent, dealer or underwriter, and the terms of any amount
of any applicable commission or discount with respect to a particular offer
will be set forth in a Prospectus Supplement and/or post-effective amendment
to the Registration Statement of which this Prospectus constitutes a part. See
"PLAN OF DISTRIBUTION".
JPS has agreed to bear all expenses of registration of the Common Stock
under federal and state securities laws and to indemnify the Selling
Stockholders against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See "PLAN OF
DISTRIBUTION".
The Selling Stockholders and any broker-dealers, agents or underwriters that
participate with the Selling Stockholders in the distribution of the Common
Stock may be deemed to be "underwriters" within the meaning of the Securities
Act, and any commissions received by them and any profit on the resale of the
Common Stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
----------------
The date of this Prospectus is .
ADDITIONAL INFORMATION
JPS has filed with the Securities and Exchange Commission (the "Commission")
a Registration Statement on Form S-1 (the "Registration Statement") under the
Securities Act, with respect to the Common Stock offered for resale hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to JPS and the Common Stock, reference is hereby made
to such Registration Statement, exhibits and schedules. Statements contained
in this Prospectus as to the contents of any agreement, instrument or other
document are not necessarily complete, and, in each instance, reference is
made to the copy of such agreement, instrument or document filed as an exhibit
to the Registration Statement, each such statement being qualified in its
entirety by such reference. The Registration Statement, including all exhibits
and schedules thereto, may be inspected and copied at the public reference
facilities maintained by the Commission at its principal office located at 450
Fifth Street, N.W., Washington, D.C. 20549, the New York Regional Office,
located at 7 World Trade Center, New York, New York 10048, and the Chicago
Regional Office, located at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can
be obtained from the public reference section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such material may
also be accessed electronically by means of the Commission's home page on the
Internet at http://www.sec.gov.
In connection with the Plan of Reorganization, JPS prepared certain
financial projections of capitalization, results of operations and cash flows
for the period ending October 2000. The projections are contained in the
Disclosure Statement, dated June 25, 1997 relating to the Plan of
Reorganization, which was approved by order of the Bankruptcy Court entered on
September 9, 1997. Such projections, which are also contained in aForm 8-K
filed by JPS with the Commission on July 2, 1997, reflect that consummation of
the confirmed Plan of Reorganization and the adoption of "fresh start"
reporting will positively affect JPS's and its subsidiaries' net income. The
projections were prepared solely for purposes of the Plan of Reorganization
and not for purposes of this Offering. JPS does not intend to update or
otherwise revise the projections. The projections are based upon a variety of
estimates and assumptions which, though considered reasonable by JPS's
management at the time of dissemination, may not be realized, and are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond JPS's control. JPS
cautions that no assurances can be made as to the accuracy of these financial
projections or to JPS's ability to achieve the projected results. Actual
results may vary substantially from those contained in the projections. Any
holder of Common Stock should understand that, while the projections represent
the best estimates of JPS's management at the time they were made, and under
the circumstances and conditions then prevailing, such estimates and the
circumstances and conditions affecting JPS, are likely to change substantially
with the passage of time.
JPS will furnish its shareholders with annual reports containing audited
financial statements and an opinion thereon expressed by independent certified
public accountants and with quarterly reports for the first three quarters of
each fiscal year containing unaudited summary financial information.
DISCLOSURES REGARDING FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical fact, included in this
Prospectus, including, without limitation, the statements under "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations," are, or may be deemed to be, forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Various
economic and competitive factors could cause actual results to differ
materially from those discussed in such forward-looking statements
("Cautionary Statements"), including, without limitation, price competition
and other competitive pressures, general economic conditions, the ability of
JPS and its subsidiaries to retain key customers, the cyclical nature of the
industries in which many of such customers compete and the availability and
cost of raw materials. All subsequent written and oral forward-looking
statements attributable to JPS and its subsidiaries or persons acting on
behalf of them are expressly qualified in their entirety by such Cautionary
Statements.
2
PROSPECTUS SUMMARY
This Summary is qualified in its entirety by the more detailed information
and financial statements contained elsewhere in this Prospectus. All
capitalized terms used and not defined herein have the respective meanings
assigned to them elsewhere in this Prospectus. Unless the context otherwise
requires, the terms "JPS" and the "Company," as used in this Prospectus mean
JPS Textile Group, Inc., and JPS Textile Group, Inc., together with its
subsidiaries, respectively.
THE COMPANY
The Company is one of the largest domestic manufacturers of textile and
textile-related products for the apparel, industrial and home fashion markets.
The Company conducts its operations from ten manufacturing plants in five
states and employs approximately 3,700 people.
Apparel Fabrics and Products. The Company is a leading manufacturer of greige
goods (unfinished woven fabrics) and yarn. The Company's products are used in
the manufacture of a broad range of consumer apparel products including
blouses, dresses, sportswear and undergarments.
Industrial Fabrics and Products. The Company manufactures products used by
the building construction industry and a broad range of woven fabrics with
specialty applications. Principal construction products include single-ply
membrane roofing and fiberglass reinforcement fabrics. In addition, the Company
produces membranes for use primarily in environmental containment systems and
specialty urethane products for use in the manufacture of various products such
as athletic shoes, "bulletproof" glass, disposable intravenous bags, seamless
welded drive belts and tubing. Other fabrics produced in this segment are used
in the manufacture of such products as flame retardant clothing, filtration
products, tarpaulins, awnings, athletic tapes, printed circuit boards and
advanced composites.
Home Fashion Textiles. The Company produces a variety of unfinished woven
fabrics and yarns for use in the manufacture of draperies, curtains and
lampshades and is a major producer of solution-dyed drapery fabrics.
In April 1991, JPS restructured its indebtedness pursuant to a confirmed plan
of reorganization under chapter 11 of the Bankruptcy Code. Since the 1991
restructuring, the Company has adopted and implemented various strategies aimed
at improving and realizing value in its operating subsidiaries. These
strategies have included, among other things, the exit, through asset sales or
otherwise, of certain unprofitable product lines. See "THE COMPANY--Disposition
of Assets; Plant Closing".
During the years following the 1991 restructuring and as a result of the
continued downturn in the apparel fabrics market and various other factors, JPS
determined that it would be unable to meet certain debt obligations on its
public bonds that would come due commencing in June 1997. Accordingly, in 1996,
JPS and JPS Capital commenced negotiations with an unofficial committee (the
"Unofficial Bondholder Committee") comprised of institutions that owned, or
represented holders that beneficially owned, approximately 60% of JPS's
outstanding public debt securities (the "Old Debt Securities"). On May 15,
1997, the parties reached an agreement in principle on the terms of a
restructuring of these obligations to be accomplished pursuant to the Plan of
Reorganization proposed by JPS and JPS Capital. On June 26, 1997, JPS and JPS
Capital commenced a solicitation of votes on the Plan of Reorganization by
holders of impaired claims and impaired equity interests entitled to vote
thereon. The Plan of Reorganization was overwhelmingly accepted by each class
that voted and a voluntary chapter 11 case was commenced by JPS on August 1,
1997 in the Bankruptcy Court. The Plan of Reorganization was confirmed by the
Bankruptcy Court pursuant to an order entered on September 9, 1997, and the
Plan of Reorganization which, among other things, resulted in the issuance of
the Common Stock, became effective on October 9, 1997. See "THE COMPANY--The
1997 Restructuring".
3
THE OFFERING
COMMON STOCK OFFERED FOR
RESALE................... 10,000,000 shares. See "DESCRIPTION OF THE COMMON
STOCK".
COMMON STOCK OUTSTANDING
ON THE CONSUMMATION DATE
OF THE PLAN OF
REORGANIZATION...........
10,000,000 shares.
NASDAQ SYMBOL FOR COMMON
STOCK.................... The Common Stock was approved for listing and trad-
ing on the Nasdaq National Market System under the
trading symbol "JPST" effective January 30, 1998.
USE OF PROCEEDS........... All shares of Common Stock being offered for resale
hereby are being so offered for the accounts of the
Selling Stockholders. JPS will not receive any pro-
ceeds from the sale of the Common Stock hereby.
RISK FACTORS
Purchasers of the Common Stock offered hereby should carefully consider the
factors set forth under "RISK FACTORS" as well as the other information set
forth in this Prospectus.
4
SUMMARY HISTORICAL FINANCIAL DATA.
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
The following table presents summary consolidated historical financial data
for the Company as of the dates and for the fiscal periods indicated. The
summary historical financial data for each of the four years ended November 2,
1996, the period from November 3, 1996 to October 9, 1997 and the period from
October 10, 1997 to November 1, 1997 has been derived from the Consolidated
Financial Statements of the Company for such periods, which have been audited.
The presentation of certain previously reported amounts has been reclassified
to conform to the current presentation and to reflect discontinued operations
of the automotive assets (sold in 1994) and the Carpet Business (sold in 1995)
as discussed in Note 5 to the Consolidated Financial Statements of the Company
presented elsewhere in this Registration Statement. The financial statements
for the period from October 10, 1997 to November 1, 1997 reflect the Company's
emergence from chapter 11 and were prepared utilizing the principles of fresh
start accounting contained in the American Institute of Certified Public
Accountants' Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code". As a result of the implementation of
fresh start accounting, certain of the summary financial data for the period
from October 10, 1997 to November 1, 1997 is not comparable to the summary
financial data of prior periods. Therefore, summary financial data for the
"Reorganized Company" has been separately identified from that of the
"Predecessor Company". The summary historical data for the three months ended
January 31, 1998 ("Reorganized Company") and February 1, 1997 ("Predecessor
Company") have been derived from the unaudited Consolidated Financial
Statements of the Company and, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the financial condition and results of operations of the
Company for such periods. The summary unaudited pro forma financial data for
the fiscal year ended November 1, 1997 gives effect to the Plan of
Reorganization and adoption of fresh start reporting as if they had occurred on
November 3, 1996. This pro forma information is provided for informational
purposes only and should not be construed to be indicative of the results of
operations of the Company had the transaction been consummated on the date
indicated and is not intended to be predictive of the results of operations of
the Company for any future period. The following information should be read in
conjunction with the Consolidated Financial Statements of the Company and Notes
thereto, and "Management's Discussion and Analysis of Financial Conditions and
Results of Operations" presented elsewhere herein.
5
REORGANIZED
PREDECESSOR COMPANY COMPANY
------------------------------------------------------------ -----------
FISCAL YEAR ENDED
---------------------------------------------- PERIOD FROM PERIOD FROM
10/30/93 10/29/94 10/28/95 11/2/96 11/3/96 10/10/97
(52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) TO 10/09/97 TO 11/1/97
---------- ---------- ---------- ---------- ------------ -----------
INCOME STATEMENT
DATA:
Net sales....... $ 457,552 $ 461,871 $ 472,565 $ 448,824 $ 379,643 $ 38,728
Cost of sales... 396,160 397,921 406,070 397,804 327,667 31,058
---------- ---------- ---------- ---------- ---------- ----------
Gross profit.... 61,392 63,950 66,495 51,020 51,976 7,670
Selling, general
and
administrative
expenses....... 39,023 39,805 39,586 40,579 37,146 2,466
Other income
(expense),
net............ (1,236) (2,914) (6,248) (2,498) (622) 11
Charges for
plant closing,
loss on sale of
certain
operations and
writedown of
certain long-
lived assets... -- -- -- (30,028) 574 --
---------- ---------- ---------- ---------- ---------- ----------
Operating profit
(loss)......... 21,133 21,231 20,661 (22,085) 14,782 5,215
Valuation
allowance on
Gulistan
securities..... -- -- -- (4,242) (5,070) --
Interest
income......... 48 749 2,821 2,856 2,744 93
Interest
expense........ (60,407) (55,570) (39,946) (40,510) (32,164) (584)
---------- ---------- ---------- ---------- ---------- ----------
Income (loss)
before
reorganization
items, income
taxes,
discontinued
operations,
extraordinary
items and
cumulative
effects of
accounting
changes(3)..... (39,226) (33,590) (16,464) (63,981) (19,708) 4,724
Reorganization
items:
Fair-value
adjustments.... -- -- -- -- (4,651) --
Professional
fees and
expenses....... -- -- -- (2,255) (8,420) --
---------- ---------- ---------- ---------- ---------- ----------
Income (loss)
before income
taxes,
discontinued
operations,
extra-ordinary
items and
cumulative
effects of
accounting
changes........ (39,226) (33,590) (16,464) (66,236) (32,779) 4,724
Income taxes
(benefit)...... 1,782 2,800 1,200 (300) (8,822) 2,007
---------- ---------- ---------- ---------- ---------- ----------
Income (loss)
before
discontinued
operations,
extraordinary
items and
cumulative
effects of
accounting
changes........ (41,008) (36,390) (17,664) (65,936) (23,957) 2,717
Discontinued
operations, net
of taxes:
Income (loss)
from
discontinued
operations..... 24,165 23,628 (7,079) -- -- --
Net gain (loss)
on sale of
discontinued
operations..... -- 132,966 (26,241) (1,500) -- --
Extraordinary
gain (loss) on
early
extinguishment
of debt........ -- (7,410) 20,120 -- 100,235 --
Cumulative
effects of
accounting
changes, net of
taxes.......... (4,988) (708) -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net income
(loss)......... $ (21,831) $ 112,086 $ (30,864) $ (67,436) $ 76,278 $ 2,717
========== ========== ========== ========== ========== ==========
Income (loss)
applicable to
common stock... $ (24,964) $ 108,753 $ (34, 695) $ (71,941) $ 72,451 $ 2,717
========== ========== ========== ========== ========== ==========
Weighted average
number of
common shares
outstanding(1).. 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 10,000,000
========== ========== ========== ========== ========== ==========
BASIC AND
DILUTED
EARNINGS (LOSS)
PER COMMON
SHARE:(1)
Income (loss)
before
discontinued
operations,
extraordinary
items and
cumulative
effects of
accounting
changes........ $ (43.87) $ (39.73) $ (21.50) $ (70.44) $ (27.79) $ 0.27
Discontinued
operations, net
of taxes:
Income (loss)
from
discontinued
operations..... 24.17 23.63 (7.08) -- -- --
Net gain (loss)
on sale of
discontinued
operations..... -- 132.97 (26.24) (1.50) -- --
Extraordinary
gain (loss),
net of taxes... -- (7.41) 20.12 -- 100.24 --
Cumulative
effects of
accounting
changes, net of
taxes.......... (4.99) (0.71) -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net income
(loss).......... $ (24.69) $ 108.75 $ (34.70) $ (71.94) $ 72.45 $ 0.27
========== ========== ========== ========== ========== ==========
PREDECESSOR REORGANIZED
PRO FORMA COMPANY COMPANY
------------ ----------- ------------
THREE MONTHS ENDED
FISCAL YEAR ------------------------
ENDED 2/1/97 1/31/98
11/1/97 (13 WEEKS) (13 WEEKS)
------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
INCOME STATEMENT
DATA:
Net sales....... $ 418,371 $ 97,166 $ 100,800
Cost of sales... 349,844 84,933 85,414
------------ ----------- ------------
Gross profit.... 68,527 12,233 15,386
Selling, general
and
administrative
expenses....... 40,744 9,314 10,509
Other income
(expense),
net............ (611) (6) 24
Charges for
plant closing,
loss on sale of
certain
operations and
writedown of
certain long-
lived assets... 574 -- --
------------ ----------- ------------
Operating profit
(loss)......... 27,746 2,913 4,901
Valuation
allowance on
Gulistan
securities..... -- (1,299) --
Interest
income......... 1,192 737 325
Interest
expense........ (8,676) (10,174) (2,284)
------------ ----------- ------------
Income (loss)
before
reorganization
items, income
taxes,
discontinued
operations,
extraordinary
items and
cumulative
effects of
accounting
changes(3)..... 20,262 (7,823) 2,942
Reorganization
items:
Fair-value
adjustments.... -- -- --
Professional
fees and
expenses....... -- (1,162) --
------------ ----------- ------------
Income (loss)
before income
taxes,
discontinued
operations,
extra-ordinary
items and
cumulative
effects of
accounting
changes........ 20,262 (8,985) 2,942
Income taxes
(benefit)...... 8,643 157 1,250
------------ ----------- ------------
Income (loss)
before
discontinued
operations,
extraordinary
items and
cumulative
effects of
accounting
changes........ 11,619 (9,142) 1,692
Discontinued
operations, net
of taxes:
Income (loss)
from
discontinued
operations..... -- -- --
Net gain (loss)
on sale of
discontinued
operations..... -- -- --
Extraordinary
gain (loss) on
early
extinguishment
of debt........ -- -- --
Cumulative
effects of
accounting
changes, net of
taxes.......... -- -- --
------------ ----------- ------------
Net income
(loss)......... $ 11,619 $ (9,142) $ 1,692
============ =========== ============
Income (loss)
applicable to
common stock... $ 11,619 $ (10,407) $ 1,692
============ =========== ============
Weighted average
number of
common shares
outstanding(1).. 10,000,000 1,000,000 10,000,000
============ =========== ============
BASIC AND
DILUTED
EARNINGS (LOSS)
PER COMMON
SHARE:(1)
Income (loss)
before
discontinued
operations,
extraordinary
items and
cumulative
effects of
accounting
changes........ $ 1.16 $ (10.40) $ 0.17
Discontinued
operations, net
of taxes:
Income (loss)
from
discontinued
operations..... -- -- --
Net gain (loss)
on sale of
discontinued
operations..... -- -- --
Extraordinary
gain (loss),
net of taxes... -- -- --
Cumulative
effects of
accounting
changes, net of
taxes.......... -- -- --
------------ ----------- ------------
Net income
(loss).......... $ 1.16 $ (10.40) $ 0.17
============ =========== ============
(continued on following page)
6
(continued from previous page)
10/30/93 10/29/94 10/28/95 11/2/96 11/1/97 2/1/97 1/31/98
-------- -------- -------- --------- ------- --------- -------
BALANCE SHEET DATA:
Working capital,
excluding net assets
held for sale.......... $ 63,821 $65,855 $72,670 $(257,866)(2) $82,132 $(262,356) $82,266
Total assets............ 532,608 452,811 412,822 335,927 322,381 327,082 320,954
Total long-term debt,
less current portion... 522,947 335,472 327,668 4,226 (2) 94,891 3,768 94,914
Senior redeemable
preferred stock........ 21,007 24,340 28,171 32,676 -- 33,941 --
Shareholders' equity
(deficit).............. (111,103) (2,350) (37,045) (108,986) 126,047 (119,394) 127,739
- --------
(1) In accordance with the provisions of Statement of Financial Accounting
Standards No. 128 ("SFAS No. 128") "Earnings Per Share," the presentation
of earnings per share data for all periods presented has been restated to
conform to SFAS No. 128.
(2) All of the Company's senior credit facility revolving line of credit and
all of the Company's subordinated notes and debentures are classified as
current liabilities as of November 2, 1996.
(3) The following non-cash charges have been included in the determination of
income (loss) before reorganization items, income taxes, discontinued
operations, extraordinary items and cumulative effects of accounting
changes for the periods shown above:
REORGANIZED
PREDECESSOR COMPANY COMPANY
------------------------------------------------------- -----------
FISCAL YEAR ENDED
------------------------------------------- PERIOD FROM PERIOD FROM
10/30/93 10/29/94 10/28/95 11/2/96 11/3/96 10/10/97
(52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) TO 10/9/97 TO 11/1/97
---------- ---------- ---------- ---------- ----------- -----------
CERTAIN NON-CASH
CHARGES TO
INCOME:
Depreciation.... $19,799 $22,242 $20,820 $21,756 $16,986 $681
Amortization of
goodwill and
other.......... 969 964 965 983 894 165
Product
liability
charge......... -- -- 5,000 -- -- --
Plant closing,
loss on sale of
certain
operations and
writedown of
certain long-
lived assets... -- -- -- 17,554 -- --
Early retirement
offer.......... -- -- -- 1,125 -- --
Valuation
allowance on
Gulistan
securities..... -- -- -- 4,242 5,070 --
Other non-cash
charges to
income......... 1,957 131 371 -- -- --
Non-cash
interest....... 11,729 11,161 8,818 10,088 7,303 20
------- ------- ------- ------- ------- ----
$34,454 $34,498 $35,974 $55,748 $30,253 $866
======= ======= ======= ======= ======= ====
PREDECESSOR REORGANIZED
PRO FORMA COMPANY COMPANY
----------- ----------- -----------
THREE MONTHS ENDED
FISCAL YEAR -----------------------
ENDED 2/1/97 1/31/98
11/1/97 (13 WEEKS) (13 WEEKS)
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
CERTAIN NON-CASH
CHARGES TO
INCOME:
Depreciation.... $ 9,230 $4,443 $2,406
Amortization of
goodwill and
other.......... 2,313 241 573
Product
liability
charge......... -- -- --
Plant closing,
loss on sale of
certain
operations and
writedown of
certain long-
lived assets... -- -- --
Early retirement
offer.......... -- -- --
Valuation
allowance on
Gulistan
securities..... -- 1,299 --
Other non-cash
charges to
income......... -- -- --
Non-cash
interest....... 385 2,431 81
----------- ----------- -----------
$11,928 $8,414 $3,060
=========== =========== ===========
7
RISK FACTORS
Prospective purchasers of the Common Stock should carefully consider the
following risk factors, as well as other information set forth in this
Prospectus, prior to making an investment decision with respect to the Common
Stock. Unless the context otherwise requires, references to the "Company"
shall mean JPS collectively with its subsidiaries on a consolidated basis.
COMPETITION IN THE TEXTILE INDUSTRY
The Company is one of the largest domestic manufacturers of textile and
textile-related products for the apparel, industrial and home fashion markets.
The textile industry is highly competitive and includes a number of
participants with aggregate sales and financial resources greater than that of
the Company including certain of the companies which compete directly with the
Company. At present, however, most market segments are dominated by a small
number of competitors with no single company dominating the industry. See
"BUSINESS--Marketing and Competition".
SIGNIFICANT MARKETS
The Company's business plan is premised upon the existence of certain
conditions in the largest of the markets in which it participates, including
women's apparel, roofing, and fiberglass products for electrical
circuitboards, as well as the Company's ability to expand into the Mexican,
European, and Asian markets. There are no assurances that such conditions will
be maintained or occur or that the Company's expansion into new markets will
be successful.
POTENTIAL UNAVAILABILITY OF CERTAIN RAW MATERIALS
Certain of the Company's products are manufactured using raw materials
which, due to brand recognition or customer specification, are not available
from more than one source. If an interruption in the supply of raw materials
were to occur, there is no assurance that the Company could obtain alternate
adequate supplies of raw materials and, thus, the Company's ability to produce
certain of its products could be adversely affected. See "BUSINESS--Raw
Materials".
SIGNIFICANT CUSTOMERS
Although no customer accounts for more than 10% of the Company's sales, the
loss of certain customers could have a material adverse effect on the
Company's sales. There can be no assurance that the Company's reliance on such
customers, and consequently the importance of the loss of such customers, will
not increase in the future. See "BUSINESS--Customers".
CYCLICAL NATURE OF CERTAIN INDUSTRIES
The industries in which many of the Company's customers compete, such as the
construction industry, are cyclical in nature and are subject to changes in
general economic conditions which affect market demand, and a significant
downturn in these industries would have an adverse effect on the Company's
results of operations. See "BUSINESS--Seasonality".
CAPITAL EXPENDITURES
The Company's business is expected to have substantial capital expenditure
needs. While the Company expects that it will generate sufficient funds to
meet its capital expenditure needs for the foreseeable future, the Company's
ability to gain access to additional capital, if needed, cannot be assured,
particularly in view of competitive factors and industry conditions.
8
INFLATION
The Company is subject to the effects of changing prices. It has generally
been able to pass along inflationary increases in its costs by increasing the
prices for its products; however, market conditions may not allow the Company
to continue this practice in the future. See "MANAGEMENT DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Inflation and Tax
Matters".
RESTRICTIONS ARISING UNDER THE REVOLVING CREDIT FACILITY; ACCESS TO ADDITIONAL
CAPITAL
The Credit Agreement contains financial covenants relating to minimum levels
of EBITDA, minimum interest coverage ratio, minimum fixed charge coverage
ratio and maximum capital expenditures. In addition, the occurrence of certain
events (including, without limitation, failure to pay principal or interest,
failure to comply with covenants, certain defaults under or acceleration of
other indebtedness, certain events of bankruptcy or insolvency and a "change
in control" of JPS (as defined therein)), in certain cases after notice and
grace periods, would constitute events of default permitting acceleration of
the indebtedness under the Credit Agreement. See "DESCRIPTION OF THE CREDIT
FACILITY".
LIMITED PUBLIC MARKET
On the Effective Date, JPS entered into a registration rights agreement in
accordance with which it has registered the Common Stock pursuant to a "shelf
registration". Prior to this offering, there has been only sporadic trading of
the Common Stock in the over-the-counter market. The Common Stock was approved
for listing and began trading on the Nasdaq National Market System effective
January 30, 1998. While a Nasdaq listing is expected to facilitate the trading
of the Common Stock, there can be no assurance that an active trading market
will develop and continue. In addition, there can be no assurance as to the
degree of price volatility in the market for the Common Stock. Accordingly, no
assurance can be given that a holder of Common Stock will be able to sell such
securities in the future or as to the price at which any such sale may occur.
If such markets were to exist, the Common Stock could trade at prices higher
or lower than the value ascribed to them in this Registration Statement,
depending upon many factors, including prevailing interest rates, markets for
similar securities, industry conditions, and the performance of, and investor
expectations for, JPS and its subsidiaries. See "PLAN OF DISTRIBUTION".
DIVIDEND POLICY AND RESTRICTIONS
The Company presently intends to retain earnings to fund working capital and
for general corporate purposes, and, therefore, does not intend to pay cash
dividends on shares of the Common Stock in the foreseeable future. The payment
of future cash dividends, if any, would be made only from assets legally
available therefor, and would also depend on the Company's financial
condition, results of operations, current and anticipated capital
requirements, restrictions under then existing indebtedness (including,
without limitation, indebtedness evidenced by the Credit Agreement (as defined
below) and refundings and refinancings thereof) and other factors deemed
relevant by JPS's Board of Directors. See "DESCRIPTION OF THE CREDIT
FACILITY".
The Company's ability to pay cash dividends is dependent on its earnings and
cash flow. The subsidiaries that are borrowers under the Credit Agreement are
restricted from paying cash dividends to JPS with respect to their capital
stock unless, among other things, JPS and its subsidiaries satisfy certain
specified financial tests. See "DESCRIPTION OF THE CREDIT FACILITY".
9
THE COMPANY
GENERAL
The Company is one of the largest domestic manufacturers of textile and
textile-related products for the apparel, industrial and home fashion markets.
The Company conducts its operations from ten manufacturing plants in five
states and employs approximately 3,700 people.
Apparel Fabrics and Products. The Company is a leading manufacturer of
greige goods (unfinished woven fabrics) and yarn. The Company's products are
used in the manufacture of a broad range of consumer apparel products
including blouses, dresses, sportswear and undergarments.
Industrial Fabrics and Products. The Company manufactures products used by
the building construction industry and a broad range of woven fabrics with
specialty applications. Principal construction products include single-ply
membrane roofing and fiberglass reinforcement fabrics. In addition, the
Company produces membranes for use primarily in environmental containment
systems and specialty urethane products for use in the manufacture of various
products such as athletic shoes, "bulletproof" glass, disposable intravenous
bags, seamless welded drive belts and tubing. Other fabrics produced in this
segment are used in the manufacture of such products as flame retardant
clothing, filtration products, tarpaulins, awnings, athletic tapes, printed
circuit boards and advanced composites.
Home Fashion Textiles. The Company produces a variety of unfinished woven
fabrics and yarns for use in the manufacture of draperies, curtains and
lampshades and is a major producer of solution-dyed drapery fabrics.
Subsidiaries. JPS's wholly-owned operating subsidiaries include JPS
Elastomerics Corp. ("Elastomerics") and JPS Converter and Industrial Corp.
("C&I"). JPS's other wholly-owned subsidiaries do not have any significant
operations: JPS Capital, International Fabrics, Inc. ("Fabrics"), JPS Auto,
Inc. ("Auto"), and JPS Carpet Corp. ("Carpet"). The operating subsidiaries
each have independent administrative, manufacturing, and marketing
capabilities for all material aspects of their operations, including product
design, customer service, purchasing, and collections. JPS provides all
finance and strategic planning services and handles the legal, tax, and
regulatory affairs for its subsidiaries. JPS Capital was formed in 1994 as a
special purpose subsidiary to hold (and invest) $39.5 million, representing a
portion of the proceeds received from the sale of the assets of JPS's
automotive division in June 1994, including the assets of Auto. These funds
were set aside to satisfy possible contingent tax liabilities incurred in
connection with that sale, and will serve as the primary source of payment of
any such liabilities. Prior to the Effective Date, the funds held by JPS
Capital aggregated approximately $48 million, of which $14 million was
distributed to holders of certain issues of Old Debt Securities on the
Effective Date. The funds held by JPS Capital currently aggregate
approximately $34 million. In connection with the implementation of the Plan
of Reorganization, approximately $34 million in aggregate principal amount
(subject to adjustment on the maturity date thereof) of Contingent Payment
Notes ("Contingent Notes") were issued by JPS Capital on the Effective Date to
holders of certain issues of Old Debt Securities.
Auto and Carpet formerly owned and operated JPS's automotive products and
carpet businesses, respectively. The assets of those businesses were sold in
1994 and 1995, respectively. See "--Disposition of Assets; Plant Closing".
The principal executive offices of JPS are located at 555 North Pleasantburg
Drive, Suite 202, Greenville, South Carolina 29607; telephone number (864)
239-3900.
THE 1988 ACQUISITION
On May 9, 1988, the Company acquired substantially all the assets of certain
operating divisions of J.P. Stevens & Co., Inc. ("J.P. Stevens") in exchange
for approximately $527 million in cash and reorganized the
10
newly acquired divisions into wholly-owned subsidiaries. At that time, JPS
raised $100 million by issuing certain public debt and equity securities in
order to partially finance the acquisition. In June 1989, JPS raised $323.6
million by issuing certain public debt and equity securities to refinance
certain outstanding notes and a portion of the indebtedness incurred in
connection with the acquisition. Due to prevailing market conditions, the
securities were priced for sale at higher rates than JPS anticipated would be
necessary at the time of the acquisition. As a result of the high interest
rates and a weak business environment for certain of the subsidiaries, JPS
realized lower than expected operating earnings and cash flow which, in turn,
materially impaired its ability to service its outstanding debt and fund
capital expenditures.
THE 1991 RESTRUCTURING
In 1990, JPS negotiated the terms of a recapitalization proposal with a
steering committee comprised of institutional holders of a substantial amount
of the then-outstanding securities, which culminated in JPS's prepetition
solicitation of votes to accept or reject a chapter 11 plan of reorganization.
The plan was overwhelmingly accepted. On February 7, 1991, JPS filed a
petition for relief under the Bankruptcy Code, and approximately 42 days
thereafter, JPS's plan was confirmed by the bankruptcy court and JPS emerged
from chapter 11 on April 2, 1991. Pursuant to that plan, in exchange for JPS's
outstanding debt securities and JPS's equity securities, JPS issued (i) $100
million in principal amount of senior secured notes due June 1, 1995 and June
1, 1996 (all of which were redeemed in 1994), (ii) $151.1 million in principal
amount of 10.85% Senior Subordinated Discount Notes due June 1, 1999 (the
"10.85% Notes"), (iii) $125 million in principal amount of 10.25% Senior
Subordinated Notes due June 1, 1999 (the "10.25% Notes"), (iv) $75 million in
principal amount of 7% Subordinated Debentures due May 15, 2000 (the "7%
Subordinated Debentures"), (v) 390,719 shares of Series A Senior Preferred
Stock (the "Old Senior Preferred Stock"), (vi) 10,000 shares of Series B
Junior Preferred Stock (the "Old Junior Preferred Stock"), (vii) 490,000
shares of class A common stock, par value $0.01 per share (the "Class A Common
Stock") and (viii) 510,000 shares of class B common stock, par value $0.01 per
share (the "Class B Common Stock" and, together with the Class A Common Stock,
the "Old Common Stock"). The 1991 restructuring did not significantly reduce
the amount of JPS's outstanding indebtedness.
DISPOSITIONS OF ASSETS; PLANT CLOSING
Since the 1991 restructuring, JPS has adopted and implemented various
strategies aimed at improving and realizing value in its operating
subsidiaries. These strategies have included, among other things, the exit,
through asset sales or otherwise, of certain unprofitable product lines.
The Automotive Asset Sale. On June 28, 1994, the Company sold the businesses
and assets of Auto and the synthetic industrial fabrics division of C&I and
JPS's investment in common stock of the managing general partner of Cramerton
Automotive Products, L.P. (an 80% owned joint venture) for approximately $283
million.
The Carpet Asset Sale. On November 16, 1995, JPS and Carpet transferred
substantially all the assets of Carpet used in the business of designing and
manufacturing tufted carpets for sale to residential, commercial and
hospitality markets (the "Carpet Business") to Gulistan Holdings Inc.
("Gulistan Holdings") and Gulistan Carpet Inc., a wholly-owned subsidiary of
Gulistan Holdings Inc. ("Gulistan Carpet" and, together with Gulistan
Holdings, "Gulistan"), for approximately $19 million in cash, a promissory
note due November 2001 issued by Gulistan Holdings in the original principal
amount of $10 million and payable to the order of Carpet, $5 million of
preferred stock of Gulistan Holdings, and warrants to purchase 25% of the
common stock of Gulistan Holdings (collectively, the "Gulistan Securities").
On August 28, 1997, the Company sold the Gulistan Securities to Gulistan for
$2 million in cash.
