1
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, 1994
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 33-58272
JPS TEXTILE GROUP, 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
- ------------------------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (803) 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: 490,000 shares of the
Company's Class A Common Stock and 510,000 shares of Class B Common Stock were
outstanding as of March 11, 1994.
Total number of pages: 11
Exhibit Index on page 11
1
2
JPS TEXTILE GROUP, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION Number
Item 1. Condensed Consolidated Balance Sheets
January 29, 1994 (Unaudited) and October 30, 1993 . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
Three Months Ended January 29, 1994 and
January 30, 1993 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended January 29, 1994 and
January 30, 1993 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2
3
Item 1. Financial Statements
JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
January 29, October 30,
1994 1993
------------- -------------
(Unaudited)
ASSETS
Current Assets:
Cash $ 4,716 $ 3,144
Accounts receivable 126,774 151,207
Inventories 100,007 94,439
Prepaid expenses and other 3,288 2,549
---------- ----------
Total current assets 234,785 251,339
Property, plant and equipment, net 306,178 304,330
Excess of cost over fair value of net assets acquired, net 33,178 33,419
Other assets 8,269 9,842
---------- ----------
Total $ 582,410 $ 598,930
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 57,613 $ 66,040
Accrued interest 8,426 16,281
Accrued salaries, benefits and withholdings 18,885 20,512
Other accrued expenses 12,009 14,368
Current portion of long-term debt 10,268 10,522
---------- ----------
Total current liabilities 107,201 127,723
Long-term debt 538,578 526,630
Deferred income taxes 2,684 2,585
Minority interest in consolidated joint venture 7,441 7,424
Other long-term liabilities 23,963 24,664
---------- ----------
Total liabilities 679,867 689,026
---------- ----------
Senior redeemable preferred stock 21,816 21,007
---------- ----------
Shareholders' deficit:
Junior preferred stock 250 250
Common stock 10 10
Additional paid-in capital 35,968 36,777
Deficit (155,501) (148,140)
---------- ----------
Total shareholders' deficit (119,273) (111,103)
---------- ----------
Total $ 582,410 $ 598,930
========== ==========
Note: The condensed consolidated balance sheet at October 30, 1993 has been
extracted from the audited financial statements.
See notes to condensed consolidated financial statements.
3
4
JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Three Months Ended
------------------
January 29, January 30,
1994 1993
---------- ----------
Net sales $ 212,162 $ 190,229
Cost of sales 182,541 163,082
---------- ----------
Gross profit 29,621 27,147
Selling, general and administrative expenses 20,409 18,737
---------- ----------
Income from operations 9,212 8,410
Interest expense 16,247 15,848
Minority interest in consolidated subsidiary (17) (151)
Other income (expense), net (27) (128)
---------- ----------
Loss before cumulative effect of accounting change
and income taxes (7,079) (7,717)
Income taxes 282 290
---------- ----------
Loss before cumulative effect of accounting change (7,361) (8,007)
Cumulative effect of accounting change - (6,654)
---------- ----------
Net loss (7,361) (14,661)
Senior redeemable preferred stock in-kind dividends and
discount accretion 809 696
---------- ----------
Loss applicable to common stock $ (8,170) $ (15,357)
========== ==========
Weighted average common shares outstanding 1,000,000 1,000,000
========== ==========
Loss per common share:
Loss before cumulative effect of accounting change $ (8.17) $ (8.70)
Cumulative effect of accounting change - (6.66)
---------- ----------
Net loss $ (8.17) $ (15.36)
========== ==========
See notes to condensed consolidated financial statements.
