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JPS INDUSTRIES, INC.
QUARTERLY REPORT ON FORM 10-Q
UNDER THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED JANUARY 29, 2000
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 29, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________.
Commission File Number 33-27038
JPS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 57-0868166
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
555 North Pleasantburg Drive, Suite 202,
Greenville, South Carolina 29607
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(Zip Code)
(Address of principal executive offices)
Registrant's telephone number (864) 239-3900
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 10,000,000 shares of the
Company's Common Stock were outstanding as of February 29, 2000.
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JPS INDUSTRIES, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION Number
Item 1. Condensed Consolidated Balance Sheets
January 29, 2000 (Unaudited) and October 30, 1999............................ 3
Condensed Consolidated Statements of Operations
Three Months Ended January 29, 2000 and
January 30, 1999 (Unaudited)................................................. 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended January 29, 2000 and
January 30, 1999 (Unaudited)................................................. 5
Notes to Condensed Consolidated Financial Statements (Unaudited)................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................... 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk....................... 14
PART II. OTHER INFORMATION ......................................................................... 15
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Item 1. Financial Statements
JPS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
January 29, October 30,
2000 1999
---------------- ----------------
(Unaudited)
ASSETS
Current assets:
Cash $ 1,210 $ 1,343
Accounts receivable 45,940 55,529
Inventories (Note 2) 35,995 36,250
Prepaid expenses and other (Note 5) 6,553 4,711
Net assets held for sale (Note 4) 354 504
---------------- ----------------
Total current assets 90,052 98,337
Property, plant and equipment, net 83,672 85,792
Reorganization value in excess of amounts allocable
to identifiable assets 30,636 31,066
Other assets 11,196 11,661
---------------- ----------------
Total assets $ 215,556 $ 226,856
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,536 $ 17,064
Accrued interest 823 865
Accrued salaries, benefits and withholdings 6,523 6,438
Other accrued expenses 7,438 8,984
Current portion of long-term debt (Note 3) 975 975
---------------- ----------------
Total current liabilities 32,295 34,326
Long-term debt (Note 3) 68,527 79,806
Other long-term liabilities 19,265 18,071
---------------- ----------------
Total liabilities 120,087 132,203
Shareholders' equity:
Common stock 100 100
Additional paid-in capital 124,046 123,942
Accumulated deficit (28,677) (29,389)
---------------- ----------------
Total shareholders' equity 95,469 94,653
Total liabilities and shareholders' equity $ 215,556 $ 226,856
================ ================
Note: The condensed consolidated balance sheet at October 30, 1999 has been
extracted from the audited financial statements.
See notes to consolidated financial statements.
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JPS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Three Months Ended
------------------------------------
January 29, January 30,
2000 1999
---------------- ----------------
Net sales $ 64,749 $ 70,384
Cost of sales 53,020 59,488
---------------- ----------------
Gross profit 11,729 10,896
Selling, general and administrative expenses 8,472 8,897
Other expense (income), net (13) (139)
---------------- ----------------
Operating profit 3,270 2,138
Interest expense (1,917) (1,890)
---------------- ----------------
Income before income taxes and discontinued operations 1,353 248
Provision (benefit) for income taxes 641 (145)
---------------- ----------------
Income before discontinued operations 712 393
Loss from discontinued operations - (536)
---------------- ----------------
Net income (loss) $ 712 $ (143)
================ ================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 10,000,000 10,000,000
================= ================
Basic and diluted income (loss) per common share:
Income before discontinued operations $ 0.07 $ 0.04
Loss from discontinued operations - (0.05)
----------------- -----------------
Net income (loss) $ 0.07 $ (0.01)
================= =================
See notes to condensed consolidated financial statements.