11
Plant Closing. On August 28, 1996, the Company implemented a plan to close
its Dunean plant in Greenville, South Carolina, as a result of management's
determination that a permanent decline in the Company's spun apparel business
had occurred. This plant had been operating on a reduced schedule due to poor
market conditions and financial projections indicated it would continue to do
so. This plant was closed on October 28, 1996 and sold on August 14, 1997 for
approximately $1.2 million in cash.
The Rubber Products Group Sale. On September 30, 1996, Elastomerics sold
substantially all the assets of its rubber products division, a business
engaged in the manufacture and sale of natural and synthetic elastic for use
in apparel products, diaper products and specialty industrial applications to
Elastomer Technologies Group, Inc. for approximately $4.8 million in cash.
THE 1997 RESTRUCTURING
On May 15, 1997, JPS, JPS Capital, and the Unofficial Bondholder Committee
reached an agreement in principle on the terms of a restructuring to be
accomplished under chapter 11 of the Bankruptcy Code which culminated in the
Plan of Reorganization. Pursuant to a disclosure statement, dated June 25,
1997 (the "Disclosure Statement"), on June 26, 1997, JPS and JPS Capital
commenced a prepetition solicitation of votes by the holders of Old Debt
Securities and Old Senior Preferred Stock to accept or reject the Plan of
Reorganization. Under the Plan of Reorganization, the holders of Old Debt
Securities and Old Senior Preferred Stock were the only holders of impaired
claims and impaired equity interests entitled to receive a distribution, and
therefore, pursuant to section 1126 of the Bankruptcy Code, were the only
holders entitled to vote on the Plan of Reorganization. At the conclusion of
the 32-day solicitation period, the Plan of Reorganization had been accepted
by holders of more than 99% of the Old Debt Securities that voted on the Plan
of Reorganization and by holders of 100% of the Old Senior Preferred Stock
that voted on the Plan of Reorganization.
On August 1, 1997, JPS commenced its voluntary reorganization case under
chapter 11 of the Bankruptcy Code in the Bankruptcy Court, and filed the Plan
of Reorganization and the Disclosure Statement. None of JPS's subsidiaries,
including JPS Capital which was a co-proponent of the Plan of Reorganization,
commenced a case under the Bankruptcy Code. Pursuant to orders of the
Bankruptcy Court entered on September 9, 1997, the Bankruptcy Court (i)
approved the Disclosure Statement and the solicitation of votes on the Plan of
Reorganization and (ii) confirmed the Plan of Reorganization. The Plan of
Reorganization became effective on October 9, 1997 resulting in, among other
things, the issuance of the Common Stock.
Through the implementation of the Plan of Reorganization as of the Effective
Date, JPS's most significant financial obligations were restructured:
$240,091,318 in face amount of outstanding Old Debt Securities were converted
to, among other things, $14 million in cash, 99.25% of the shares of Common
Stock and approximately $34 million in aggregate principal amount (subject to
adjustment on the maturity date) of Contingent Notes; the Old Senior Preferred
Stock, the Old Junior Preferred Stock and the Old Common Stock were cancelled;
warrants to purchase up to 5% of the common stock of JPS (the "New Warrants")
with an initial purchase price of $98.76 per share were issued in respect of
the Old Senior Preferred Stock; and the obligations of JPS under its former
working capital facility were satisfied and the Revolving Credit Facility was
obtained. JPS's senior management received approximately 0.75% of the Common
Stock in lieu of payment under the contractual retention bonus agreements
described in Note 9 to the Consolidated Financial Statements. As a result of
the restructuring, JPS's only significant debt obligation is its guaranty of
the obligations of its operating subsidiaries under the Revolving Credit
Facility.
12
USE OF PROCEEDS
JPS will not receive any of the proceeds from the sale of shares of Common
Stock offered hereby, all of which will be received by the Selling
Stockholders.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
MARKET INFORMATION
Pursuant to the Plan of Reorganization, the Old Debt Securities were
converted into, among other things, $14 million in cash, 99.25% of the shares
of Common Stock and $34 million in aggregate principal amount (subject to
adjustment on the maturity date) of Contingent Notes. In addition, New
Warrants to purchase up to 5% of JPS's common stock were issued to holders of
JPS's Old Senior Preferred Stock in place thereof, and JPS's Old Senior
Preferred Stock, Old Junior Preferred Stock and Old Common Stock were
cancelled. On the Effective Date, 10,000,000 shares of Common Stock and New
Warrants to purchase up to 526,316 shares of common stock of JPS were issued
by JPS and distributed pursuant to the Plan of Reorganization.
Trading of JPS's Common Stock commenced on the Nasdaq National Market on
January 30, 1998 under the symbol "JSPT." The following table sets forth, for
the periods indicated, the high and low sales prices for the Common Stock, as
reported by the Nasdaq National Market.
PRICE RANGE
--------------
HIGH LOW
------- ------
1998
Second quarter............................................ 13 5/16 11 3/4
Third quarter (through May 5, 1998)....................... 12 1/2 11 1/2
HOLDERS
The number of record holders of Common Stock as of May 7, 1998 was
approximately 11.
DIVIDENDS
Each share of Common Stock is entitled to participate equally in any
dividend declared by the Board of Directors and paid by JPS. The Company
presently intends to retain earnings to fund working capital and for general
corporate purposes, and, therefore, does not intend to pay cash dividends on
shares of the Common Stock in the foreseeable future. The payment of future
cash dividends, if any, would be made only from assets legally available
therefor, and would also depend on the Company's financial condition, results
of operations, current and anticipated capital requirements, restrictions
under then existing indebtedness (including, without limitation, indebtedness
evidenced by the Revolving Credit Facility (as defined below) and refundings
and refinancings thereof) and other factors deemed relevant by JPS's Board of
Directors. See "DESCRIPTION OF THE CREDIT FACILITY."
The Company's ability to pay cash dividends is dependent on its earnings and
cash flow. The subsidiaries that are borrowers under the Revolving Credit
Facility are restricted from paying cash dividends to JPS with respect to
their capital stock unless, among other things, JPS and its subsidiaries
satisfy certain specified financial tests. See "DESCRIPTION OF THE CREDIT
FACILITY."
13
CAPITALIZATION
The following table summarizes the consolidated capitalization of the
Company as of January 31, 1998. This table should be read in conjunction with
the Consolidated Financial Statements of the Company and related Notes thereto
included elsewhere in this Prospectus.
JANUARY 31, 1998
----------------
(IN THOUSANDS)
Long-term debt (including current portion):
Borrowings under senior credit facility..................... $ 92,475
Contingent notes payable.................................... 34,540
Equipment financing......................................... 3,744
--------
Total long-term debt...................................... 130,759
--------
Shareholders' equity:
Common stock:
$.01 par value 22,000,000 shares authorized, 10,000,000
shares issued
and outstanding........................................... 100
Additional paid-in capital.................................. 123,230
Retained earnings........................................... 4,409
--------
Total shareholders' equity................................ 127,739
--------
Total capitalization.................................... $258,498
========
14
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
The following table presents selected consolidated historical financial data
for the Company as of the dates and for the fiscal periods indicated. The
selected historical financial data for each of the four years ended November
2, 1996, the period from November 3, 1996 to October 9, 1997 and the period
from October 10, 1997 to November 1, 1997 has been derived from the
Consolidated Financial Statements of the Company for such periods, which have
been audited. The presentation of certain previously reported amounts has been
reclassified to conform to the current presentation and to reflect
discontinued operations of the automotive assets (sold in 1994) and the Carpet
Business (sold in 1995) as discussed in Note 5 to the Consolidated Financial
Statements of the Company presented elsewhere in this Registration Statement.
The financial statements for the period from October 10, 1997 to November 1,
1997 reflect the Company's emergence from chapter 11 and were prepared
utilizing the principles of fresh start accounting contained in the American
Institute of Certified Public Accountants' Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code."
As a result of the implementation of fresh start accounting, certain of the
selected financial data for the period from October 10, 1997 to November 1,
1997 is not comparable to the selected financial data of prior periods.
Therefore, selected financial data for the "Reorganized Company" has been
separately identified from that of the "Predecessor Company." The selected
historical data for the three months ended January 31, 1998 ("Reorganized
Company") and February 1, 1997 ("Predecessor Company") have been derived from
the unaudited Consolidated Financial Statements of the Company and, in the
opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the financial
condition and results of operations of the Company for such periods. The
selected unaudited pro forma financial data for the fiscal year ended November
1, 1997 gives effect to the Plan of Reorganization and adoption of fresh start
reporting as if they had occurred on November 3, 1996. This pro forma
information is provided for informational purposes only and should not be
construed to be indicative of the results of operations of the Company had the
transaction been consummated on the date indicated and is not intended to be
predictive of the results of operations of the Company for any future period.
The following information should be read in conjunction with the Consolidated
Financial Statements of the Company and Notes thereto, and "Management's
Discussion and Analysis of Financial Conditions and Results of Operations"
presented elsewhere herein.
15
REORGANIZED PREDECESSOR REORGANIZED
PREDECESSOR COMPANY COMPANY PRO FORMA COMPANY COMPANY
----------------------------------------------------------- ----------- ----------- ----------- -----------
FISCAL YEAR ENDED THREE MONTHS ENDED
---------------------------------------------- PERIOD FROM PERIOD FROM FISCAL YEAR ------------------------
10/30/93 10/29/94 10/28/95 11/2/96 11/3/96 10/10/97 ENDED 2/1/97 1/31/98
(52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) TO 10/9/97 TO 11/1/97 11/1/96 (13 WEEKS) (13 WEEKS)
---------- ---------- ---------- ---------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
INCOME STATEMENT
DATA:
Net sales....... $ 457,552 $ 461,871 $ 472,565 $ 448,824 $ 379,643 $ 38,728 $ 418,371 $ 97,166 $ 100,800
Cost of sales... 396,160 397,921 406,070 397,804 327,667 31,058 349,844 84,933 85,414
---------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -----------
Gross profit.... 61,392 63,950 66,495 51,020 51,976 7,670 68,527 12,233 15,386
Selling, general
and
administrative
expenses....... 39,023 39,805 39,586 40,579 37,146 2,466 40,744 9,314 10,509
Other income
(expense),
net............ (1,236) (2,914) (6,248) (2,498) (622) 11 (611) (6) 24
Charges for
plant closing,
loss on sale of
certain
operations and
writedown of
certain long-
lived assets... -- -- -- (30,028) 574 -- 574 -- --
---------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -----------
Operating profit
(loss)......... 21,133 21,231 20,661 (22,085) 14,782 5,215 27,746 2,913 4,901
Valuation
allowance on
Gulistan
securities..... -- -- -- (4,242) (5,070) -- -- (1,299) --
Interest
income......... 48 749 2,821 2,856 2,744 93 1,192 737 325
Interest
expense........ (60,407) (55,570) (39,946) (40,510) (32,164) (584) (8,676) (10,174) (2,284)
---------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -----------
Income (loss)
before
reorganization
items, income
taxes,
discontinued
operations,
extraordinary
items and
cumulative
effects of
accounting
changes(/3/)... (39,226) (33,590) (16,464) (63,981) (19,708) 4,724 20,262 (7,823) 2,942
Reorganization
items:
Fair-value
adjustments.... -- -- -- -- (4,651) -- -- -- --
Professional
fees and
expenses....... -- -- -- (2,255) (8,420) -- -- (1,162) --
---------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -----------
Income (loss)
before income
taxes,
discontinued
operations,
extra-ordinary
items and
cumulative
effects of
accounting
changes........ (39,226) (33,590) (16,464) (66,236) (32,779) 4,724 20,262 (8,985) 2,942
Income taxes
(benefit)...... 1,782 2,800 1,200 (300) (8,822) 2,007 8,643 157 1,250
---------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -----------
Income (loss)
before
discontinued
operations,
extraordinary
items and
cumulative
effects of
accounting
changes........ (41,008) (36,390) (17,664) (65,936) (23,957) 2,717 11,619 (9,142) 1,692
Discontinued
operations, net
of taxes:
Income (loss)
from
discontinued
operations..... 24,165 23,628 (7,079) -- -- -- -- -- --
Net gain (loss)
on sale of
discontinued
operations..... -- 132,966 (26,241) (1,500) -- -- -- -- --
Extraordinary
gain (loss) on
early
extinguishment
of debt........ -- (7,410) 20,120 -- 100,235 -- -- -- --
Cumulative
effects of
accounting
changes, net of
taxes.......... (4,988) (708) -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -----------
Net income
(loss)......... $ (21,831) $ 112,086 $ (30,864) $ (67,436) $ 76,278 $ 2,717 $ 11,619 $ (9,142) $ 1,692
========== ========== ========== ========== ========== =========== =========== ========== ===========
Income (loss)
applicable to
common stock... $ (24,694) $ 108,753 $ (34,695) $ (71,941) $ 72,451 $ 2,717 $ 11,619 $ (10,407) $ 1,692
========== ========== ========== ========== ========== =========== =========== ========== ===========
Weighted average
number of
common shares
outstanding(1).. 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 10,000,000 10,000,000 1,000,000 10,000,000
========== ========== ========== ========== ========== =========== =========== ========== ===========
BASIC AND
DILUTED
EARNINGS (LOSS)
PER COMMON
SHARE:(1)
Income (loss)
before
discontinued
operations,
extraordinary
items and
cumulative
effects of
accounting
changes........ $ (43.87) $ (39.73) $ (21.50) $ (70.44) $ (27.79) $ 0.27 $ 1.16 $ (10.40) $ 0.17
Discontinued
operations, net
of taxes:
Income (loss)
from
discontinued
operations..... 24.17 23.63 (7.08) -- -- -- -- -- --
Net gain (loss)
on sale of
discontinued
operations..... -- 132.97 (26.24) (1.50) -- -- -- -- --
Extraordinary
gain (loss),
net of taxes... -- (7.41) 20.12 -- 100.24 -- -- -- --
Cumulative
effects of
accounting
changes, net of
taxes.......... (4.99) (0.71) -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -----------
Net income
(loss)......... $ (24.69) $ 108.75 $ (34.70) $ (71.94) $ 72.45 $ 0.27 $ 1.16 $ (10.40) $ 0.17
========== ========== ========== ========== ========== =========== =========== ========== ===========
(Continued on following page)
16
(Continued from previous page)
10/30/93 10/29/94 10/28/95 11/2/96 11/1/97 2/1/97 1/31/98
-------- -------- -------- ---------- -------- ---------- --------
BALANCE SHEET DATA:
Working capital,
excluding net assets
held for sale.......... $ 63,821 $ 65,855 $ 72,670 $ (257,866)(/2/) $ 82,132 $ (262,356) $ 82,266
Total assets............ 532,608 452,811 412,822 335,927 322,381 327,082 320,954
Total long-term debt,
less current portion... 522,947 335,472 327,668 4,226 (/2/) 94,891 3,768 94,914
Senior redeemable
preferred stock........ 21,007 24,340 28,171 32,676 -- 33,941 --
Shareholders' equity
(deficit).............. (111,103) (2,350) (37,045) (108,986) 126,047 (119,394) 127,739
- --------
(1) In accordance with the provisions of SFAS No. 128, the presentation of
earnings per share data for all periods presented has been restated to
conform to SFAS No. 128.
(2) All of the Company's senior credit facility revolving line of credit and
all of the Company's subordinated notes and debentures are classified as
current liabilities as of November 2, 1996.
(3) The following non-cash charges have been included in the determination of
income (loss) before reorganization items, income taxes, discontinued
operations, extraordinary items and cumulative effects of accounting
changes for the periods shown above:
REORGANIZED
PREDECESSOR COMPANY COMPANY
------------------------------------------------------- -----------
FISCAL YEAR ENDED
------------------------------------------- PERIOD FROM PERIOD FROM
10/30/93 10/29/94 10/28/95 11/2/96 11/3/96 10/10/97
(52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) TO 10/9/97 TO 11/1/97
---------- ---------- ---------- ---------- ----------- -----------
CERTAIN NON-CASH
CHARGES TO
INCOME:
Depreciation.......................... $19,799 $22,242 $20,820 $21,756 $16,986 $681
Amortization of goodwill and
other................................ 969 964 965 983 894 165
Product liability charge.............. -- -- 5,000 -- -- --
Plant closing, loss on sale of
certain operations and writedown of
certain long-lived assets............ -- -- -- 17,554 -- --
Early retirement offer................ -- -- -- 1,125 -- --
Valuation allowance on Gulistan
securities........................... -- -- -- 4,242 5,070 --
Other non-cash charges to income...... 1,957 131 371 -- -- --
Non-cash interest..................... 11,729 11,161 8,818 10,088 7,303 20
------- ------- ------- ------- ------- ----
$34,454 $34,498 $35,974 $55,748 $30,253 $866
======= ======= ======= ======= ======= ====
PREDECESSOR REORGANIZED
PRO FORMA COMPANY COMPANY
----------- ----------- -----------
THREE MONTHS ENDED
FISCAL YEAR -----------------------
ENDED 2/1/97 1/31/98
11/1/97 (13 WEEKS) (13 WEEKS)
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
CERTAIN NON-CASH CHARGES TO INCOME:
Depreciation.......................... $ 9,230 $4,443 $2,406
Amortization of goodwill and
other................................ 2,313 241 573
Product liability charge.............. -- -- --
Plant closing, loss on sale of
certain operations and writedown of
certain long-lived assets............ -- -- --
Early retirement offer................ -- -- --
Valuation allowance on Gulistan
securities........................... -- 1,299 --
Other non-cash charges to income...... -- -- --
Non-cash interest..................... 385 2,431 81
--------- ---------- ----------
$11,928 $8,414 $3,060
========= ========== ==========
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
On October 9, 1997, JPS consummated a Plan of Reorganization as discussed
under the caption "The 1997 Restructuring". The following discussion should be
read in conjunction with that caption and with the Consolidated Financial
Statements of the Company and the Notes thereto included herein.
The pro forma financial information was prepared for comparison purposes and
gives effect to the Plan of Reorganization as if the transactions had occurred
on October 29, 1995 (for Fiscal 1996) and November 3, 1996 (for Fiscal 1997
and the three months ended February 1, 1997). The unaudited pro forma
financial information was derived by adjusting the historical consolidated
financial statements of the Company for the effects of fresh start accounting
as described in Notes 2 and 3 to the Consolidated Financial Statements
included herein. Such adjustments primarily relate to decreased depreciation
expense resulting from revaluation of the Company's fixed assets, decreased
interest expense resulting from extinguishment of Old Debt Securities in the
reorganization, increased amortization resulting from reorganization value in
excess of amounts allocable to identifiable assets and the elimination of
reorganization items, and their related tax effects. This pro forma
information is provided for informational purposes only and should not be
construed to be indicative of the results of operations of the Company had the
transactions been consummated on the respective dates indicated and are not
intended to be predictive of the results of operations of the Company for any
future period.
REORGANIZED
PREDECESSOR COMPANY COMPANY(3) PRO FORMA
------------------------------------ ----------- -----------------------
FISCAL YEAR
FISCAL YEAR ENDED PERIOD FROM PERIOD FROM ENDED
-------------------- 11/3/96 10/10/97 -----------------------
10/28/95 11/2/96 TO 10/9/97 TO 11/1/97 11/2/96 11/1/97
--------- --------- ----------- ----------- --------- ---------
(UNAUDITED)
NET SALES
Apparel fabrics and
products............... $ 247,846 $ 221,799 $ 167,070 $ 18,590 $ 221,799 $ 185,660
Industrial fabrics and
products............... 191,985 193,001 179,434 17,847 193,001 197,281
Home fashion textiles... 32,734 34,024 33,139 2,291 34,024 35,430
--------- --------- --------- -------- --------- ---------
$ 472,565 $ 448,824 $ 379,643 $ 38,728 $ 448,824 $ 418,371
========= ========= ========= ======== ========= =========
OPERATING PROFIT (LOSS)
Apparel fabrics and
products............... $ 16,667 $ (22,422)(1) $ 1,210 $ 2,201 $ (15,063)(1) $ 9,253
Industrial fabrics and
products............... 7,590 5,947 (2) 16,748 2,652 8,752 (2) 21,241
Home fashion textiles... 1,749 647 976 693 1,791 2,980
Indirect corporate
expenses, net.......... (5,345) (6,257) (4,152) (331) (7,611) (5,728)
--------- --------- --------- -------- --------- ---------
Operating profit
(loss)................. 20,661 (22,085) 14,782 5,215 (12,131) 27,746
Valuation allowance on
Gulistan securities.... -- (4,242) (5,070) -- -- --
Interest income......... 2,821 2,856 2,744 93 1,130 1,192
Interest expense........ (39,946) (40,510) (32,164) (584) (8,561) (8,676)
--------- --------- --------- -------- --------- ---------
Income (loss) before
reorganization items,
income taxes,
discontinued operations
and extraordinary
items.................. $ (16,464) $ (63,981) $ (19,708) $ 4,724 $ (19,562) $ 20,262
========= ========= ========= ======== ========= =========
PREDECESSOR REORGANIZED
COMPANY COMPANY
----------- -----------
PRO FORMA
THREE MONTHS ENDED
-----------------------
2/1/97 1/31/98
----------- -----------
(UNAUDITED)
NET SALES
Apparel fabrics and
products............... $ 47,318 $ 52,591
Industrial fabrics and
products............... 40,776 41,997
Home fashion textiles... 9,072 6,212
----------- -----------
$ 97,166 $ 100,800
=========== ===========
OPERATING PROFIT (LOSS)
Apparel fabrics and
products............... $ 2,090 $ 3,365
Industrial fabrics and
products............... 3,320 3,040
Home fashion textiles... 999 (93)
Indirect corporate
expenses, net.......... (1,500) (1,411)
----------- -----------
Operating profit
(loss)................. 4,909 4,901
Valuation allowance on
Gulistan securities.... -- --
Interest income......... 294 325
Interest expense........ (2,298) (2,284)
----------- -----------
Income (loss) before
reorganization items,
income taxes,
discontinued operations
and extraordinary
items.................. $ 2,905 $ 2,942
=========== ===========
- --------
(1) The Fiscal 1996 operating loss for apparel fabrics and products includes
charges of approximately $14.2 million for plant closing and $6.2 million
for loss on sale of certain operations.
(2) The Fiscal 1996 operating profit for industrial fabrics and products
includes charges of approximately $8.1 million for writedown of certain
long-lived assets and $1.5 million for loss on sale of certain operations.
(3) The financial statements for the period from October 10, 1997 to November
1, 1997 reflect the Company's emergence from chapter 11 and were prepared
utilizing the principles of fresh start reporting contained in the
American Institute of Certified Public Accountants' Statement of Position
90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code." As a result of the implementation of fresh start
accounting, the financial information for the period from October 10, 1997
to November 1, 1997 and for subsequent periods is not comparable to the
financial information of prior periods.
18
RESULTS OF OPERATIONS
Three Months Ended January 31, 1998 (the "1998 First Quarter") Compared to
the (Pro Forma) Three Months Ended February 1, 1997 (the "1997 First
Quarter")
Consolidated net sales increased $3.6 million or 3.7% from $97.2 million in
the 1997 first quarter to $100.8 million in the 1998 first quarter. Operating
profit remained constant at $4.9 million in the 1998 first quarter compared to
the pro forma operating profit of $4.9 million in the 1997 first quarter.
Net sales in the apparel fabrics and products segment, which includes
unfinished woven apparel fabrics (greige goods) and yarn primarily for women's
wear increased $5.3 million or 11.2% from $47.3 million in the 1997 first
quarter to $52.6 million in the 1998 first quarter. This increase is
attributable to an improvement in the market conditions for certain of the
Company's apparel fabrics as a result of the exit of certain domestic
competitors and an increase in average selling prices resulting from an
improvement in the mix of products sold during the 1998 first quarter. In
addition, the Company utilized certain productive capacity for apparel fabrics
in the 1998 first quarter that was utilized for home fashions fabrics in the
1997 first quarter. The Company continues to broaden its sales distribution in
its apparel segment to include more export sales and continually works to
develop new fabric construction and styles to improve the profitability of its
product mix.
Operating profit in the 1998 first quarter for the apparel fabrics and
products segment increased by $1.3 million to $3.4 million from pro forma
operating profit of $2.1 million in the 1997 first quarter. This increase is
attributable to the increase in sales volume, a more profitable product mix
and certain improvements in manufacturing efficiencies and productivity
resulting from the Company's capital spending plan. The Company expects to
realize further improvements in its cost structure as a result of the capital
spending plan.
Net sales in the industrial fabrics and products segment, which includes
single-ply roofing and environmental membrane, woven fabrics constructed of
cotton, synthetics and fiberglass for lamination, insulation and filtration
applications and extruded urethane products, increased $1.2 million or 2.9%
from $40.8 million in the 1997 first quarter to $42.0 million in the 1998
first quarter. Sales of fiberglass fabrics increased $0.9 million or 5.5% from
$16.4 million in the 1997 first quarter to $17.3 million in the 1998 first
quarter primarily as a result of the continued growth in demand for fabrics
used in the manufacture of electrical circuit boards. The Company expects that
the global demand for electronic products which has fueled the growth in
demand for fiberglass fabrics will continue in the foreseeable future. The
Company has expanded and enhanced its productive capacity and expects to
continue to invest in additional machinery and equipment in order to satisfy
customer demand and improve product quality. Sales of roofing membrane
decreased $0.8 million from $12.2 million in the 1997 first quarter to $11.4
million in the 1998 first quarter. This decrease is primarily attributable to
the unusually adverse winter weather conditions throughout much of the United
States. The Company's "Hi-Tuff/EP" line of roofing products has enjoyed
success in recent years as a result of the membrane's competitive price and
outstanding performance characteristics. The Company expects its roofing sales
to continue to grow as the Company capitalizes on the market enthusiasm for
its line of roofing products. Sales of urethane products in the 1998 first
quarter decreased $0.2 million or 3% from the 1997 first quarter because of a
slight decline in demand for certain of the Company's products used in the
manufacture of athletic footwear. Sales of cotton industrial fabrics in the
1998 first quarter increased $1.9 million or 27.5% from the 1997 first quarter
due to improved unit volumes and selling prices. Sales of other industrial
fabrics in the 1998 first quarter declined $0.6 million from the 1997 first
quarter primarily as a result of the exit of certain low margin products.
Operating profit in the 1998 first quarter for the industrial fabrics and
products segment decreased $0.3 million to $3.0 million from pro forma
operating profit of $3.3 million in the 1997 first quarter primarily as a
result of a change in the product mix, certain costs associated with the
installation of additional machinery and equipment referred to above, and
increased selling, general and administrative expenses.
Net sales in the home fashion textiles segment, which includes woven drapery
fabrics and yarns for the home furnishings industry, decreased $2.9 million or
31.9% from $9.1 million in the 1997 first quarter to $6.2
19
million in the 1998 first quarter due to a soft home furnishings market in the
1998 first quarter compared to an extremely strong market in the 1997 first
quarter.
Operating results in the 1998 first quarter for the home fashion textiles
segment decreased to a loss of $0.1 million from a pro forma operating profit
of $1.0 million in the 1997 first quarter principally due to the decrease in
sales volume and a generally weaker product mix.
Indirect corporate expenses decreased $0.1 million from $1.5 million (pro
forma) in the 1997 first quarter to $1.4 million in the 1998 first quarter
principally due to slightly lower insurance costs.
Reorganization-related fees and expenses incurred in the 1997 first quarter
totaled $1.2 million and represented fees and expenses of the Company's
financial advisor, legal counsel and other professionals associated with the
Company's financial restructuring and the financial advisor and legal counsel
for the holders of a substantial majority of the Company's old outstanding
bonds. Such fees and expenses have been excluded from the pro forma financial
statements.
In the 1997 first quarter, the Company held debt and equity securities of
Gulistan Holdings, Inc. As a result of net losses incurred by Gulistan, the
Company recorded a valuation allowance against its investment in the
securities with a corresponding charge to income of $1.3 million. These
securities were sold in August 1997 for $2 million. Accordingly, the charge of
$1.3 million has been excluded from the 1997 first quarter pro forma financial
information.
Interest income and expense in the 1998 first quarter are consistent with
the 1997 first quarter pro forma amounts.
Fiscal 1997 (Pro Forma) Compared to Fiscal 1996 (Pro Forma)
The financial statements for the period subsequent to the consummation of
the Plan of Reorganization (period from October 10, 1997 to November 1, 1997)
were prepared under the principles of fresh-start reporting for companies
emerging from a plan of reorganization and are not comparable to prior
periods. The Company believes that the most meaningful comparisons are made
using the pro forma financial information and therefore this discussion
addresses such pro forma information.
Consolidated net sales declined $30.4 million (6.8%) from $448.8 million in
Fiscal 1996 to $418.4 million in Fiscal 1997. Pro forma operating profit
(loss) increased $39.8 million from a pro forma operating loss of $12.1
million in Fiscal 1996 to a pro forma operating profit of $27.7 million in
Fiscal 1997. Fiscal 1996 results included charges for plant closings, loss on
sale of certain operations, and charges for writedown of certain long-lived
assets which totaled $30 million. Excluding such charges for comparative
purposes, pro forma operating profit in Fiscal 1996 was $17.9 million. All
segments reported improved earnings in Fiscal 1997 compared to Fiscal 1996.
Net sales in Fiscal 1997 in the apparel fabrics and products segment, which
includes unfinished woven apparel fabrics (greige goods) and yarn primarily
for women's wear declined $36.1 million (16.3%) from $221.8 million in Fiscal
1996 to $185.7 million in Fiscal 1997. Much of this decline in net sales was
expected as a result of the Company's actions in Fiscal 1996 to exit certain
product lines which included plant closings and asset sales. Net sales in
Fiscal 1996 included $12.8 million of apparel elastics sales. As discussed
below, the Company sold its rubber products business, which produced these
elastic products, in September 1996. Apparel fabric sales declined $20.5
million in Fiscal 1997 primarily as a result of the Company's decision in
Fiscal 1996 to close one of its facilities in Greenville, South Carolina and
cease production of certain commodity-type apparel fabrics which, due to
competitive pressures from abroad, carried very weak margins.
Many participants in the domestic women's apparel industry have suffered
from falling margins in recent years as a result of a number of factors,
including increased imports of both fabric and garments, generally relaxed
consumer attitudes regarding fashion, and price pressures from a troubled
retail industry. Many of the
20
Company's customers for apparel fabric (converters) have seen their importance
to the industry diminish and their volumes decline. The Company has taken
steps to broaden its sales distribution in its apparel fabrics segment to
include export sales to Mexico, Europe and other continents. Exports have not
comprised a significant portion of the Company's sales in the past. In
addition, the Company continually works to develop new fabric constructions
and styles in an effort to improve the profitability of its product mix.
During Fiscal 1997, the market conditions for certain of the Company's apparel
fabrics improved slightly as a result of the exit of certain domestic
competitors.
Pro forma operating profit (loss) in Fiscal 1997 for the apparel fabrics and
products segment increased by $24.4 million from a $15.1 million pro forma
loss to a pro forma operating profit of $9.3 million. Fiscal 1996 included
charges of approximately $20.4 million for plant closing and loss on sale of
certain operations. Pro forma operating profit before such charges increased
by $4.0 million from $5.3 million in Fiscal 1996 to $9.3 million in Fiscal
1997. The improvement is the result of several factors. Fiscal 1997 results
were not adversely affected by the negative operating margins associated with
the product lines exited during Fiscal 1996. In addition, manufacturing
efficiency and productivity have improved as a result of certain capital
projects completed during Fiscal 1997. The Company expects to realize further
improvements in its cost structure in Fiscal 1998 as a result of these capital
expenditures.
Net sales in Fiscal 1997 in the industrial fabrics and products segment,
which includes single-ply roofing and environmental membrane, woven fabrics
constructed of cotton, synthetics and fiberglass for lamination, insulation,
and filtration applications, and extruded urethane products increased $4.3
million (2.2%) to $197.3 million from $193.0 million in Fiscal 1996. Net sales
in Fiscal 1996 included $4.0 million of industrial elastic sales. The Company
sold its rubber products business, which produced these elastic products, in
September 1996 and therefore Fiscal 1997 includes no industrial elastic sales.
Sales of fiberglass fabrics increased $5.0 million in Fiscal 1997 primarily
as a result of the continued growth in demand for fabrics used in the
manufacture of electrical circuit boards. The Company expects that the global
demand for electronic products which has fueled the growth in demand for
fiberglass fabric will continue for the foreseeable future. Therefore, the
Company has expanded and enhanced its productive capacity and expects to
continue to invest in additional machinery and equipment in order to satisfy
customer demand and improve product quality. Sales of roofing membrane
increased $1.4 million from Fiscal 1996. The Company's "Hi-Tuff/EP" line of
roofing products has enjoyed success in recent years as a result of the line's
competitive price and outstanding performance characteristics. The Company
expects its roofing sales to continue to grow as the Company capitalizes on
the market enthusiasm for its line of roofing products. Sales of urethane
products increased $3.7 million from Fiscal 1996 primarily as a result of
stronger demand for certain of the Company's products used in the manufacture
of athletic footwear. The Company has been successful in developing a variety
of urethane film and sheet products for specific customer requirements. The
Company's capital plan involves investments in Fiscal 1998 to increase
productive capacity in this area which is expected to allow further sales
growth for urethane products. Sales of cotton industrial fabrics increased
$3.7 million from Fiscal 1996 due to improved unit volumes and selling prices.
Sales of other industrial fabrics declined $5.5 million primarily as a result
of the exit of certain low margin products and redirecting such weaving
capacity toward more profitable goods.
Pro forma operating profit in Fiscal 1997 for the industrial fabrics and
products segment increased by $12.5 million from $8.8 million in Fiscal 1996
to $21.2 million in Fiscal 1997. Included in the Fiscal 1996 pro forma
operating profit are charges of approximately $9.6 million for writedown of
certain long-lived assets and loss on sale of operations. Adjusting for such
charges, pro forma operating profit in Fiscal 1997 increased by $2.8 million
(15.2%) from Fiscal 1996. The increases in sales as described above, and the
exit of certain low margin product lines, combined with improved operating
efficiencies, increased pro forma operating income in Fiscal 1997.
