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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 28, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 33-27038
JPS TEXTILE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 57-0868166
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(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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(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
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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
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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 10, 1995.
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JPS TEXTILE GROUP, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
Number
Item 1. Condensed Consolidated Balance Sheets
January 28, 1995 (Unaudited) and October 29, 1994 . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
Three Months Ended January 28, 1995 and
January 29, 1994 (Unaudited) . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended January 28, 1995 and
January 29, 1994 (Unaudited) . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements (Unaudited) . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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Item 1. Financial Statements
JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
January 28, October 29,
1995 1994
------------ ------------
(Unaudited)
ASSETS
Current Assets:
Cash $ 3,576 $ 2,873
Accounts receivable 92,902 102,804
Inventories 77,897 74,966
Prepaid expenses and other 3,267 1,783
-------- --------
Total current assets 177,642 182,426
Property, plant and equipment, net 203,737 204,094
Excess of cost over fair value of net assets acquired, net 32,213 32,454
Other assets 48,615 49,016
-------- --------
Total $462,207 $467,990
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 41,574 $ 41,013
Accrued interest 5,328 12,448
Accrued salaries, benefits and withholdings 13,953 15,271
Other accrued expenses 13,490 15,403
Current portion of long-term debt 2,875 2,347
-------- --------
Total current liabilities 77,220 86,482
Long-term debt 326,365 335,472
Deferred income taxes 4,865 3,565
Other long-term liabilities 19,945 20,481
-------- --------
Total liabilities 428,395 446,000
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Senior redeemable preferred stock 25,270 24,340
-------- --------
Shareholders' equity (deficit):
Junior preferred stock 250 250
Common stock 10 10
Additional paid-in capital 32,514 33,444
Deficit (24,232) (36,054)
-------- --------
Total shareholders' equity (deficit) 8,542 (2,350)
-------- --------
Total $462,207 $467,990
======== ========
Note: The condensed consolidated balance sheet at October 29, 1994 has been
extracted from the audited financial statements.
See notes to condensed consolidated financial statements.
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JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Three Months Ended
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January 28, January 29,
1995 1994
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Net sales $ 147,233 $ 134,066
Cost of sales 126,278 116,244
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Gross profit 20,955 17,822
Selling, general and administrative expenses 15,894 15,371
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Income from operations 5,061 2,451
Interest expense 10,065 15,486
Other income (expense), net (394) 17
---------- ----------
Loss before income taxes, income from discontinued
operations, extraordinary gain and cumulative effect of
accounting change (5,398) (13,018)
Income taxes 300 282
---------- ----------
Loss before income from discontinued operations, extraordinary
gain and cumulative effect of accounting change (5,698) (13,300)
Income from discontinued operations, net of taxes - 5,939
Extraordinary gain on early extinguishment of debt, net of taxes 17,520 -
Cumulative effect of accounting change, net of taxes - (1,000)
---------- ----------
Net income (loss) 11,822 (8,361)
Senior redeemable preferred stock in-kind dividends and
discount accretion 930 809
---------- ----------
Income (loss) applicable to common stock $ 10,892 $ (9,170)
========== ==========
Weighted average common shares outstanding 1,000,000 1,000,000
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Earnings (loss) per common share:
Loss before income from discontinued operations, extraordinary
gain and cumulative effect of accounting change $ (6.63) $ (14.11)
Income from discontinued operations - 5.94
Extraordinary gain on early extinguishment of debt 17.52 -
Cumulative effect of accounting change - (1.00)
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Net income (loss) $ 10.89 $ (9.17)
========== ==========
See notes to condensed consolidated financial statements.