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JPS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
------------------------------------
January 29, January 30,
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 712 $ (143)
---------------- ----------------
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Loss from discontinued operations - 536
Depreciation and amortization, except amounts included in
interest expense 2,693 2,655
Interest accretion and debt issuance cost amortization 135 78
Other, net 119 554
Changes in assets and liabilities:
Accounts receivable 9,589 10,879
Inventories 255 (4,297)
Prepaid expenses and other assets (1,272) (561)
Accounts payable (528) (2,505)
Accrued expenses and other liabilities (89) (2,341)
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Total adjustments 10,902 4,998
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Net cash provided by operating activities 11,614 4,855
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CASH FLOWS USED IN INVESTING ACTIVITIES
Property and equipment additions (377) (1,581)
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CASH FLOWS FROM FINANCING ACTIVITIES
Financing costs incurred (90) -
Revolving credit facility borrowings (repayments), net (11,057) (3,667)
Repayment and purchases of other long-term debt, net (223) 1,027
---------------- -----------------
Net cash used in financing activities (11,370) (2,640)
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NET INCREASE (DECREASE) IN CASH (133) 634
CASH AT BEGINNING OF PERIOD 1,343 1,549
---------------- ----------------
CASH AT END OF PERIOD $ 1,210 $ 2,183
================ ================
SUPPLEMENTAL INFORMATION ON CASH FLOWS
FROM CONTINUING OPERATIONS:
Interest paid $ 1,824 $ 1,882
Income taxes paid, net 80 299
Non-cash financing activities:
Capital lease obligation - 1,307
See notes to consolidated financial statements.
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JPS INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Unless the context otherwise requires, the terms "JPS" and the
"Company", as used in these condensed consolidated financial
statements, mean JPS Industries, Inc. and JPS Industries, Inc.
together with its subsidiaries, respectively.
The Company has prepared, without audit, the interim condensed
consolidated financial statements and related notes. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and cash flows at January 29, 2000 and for all
periods presented have been made.
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 amount of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the fiscal year ended
October 30, 1999 ("Fiscal 1999"). The results of operations for the
interim period are not necessarily indicative of the operating results
for the full year. Certain amounts have been reclassified to conform
to the current presentation.
2. Inventories (in thousands):
January 29, October 30,
2000 1999
---------------- ----------------
Raw materials and supplies $ 7,043 $ 6,640
Work-in-process 13,073 11,809
Finished goods 15,879 17,801
---------------- ----------------
Total $ 35,995 $ 36,250
================ ================
3. Long-Term Debt (in thousands):
January 29, October 30,
2000 1999
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Senior credit facility, revolving line of credit $ 64,337 $ 75,394
Equipment financing 1,033 1,125
Capital lease obligation 4,132 4,262
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Total 69,502 80,781
Less current portion (975) (975)
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Long-term portion $ 68,527 $ 79,806
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4. Discontinued Operations and Certain Other Changes
During Fiscal 1999, the Company took certain actions to reposition
itself from a textile-oriented enterprise to a diversified
manufacturing and marketing company that is focused on a broad array
of industrial applications. This was accomplished by successfully
streamlining the ongoing apparel fabrics business and exiting three
other textile businesses while intensifying its focus on the two
businesses with growth potential, JPS Elastomerics and JPS Glass. On
March 2, 1999, the Company exited its home fashions woven fabrics
business by completing the sale of its Boger City manufacturing plant.
This business accounted for sales of $4.1 million and operating income
of $0.1 million in the three months ended January 30, 1999. The
Company closed its Angle manufacturing facility located in Rocky
Mount, Virginia, in its 1999 third fiscal quarter and sold the plant
on September 3, 1999, thereby streamlining the apparel fabrics
business. On July 23, 1999, the Company sold its Stanley, North
Carolina plant, thereby exiting its yarn sales textile business. This
business generated sales of $3.2 million and operating loss of $0.2
million in the three months ended January 30, 1999. On August 27,
1999, the Company sold its Borden manufacturing plant located in
Kingsport, Tennessee, thereby exiting its cotton commercial products
textile business. This business generated sales of $5.4 million and
operating loss of $0.3 million in the three months ended January 30,
1999. The results of operations for the yarn sales business and cotton
commercial products business for the three months ended January 30,
1999 have been included in the accompanying condensed consolidated
financial statements as discontinued operations.
5. Contingencies
The Company has provided for all estimated future costs associated
with certain roofing products including those sold by the Predecessor
Stevens Division operations. The liability for future costs associated
with these 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. The liability for such
products was approximately $2.4 million at January 29, 2000 and $2.4
million at October 30, 1999. The Company records the costs of meeting
these obligations as a reduction of the balance of the recorded
liability and, accordingly, such costs are not reflected in results of
operations. Management updates its assessment of the adequacy of the
remaining reserve for these 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.