4
5
JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
------------------
January 29, January 30,
1994 1993
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (7,361) $(14,661)
-------- --------
Adjustments to reconcile net loss to net cash provided
by operating activities:
Cumulative effect of accounting change - 6,654
Depreciation and amortization, except amounts included
in interest expense 9,683 8,790
Interest accretion and debt issuance cost amortization 3,039 2,923
Other, net 1,389 666
Changes in assets and liabilities:
Accounts receivable 24,433 26,703
Inventory (5,568) (7,647)
Prepaid expenses and other assets (957) (209)
Accounts payable (8,427) (2,722)
Accrued expenses and other liabilities (12,702) (15,036)
-------- --------
Total adjustments 10,890 20,122
-------- --------
Net cash provided by operating activities 3,529 5,461
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment additions (11,217) (10,998)
-------- --------
Net cash used in investing activities (11,217) (10,998)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Financing costs incurred (78) (2,084)
Proceeds from issuance of long-term debt - 5,003
Revolving credit facility borrowings, net 10,313 5,747
Repayment of other long-term debt (975) (1,583)
-------- --------
Net cash provided by financing activities 9,260 7,083
-------- --------
Net increase in cash 1,572 1,546
Cash at beginning of period 3,144 1,732
-------- --------
Cash at end of period $ 4,716 $ 3,278
======== ========
Supplemental cash flow information:
Interest paid $ 21,067 $ 20,948
Income taxes paid 421 343
Non-cash financing activities:
Senior redeemable preferred stock dividends-in-kind 676 636
See notes to condensed consolidated financial statements.
5
6
JPS TEXTILE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. 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, 1994 for all
periods presented have been made.
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 October 30, 1993 Annual Report. The results of
operations for the interim period is not necessarily indicative of the
operating results of the full year.
During the fourth quarter of fiscal 1993, the Company changed,
effective as of the beginning of fiscal 1993, its accounting policy
with respect to postretirement benefits to comply with Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions". This change is more
fully explained in Note 8 of the Notes to Consolidated Financial
Statements in the Company's Annual Report. The fiscal 1993 amounts
included in this report have been restated, where applicable, to
reflect the adoption of these changes as of November 1, 1992. The
effect of the restatement was to increase the net loss for the three
months ended January 30, 1993 form $8,007,000 to $14,661,000 as a
result of the cumulative effect of the accounting change of
$6,654,000. There was no material effect on income from operations
for the three months ended January 30, 1993 as a result of the
accounting change.
2. Inventories (In Thousands):
January 29, October 30,
1994 1993
---- ----
Raw materials $ 19,498 $ 17,560
Work-in-process 38,213 40,289
Finished goods 42,296 36,590
--------- ---------
Total $ 100,007 $ 94,439
========= =========
3. Proposed Sale of the Automotive Products and Synthetic Industrial
Fabrics Operations
On February 22, 1994, the Company announced that it intends to
sell, subject to certain conditions, all of the automotive products and
synthetic industrial fabrics operations of the Company to a newly
formed corporation, JPS Automotive Products Corp. (JPS Automotive),
organized to acquire such assets for approximately $258 million, based
on the mid-point of the price range in the common stock registration
statement of JPS Automotive discussed below, plus 20% of the
outstanding stock of the new corporation. The sale is not expected
to result in a loss to the Company. The transaction is expected to
be financed with the net proceeds from an initial public offering of
6,500,000 shares of common stock of JPS Automotive and the sale of
$150 million aggregate principal amount of Senior Notes of JPS
Automotive.
The sale of the automotive and synthetic industrial fabrics
operations is conditioned, among other things, upon the successful
consummation of the public offerings, which is expected to occur in
April 1994. The Company is required to utilize the net proceeds to
reduce indebtedness in accordance with the terms of its indentures and
credit agreements. Registration statements relating to the offerings
of common stock and senior notes were filed by JPS Automotive with the
Securities and Exchange Commission on
6
7
February 18, 1994, but have not yet become effective.
The automotive products and synthetic industrial fabrics operations, which were
included in the Industrial Fabrics and Products segment, had net sales of
approximately $80 million and $63 million for the 1994 and 1993 first
quarters, respectively. Income before interest and income taxes, prior to
allocated Company charges, was approximately $7 million and $5 million for the
1994 and 1993 first quarters, respectively.
Total assets of the automotive products and synthetic industrial fabric
operations at the end of the first quarter of 1994 and October 30, 1993 were
approximately $166 million and $170 million, respectively. Net assets at
the end of the first quarter of 1994 and October 30, 1993 were approximately
$86 million and $90 million, respectively, after allocating approximately
$31 million (end of first quarter 1994) and $27 million (October 30, 1993)
of the Company's revolving debt to the automotive products and synthetic
industrial operations.