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JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
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January 28, January 29,
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 11,822 $ (8,361)
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Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Income from discontinued operations - (5,939)
Extraordinary gain on early extinguishment of debt (17,520) -
Cumulative effect of accounting change - 1,000
Depreciation and amortization, except amounts included
in interest expense 6,974 6,595
Interest accretion and debt issuance cost amortization 2,422 2,922
Other, net (282) 1,389
Changes in assets and liabilities:
Accounts receivable 9,902 18,347
Inventory (2,931) (3,912)
Prepaid expenses and other assets (907) (532)
Accounts payable 561 (4,867)
Accrued expenses and other liabilities (9,722) (10,889)
-------- --------
Total adjustments (11,503) 4,114
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Net cash provided by (used in) operating activities 319 (4,247)
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CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment additions (6,375) (7,228)
Receipts from discontinued operations, net - 6,006
-------- --------
Net cash used in investing activities (6,375) (1,222)
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CASH FLOWS FROM FINANCING ACTIVITIES
Financing costs incurred (25) (61)
Revolving credit facility borrowings, net 44,048 7,194
Proceeds from issuance of long-term debt 5,000 -
Repayment of long-term debt (42,264) (585)
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Net cash provided by financing activities 6,759 6,548
-------- --------
Net increase in cash 703 1,079
Cash at beginning of period 2,873 2,080
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Cash at end of period $ 3,576 $ 3,159
======== ========
Supplemental cash flow information:
Interest paid $ 15,428 $ 20,435
Income taxes paid 830 421
Non-cash financing activities:
Senior redeemable preferred stock dividends-in-kind 718 676
See notes to condensed consolidated financial statements.
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JPS TEXTILE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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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 28, 1995 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 Annual Report on Form 10-K for the fiscal year ended
October 29, 1994. The results of operations for the interim period are
not necessarily indicative of the operating results of the full year.
During the fourth quarter of fiscal 1994, the Company changed,
effective as of the beginning of fiscal 1994, its accounting policy
with respect to other postemployment benefits to comply with Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits ". This change is more fully explained in
Note 9 of the Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the fiscal year ended October
29, 1994. The fiscal 1994 amounts included in this report have been
restated, where applicable, to reflect the adoption of these changes
as of October 31, 1993. The effect of the restatement was to increase
the net loss for the three months ended January 29, 1994 from
$7,361,000 to $8,361,000 as a result of the cumulative effect of the
accounting change of $1,000,000. There was no material effect on
income from operations for the three months ended January 29, 1994 as
a result of the accounting change.
Certain 1994 amounts have been reclassified to conform to the 1995
presentation. In addition, see Note 3 of the Notes to Consolidated
Financial Statements in the Company's Annual Report on Form 10-K for
the fiscal year ended October 29, 1994 regarding reclassifications of
1994 amounts for discontinued operations.
2. Inventories (In Thousands):
January 28, October 29,
1995 1994
----------- ----------
Raw materials $16,482 $17,104
Work-in-process 32,113 29,059
Finished goods 29,302 28,803
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Total $77,897 $74,966
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3. Long-Term Debt and Purchases of Company Debt Securities
During the first quarter of fiscal 1995, the Company expended
$36,607,000 to make open market purchases of certain of its
outstanding notes and debentures with an aggregate face value
of $66,571,000 and a carrying value (including interest due at
maturity) of $59,225,000. The Company recognized a gain from early
extinguishment of debt of $17,520,000, net of expenses of $1,898,000
and income taxes of $3,200,000.
Long-term debt consists of (in thousands):
January 28, October 29,
1995 1994
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Senior credit facility revolving line of credit $ 93,966 $ 49,918
Senior subordinated discount notes (including interest due
at maturity of $3,277 and $3,395, respectively) 112,525 130,179
Senior subordinated notes (including interest due at maturity of
$3,497 and $4,404, respectively) 80,270 109,283
Subordinated debentures 54,071 75,000
Equipment financing 12,100 7,658
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Total 352,932 372,038
Less reorganization discount:
Senior subordinated discount notes (6,388) (8,109)
Senior subordinated notes (5,569) (8,723)
Subordinated debentures (11,735) (17,387)
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Total long-term debt 329,240 337,819
Less current portion (2,875) (2,347)
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Long-term portion $326,365 $335,472
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4. Discontinued Operations
On June 28,1994, pursuant to the terms of an Asset Purchase Agreement
dated May 25, 1994 (the "Asset Purchase Agreement"), by and among the
Company, JPS Auto Inc., a wholly-owned subsidiary of the Company
("Auto"), JPS Converter and Industrial Corp., a wholly-owned
subsidiary of the Company ("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 (as described
below) to the Purchaser.
The Automotive Assets consisted of the businesses and assets of Auto
and the synthetic industrial fabrics division of C&I, and the
Company's investment in common stock of the managing general partner
of Cramerton Automotive Products, L.P. (an 80% owned joint venture).