Net sales in Fiscal 1997 in the home fashion textiles segment, which
includes woven drapery fabrics and yarns for the home furnishings industry,
increased $1.4 million (4.1%) to $35.4 million in Fiscal 1997 from $34.0
million in Fiscal 1996 primarily as a result of new product development and
styling which has resulted in higher unit volumes and selling prices.
21
Pro forma operating profit in Fiscal 1997 for the home fashion textiles
segment increased $1.2 million (67%) to $3.0 million from $1.8 million in
Fiscal 1996. The aforementioned volume and product mix enhancements were the
primary causes for improved operating results. Substantially all of such
improvement in pro forma operating increase occurred during the first half of
Fiscal 1997.
Indirect corporate expenses (pro forma) declined by $1.9 million from $7.6
million in Fiscal 1996 to $5.7 million in Fiscal 1997. Fiscal 1996 pro forma
expenses included a $1.1 million charge resulting from an early retirement
offer extended to certain salaried employees. Fiscal 1996 also included an
expense of $1.0 million for management services provided by a former
shareholder pursuant to a management services agreement. Pursuant to the Plan
of Reorganization on the Effective Date, such agreement was cancelled and
rejected and claims for rejection damages were waived. Accordingly, no such
expense was incurred in Fiscal 1997. Offsetting such decreases were slightly
higher employee compensation costs and insurance costs.
Reorganization-related fees and expenses incurred in Fiscal 1997 totaled
$8.4 million. These fees and expenses totaled $2.3 million in Fiscal 1996.
Such fees and expenses, which represent fees and expenses of the Company's
financial advisor, legal counsel and other professionals associated with the
Company's financial restructuring and the financial advisor and legal counsel
for the holders of a substantial majority of the Company's old outstanding
bonds, have been excluded from the pro forma financial statements.
During Fiscal 1997, the Company sold its debt and equity securities of
Gulistan Holdings consisting of a $10 million Promissory Note due in November
2001, $5 million of preferred stocks redeemable in November 2005 and warrants
to purchase up to 25% of the common stock of Gulistan Holdings. Proceeds from
the sale were $2 million. The writedown of the carrying value of the Gulistan
securities to $2 million was reported in the period from November 3, 1996 to
October 9, 1997. Such writedown, which totaled $4.2 million in Fiscal 1996 and
$5.1 million in Fiscal 1997, has been excluded from the pro forma financial
statements.
As a result of the application of fresh start accounting as required by
Statement of Position 90-7 ("SOP 90-7") of the American Institute of Certified
Public Accountants, entitled "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code," a gain on early extinguishment of
debt of approximately $100.2 million and reorganization items of approximately
$13.1 million were recorded as of the Effective Date. The reorganization items
include professional fees and expenses of approximately $8.4 million
(discussed above) and fair value adjustments of approximately $4.7 million.
These items have been excluded from the pro forma financial information.
Fiscal 1996 Compared to Fiscal 1995
Consolidated net sales from continuing operations declined $23.8 million
(5.0%) from $472.6 million in Fiscal 1995 to $448.8 million in Fiscal 1996.
Operating profit (loss) from continuing operations decreased $42.8 million
from an operating profit of $20.7 million in Fiscal 1995 to an operating loss
of $22.1 million in Fiscal 1996. Excluding charges for plant closings, loss on
sale of certain operations, and charges for writedown of certain long-lived
assets, operating profit for Fiscal 1996 would have been $7.9 million,
compared to $25.7 million in Fiscal 1995 (excluding the product liability
charge). Substantially all of the declines in sales and operating profits are
attributable to the apparel fabrics segment.
Net sales in Fiscal 1996 in the apparel fabrics and products segment
declined $26.0 million (10.5%) from $247.8 million in Fiscal 1995 to $221.8
million in Fiscal 1996. Fiscal 1996 saw the continuation of the trend of
weakened demand for apparel fabrics which began during the second half of
Fiscal 1995.
Apparel fabric sales declined $22.3 million in Fiscal 1996 as a result of
lower unit volume combined with lower average selling prices. Fiscal 1996 was
marked by generally poor retail women's apparel sales, increased competitive
pressures from abroad (particularly in commodity-type fabrics), and falling
margins. As a result of this weaker demand, the Company curtailed production
for most of its apparel fabrics, and experienced a less favorable product mix
with a higher ratio of commodity-type fabrics than was experienced in Fiscal
1995. These
22
and other conditions led management to conclude in the third fiscal quarter of
1996 that one of its facilities in Greenville, South Carolina should be
closed. The plant, which was closed on October 28, 1996, had been operating on
a significantly reduced production schedule and was not cost-effective. The
accompanying consolidated statement of operations for Fiscal 1996 includes a
"charge for plant closing" of approximately $14.2 million related principally
to the loss on impairment of the plant in accordance with SFAS No. 121,
employee severance costs and estimated costs of equipment relocation.
Sales of elastic apparel products declined $4.6 million to $12.8 million in
Fiscal 1996 from $17.4 million in Fiscal 1995. As discussed below, the Company
sold its rubber products business, which produced these elastic products, in
September 1996. Discontinuation in Fiscal 1996 of certain unprofitable product
lines, changes in customer requirements to non-rubber elastomers, and less
than a full year's sales in Fiscal 1996 caused the decline in elastic sales
from Fiscal 1995.
Operating loss in Fiscal 1996 for the apparel fabrics and products segment
decreased by $39.1 million to a $22.4 million loss from a $16.7 million profit
in Fiscal 1995. Included in the Fiscal 1996 operating loss are charges of
approximately $14.2 million for plant closing and $6.2 million for loss on
sale of certain operations. Operating profit (loss) in Fiscal 1996 for the
apparel fabrics and products segment before the charges for plant closing and
loss on sale of certain operations declined by $18.7 million to a $2.0 million
loss from a $16.7 million profit in Fiscal 1995. Such decline results from the
significantly lower unit volume and the lower margins associated with the
Fiscal 1996 product mix.
Net sales in Fiscal 1996 in the industrial fabrics and products segment
increased $1.0 million (0.5%) to $193.0 million from $192.0 million in Fiscal
1995. Sales of fiberglass fabrics increased $7.7 million from Fiscal 1995 as a
result of the continued growth in demand for fabrics used in the manufacture
of electrical circuit boards. Sales of roofing membrane increased $8.8 million
from Fiscal 1995, as a result of the continued success of the Company's "Hi-
Tuff/EP" line of roofing products, which was introduced in late 1993. Sales of
extruded urethane products increased $1.9 million from Fiscal 1995 as a result
of the Company's expanded productive capacity and success in developing and
satisfying the specification-driven customer requirements for urethane
products. Sales of cotton industrial fabrics declined $12.8 million as a
result of weak markets and intense foreign competition, particularly from
China. Sales of other industrial fabrics and products declined $4.6 million
primarily as a result of exiting certain industrial fabric markets during late
1995.
Operating profit in Fiscal 1996 for the industrial fabrics and products
segment decreased by $1.7 million from $7.6 million in 1995 to $5.9 million in
1996. Included in the Fiscal 1996 operating profit are charges of
approximately $8.1 million for writedown of certain long-lived assets and $1.5
million for loss on sale of certain operations. Operating profit in Fiscal
1996 for the industrial fabrics and products segment before the charge for the
writedown of certain long-lived assets and loss on sale of certain operations
increased $7.9 million (105%) to $15.5 million from $7.6 million in Fiscal
1995. Fiscal 1995 operating profit reflects a charge of $5 million related to
product liability costs. No such charge occurred in Fiscal 1996. The
aforementioned sales volume increases in roofing, fiberglass, and extruded
urethane products, combined with improved manufacturing and operating
efficiencies, increased operating profits. Partially offsetting these
improvements, however, are the effects of lower sales volumes of cotton
industrial fabrics and other synthetic industrial fabrics. Curtailed
production schedules in the Company's cotton manufacturing facility and the
resulting under-absorption of costs were negative influences on operating
profit.
As a result of the Company's assessment of the market conditions for its
cotton industrial fabrics, management concluded that its plant in Kingsport,
Tennessee, which manufactures such fabrics, was impaired under the criteria of
Statement of Financial Accounting Standard ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." SFAS No. 121 requires a writedown to fair value in circumstances in which
the expected future net cash flows from the operation of the plant are less
than its carrying value. The accompanying consolidated statement of operations
for Fiscal 1996 includes a charge, "writedown of certain long-lived assets,"
of $8.1 million for the excess of the carrying amount of this plant over its
estimated fair value.
23
Pursuant to the terms of an Asset Purchase Agreement dated September 30,
1996, between JPS Elastomerics Corp., a wholly-owned subsidiary of the
Company, and Elastomer Technologies Group, Inc. and a Receivables Purchase
Agreement dated September 30, 1996 between JPS Elastomerics Corp. and the Bank
of New York Commercial Corporation, JPS Elastomerics Corp. consummated the
sale of substantially all of the assets of its rubber products division, a
business engaged in the manufacture and sale of natural and synthetic elastics
for use in apparel products, diaper products, and specialty industrial
applications (the "Rubber Products Business"). Pursuant to the Asset Purchase
Agreement, Elastomer Technologies Group, Inc. agreed to assume substantially
all of the liabilities and obligations associated with the Rubber Products
Business.
The consideration for the sale of the Rubber Products Business consisted of
approximately $5.1 million in cash, subject to certain post-closing
adjustments based on the amount of working capital transferred. The net cash
proceeds of approximately $4.8 million were used by the Company to reduce
outstanding borrowings under its senior credit facility. Revenues of the
Rubber Products Business for Fiscal 1994, Fiscal 1995 and Fiscal 1996 were
$22.6 million, $20.7 million and $16.8 million, respectively.
Net sales in Fiscal 1996 in the home fashion textiles segment increased $1.3
million (3.9%) to $34.0 million from $32.7 million in Fiscal 1995 due
primarily to an increase in yarn sales. Sales of home furnishings fabrics in
Fiscal 1996 were approximately flat with Fiscal 1995. Demand for the Company's
woven fabrics used in home decoration has been in decline for several years.
Operating profit in Fiscal 1996 in the home fashion textile segment declined
by $1.1 million (64%) to $0.6 million from $1.7 million in Fiscal 1995
primarily as a result of lower margins on fabric sales.
Indirect corporate expenses in Fiscal 1996 increased $1.0 million from $5.3
million in Fiscal 1995 to $6.3 million in Fiscal 1996 primarily as a result of
the $1.1 million cost of an early retirement offer extended to certain
salaried employees. Lower corporate employee compensation costs in Fiscal 1996
partially offset this increase.
Debt restructuring fees and expenses totaled $2.3 million in Fiscal 1996.
There were no comparable charges in Fiscal 1995. Such expenses represent fees
and expenses of the Company's financial advisor, the financial advisor for the
holders of a substantial majority of its outstanding bonds, the Company's
legal counsel and other professionals associated with the Company's financial
restructuring.
During Fiscal 1996, Gulistan reported net losses of approximately $4.5
million before interest expense on the promissory note held by the Company.
Accordingly, the Company did not record interest income on any of the Gulistan
securities held by the Company. Also, in accordance with relevant accounting
literature, the Company recorded a valuation allowance against its investment
in the Gulistan securities and a corresponding charge to income of $4.2
million as a result of the net loss ($4.5 million reduced by the $0.3 million
of common equity held by Gulistan management) incurred by Gulistan during
Fiscal 1996.
Interest expense in Fiscal 1996 was $40.5 million, or $0.6 million more than
Fiscal 1995 due primarily to the compounding effect of accretion of debt
discounts and non-cash interest.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity for operations and expansion
are funds generated internally and borrowings under its Revolving Credit
Facility (as defined below). On the Effective Date, Elastomerics and C&I (the
"Borrowing Subsidiaries") and JPS entered into the Credit Facility Agreement,
dated as of the Effective Date (the "Credit Agreement"), by and among the
financial institutions party thereto, Citibank, as agent, and NationsBank,
N.A., as co-agent. The Credit Agreement provides for a revolving credit loan
facility and letters of credit (the "Revolving Credit Facility") in a maximum
principal amount equal to the lesser of (a) $135 million and (b) a specified
borrowing base (the "Borrowing Base"), which is based upon eligible
receivables, eligible inventory and a specified dollar amount ($55,000,000
(subject to reduction) based on fixed assets of the Borrowing Subsidiaries),
except that (i) no Borrowing Subsidiary may borrow an amount greater than the
Borrowing Base attributable to it (less any reserves as specified in the
Credit Agreement) and (ii) letters
24
of credit may not exceed $20 million in the aggregate. The maturity date of
the Revolving Credit Facility is October 9, 2002. Until the delivery of the
Company's certificate with respect to its compliance with the terms of the
Credit Agreement during its second fiscal quarter of 1998 (the date of such
delivery being the "Delivery Date"), all loans outstanding under the Revolving
Credit Facility bear interest at either (i) the Eurodollar Rate (as defined in
the Credit Agreement) plus 1.5% per annum or (ii) the Base Rate (as defined in
the Credit Agreement) and, thereafter, will bear interest at the Base Rate or
the Eurodollar Rate plus an applicable margin (the "Applicable Margin") based
upon the Company's consolidated leverage ratio (which margin will not exceed
.25% for Base Rate borrowings and 1.75% for Eurodollar Rate borrowings). The
weighted average interest rate at January 31, 1998 is approximately 7.33%. The
Company currently pays (i) a fee of .375% per annum on the average unused
commitments under the Revolving Credit Facility until the Delivery Date and
thereafter such fees will be reduced to .25% per annum if a specified leverage
ratio is satisfied and (ii) a letter of credit fee equal to the Applicable
Margin for Eurodollar Rate borrowings. Borrowings under the Revolving Credit
Facility are made or repaid on a daily basis in amounts equal to the net cash
requirements or proceeds for that business day. As of January 31, 1998, unused
and outstanding letters of credit totaled $1,749,000. The outstanding letters
of credit reduce the funds available under the Revolving Credit Facility. At
January 31, 1998, the Company had approximately $40.8 million available for
borrowing under the Revolving Credit Facility.
The Credit Agreement contains restrictions on investments, acquisitions and
dividends unless, among other things, the Company satisfies a specified pro
forma fixed charge coverage ratio and maintains a specified minimum
availability under the Revolving Credit Facility for a stated period of time,
and no default exists under the Credit Agreement. The Credit Agreement also
restricts, among other things, indebtedness, liens, affiliate transactions,
operating leases, fundamental changes and asset sales other than the sale of
up to $35 million of fixed assets, subject to the satisfaction of certain
conditions. The Credit Agreement contains financial covenants relating to
minimum levels of EBITDA, minimum interest coverage ratio, minimum fixed
charge coverage ratio and maximum capital expenditures. As of January 31,
1998, the Company was in compliance with these restrictions and all financial
covenants.
Net cash provided by operations increased by approximately $2.0 million in
the combined periods from November 3, 1996 to October 9, 1997 and October 10,
1997 to November 1, 1997 (Fiscal 1997) compared to Fiscal 1996 primarily due
to a decrease in interest payments associated with the Old Debt Securities
offset by the payment of $14.0 million to holders of the 10.85% Notes and
10.25% Notes as part of the Plan of Reorganization. Working capital at
November 1, 1997 was $82.1 million compared to a deficit of $257.9 million at
November 2, 1996. This increase of $340.0 million is primarily due to the
effects of the consummation of the Plan of Reorganization including the
conversion of approximately $271.1 million of Old Debt Securities and the
reclassification of the borrowings under the Revolving Credit Facility from
current liabilities to long-term debt.
During the three months ended January 31, 1998, cash provided by operating
activities was $3.5 million. Working capital increased slightly from $82.1
million at November 1, 1997 to $82.3 million at January 31, 1998. Accounts
receivable decreased by $4.7 million from November 1, 1997 to January 31, 1998
due to seasonally lower sales in January 1998 compared to October 1997.
Inventories increased by $1.9 million, primarily in finished goods, during the
1998 first quarter as a result of the lower sales volume in that period.
Accounts payable decreased by $1.3 million from November 1, 1997 to January
31, 1998 primarily as a result of the slowdown in sales volume in January 1998
compared to October 1997 and the corresponding decrease in production
requirements. Accrued interest increased $1.0 million from November 1, 1997 to
January 31, 1998 due to the timing of interest payments on the Company's
revolving credit facility and the accrual of interest on the contingent notes.
Accrued salaries, benefits and withholding decreased $1.1 million from
November 1, 1997 to January 31, 1998 due to payment of fiscal year-end accrued
incentive compensation. Other accrued expenses decreased $1.7 million during
the 1998 first quarter due to the payment of certain accrued restructuring
fees and expenses.
The Company expects that its planned capital expenditures in Fiscal 1998 of
approximately $25 million will be funded by cash from operations, bank and
other equipment financing sources. At January 31, 1998, the Company had
commitments for capital expenditures of approximately $8.3 million.
25
Based upon the Company's ability to generate working capital through its
operations and its Revolving Credit Facility, the Company believes that it has
the financial resources necessary to pay its capital obligations and implement
its business plan.
The Company, like most other manufacturing companies, utilizes a number of
computer software programs and systems throughout its organization. To the
extent the Company's software applications contain source code that is unable
to appropriately interpret the upcoming Year 2000, some level of modification
or replacement of such applications will be necessary.
The Company is in the process of completing its Year 2000 assessment. The
Company expects that the primary costs will be associated with remediation and
testing of its internal systems and that a major portion of these costs will
be met from existing resources through reprioritization of technology
development initiatives. In addition, the assessment of the readiness of
external entities with which the Company interfaces, such as vendors,
customers and others is ongoing. The Company has been and continues to be
engaged in a number of projects to upgrade its computer information systems
which will, among other things, be Year 2000 compliant. The Company believes
that it is taking all appropriate steps to assure Year 2000 compliance, but is
dependent on vendor compliance to some extent. The Company is requiring its
systems and software vendors to represent that their products are, or will be,
Year 2000 compliant. The Company does not anticipate that Year 2000 issues
will have a material impact on its business, financial condition or results of
operations.
INFLATION AND TAX MATTERS
The Company is subject to the effects of changing prices. It has generally
been able to pass along inflationary increases in its costs by increasing the
prices for its products; however, market conditions sometimes preclude this
practice.
For the quarter ended January 31, 1998, the Company recorded a tax expense
of $1.25 million. The company utilized approximately $1.4 million of net
operating losses for regular Federal income tax purposes during the quarter.
The effective tax rate exceeds the statutory Federal income tax rate due to
the impact of items (primarily amortization of excess reorganization value)
not deductible for Federal income tax purposes, and because of state income
taxes.
For the period from October 10, 1997 to November 1, 1997, the Company
recorded a tax expense of $2.0 million. The tax expense includes the
utilization of a portion of the deferred tax asset, described below, which was
recorded as of the Effective Date of the Plan of Reorganization of the
Company. The effective tax rate exceeds the statutory federal income tax rate
due to the impact of items not deductible for federal income tax purposes and
because of state income taxes. See Note 11 to the Consolidated Financial
Statements for additional information.
The Company recorded a tax benefit for the period ending October 9, 1997 of
approximately $8.8 million. This consists of a benefit from the implementation
of the Plan of Reorganization net of state taxes on subsidiary operations that
could not be offset by operating loss carryovers or current year losses of JPS
or its subsidiaries. The benefit arose as consummation of the Plan of
Reorganization substantially deleveraged JPS. Accordingly, the reserve
established against the deferred tax assets that was required due to the
operating history was significantly reduced. However, the deferred tax asset
attributable to the net operating loss carryforwards was also reduced as a
result of the reduction in net operating loss carryforwards that is required
for reorganizations such as that provided in the Plan of Reorganization. The
reduction in reserves and reduction in deferred tax liabilities exceeded the
reduction in the gross deferred tax asset by a net amount of $9.7 million thus
resulting in a deferred tax benefit. The recording of the tax benefit and the
net deferred tax asset reflects the Company's determination that it is more
likely than not that these deferred tax assets, net of the valuation
allowance, will be realized based on current income tax laws and expectations
of future taxable income stemming from the reversal of deferred tax
liabilities or operations. Uncertainties surrounding income tax law changes,
shifts in operations
26
between state taxing jurisdictions and future operating income levels may,
however, affect the ultimate realization of all or some portion of these
deferred income tax assets.
The Internal Revenue Code (the "Code") provides that there are no taxes
payable on gains such as the extraordinary gain on early extinguishment of
debt that was realized on the reorganization of the Company in the period from
November 3, 1996 to October 9, 1997. However, the Company is required under
provisions of the Code to reduce certain net operating loss carryforwards and
certain other tax attributes as a result of such gain. The Company estimates
that beginning net operating loss carryovers will be reduced by approximately
$60 million. In addition, alternative minimum tax credit carryovers will be
reduced by approximately $0.7 million. As a result of valuation allowances on
these assets, there is no tax expense attributable to such reductions. In
addition to attribute reduction, any remaining net operating loss
carryforwards and certain other tax attributes are subject to the limitations
imposed by Section 382 of the Code. The effect of these limitations is to
limit the utilization of the approximately $28 million in remaining net
operating loss carryovers and certain other attributes to an annual amount
equal to the value of the Company immediately after the ownership change
(subject to certain adjustments) multiplied by the Federal long-term tax
exempt rate as of the date of reorganization.
The Company recorded a net $0.3 million income tax benefit on continuing
operations in Fiscal 1996. The Company had a $0.5 million deferred state tax
benefit from the charge for the plant closing and writedown of certain long-
lived assets. While no tax expense resulted from applying the statutory tax
rate to the loss before income taxes, the Company was not able to fully offset
subsidiary income in all tax jurisdictions with net operating losses of the
Company or other subsidiaries or operating loss carryovers. As a result, $0.2
million current year provision for state income taxes was required. In Fiscal
1995, the Company recorded $0.6 million in tax liabilities resulting from the
gain on the open market purchases of certain of its debt securities. Such
amount was recorded as a reduction of the extraordinary gain from early
extinguishment of debt. The loss recorded on the disposition of the Carpet
Business was not currently recognizable for tax purposes. The Company recorded
no net tax benefit in its financial statements due to uncertainties
surrounding the Company's ability to utilize such losses in the future.
During Fiscal 1994, the Company utilized approximately $141 million of net
operating loss carryforwards to offset the gain on sale of the automotive
assets. Income tax expense incident to the sale was reduced by approximately
$49 million as a result of such utilization. Federal alternative minimum and
state taxes of approximately $2.8 million were recognized as a result of the
sale. Although the Company believes use of its net operating loss
carryforwards to offset the gain on the automotive assets will more likely
than not be sustained under existing tax laws, uncertainty exists primarily
due to the fact that applicable regulations under Section 382 of the Code have
not been issued. Therefore, in accordance with provisions of the indentures
governing the Old Debt Securities, the Company set aside, in a special-purpose
subsidiary, a portion ($39.5 million) of the net proceeds from the sale of the
automotive assets to satisfy, if necessary, these possible contingent tax
liabilities. As of November 1, 1997 and November 2, 1996, the aggregate fair
value of the investments was approximately $34.6 million and $46.2 million,
respectively. Under the terms of the Plan of Reorganization, the holders of
the 10.25% and 10.85% Notes received $14 million in cash from these
investments and Contingent Notes with an aggregate principal amount of $34
million (subject to adjustment on the maturity date), payable from these
investments upon the occurrence of certain events. The respective amounts of
the cash distribution and the initial principal amount of the Contingent Notes
were determined based on the assumptions used to determine the original amount
set aside for contingent tax liabilities related to the 1994 sale of the
Company's automotive business with adjustments for certain events arising
subsequent to the sale and such original determination. A current liability in
an amount equal to the approximate aggregate fair value of invested funds is
recorded in the Company's Consolidated Balance Sheet as of November 1, 1997.
Even before giving effect to the previously described limitations on use of
net operating loss carryforwards occurring under the Plan of Reorganization,
due to the Company's operating history, it was uncertain that it would be able
to utilize all deferred tax assets. Therefore, for years ending prior to
November 1, 1997, a valuation allowance had been provided equal to the
deferred tax assets remaining after deducting all deferred tax liabilities,
exclusive of those related to certain deferred state tax liabilities. As
described above, a portion of the valuation allowance was reversed and a tax
benefit recognized upon the Effective Date of the Plan of Reorganization.
27
BUSINESS
APPAREL FABRICS AND PRODUCTS
The Company is a leading manufacturer of greige goods (unfinished woven
fabrics) and yarn. The Company's products are used in the manufacture of a
broad range of consumer apparel products including blouses, dresses,
sportswear and undergarments.
Greige Goods. The Company produces fabrics from spun and filament yarns that
are used ultimately in the manufacture of apparel such as blouses, dresses and
sportswear. Greige goods are produced from rayon, acetate, polyester and
cotton yarns, and are primarily sold to other textile manufacturers for use in
producing printed and dyed fabrics.
Yarn. The Company produces a variety of rayon and polyester spun yarns for
its own use and for sale to manufacturers of knitted apparel.
INDUSTRIAL FABRICS AND PRODUCTS
Commercial Roofing Products. The Company is a well-established manufacturer
of single-ply membrane roofs that are made from woven synthetic fabrics and
rubber-based or polypropylene specialty polymer compounds which are sold
principally to roofing distributors for use in both the new and replacement
commercial markets.
Other Building Construction Products. The Company is a producer of fabrics
made from glass and synthetic fibers that are used in a number of applications
in the building construction industry. Products include various scrims used
for wallboard tapes and certain roofing applications, and reinforcement
substrates used for the installation of internal and external tiles and
synthetic wall surfaces. The Company produces and sells membrane products
(similar to commercial roofing products) for use in environmental containment
applications such as reservoir liners and covers.
Other Industrial Products. The Company produces a wide variety of other
industrial textile products that are used in various industries for many
different end uses. Many of these products have characteristics that provide
insulation or filtration properties. These specialty fabrics are used in the
manufacture of such products as flame-retardant clothing, filtration products,
tarpaulins, awnings, athletic tapes, printed circuit boards and advanced
composites. In addition, the Company produces urethane products for use in the
manufacture of various products such as athletic shoes, "bulletproof" glass,
disposable intravenous bags, seamless welded drive belts and tubing.
HOME FASHION TEXTILES
The Company produces a variety of unfinished woven fabrics and yarns for use
in the manufacture of draperies, curtains and lampshades and is a major
producer of solution-dyed drapery fabrics.
SUBSIDIARIES
JPS's wholly-owned operating subsidiaries include Elastomerics and C&I.
JPS's other wholly-owned subsidiaries do not have any significant operations:
JPS Capital, International Fabrics, Inc. ("Fabrics"), Auto and Carpet. The
operating subsidiaries each have independent administrative, manufacturing,
and marketing capabilities for all material aspects of their operations,
including product design, customer service, purchasing, and collections. JPS
provides all finance and strategic planning services and handles the legal,
tax, and regulatory affairs for its subsidiaries. JPS Capital was formed in
1994 as a special purpose subsidiary to hold (and invest) $39.5 million,
representing a portion of the proceeds received from the sale of the assets of
JPS's automotive division in June 1994, including the assets of Auto. These
funds were set aside to satisfy possible contingent tax liabilities incurred
in connection with that sale, and will serve as the primary source of payment
of any such
28
liabilities. Prior to the Effective Date, the funds held by JPS Capital
aggregated approximately $48 million, of which $14 million was distributed on
the Effective Date pursuant to the Plan of Reorganization to holders of
certain issues of Old Debt Securities on the Effective Date. The funds held by
JPS Capital currently aggregate approximately $34 million. In connection with
the implementation of the Plan of Reorganization, approximately $34 million in
aggregate principal amount (subject to adjustment on the maturity date
thereof) of Contingent Notes were issued by JPS Capital on the Effective Date
to holders of certain issues of Old Debt Securities.
Auto and Carpet formerly owned and operated JPS's automotive products and
carpet businesses, respectively. The assets of those businesses were sold in
1994 and 1995, respectively. See "--Disposition of Assets; Plant Closing."
MANUFACTURING
The Company's experienced workforce and wide variety of yarn making, fabric
forming and other manufacturing equipment allow the Company to rapidly and
efficiently change its product mix to meet style and seasonal requirements.
The Company's activities generally encompass all phases of manufacturing its
products.
In the manufacture of woven textile products, the Company purchases
synthetic and natural fibers and spins them into yarn or purchases filament
yarn for processing. In addition, the Company purchases certain spun yarns.
Yarns are then coated, sized or directly woven into unfinished fabric. Upon
completion of the weaving process, fabric is generally shipped to customers
who dye, finish, coat and cut those fabrics for resale.
Single-ply membrane roofing is made by processing a Company-manufactured
woven substrate with specialty polymers. Other industrial fabric products are
produced from either woven fiberglass or cotton and synthetic fibers, which
fibers are processed into yarn, woven and finished into fabrics by the
Company. Other specialty industrial products are produced by extrusion of
urethane resins.
The Company has an aggressive capital spending plan to expand capacity in
certain segments and improve productivity in other segments, as described in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Company believes that its manufacturing facilities and
capital spending plan are sufficient for its production requirements.
RAW MATERIALS
The Company maintains good relationships with its suppliers and has, where
possible, diversified its supplier base so as to avoid a disruption of supply.
In most cases, the Company's raw materials are staple goods that are readily
available from numerous domestic fiber and chemical manufacturers. For several
products, however, branded goods or other circumstances prevent such a
diversification, and an interruption of the supply of these raw materials
could have a significant negative impact on the Company's ability to produce
certain products. The Company believes that its practice of purchasing such
items from large, stable companies minimizes the risk of such an interruption
in supply.
MARKETING AND COMPETITION
The textile industry is highly competitive and includes a number of
participants with aggregate sales and financial resources greater than the
Company's. The Company generally competes on the basis of price, quality,
design and customer service. Many companies compete in limited segments of the
textile market. In recent years, a large and growing percentage of domestic
consumer apparel demand has been met by foreign competitors whose products,
both fabrics and garments, are imported into the United States. The Company is
well-positioned due to its ability to respond quickly to changing styling and
fashion trends. This ability generally provides advantages for domestic
textile manufacturers. Although no single company dominates the industry, most
market segments are dominated by a small number of competitors. The Company
believes it has a significant market share in the market for rayon and acetate
apparel fabrics, rayon yarn, solution-dyed satin fabrics and quartz fabrics.
29
The Company's marketing efforts include the development of new product
designs and styles which meet customer needs. The Company's operating units
have been established suppliers to each of its markets for many years and are
taking advantage of well-established customer relationships to increase
product development with its customers. The "J.P. Stevens" trade name, which
the Company has a non-exclusive, royalty-free license to use (see "--Patents,
Licenses and Trademarks" below), is widely recognized throughout the textile
industry. The Company believes that its relatively broad base of manufacturing
operations provides it with a competitive advantage in developing new textile
products. In addition to its direct marketing capabilities, the Company
markets certain of its products through distributors.
The following is a discussion of marketing and competitive factors as they
relate to each of the Company's segments.
Apparel Fabrics and Products
Greige Goods. The Company markets its spun and filament fabrics to
converters who finish and/or dye these products prior to shipping to finished
apparel manufacturers. The Company has sought to maintain a relatively high
proportion of such sales in product areas where its manufacturing flexibility
can provide a competitive advantage.
Yarn. The Company competes with a large number of companies which sell yarn
to woven and knit goods manufacturers. Yarns are generally sold on a direct
basis, and the Company believes that quality and price are the primary
competitive factors.
Industrial Fabrics and Products
Construction Products. The Company markets its single-ply roofing products
on a direct basis to roofing distributors. The Company competes with
manufacturers of this and other types of roofing products. The Company
believes that its product's ease of installation and warranty are important
competitive factors.
Other Products. Other industrial fabrics and products are marketed directly
to other manufacturers and distributors. The Company believes that price and
its ability to meet customer technical specifications are important
competitive factors.
Home Fashion Textiles
The Company's home fashion operations compete with a large number of
manufacturers of similar woven fabric products. In general, product markets
are differentiated on the basis of price and quality. The Company believes
that design and style features are important competitive factors.
CUSTOMERS
No customer accounts for more than 10% of the Company's sales. However, the
loss of certain customers could have a material adverse effect on sales.
PRODUCT DEVELOPMENT
In general, the textile industry expends its efforts on design innovation
and capital expenditures for process enhancements rather than on basic
research, relying on fiber suppliers or machinery manufacturers for basic
research.
The Company's research and development activities are directed toward the
development of new fabrics and styles which meet specific styling requirements
(in the case of apparel and home furnishing fabrics and products) or other
specific properties such as insulation, weight, strength, filtration or
laminate adherence (in the
30
case of industrial fabrics and products). Significant time is spent by
employees in activities such as meeting with stylists, designers, customers,
suppliers and machinery manufacturers, as well as producing samples and
running trials in order to develop new products and markets. These activities
are performed at various levels and at various locations, and their
specifically identifiable incremental costs are not material in relation to
the Company's total operating costs.
BACKLOG
Unfilled open orders, which the Company believes are firm, were $60.1
million at January 31, 1998 and $73.3 million at November 1, 1997. The Company
generally fills its open orders in the following fiscal year and the Company
expects that all of the open orders as of November 1, 1997 will be filled in
the 52-week period ending October 31, 1998 ("Fiscal 1998"). The decrease in
open orders at January 31, 1998 as compared to November 1, 1997 is primarily
due to an decrease in customer demand for apparel fabrics and products and is
representative of a change in the timing of the acceptance of certain orders
by the Company. The Company believes that the amount of backlog provides some
indication of the sales volume that can be expected in coming months, although
changes in economic conditions may result in deferral or acceleration of
orders which may affect sales volume for a period.