At January 29, 2000, the Company had net operating loss carryforwards
for regular federal income tax purposes of approximately $52.5 million
(subject to adjustment by the Internal Revenue Service). The net
operating loss carryforwards expire in years 2003 through 2019. The
Company also has federal alternative minimum tax net operating loss
carryforwards of approximately $61.5 million (subject to adjustment)
which expire in 2004 through 2019. In addition, the Company has
alternative minimum tax credits of approximately $1.8 million that can
be carried forward indefinitely and used as a credit against regular
federal taxes, subject to limitation. The Company utilized
approximately $0.5 million of net operating losses during the three
month period ended January 29, 2000.
The Company's ability to utilize its net operating loss carryforwards
realized prior to completion of the Plan of Reorganization 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 Plan of
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 of approximately $30.5 million has
been provided.
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The Company is exposed to a number of asserted and unasserted
potential claims encountered in the normal course of business. Except
as discussed below, management believes that none of this litigation,
if determined unfavorable to the Company, would have a material
adverse effect on the financial condition or results of operations of
the Company.
In June 1997, Sears Roebuck and Co. ("Sears") filed a multi-count
complaint against JPS Elastomerics Corp. ("Elastomerics"), a
wholly-owned subsidiary of JPS, and two other defendants alleging an
unspecified amount of damages in connection with the alleged premature
deterioration of the Company's roofing membrane installed on
approximately 150 Sears stores. No trial date has been established.
The Company believes it has meritorious defenses to the claims and
intends to defend the lawsuit vigorously. Management, however, cannot
determine the outcome of the lawsuit or estimate the range of loss, if
any, that may occur. Accordingly, no provision has been made for any
loss which may result. An unfavorable resolution of the actions could
have a material adverse effect on the business, results of operations
or financial condition of the Company.
6. Business Segments
Effective in Fiscal 1999, the Company adopted SFAS No. 131. The
Company's reportable segments are Elastomerics, Glass and Apparel. The
reportable segments were determined using the Company's method of
internal reporting, which divides and analyzes the business by the
nature of the products manufactured and sold, the customer base,
manufacturing process, and method of distribution. The Elastomerics
segment principally manufactures and markets extruded products
including high performance roofing products, environmental
geomembranes, and various polyurethane products. The Glass segment
produces and markets specialty substrates mechanically formed from
fiberglass and other specialty yarns for a variety of applications
such as printed circuit boards, filtration, advanced composites,
building products, defense, and aerospace. The Apparel segment
produces and markets woven fabrics, principally cellulosic-based
fibers, for use in a broad range of consumer apparel products for use
primarily in the women's dress and sportswear markets.
During the process of implementing SFAS No. 131, the Company
identified two other segments which met its criteria as reportable
segments. These two segments are the cotton commercial products
segment and the yarn sales segment. As discussed in Note 4, the
Company has exited these segments.
The Company evaluates the performance of its reportable segments and
allocates resources principally based on the segment's operating
profit, defined as earnings before interest and taxes. In the fourth
quarter of Fiscal 1999, the Company changed its presentation of
business segment information to include allocation of all indirect
corporate expenses to each business segment. Such allocation is based
on management's analysis of the costs attributable to each segment.
All periods presented have been restated to reflect the new
presentation. The following table presents certain information
regarding the business segments (in thousands):
Three Months Ended
----------------------------
January 29, January 30,
2000 1999
------------ -------------
Net sales:
Elastomerics $ 18,308 $ 17,837
Glass 18,066 19,179
Apparel 29,989 35,608
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66,363 72,624
Less intersegment sales (1) (1,614) (2,240)
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Net sales $ 64,749 $ 70,384
============ =============
(Table continued on next page)
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(Table continued from previous page)
Three Months Ended
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January 29, January 30,
2000 1999
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Operating profit (loss) (2):
Elastomerics $ 1,552 $ 1,203
Glass 1,054 1,095
Apparel 664 (160)
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Operating profit 3,270 2,138
Interest expense (1,917) (1,890)
------------ -------------
Income before income taxes
and discontinued operations $ 1,353 $ 248
============ =============
January 29, January 30,
2000 1999
------------ -------------
Identifiable assets:
Elastomerics $ 55,031 $ 55,673
Glass 60,997 61,975
Apparel 101,732 110,081
Eliminations (2,204) (873)
------------ -------------
Total assets
$ 215,556 $ 226,856
============ =============
(1) Intersegment sales consist primarily of the transfer of certain scrim
products manufactured by the Glass segment to the Elastomerics
segment. All intersegment revenues and profits are eliminated in the
accompanying condensed consolidated financial statements.