Net sales from such discontinued operations were $78.1 million in the
first quarter of fiscal 1994. Pursuant to the terms of the Asset
Purchase Agreement, the Purchaser agreed to assume substantially all
of the liabilities and obligations associated with the Automotive
Assets. In addition, the Company and its affiliates agreed, for a
four year period, not to directly or indirectly compete with the sold
businesses in North, Central and South America.
The purchase price for the Automotive Assets was approximately $279
million, consisting of $264 million of cash paid at closing and $15
million of assumed debt as of June 28, 1994, subject to certain
post-closing adjustments which may result in a gain to be recognized
in a future period. The sale of the Automotive Assets resulted in an
approximate gain of $133 million, net of income taxes of $2.8 million,
in the third quarter of fiscal 1994.
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The net cash proceeds from the disposition of the Automotive Assets
(after deductions for fees, other expenses and amounts designated by
management to satisfy possible contingent tax liabilities) were
approximately $213 million and such proceeds were used by the Company
to reduce its outstanding indebtedness. See Note 5 of the Notes to
Consolidated Financial Statements in the Company's Annual Report on
Form 10-K for the fiscal year ended October 29, 1994.
The Company has allocated to the discontinued operations a pro-rata
portion of the interest expense of its senior credit facility, which
pro-rata portion was approximately $0.6 million in the first quarter
of 1994.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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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
29, 1994.
(In Thousands)
Three Months Ended
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January 28, January 29,
1995 1994
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NET SALES
Apparel Fabrics and Products $ 64,713 $ 60,443
Industrial Fabrics and Products 43,460 33,381
Home Fashion Textiles 39,060 40,242
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Net Sales $147,233 $134,066
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OPERATING PROFIT
Apparel Fabrics and Products $ 5,091 $ 4,068
Industrial Fabrics and Products 1,392 (182)
Home Fashion Textiles (420) 651
Indirect Corporate Expenses, net (1,396) (2,069)
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Operating Profit 4,667 2,468
Interest expense 10,065 15,486
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Loss before income taxes, income from discontinued operations,
extraordinary gain and cumulative effect of accounting change $ (5,398) $(13,018)
======== ========
RESULTS OF OPERATIONS
1995 First Quarter Compared to 1994 First Quarter
-------------------------------------------------
Consolidated net sales for the 1995 first quarter increased 9.8% to
$147.2 million from $134.1 million in the 1994 first quarter generally due to
increased sales of industrial fabrics, construction products and apparel
fabrics. Apparel Fabrics and Products sales increased 7.1% to $64.7 million for
the 1995 first quarter from $60.4 million for the 1994 first quarter principally
due to the Company's change in its product offering to emphasize specialty
fabrics with more fashion and styling characteristics. These specialty fabrics
command a higher average selling price than commodity type fabrics. The 30.2%
increase in Industrial Fabrics and Products sales to $43.5 million for the 1995
first quarter from $33.4 million for the 1994 first quarter is due to general
increased demand for the Company's various products. Fiberglass insulation and
filtration fabrics and synthetic scrim fabrics increased $2.6 million due to
increased demand for construction related products and due to a supply shortage
in the market for certain filtration fabrics. Single-ply roofing product sales
increased $2.1 million due to the continued increase in demand for a new roofing
product introduced by the Company in late 1993. Cotton industrial fabric sales
increased $2.9 million due to higher selling prices and unit volume driven by
improved product demand, particularly in the book-cloth market, and the pass
through of increases in cotton raw material prices as a result of a worldwide
cotton crop shortfall. Improved demand also caused a $0.9 million increase in
extruded urethane product sales. Home Fashion Textiles sales decreased 2.9% to
$39.1 million for the 1995 first quarter from $40.2 million for the 1994 first
quarter due to a 5% decrease in carpet unit volume
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and average selling prices. Carpet sales decreased $3.0 million to $28.7
million for the 1995 first quarter compared to the 1994 first quarter. Partially
offsetting the decline in carpet sales was a $1.9 million increase in sales of
yarn to home fashion customers for use in the manufacture of carpets and
fabrics.
Operating profits in the 1995 first quarter increased 89.1% to $4.7 million from
$2.5 million for the 1994 first quarter. Profits from Apparel Fabrics and
Products of $5.1 million for the 1995 first quarter increased $1.0 million, or
25.1%, from the 1994 first quarter due to more favorable margins for the
Company's newer specialty fabrics than on commodity type apparel fabrics.