No significant portion of the Company's business is subject to renegotiation
of profits, or termination of contracts or subcontracts at the election of the
government.
PATENTS, LICENSES AND TRADEMARKS
Certain of the Company's products are sold under registered trademarks which
have been licensed royalty-free to the Company from J.P. Stevens until May
2013, including trademarks for certain products using the "J.P. Stevens" name.
Patented processes used in the manufacturing process are not a significant
part of the Company's business. The Company does not license its name or
products to others except for the licenses of certain trade names granted
royalty free to operations that the Company has sold.
EMPLOYEES
The Company currently has approximately 3,700 employees of which
approximately 3,200 are hourly and approximately 500 are salaried. The
Company's employees are not represented by unions. The Company believes its
relations with its employees to be good and has not had any work stoppages or
strikes.
ENVIRONMENTAL AND REGULATORY MATTERS
The Company is subject to various federal, state and local government laws
and regulations concerning, among other things, the discharge, storage,
handling and disposal of a variety of hazardous and non-hazardous substances
and wastes. The Company's plants generate small quantities of hazardous waste
that are either recycled or disposed of off-site by or at licensed disposal or
treatment facilities.
The Company believes that it is in substantial compliance with all existing
environmental laws and regulations to which it is subject. In addition, the
Company is subject to liability under environmental laws relating to the past
release or disposal of hazardous materials. To date, and in management's
belief for the foreseeable future, liability under and compliance with
existing environmental laws has not had and will not have a material adverse
effect on the Company's financial or competitive positions. No representation
or assurance can be made, however, that any change in federal, state or local
requirements or the discovery of unknown problems or conditions will not
require substantial expenditures by the Company.
SEASONALITY
Certain portions of the business of the Company are seasonal (principally
construction products) and sales of these products tend to decline during
winter months in correlation with construction activity. These declines have
historically tended to result in lower sales and operating profits in the
first and second quarters than in the third and fourth quarters of the
Company's fiscal year.
31
PROPERTIES
The following table sets forth certain information relating to the Company's
principal facilities (segment information relates to principal use). All of
the facilities owned or leased by the Company are used for manufacturing,
except for the facility in New York, New York, which is used for sales
offices. Except as noted, all of the Company's facilities are owned in fee and
substantially all owned facilities are pledged as collateral for the Company's
bank financing arrangement.
APPAREL FABRICS AND PRODUCTS
- --------------------------------
SQUARE
LOCATION FOOTAGE
- -------- -------
Laurens, SC............. 475,000
Greenville, SC.......... 460,000
Stanley, NC............. 338,000
S. Boston, VA........... 286,000
Rocky Mount, VA......... 81,000
HOME FASHION TEXTILES
- ---------------------
Lincolnton, NC.......... 387,000
INDUSTRIAL FABRICS AND PRODUCTS
- --------------------------------
SQUARE
LOCATION FOOTAGE
- -------- -------
Kingsport, TN........... 625,000
Slater, SC.............. 433,000
Westfield, NC........... 237,000
Easthampton, MA......... 50,000
ALL SEGMENTS
- ------------
New York, NY(1)......... 10,000
- --------
(1) The New York, NY facility is leased by the Company under a lease agreement
which expires on May 30, 1999.
The Company also leases certain other warehouse facilities, various regional
sales offices, a subsidiary's corporate office and its corporate headquarters.
The Company believes that all of its facilities are suitable and adequate for
the current and anticipated conduct of its operations.
LEGAL PROCEEDINGS
The Company is involved in various legal proceedings which are routine
litigations incidental to the conduct of its business or the conclusion of
JPS's chapter 11 case. Management believes that none of this litigation, if
determined unfavorably to the Company, would have a material adverse effect on
the financial condition or results of operations of the Company.
32
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
persons who are members of the Board of Directors or executive officers of
JPS. Each director took office as of the Effective Date and will serve until a
successor is elected and qualified or until his earlier resignation or
removal.
NAME AGE POSITION(S) HELD
---- --- ----------------
Monnie L. Broome............ 55 Vice President--Human Resources
Robert J. Capozzi........... 33 Director
Jeffrey S. Deutschman....... 41 Director
Nicholas P. DiPaolo......... 56 Director
Michael L. Fulbright........ 48 Director
James H. Gully.............. 48 Executive Vice President--Operations
JPS Converter & Industrial Corp.
Jerry E. Hunter............. 61 Chairman of the Board, Director,
Chief Executive Officer and President
Heyward D. Maddox........... 59 President--Sales and Marketing
JPS Converter & Industrial Corp.
Carl Rosen.................. 68 President, JPS Converter & Industrial Corp.
John M. Sullivan, Jr........ 52 Director
David H. Taylor............. 43 Director, Executive Vice President--
Finance and Secretary
Bruce R. Wilby.............. 47 President, JPS Elastomerics Corp.
The business experience of each of the directors and executive officers
during the past five years is as follows:
Mr. Broome has served as Vice President--Human Resources since May 1988.
Prior thereto, Mr. Broome was Vice President--Human Resources for J.P. Stevens
& Co., Inc. from January 1988 until May 1988 when JPS Textile Group, Inc. was
formed. From July 1981 until September 1987, Mr. Broome was Vice President of
Personnel for M. Lowenstein Corp. when Lowenstein was acquired by Springs
Industries, whereupon he was Vice President of Personnel for the Home Products
Group of Springs Industries from September 1987 until January 1988. From
August 1975 through June 1981, Mr. Broome was Divisional Director of
Management Development for the Synthetic, Yarn, and Automotive Divisions of
J.P. Stevens & Co., Inc.
Mr. Capozzi became a director of JPS on the Effective Date and is a Managing
Director of Magten Asset Management Corp. ("Magten"), an investment advisory
firm established in 1978. Magten, a registered investment adviser under the
Investment Advisers Act of 1940, as amended, beneficially owns approximately
19.05% of the Common Stock of JPS as of March , 1998. See "Security
Ownership of Principal Shareholders and Management." Mr. Capozzi has been with
Magten since 1986. Currently, Mr. Capozzi serves as a member of the Board of
Directors of Magten Offshore Fund Ltd.
Mr. Deutschman became a director of JPS on the Effective Date and is a
private investor and merchant banker. From 1992 to 1995, he was a Managing
Director with Aurora Capital Partners, L.P. Prior to that, he was a Managing
Director and principal of Deutschman Clayton & Company. Mr. Deutschman has
been Co-Chairman of the Board of Directors of The Cherokee Group, a designer,
manufacturer, and marketer of casual apparel, and an officer and director of
Fair Holdings Corporation and Fair Lanes, Inc., a manager and operator of
bowling centers.
33
Mr. DiPaolo became a director of JPS on the Effective Date and was Chairman
of the Board, President and Chief Executive Officer of Salant Corporation, a
diversified apparel company listed on the New York Stock Exchange from March
1991 until his retirement in May 1997. Prior to that, Mr. DiPaolo served as
President and Chief Operating Officer of Salant Corporation since June 1988.
From 1985 to 1988, Mr. DiPaolo served as President and Chief Operating Officer
of Manhattan Industries, which was merged into Salant Corporation in 1988.
Prior to that he was Chairman and Chief Executive Officer of the Villager, a
women's sportswear company, from 1979 to 1985. Mr. DiPaolo has served on the
Board of Directors of Manhattan Far East, a trading company based in Hong
Kong. He is also a member of the Board of Directors of the American Apparel
Manufacturers Association and other industry associations.
Mr. Fulbright became a director of JPS on the Effective Date and has served
as President and Chief Executive Officer of The Bibb Company, a diversified
textile company, since August 1996. Prior to that, he served as President of
the Denim Division of Cone Mills, Inc. from December 1994 to August 1996.
Prior to that, Mr. Fulbright was employed with Springs Industries, serving as
President of the Greige Manufacturing Division from August 1992 to November
1994, as President of Wamsutta/Pacific Home Products from July 1986 to July
1992, and as Executive Vice President of Wamsutta/Pacific Home Products from
December 1985 to July 1986. Prior to that, Mr. Fulbright was employed by M.
Lowenstein Corporation and WestPoint Pepperell.
Mr. Gully has served as Executive Vice President, Operations of JPS
Converter and Industrial Corp. since January 1995. Prior to that time, he
served as Senior Vice President--Operations of Nazareth-Century Mills from
1994 to 1995 and prior thereto as Vice President--Manufacturing of The William
Carter Company from 1990 to 1994. Prior to that, Mr. Gully served as President
of Delta Apparel, a subsidiary of Delta Woodside Industries, from 1987 to 1990
and was employed by Milliken and Riegel in various positions from 1973 to
1987.
Mr. Hunter was appointed as a director of JPS on April 6, 1993 and as Chief
Executive Officer of JPS on November 29, 1994. Mr. Hunter has served as
President of JPS since September 1988. Prior to that time, from May 1988 to
September 1988, he was Executive Vice-President--Operations. In addition, on
January 18, 1994, Mr. Hunter was appointed as Chief Operating Officer of JPS
Converter and Industrial Corp., a wholly-owned subsidiary of JPS, and he also
serves as a Vice-President of each of JPS's subsidiaries. From April 1986 to
May 1988, he was Vice-President--Technical Services at J.P. Stevens. From
March 1983 to March 1986, he was Senior Vice-President at Cannon Mills, Inc.,
a textile manufacturer. Prior to March 1983, he was employed by Springs
Industries, a textile manufacturer, for 21 years.
Mr. Maddox has served as President--Sales and Marketing of JPS Converter and
Industrial Corp. since October 1996, and prior thereto as Vice President--
Sales and Marketing of JPS Converter and Industrial Corp. from May 1988 to
September 1996. Prior to that time, from 1986 to 1988, Mr. Maddox served as
Vice President of the Synthetics Division of J.P. Stevens. From 1982 to 1986,
he was National Sales Manager for J.P. Stevens' Glass and Synthetics Division.
Prior to that, from 1959 to 1982, he held various positions within J.P.
Stevens including product manager and salesperson for the Glass and Synthetics
Division.
Mr. Rosen has served as President of JPS Converter and Industrial Corp.
since May 1993 and prior thereto as Vice President--Sales of JPS Converter and
Industrial Corp. from February 1991 to May 1993. Prior to that time, Mr. Rosen
served as President of Loomtex Corp., a fashion converter which he founded,
from 1961 to 1991.
Mr. Sullivan became a director of JPS on the Effective Date and has served
as President of American Silk Mills Corp. since 1985, as President and Chief
Executive Officer of Gerli & Co., Inc. since 1987, as President of
International Silk Association (USA), N.Y., N.Y. since 1988, and as Co-
Chairman of the Home Furnishings Committee, I.S.A., Lyons France, since 1995.
From 1987 to 1991, Mr. Sullivan served as President of Cheney Brothers Inc.
Prior to that, he served as Executive Vice President (Merchandising, Marketing
& Sales) of Gerli & Co., Inc. from 1984 to 1987. Prior to that, Mr. Sullivan
served as President of A.H. Rice Company Inc., Pittsfield, Massachusetts from
1982 to 1989, as Vice President of Marketing and Sales for Gerli & Co., Inc.
from 1979-1982, and as Sales Manager of American Silk Mills Corp. from 1974 to
1979.
34
Mr. Taylor was appointed as a director of JPS on April 15, 1993. Mr. Taylor
has served as Executive Vice-President--Finance and Secretary of JPS since
June 1991, and prior thereto he was Controller and Assistant Secretary of JPS
since May 1988. Prior to that time, he was a Senior Manager at Deloitte
Haskins & Sells, a public accounting firm, by which he was employed from June
1977 through May 1988. In addition, Mr. Taylor serves as a Vice-President and
Assistant Secretary of each of JPS's subsidiaries.
Mr. Wilby has served as President of JPS Elastomerics Corp. since May 1993
and prior thereto, as Business Manager of JPS Elastomerics Corp. from 1988 to
1993. Prior to that time, Mr. Wilby served as Business Manager of Stevens
Roofing Systems, a Division of J.P. Stevens from 1985 to 1988 and as product
manager from 1981 to 1985. Prior to that, from 1973 to 1981, he held various
positions within J.P. Stevens.
None of the directors or executive officers listed herein is related to any
other such director or executive officer.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an Audit Committee and a Compensation
Committee.
The Audit Committee, which consists of Messrs. Deutschman and Sullivan,
makes recommendations to the Board of Directors regarding the independent
auditors to be nominated for ratification by the shareholders, reviews the
independence of such auditors, approves the scope of the annual activities of
the independent auditors and reviews audit results.
Prior to the Effective Date, the Compensation Committee consisted of certain
members of the Board of Directors of JPS who, as of the Effective Date, were
replaced by the current Board of Directors of JPS. The Compensation Committee,
which consists of Messrs. Capozzi, DiPaolo and Fulbright, recommends to the
Board of Directors compensation plans and arrangements with respect to the
Company's executive officers and key personnel.
35
EXECUTIVE COMPENSATION
The following summary compensation table sets forth information concerning
compensation for the last three years for services in all capacities awarded
to, earned by or paid to the Company's Chief Executive Officer and the five
other most highly compensated executive officers of the Company during Fiscal
1997.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ------------------
AWARDS
----------
SECURITIES
UNDERLYING
NAME AND OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS SAR'S PAYOUTS COMPENSATION(2)
------------------ ---- ---------- --------- ---------- ------- ---------------
Jerry E. Hunter ....... 1997 $361,218 $ 137,052 115,000 $9,059
Chairman of the Board,
President 1996 332,025 -- 3,371
and Chief Executive
Officer 1995 306,075 195,902 3,228
Carl Rosen............. 1997 267,650 43,195 30,000 3,178
President, JPS
Converter & 1996 251,875 -- 3,131
Industrial Corp.(1) 1995 243,750 83,000 3,046
David H. Taylor........ 1997 209,973 79,566 75,000 8,025
Executive Vice
President-Finance 1996 204,783 -- 2,291
and Secretary 1995 196,350 118,139 2,238
Monnie L. Broome....... 1997 167,040 63,272 30,000 8,016
Vice President-Human
Resources 1996 162,775 -- 2,295
1995 155,925 91,822 2,250
Bruce R. Wilby......... 1997 165,000 78,779 30,000 $27,751 6,205
President, JPS
Elastomerics Corp.(1) 1996 161,474 57,761 6,040
1995 140,359 -- 5,591
Heyward D. Maddox...... 1997 133,883 66,857 30,000 1,798
President-Sales and
Marketing, JPS 1996 124,813 93,249 2,258
Converter & Industrial
Corp.(1) 1995 119,242 -- 1,724
- --------
(1) Such executive officers of the Company's subsidiaries perform certain
policy-making functions for the Company and are therefore included herein
pursuant to Item 402(a)(3) of Regulation S-K and Rule 3b-7 under the
Exchange Act.
(2) Employer-matching 401(k) plan contribution, employer-provided life
insurance premiums and imputed lease value of company-provided
automobiles.
AGREEMENTS WITH EXECUTIVE OFFICERS
On the Effective Date, JPS entered into an employment agreement with Jerry
E. Hunter. The agreement, which provides that Mr. Hunter will serve as
President and Chief Executive Officer of JPS until the third anniversary of
the Effective Date (the "Termination Date"), shall automatically be extended
on an annual basis following the Termination Date unless either party elects
in advance not to extend the employment period. The initial base salary under
the agreement is $380,000 and may be increased but not reduced over the term
of the agreement. In addition, under the new employment agreement, on the
Effective Date Mr. Hunter received a retention grant cash payment of $256,274
and 32,852 shares of Common Stock. Mr. Hunter is eligible for an annual bonus
up to 50% of base salary based upon the Company's attainment of certain
performance goals specified in the 1997 Management Incentive Bonus Plan. If
JPS terminates Mr. Hunter's employment for reasons other than for cause (as
defined in the agreement), he will be entitled to severance benefits equal to
(i) his annual
36
base salary continued through the Termination Date or for one year from the
date of termination, if later, (ii) his target annual bonus continued through
the Termination Date or for one year, if greater and (iii) continuation of all
health and life insurance benefits for up to twenty-four months following the
termination of employment. In the event JPS reduces Mr. Hunter's base salary
or bonus, materially changes the requirements of his position or requires that
he relocate his principal residence, or in the event Mr. Hunter elects to
terminate his employment no earlier than six months following a change in
control (as defined in the agreement), Mr. Hunter may voluntarily terminate
his employment with JPS with such termination being treated, for purposes of
severance benefits, as a termination by JPS.
On the Effective Date, JPS entered into substantially similar employment
agreements with David H. Taylor and Monnie L. Broome, with Mr. Taylor serving
as Executive Vice President--Finance and Secretary of JPS and Mr. Broome
serving as Vice President--Human Resources of JPS. Under the agreements, base
salary for Mr. Taylor is $225,000 and for Mr. Broome is $180,000. In addition,
under the new employment agreements, Mr. Taylor received a retention grant
cash payment of $163,694 and 20,984 shares of Common Stock and Mr. Broome
received a retention grant cash payment of $115,531 and 14,810 shares of
Common Stock. Each of Mr. Taylor and Mr. Broome is also eligible for an annual
bonus of up to 50% of his salary based upon the Company's attainment of
certain performance goals specified in the 1997 Management Incentive Bonus
Plan. The new employment agreements of Mr. Taylor and Mr. Broome do not
provide that within six months following a change in control, Mr. Taylor or
Mr. Broome (as the case may be) may voluntarily terminate their employment
with JPS, with such termination being treated, for purposes of severance
benefits, as a termination by JPS.
On December 23, 1991, the Company entered into an employment agreement with
Bruce R. Wilby. This agreement, as amended, provides severance benefits in the
event Mr. Wilby is terminated prior to December 23, 1999 for reasons other
than for cause (as defined in the agreement). If such termination occurs, Mr.
Wilby is entitled to receive an amount equal to his annual base salary
including normal fringe benefits payable in the normal course as if employment
had not been terminated. As of January 30, 1998, there have been no payments
under this agreement.
On May 1, 1993, the Company entered into an employment agreement with Carl
Rosen. This agreement, as amended, provides that Mr. Rosen will serve as
President of JPS Converter & Industrial Corp. until April 30, 1998. Base
salary under the agreement is currently $265,000 and may be increased but not
reduced over the term of the agreement. Mr. Rosen is eligible for an annual
bonus with a target level equal to 50% of base salary. If the Company
terminates Mr. Rosen's employment for reasons other than for cause (as defined
in the agreement), he is entitled to severance benefits equal to his annual
base salary including fringe benefits plus a pro rata bonus amount up to the
date of termination. In the event the Company reduces Mr. Rosen's base salary
or bonus or materially changes the requirements of his position, Mr. Rosen may
voluntarily terminate his employment with the Company with such termination
being treated, for purposes of severance benefits, as a termination by the
Company.
RETIREMENT PENSION PLAN
The Company maintains a Retirement Pension Plan for all employees (the
"Pension Plan"), including its salaried employees. The Pension Plan is a
defined benefit pension plan providing a formula benefit with contributions
determined on an actuarial basis. The Pension Plan generally covers all
employees 21 years of age or older who have completed one year of service with
the Company. The Pension Plan generally takes into account annual compensation
earned under certain predecessor plans of J.P. Stevens.
37
The following table indicates the approximate amounts of annual retirement
income that would be payable to a salaried employee under the Pension Plan
based on the compensation levels and years of credited service shown. There
would be no social security or other offset deducted from the amounts shown.
PENSION PLAN TABLE*
YEARS OF SERVICE
--------------------------------------------
REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
------------ -------- -------- -------- -------- --------
$125,000..................... $19,863 $26,484 $33,104 $39,725 $46,346
150,000..................... 24,362 32,483 40,604 48,725 56,846
160,000 and above........... 26,162 34,884 43,604 52,325 61,046
- --------
* Assumes individual retires at age 65 in 1997 with the indicated years of
service and compensation. The social security integration level of such
individuals would be $29,304. The social security integration level is
adjusted annually.
Credited years of service for benefit accrual under the Pension Plan as of
November 1, 1997 for the following executive officers are:
Jerry E. Hunter.................................... 11 years
Carl Rosen......................................... 6 years
David H. Taylor.................................... 9 years
Monnie L. Broome................................... 9 years
Bruce R. Wilby..................................... 22 years
Heyward D. Maddox.................................. 29 years
Annual retirement benefits for salaried employees are generally computed as
the sum of 0.6% of a participant's average compensation (the annual average of
five consecutive, complete plan years of highest compensation during the last
10 plan years of service) multiplied by the years of benefit service plus 0.6%
of a participant's compensation which exceeds the Participant's Social
Security Integration Level (equal to $29,304 in 1997) multiplied by the
participant's years of benefit service. The Pension Plan provides that each
participant's benefits fully vest after five years of service or the
attainment of age 55.
This table may understate the benefits available to certain participants
because salaried employees who were covered by the Pension Plan before July 1,
1989 are entitled to the greater of the benefit formula noted above or the
prior benefit formula, plus additional accrued benefits under the new formula
since July 1, 1989. Under the prior formula, a participant's annual pension
payable as of normal retirement age was equal to 1% of the portion of "final
average compensation" which was equal to the "social security integration
level" in effect for the year of retirement, plus 1.5% of the portion of the
participant's final average compensation in excess of the social security
integration level, the sum of which was multiplied by the number of years of
credited service not exceeding 35. In addition, as noted below, the table
assumes that covered compensation was limited to the current allowable amount
for all years while benefits may have been accrued in years when limitations
were higher.
Compensation covered by the Pension Plan consists of all payments made to a
participant for personal services rendered as an employee of the Company which
are subject to federal income tax withholding, excluding imputed income
attributable to certain fringe benefit programs. In accordance with the
Revenue Reconciliation Act of 1993 with respect to salaried employees, plan
compensation covers up to an adjusted maximum of $160,000 per individual for
the plan year beginning November 1, 1997. Plan compensation was subject to
substantially higher limits in previous years ($235,840 for 1994). The amounts
shown are also subject to possible maximum limitations under Section 415 of
the Internal Revenue Code of 1986, as amended (the "Code"), and are subject to
possible reduction for amounts payable under other JPS qualified plans.
38
1997 MANAGEMENT INCENTIVE BONUS PLAN
The Company's 1997 Management Incentive Bonus Plan provides incentives for
key management employees of the Company and its subsidiaries based upon the
financial performance of the Company. The plan is designed to provide
incentives to maximize operating earnings while minimizing the net assets
required to generate those earnings. Targets are set annually for operating
earnings (defined as EBITDA before bonus expense and restructuring and
reorganization expenses) and net assets employed (defined as average total
assets less average current liabilities other than debt-related liabilities
such as accrued interest) for each fiscal year and for each operating
subsidiary. If actual operating earnings and net assets employed are equal to
the targets, a targeted bonus is paid to each participant. To the extent
actual operating earnings are greater than the target, amounts in excess of
the targeted bonuses are paid to each participant. Likewise, operating
earnings lower than target result in a bonus payment that is less then the
targeted bonus. A participant's bonus is reduced to zero if actual operating
earnings are 80% of target or less. The operating earnings target is adjusted
up or down by 12.5% of the excess or deficiency of actual net assets employed
compared to the target for net assets employed. Targeted bonus amounts
expressed as a percentage of salary for participants in the plan range from
15% to 50%. Individuals listed on the Summary Compensation Table have targeted
bonus amounts equal to 50% of salary.
1997 INCENTIVE AND CAPITAL ACCUMULATION PLAN
The Company's Incentive and Capital Accumulation Plan (the "Incentive Plan")
is intended to provide incentives that will attract, retain, and motivate
highly competent individuals as key employees of the Company and its
subsidiaries, by providing them with opportunities to acquire shares of Common
Stock or monetary payments based on the value of such shares. Pursuant to the
Incentive Plan, 853,485 shares of Common Stock are reserved for issuance to
salaried key employees and non-employee directors of the Company pursuant to
benefits in the form of stock options, stock appreciation rights, stock
awards, performance awards, and stock units that may be granted by the
compensation committee comprised of disinterested members of the Company's
Board of Directors. The Incentive Plan will terminate on the tenth anniversary
of its adoption.
On October 30, 1997, options to acquire approximately 569,000 shares of the
shares reserved pursuant to the Incentive Plan were granted to senior
management of the Company. These options include a combination of time vesting
options which vest solely on the lapse of time and performance options which
vest upon achievement of specified corporate performance goals. These options
are according to specific vesting schedules set forth in individual
participant's grant letters. In addition, on the Effective Date, each non-
employee director (except one, who waived his right to receive options)
received options to purchase 25,000 shares of Common Stock.
In the event the employment of any of Jerry E. Hunter, David H. Taylor or
Monnie L. Broome, is terminated by the Company without "cause" or by such
employee for "good reason" (as such terms are defined in each such employee's
employment agreement), such employee's rights immediately will be fully vested
in 100% of the shares granted to him.
39
The following table contains information about stock options granted in
fiscal 1997 to the executive officers:
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (3)
- ------------------------------------------------------ ---------------------------
PERCENT
NUMBER OF OF TOTAL
SECURITIES OPTIONS/
UNDERLYING SARS
OPTIONS/ GRANTED TO EXERCISE
SARS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#) YEAR ($/SH) (1) DATE (2) 5% ($) 10% ($)
- ---- ---------- ---------- ---------- ---------- ------------ --------------
Jerry E.
Hunter.. 115,000 20.21% $12.33 10/30/2007 $ 891,741 $ 2,259,847
Carl
Rosen.. 30,000 5.27% $12.33 10/30/2007 $ 232,628 $ 589,525
David H.
Taylor.. 75,000 13.18% $12.33 10/30/2007 $ 581,570 $ 1,473,813
Monnie
L.
Broome.. 30,000 5.27% $12.33 10/30/2007 $ 232,628 $ 589,525
Bruce R.
Wilby.. 30,000 5.27% $12.33 10/30/2007 $ 232,628 $ 589,525
Heyward
D.
Maddox.. 30,000 5.27% $12.33 10/30/2007 $ 232,628 $ 589,525
- --------
(1) The exercise price (the price that the executive officer must pay to
purchase each share of common stock that is subject to option) is equal to
the fair market value of the stock on the date of grant of the option. All
options shown were granted on October 30, 1997.
(2) One-half of options granted become exercisable ratably over three years
from the fiscal year end. The remaining one-half of options granted are
subject to the Company meeting certain performance goals in addition to
the time requirements applicable to the other options. All options expire
10 years from grant. Vesting accelerates in the event of death,
disability, involuntary termination, and in certain other events at the
discretion of the compensation committee of the Board of Directors.
(3) The potential realizable value shown for the executive officers is net of
the option exercise price. The dollar gains under these columns result
from calculations assuming 5% and 10% growth rates in stock price as
prescribed by the Securities and Exchange Commission and achievement of
performance of goals, and are not intended to forecast future price
appreciation of JPS Textile Group, Inc. common stock. The gains reflect a
future value based upon growth at these prescribed rates. It is important
to note that options have value to the executive officers and to other
option recipients only if the stock price advances beyond the grant date
price shown in the Table during the effective option period.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company will be paid $20,000
annually for his services as a director, $1,200 for attendance at each meeting
of the Board of Directors and each committee meeting which does not occur in
conjunction with a directors' meeting, and $1,000 annually for his or her
services as the chairman of any committee. In addition, each non-employee
director received on the Effective Date a grant of options to purchase 25,000
shares of common stock of JPS (other than Robert J. Capozzi who has waived his
right to receive such options) at an exercise price based on the per share
price of the Common Stock as of the Effective Date (which was $12.33 per
share). With respect to the options granted to each non-employee director on
the Effective Date, options to purchase 5,000 shares of common stock of JPS
vested on the Effective Date and with respect to the balance of the options so
granted, options to purchase 5,000 shares of common stock of JPS will vest on
each of the first, second, third and fourth anniversaries of the Effective
Date. Moreover, non-employee directors are eligible to participate in the
Incentive Plan. Under the Incentive Plan each non-employee director appointed
subsequent to the Effective Date will receive on the date such director is
appointed (the "Appointment Date") a grant of options to purchase 25,000
shares of common stock of JPS at an exercise price based on the per share
price of the common stock of JPS as of the Appointment Date. With respect to
the options granted to each non-employee director appointed subsequent to the
Effective Date, options to purchase 5,000 shares of common stock of JPS will
vest on the applicable Appointment Date and with respect to the balance of the
options so granted, options to purchase 5,000 shares of common stock of JPS
will vest on each of the first, second, third and fourth anniversaries of such
Appointment Date.
40
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
Based upon information known to JPS as of March , 1998, the following table
sets forth the ownership of the shares of Common Stock issued and outstanding
as of such date by (a) each person or group that is the beneficial owner of
more than 5% of such shares on such date, (b) each director and executive
officer of JPS on such date and (c) all directors and executive officers of
JPS as a group on such date.
COMMON STOCK(1)
---------------------
NAME AND ADDRESS OF NUMBER OF PERCENT OF
BENEFICIAL OWNERS SHARES CLASS
------------------- --------- ----------
Magten Asset Management Corp.(2).................... 1,905,435 18.07%
35 East 21st Street
New York, New York 10010
Northeast Investors Trust........................... 1,038,823 9.85%
50 Congress Street, 10th Floor
Boston, Massachusetts 02109
TCW Shared Opportunity Fund II, L.P.(3)............. 568,376 5.39%
11100 Santa Monica Boulevard
Suite 2000
Los Angeles, California 90025
Swiss Bank Corporation, London Branch............... 1,027,214 9.74%
222 Broadway
New York, New York 10038
Merrill Lynch, Pierce, Fenner & Smith, 925,685 8.78%
Incorporated.......................................
250 Vesey Street
World Financial Center--North Tower
New York, New York 10281
Daystar L.L.C....................................... 1,679,360 15.92%
411 Theodore Fremd Avenue
Rye, New York 10580
Monnie L. Broome.................................... 14,810 0.14%
JPS Textile Group, Inc.
555 North Pleasantburg Drive
Suite 202
Greenville, South Carolina 29607
Robert J. Capozzi(5)................................ 1,905,435 18.07%
Magten Asset Management Corp.
35 East 21st Street
New York, New York 10010
Jeffrey S. Deutschman............................... 5,000(4) 0.05%
10519 Ashton Avenue
Los Angeles, California 90024
Nicholas P. DiPaolo................................. 5,000(4) 0.05%
4 Powder Hill
Saddle River, New Jersey 07458
Michael L. Fulbright................................ 5,000(4) 0.05%
1940 Dinsmore Road
Alpharetta, Georgia 30004
Jerry E. Hunter..................................... 32,852 0.31%
JPS Textile Group, Inc.
555 North Pleasantburg Drive
Suite 202
Greenville, South Carolina 29607
41
COMMON STOCK(1)
-----------------------
NAME AND ADDRESS OF NUMBER OF PERCENT OF
BENEFICIAL OWNERS SHARES CLASS
------------------- --------- ----------
Heyward D. Maddox.................................. 0 0
JPS Converter & Industrial Corp.
101 Slater Road
P.O. Box 242
Slater, South Carolina 29683
Carl Rosen......................................... 0 0
JPS Converter & Industrial Corp.
1185 Avenue of the Americas
New York, New York 10036
John M. Sullivan................................... 5,000(4) 0.05%
American Silk Mills Corp.
41 Madison Avenue
41st Floor
New York, New York 10010
David H. Taylor.................................... 20,984 0.20%
JPS Textile Group, Inc.
555 North Pleasantburg Drive
Suite 202
Greenville, South Carolina 29607
Bruce R. Wilby..................................... 0 0
JPS Elastomerics Corp.
Nine Sullivan Road
Holyoke, Massachusetts 01040
Directors and executive officers as a group........ 1,994,081(6) 18.91%
- --------
(1) After giving effect to (i) the exercise in full of the New Warrants issued
on the Effective Date and (ii) the exercise in full of all options to
purchase shares of common stock of JPS which became vested on the
Effective Date.
(2) Includes shares of the Common Stock held by Magten in accounts managed by
Magten on behalf of various investment advisory clients, including the
City of Los Angeles Fire and Police Pension Systems (719,411 shares, or
6.82%, of the Common Stock) and Hughes Retirement Plans Trust (575,617
shares, or 5.46%, of the Common Stock). Certain of such shares are held
for the benefit of family interests of Talton R. Embry, the Chairman, a
director and controlling shareholder of Magten, or in employee plans with
respect to which Mr. Embry serves as a trustee. Magten has shared voting
and investment power over all of such 1,905,447 shares.
(3) The general partner and investment advisor of TCW Shared Opportunity Fund
II, L.P. ("SHOP II") is TCW Investment Management Company ("TIMCO").
Messrs. Mark L. Attanasio, Robert D. Beyer, Jean-Marc Chapus and Mark L.
Gold are portfolio managers of SHOP II and exercise voting and dispositive
power on its behalf. Messrs. Attanasio, Beyer, Chapus and Gold disclaim
any beneficial ownership of the capital stock of JPS.
(4) Represents options granted to non-employee directors of JPS (other than
Robert J. Capozzi) on the Effective Date. See "EXECUTIVE COMPENSATION--
Compensation of Directors."
(5) By virtue of 1,905,435 shares of Common Stock of JPS beneficially owned by
Magten, of which Mr. Capozzi is Managing Director. Mr. Capozzi disclaims
beneficial ownership of all of these shares. Mr. Capozzi has informed JPS
that he has waived his entitlement to receive any options to purchase
shares of common stock of JPS to which each non-employee director will be
entitled on the Effective Date. See "EXECUTIVE COMPENSATION--Compensation
of Directors."
(6) Includes 1,905,435 shares of Common Stock of JPS beneficially owned by
Magten. See Note 5.
42
DESCRIPTION OF THE COMMON STOCK
JPS's Restated Certificate of Incorporation authorizes the issuance of
22,000,000 shares of common stock, par value $0.01 per share, of which
10,000,000 shares are issued and outstanding as of the date hereof.