(2) The operating profit (loss) of each business segment includes a
proportionate share of indirect corporate expenses. JPS's parent
company corporate group is responsible for finance, strategic
planning, legal, tax, audit, and regulatory affairs for the business
segments. Such expense consists primarily of salaries and employee
benefits, professional fees, and amortization of reorganization value
in excess of amounts allocable to identifiable assets.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This quarterly report on Form 10-Q contains forward-looking information
statements that involve risks and uncertainties. Such forward looking
statements include, but are not limited to, statements regarding the Company?s
expectations of the impact of the year 2000 issue on results of operations. The
Company's actual results, performance or achievements could differ materially
from the results expressed in, or implied by, these forward-looking statements,
which are made only as of the date hereof.
The following should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing in Item 7
of the Company's Annual Report on Form 10-K for the fiscal year ended October
30, 1999. As discussed in Note 6 of the Notes to Condensed Consolidated
Financial Statements included in Item 1 herein, effective in the quarter ended
May 1, 1999, the Company adopted SFAS No. 131 "Disclosures About Segments of an
Enterprise and Related Information." Accordingly, segment information for prior
periods has been restated to conform to the current presentation.
(In Thousands)
Three Months Ended
-----------------------------
January 29, January 30,
2000 1999
------------ -------------
Net sales:
Elastomerics $ 18,308 $ 17,837
Glass 18,066 19,179
Apparel 29,989 35,608
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66,363 72,624
Less intersegment sales (1,614) (2,240)
------------- --------------
Net sales $ 64,749 $ 70,384
============= ==============
Operating profit (loss):
Elastomerics $ 1,552 $ 1,203
Glass 1,054 1,095
Apparel 664 (160)
------------- --------------
Operating profit 3,270 2,138
Interest expense (1,917) (1,890)
------------- --------------
Income before income taxes and discontinued operations $ 1,353 $ 248
============= ==============
RESULTS OF OPERATIONS
Introduction
The Company has repositioned itself from one that was largely textile-oriented
to a diversified manufacturing and marketing company that is focused on a broad
array of industrial applications. This has been accomplished by successfully
streamlining the ongoing apparel fabrics business and exiting three other
textile businesses, while intensifying its focus on the two businesses with
growth potential, JPS Glass and JPS Elastomerics. On March 2, 1999, the Company
sold its Boger City manufacturing plant, thereby exiting the home fashions
woven fabrics business.
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The Company closed its Angle manufacturing facility in the third quarter and
sold the remaining plant on September 3, 1999, thereby streamlining the apparel
business. On July 23, 1999, the Company sold its Stanley manufacturing plant,
thereby exiting its yarn sales segment. On August 27, 1999, the Company sold
its Borden manufacturing plant, thereby exiting its cotton commercial products
segment. The yarn sales and cotton commercial products segments are reported in
the accompanying condensed consolidated financial statements as discontinued
operations. The Company changed its name from JPS Textile Group, Inc. to JPS
Industries, Inc. and is now focusing solely on improving the performance and
profitability of its remaining core businesses: JPS Elastomerics, JPS Glass and
JPS Apparel.
Three Months Ended January 29, 2000 (the "2000 First Quarter") Compared to the
Three Months Ended January 30, 1999 (the "1999 First Quarter")
Consolidated net sales decreased $5.6 million, or 8.0%, from $70.4 million in
the 1999 first quarter to $64.8 million in the 2000 first quarter. Operating
profit increased $1.2 million from $2.1 million in the 1999 first quarter to
$3.3 million in the 2000 first quarter. Included in the 1999 first quarter are
sales of $4.1 million and operating profit of $0.1 million related to the home
fashions woven fabrics business which was sold in March 1999.
Net sales in the 2000 first quarter in the Elastomerics segment, which includes
single-ply roofing, environmental membrane and extruded urethane products,
increased $0.5 million, or 2.8%, from $17.8 million in the 1999 first quarter
to $18.3 million in the 2000 first quarter. This increase is primarily
attributable to an improvement in demand for the Company's extruded urethane
products, which have a wide variety of end-uses including applications in
athletic, automotive, medical industrial, and consumer products industries, and
Stevens(R) Roofing System accessory products.
Operating profit in the 2000 first quarter for the Elastomerics segment
increased $0.3 million from $1.2 million in the 1999 first quarter to $1.5
million in the 2000 first quarter. This increase resulted principally from the
improvement in extruded urethane sales volume, implementation of cost reduction
measures, and lower selling, general and administrative costs.