The Company intends to enter into various agreements with JPS Automotive for:
- - Tax sharing - JPS Automotive will pay the Company for certain tax benefits
resulting from the transaction as those tax benefits are realized by JPS
Automotive.
- - Plant sharing - The Company will equitably share certain operating
expenses with JPS Automotive at a plant that will be owned approximately
one-half by the Company and one-half by JPS Automotive.
- - Management services - JPS Automotive will pay the Company for a limited
term for certain financial advisory and business management services.
7
8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing on page 5
of the Company's October 30, 1993 Annual Report.
(In Thousands)
Three Months Ended
------------------
January 29, January 30,
1994 1993
---- ----
NET SALES
Apparel Fabrics and Products $ 60,443 $ 56,940
Industrial Fabrics and Products 111,476 94,092
Home Fashion Textiles 40,243 39,197
-------- -------
Net Sales $ 212,162 $190,229
======== =======
OPERATING PROFIT
Apparel Fabrics and Products $ 4,068 $ 4,277
Industrial Fabrics and Products 6,607 5,065
Home Fashion Textiles 651 1,135
Indirect Corporate Expenses, net (2,081) (2,195)
-------- -------
Operating Profit 9,245 8,282
Minority interest in consolidated
subsidiary and equity in loss of
unconsolidated affiliate (77) (151)
-------- --------
Income before interest expense,
income taxes and cumulative effect
of accounting change $ 9,168 $ 8,131
======== ========
RESULTS OF OPERATIONS
1994 First Quarter Compared to 1993 First Quarter
Consolidated net sales for the 1994 first quarter increased 11.5% to $212.2
million from $190.2 million in the 1993 quarter generally due to increased
sales of automotive related products in the Industrial Fabrics and Products
segment and apparel fabrics. Apparel Fabrics and Products sales increased
6.2% to $60.4 million for the 1994 first quarter from $56.9 million for the
1993 first quarter due to an increase in apparel fabric unit volume.
Partially offsetting the increase in apparel fabric volume was a $0.7 million
decrease in diaper elastic sales to $2.0 million for the 1994 first quarter
from $2.7 million in the 1993 first quarter due to lower shipments to
international customers as certain of those customers were reducing inventory
levels or adapting to changing economic conditions. The 18.5% increase in
Industrial Fabrics and Products sales to $111.5 million for the 1994 first
quarter from $94.1 million for the 1993 first quarter is due to increased
sales of automotive carpeting, upholstery fabric and air bag fabric in 1994.
The Company's increase in sales of automotive related products is a result of
continuing higher car and truck sales to consumers by automobile
manufacturers, incremental business from new model platforms and increasing
airbag usage in automobiles and light trucks during 1994. Home Fashion
Textiles sales increased slightly to $40.2 million for the 1994 first
8
9
quarter from $39.2 million for the 1993 first quarter due to an increase in
carpet unit volume consistent with the carpet industry as a whole. Carpet
sales increased $1.2 million to $31.8 million for the 1994 first quarter
compared to the 1993 first quarter.
Operating profits in the 1994 first quarter increased 11.6% to $9.2 million
from $8.3 million for the 1993 first quarter. Profits from Apparel Fabrics
and Products of $4.1 million for the 1994 first quarter declined $0.2 million,
or 4.9%, from the 1993 first quarter due to less favorable fabric selling
prices and lower international sales of diaper elastic. Average selling
prices for apparel greige goods declined approximately 3% as a result of an
over supply of goods in the market. Also, imports from eastern Europe, Asia
and South America continue to hurt the spun apparel fabrics' pricing. Diaper
elastic profits declined $0.3 million from $0.2 million in the 1993 first
quarter to a loss of $0.1 million in the 1994 first quarter as a result of the
decline in international sales of diaper elastic and a decline in profit
margins due to lower production levels. Home Fashion Textiles experienced a
42.6% decrease in operating profits in the 1994 first quarter to $0.7 million
from $1.1 million in the 1993 first quarter due to a less favorable product
mix of home furnishing fabric sales, lower average selling prices for carpet
resulting from promotional pricing for a new carpet product and the effect of
a one week shut down of the carpet operations in January 1994 to control
inventory levels. Offsetting the decrease in operating profits for apparel
and home fashion products was a $1.5 million (30.4%) increase in operating
profits for Industrial Fabrics and Products to $6.6 million in the 1994 first
quarter from $5.1 million in the 1993 first quarter. This increase is a
result of the increased sales and improved manufacturing efficiencies for
automotive related products. Operating profits for automotive related
products increased $2.4 million from $4.3 million for the 1993 first quarter
to $6.7 million for the 1994 first quarter. This profit improvement was
partially offset by a $0.5 million decline in profits on extruded specialty
urethane products from $1.0 million on sales of $3.9 million for the 1993
first quarter to $0.5 million on sales of $4.0 million for the 1994 first
quarter primarily as a result of changes in product mix which reduced average
profit margins and negatively impacted manufacturing efficiency.