The Amended and Restated By-laws of JPS (the "By-laws") provide that the
holders of shares of common stock of JPS are entitled to one vote, in person
or by proxy, for each share on all matters submitted to a vote of JPS's
stockholders. Except as the General Corporation Law of the State of Delaware
(the "General Corporation Law") or JPS's Restated Certificate of Incorporation
may otherwise provide, the holders of a majority in voting power of the issued
and outstanding shares of capital stock of JPS entitled to vote shall
constitute a quorum at a meeting of stockholders for the transaction of any
business. Under the By-laws, the stockholders present may adjourn the meeting
despite the absence of a quorum. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any stockholder. The
By-laws provide that directors of JPS are elected by a plurality of the votes
of the shares entitled to vote in the election of directors. There is no
provision in the Restated Certificate of Incorporation for cumulative voting
with respect to the election of directors of JPS. Under the By-laws, any
action required or permitted to be taken by the stockholders of JPS may be
effected at a duly called annual or special meeting of such stockholders, or
may be effected, except as otherwise required by the General Corporation Law
or the Restated Certificate of Incorporation, by a consent in writing by such
stockholders, setting forth the action so taken. The By-laws provide that
except as otherwise provided by the General Corporation Law, special meetings
of stockholders of JPS may be called only by the Board of Directors or by
stockholders holding together at least 25% in voting power of all the shares
of JPS entitled to vote at the meeting. Under the By-laws, subject to the
provisions of the General Corporation Law and the Restated Certificate of
Incorporation, dividends on the shares of capital stock of JPS may be declared
by the Board of Directors at any regular or special meeting, and may be paid
in cash, in property or in shares of stock of JPS, unless otherwise provided
by the General Corporation Law or the Restated Certificate of Incorporation.
The shares of Common Stock have no preemptive or conversion rights, redemption
rights or sinking fund provisions and are not subject to calls, assessments or
rights of redemption by JPS.
REGISTRATION RIGHTS
Pursuant to the terms of a registration rights agreement dated the Effective
Date (the "Registration Rights Agreement"), among JPS and the initial holders
of the Common Stock, JPS filed this registration statement with the Commission
registering the Common Stock pursuant to a "shelf registration" and caused
this registration statement to become effective. In addition, JPS has agreed
to keep the "shelf registration" continuously effective for three years,
subject to the right to suspend the use of the prospectus constituting part of
this registration statement for designated corporate purposes specified
therein. Thereafter, holders who did not resell Common Stock during the three-
year period, but whose resales would have been covered by this registration
statement, will be entitled to exercise, over a two-year period, up to three
demand registrations and will be entitled to piggyback registration rights as
well during such period. In the event that the shelf registration does not
become effective within 60 days after the date of the initial filing of this
registration statement with the Commission, holders of Registrable Common
Stock (as defined in the Registration Rights Agreement) whose resales would
have been covered by this registration statement will be entitled to exercise,
over a two-year period, up to four demand registrations and will be entitled
to piggyback registration rights as well during such period.
DESCRIPTION OF THE CREDIT FACILITY
JPS and the Borrowing Subsidiaries are parties to the Credit Facility
Agreement, dated as of the Effective Date (the "Credit Agreement"), by and
among the financial institutions party thereto, Citibank, as agent and
collateral agent, and NationsBank, N.A., as co-agent. The Credit Agreement
provides for a revolving credit loan facility and letters of credit (the
"Revolving Credit Facility") in a maximum principal amount equal to the lesser
of (a) $135 million and (b) a specified borrowing base (the "Borrowing Base"),
which is based upon eligible
43
receivables and eligible inventory of the Borrowing Subsidiaries and a
specified dollar amount ($55,000,000 (subject to reduction) based on fixed
assets of the Borrowing Subsidiaries), except that (i) no Borrowing Subsidiary
may borrow an amount greater than the Borrowing Base attributable to it (less
any reserves as specified in the Credit Agreement) and (ii) letters of credit
may not exceed $20 million in the aggregate. The maturity date of the
Revolving Credit Facility is October 9, 2002. All borrowings under the
Revolving Credit Facility will initially bear interest at either (i) the
Eurodollar Rate (as defined) plus 1.5% per annum or (ii) the Base Rate (as
defined) and, thereafter, will bear interest at the Base Rate or the
Eurodollar Rate plus an applicable margin (the "Applicable Margin") based upon
the Company's leverage ratio (which margin will not exceed .25% for Base Rate
borrowings and 1.75% for Eurodollar Rate borrowings). The Company pays a fee
of .375% per annum on the average unused commitments under the Revolving
Credit Facility (reduced to .25% per annum if a specified leverage ratio is
satisfied) and a letter of credit fee equal to the Applicable Margin for
Eurodollar Rate borrowings.
The Credit Agreement contains restrictions on investments, acquisitions and
dividends unless, among other things, the Company and its consolidated
subsidiaries satisfy a specified pro forma fixed charge coverage ratio and
maintain a specified minimum availability under the Revolving Credit Facility
for a stated period of time, and are not in default under the Credit
Agreement. The Credit Agreement also restricts, among other things,
indebtedness, liens, affiliate transactions, operating leases, fundamental
changes and asset sales other than the sale of up to $35 million of fixed
assets, subject to the satisfaction of certain conditions.
The Credit Agreement contains financial covenants relating to minimum levels
of EBITDA, minimum interest coverage ratio, minimum fixed charge coverage
ratio and maximum capital expenditures.
The loans and extensions of credit to the Borrowing Subsidiaries under the
Credit Agreement are guaranteed by JPS and its existing subsidiaries other
than JPS Capital, and are secured by the assets of JPS (excluding the stock of
JPS Capital) and its existing subsidiaries other than JPS Capital.
The occurrence of certain events (including, without limitation, failure to
pay principal or interest, failure to comply with covenants, certain defaults
under or acceleration of (or right to accelerate) other indebtedness, certain
events of bankruptcy or insolvency, and a "change of control" of JPS (as
defined), after any applicable notice or grace period) would constitute events
of default permitting acceleration of the loans under the Credit Agreement.
44
SELLING STOCKHOLDERS
The following table provides certain information with respect to the Common
Stock held by each person who is a Selling Stockholder. Except as otherwise
noted elsewhere in this Prospectus, none of such persons has held any
position, office, or other material relationship with JPS or any of its
affiliates within the past three years other than as a result of the holding
of claims and the ownership of the Common Stock. All of the Common Stock held
by the Selling Stockholder is expected to be offered for sale.
SHARES OF COMMON
STOCK BENEFICIALLY
OWNED
BEFORE THE OFFERING SHARES TO BE
----------------------- SOLD IN
NAME OF SELLING STOCKHOLDER NUMBER PERCENTAGE THE OFFERING
- --------------------------- --------- ---------- ------------
Magten Asset Management Corp. ........... 1,905,435(1) 18.07% 1,905,435(1)
- --------
(1)This amount represents Shares of Common Stock held by Magten Asset
Management Corp. ("Magten") in accounts managed by it on behalf of various
investment advisory clients, including the City of Los Angeles Fire and Police
Pension Systems (719,411 shares, or 6.82% of the Common Stock) and Hughes
Retirement Plans Trust (575,617 shares, or 5.46% of the Common Stock). Certain
such shares are held for the benefit of family interests of Talton R. Embry,
the Chairman, a director and controlling shareholder of Magten, or in employee
plans with respect to which Mr. Embry serves as a trustee. Magten has shared
voting and investment power over all of such 1,905,435 shares. Robert J.
Capozzi, a director of JPS, is a Managing Director of Magten. Mr. Capozzi
disclaims beneficial ownership of all of these shares.
45
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the Offering. The Common
Stock may be sold from time to time to purchasers directly by any of the
Selling Stockholders. Alternatively, any of the Selling Stockholders may from
time to time offer the Common Stock through underwriters, dealers or agents
who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Stockholders and/or the purchasers
of Common Stock for whom they may act as agent. The Selling Stockholders and
any such underwriters, dealers or agents who participate in the distribution
of the Common Stock may be deemed to be underwriters, and any profits on the
sale of the Common Stock by them and any discounts, commissions or concessions
received by any such underwriters, dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act. To the extent
Selling Stockholders may be deemed to be underwriters, such Selling
Stockholders may be subject to certain statutory liabilities of the Securities
Act, including, but not limited to, Sections 11, 12 and 17 of the Securities
Act and Rule 10b-5 under the Exchange Act. At any time a particular offer of
the Common Stock is made, if required, a Prospectus Supplement will be
distributed that will set forth the aggregate amount of the Common Stock being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, any discounts, commissions and other items
constituting compensation from the Selling Stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers. Under
guidelines adopted by the National Association of Securities Dealers, Inc.
("NASD"), the maximum commission that any NASD member firm can receive in
connection with a distribution of the Common Stock, without further approval
from the NASD, is 8%. Such Prospectus Supplement and, if necessary, a post-
effective amendment to the Registration Statement of which this Prospectus is
a part will be filed with the Commission to reflect the disclosure of
additional information with respect to the distribution of the Common Stock.
The Common Stock may be sold from time to time in one or more transactions
at a fixed offering price, which may be changed, or at varying prices
determined at the time of sale or at negotiated prices. Such prices will be
determined by the Selling Stockholders or by agreement between the Selling
Stockholders and underwriters or dealers.
The Common Stock is traded in the Nasdaq National Market System.
Pursuant to the Registration Rights Agreement, JPS will pay substantially
all of the expenses incident to the registration, offering and sale of the
Common Stock to the public other than commissions, fees and discounts of
underwriters, dealers or agents. Under the Registration Rights Agreement, the
Selling Stockholders and any underwriter they may utilize will be indemnified
by JPS against certain civil liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock offered hereby
will be passed upon for JPS by Weil, Gotshal & Manges LLP, 767 Fifth Avenue,
New York, New York 10153.
EXPERTS
The Consolidated Financial Statements included in this Prospectus and the
related financial statement schedule included elsewhere in the Registration
Statement have been audited by Deloitte & Touche LLP, independent public
accountants, as stated in their report appearing herein, and have been so
included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
46
JPS TEXTILE GROUP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets as of November 2, 1996 (Predecessor Company),
November 1, 1997 (Reorganized Company) and January 31, 1998 (Reorganized
Company-unaudited)...................................................... F-3
Consolidated Statements of Operations for the fiscal years ended October
28, 1995 and November 2, 1996, the three months ended February 1, 1997
(unaudited) and the period from November 3, 1996 to October 9, 1997
(Predecessor Company) and the period from October 10, 1997 to November
1, 1997 and the three months ended January 31, 1998 (unaudited)
(Reorganized Company)................................................... F-4
Consolidated Statements of Senior Redeemable Preferred Stock and
Shareholders' Equity (Deficit) for the fiscal years ended October 28,
1995 and November 2, 1996, the three months ended February 1, 1997
(unaudited) and the period from November 3, 1996 to October 9, 1997
(Predecessor Company) and the period from October 10, 1997 to November
1, 1997 and the three months ended January 31, 1998 (unaudited)
(Reorganized Company)................................................... F-6
Consolidated Statements of Cash Flows for the fiscal years ended October
28, 1995 and November 2, 1996, the three months ended February 1, 1997
(unaudited) and the period from November 3, 1996 to October 9, 1997
(Predecessor Company) and the period from October 10, 1997 to November
1, 1997 and the three months ended January 31, 1998 (unaudited)
(Reorganized Company)................................................... F-7
Notes to Consolidated Financial Statements............................... F-8
F-1
INDEPENDENT AUDITORS' REPORT
JPS Textile Group, Inc.:
We have audited the accompanying consolidated balance sheets of JPS Textile
Group, Inc. and subsidiaries (the "Company") as of November 1, 1997
(Reorganized Company consolidated balance sheet) and November 2, 1996
(Predecessor Company consolidated balance sheet), and the related consolidated
statements of operations and shareholders' equity and of cash flows for the
period from October 10, 1997 to November 1, 1997 (Reorganized Company
consolidated operations), and the consolidated statements of operations,
senior redeemable preferred stock and shareholders' equity (deficit) and of
cash flows for the period from November 3, 1996 to October 9, 1997 and each of
the two years in the period ended November 2, 1996 (Predecessor Company
consolidated operations). Our audits also included the financial statement
schedule listed in the index at page S-1. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As discussed in Note 1 to the consolidated financial statements, on
September 9, 1997, the Bankruptcy Court entered an order confirming the plan
of reorganization which became effective after the close of business on
October 9, 1997. The accompanying consolidated financial statements as of
November 1, 1997 and for the period from October 10, 1997 to November 1, 1997
have been prepared in conformity with AICPA Statement of Position 90-7,
"Financial Reporting for Entities in Reorganization Under the Bankruptcy
Code." Accordingly, the Reorganized Company is a new entity with assets,
liabilities, and a capital structure having carrying values not comparable
with prior periods as described in Note 1.
In our opinion, the Reorganized Company consolidated financial statements
present fairly, in all material respects, the financial position of the
Company at November 1, 1997, and the results of its operations and its cash
flows for the period from October 10, 1997 to November 1, 1997 in conformity
with generally accepted accounting principles. Further, in our opinion, the
Predecessor Company consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Predecessor Company as of November 2, 1996 and the results of its operations
and its cash flows for the period from November 3, 1996 to October 9, 1997 and
each of the two years in the period ended November 2, 1996 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
Deloitte & Touche LLP
Greenville, South Carolina
December 18, 1997
F-2
JPS TEXTILE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
PREDECESSOR
COMPANY REORGANIZED COMPANY
----------- -----------------------
NOVEMBER 2, NOVEMBER 1, JANUARY 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
ASSETS
Current assets:
Cash.................................... $ 1,460 $ 3,888 $ 2,575
Accounts receivable, less allowance of
$2,511 in 1996 and $1,053 in 1997 (Note
9)..................................... 75,166 79,569 74,825
Inventories (Notes 2, 7, and 9)......... 48,374 44,770 46,706
Prepaid expenses and other (Notes 7, 8
and 9)................................. 1,967 37,085 38,143
--------- --------- ---------
Total current assets................ 126,967 165,312 162,249
Property, plant and equipment, net (Notes
2, 7, and 9)............................. 124,004 104,554 106,799
Reorganization value in excess of amounts
allocable to identifiable assets, less
accumulated amortization of $164 in 1997
(Note 2)................................. -- 45,690 45,116
Excess of cost over fair value of net
assets acquired, less accumulated
amortization of $7,860 in 1996........... 30,506 -- --
Other assets (Notes 2, 7 and 8)........... 54,450 6,825 6,790
--------- --------- ---------
Total assets........................ $ 335,927 $ 322,381 $ 320,954
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable........................ $ 24,708 $ 24,353 $ 23,090
Accrued interest........................ 9,608 421 1,436
Accrued salaries, benefits and
withholdings (Note 12)................. 10,440 9,148 8,086
Other accrued expenses (Notes 7, 12 and
14).................................... 13,987 13,182 11,525
Senior credit facility, revolving line
of credit (Notes 1, 2 and 9)........... 85,639 -- --
Current portion of long-term debt (Note
9)..................................... 240,451 36,076 35,845
--------- --------- ---------
Total current liabilities........... 384,833 83,180 79,982
Long-term debt (Notes 1, 2 and 9)......... 4,226 94,891 94,914
Deferred income taxes (Notes 2 and 11).... 3,665 -- --
Other long-term liabilities (Notes 2, 7
and 12).................................. 19,513 18,263 18,319
--------- --------- ---------
Total liabilities................... 412,237 196,334 193,215
--------- --------- ---------
Commitments and contingencies (Notes 9, 11
and 12)
Senior redeemable preferred stock,
redemption value of $54,520 in 1996
(Notes 1, 2 and 10)...................... 32,676 -- --
--------- --------- ---------
Shareholders' equity (deficit) (Note 10):
Junior preferred stock.................. 250 -- --
Common stock:
Common stock--Reorganized Company..... -- 100 100
Common stock--Predecessor Company..... 10 -- --
Additional paid-in capital.............. 25,108 123,230 123,230
Retained earnings (deficit)............. (134,354) 2,717 4,409
--------- --------- ---------
Total shareholders' equity
(deficit).......................... (108,986) 126,047 127,739
--------- --------- ---------
Total liabilities and shareholders'
equity............................. $ 335,927 $ 322,381 $ 320,954
========= ========= =========
See notes to consolidated financial statements.
F-3
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
REORGANIZED PREDECESSOR REORGANIZED
PREDECESSOR COMPANY COMPANY COMPANY COMPANY
-------------------------------------------- ------------------- ----------- -----------
YEAR ENDED THREE MONTHS ENDED
------------------------ PERIOD FROM PERIOD FROM ------------------------
OCTOBER 28, NOVEMBER 2, NOVEMBER 3, 1996 OCTOBER 10, 1997 FEBRUARY 1, JANUARY 31,
1995 1996 TO OCTOBER 9, 1997 TO NOVEMBER 1, 1997 1997 1998
----------- ----------- ------------------ ------------------- ----------- -----------
UNAUDITED
Net sales............... $ 472,565 $ 448,824 $ 379,643 $ 38,728 $ 97,166 $ 100,800
Cost of sales........... 406,070 397,804 327,667 31,058 84,933 85,414
---------- ---------- ---------- ----------- ---------- -----------
Gross profit............ 66,495 51,020 51,976 7,670 12,233 15,386
Selling, general and
administrative expenses
(Note 12).............. 39,586 40,579 37,146 2,466 9,314 10,509
Other income (expense),
net (Note 12).......... (6,248) (2,498) (622) 11 (6) 24
Charges for plant
closing, loss on sale
of certain operations
and writedown of
certain long-lived
assets (Note 6)........ -- (30,028) 574 -- -- --
---------- ---------- ---------- ----------- ---------- -----------
Operating profit
(loss)................. 20,661 (22,085) 14,782 5,215 2,913 4,901
Valuation allowance on
Gulistan securities
(Note 5)............... -- (4,242) (5,070) -- (1,299) --
Interest income......... 2,821 2,856 2,744 93 737 325
Interest expense (Note
9)..................... (39,946) (40,510) (32,164) (584) (10,174) (2,284)
---------- ---------- ---------- ----------- ---------- -----------
Income (loss) before
reorganization items,
income taxes,
discontinued operations
and extraordinary
items.................. (16,464) (63,981) (19,708) 4,724 (7,823) 2,942
Reorganization items
(Notes 1 and 2):
Fair-value
adjustments........... -- -- (4,651) -- -- --
Professional fees and
expenses.............. -- (2,255) (8,420) -- (1,162) --
---------- ---------- ---------- ----------- ---------- -----------
Income (loss) before
income taxes,
discontinued operations
and extraordinary
items.................. (16,464) (66,236) (32,779) 4,724 (8,985) 2,942
Provision (benefit) for
income taxes (Note
11).................... 1,200 (300) (8,822) 2,007 157 1,250
---------- ---------- ---------- ----------- ---------- -----------
Income (loss) before
discontinued operations
and extraordinary
items.................. (17,664) (65,936) (23,957) 2,717 (9,142) 1,692
Discontinued operations
(Note 5):
Loss from discontinued
operations............ (7,079) -- -- -- -- --
Loss on sale of
discontinued
operations, net of
taxes of $100 in 1995
and $0 in 1996........ (26,241) (1,500) -- -- -- --
---------- ---------- ---------- ----------- ---------- -----------
Income (loss) before
extraordinary items.... (50,984) (67,436) (23,957) 2,717 (9,142) 1,692
Extraordinary gain on
early extinguishment of
debt, net of taxes of
$600 in 1995 and $0 in
1997 (Notes 1 and 9)... 20,120 -- 100,235 -- -- --
---------- ---------- ---------- ----------- ---------- -----------
Net income (loss)....... $ (30,864) $ (67,436) $ 76,278 $ 2,717 $ (9,142) $ 1,692
Senior redeemable
preferred stock in-kind
dividends and discount
accretion (Note 10).... 3,831 4,505 3,827 -- 1,265 --
---------- ---------- ---------- ----------- ---------- -----------
Income (loss) applicable
to common stock........ $ (34,695) $ (71,941) $ 72,451 $ 2,717 $ (10,407) $ 1,692
========== ========== ========== =========== ========== ===========
Weighted average number
of common shares
outstanding(A)......... 1,000,000 1,000,000 1,000,000 10,000,000 1,000,000 10,000,000
========== ========== ========== =========== ========== ===========
See notes to consolidated financial statements.
F-4
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
REORGANIZED
PREDECESSOR COMPANY COMPANY
-------------------------------------------- -------------------
PREDECESSOR REORGANIZED
COMPANY COMPANY
------------ -----------
YEAR ENDED
------------------------ PERIOD FROM PERIOD FROM
OCTOBER 28, NOVEMBER 2, NOVEMBER 3, 1996 OCTOBER 10, 1997
1995 1996 TO OCTOBER 9, 1997 TO NOVEMBER 1, 1997
----------- ----------- ------------------ -------------------
Basic and diluted earnings (loss)
per common share:(A)
Income (loss) before discontinued
operations, and extraordinary
items.............................. $ (21.50) $ (70.44) $ (27.79) $ 0.27
Discontinued operations, net of
taxes:
Loss from discontinued opera-
tions............................. (7.08) -- -- --
Net loss on sale of discontinued
operations........................ (26.24) (1.50) -- --
Extraordinary gain, net of taxes... 20.12 -- 100.24 --
---------- ---------- ---------- -----------
Net income (loss)................... $ (34.70) $ (71.94) $ 72.45 $ 0.27
========== ========== ========== ===========
THREE MONTHS ENDED
------------------------
FEBRUARY 1, JANUARY 31,
1997 1998
------------ -----------
UNAUDITED
Basic and diluted earnings (loss)
per common share:(A)
Income (loss) before discontinued
operations, and extraordinary
items.............................. $ (10.40) $ 0.17
Discontinued operations, net of
taxes:
Loss from discontinued opera-
tions............................. -- --
Net loss on sale of discontinued
operations........................ -- --
Extraordinary gain, net of taxes... -- --
------------ -----------
Net income (loss)................... $ (10.40) $ 0.17
============ ===========
- --------
(A) In accordance with the provisions of Statement of Financial Accounting
Standard No. 128 ("SFAS No. 128") "Earning Per Share", the presentation of
earnings per share data for all periods presented has been restated to
conform to SFAS No. 128.
F-5
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF SENIOR REDEEMABLE PREFERRED STOCK
AND SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
SHAREHOLDERS' EQUITY (DEFICIT)
SENIOR -------------------------------------
REDEEMABLE JUNIOR ADDITIONAL RETAINED
PREFERRED COMMON PREFERRED PAID-IN EARNINGS
STOCK STOCK STOCK CAPITAL (DEFICIT)
---------- ------ --------- ---------- ---------
Predecessor Company
Balance--October 29, 1994.... $24,340 $ 10 $250 $ 33,444 $(36,054)
Net loss for 52 weeks........ (30,864)
Preferred stock-in-kind
dividends and discount
accretion................... 3,831 (3,831)
------- ---- ---- -------- --------
Balance--October 28, 1995.... 28,171 10 250 29,613 (66,918)
Net loss for 53 weeks........ (67,436)
Preferred stock-in-kind
dividends and discount
accretion................... 4,505 (4,505)
------- ---- ---- -------- --------
Balance--November 2, 1996.... 32,676 10 250 25,108 (134,354)
Net income for the period
from November 3, 1996 to
October 9, 1997............. 76,278
Preferred stock-in-kind
dividends and discount
accretion................... 3,827 (3,827)
Fresh start adjustments...... (36,503) 90 (250) 101,949 58,076
------- ---- ---- -------- --------
Reorganized Company
Balance--October 9, 1997..... 0 100 0 123,230 0
Net income for the period
from October 10, 1997 to
November 1, 1997............ 2,717
------- ---- ---- -------- --------
Balance--November 1, 1997.... 0 100 0 123,230 2,717
Net income for 13 weeks...... 1,692
------- ---- ---- -------- --------
Balance--January 31, 1998
(unaudited)................. $ 0 $100 $ 0 $123,230 $ 4,409
======= ==== ==== ======== ========
See notes to consolidated financial statements.
F-6
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
REORGANIZED PREDECESSOR REORGANIZED
PREDECESSOR COMPANY COMPANY COMPANY COMPANY
------------------------------------------ ------------------- ----------- -----------
YEAR ENDED THREE MONTHS ENDED
----------------------- PERIOD FROM PERIOD FROM -----------------------
OCTOBER 28, NOVEMBER 2, NOVEMBER 3, 1996 OCTOBER 10, 1997 FEBRUARY 1, JANUARY 31,
1995 1996 TO OCTOBER 9, 1997 TO NOVEMBER 1, 1997 1997 1998
----------- ----------- ------------------ ------------------- ----------- -----------
UNAUDITED
CASH FLOWS FROM OPERAT-
ING ACTIVITIES
Net income (loss)....... $(30,864) $(67,436) $ 76,278 $ 2,717 $(9,142) $ 1,692
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities:
Charges for plant
closing, loss on sale
of certain operations
and writedown of
certain long-lived
assets................ -- 30,028 (574) -- -- --
Loss from discontinued
operations............ 7,079 -- -- -- -- --
Loss on sale of
discontinued
operations............ 26,241 1,500 -- -- -- --
Extraordinary gain on
early extinguishment
of debt............... (20,120) -- (100,235) -- -- --
Depreciation and
amortization, except
amounts included in
interest expense...... 21,785 22,739 17,880 846 4,684 2,979
Interest accretion and
debt issuance cost
amortization.......... 8,818 10,088 7,303 20 2,431 81
Reorganization
charges............... -- -- 5,581 -- -- --
Tax benefit from
reduction of valuation
allowance............. -- -- (9,745) -- -- --
Product liability
charge................ 5,000 -- -- -- -- --
Deferred income tax
provision (benefit)... -- (500) -- 1,256 500 750
Valuation allowance on
Gulistan securities... -- 4,242 5,070 -- 1,299 --
Other, net............. (498) (3,163) (3,229) (295) 496 (391)
Changes in assets and
liabilities:
Accounts receivable.... (1,086) 10,372 10,599 (15,002) 3,943 4,744
Inventories............ (685) (2,635) (6,920) 9,664 495 (1,936)
Prepaid expenses and
other assets.......... (2,505) (2,348) (18,565) 816 (1,430) (1,525)
Accounts payable....... (911) (3,983) 1,243 (1,599) (2,544) (1,262)
Accrued expenses and
other liabilities..... (7,202) (1,688) 15,432 650 3,496 (1,585)
-------- -------- --------- -------- ------- -------
Total adjustments.... 35,916 64,652 (76,160) (3,644) 13,370 1,855
-------- -------- --------- -------- ------- -------
Net cash provided by
(used in) operating
activities............. 5,052 (2,784) 118 (927) 4,228 3,547
-------- -------- --------- -------- ------- -------
CASH FLOWS FROM
INVESTING ACTIVITIES
Property and equipment
additions.............. (18,811) (9,834) (14,467) (1,618) (1,165) (4,651)
Receipts from
discontinued
operations, net........ 3,453 -- -- -- -- --
Proceeds from sale of
discontinued
operations, net........ 4,415 17,077 -- -- -- --
Proceeds from sale of
certain operations..... -- 5,113 988 -- -- --
Proceeds from sale of
long-term investments.. -- -- 49,500 -- -- --
Purchase of
investments............ -- -- (33,500) -- -- --
-------- -------- --------- -------- ------- -------
Net cash provided by
(used in) investing
activities............. (10,943) 12,356 2,521 (1,618) (1,165) (4,651)
-------- -------- --------- -------- ------- -------
CASH FLOWS FROM
FINANCING ACTIVITIES
Financing costs
incurred............... (25) (614) (1,465) (66) -- --
Proceeds from issuance
of long-term debt...... 5,000 29 -- -- -- --
Revolving credit
facility borrowings
(repayments), net...... 41,808 (6,087) 3,361 3,245 (3,081) 229
Purchases and repayment
of other long-term
debt, net.............. (41,384) (2,792) (2,655) (86) (411) (438)
-------- -------- --------- -------- ------- -------
Net cash provided by
(used in) financing
activities............. 5,399 (9,464) (759) 3,093 (3,492) (209)
-------- -------- --------- -------- ------- -------
NET INCREASE (DECREASE)
IN CASH (492) 108 1,880 548 (429) (1,313)
Cash at beginning of
period................. 1,844 1,352 1,460 3,340 1,460 3,888
-------- -------- --------- -------- ------- -------
Cash at end of period... $ 1,352 $ 1,460 $ 3,340 $ 3,888 $ 1,031 $ 2,575
======== ======== ========= ======== ======= =======
SUPPLEMENTAL INFORMATION
ON CASH FLOWS FROM
CONTINUING OPERATIONS:
Interest paid........... $ 33,681 $ 30,709 $ 7,944 $ 24 $ 1,566 $ 1,188
Income taxes paid
(received), net........ 3,314 693 (46) (8) 213 488
Non-cash financing
activities:
Senior redeemable
preferred stock
dividends-in-kind...... 2,936 3,114 -- -- -- --
See notes to consolidated financial statements.
F-7
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND BASIS OF PRESENTATION
Unless the context otherwise requires, the terms "JPS" and the "Company" as
used in these Consolidated Financial Statements mean JPS Textile Group, Inc.
and JPS Textile Group, Inc. together with its subsidiaries, respectively.
The 1988 Acquisition--JPS purchased from J.P. Stevens & Co., Inc. ("J.P.
Stevens") substantially all of the property, plant and equipment, inventories,
certain other assets and the business of five former divisions of J.P. Stevens
(the "Predecessor Stevens Divisions") on May 9, 1988 (the "Acquisition"). The
purchase was financed through long-term borrowings and the sale of preferred
and common stock. The Company operates principally as a manufacturer of
apparel fabrics and products, industrial fabrics and products and home fashion
textiles. These products are sold primarily to the domestic clothing
manufacturing and construction industries. As described in Notes 5 and 6,
certain of the acquired businesses and operations have been subsequently sold.
The 1991 Restructuring--In 1990, JPS negotiated the terms of a
recapitalization proposal with a steering committee comprised of institutional
holders of a substantial amount of the then-outstanding securities, which
culminated in JPS's prepetition solicitation of votes to accept or reject a
chapter 11 plan of reorganization. The plan was overwhelmingly accepted. On
February 7, 1991, JPS filed a petition for relief under the Bankruptcy Code,
and approximately 42 days thereafter, JPS's plan was confirmed by the
bankruptcy court and JPS emerged from chapter 11 on April 2, 1991. Pursuant to
that plan, in exchange for JPS's outstanding debt securities and JPS's equity
securities, JPS issued (i) $100 million in principal amount of senior secured
notes due June 1, 1995 and June 1, 1996 (all of which were redeemed in 1994),
(ii) $151.1 million in principal amount of 10.85% Senior Subordinated Discount
Notes due June 1, 1999 (the "10.85% Notes"), (iii) $125 million in principal
amount of 10.25% Senior Subordinated Notes due June 1, 1999 (the "10.25%
Notes"), (iv) $75 million in principal amount of 7% Subordinated Debentures
due May 15, 2000 (the "7% Subordinated Debentures"), (v) 390,719 shares of
Series A Senior Preferred Stock (the "Old Senior Preferred Stock"), (vi)
10,000 shares of Series B Junior Preferred Stock (the "Old Junior Preferred
Stock"), (vii) 490,000 shares of class A common stock, par value $0.01 per
share (the "Class A Common Stock") and (viii) 510,000 shares of class B common
stock, par value $0.01 per share (the "Class B Common Stock" and, together
with the Class A Common Stock, the "Old Common Stock"). Since this
reorganization did not meet the criteria for "fresh-start" accounting, the
primary adjustment to historical carrying values as a result of the
reorganization was to state the new long-term debt and senior redeemable
preferred stock at present values of amounts to be paid determined at
appropriate current interest rates as of April 2, 1991, the effective date of
the plan. The resulting present value discount was amortized as interest
expense or dividends over the life of the related debt or senior redeemable
preferred stock instrument using the interest method.
The 1997 Restructuring--In 1996, JPS, and JPS Capital Corp., a wholly-owned
subsidiary of JPS ("JPS Capital") commenced negotiations with an unofficial
committee (the "Unofficial Bondholder Committee") comprised of institutions
that owned, or represented holders that beneficially owned, approximately 60%
of the 10.85% Notes, the 10.25% Notes and the 7% Subordinated Debentures (the
"Old Debt Securities"). On May 15, 1997, the parties reached an agreement in
principle on the terms of a restructuring to be accomplished under chapter 11
of the Bankruptcy Code which culminated in a Joint Plan of Reorganization (as
amended the "Plan of Reorganization") proposed by JPS and JPS Capital under
the Bankruptcy Code. Pursuant to a disclosure statement, dated June 25, 1997
(the "Disclosure Statement"), on June 26, 1997, JPS and JPS Capital commenced
a prepetition solicitation of votes by the holders of Old Debt Securities and
Old Senior Preferred Stock to accept or reject the Plan of Reorganization.
Under the Plan of Reorganization, the holders of Old Debt Securities and Old
Senior Preferred Stock were the only holders of impaired claims and impaired
equity interests entitled to receive a distribution, and therefore, pursuant
to section 1126 of the Bankruptcy Code, were the only holders entitled to vote
on the Plan of Reorganization. At the conclusion of the 32-day solicitation
period, the Plan of Reorganization had been accepted by holders of more than
99% of the Old Debt Securities that voted on the
F-8
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Plan of Reorganization and by holders of 100% of the Old Senior Preferred
Stock that voted on the Plan of Reorganization.
