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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 July 29, 1995
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 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
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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
------- ------
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 September 1, 1995.
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JPS TEXTILE GROUP, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION Number
Item 1. Condensed Consolidated Balance Sheets at July 29, 1995 (Unaudited)
and October 29, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations for the Three Months and
Nine Months Ended July 29, 1995 and July 30, 1994 (Unaudited) . . . . . 4
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended July 29, 1995 and July 30, 1994 (Unaudited) . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements (Unaudited) . . . . . . 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 11
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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Item 1. Financial Statements
JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
July 29, October 29,
1995 1994
------------ ------------
(Unaudited)
ASSETS
Current Assets:
Cash $ 1,687 $ 2,873
Accounts receivable 87,889 102,804
Inventories 83,177 74,966
Prepaid expenses and other 1,649 1,783
--------- ---------
Total current assets 174,402 182,426
Property, plant and equipment, net 197,390 204,094
Excess of cost over fair value of net assets acquired, net 31,730 32,454
Other assets 49,660 49,016
--------- ---------
Total $ 453,182 $ 467,990
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 31,912 $ 41,013
Accrued interest 4,768 12,448
Accrued salaries, benefits and withholdings 14,089 15,271
Other accrued expenses 13,829 15,403
Current portion of long-term debt 2,770 2,347
--------- ---------
Total current liabilities 67,368 86,482
Long-term debt 336,819 335,472
Deferred income taxes 5,265 3,565
Other long-term liabilities 17,968 20,481
--------- ---------
Total liabilities 427,420 446,000
--------- ---------
Senior redeemable preferred stock 27,199 24,340
--------- ---------
Shareholders' equity (deficit):
Junior preferred stock 250 250
Common stock 10 10
Additional paid-in capital 30,585 33,444
Deficit (32,282) (36,054)
--------- ---------
Total shareholders' deficit (1,437) (2,350)
--------- ---------
Total $ 453,182 $ 467,990
========= =========
Note: The condensed consolidated balance sheet at October 29, 1994 has been
derived 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 Nine Months Ended
-------------------------- -------------------------
July 29, July 30, July 29, July 30,
1995 1994 1995 1994
----------- ----------- ----------- ----------
Net sales $ 140,071 $ 150,633 $ 439,320 $ 436,082
Cost of sales 121,168 128,102 376,366 374,813
----------- ----------- ---------- ----------
Gross profit 18,903 22,531 62,954 61,269
Selling, general and administrative expenses 15,312 15,191 47,225 46,601
----------- ----------- ---------- ----------
Income from operations 3,591 7,340 15,729 14,668
Other income (expense):
Interest income 776 130 2,127 134
Interest expense (10,259) (14,764) (31,182) (45,925)
Other, net (216) (1,791) (885) (1,750)
----------- ----------- ---------- ----------
Loss before income taxes, income from
discontinued operations, extraordinary items
and cumulative effect of accounting change (6,108) (9,085) (14,211) (32,873)
Income taxes 64 520 1,000 1,954
----------- ----------- ---------- ----------
Loss before income from discontinued
operations, extraordinary items and
cumulative effect of accounting change (6,172) (9,605) (15,211) (34,827)
Income from discontinued operations,
net of taxes - 8,566 - 25,651
Gain on sale of discontinued operations,
net of taxes 423 132,966 1,463 132,966
----------- ----------- ---------- ----------
Income (loss) before extraordinary items and
cumulative effect of accounting change (5,749) 131,927 (13,748) 123,790
Extraordinary gain (loss) on early
extinguishment of debt, net of taxes - (3,736) 17,520 (3,736)
Cumulative effect of accounting change,
net of taxes - - - (1,000)
----------- ----------- ---------- ----------
Net income (loss) (5,749) 128,191 3,772 119,054
Senior redeemable preferred stock in-kind
dividends and discount accretion 959 852 2,859 2,479
----------- ----------- ---------- ----------
Income (loss) applicable to common stock $ (6,708) $ 127,339 $ 913 $ 116,575
=========== =========== ========== ==========
Weighted average common shares outstanding 1,000,000 1,000,000 1,000,000 1,000,000
=========== =========== ========== ==========
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JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Three Months Ended Nine Months Ended
-------------------------- -------------------------
July 29, July 30, July 29, July 30,
1995 1994 1995 1994
----------- ----------- ----------- ----------
Earnings (loss) per common share:
Loss before income from discontinued
operations, extraordinary items and
cumulative effect of accounting change $ (7.13) $ (10.46) $ (18.07) $ (37.30)
Income from discontinued operations - 8.57 - 25.65
Gain on sale of discontinued operations .42 132.97 1.46 132.97
Extraordinary gain (loss) on early
extinguishment of debt - (3.74) 17.52 (3.74)
Cumulative effect of accounting change - - - (1.00)
----------- ----------- ---------- ----------
Net income (loss) $ (6.71) $ 127.34 $ .91 $ 116.58
=========== =========== ========== ==========
See notes to condensed consolidated financial statements.
