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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 27, 1996
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
- ------------------------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
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: 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 6, 1996.
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JPS TEXTILE GROUP, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION Number
Item 1. Condensed Consolidated Balance Sheets
July 27, 1996 (Unaudited) and October 28, 1995 . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
Three Months and Nine Months Ended July 27, 1996 and
July 29, 1995 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended July 27, 1996 and
July 29, 1995 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements (Unaudited) . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 11
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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Item 1. Financial Statements
JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
July 27, October 28,
1996 1995
------------ -----------
(Unaudited)
ASSETS
Current Assets:
Cash $ 1,196 $ 1,352
Accounts receivable 71,271 88,186
Inventories 57,549 48,729
Prepaid expenses and other 779 2,545
Net assets held for sale - 28,932
---------- ----------
Total current assets 130,795 169,744
Property, plant and equipment, net 126,139 161,436
Excess of cost over fair value of net assets acquired, net 30,766 31,489
Other assets (Note 4) 53,093 50,153
---------- ----------
Total $ 340,793 $ 412,822
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 27,616 $ 29,754
Accrued interest 4,106 9,895
Accrued salaries, benefits and withholdings 10,285 11,503
Other accrued expenses 15,095 12,699
Senior credit facility, revolving line of credit (Note 3) 86,232 -
Current portion of long-term debt (Note 3) 238,054 2,770
---------- ----------
Total current liabilities 381,388 66,621
Long-term debt (Note 3) 5,087 327,668
Deferred income taxes 3,665 4,165
Other long-term liabilities 18,489 23,242
---------- ----------
Total liabilities 408,629 421,696
---------- ----------
Senior redeemable preferred stock 31,472 28,171
---------- ----------
Shareholders' equity (deficit):
Junior preferred stock 250 250
Common stock 10 10
Additional paid-in capital 26,311 29,613
Deficit (125,879) (66,918)
---------- ----------
Total shareholders' deficit (99,308) (37,045)
---------- ----------
Total $ 340,793 $ 412,822
========== ==========
Note: The condensed consolidated balance sheet at October 28, 1995 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 Nine Months Ended
-------------------------- ----------------------------
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
----------- ----------- ----------- ------------
Net sales $ 110,266 $ 109,117 $ 333,444 $ 349,532
Cost of sales 95,908 93,805 294,635 299,039
----------- ----------- ----------- ------------
Gross profit 14,358 15,312 38,809 50,493
Selling, general and administrative expenses 9,888 9,633 30,601 30,856
Other expense, net 129 216 2,078 876
Charges for plant closing, loss on sale of
certain operations and write down of
certain long-lived assets 30,055 - 30,055 -
----------- ----------- ----------- ------------
Operating profit (loss) (25,714) 5,463 (23,925) 18,761
Valuation allowance on Gulistan securities (Note 4) (1,395) - (5,463)
Interest income 714 776 2,102 2,127
Interest expense (10,082) (9,754) (29,647) (29,820)
Debt restructuring fees and expenses (Note 3) (727) - (902) -
----------- ----------- ----------- ------------
Loss before income taxes, discontinued
operations and extraordinary gain (37,204) (3,515) (57,835) (8,932)
Income tax expense (benefit) (582) 64 (374) 1,000
----------- ----------- ----------- ------------
Loss before discontinued operations
and extraordinary gain (36,622) (3,579) (57,461) (9,932)
Loss from discontinued operations, net of taxes - (2,593) - (5,279)
Gain (loss) on sale of discontinued operations,
net of taxes - 423 (1,500) 1,463
Extraordinary gain on early extinguishment of debt,
net of taxes - - - 20,120
----------- ----------- ----------- ------------
Net income (loss) (36,622) (5,749) (58,961) 6,372
Senior redeemable preferred stock in-kind
dividends and discount accretion 1,109 959 3,301 2,859
----------- ----------- ----------- ------------