Net sales in the Glass segment, which includes mechanically-formed substrates
constructed of synthetics and fiberglass for electronic components,
construction products, reinforced composites, industrial insulation, and
filtration applications, had an expected decrease of $1.1 million, or 5.7%,
from $19.2 million in the 1999 first quarter to $18.1 million in the 2000 first
quarter. The decrease is primarily attributable to (i) a reduction in
intercompany sales of scrim related to the Company's overall focus on inventory
management and (ii) lower sales of substrates used in electrical products
resulting from the Company's shift of production to a more favorable
lightweight substrate mix positioning this business for growth.
Operating profit in the 2000 first quarter for the Glass segment was $1.1
million for both the 1999 first quarter and the 2000 first quarter. Although
sales were lower, operating profit remained constant because of significant
improvements in manufacturing efficiencies, inventory reduction, waste
reduction and quality control.
Net sales in the Apparel segment, which includes unfinished woven apparel
fabrics primarily for women's wear, experienced a planned decrease of $5.6
million, or 15.7%, from $35.6 million in the 1999 first quarter to $30.0
million in the 2000 first quarter. Apparel fabrics are produced chiefly from
yarns consisting of acetate, rayon and Tencel(R) fibers. As discussed above,
the Company significantly streamlined its apparel fabrics business by closing a
manufacturing facility in its 1999 third fiscal quarter.
Operating profit in the 2000 first quarter for the Apparel segment increased
$0.8 million from an operating loss of $0.1 million in the 1999 first quarter
to an operating profit of $0.7 million in the 2000 first quarter. This increase
is primarily attributable to improving product mix, manufacturing efficiencies,
inventory reductions, and lower selling, general and administrative costs.
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Intersegment sales consist primarily of the transfer of certain scrim products
manufactured by the Glass segment to the Elastomerics segment. All intersegment
sales and profits are eliminated in the accompanying condensed consolidated
financial statements.
Interest expense in the 2000 first quarter was consistent with the 1999 first
quarter. Although interest rates were higher in the 2000 first quarter, the
Company's debt balance was reduced by approximately $28.0 million at January
29, 2000 compared to January 30, 1999.
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 October 9, 1997, JPS Elastomerics and JPS C&I (the
"Borrowing Subsidiaries") and JPS entered into the Credit Facility Agreement
(the "Credit Agreement"), by and among the financial institutions party
thereto, Citibank, as agent, and Bank of America, 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) $100 million and (b) a specified borrowing base (the "Borrowing
Base"), which is based upon eligible receivables, eligible inventory, and a
specified dollar amount (currently $33,250,000 (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 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. The maturity date of the Revolving Credit Facility is
October 9, 2002. Subsequent to October 9, 1997, the Credit Agreement has been
amended to, among other things (i) modify the financial covenants relating to
minimum levels of EBITDA, minimum interest coverage ratio, minimum fixed charge
coverage ratio, and maximum capital expenditures, (ii) modify the interest rate
margin and unused commitment fees, (iii) provide additional reduction of the
fixed asset portion of the Borrowing Base, and (iv) allow the Company to
repurchase shares of its common stock subject to certain limitations. As of
January 29, 2000, the Company was in compliance with these restrictions and all
financial covenants, as amended. All loans outstanding under the Revolving
Credit Facility, as amended, bear interest at either the Eurodollar Rate (as
defined in the Credit Agreement) or the Base Rate (as defined in the Credit
Agreement) plus an applicable margin (the "Applicable Margin") based upon the
Company's fixed charge coverage ratio (which margin will not exceed 2.50% for
Eurodollar Rate borrowings and 1.00% for Base Rate borrowings). The weighted
average interest rate at January 29, 2000 is approximately 8.4%. The Company
pays a fee of .25% per annum and 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 29, 2000, unused
and outstanding letters of credit totaled $1,355,000. The outstanding letters
of credit reduce the funds available under the Revolving Credit Facility. At
January 29, 2000, the Company had approximately $21.2 million available for
borrowing under the Revolving Credit Facility.