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JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Nine Months Ended
------------------------
July 29, July 30,
1995 1994
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,772 $ 119,054
-------- ----------
Adjustments to reconcile net income to net cash used in operating activities:
Income from discontinued operations - (25,651)
Gain on sale of discontinued operations (1,463) (132,966)
Extraordinary gain (loss) on early extinguishment of debt (17,520) 3,736
Cumulative effect of accounting change - 1,000
Depreciation and amortization, except amounts included
in interest expense 20,640 21,046
Interest accretion and debt issuance cost amortization 6,742 8,691
Deferred income taxes 1,700 684
Financing costs incurred (25) (2,933)
Other, net (401) (2,499)
Changes in assets and liabilities:
Accounts receivable 14,915 13,725
Inventory (8,211) (7,564)
Prepaid expenses and other assets (574) (1,397)
Accounts payable (9,101) (5,048)
Accrued expenses and other liabilities (13,244) (13,796)
-------- ----------
Total adjustments (6,542) (142,972)
-------- ----------
Net cash used in operating activities (2,770) (23,918)
-------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment additions (13,214) (17,838)
Receipts from discontinued operations, net - 17,978
Proceeds from sale of discontinued operations 1,462 260,054
Long-term investments - (39,500)
-------- ----------
Net cash provided by (used in) investing activities (11,752) 220,694
-------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Revolving credit facility borrowings (repayments), net 52,109 (77,537)
Proceeds from issuance of long-term debt 5,000 -
Repayment of other long-term debt (43,773) (119,509)
-------- ----------
Net cash provided by (used in) financing activities 13,336 (197,046)
-------- ----------
Net decrease in cash (1,186) (270)
Cash at beginning of period 2,873 2,080
-------- ----------
Cash at end of period $ 1,687 $ 1,810
======== ==========
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JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In Thousands)
(Unaudited)
Nine Months Ended
-------------------------
July 29, July 30,
1995 1994
---------- ---------
Supplemental cash flow information:
Interest paid $ 32,120 $ 47,881
Income taxes paid 3,459 481
Non-cash financing activities:
Senior redeemable preferred stock dividends-in-kind 2,185 2,059
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 July 29, 1995 and 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 periods
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 decrease the
net income for the nine months ended July 30, 1994 by $1,000,000, from
$120,054,000 to $119,054,000 as a result of the cumulative effect of
the accounting change. There was no material effect on income from
operations for the nine months ended July 30, 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 reclassification of
1994 amounts for discontinued operations.
2. Inventories (In Thousands):
July 29, October 29,
1995 1994
---------- -----------
Raw materials $ 16,961 $ 17,104
Work-in-process 30,743 29,059
Finished goods 35,473 28,803
-------- --------
Total $ 83,177 $ 74,966
======== ========
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3. Long-Term Debt and Purchases of Company Debt Securities
Long-term debt consists of (in thousands):
July 29, October 29,
1995 1994
---------- -----------
Senior credit facility revolving line of credit $ 102,027 $ 49,918
Senior subordinated discount notes (including interest due at
maturity of $3,997 and $3,395, respectively) 113,245 130,179
Senior subordinated notes (including interest due at maturity of
$4,057 and $4,404, respectively) 80,830 109,283
Subordinated debentures 54,071 75,000
Equipment financing 10,590 7,658
--------- ---------
Total 360,763 372,038
Reorganization discount:
Senior subordinated discount notes (5,586) (8,109)
Senior subordinated notes (4,822) (8,723)
Subordinated debentures (10,766) (17,387)
--------- ---------
Total long-term debt 339,589 337,819
Less current portion 2,770 2,347
--------- ---------
Long-term portion $ 336,819 $ 335,472
========= =========
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.