On August 1, 1997, JPS commenced its voluntary reorganization case under
chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for
the Southern District of New York (the "Bankruptcy Court"), and filed the Plan
of Reorganization and the Disclosure Statement. None of JPS's subsidiaries,
including JPS Capital which was a co-proponent of the Plan of Reorganization,
commenced a case under the Bankruptcy Code. Pursuant to orders of the
Bankruptcy Court entered on September 9, 1997, the Bankruptcy Court (i)
approved the Disclosure Statement and the solicitation of votes on the Plan of
Reorganization and (ii) confirmed the Plan of Reorganization. The Plan of
Reorganization became effective on October 9, 1997 (the "Effective Date")
resulting in, among other things, the cancellation of the Old Senior Preferred
Stock, Old Junior Preferred Stock, and Old Common Stock, and the issuance of
10 million shares of $.01 par value new common stock (the "Common Stock").
Through the implementation of the Plan of Reorganization as of the Effective
Date, JPS's most significant financial obligations were restructured:
$240,091,318 in face amount of outstanding Old Debt Securities were converted
to, among other things, $14 million in cash, 99.25% of the shares of Common
Stock and approximately $34 million in aggregate principal amount (subject to
adjustment on the maturity date) of contingent payment notes issued by JPS
Capital (the "Contingent Notes"); the Old Senior Preferred Stock, the Old
Junior Preferred Stock and the Old Common Stock were cancelled; warrants to
purchase up to 5% of the common stock of JPS (the "New Warrants") with an
initial purchase price of $98.76 per share were issued in respect of the Old
Senior Preferred Stock; and the obligations of JPS under its former working
capital facility were satisfied and the Revolving Credit Facility was
obtained. JPS's senior management received approximately 0.75% of the Common
Stock in lieu of payment under their contractual retention bonus agreements.
2. FRESH START REPORTING
The Plan of Reorganization was accounted for pursuant to Statement of
Position 90-7 ("SOP 90-7") of the American Institute of Certified Public
Accountants, entitled "Financial Reporting by Entities in Reorganization under
the Bankruptcy Code." The accompanying consolidated financial statements
reflect the use of "fresh start" reporting as required by SOP 90-7, in which
assets and liabilities were adjusted to their fair values and resulted in the
creation of a new reporting entity (the "Company" or the "Reorganized
Company") with no retained earnings or accumulated deficit as of October 9,
1997. Accordingly, the consolidated financial statements for the periods prior
to October 9, 1997 (the "Predecessor Company") are not comparable to
consolidated financial statements presented subsequent to October 9, 1997. A
black line has been drawn on the accompanying consolidated financial
statements and notes thereto to distinguish between the Reorganized Company
and Predecessor Company balances.
The total reorganization value assigned to the Company's assets was
determined, by independent valuation, by calculating projected cash flows
before debt service requirements, for a three-year period, plus an estimated
terminal value of the Company (calculated using a multiple of projected
EBITDA), each discounted back to its present value using a discount rate of
10% (estimating the after-tax weighted average cost of capital). The above
calculations resulted in an estimated reorganization value attributable to the
common stock of approximately $123.3 million of which the Excess
Reorganization Value was approximately $45.9 million. The Excess
Reorganization Value will be amortized over twenty years.
As a result of the restructuring and the application of fresh start
accounting as required by SOP 90-7, a gain on early extinguishment of debt of
approximately $100.2 million and reorganization items of approximately $13.1
million were recorded in the Predecessor Company period ending October 9,
1997.
F-9
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The effect of the Plan of Reorganization and the implementation of fresh
start accounting on the Company's consolidated balance sheet as of October 9,
1997 was as follows (in thousands) (unaudited):
PRE-FRESH START FRESH START
BALANCE SHEET REORGANIZATION FRESH START BALANCE SHEET
OCTOBER 9, 1997 ADJUSTMENTS (A) ADJUSTMENTS (B) OCTOBER 9, 1997
--------------- --------------- --------------- ---------------
Current assets.......... $ 125,176 $ (861) $124,315
Property, plant and
equipment, net......... 121,299 (17,682) 103,617
Reorganization value in
excess of amounts
allocable to
identifiable assets.... 45,854 45,854
Excess of cost over fair
value of net assets
acquired............... 29,612 (29,612) --
Other assets............ 54,254 $ (6,555) (3,637) 44,062
--------- --------- -------- --------
Total................. $ 330,341 $ (6,555) $ (5,938) $317,848
========= ========= ======== ========
Current liabilities
excluding current
portion of long-term
debt................... $ 48,070 $ 49 $ 48,119
Long-term debt including
current portion........ 91,408 36,400 127,808
Deferred income taxes... 3,665 (3,665) --
Other long-term
liabilities............ 19,878 $ (1,287) 18,591
Liabilities subject to
compromise............. 271,082 (271,082) --
Senior redeemable
preferred stock........ 36,503 (36,503) --
Capital stock........... 21,540 101,790 123,330
Accumulated deficit..... (161,805) 166,456 (4,651) --
--------- --------- -------- --------
Total................. $ 330,341 $ (6,555) $ (5,938) $317,848
========= ========= ======== ========
- --------
(a) To record the transactions associated with the Plan of Reorganization as
described in Note 1 and eliminate the deficit in retained earnings.
(b) To record the adjustments to assets and liabilities to reflect their
estimated fair value, including the establishment of reorganization value
in excess of amounts allocable to identifiable assets.
F-10
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma consolidated statement of operations
combines the period from November 3, 1996 to October 9, 1997 and the period
from October 10, 1997 to November 1, 1997 and reflects the financial results
of the Company as if the Plan of Reorganization had been effective November 3,
1996 (in thousands except share and per share data). The pro forma information
does not purport to be indicative of the results that actually would have been
obtained had such transactions been completed as of the beginning of the
period presented or that may be obtained in the future.
YEAR ENDED NOVEMBER 1, 1997
---------------------------------------------------------------------------
PREDECESSOR
COMPANY REORGANIZED COMPANY
------------------ --------------------------------------------------------
PERIOD FROM PERIOD FROM
NOVEMBER 3, 1996 OCTOBER 10, 1997 PRO FORMA
TO OCTOBER 9, 1997 TO NOVEMBER 1, 1997 TOTAL ADJUSTMENTS PRO FORMA
------------------ ------------------- -------- ----------- -----------
Net sales......................................... $379,643 $38,728 $418,371 $ 418,371
Cost of sales..................................... 327,667 31,058 358,725 $ (8,881)(a) 349,844
-------- ------- -------- --------- -----------
Gross profit...................................... 51,976 7,670 59,646 8,881 68,527
Selling, general and administrative expenses...... 37,146 2,466 39,612 1,132 (b) 40,744
Other income (expense), net....................... (48) 11 (37) -- (37)
-------- ------- -------- --------- -----------
Operating profit (loss)........................... 14,782 5,215 19,997 7,749 27,746
Valuation allowance on Gulistan securities........ (5,070) -- (5,070) 5,070 (c) --
Interest income................................... 2,744 93 2,837 (1,645)(d) 1,192
Interest expense.................................. (32,164) (584) (32,748) 24,072 (e) (8,676)
-------- ------- -------- --------- -----------
Income (loss) before reorganization items, income
taxes and extraordinary items.................... (19,708) 4,724 (14,984) 35,246 20,262
Reorganization items:
Fair-value adjustments............................ (4,651) -- (4,651) 4,651 (f) --
Professional fees and expenses.................... (8,420) -- (8,420) 8,420 (f) --
-------- ------- -------- --------- -----------
Income (loss) before income taxes and
extraordinary items.............................. (32,779) 4,724 (28,055) 48,317 20,262
Provision (benefit) for income taxes.............. (8,822) 2,007 (6,815) 15,458 (g) 8,643
-------- ------- -------- --------- -----------
Income (loss) before extraordinary items.......... (23,957) 2,717 (21,240) 32,859 11,619
Extraordinary gain on early extinguishment of
debt............................................. 100,235 -- 100,235 (100,235)(h) --
-------- ------- -------- --------- -----------
Net income (loss)................................. $ 76,278 $ 2,717 $ 78,995 $ (67,376) $ 11,619
======== ======= ======== ========= ===========
Weighted average number of common shares
outstanding...................................... 10,000,000
===========
Net income per common share....................... $ 1.16
===========
F-11
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------
(a) The following table details the net adjustment to cost of goods sold
related to fresh start accounting:
Decrease in depreciation expense reflecting revaluation of the
Company's property, plant and equipment........................... $(8,530)
Net decrease in pension and post-retirement expense reflecting the
full recognition of unamortized gains and losses on the Effective
Date.............................................................. (351)
-------
$(8,881)
=======
(b) The following table details the net adjustment to selling, general and
administrative expenses:
Decrease in depreciation expense reflecting revaluation of the
Company's property, plant and equipment......................... $ (123)
Elimination of goodwill amortization............................. (953)
Addition of amortization of reorganization value in excess of
amounts allocable to identifiable assets........................ 2,208
-------
$ 1,132
=======
(c) Reflects the elimination of the valuation allowance on Gulistan Securities
since these assets were sold in connection with the reorganization.
(d) Reflects the elimination of interest income on the $14 million cash
distribution to the holders of 10.25% Notes and 10.85% Notes.
(e) The following table details the net adjustment to interest expense related
to the reorganization:
Decrease in interest expense due to exchange of JPS's 10.25%
Notes, 10.85% Notes and 7% Subordinated Debentures............. $ 25,617
Elimination of amortization of deferred financing costs of the
former revolving Credit Facility............................... 297
Amortization of deferred financing costs of the new Credit
Agreement...................................................... (344)
Increase in interest expense resulting from additional
borrowings under the new Credit Agreement...................... (489)
Interest expense on the Contingent Notes........................ (1,009)
--------
$ 24,072
========
(f) Reflects the elimination of reorganization items.
(g) Reflects the estimated income tax effects reflecting the reorganization
and the application of fresh start accounting. Pro forma income tax
expense is calculated using a 38% effective tax rate times taxable income
before amortization of excess reorganization value. Cash tax expense is
calculated after giving effect to certain differences in taxable income
for tax purposes including the amortization of excess reorganization value
and differences in depreciation expense and pension expense.
(h) Reflects the elimination of the gain on early extinguishment of debt.
4. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation--The consolidated financial statements include
JPS Textile Group, Inc. and its direct subsidiaries, all of which are wholly
owned. Significant intercompany transactions and accounts have been
eliminated.
F-12
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Use of Estimates--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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The Company's most significant financial statement estimates
include the estimate of the allowance for doubtful accounts, reserve for self-
insurance liabilities and the reserve for certain defective roofing products
sold by the Predecessor Stevens Division operations (discussed in Note 12).
Management determines its estimate of the allowance for doubtful accounts
considering a number of factors, including historical experience, aging of the
accounts and the current creditworthiness of its customers. The Company self-
insures, with various insured stop-loss limitations, its workers'
compensation, general liability and health claims. Management determines its
estimate of the reserve for self-insurance considering a number of factors,
including historical experience and third party claims administrator and
actuarial assessment of the liabilities for reported claims and claims
incurred but not reported.
Management believes that its estimates provided in the financial statements,
including those for the above-described items, are reasonable and adequate.
However, actual results could differ from those estimates.
Inventories--Inventories are stated at the lower of cost or market. Cost,
which includes labor, material and factory overhead, is determined on the
first-in, first-out basis.
Investments--At November 1, 1997, all debt and equity securities are
classified as held-for-sale and reported at fair value as determined based on
market prices or dealer quotes. At November 2, 1996, all debt and equity
securities were classified as held-to-maturity and carried at amortized cost,
adjusted for amortization of premiums and accretion of discounts to maturity.
Property, Plant and Equipment--As a result of the adoption of fresh start
accounting as described in Note 2, property, plant and equipment was adjusted
to estimated fair value as of October 9, 1997 and historical accumulated
depreciation was eliminated. Property, plant and equipment is recorded at cost
and depreciation is recorded using the straight-line method for financial
reporting purposes. The estimated useful lives used in the computation of
depreciation are as follows:
Land improvements.......................................... 10 to 45 years
Buildings and improvements................................. 25 to 45 years
Machinery and equipment.................................... 3 to 15 years
Furniture, fixtures and other.............................. 5 to 10 years
Excess of Cost Over Fair Value of Net Assets Acquired--Excess of cost over
fair value of net assets acquired was being amortized on a straight-line basis
over a period of forty years. As a result of the implementation of fresh start
accounting as described in Note 2, the excess of cost over fair value of net
assets acquired was written off as of October 9, 1997.
Reorganization Value in Excess of Amounts Allocable to Identifiable Assets--
Reorganization value in excess of amounts allocable to identifiable assets
results from the application of "fresh start" reporting, as discussed in Note
2, which requires the Predecessor Company's unidentified intangibles, net of
amortization, to be reduced to zero and a new amount to be recorded equaling
the excess of the fair value of the Company over the fair value allocated to
its identifiable assets. This excess is classified as reorganization value in
excess of amounts allocable to identifiable assets and is being amortized over
a twenty-year period.
Debt Issuance Costs--Costs incurred in securing and issuing long-term debt
are deferred and amortized over the terms of the related debt in amounts which
approximate the interest method of amortization.
F-13
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Product Warranties--On certain of its products, the Company provides a
warranty against defects in materials and workmanship under separately priced
extended warranty contracts generally for a period of ten years. Revenue from
such extended warranty contracts is deferred and recognized as income on a
straight-line basis over the contract period. The cost of servicing such
product warranties is charged to expense as incurred.
Postretirement Benefits--The Company accounts for postretirement benefits
other than pensions using the principles of Statement of Financial Accounting
Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." SFAS No. 106 requires that the projected future cost of
providing postretirement benefits, such as health care and life insurance, be
recognized as an expense as employees render service. See Note 13 for a
further description of the accounting for postretirement benefits.
Postemployment Benefits--The Company accounts for postemployment benefits
using the principles of SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." SFAS No. 112 requires that the cost of benefits
provided to former or inactive employees after employment but before
retirement be recognized on the accrual basis of accounting. See Note 13 for a
further description of the accounting for postemployment benefits.
Revenue Recognition--The Company recognizes revenue from product sales when
it has shipped the goods or ownership has been transferred to the customer for
goods to be held for future shipment at the customer's request.
Advertising Costs--The Company defers advertising related costs until the
advertising is first run in magazines or other publications or in the case of
brochures, until the brochures are printed and available for distribution.
Advertising costs were approximately $1,355,000 and $1,967,000 in Fiscal 1995
and 1996, respectively, and $1,947,000 and $122,000 in the period from
November 3, 1996 to October 9, 1997 and the period from October 10, 1997 to
November 1, 1997, respectively.
Income Taxes--The Company accounts for income taxes using the principles of
SFAS No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred
taxes represent the future income tax effect of temporary differences between
the book and tax bases of the Company's assets and liabilities, assuming they
will be realized and settled at the amount reported in the Company's financial
statements.
Earnings Per Share--Effective November 2, 1997, the Company adopted SFAS No.
128, "Earnings Per Share" which requires the presentation of basic and diluted
earnings per share, as defined. Basic earnings per share is computed by
dividing net income by the weighted average number of shares outstanding
during the period. The presentation of diluted earnings per share is not
required since the inclusion of additional shares assuming the exercise of
stock options and warrants was antidilutive. In accordance with the provisions
of SFAS No. 128, the presentation of earnings per share data for all periods
presented has been restated to conform to SFAS No. 128.
Cash Flows--For purposes of reporting cash flows, cash includes cash on hand
and in banks. The Company has no investments that are deemed to be cash
equivalents.
Fiscal Year--The Company's operations are based on a fifty-two or fifty-
three week fiscal year ending on the Saturday closest to October 31. Fiscal
1995 consisted of fifty-two weeks and Fiscal 1996 had fifty-three weeks. The
1997 fiscal year consisted of fifty-two weeks including the period from
November 3, 1996 to October 9, 1997 (Predecessor Company) and the period from
October 10, 1997 to November 1, 1997 (Reorganized Company).
Unaudited Interim Financial Data--The interim financial data relating to the
three months ended February 1, 1997 ("Predecessor Company") and January 31,
1998 ("Reorganized Company") are unaudited; however,
F-14
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
in the opinion of the Company's management, the interim data includes all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the financial condition and results of operations of the
Company for such interim periods. The results for the three months ended
January 31, 1998 are not necessarily indicative of the results to be expected
for the full fiscal year or any other interim period.
In accordance with the provisions of SFAS No. 128, the presentation of
earnings per share data for the period from October 10, 1997 to November 1,
1997 has been restated to conform to SFAS No. 128.
Reclassifications--Certain Fiscal 1995 and 1996 amounts have been
reclassified to conform to the 1997 presentation.
5. SALE OF DISCONTINUED OPERATIONS
Carpet Business--On November 16, 1995, pursuant to the terms of an Asset
Transfer Agreement dated as of November 16, 1995, by and among JPS, JPS Carpet
Corp. ("Carpet"), a wholly-owned subsidiary of JPS, Gulistan Holdings Inc. and
Gulistan Carpet Inc., a wholly-owned subsidiary of Gulistan Holdings Inc.
(collectively, "Gulistan"), the Company and Carpet consummated the sale of
substantially all of the assets of Carpet used in the business of designing
and manufacturing tufted carpets for sale to residential, commercial and
hospitality markets (the "Carpet Business"). Pursuant to the Asset Transfer
Agreement, Gulistan agreed to assume substantially all of the liabilities and
obligations associated with the Carpet Business. Gulistan was formed and its
common stock is owned by certain members of the former management team at
Carpet. The Company and its subsidiaries have agreed, for a three-year period,
not to compete directly or indirectly with the business that was sold.
The consideration for the sale of the Carpet Business consisted of
approximately $22.5 million in cash, subject to certain post-closing
adjustments based on the audited amount of working capital transferred on
November 16, 1995, and other debt and equity securities of Gulistan as
follows: a $10 million Promissory Note due in November 2001, $5 million of
preferred stock redeemable in November 2005, and warrants to purchase 25% of
the common stock of Gulistan. Based on an independent valuation at the asset
transfer date, the Company determined the fair value of these debt and equity
securities to be approximately $11.3 million. These debt and equity securities
are included in other non-current assets on the November 2, 1996 Consolidated
Balance Sheet. As of October 28, 1995, the Company adjusted the net assets of
the Carpet Business to their net realizable value, which resulted in a charge
to the 1995 Consolidated Statement of Operations of $30.7 million, classified
as loss on sale of discontinued operations. The loss on the sale was not
currently recognizable for tax purposes and the Company recorded no net tax
benefit as a result of this loss due to uncertainties regarding the ability to
utilize these losses in future years. Net sales from the discontinued
operations of the Carpet Business were $120.1 million in Fiscal 1995.
In May 1996, the Company and Gulistan agreed on the amount of the post-
closing adjustment. As a result, the Company paid a post-closing adjustment of
$3.5 million (an estimated post-closing adjustment of $2.0 million was
included in the Fiscal 1995 loss on sale of discontinued operations) and
recognized in Fiscal 1996 an additional loss of $1.5 million on the sale of
discontinued operations. The final amount of net cash proceeds applied by the
Company to reduce outstanding borrowings under its senior credit facility was
approximately $16.7 million (net of fees, expenses, and the post-closing
adjustment resulting from the level of working capital transferred at the
closing date).
F-15
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company did not record interest income on any of the Gulistan securities
held by the Company because of net losses reported by Gulistan since the date
of sale. Also, in accordance with relevant accounting literature, the Company
recorded a valuation allowance against its investment in Gulistan securities
and corresponding charges to income of approximately $4.2 million in Fiscal
1996 and $2.1 million in the period from November 3, 1996 to October 9, 1997
as a result of the net losses incurred by Gulistan. On August 28, 1997, the
Company sold its investment in the Gulistan securities to Gulistan for $2.0
million in cash resulting in an additional charge of approximately $3.0
million.
Automotive Businesses--On June 28, 1994, pursuant to the terms of an Asset
Purchase Agreement dated May 25, 1994 (the "Asset Purchase Agreement"), by and
among JPS, JPS Auto Inc., a wholly-owned subsidiary of JPS ("Auto"), JPS
Converter and Industrial Corp., a wholly-owned subsidiary of JPS ("C&I"),
Foamex International Inc. ("Foamex") and JPS Automotive Products Corp., an
indirect, wholly-owned subsidiary of Foamex ("Purchaser"), the Company
consummated the disposition of its automotive assets to the Purchaser.
The sale price for the automotive assets was approximately $283 million,
consisting of $264 million of cash paid at closing and $15 million of assumed
debt as of June 28, 1994. In addition, certain post-closing adjustments which
resulted in a gain of $4.4 million, net of $0.1 million of taxes, were
recognized in Fiscal 1995.
The Company has allocated to the discontinued operations of the automotive
assets and the Carpet Business a pro-rata portion of the interest expense of
its senior credit facility, which pro-rata portion was approximately $1.6
million in Fiscal 1995.
6. SALE OF CERTAIN OPERATIONS, PLANT CLOSING AND WRITEDOWN OF CERTAIN LONG-
LIVED ASSETS
Pursuant to an Asset Purchase Agreement dated September 30, 1996 between JPS
Elastomerics Corp. ("Elastomerics"), a wholly-owned subsidiary of the Company,
and Elastomer Technologies Group, Inc. ("Elastomer") and a Receivables
Purchase Agreement dated September 30, 1996 between Elastomerics and the Bank
of New York Commercial Corporation, Elastomerics sold substantially all the
assets of its rubber products division, a business engaged in the manufacture
and sale of natural and synthetic elastic for use in apparel products, diaper
products and specialty industrial applications (the "Rubber Products
Business"). The Rubber Products Business had accounted for sales of $20.7
million and $16.8 million in Fiscal 1995 and 1996 (eleven months),
respectively. Under the terms of the agreement, Elastomer agreed to assume
substantially all the liabilities and obligations associated with the Rubber
Products Business. The Company and its subsidiaries have agreed not to compete
directly or indirectly with the business that was sold for a period of two
years. The consideration for the Rubber Products Business consisted of
approximately $5.1 million in cash, subject to certain post-closing
adjustments based on the audited amount of working capital transferred on the
closing date, and resulted in a loss of approximately $7.7 million. This loss
on sale was charged to operations in Fiscal 1996. The net proceeds from the
sale, after fees and expenses, was approximately $4.8 million and was used to
reduce the Company's outstanding indebtedness. In April 1997, the Company paid
$0.3 million to Elastomer as final settlement for certain post-closing
adjustments based on the audited amount of net assets transferred.
On August 28, 1996, the Company implemented a plan to close its Duncan plant
in Greenville, South Carolina, as a result of management's determination that
a permanent decline in the Company's spun apparel business had occurred. This
plant had been operating on a reduced schedule due to poor market conditions
and financial projections indicated it would continue to do so. As a result of
the plant closing, the accompanying Consolidated Statement of Operations
includes a "charge for plant closing" of approximately $14.2 for Fiscal 1996
related principally to the estimated loss on the impairment of long-lived
assets in accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", employee
severance costs and estimated costs for equipment relocation. The plant
closing was completed on October 28, 1996 and the plant was sold on August 14,
1997 for approximately $1.2 million in cash.
F-16
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Also, in connection with the Company's review of present and expected
conditions in the markets it serves, management determined that its plant in
Kingsport, Tennessee, which manufactures cotton fabrics, was impaired under
the criteria of SFAS No. 121 because expected future cash flows from the
operation of the plant were less than the carrying value of the plant assets.
The accompanying Consolidated Statement of Operations for Fiscal 1996 includes
a "writedown of certain long-lived assets" of $8.1 million for the excess of
the carrying value of the plant over its estimated fair value. Estimated fair
value was determined based on an independent appraisal of the plant's
property, plant and equipment.
7. BALANCE SHEET COMPONENTS
The components of certain balance sheet accounts are (in thousands):
PREDECESSOR
COMPANY REORGANIZED COMPANY
----------- -----------------------
NOVEMBER 2, NOVEMBER 1, JANUARY 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
Inventories:
Raw materials and supplies............... $ 13,155 $ 12,508 $ 12,713
Work-in-process.......................... 16,912 17,168 17,488
Finished goods........................... 18,307 15,094 16,505
--------- -------- --------
$ 48,374 $ 44,770 $ 46,706
========= ======== ========
Prepaid expenses and other:
Investments.............................. $ -- $ 34,597 $ 34,922
Deferred current tax..................... -- 867 867
Prepaid insurance........................ 620 555 451
Other.................................... 1,347 1,066 1,903
--------- -------- --------
$ 1,967 $ 37,085 $ 38,143
========= ======== ========
Property, plant and equipment, net:
Land and improvements.................... $ 5,921 $ 4,187 $ 4,187
Buildings and improvements............... 42,775 13,548 13,616
Machinery and equipment.................. 183,320 81,108 81,290
Furniture, fixtures and other............ 8,116 1,069 1,069
--------- -------- --------
240,132 99,912 100,162
Less accumulated depreciation............ (117,642) (681) (3,087)
--------- -------- --------
122,490 99,231 97,075
Construction in progress................. 1,514 5,323 9,724
--------- -------- --------
$ 124,004 $104,554 $106,799
========= ======== ========
Other noncurrent assets:
Unamortized debt issuance costs.......... $ 351 $ 1,438 $ 1,358
Prepaid pension costs.................... 1,055 2,043 2,372
Deferred income tax...................... -- 3,344 2,594
Investments.............................. 52,986 -- --
Other.................................... 58 -- 466
--------- -------- --------
$ 54,450 $ 6,825 $ 6,790
========= ======== ========
Other accrued expenses:
Roofing product liability costs.......... $ 3,000 $ 1,500 $ 1,312
Taxes payable other than income taxes.... 1,250 1,090 610
Income taxes............................. 2,150 3,292 3,314
Other.................................... 7,587 7,300 6,289
--------- -------- --------
$ 13,987 $ 13,182 $ 11,525
========= ======== ========
Other long-term liabilities:
Roofing product liability costs and
deferred warranty income................ $ 14,361 $ 14,744 $ 14,871
Accrued postretirement benefit plan
liability............................... 4,808 3,393 3,448
Other.................................... 344 126 --
--------- -------- --------
$ 19,513 $ 18,263 $ 18,319
========= ======== ========
F-17
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. INVESTMENTS
In connection with the sale of the Automotive Assets in June 1994, the
Company invested $39.5 million of the sale proceeds in long-term securities.
During 1997, the original investments matured and were reinvested as detailed
below. The following table details the original and reinvested amounts at
November 2, 1996 and November 1, 1997 (in thousands):
1996
-----------------------------------------------
HELD TO MATURITY: ADJUSTED COST GROSS UNREALIZED GAINS FAIR VALUE
- ----------------- ------------- ---------------------- ----------
U.S. Treasury obligations...... $45,257 $437 $45,694
Other.......................... 464 -- 464
------- ---- -------
$45,721 $437 $46,158
======= ==== =======
1997
-----------------------------------------------
HELD FOR SALE: ADJUSTED COST GROSS UNREALIZED GAINS FAIR VALUE
- -------------- ------------- ---------------------- ----------
U.S. Treasury obligations...... $28,553 -- $28,553
Corporate obligations.......... 5,938 -- 5,938
Other.......................... 106 -- 106
------- ---- -------
$34,597 -- $34,597
======= ==== =======
At November 2, 1996, the investments are included in other assets and
classified as long-term. At November 1, 1997, the investments are included in
other current assets because, as discussed in Note 9, the Company expects to
use these investments to satisfy certain contingent liabilities in 1998. All
investment securities at November 1, 1997 have a contractual maturity of less
than one year.
9. LONG-TERM DEBT
Long-term debt consists of (in thousands):
PREDECESSOR
COMPANY REORGANIZED COMPANY
----------- -----------------------
NOVEMBER 2, NOVEMBER 1, JANUARY 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
Senior credit facility, revolving line of
credit..................................... $ 85,639 $92,246 $92,475
10.85% Notes (including interest due at
maturity of $6,002)...........................115,249 -- --
10.25% Notes (including interest due at
maturity of $5,609)........................ 82,382 -- --
7% Subordinated Debentures.................. 54,071 -- --
Contingent Notes............................ -- 34,540 34,540
Equipment financing......................... 7,016 4,181 3,744
-------- ------- -------
Total..................................... 344,357 130,967 130,759
Less reorganization discount:
10.85% Notes.............................. (3,308) -- --
10.25% Notes.............................. (2,694) -- --
7% Debentures............................. (8,039) -- --
-------- ------- -------
Total long-term debt..................... 330,316 130,967 130,759
Less current portion........................ (326,090) (36,076) (35,845)
-------- ------- -------
Long-term portion........................... $ 4,226 $94,891 $94,914
======== ======= =======
F-18
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Senior Credit Facility--Until the Effective Date, JPS and its operating
subsidiaries (being hereinafter collectively referred to as the "Borrowing
Subsidiaries") were parties to the Fourth Amended and Restated Credit
Agreement, dated as of June 24, 1994, as amended (the "Restated Credit
Agreement"), by and among the financial institutions party thereto, Citibank,
N.A. ("Citibank"), as administrative agent and co-agent, and General Electric
Capital Corporation ("GECC"), as collateral agent and co-agent. The Restated
Credit Agreement provided for a revolving credit loan facility and letters of
credit (the "Old Revolving Credit Facility") in a maximum principal amount
equal to the lesser of (a) $118 million and (b) a specified borrowing base,
which was based upon eligible receivables and inventory of the Borrowing
Subsidiaries (the "Borrowing Base"), except that (i) no Borrowing Subsidiary
could borrow an amount greater than the Borrowing Base attributable to it,
(ii) letters of credit could not exceed $15 million in the aggregate, and
(iii) $20 million of the Old Revolving Credit Facility was available, not
subject to the Borrowing Base, to purchase property, plant and equipment or to
finance or refinance such purchases ("Capex Loans"), provided that the
aggregate of all revolving credit loans, including Capex Loans, and letters of
credit did not exceed the lesser of (A) $118 million and (B) the sum of the
Borrowing Base plus $25 million (subject to certain reductions). Borrowings
under the Restated Credit Agreement bore interest at a Base Rate (as defined)
plus 1.0% per annum or at the Eurodollar Rate (as defined) plus 2.5% per
annum. A fee of 1/2 of 1% per annum was paid on the unused line of credit.
During the first quarter of Fiscal 1995, the Company borrowed $36,607,000
under the Restated Credit Agreement and made open market purchases of certain
of its outstanding notes and debentures with an aggregate face value
(including interest due at maturity) of $68,318,000 and a carrying value of
$59,225,000. The Company recognized an extraordinary gain from early
extinguishment of debt of $20,120,000, net of expenses of $1,898,000 and
income taxes of $600,000.
On the Effective Date, JPS and the Borrowing Subsidiaries entered into the
Credit Facility Agreement, dated as of the Effective Date (the "Credit
Agreement"), by and among the financial institutions party thereto, Citibank,
as agent, and NationsBank, N.A., as co-agent. The Credit Agreement provides
for a revolving credit loan facility and letters of credit (the "Revolving
Credit Facility") in a maximum principal amount equal to the lesser of (a)
$135 million and (b) a specified borrowing base (the "Borrowing Base"), which
is based upon eligible receivables, eligible inventory and a specified dollar
amount ($55,000,000 (subject to reduction) based on fixed assets of the
Borrowing Subsidiaries), except that (i) no Borrowing Subsidiary may borrow an
amount greater than the Borrowing Base attributable to it (less any reserves
as specified in the Credit Agreement) and (ii) letters of credit may not
exceed $20 million in the aggregate. The maturity date of the Revolving Credit
Facility is October 9, 2002. Until delivery of the Company's certificate with
respect to its compliance with the terms of the Credit Agreement during the
second fiscal quarter of 1998 (the date of such delivery being the "Delivery
Date"), all borrowings under the Revolving Credit Facility bear interest at
either (i) the Eurodollar Rate (as defined in the Credit Agreement) plus 1.5%
per annum or (ii) the Base Rate (as defined in the Credit Agreement) and,
thereafter, will bear interest at the Base Rate or the Eurodollar Rate plus an
applicable margin (the "Applicable Margin") based upon the Company's
consolidated leverage ratio (which margin will not exceed .25% for Base Rate
borrowings and 1.75% for Eurodollar Rate borrowings). The weighted average
interest rate at November 1, 1997 is approximately 7.33%. The Company
currently pays (i) a fee of .375% per annum on the average unused commitments
under the Revolving Credit Facility until the Delivery Date and thereafter
such fees will be reduced to .25% per annum if a specified leverage ratio is
satisfied and (ii) a letter of credit fee equal to the Applicable Margin for
Eurodollar Rate borrowings. As of November 1, 1997, unused and outstanding
letters of credit totaled $2,040,000. The outstanding letters of credit reduce
the funds available under the Revolving Credit Facility. At November 1, 1997,
the Company had $40,714,000 available for borrowing under the Revolving Credit
Facility.
The Credit Agreement contains restrictions on investments, acquisitions and
dividends unless, among other things, the Company satisfies a specified pro
forma fixed charge coverage ratio and maintains a specified
F-19
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
minimum availability under the Revolving Credit Facility for a stated period
of time, and no default exists under the Credit Agreement. The Credit
Agreement also restricts, among other things, indebtedness, liens, affiliate
transactions, operating leases, fundamental changes and asset sales other than
the sale of up to $35 million of fixed assets, subject to the satisfaction of
certain conditions. The Credit Agreement contains financial covenants relating
to minimum levels of EBITDA (as defined), minimum interest coverage ratio,
minimum fixed charge coverage ratio and maximum capital expenditures. As of
November 1, 1997, the Company was in compliance with these restrictions and
all financial covenants.
The loans and extensions of credit to the Borrowing Subsidiaries under the
Credit Agreement are guaranteed by JPS and its other existing subsidiaries
other than JPS Capital, and are secured by the assets of JPS (excluding the
stock of JPS Capital) and its existing subsidiaries other than JPS Capital.
10.85% Notes--The Company issued the 10.85% Notes in the 1991
reorganization. The 10.85% Notes began accruing interest on June 1, 1992 at
10.85% with 9.85% paid semi-annually and 1% payable at maturity. Interest
payable at maturity compounded semi-annually at the annual rate of 10.85%. In
connection with the 1991 reorganization, the carrying value of the 10.85%
Notes was reduced to its estimated net present value using an effective
interest rate of 13%. As discussed in Note 1, under the terms of the Plan of
Reorganization, the discount notes were converted to cash, Common Stock and
Contingent Notes as of the Effective Date.