Operating profits for Industrial Fabrics and Products increased $1.6 million to
$1.4 million in the 1995 first quarter from a $0.2 million loss in the 1994
first quarter as a result of increased sales. Home Fashion Textiles
experienced a $1.1 million decrease in operating profits in the 1995 first
quarter to a loss of $0.4 million from a profit of $0.7 million in the 1994
first quarter due to weak demand for home furnishing fabrics and increased
pricing pressures resulting in lower average selling prices for carpet.
Indirect corporate expenses declined by $0.7 million to $1.4 million for the
1995 first quarter as compared to the 1994 first quarter due to lower employee
compensation, professional fees and amortization expense.
Interest expense decreased 35.0% to $10.1 million for the 1995 first quarter
from $15.5 million for the 1994 first quarter due to the reduction in debt
resulting from the application of a portion of the net proceeds from the sale of
the Automotive Assets. Giving effect to this reduction of debt on a pro forma
basis would reduce interest expense by $5.5 million in the 1994 first quarter to
$10.0 million. Such pro forma reduction includes $0.5 million representing
interest accretion and debt issuance cost amortization. After giving effect to
the debt reduction described above, interest expense increased only $0.1 million
in the 1995 first quarter. Higher average interest rates for the revolving
credit facility were offset by reductions in outstanding principal amounts of
the Company's notes and debentures as the Company purchased a portion of its
debt securities in the 1995 first quarter on the open market. These securities
were purchased at prices less than their carrying values using loan proceeds
from the revolving credit facility (see Note 3 of the Notes to Condensed
Consolidated Financial Statements for the 1995 first quarter).
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased approximately 4.7% to $100.4 million at January 28,
1995 from $95.9 million at October 29, 1994. A decline in accounts receivable
reduced working capital $9.9 million (9.6%) due to the seasonally lower sales in
the first quarter of the fiscal year than in the fourth quarter. Inventories
increased $2.9 million (3.9%) from October 29, 1994 to January 28, 1995
principally due to higher costs associated with the specialty fabrics to which
the Company has changed its focus in the Apparel Fabrics and Products segment
and due to an increase in yarn in work in process in anticipation of increased
production needs during the next quarter. Accrued interest, compensation and
other liabilities decreased $10.4 million during the 1995 first quarter
due to the scheduled timing of interest, annual incentive compensation and
other payments.
The Company's principal sources of liquidity for operations and expansion
are funds generated internally and borrowings under the Company's $135 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 activities (principally $36.6 million to purchase
and retire certain of the Company's outstanding notes and debentures) to the
extent such funds were not provided for by the net cash flow from operations
during the 1995 first quarter. All senior borrowings bear interest at a Base
Rate, as defined, plus 1 1/2% per annum (10.0% at January 28, 1995) or at the
Eurodollar Rate, as defined, plus 3.0% per annum (approximately 9.2% at January
28, 1995). Borrowings under the senior credit agreement are limited to
specified percentages of eligible accounts receivable and inventories, as
defined, plus an additional fixed amount of $25 million. The Company had $38.7
million available for borrowing under the revolving credit agreement on January
28, 1995. Borrowings under the revolving credit facility 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. During
the 1995 first quarter, the Company obtained a $5 million equipment loan from a
commercial lender to finance certain capital
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expenditures.
As previously discussed, the Company expended $36,607,000 during the first
quarter of fiscal 1995 to purchase and retire certain of its outstanding notes
and debentures with an aggregate face value of $66,571,000 and a carrying value
(including interest due at maturity) of $59,225,000. The Company recognized a
gain from early extinguishment of debt of $17,520,000, net of expenses of
$1,898,000 and income taxes of $3,200,000. The Company has made no further
open market purchases of its debt securities subsequent to January 28, 1995 and
is not currently seeking to make any such purchases.
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 and financing 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, including any necessary
refinancings will be adequate to meet future debt service requirements and
working capital needs.
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JPS TEXTILE GROUP, 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:
(10.1) Long-term Incentive Plan of the Company effective November
1, 1994.
(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:
None
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: 3/14/95 /s/ David H. Taylor
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David H. Taylor
Executive Vice President - Finance,
Secretary and Chief Financial Officer
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