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 $225 million in the
eight months ended June 28, 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 sale 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-
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closing adjustments. 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. During the nine months ended
July 29, 1995, the Company received approximately $1.6 million as a
partial post-closing adjustment to the sale price. This post-closing
adjustment was recorded as a gain on sale of discontinued operations
in the amount of $1.5 million, net of income taxes of $0.1 million.
Additional post-closing adjustments to the sale price may occur and
result in a gain to be recognized in a future period.
The net cash proceeds in the third quarter of fiscal 1994 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 allocated to the discontinued operations a pro-rata
portion of the interest expense of its senior credit facility, which
pro-rata portion was approximately $1.8 million in the nine months
ended July 30, 1994.
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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 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 Nine Months Ended
-------------------------- -------------------------
July 29, July 30, July 29, July 30,
1995 1994 1995 1994
----------- ----------- ---------- ----------
NET SALES
Apparel Fabrics and Products $ 53,789 $ 60,147 $ 182,948 $ 184,417
Industrial Fabrics and Products 48,412 44,600 141,405 120,120
Home Fashion Textiles 37,870 45,886 114,967 131,545
----------- ---------- ---------- ----------
Net Sales $ 140,071 $ 150,633 $ 439,320 $ 436,082
=========== =========== ========== ==========
OPERATING PROFIT
Apparel Fabrics and Products $ 2,955 $ 4,175 $ 13,486 $ 13,265
Industrial Fabrics and Products 3,451 2,518 8,137 3,557
Home Fashion Textiles (1,655) 201 (2,584) 1,416
Indirect Corporate Expenses, net (1,376) (1,345) (4,195) (5,320)
----------- ---------- ---------- ----------
Operating Profit before interest expense
and provision for income taxes 3,375 5,549 14,844 12,918
Interest income 776 130 2,127 134
Interest expense (10,259) (14,764) (31,182) (45,925)
---------- ---------- ----------- ----------
Loss before income taxes, income from
discontinued operations, extraordinary items
and cumulative effect of accounting change $ (6,108) $ (9,085) $ (14,211) $ (32,873)
=========== ========== ========== ==========
RESULTS OF OPERATIONS
Three Months Ended July 29, 1995 (the "1995 Third Quarter") Compared To The
Three Months Ended July 30, 1994 (the "1994 Third Quarter"):
--------------------------------------------------------------------------------
Consolidated net sales for the 1995 Third Quarter decreased 7.0% to $140.1
million from $150.6 million in the 1994 Third Quarter. Industrial Fabrics and
Products sales increased while Apparel Fabrics and Products and Home Fashion
Textiles sales declined. Apparel Fabrics and Products sales decreased 10.6% to
$53.8 million for the 1995 Third Quarter from $60.1 million for the 1994 Third
Quarter principally due to reduced production requirements by apparel
manufacturers in response to weak consumer demand for apparel at the retail
level. The 8.6% increase in Industrial Fabrics and Products sales to $48.4
million for the 1995 Third Quarter from $44.6 million for the 1994 Third
Quarter is due to increased demand for several of the Company's various
products. Sales of fiberglass and synthetic fabrics increased $1.3 million due
to strong demand for construction related products and fabrics for electrical
circuitry. Single-ply roofing product sales increased $0.6 million due to the
continued increase in demand for a new roofing product introduced by the
Company in late 1993. Cotton
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industrial fabric sales increased $1.5 million due to a 4% increase in unit