10.25% Notes--The Company issued the 10.25% Notes in the 1991
reorganization. The 10.25% Notes began accruing interest June 1, 1992 at
10.25% with 9.25% paid semi-annually and 1% payable at maturity. Interest
payable at maturity compounded semi-annually at the annual rate of 10.25%. In
connection with the 1991 reorganization, the notes were adjusted to their
estimated net present value by recording a discount resulting in an effective
interest rate of 13%. As discussed in Note 1, under the terms of the Plan of
Reorganization, the 10.25% Notes were converted to cash, Common Stock and
Contingent Notes as of the Effective Date.
7% Subordinated Debentures--In connection with the 1991 reorganization, the
debentures were adjusted to an estimated net present value by recording a
discount of $24,390,000 resulting in an effective interest rate of 13.5%. The
subordinated debentures accrued interest at 7%, payable semi-annually. As
discussed in Note 1, under the terms of the Plan of Reorganization, the 7%
Subordinated Debentures were converted to Common Stock as of the Effective
Date.
Contingent Notes--As discussed in Note 1, on the Effective Date, under the
terms of the Plan of Reorganization, JPS Capital, the Company and First Trust
National Association, as trustee, entered into an indenture, dated as of the
Effective Date (the "Contingent Note Indenture"), pursuant to which JPS
Capital issued the Contingent Notes in an initial principal amount of
approximately $34 million, subject to adjustment as set forth below. The
Contingent Notes are unsecured obligations of JPS Capital and are contingent
as to timing and amount of payments.
The timing and amount of payments due pursuant to the Contingent Notes will
depend upon the amount of cash on hand at JPS Capital at maturity, which in
turn will depend on the ultimate resolution of certain possible contingent tax
liabilities of the Company. JPS Capital was established in 1994 at the time of
the Company's sale of its automotive assets. During fiscal year 1994, the
Company utilized approximately $141 million of tax net operating loss
carryforwards to offset the gain recognized on such sale. Although the Company
believes that the use of such carryforwards to offset such gain more likely
than not will be sustained under existing tax laws, uncertainty existed at the
time of such sale and continues to exist. Therefore, in accordance with
provisions of the Old Debt Securities, the Company set aside in JPS Capital a
portion of the net proceeds from such sale to satisfy, if necessary, these
possible contingent tax liabilities. Such amounts were invested in United
States Treasury Securities and subsequently reinvested in United States
Treasury Securities and corporate obligations
F-20
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
by JPS Capital. As of the Effective Date, JPS Capital held funds of
approximately $34 million. Pursuant to the Plan of Reorganization, JPS Capital
will continue to hold those funds on behalf of the JPS tax affiliates, and
following the final resolution of such possible contingent tax liabilities,
provide to them from such funds the amounts with which they will satisfy their
finally determined liabilities.
In the event the aggregate funds held by JPS Capital are less than $34
million following the date on which the possible contingent tax liability in
respect of the Company's 1994 fiscal year is finally resolved, and to the
extent of any such liability, satisfied, the aggregate principal amount of the
Contingent Notes will be reduced to equal the aggregate funds held by JPS
Capital. The Contingent Notes will mature and be payable on the forty-fifth
day following the date on which the possible contingent tax liability in
respect of fiscal year 1994 is finally resolved, and to the extent of any such
liability satisfied. No interest is payable on the Contingent Notes prior to
maturity. However, on the maturity date thereof, as provided above, interest
will be payable on the Contingent Notes to the extent the aggregate funds held
by JPS Capital on such date exceeds $34 million. If, on such date, the
aggregate principal amount, reduced as provided above, is zero or less, the
Contingent Notes will be deemed automatically cancelled and no longer an
obligation of JPS Capital.
The Contingent Note Indenture prohibits redemption by JPS Capital of any
portion of the Contingent Notes prior to maturity other than with funds
contributed to it by the Company in the Company's sole discretion. No
acceleration of obligations under the Contingent Notes may occur prior to
maturity.
Except as specifically provided in the Contingent Note Indenture, neither
JPS Capital, JPS, nor the trustee under the Contingent Note Indenture may
amend or waive compliance by JPS Capital or reorganized JPS with any provision
of the Contingent Notes or the Contingent Note Indenture without the requisite
consent of the holders of the Contingent Notes and a final order of the
Bankruptcy Court. In addition, prior to maturity, the Restated Certificate of
Incorporation of JPS Capital (i) restricts the Company from transferring,
pledging or otherwise disposing of any shares of capital stock of JPS Capital,
and (ii) prohibits JPS Capital from declaring any dividends, making any
distributions to JPS or any other entity, incurring any obligations or liens,
or making any transfer or disposition of property not permitted by JPS
Capital's Restated Certificate of Incorporation.
Due to the uncertainties in connection with the contingent tax liabilities
described above, the Company has not assigned a fair value to the Contingent
Notes.
Equipment Financing--The Company has financed a portion of its equipment
purchases with loans from a finance company and certain equipment vendors at
fixed interest rates ranging from 7.6% to 9.7%. Monthly principal payments are
due in various amounts as determined by the terms of the loans which have
final maturity dates through December 2001.
Other--Substantially all of the Company's assets are pledged as collateral
for the Credit Agreement and the equipment financing.
Interest expense includes $8,818,000 in Fiscal 1995, $10,088,000 in Fiscal
1996, $7,303,000 in the period from November 3, 1996 to October 9, 1997 and
$19,000 in the period from October 10, 1997 to November 1, 1997, representing
amortization of debt issuance expenses and accretion of interest on the
discounted notes and accrued product liability costs (see Note 12).
F-21
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Maturities--Aggregate principal maturities of all long-term debt as of
November 1, 1997 are as follows (in thousands):
FISCAL YEAR ENDING
------------------
1998............................................................. $ 36,076
1999............................................................. 689
2000............................................................. 638
2001............................................................. 639
2002............................................................. 92,925
--------
$130,967
========
10. EQUITY SECURITIES AND SENIOR REDEEMABLE PREFERRED STOCK
Through the implementation of the Plan of Reorganization as of the Effective
Date, approximately $240 million in face amount of outstanding debt securities
were converted to, among other things, $14 million in cash, 9,924,623 shares
of Common Stock and approximately $34 million in aggregate principal amount of
Contingent Notes. The Old Senior Preferred Stock, Old Junior Preferred Stock
and Old Common Stock were cancelled. Warrants to purchase up to 5% of the
Common Stock exercisable until October 9, 2000 with an initial purchase price
of $98.76 per share were issued in respect of the Old Senior Preferred Stock.
Senior management received 75,377 shares of Common Stock on the Effective Date
in lieu of payment under their contractual retention bonus arrangements.
Certain information on equity securities and senior redeemable preferred
stock at November 2, 1996 and November 1, 1997 is as follows:
SHARES ISSUED AND OUTSTANDING
-------------------------------------
PAR VALUE NOVEMBER 2, NOVEMBER 1,
PER SHARE AUTHORIZED 1996 1997
--------- ---------- ----------- -----------
Old Series A Senior Redeemable
Preferred Stock.............. $.01 700,000(1) 538,176 --
Old Series B Junior Preferred
Stock........................ .01 700,000(1) 10,000 --
Old Class A Common Stock...... .01 700,000 490,000 --
Old Class B Common Stock...... .01 700,000 510,000 --
New Common Stock.............. .01 22,000,000 -- 10,000,000
- --------
(1) The aggregate number of authorized shares of preferred stock is 700,000,
including both the senior redeemable preferred stock and the junior
preferred stock.
Until the Effective Date, the Old Senior Preferred Stock was redeemable,
prior to its maturity date of May 15, 2003, at 103% of the liquidation
preference of $100 per share. Dividends were cumulative and calculated based
on an annual rate of 6% of the liquidation preference. Under the terms of
various credit agreements, dividends had to be in the form of additional
shares until 1998. In connection with the 1991 restructuring, the Old Senior
Preferred Stock was discounted to its estimated net present value with the net
discount of $23,351,000 reflected as an adjustment of additional paid-in
capital.
The difference between the net carrying amount of the Old Senior Preferred
Stock and its mandatory value was amortized using the interest method of
amortization over the life of the shares by charges to additional paid-in
capital or, if available, by charges to retained earnings. The unamortized
discount was approximately $21,844,000 at November 2, 1996. The Company did
not issue first, second or third quarter Fiscal 1997 dividends on its senior
redeemable preferred stock. Such cumulative dividends that had not been
declared or issued totaled $3,827,000 at October 9, 1997.
F-22
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1997 Incentive and Capital Accumulation Plan
As of the Effective Date, the Company adopted the 1997 Incentive and Capital
Accumulation Plan (the "Incentive Plan") which provides certain key employees
and non-employee directors of the Company the right to acquire shares of
Common Stock or monetary payments based on the value of such shares. Pursuant
to the Incentive Plan, approximately 853,000 shares of Common Stock were
reserved for issuance to the participants in the form of stock options, stock
appreciation rights, stock awards, performance awards, and stock units that
may be granted by the compensation committee comprised of certain members of
the Company's Board of Directors. The Incentive Plan will terminate ten years
from the date of adoption.
On October 30, 1997, options to acquire approximately 569,000 shares of the
shares reserved pursuant to the Incentive Plan were granted to senior
management of the Company. These options include a combination of time vesting
options which vest solely on the lapse of time and performance options which
vest upon achievement of specified corporate performance goals and the lapse
of time. These options are according to specific vesting schedules as set
forth in individual participant's grant letters. In addition, on the Effective
Date, each non-employee director (except one, who waived his right to receive
such options) received options to purchase 25,000 shares of Common Stock.
These options vest equally in amounts of 5,000 shares per director, on the
Effective Date and the first, second, third and fourth anniversaries of the
Effective Date.
A summary of the activity in the Company's stock options for the period from
the Effective Date to November 1, 1997 is presented below:
NUMBER OF SHARES EXERCISE PRICE
---------------- --------------
Options granted on the Effective Date...... 100,000 $ 12.33
Options granted during the period from the
Effective Date to November 1, 1997........ 568,990 12.33
Options exercised.......................... -- --
Options cancelled.......................... -- --
------- -------
Outstanding at November 1, 1997............ 668,990 $ 12.33
======= =======
Exercisable at November 1, 1997............ 20,000 $ 12.33
======= =======
Weighted average remaining contractual life
(years)................................... 10
=======
The Company applies the principles of APB Opinion 25 in accounting for
employee stock option plans. Had compensation cost been determined on the
basis of SFAS No. 123, "Accounting for Stock-Based Compensation", compensation
expense would have been recorded based on the estimated fair value of stock
options granted during the period from the Effective Date to November 1, 1997.
The total fair value of stock options granted for the period from October 10,
1997 to November 1, 1997 was estimated at $3,266,000, based upon the Black-
Scholes option pricing model. The following weighted-average assumptions were
used in the Black-Scholes option pricing model for stock options granted
during the period from the Effective Date to November 1, 1997 (i) risk-free
interest rates of approximately 5.7%, (ii) a weighted average expected life of
approximately 4.4 years from the grant date, and (iii) 38% volatility. The
expected life of the stock options granted and the stock price volatility
during the expected life of the options were estimated based upon historical
information from public textile companies and management's expectations. Had
compensation cost for the Company's stock option plans been determined based
on the estimated fair value at the grant dates for awards under those plans
consistent with the method of SFAS 123, the Company's income and earnings per
share would have been decreased by approximately $70,000 and $0.01
respectively, for the period from October 10, 1997 to November 1, 1997.
F-23
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. INCOME TAXES
The provision (benefit) for income taxes on continuing operations included
in the consolidated statements of operations consists of the following (in
thousands):
REORGANIZED
PREDECESSOR COMPANY COMPANY
--------------------------------------- -------------------
PERIOD FROM PERIOD FROM
FISCAL FISCAL NOVEMBER 3, 1996 OCTOBER 10, 1997
1995 1996 TO OCTOBER 9, 1997 TO NOVEMBER 1, 1997
-------- --------- ------------------ -------------------
Current state provision (benefit)................................ $ 1,200 $ 200 $ 923 $ (17)
Deferred federal provision (benefit)............................. -- -- (6,080) 1,714
Deferred state provision (benefit)............................... -- (500) (3,665) 310
-------- --------- --------- -------
Provision (benefit) for income taxes............................. $ 1,200 $ (300) $ (8,822) $ 2,007
======== ========= ========= =======
There is no current provision for Federal income taxes.
A reconciliation between income taxes at the 35% statutory Federal income
tax rate and the provision (benefit) for income taxes for the fiscal years
ended 1995 and 1996, the period from November 3, 1996 to October 9, 1997 and
the period from October 10, 1997 to November 1, 1997 is as follows (in
thousands):
REORGANIZED
PREDECESSOR COMPANY COMPANY
--------------------------------------- -------------------
PERIOD FROM PERIOD FROM
FISCAL FISCAL NOVEMBER 3, 1996 OCTOBER 10, 1997
1995 1996 TO OCTOBER 9, 1997 TO NOVEMBER 1, 1997
-------- --------- ------------------ -------------------
Income tax provision (benefit) at Federal statutory rate......... $ (5,762) $ (23,183) $ (11,473) $ 1,653
Increase (decrease) in income taxes arising from effect of:
State and local income taxes................................... 1,200 (300) (2,742) 293
Non-deductible reorganization costs............................ -- -- 2,947 --
Amortization of goodwill or excess reorganization value........ 316 344 312 57
Losses not resulting in tax benefits........................... -- -- 8,158 --
Change in valuation reserve.................................... 5,234 22,730 (6,080) --
Other.......................................................... 212 109 56 4
-------- --------- --------- -------
Provision (benefit) for income taxes............................. $ 1,200 $ (300) $ (8,822) $ 2,007
======== ========= ========= =======
F-24
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Presented below are the elements which comprise deferred tax assets and
liabilities (in thousands):
PREDECESSOR REORGANIZED
COMPANY COMPANY
----------- -----------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
Gross deferred assets:
Estimated allowance for doubtful accounts............ $ 412 $ 1,035
Excess of tax over financial statement basis of
inventory........................................... 647 580
Accruals deductible for tax purposes when paid....... 2,497 2,275
Deferred compensation deductible for tax purposes
when paid........................................... 157 --
Postretirement benefits deductible for tax purposes
when paid........................................... 2,141 1,562
Miscellaneous........................................ 83 120
Alternative minimum tax credit carryforward
available........................................... 2,564 1,827
Deferred financial statement income recognized for
tax purposes when received.......................... 6,489 5,013
Excess of tax over financial statement carrying value
of investment in discontinued operation............. 13,474 --
Excess of tax basis of intangibles over financial
statement basis..................................... 8,817 10,406
Net operating loss carryforward...................... 33,291 11,880
Less valuation allowance............................. (53,578) (28,444)
-------- -------
Gross deferred assets.............................. 16,994 6,254
-------- -------
Gross deferred liabilities:
Pension asset recognized for book purposes........... (411) (776)
Excess of financial statement over tax basis of
property, plant, and equipment...................... (11,898) (1,267)
Excess of tax over financial statement basis of debt
instruments (net of deferred financing fees)........ (4,685) --
Deferred state taxes resulting from filing separate
subsidiary returns in some jurisdictions............ (3,665) --
-------- -------
Gross deferred liabilities......................... (20,659) (2,043)
-------- -------
Net deferred tax (liability) asset................... $ (3,665) $ 4,211
======== =======
Recognized in the accompanying consolidated balance
sheets as follows:
Non-current deferred income tax liability............ $ (3,665) --
Prepaid expenses and other........................... -- $ 867
Other non-current assets............................. -- 3,344
-------- -------
$ (3,665) $ 4,211
======== =======
The Company recorded a tax benefit for the period ending October 9, 1997 of
approximately $8.8 million. This consists of a benefit from the implementation
of the Plan of Reorganization net of state taxes on subsidiary operations that
could not be offset by operating loss carryovers or current year losses of JPS
or its subsidiaries. The benefit arose as consummation of the Plan of
Reorganization substantially deleveraged JPS. The deferred tax asset
attributable to the net operating loss carryforwards was reduced as a result
of the reduction in net operating loss carryforwards that is required for
reorganizations such as that provided in the Plan of Reorganization, and the
reserve established against the deferred tax assets that was required due to
the operating history was also significantly reduced. The reduction in
reserves and reduction in deferred tax liabilities during
F-25
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the period ended October 9, 1997 results in a deferred tax benefit of $9.7
million. The recording of the tax benefit and the net deferred tax asset
reflects the Company's determination that it is more likely than not that
these deferred tax assets, net of the valuation allowance, will be realized
based on current income tax laws and expectations of future taxable income
stemming from operations or the reversal of deferred tax liabilities.
Uncertainties surrounding income tax law changes, shifts in operations between
state taxing jurisdictions and future operating income levels may, however,
affect the ultimate realization of all or some portion of these deferred
income tax assets.
At November 1, 1997, the Company had regular federal net operating loss
carryforwards for tax purposes of approximately $28 million. The net operating
loss carryforwards expire in years 2004 through 2011. The Company also has
federal alternative minimum tax net operating loss carryforwards of
approximately $22 million which expire in 2005 through 2012. Alternative
minimum tax credits can be carried forward indefinitely and used as a credit
against regular federal taxes, subject to limitation. During 1997, the Company
reduced net operating loss carryforwards by approximately $60 million due to
the provisions of the Code requiring attribute reduction in certain
reorganizations, such as the Plan of Reorganization. The Company was also
required to reduce alternative minimum tax credit carryforwards by
approximately $737,000 as a result of these provisions. The Company utilized
approximately $2 million of net operating losses during the period from
October 10, 1997 to November 1, 1997.
The Company's future ability to utilize its net operating loss carryforwards
is limited under the income tax laws as a result of the change in the
ownership of the Company's stock occurring as a part of the reorganization.
The effect of such an ownership change is to limit the annual utilization of
the net operating loss carryforwards to an amount equal to the value of the
Company immediately after the time of the change (subject to certain
adjustments) multiplied by the Federal long-term tax exempt rate. Due to the
Company's operating history, it is uncertain that it will be able to utilize
all deferred tax assets. Therefore, a valuation allowance has been provided.
12. COMMITMENTS AND CONTINGENCIES
The Company leases office facilities, machinery and computer equipment under
noncancellable operating leases. Rent expense was approximately, $3,411,000,
$5,158,000, $5,178,000 and $399,000 in Fiscal 1995, Fiscal 1996, the period
from November 3, 1996 to October 9, 1997 and the period from October 10, 1997
to November 1, 1997, respectively.
Future minimum payments, by year and in the aggregate, under the
noncancellable operating leases with terms of one year or more consist of the
following at November 1, 1997 (in thousands):
FISCAL YEAR ENDING
------------------
1998............................................................. $ 4,096
1999............................................................. 3,605
2000............................................................. 2,878
2001............................................................. 1,165
2002............................................................. 197
--------
$ 11,941
--------
The Company has planned expenditures of approximately $25.0 million for
property, plant and equipment additions in Fiscal 1998. At November 1, 1997,
the Company had commitments for capital expenditures of approximately $1.5
million.
F-26
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On the Effective Date, the Company entered into employment agreements with
certain of its executives and key employees. These agreements have three-year
terms and are automatically extended on an annual basis after the third year
unless the Company or the participant elects in advance not to extend the
employment period. The employment agreements provide specific salary levels
and bonus eligibility for each participant. In addition, the agreements
provide severance benefits if the Company terminates the participant's
employment for reasons other than for cause (as defined). Under the terms of
the employment agreements, on the Effective Date, the participants received,
in the aggregate, a retention grant cash payment of $588,000 and 75,377 shares
of Common Stock.
The Company has provided for all estimated future costs associated with
certain defective roofing products sold by the Predecessor Stevens Division
operations. The liability for future costs associated with these defective
roofing products is subject to management's best estimate, including factors
such as expected future claims by geographic region and roofing compound
applied; expected costs to repair or replace such roofing products; estimated
remaining length of time that such claims will be made by customers; and the
estimated costs to litigate and settle certain claims now in litigation. Based
on warranties that were issued on the roofs, the Company estimates that the
defective roofing product claims will be substantially settled by 2000.
Management updates its assessment of the adequacy of the remaining reserve
for defective roofing products quarterly and if it is deemed that an
adjustment to the reserve is required, it will be charged to operations in the
period in which such determination is made. Based on management's estimate of
a range of future costs, the Company recorded a $5,000,000 addition to the
liability for such defective products, charged to other expense in the
accompanying Fiscal 1995 Consolidated Statement of Operations. The Company
charges the costs of settling these defective material obligations as a
reduction of the recorded liability balance and, accordingly, such costs are
not charged against the results of operations. Payments on the defective
product liability claims were $4,040,000, $3,111,000, $1,815,000 and $521,000
in Fiscal 1995, Fiscal 1996, the period from November 3, 1996 to October 9,
1997 and the period from October 10, 1997 to November 1, 1997, respectively.
The Company is exposed to a number of asserted and unasserted potential
claims encountered in the normal course of business. In the opinion of
management, the resolution of these matters will not have a material adverse
effect on the Company's financial position or future results of operations.
13. RETIREMENT PLANS
Defined Benefit Pension Plan--Substantially all of the Company's employees
are covered by a Company-sponsored defined benefit pension plan. The plan also
provides benefits to individuals employed by the automotive businesses which
were sold by the Company on June 28, 1994, the Carpet Business sold on
November 16, 1995 and the Rubber Products Business sold on September 30, 1996.
The benefits of these former employees were "frozen" at the respective dates
of sale of the businesses. Accordingly, these former employees will retain
benefits earned through the respective disposal dates, however, they will not
accrue additional benefits. In addition, the plan provides benefits to
individuals employed by the Dunean plant which was closed effective October
28, 1996. Benefits for employees who were terminated as a result of the plant
closing were also "frozen" as of October 28, 1996 and no additional benefits
will accrue subsequent to that date. The plan provides pension benefits that
are based on the employees' compensation during the last ten years of
employment. The Company's policy is to fund the annual contribution required
by applicable regulations.
Assets of the pension plan are invested in common and preferred stocks,
government and corporate bonds, real estate and various short-term
investments.
F-27
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A reconciliation as of the most recent measurement date (November 1, 1996)
of the funded status of the plan with amounts reported in the Company's
Consolidated Balance Sheets follows (in thousands):
PREDECESSOR REORGANIZED
COMPANY COMPANY
----------- -----------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
Actuarial present value of benefit obligations:
Vested........................................... $88,983 $90,574
Non-vested....................................... 377 197
------- -------
Accumulated benefit obligation..................... 89,360 90,771
Provision for future pay increases................. 6,755 5,528
------- -------
Total projected benefit obligation............. 96,115 96,299
Plan assets at fair value.......................... 89,410 97,312
------- -------
Projected benefit obligation (greater than) less
than plan assets.................................. (6,705) 1,013
Unrecognized net loss.............................. 4,212 1,030
Prior service cost not yet recognized in net
periodic pension cost............................. 3,548 --
------- -------
Pension asset in accompanying Consolidated Balance
Sheets............................................ $ 1,055 $ 2,043
======= =======
PREDECESSOR COMPANY REORGANIZED COMPANY
------------------------------------- -------------------
PERIOD FROM PERIOD FROM
FISCAL FISCAL NOVEMBER 3, 1996 OCTOBER 10, 1997
1995 1996 TO OCTOBER 9, 1997 TO NOVEMBER 1, 1997
-------- ------- ------------------ -------------------
Components of net periodic pension cost:
Service cost-benefits earned during the period.................... $ 2,483 $ 2,378 $ 2,026 $ 136
Interest cost on projected benefit obligation..................... 7,131 7,048 6,683 449
Return on plan assets............................................. (15,628) (7,674) (7,184) (483)
Net amortization and deferral..................................... 8,478 451 330 --
-------- ------- ------- -----
Net periodic pension cost......................................... 2,464 2,203 1,855 102
Cost allocated to discontinued operations......................... 444 -- -- --
-------- ------- ------- ----
Net periodic pension cost for continuing operations................. $ 2,020 $ 2,203 $ 1,855 $ 102
======== ======= ======= =====
As a result of the application of fresh start accounting as described in
Note 2, all unamortized prior service costs and unrecognized gains were
immediately recognized as of October 9, 1997 and included in reorganization
items for the period then ended.
On February 15, 1996, the Company offered special early retirement benefits
to approximately fifty salaried employees who met certain criteria.
Approximately $2.2 million of pension benefits were paid in lump-sums by the
plan to twenty-eight employees who accepted the offer. In Fiscal 1996 a charge
of $1,125,000 representing the actuarial cost to the plan of the early
retirement offer as accepted by the employees is included in other expense in
the accompanying Consolidated Statement of Operations.
In Fiscal 1996 the Company recognized losses of approximately $632,000 for
pension curtailment and special termination benefits in accordance with SFAS
No. 88, "Employees' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits", which related primarily
to the sale of the Rubber Products Business and the Dunean plant closing and
related termination of participation in the plan of these employees.
F-28
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The weighted-average discount rate used in determining the actuarial present
value of the projected benefit obligation at November 2, 1996 and November 1,
1997 was 7.8%. The expected long-term rate of return on assets was 9% at
November 2, 1996 and November 1, 1997. The assumed rate of increase in
compensation levels was based on age-related tables at November 2, 1996 and
November 1, 1997. Effective November 1, 1993, the Company amended the benefit
formula for salaried employees to provide for an additional benefit on
compensation in excess of the average social security wage base.
401(k) Savings Plan--The Company also has a savings, investment and profit-
sharing plan available to employees meeting eligibility requirements. The plan
is a tax qualified plan under Section 401(k) of the Internal Revenue Code. The
Company makes a matching contribution of 25% of each participant's
contribution with a maximum matching contribution of 1 1/2% of the
participant's base compensation. Company contributions were approximately
$589,000 in Fiscal 1995, $587,000 in Fiscal 1996, $523,000 in the period from
November 3, 1996 to October 9, 1997 and $47,000 in the period from October 10,
1997 to November 1, 1997.
Postretirement Benefits--The Company has several unfunded postretirement
plans that provide certain health care and life insurance benefits to eligible
retirees. The plans are contributory, with retiree contributions adjusted
periodically, and contain cost-sharing features such as deductibles and
coinsurance. The Company's life insurance plan provides benefits to both
active employees and retirees. Active employee contributions in excess of the
cost of providing active employee benefits are applied to reduce the cost of
retirees' life insurance benefits. The following table sets forth the status
of the Company's postretirement plans as recorded in the accompanying
Consolidated Balance Sheets (in thousands):
Accumulated postretirement benefit obligation (APBO):
PREDECESSOR REORGANIZED
COMPANY COMPANY
----------- -----------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
Retirees............................................. $1,721 $1,444
Fully eligible active plan participants.............. 1,075 1,130
Other active plan participants....................... 914 807
Unrecognized gain.................................... 1,098 12
------ ------
Accrued postretirement benefit plan liability........ $4,808 $3,393
====== ======
Net periodic postretirement benefit expense included the following
components (in thousands):
PREDECESSOR COMPANY REORGANIZED COMPANY
-------------------------------- -------------------
PERIOD FROM PERIOD FROM
FISCAL FISCAL NOVEMBER 3, 1996 OCTOBER 10, 1997
1995 1996 TO OCTOBER 9, 1997 TO NOVEMBER 1, 1997
------ ------ ------------------ -------------------
Service cost for benefits earned........................................ $ 1 $ 5 $ 5 $ 6
Interest cost on APBO................................................... 357 297 229 16
---- ---- ---- ---
Net periodic postretirement cost........................................ $358 $302 $234 $32
==== ==== ==== ===
As a result of the application of fresh start accounting as described in
Note 1, all unamortized gains were fully recognized as of October 9, 1997 and
included in reorganization items for the period then ended.
In Fiscal 1996, the Company recognized a curtailment gain of approximately
$347,000 related to the sale of the Rubber Products Business and the Dunean
plant closing, and related termination of participation in the plans of these
employees.
F-29
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Since the Company has capped its annual liability per person and all future
cost increases will be passed on to retirees, the annual rate of increase in
health care costs does not affect the postretirement benefit obligation.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.8% as of November 2, 1996 and November
1, 1997.
Postemployment Benefits--The Company provides certain benefits to former or
inactive employees after employment but before retirement. In accordance with
SFAS No. 112, these benefits are recognized on the accrual basis of
accounting. The liability for postemployment benefits at November 2, 1996 and
November 1, 1997 is included in other long-term liabilities in the
accompanying consolidated financial statements.
14. RELATED PARTIES
The Company incurred fees of $1,000,000 in each of Fiscal 1995 and 1996 for
management services provided by a former shareholder pursuant to a management
services agreement. The accompanying Consolidated Balance Sheet as of November
2, 1996 includes accrued fees of $1,000,000 in other accrued expenses. On the
Effective Date, the agreement was cancelled and rejected and rejection damage
claims were waived by the shareholders. Accordingly, no amount was accrued for
the period from November 3, 1996 to October 9, 1997.
15. BUSINESS SEGMENTS
The Company competes in three industry segments: Apparel Fabrics and
Products, Industrial Fabrics and Products and Home Fashion Textiles. The
apparel fabrics and products segment manufactures a broad range of apparel
fabrics and apparel related products, including unfinished woven apparel
fabrics (greige goods) for men's, women's and children's wear, and spun yarns
for use in apparel. The industrial fabrics and products segment manufactures
commercial roofing products made from woven synthetic fabrics and rubber-based
specialty polymer compounds, other building construction products made from
glass and synthetic fibers, various industrial products which generally have
insulation or filtration characteristics, and other rubber products and
various extruded polyurethane products. The home fashion textiles segment
manufactures a variety of unfinished woven fabrics and yarns for use in the
manufacturing of draperies, curtains and lampshades and is a major producer of
solution-dyed drapery fabrics.
Export sales are approximately 4% of net sales and the Company has no
significant foreign operations. Earnings by business segment represent
operating profit, excluding net unallocated corporate operating expenses.
Identifiable segment assets are those assets used in the operations of the
segment. Corporate assets are cash and other assets.