During the 2000 first quarter, cash provided by operating activities was $11.6
million. Working capital decreased from $64.0 million at October 30, 1999 to
$57.8 million at January 29, 2000. Accounts receivable decreased by $9.6
million from October 30, 1999 to January 29, 2000 due to lower sales in January
2000 compared to October 1999. Inventories were consistent with the October 30,
1999 balances. Prepaid and other assets increased $1.8 million due to unbilled
costs under the Company's warranty management program. Accounts payable
decreased by $0.6 million from October 30, 1999 to January 29, 2000 primarily
as a result of the slowdown in sales volume in January 2000 compared to October
1999 and the corresponding decrease in production requirements. Other accrued
expenses decreased $1.6 million due to certain cash payments related to
discontinued operations.
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The principal use of cash in the 2000 first quarter was for capital
expenditures of $0.4 million and net repayment of borrowings under the
Revolving Credit Facility of $11.1 million. As of January 29, 2000, the Company
had commitments of $0.8 million for capital expenditures. The Company
anticipates making capital expenditures in Fiscal 2000 of approximately $5.0
million and expects such amounts to be funded by cash from operations, bank and
other equipment financing services. Also, on February 29, 2000, the Company
announced a stock repurchase program for up to $8 million of its outstanding
common stock. Repurchases under this program will be made from time to time in
open market or privately negotiated transactions consistent with the Credit
Agreement. The actual number of shares purchased, the timing of purchases and
the prices paid will depend on future market conditions.
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.
YEAR 2000 COMPLIANCE
The Company completed its preparation for the Year 2000 issue and, as of this
date, there have been no failures of IT or process systems causing significant
disruptions of Company business. Further, we are aware of no third party
failures that have significantly impacted Company systems or processes. It is
possible, however, that additional problems may manifest themselves in the next
several months, particularly with systems that will be used for the first time
during the remainder of this calendar year. To preserve compliance of
remediated and tested systems, testing of IT and process systems will continue
through March of this year. The incremental cost of addressing the Year 2000
issue was approximately $130,000, substantially all of which had been spent as
of January 29, 2000.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement requires companies to
record derivatives on the balance sheet as assets or liabilities, measured at
fair value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. SFAS No. 133 will be effective for
the Company in Fiscal 2001. Management of the Company has not yet evaluated the
effects of this statement on the Company's financial position, results of
operations or cash flows.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest rate risk. The Company has exposure to interest rate changes primarily
relating to interest rate changes under its Revolving Credit Facility. The
Company's Revolving Credit Facility bears interest at rates which vary with
changes in (i) the London Interbank Offered Rate (LIBOR) or (ii) a rate of
interest announced publicly by Citibank in New York, New York. The Company does
not speculate on the future direction of interest rates. As of January 29,
2000, approximately $64.3 million of the Company's debt bore interest at
variable rates. The Company believes that the effect, if any, of reasonably
possible near-term changes in interest rates on the Company's consolidated
financial position, results of operations or cash flows would not be
significant.
Raw material price risk. A portion of the Company's raw materials are staple
goods that are affected by raw material pricing and are, therefore, subject to
price volatility caused by weather, production problems, delivery difficulties,
and other factors which are outside the control of the Company. In most cases,
essential raw materials are available from several sources. For several raw
materials, however, branded goods or other circumstances may prevent such
diversification and an interruption of the supply of these raw materials could
have a significant impact on the Company's ability to produce certain products.
The Company has established long-term relationships with key suppliers and may
enter into purchase contracts or commitments of one year or less for certain
raw materials. Such agreements generally include a pricing schedule for the
period covered by the contract or commitment. The Company believes that any
changes in raw material pricing, which cannot be adjusted for by changes in its
product pricing or other strategies, would not be significant.
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JPS INDUSTRIES, INC.
PART II - OTHER INFORMATION
Item
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1. Legal Proceedings None
2. Changes in Securities None
3. Defaults Upon Senior Securities None
4. Submission of Matters to a Vote of Security Holders None
5. Other Information None
6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
(10) Fourth Amendment to the Credit Facility Agreement, dated as of
February 29, 2000, by and among JPS, C&I, Elastomerics, the
financial institutions listed on the signature pages thereto,
and the agent and co-agent thereto.
(11) Statement re: Computation of Per Share Earnings - not required
since such computation can be clearly determined from the
material contained herein.
(27) Financial Data Schedule (for SEC use only)
(b) Current Reports on Form 8-K:
No reports on Form 8-K were filed for the fiscal quarter ended
January 29, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JPS INDUSTRIES, INC.
Date: March 14, 2000 /s/ L. Allen Ollis
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L. Allen Ollis
Corporate Controller & Secretary
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