volume combined with higher selling prices which are a result of the pass
through of increases in cotton raw material prices resulting from a worldwide
cotton crop shortfall. Home Fashion Textiles sales decreased 17.5% to $37.9
million for the 1995 Third Quarter from $45.9 million for the 1994 Third
Quarter due to a decrease in carpet, woven fabric and yarn unit volume. The
Company's major polyester fiber vendor discontinued its merchandising support
for carpet retailers in early 1995 and, as a result, the retailers are greatly
reducing their purchase of such branded carpet products. This situation has
dramatically affected the Company's carpet sales since many of the Company's
best selling carpet styles in the prior year were those made with this branded
polyester fiber yarn and demand for such products continues to decline. Carpet
sales decreased $6.1 million to $31.0 million for the 1995 Third Quarter
compared to the 1994 Third Quarter. Although the Company has moved to redirect
its carpet product offering by introducing a number of new styles with
alternate fiber systems, no significant sales benefit was yet realized in the
1995 Third Quarter due to lag time between product introduction and order flow.
Some sales benefit from these product introductions is expected in future
periods; however, the previously described trend related to declines in demand
for many of the Company's branded products is expected to continue. Sales of
home fashion fabrics and yarn declined $1.9 million to $6.9 million for the
1995 Third Quarter due to a general weakness in market demand for woven fabric
used in home accessories.
Operating profits in the 1995 Third Quarter decreased 39.2% to $3.4 million
from $5.5 million for the 1994 Third Quarter. Profits from Apparel Fabrics and
Products of $3.0 million for the 1995 Third Quarter decreased $1.2 million, or
29.2%, from the 1994 Third Quarter due to the decline in sales and increased
raw material prices for rubber used in apparel elastic products. Operating
profits for Industrial Fabrics and Products increased $0.9 million, or 37.1%,
to $3.5 million in the 1995 Third Quarter from $2.5 million in the 1994 Third
Quarter as a result of increased sales and improved gross margins. Margins
have improved due to higher throughput and a more profitable product mix
combined with increased demand and shortages of certain products resulting in
improved pricing on these products. Home Fashion Textiles experienced a $1.9
million decrease in operating profits in the 1995 Third Quarter to a loss of
$1.7 million from a profit of $0.2 million in the 1994 Third Quarter due
primarily to lower sales.
Interest expense decreased 30.5% to $10.3 million for the 1995 Third Quarter
from $14.8 million for the 1994 Third Quarter primarily due to the use of a
portion of the net proceeds from the sale of the Automotive Assets in the third
quarter of fiscal 1994 to reduce the Company's debt. Giving effect to this
reduction of debt on a pro forma basis would reduce interest expense by $4.1
million in the 1994 Third Quarter to $10.7 million. Such pro forma reduction
includes $0.3 million representing interest accretion and debt issuance cost
amortization. After giving effect to the debt reduction described above,
interest expense decreased $0.4 million in the 1995 Third Quarter due to
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 Third Quarter).
Nine Months Ended July 29, 1995 (the "1995 Nine-Month Period") Compared To The
Nine Months Ended July 30, 1994 (the "1994 Nine-Month Period"):
--------------------------------------------------------------------------------
Consolidated net sales for the 1995 Nine-Month period increased 0.7% to $439.3
million from $436.1 million in the 1994 Nine-Month period as increased sales of
industrial fabrics and construction products were almost completely offset by a
decline in sales of carpet. Apparel Fabrics and Products sales decreased 0.8%
to $182.9 million for the 1995 Nine-Month period from $184.4 million for the
1994 Nine-Month period principally due to lower demand driven by slow consumer
purchases at the retail level during the third quarter. The Company has
changed its product offering during 1995 to emphasize specialty fabrics with
more fashion and styling
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characteristics. These specialty fabrics command a higher average selling
price and margin than commodity type fabrics. The gains earned by this change
in product focus were offset by a drop in demand during the third quarter of
1995. The 17.7% increase in Industrial Fabrics and Products sales to $141.4
million for the 1995 Nine-Month period from $120.1 million for the 1994
Nine-Month period is due to increased demand for several of the Company's
various products. Sales of fiberglass fabrics and synthetic fabrics increased
$6.4 million due to increased demand for construction related products and
fabrics for electrical components. Single-ply roofing product sales increased
$5.0 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 $6.1 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 $1.5 million increase in
extruded urethane product sales. Home Fashion Textiles sales decreased 12.6%
to $115.0 million for the 1995 Nine-Month period from $131.5 million for the
1994 Nine-Month period as a result of decreased carpet unit volume principally
due to a major polyester fiber vendor terminating its merchandising support for
carpet retailers and, as a result, the retailers are greatly reducing their
support for such branded carpet products. Carpet sales decreased $14.5 million
to $89.8 million for the 1995 Nine-Month period compared to the 1994 Nine-Month
period.