F-30
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INDUSTRY SEGMENT INFORMATION (IN THOUSANDS):
REORGANIZED
PREDECESSOR COMPANY COMPANY
------------------------------------------ -------------------
YEAR ENDED
----------------------- PERIOD FROM PERIOD FROM
OCTOBER 28, NOVEMBER 2, NOVEMBER 3, 1996 OCTOBER 10, 1997
1995 1996 TO OCTOBER 9, 1997 TO NOVEMBER 1, 1997
----------- ----------- ------------------ -------------------
Net sales:
Apparel fabrics and products....... $ 247,846 $ 221,799 $ 167,070 $18,590
Industrial fabrics and products.... 191,985 193,001 179,434 17,847
Home fashion textiles.............. 32,734 34,024 33,139 2,291
--------- --------- --------- -------
$ 472,565 $ 448,824 $ 379,643 $38,728
========= ========= ========= =======
Operating profit (loss):
Apparel fabrics and products....... $ 16,667 $ (22,422) $ 1,210 $ 2,201
Industrial fabrics and products.... 7,590 5,947 16,748 2,652
Home fashion textiles.............. 1,749 647 976 693
Indirect corporate expenses, net... (5,345) (6,257) (4,152) (331)
--------- --------- --------- -------
Operating profit (loss)............ 20,661 (22,085) 14,782 5,215
Valuation allowance on Gulistan
Securities......................... -- (4,242) (5,070) --
Interest income..................... 2,821 2,856 2,744 93
Interest expense.................... (39,946) (40,510) (32,164) (584)
Restructuring fees and expenses..... -- (2,255) (13,071) --
--------- --------- --------- -------
Income (loss) before income taxes,
discontinued operations and
extraordinary items................ $ (16,464) $ (66,236) $ (32,779) $ 4,724
========= ========= ========= =======
Depreciation and amortization
expense:
Apparel fabrics and products....... $ 12,722 $ 12,946 $ 9,410 $ 297
Industrial fabrics and products.... 5,690 6,282 5,032 283
Home fashion textiles.............. 2,394 2,517 2,537 100
--------- --------- --------- -------
Total segments..................... 20,806 21,745 16,979 680
Corporate and other................ 979 994 901 166
--------- --------- --------- -------
$ 21,785 $ 22,739 $ 17,880 $ 846
========= ========= ========= =======
Capital expenditures:
Apparel fabrics and products....... $ 8,852 $ 4,389 $ 10,473 $ 472
Industrial fabrics and products.... 9,312 4,545 3,636 1,130
Home fashion textiles.............. 643 899 353 16
--------- --------- --------- -------
Total segments..................... 18,807 9,833 14,462 1,618
Corporate and other................ 4 1 5 --
--------- --------- --------- -------
$ 18,811 $ 9,834 $ 14,467 $ 1,618
========= ========= ========= =======
PREDECESSOR REORGANIZED
COMPANY COMPANY
----------- -----------
THREE MONTHS ENDED
-----------------------
FEBRUARY 1, JANUARY 31,
1997 1998
----------- -----------
UNAUDITED
Net sales:
Apparel fabrics and products....... $ 47,318 $ 52,591
Industrial fabrics and products.... 40,776 41,997
Home fashion textiles.............. 9,072 6,212
----------- -----------
$ 97,166 $100,800
=========== ===========
Operating profit (loss):
Apparel fabrics and products....... $ 655 $ 3,365
Industrial fabrics and products.... 2,695 3,040
Home fashion textiles.............. 728 (93)
Indirect corporate expenses, net... (1,165) (1,411)
----------- -----------
Operating profit (loss)............ 2,913 4,901
Valuation allowance on Gulistan
Securities......................... (1,299) --
Interest income..................... 737 325
Interest expense.................... (10,174) (2,284)
Restructuring fees and expenses..... (1,162) --
----------- -----------
Income (loss) before income taxes,
discontinued operations and
extraordinary items................ $ (8,985) $ 2,942
=========== ===========
Depreciation and amortization
expense:
Apparel fabrics and products....... $ 2,488 $ 1,187
Industrial fabrics and products.... 1,359 954
Home fashion textiles.............. 594 260
----------- -----------
Total segments..................... 4,441 2,401
Corporate and other................ 243 578
----------- -----------
$ 4,684 $ 2,979
=========== ===========
Capital expenditures:
Apparel fabrics and products....... $ 303 $ 688
Industrial fabrics and products.... 837 3,940
Home fashion textiles.............. 25 10
----------- -----------
Total segments..................... 1,165 4,638
Corporate and other................ -- 13
----------- -----------
$ 1,165 $ 4,651
=========== ===========
F-31
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INDUSTRY SEGMENT INFORMATION (IN THOUSANDS) (CONTINUED):
PREDECESSOR REORGANIZED
COMPANY COMPANY
----------- -----------
PREDECESSOR REORGANIZED
COMPANY COMPANY THREE MONTHS ENDED
----------------------- ----------- -----------------------
OCTOBER 28, NOVEMBER 2, NOVEMBER 1, FEBRUARY 1, JANUARY 31,
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
UNAUDITED
Identifiable assets:
Apparel fabrics and
products.............. $165,622 $127,909 $110,891 $122,357 $111,746
Industrial fabrics and
products.............. 115,710 101,376 100,140 90,913 99,445
Home fashion textiles.. 20,731 21,333 21,028 30,025 20,219
-------- -------- -------- -------- --------
Total segments......... 302,063 250,618 232,059 243,295 231,410
Corporate and other.... 81,827 85,309 90,322 83,787 89,544
-------- -------- -------- -------- --------
383,890 335,927 322,381 327,082 320,954
Net assets held for
sale.................. 28,932 -- -- -- --
-------- -------- -------- -------- --------
$412,822 $335,927 $322,381 $327,082 $320,954
======== ======== ======== ======== ========
UNAUDITED INTERIM FINANCIAL DATA (IN THOUSANDS):
The results for each quarter include all adjustments which are, in the
opinion of management, necessary for a fair presentation of the results for
interim periods. The consolidated financial results on an interim basis are
not necessarily indicative of future financial results on either an interim or
annual basis. Selected consolidated financial data for each quarter within
Fiscal 1996 and Fiscal 1997 are as follows:
PREDECESSOR COMPANY
---------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- --------- --------
Year Ended November 2, 1996:
Net sales........................... $ 98,741 $124,437 $ 110,266 $115,380
Cost of sales....................... 88,846 109,881 95,908 103,169
-------- -------- --------- --------
Gross profit........................ 9,895 14,556 14,358 12,211
Selling, general and administrative
expenses........................... 9,875 10,838 9,888 9,978
Other income (expense), net......... (241) (1,708) (129) (420)
Charges for plant closing, loss on
sale of certain operations and
writedown of certain long-lived
assets............................. -- -- (30,055) 27
-------- -------- --------- --------
Operating profit (loss)............. (221) 2,010 (25,714) 1,840
Valuation allowance on Gulistan
Securities......................... (1,500) (2,568) (1,395) 1,221
Interest income..................... 695 693 714 754
Interest expense.................... (9,737) (9,828) (10,082) (10,863)
Debt restructuring fees and
expenses........................... -- (175) (727) (1,353)
-------- -------- --------- --------
Loss before income taxes and
discontinued operations............ (10,763) (9,868) (37,204) (8,401)
Income taxes........................ 70 138 (582) 74
-------- -------- --------- --------
Loss before discontinued
operations......................... (10,833) (10,006) (36,622) (8,475)
Loss on sale of discontinued
operations, net of taxes........... -- (1,500) -- --
-------- -------- --------- --------
Net loss............................ $(10,833) $(11,506) $ (36,622) $ (8,475)
======== ======== ========= ========
Loss applicable to common stock..... $(11,916) $(12,615) $ (37,731) $ (9,679)
======== ======== ========= ========
Basic loss per common share:
Loss before discontinued
operations......................... $ (11.92) $ (11.11) $ (37.73) $ (9.68)
Loss on sale of discontinued
operations......................... -- (1.50) -- --
-------- -------- --------- --------
Net loss............................ $ (11.92) $ (12.61) $ (37.73) $ (9.68)
======== ======== ========= ========
F-32
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
REORGANIZED
PREDECESSOR COMPANY COMPANY
------------------------------------------------ -------------------
PERIOD FROM PERIOD FROM
FIRST SECOND THIRD AUGUST 3, 1997 OCTOBER 10, 1997
QUARTER QUARTER QUARTER TO OCTOBER 9, 1997 TO NOVEMBER 1, 1997
-------- -------- -------- ------------------ -------------------
Year Ended November 1,
1997:
Net sales............. $ 97,167 $108,138 $ 95,883 $ 78,455 $38,728
Cost of sales......... 84,934 93,038 80,682 69,013 31,058
-------- -------- -------- -------- -------
Gross profit.......... 12,233 15,100 15,201 9,442 7,670
Selling, general and
administrative
expenses............. 9,314 10,293 10,256 7,283 2,466
Other income
(expense), net....... (6) (377) (102) 437 11
-------- -------- -------- -------- -------
Operating profit
(loss)............... 2,913 4,430 4,843 2,596 5,215
Valuation allowance on
Gulistan securities.. (1,299) (789) (2,982) -- --
Interest income....... 737 734 761 512 93
Interest expense...... (10,174) (10,049) (10,086) (1,855) (584)
-------- -------- -------- -------- -------
Income (loss) before
reorganization items,
income taxes and
extraordinary items.. (7,823) (5,674) (7,464) 1,253 4,724
Reorganization items:
Fair-value
adjustments.......... -- -- -- (4,651) --
Professional fees and
expenses............. (1,162) (1,982) (3,332) (1,944) --
-------- -------- -------- -------- -------
Income (loss) before
income taxes and
extraordinary items.. (8,985) (7,656) (10,796) (5,342) 4,724
Provision (benefit)
for income taxes..... 157 252 275 (9,506) 2,007
-------- -------- -------- -------- -------
Income (loss) before
extraordinary items.. (9,142) (7,908) (11,071) 4,164 2,717
Extraordinary gain on
early extinguishment
of debt.............. -- -- -- 100,235 --
-------- -------- -------- -------- -------
Net income (loss)..... $ (9,142) $ (7,908) $(11,071) $104,399 $ 2,717
======== ======== ======== ======== =======
Income (loss)
applicable to common
stock................ $(10,407) $ (9,185) $(12,356) $104,399 $ 2,717
======== ======== ======== ======== =======
Basic earnings (loss)
per common share:
Income (loss) before
extraordinary gain on
early extinguishment
of debt.............. $ (10.40) $ (9.19) $ (12.36) $ 4.16 $ 0.27
Extraordinary gain on
early extinguishment
of debt.............. -- -- -- 100.24 --
-------- -------- -------- -------- -------
Net income (loss)..... $ (10.40) $ (9.19) $ (12.36) $ 104.40 $ 0.27
======== ======== ======== ======== =======
In accordance with the provision of SFAS No. 128, the presentation of
earnings per share data for all periods presented has been restated to conform
to SFAS No. 128.
F-33
During the second quarter of Fiscal 1996, the Company finalized the selling
price for the assets and operations of the Carpet business which resulted in
loss on sale of discontinued operations of $1.5 million.
During the period from August 3, 1997 to October 9, 1997, the Company
consummated its Plan of Reorganization, as described in Notes 1, 2 and 3.
Accordingly, the results of operations subsequent to October 9, 1997 are not
comparable to results of operations for periods preceding that date.
F-34
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMA-
TION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICI-
TATION OF AN OFFER TO BUY ANY OF THESE SECURITIES IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JU-
RISDICTION. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
---------------
TABLE OF CONTENTS
PAGE
----
Additional Information................................................... 2
Disclosures Regarding Forward-Looking Statements......................... 2
Prospectus Summary....................................................... 3
Summary Historical Financial Data........................................ 5
Risk Factors............................................................. 8
The Company.............................................................. 10
Use of Proceeds.......................................................... 13
Price Range of Common Stock and Dividend Policy.......................... 13
Capitalization........................................................... 14
Selected Historical Financial Data....................................... 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 28
Management............................................................... 33
Security Ownership of Principal Stockholders and Management.............. 41
Description of the Common Stock.......................................... 43
Registration Rights...................................................... 43
Description of the Credit Facility....................................... 43
Selling Stockholders..................................................... 45
Plan of Distribution..................................................... 46
Legal Matters............................................................ 46
Experts.................................................................. 46
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
JPS TEXTILE GROUP, INC.
10,000,000 SHARES OF COMMON STOCK,
$.01 PAR VALUE PER SHARE
---------------
PROSPECTUS
---------------
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF DISTRIBUTION.
The following table sets forth an estimate of the expenses that will be
incurred by the Registrant in connection with the distribution of the
securities being registered hereby:
SEC registration fee.......................................... $ 37,373.00
NASD filing fees.............................................. $ 0.00
Legal fees and expenses....................................... $100,000.00
Accounting fees and expenses.................................. $250,000.00
Miscellaneous................................................. $105,000.00
-----------
Total....................................................... $492,373.00
===========
ITEM 14. INDEMNIFICATION AND LIMITATION OF LIABILITY OF DIRECTORS AND
OFFICERS.
Generally, Section 145 of the General Corporation Law of the State of
Delaware (the "GCL") permits a corporation to indemnify certain persons made a
party to an action, by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise. In the case of an action by or in the right
of the corporation, no indemnification may be made in respect of any matter as
to which such person was adjudged liable for negligence or misconduct in the
performance of such person's duty to the corporation unless the Delaware Court
of Chancery or the court in which such action was brought determines that
despite the adjudication of liability such person is fairly and reasonably
entitled to indemnity for proper expenses. To the extent such person has been
successful in the defense of any matter, such person shall be indemnified
against expenses actually and reasonably incurred by him.
Section 102(b)(7) of the GCL enables a Delaware corporation to include a
provision in its certificate of incorporation limiting a director's liability
to the corporation or its stockholders for monetary damages for breaches of
fiduciary duty as a director. JPS' Amended and Restated Certificate of
Incorporation and By-laws that were adopted pursuant to the Plan of
Reorganization provide for indemnification of its officers and directors to
the full extent permitted under Delaware law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On October 9, 1997 (the Effective Date of the Joint Plan of Reorganization
proposed by JPS and JPS Capital Corp., a Delaware corporation and a wholly-
owned subsidiary of JPS, and confirmed by order of the Bankruptcy Court
entered on September 9, 1997), 10,000,000 shares of Common Stock, par value
$.01 per share, of JPS (the "Common Stock"), and warrants to purchase up to
526,316 shares of common stock of JPS at an initial purchase price of $98.76
per share were issued by JPS and distributed pursuant to the Plan of
Reorganization.
II-1
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.
(a) Exhibits
The following is a complete list of Exhibits filed as part of this
Registration Statement, which are incorporated herein:
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1(i) Joint Plan of Reorganization for JPS Textile Group, Inc., a Delaware
corporation ("JPS"), proposed by JPS and JPS Capital Corp., a
Delaware corporation, pursuant to chapter 11 of title 11 United
States Code (the "Bankruptcy Code"), dated August 1, 1997 (as
amended, the "Plan").(K)
2.1(ii) Revised Technical and Conforming Amendment to the Plan, dated
September 4, 1997.(L)
3.1 Restated Certificate of Incorporation of JPS, filed with the
Secretary of State of the State of Delaware on October 9, 1997.(P)
3.2 Amended and Restated By-laws of JPS.(P)
4.1 Indenture, dated as of October 9, 1997 (the "Contingent Note
Indenture"), between JPS Capital Corp. ("Capital") and First Trust
National Association ("First Trust"), as Trustee, relating to
Capital's Contingent Notes (the "Contingent Notes").(K)
4.2 Form of Contingent Note, incorporated by reference to Exhibit A to
the Contingent Note Indenture.(K)
10.1 Loan and Security Agreement, dated as of October 30, 1991 (the "CIT
Loan Agreement"), between JPS Converter and Industrial Corp., a
Delaware corporation ("JCIC") and The CIT Group/Equipment Financing,
Inc. ("CIT").(A)
10.2 First Amendment to the CIT Loan Agreement, dated as of June 26, 1992,
by and between JCIC and CIT.(A)
10.3 Second Amendment to the CIT Loan Agreement, dated as of December 22,
1992, by and between JCIC and CIT.(A)
10.4 Agreement of Lease, dated as of June 1, 1988, by and between 1185
Avenue of the Americas Associates ("1185 Associates") and JCIC.(A)
10.5 Lease Modification and Extension Agreement, dated as of April 2,
1991, by and between 1185 Associates and JCIC.(A)
10.6 Third Amendment to the CIT Loan Agreement, dated as of August 6,
1993, by and between JCIC and CIT.(B)
10.7 Trademark License Agreement, dated as of May 9, 1988, by and between
J.P. Stevens and JPS Acquisition Corp. (predecessor to the
Company.)(B)
10.8 Omnibus Real Estate Closing Agreement, dated as of May 9, 1988, by
and among J.P. Stevens, JPS Acquisition Corp., JPS Acquisition
Automotive Products Corp., JPS Acquisition Carpet Corp., JPS
Acquisition Industrial Fabrics Corp., JPS Acquisition Converter and
Yarn Corp. and JPS Acquisition Elastomerics Corp.(B)
10.9 Purchase Agreement, dated as of April 24, 1988, by and among JPS
Holding Corp., the Company, Odyssey Partners, West Point-Pepperell,
Inc., STN Holdings Inc., Magnolia Partners, L.P. and J.P. Stevens.(B)
10.10 Asset Purchase Agreement, dated as of May 25, 1994, by and among the
Company, JAPC, JCIC, JPS Auto Inc., a Delaware corporation, and
Foamex International Inc., a Delaware corporation.(C)
10.11 Fourth Amended and Restated Credit Agreement (the "Existing Credit
Agreement"), dated as of June 24, 1994, by and among the Company,
JCIC, JPS Elastomerics Corp., a Delaware corporation ("JEC"), JPS
Carpet Corp., a Delaware corporation ("JCC"), the financial
institutions listed on the signature pages thereof, Citibank, N.A.
("Citibank") as Agent and Administrative Agent, and General Electric
Capital Corporation ("GECC") as Co-Agent and Collateral Agent.(D)
II-2
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.12 First Amendment to the Existing Credit Agreement, dated as of November
4, 1994, by and among the Company, JCIC, JEC, JCC, the financial
institutions listed on the signature pages thereof, Citibank, as Agent
and Administrative Agent, and GECC, as Co-Agent and Collateral
Agent.(E)
10.13 Second Amendment to the Existing Credit Agreement, dated as of
December 21, 1994, by and among the Company, JCIC, JEC, JCC, the
financial institutions listed on the signature pages thereof,
Citibank, as Agent and Administrative Agent, and GECC as Co-Agent and
Collateral Agent.(E)
10.14 Fourth Amendment to CIT Loan Agreement, dated as of December 29, 1994,
by and between JCIC and CIT.(E)
10.15 Lease Modification and Extension Agreement, dated as of April 30,
1993, by and between 1185 Associates and JCIC.(E)
10.16 Third Amendment to Existing Credit Agreement, dated as of May 31, 1995
by and among the Company, JCIC, JEC, JCC, the financial institutions
listed on the signature pages thereof, Citibank, as Agent and
Administrative Agent, and GECC, as Co-Agent and Collateral Agent.(F)
10.17 Fourth Amendment to Existing Credit Agreement, dated as of October 28,
1995 by and among the Company, JCIC, JEC, JCC, the financial
institutions listed on the signature pages thereof, Citibank, as Agent
and Administrative Agent, and GECC, as Co-Agent and Collateral
Agent.(G)
10.18 Lease Modification and Extension Agreement, dated as of November 17,
1994, by and between 1185 Associates and JCIC.(G)
10.19 Asset Transfer Agreement, dated as of November 16, 1995, by and among
the Company, JPS Carpet Corp., a Delaware corporation, Gulistan
Holdings Inc. ("GHI"), a Delaware corporation and Gulistan Carpet
Inc., a Delaware Corporation and wholly -owned subsidiary of GHI.(H)
10.20 Fifth Amendment to the Fourth Amended & Restated Credit Agreement,
dated as of May 6, 1996, by and among the Company, JPS Elastomerics
Corp., JPS Converter and Industrial Corp., JPS Auto Inc., JPS Carpet
Corp., International Fabrics, Inc., the financial institutions listed
on the signature pages thereof, Citibank, N.A. as agent and
Administrative Agent and General Electric Capital Corporation as Co-
Agent and Collateral Agent.(I)
10.21 Sixth Amendment to the Fourth Amended & Restated Credit Agreement,
dated as of May 15, 1996, by and among the Company, JPS Elastomerics
Corp., JPS Converter and Industrial Corp., JPS Auto Inc., JPS Carpet
Corp., International Fabrics, Inc., the financial institutions listed
on the signature pages thereof, Citibank, N.A. as agent and
Administrative Agent and General Electric Capital Corporation as Co-
Agent and Collateral Agent.(I)
10.22 Seventh Amendment to the Fourth Amended and Restated Credit Agreement,
dated as of July 22, 1996, by and among the Company, JPS Elastomerics
Corp., JPS Converter and Industrial Corp., JPS Auto Inc., JPS Carpet
Corp., International Fabrics, Inc., the financial institutions listed
on the signature pages thereof, Citibank, N.A. as agent and
Administrative Agent and General Electric Capital Corporation as Co-
Agent and Collateral Agent.(J)
10.23 Eighth Amendment to the Fourth Amended and Restated Credit Agreement,
dated as of September 6, 1996, by and among the Company, JPS
Elastomerics Corp., JPS Converter and Industrial Corp., JPS Auto Inc.,
JPS Carpet Corp., International Fabrics, Inc., the financial
institutions listed on the signature pages thereof, Citibank, N.A. as
agent and Administrative Agent and General Electric Capital
Corporation as Co-Agent and Collateral Agent.(J)
10.24 Employment Agreement dated October 9, 1997, between the Company and
Jerry E. Hunter. (P)
10.25 Employment Agreement dated October 9, 1997, between the Company and
David H. Taylor. (P)
10.26 Employment Agreement dated October 9, 1997, between the Company and
Monnie L. Broome.(P)
10.27 Employment Agreement, dated May 1, 1993 and amended September 11, 1995
between the Company and Carl Rosen.(J)
II-3
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.28 Employment Agreement, dated December 23, 1991 and amended August 20,
1996 and December 23, 1996 between the Company and Bruce Wilby.(G)
10.29 Asset Purchase Agreement, dated as of September 30, 1996 between
Elastomer Technologies Group, Inc. a Delaware Corporation, and JPS
Elastomerics Corp., a Delaware Corporation and wholly-owned
subsidiary of the Company.(G)
10.30 Receivables Purchase Agreement dated as of September 30, 1996 between
The Bank of New York Commercial Corporation, a New York Corporation
and JPS Elastomerics Corp., a Delaware Corporation and wholly-owned
subsidiary of the Company.(G)
10.31 Registration Rights Agreement, dated as of October 9, 1997, by and
among JPS and the holders of JPS's Common Stock.(P)
10.32 Ninth Amendment to Existing Credit Agreement, dated as of February
21, 1997, by and among JPS, JCIC, JEC, JCC, the financial
institutions listed on the signature pages thereof, Citibank, as
agent and Administrative Agent and GECC as Co-Agent and Collateral
Agent.(N)
10.33 Tenth Amendment to the Existing Credit Agreement, dated as of April
29, 1997, by and among JPS, JCIC, JEC, JCC, the financial
institutions listed on the signature pages thereof, Citibank, as
agent and Administrative Agent and GECC as Co-Agent and Collateral
Agent.(O)
10.34 Eleventh Amendment to the Existing Credit Agreement, dated as of May
15, 1997, by and among JPS, JCIC, JEC, JCC, the financial
institutions listed on the signature pages thereof, Citibank, as
agent and Administrative Agent and GECC as Co-Agent and Collateral
Agent.(O)
10.35 Credit Facility Agreement, dated as of October 9, 1997, by and among
JPS, C&I, Elastomerics, the financial institutions listed on the
signature pages thereto, and the agent and co-agent party thereto.(M)
10.36 1997 Incentive and Capital Accumulation Plan dated as of October 9,
1997.(P)
10.37 Warrant Agreement dated as of October 9, 1997.(P)
21.1 List of Subsidiaries of the Company.(E)
23.1 Consent of Deloitte & Touche LLP.(Q)
24.1 Power of Attorney relating to JPS (included as part of the signature
page hereof).(M)
- --------
(A) Previously filed as an exhibit to Registration Statement No. 33-58272 on
Form S-1, declared effective by the SEC on July 26, 1993, and incorporated
herein by reference.
(B) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended October 30, 1993.
(C) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended April 30, 1994.
(D) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended July 30, 1994.
(E) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended October 29, 1994.
(F) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended April 29, 1995.
(G) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended November 2, 1996.
(H) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated December 1, 1995.
(I) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended April 27, 1996.
(J) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended July 27, 1996.
II-4
(K) Previously filed as an exhibit to JPS's Current Report on Form 8-K dated
July 2, 1997.
(L) Previously filed as an exhibit JPS's Registration Statement on Form 8-A
filed on September 8, 1997.
(M) Previously filed.
(N) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended February 1, 1997.
(O) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended May 3, 1997.
(P) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended November 1, 1997.
(Q) Filed herein.
(b) Financial Statement Schedule:
None.
All other schedules are omitted because they are not required or are not
applicable, or the required information is shown in the Consolidated Financial
Statements or Notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of JPS pursuant to the provisions in Item 14 above, or otherwise, JPS
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in such act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by JPS of expenses incurred
or paid by a director or officer or controlling person of JPS in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, JPS will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in such act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the Plan of
Distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-5
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSON
IN THE CAPACITIES AND ON THE DATE INDICATED.
JPS Textile Group, Inc.
/s/ Jerry E. Hunter
By: _________________________________
Jerry E. Hunter
Chairman of the Board, President
and
Chief Executive Officer
Date: May 8, 1998
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
* Director, Chairman of the
_________________________________ Board, President and Chief May 8, 1998
JERRY E. HUNTER Executive Officer
/s/ David H. Taylor Director, Executive Vice
_________________________________ President--Finance, May 8, 1998
DAVID H. TAYLOR Principal Financial Officer
and Secretary
* Director
_________________________________ May 8, 1998
ROBERT J. CAPOZZI
* Director
_________________________________ May 8, 1998
JEFFREY S. DEUTSCHMAN
* Director
_________________________________ May 8, 1998
NICHOLAS P. DIPAOLO
* Director
_________________________________ May 8, 1998
MICHAEL L. FULBRIGHT
* Director
_________________________________ May 8, 1998
JOHN M. SULLIVAN, JR.
* Controller
_________________________________ May 8, 1998
L. ALLEN OLLIS
*David H. Taylor
_________________________________
ATTORNEY-IN-FACT
II-6
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
2.1(i) Joint Plan of Reorganization for JPS Textile Group, Inc., a
Delaware corporation ("JPS"), proposed by JPS and JPS Capital
Corp., a Delaware corporation, pursuant to chapter 11 of title
11 United States Code (the "Bankruptcy Code"), dated August 1,
1997 (as amended, the "Plan").(K)
2.1(ii) Revised Technical and Conforming Amendment to the Plan, dated
September 4, 1997.(L)
3.1 Restated Certificate of Incorporation of JPS, filed with the
Secretary of State of the State of Delaware on October 9,
1997.(P)
3.2 Amended and Restated By-laws of JPS.(P)
4.1 Indenture, dated as of October 9, 1997 (the "Contingent Note
Indenture"), between JPS Capital Corp. ("Capital") and First
Trust National Association ("First Trust"), as Trustee,
relating to Capital's Contingent Notes (the "Contingent
Notes").(K)
4.2 Form of Contingent Note, incorporated by reference to Exhibit
A to the Contingent Note Indenture.(K)
10.1 Loan and Security Agreement, dated as of October 30, 1991 (the
"CIT Loan Agreement"), between JPS Converter and Industrial
Corp., a Delaware corporation ("JCIC") and The CIT
Group/Equipment Financing, Inc. ("CIT").(A)
10.2 First Amendment to the CIT Loan Agreement, dated as of June
26, 1992, by and between JCIC and CIT.(A)
10.3 Second Amendment to the CIT Loan Agreement, dated as of
December 22, 1992, by and between JCIC and CIT.(A)
10.4 Agreement of Lease, dated as of June 1, 1988, by and between
1185 Avenue of the Americas Associates ("1185 Associates") and
JCIC.(A)
10.5 Lease Modification and Extension Agreement, dated as of April
2, 1991, by and between 1185 Associates and JCIC.(A)
10.6 Third Amendment to the CIT Loan Agreement, dated as of August
6, 1993, by and between JCIC and CIT.(B)
10.7 Trademark License Agreement, dated as of May 9, 1988, by and
between J.P. Stevens and JPS Acquisition Corp. (predecessor to
the Company.)(B)
10.8 Omnibus Real Estate Closing Agreement, dated as of May 9,
1988, by and among J.P. Stevens, JPS Acquisition Corp., JPS
Acquisition Automotive Products Corp., JPS Acquisition Carpet
Corp., JPS Acquisition Industrial Fabrics Corp., JPS
Acquisition Converter and Yarn Corp. and JPS Acquisition
Elastomerics Corp.(B)
10.9 Purchase Agreement, dated as of April 24, 1988, by and among
JPS Holding Corp., the Company, Odyssey Partners, West Point-
Pepperell, Inc., STN Holdings Inc., Magnolia Partners, L.P.
and J.P. Stevens.(B)
10.10 Asset Purchase Agreement, dated as of May 25, 1994, by and
among the Company, JAPC, JCIC, JPS Auto Inc., a Delaware
corporation, and Foamex International Inc., a Delaware
corporation.(C)
10.11 Fourth Amended and Restated Credit Agreement (the "Existing
Credit Agreement"), dated as of June 24, 1994, by and among
the Company, JCIC, JPS Elastomerics Corp., a Delaware
corporation ("JEC"), JPS Carpet Corp., a Delaware corporation
("JCC"), the financial institutions listed on the signature
pages thereof, Citibank, N.A. ("Citibank") as Agent and
Administrative Agent, and General Electric Capital Corporation
("GECC") as Co-Agent and Collateral Agent.(D)
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
10.12 First Amendment to the Existing Credit Agreement, dated as of
November 4, 1994, by and among the Company, JCIC, JEC, JCC, the
financial institutions listed on the signature pages thereof,
Citibank, as Agent and Administrative Agent, and GECC, as Co-
Agent and Collateral Agent.(E)
10.13 Second Amendment to the Existing Credit Agreement, dated as of
December 21, 1994, by and among the Company, JCIC, JEC, JCC,
the financial institutions listed on the signature pages
thereof, Citibank, as Agent and Administrative Agent, and GECC
as Co-Agent and Collateral Agent.(E)
10.14 Fourth Amendment to CIT Loan Agreement, dated as of December
29, 1994, by and between JCIC and CIT.(E)
10.15 Lease Modification and Extension Agreement, dated as of April
30, 1993, by and between 1185 Associates and JCIC.(E)
10.16 Third Amendment to Existing Credit Agreement, dated as of May
31, 1995 by and among the Company, JCIC, JEC, JCC, the
financial institutions listed on the signature pages thereof,
Citibank, as Agent and Administrative Agent, and GECC, as Co-
Agent and Collateral Agent.(F)
10.17 Fourth Amendment to Existing Credit Agreement, dated as of
October 28, 1995 by and among the Company, JCIC, JEC, JCC, the
financial institutions listed on the signature pages thereof,
Citibank, as Agent and Administrative Agent, and GECC, as Co-
Agent and Collateral Agent.(G)
10.18 Lease Modification and Extension Agreement, dated as of
November 17, 1994, by and between 1185 Associates and JCIC.(G)
10.19 Asset Transfer Agreement, dated as of November 16, 1995, by and
among the Company, JPS Carpet Corp., a Delaware corporation,
Gulistan Holdings Inc. ("GHI"), a Delaware corporation and
Gulistan Carpet Inc., a Delaware Corporation and wholly -owned
subsidiary of GHI.(H)
10.20 Fifth Amendment to the Fourth Amended & Restated Credit
Agreement, dated as of May 6, 1996, by and among the Company,
JPS Elastomerics Corp., JPS Converter and Industrial Corp., JPS
Auto Inc., JPS Carpet Corp., International Fabrics, Inc., the
financial institutions listed on the signature pages thereof,
Citibank, N.A. as agent and Administrative Agent and General
Electric Capital Corporation as Co-Agent and Collateral
Agent.(I)
10.21 Sixth Amendment to the Fourth Amended & Restated Credit
Agreement, dated as of May 15, 1996, by and among the Company,
JPS Elastomerics Corp., JPS Converter and Industrial Corp., JPS
Auto Inc., JPS Carpet Corp., International Fabrics, Inc., the
financial institutions listed on the signature pages thereof,
Citibank, N.A. as agent and Administrative Agent and General
Electric Capital Corporation as Co-Agent and Collateral
Agent.(I)
10.22 Seventh Amendment to the Fourth Amended and Restated Credit
Agreement, dated as of July 22, 1996, by and among the Company,
JPS Elastomerics Corp., JPS Converter and Industrial Corp., JPS
Auto Inc., JPS Carpet Corp., International Fabrics, Inc., the
financial institutions listed on the signature pages thereof,
Citibank, N.A. as agent and Administrative Agent and General
Electric Capital Corporation as Co-Agent and Collateral
Agent.(J)
10.23 Eighth Amendment to the Fourth Amended and Restated Credit
Agreement, dated as of September 6, 1996, by and among the
Company, JPS Elastomerics Corp., JPS Converter and Industrial
Corp., JPS Auto Inc., JPS Carpet Corp., International Fabrics,
Inc., the financial institutions listed on the signature pages
thereof, Citibank, N.A. as agent and Administrative Agent and
General Electric Capital Corporation as Co-Agent and Collateral
Agent.(J)
10.24 Employment Agreement dated October 9, 1997, between the Company
and Jerry E. Hunter. (P)
10.25 Employment Agreement dated October 9, 1997, between the Company
and David H. Taylor. (P)
EXHIBIT
NUMBER DESCRIPTION PAGE
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10.26 Employment Agreement dated October 9, 1997, between the Company
and Monnie L. Broome.(P)
10.27 Employment Agreement, dated May 1, 1993 and amended September
11, 1995 between the Company and Carl Rosen.(J)
10.28 Employment Agreement, dated December 23, 1991 and amended
August 20, 1996 and December 23, 1996 between the Company and
Bruce Wilby.(G)
10.29 Asset Purchase Agreement, dated as of September 30, 1996
between Elastomer Technologies Group, Inc. a Delaware
Corporation, and JPS Elastomerics Corp., a Delaware Corporation
and wholly-owned subsidiary of the Company.(G)
10.30 Receivables Purchase Agreement dated as of September 30, 1996
between The Bank of New York Commercial Corporation, a New York
Corporation and JPS Elastomerics Corp., a Delaware Corporation
and wholly-owned subsidiary of the Company.(G)
10.31 Registration Rights Agreement, dated as of October 9, 1997, by
and among JPS and the holders of JPS's Common Stock.(P)
10.32 Ninth Amendment to Existing Credit Agreement, dated as of
February 21, 1997, by and among JPS, JCIC, JEC, JCC, the
financial institutions listed on the signature pages thereof,
Citibank, as agent and Administrative Agent and GECC as Co-
Agent and Collateral Agent.(N)
10.33 Tenth Amendment to the Existing Credit Agreement, dated as of
April 29, 1997, by and among JPS, JCIC, JEC, JCC, the financial
institutions listed on the signature pages thereof, Citibank,
as agent and Administrative Agent and GECC as Co-Agent and
Collateral Agent.(O)
10.34 Eleventh Amendment to the Existing Credit Agreement, dated as
of May 15, 1997, by and among JPS, JCIC, JEC, JCC, the
financial institutions listed on the signature pages thereof,
Citibank, as agent and Administrative Agent and GECC as Co-
Agent and Collateral Agent.(O)
10.35 Credit Facility Agreement, dated as of October 9, 1997, by and
among JPS, C&I, Elastomerics, the financial institutions listed
on the signature pages thereto, and the agent and co-agent
party thereto.(M)
10.36 1997 Incentive and Capital Accumulation Plan dated as of
October 9, 1997.(P)
10.37 Warrant Agreement dated as of October 9, 1997.(P)
21.1 List of Subsidiaries of the Company.(E)
23.1 Consent of Deloitte & Touche LLP.(Q)
24.1 Power of Attorney relating to JPS (included as part of the
signature page hereof).(M)
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(A) Previously filed as an exhibit to Registration Statement No. 33-58272 on
Form S-1, declared effective by the SEC on July 26, 1993, and incorporated
herein by reference.
(B) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended October 30, 1993.
(C) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended April 30, 1994.
(D) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended July 30, 1994.
(E) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended October 29, 1994.
(F) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended April 29, 1995.
(G) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended November 2, 1996.
(H) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated December 1, 1995.
(I) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended April 27, 1996.
(J) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended July 27, 1996.
(K) Previously filed as an exhibit to JPS's Current Report on Form 8-K dated
July 2, 1997.
(L) Previously filed as an exhibit JPS's Registration Statement on Form 8-A
filed on September 8, 1997.
(M) Previously filed.
(N) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended February 1, 1997.
(O) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended May 3, 1997.
(P) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended November 1, 1997.
(Q) Filed herein.