Interest expense increased 2.5% to $16.2 million for the 1994 first quarter
from $15.8 million for the 1993 first quarter due to an increase in average
debt balances in 1994. Indirect corporate expenses declined slightly by $0.1
million to $2.1 million for the 1994 first quarter as compared to the 1993
first quarter.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased approximately 3.2% to $127.6 million at January 29,
1994 from $123.6 million at October 30, 1993. Accounts receivable declined
$24.4 million (16.2%) due to the seasonally lower sales in the first quarter
of the fiscal year than in the fourth quarter. Inventories increased $5.6
million (5.9%) from October 30, 1993 to January 29, 1994. The Company has
rebuilt inventory levels somewhat from last year end's level which is
typically lower than the rest of the year due to the seasonally higher fourth
quarter sales. Accounts payable declined $8.4 million during the 1994 first
quarter due to the seasonally lower level of activity in the first quarter of
the fiscal year. Accrued interest decreased $7.9 million during the 1994
first quarter due to variances in the scheduled timing of interest payment due
dates.
The Company's sources of liquidity for operations and expansion are funds
generated internally and borrowings under the Company's line of credit, a
$132.3 million revolving credit facility. Revolving credit facility
borrowings were used to provide funds needed for the working capital increase
discussed above, capital expenditures and financing costs to the extent such
funds were not provided for by the net cash flow from operations during the
1994 first quarter. The Company had $29.8 million available for borrowing
under the revolving credit agreement on January 30, 1994. Borrowings under
the revolving line of credit are made or repaid on a daily basis in amounts
equal to the net cash requirements for that business day, thereby reducing net
borrowings to the maximum extent possible.
9
10
Management continually reviews various options for enhancing liquidity and its
cash flow to cash requirements coverage, both operationally and financially.
Such options include strategic dispositions or investments and refinancing
activities aimed at increasing cash flow and reducing cash requirements, the
principal items of which are interest and capital expenditures.
Management believes that expected cash flows and capital resources will be
adequate to meet future debt service requirements and working capital needs.
As discussed below and in Note 3 of the Notes to the Condensed Consolidated
Financial Statements, the Company is required to utilize the net proceeds of its
sale of the automotive products and synthetic industrial fabrics operations to
reduce indebtedness in accordance with the terms of its indentures and credit
agreements.
Proposed Sale of the Automotive Products and Synthetic Industrial Fabrics
Operations
See Note 3 of the Notes to the Condensed Consolidated Financial Statements for
a discussion of the proposed sale of the automotive products and synthetic
industrial fabrics operations, a significant portion of the Company's
Industrial Fabrics and Products segment.
10
11
JPS TEXTILE GROUP, INC.
PART II - OTHER INFORMATION
Item
- ----
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:
Exhibit 11, Computation of Loss Per Common Share, not required
because computation is included on face of Condensed Consolidated
Statements of Operations.
(b) Reports on Form 8-K:
Form 8-K dated February 22, 1994 disclosing the Company's press
release dated February 22, 1994, which announced that the Company
intends to sell, subject to certain conditions, all of the automotive
products and synthetic industrial fabrics operations of the Company
to a newly formed corporation, JPS Automotive Products Corp.,
organized to acquire such assets.
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 TEXTILE GROUP, INC.
Date: 3/14/94 /s/ David H. Taylor
-----------------------------------
David H. Taylor
Executive Vice President - Finance,
Secretary and Chief Financial Officer
11