Operating profits in the 1995 Nine-Month period increased 14.9% to $14.8
million from $12.9 million for the 1994 Nine-Month period. Profits from
Apparel Fabrics and Products of $13.5 million for the 1995 Nine-Month period
increased $0.2 million, or 1.7%, from the 1994 Nine-Month period 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 $4.6 million to $8.1 million in the 1995 Nine-Month period from $3.6
million in the 1994 Nine-Month period as a result of increased sales from
improved demand and improved gross margins resulting from industry shortages of
certain products and a more profitable product mix. Home Fashion Textiles
experienced a $4.0 million decrease in operating profits in the 1995 Nine-Month
period to a loss of $2.6 million from a profit of $1.2 million in the 1994
Nine-Month period due to weak demand resulting in lower margins for home
furnishing fabrics and lower sales of carpet.
Indirect corporate expenses declined by $1.1 million to $4.2 million for the
1995 Nine-Month period as compared to the 1994 Nine-Month period due to lower
employee compensation, professional fees and amortization expense.
Interest expense decreased 32.1% to $31.2 million for the 1995 Nine-Month
period from $45.9 million for the 1994 Nine- Month period primarily due to the
use of a portion of the net proceeds from the sale of the Automotive Assets in
the third quarter of 1994 to reduce the Company's debt. Giving effect to this
reduction of debt on a pro forma basis would reduce interest expense by $15.2
million in the 1994 Nine-Month period to $30.7 million. Such pro forma
reduction includes $1.3 million representing interest accretion and debt
issuance cost amortization. After giving effect to the debt reduction
described above, interest expense increased $0.4 million in the 1995 Nine-Month
period due to an increase in average base rates for the revolving credit
facility which was partially offset by interest savings as a result of
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 Third Quarter). Interest income increased by $2.0
million for the 1995 Nine-Month period from $0.1 million for the 1994
Nine-Month period due to the Company's investment in long-term securities (see
Note 8 to the Consolidated Financial Statements in the Company's 1994 Annual
Report) in July 1994 of $39.5 million of the Automotive Assets sale proceeds.
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LIQUIDITY AND CAPITAL RESOURCES
At July 29, 1995, working capital was approximately $107.0 million, an increase
of $11.1 million from the $95.9 million of working capital at October 29, 1994.
Accounts receivable declined by $14.9 million (14.5%) due to the lower sales in
July 1995 than in October 1994. Inventories increased $8.2 million (11.0%)
from October 29, 1994 to July 29, 1995 principally due to slower apparel sales
allowing finished goods inventories to build. Accounts payable at July 29,
1995 were $9.1 million lower than at October 29, 1994 due to the lower level of
production activity and capital spending in July 1995 than in October 1994.
Accrued interest, compensation and other liabilities decreased $13.2 million
during the 1995 Nine-Month period 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 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 Nine-Month period.
All senior borrowings bear interest at a Base Rate, as defined, plus 1.0% per
annum (9.75% at July 29, 1995) or at the Eurodollar Rate, as defined, plus 2.5%
per annum (approximately 8.4% at July 29, 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 $28.3 million available for borrowing under the
revolving credit agreement on July 29, 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 Nine-Month period, the Company
obtained a $5 million equipment loan from a commercial lender to finance
certain capital expenditures.
As previously discussed, the Company expended $36.6 million during the first
quarter of fiscal 1995 to purchase and retire certain of its outstanding notes
and debentures with an aggregate face value of $66.6 million and a carrying
value (including interest due at maturity) of $59.2 million. The Company
recognized a gain from early extinguishment of debt of $17.5 million net of
expenses of $1.9 million and income taxes of $3.2 million. The Company has
made no further open market purchases of its debt securities subsequent to the
first quarter of 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
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:
(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: September 12, 1995 /s/ David H. Taylor
--------------------------------------
David H. Taylor
Executive Vice President - Finance,
Secretary and Chief Financial Officer
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