Income (loss) applicable to common stock $ (37,731) $ (6,708) $ (62,262) $ 3,513
=========== =========== =========== ============
Weighted average common shares outstanding 1,000,000 1,000,000 1,000,000 1,000,000
=========== =========== =========== ============
Earnings (loss) per common share:
Loss before discontinued operations
and extraordinary gain $ (37.73) $ (4.54) $ (60.76) $ (12.79)
Loss from discontinued operations - (2.59) (5.28)
Gain (loss) on sale of discontinued operations - .42 (1.50) 1.46
Extraordinary gain on early
extinguishment of debt - - - 20.12
----------- ----------- ----------- ------------
Net income (loss) $ (37.73) $ (6.71) $ (62.26) $ 3.51
=========== =========== =========== ============
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 27, July 29,
1996 1995
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (58,961) $ 6,372
--------- --------
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Charges for plant closing, loss on sale of certain operations
and write down of certain long-lived assets 30,055 -
Loss from discontinued operations - 5,279
Loss (gain) on sale of discontinued operations 1,500 (1,463)
Extraordinary gain on early extinguishment of debt - (20,120)
Depreciation and amortization, except amounts included
in interest expense 17,444 16,438
Interest accretion and debt issuance cost amortization 7,219 6,607
Valuation allowance on Gulistan securities 5,463 -
Deferred income taxes (500) -
Other, net 3,061 (401)
Changes in assets and liabilities:
Accounts receivable 16,915 12,885
Inventory (8,821) (9,254)
Prepaid expenses and other assets (184) (535)
Accounts payable (2,139) (7,601)
Accrued expenses and other liabilities (13,262) (11,244)
--------- --------
Total adjustments 56,751 (9,409)
--------- --------
Net cash used in operating activities (2,210) (3,037)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment additions (7,391) (12,500)
Cash provided by (used in) discontinued operations, net 364 (348)
Proceeds from sales of discontinued operations, net 16,778 1,463
--------- --------
Net cash provided by (used in) investing activities 9,751 (11,385)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Financing costs incurred (301) (25)
Revolving credit facility borrowings (repayments), net (5,494) 52,109
Proceeds from issuance of long-term debt 29 5,000
Repayment and purchases of long-term debt (1,931) (43,773)
--------- --------
Net cash provided by (used in) financing activities (7,697) 13,311
--------- --------
Net decrease in cash (156) (1,111)
Cash at beginning of period 1,352 1,844
--------- --------
Cash at end of period $ 1,196 $ 733
========= ========
Supplemental cash flow information:
Interest paid $ 28,217 $ 30,893
Income taxes paid 680 3,459
Non-cash financing activities:
Senior redeemable preferred stock dividends-in-kind 2,319 2,185
See notes to condensed consolidated financial statements.
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JPS TEXTILE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. JPS Textile Group, Inc. (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 27,
1996 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 28, 1995. The results of operations for the interim period
are not necessarily indicative of the operating results of the full
year.
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 (see Notes 5 and 7).
In the 1995 nine-month period, the Company estimated that the open
market purchases of certain of its debt securities would result in
additional tax liabilities of approximately $3.2 million. Such amount
was recorded as a reduction of the extraordinary gain from early
extinguishment of debt in the 1995 nine-month period. This amount of
tax was based on management's best estimate at that time of
alternative minimum taxable income for Fiscal 1995. During the fourth
quarter of Fiscal 1995, management's estimate of Fiscal 1995
alternative minimum taxable income was revised downward. Accordingly,
the Company reduced the $3.2 million tax estimate by $2.6 million to
$0.6 million during the fourth quarter of Fiscal 1995. The Company
has restated the extraordinary gain in the 1995 nine-month period for
this report on Form 10-Q to give effect to the revised amount of tax
on the extraordinary gain.
The Company has reclassified $1.5 million in the October 28, 1995
balance sheet from property, plant and equipment to other current
assets. The reclassified amount represents the Company's progress
payments in 1995 on equipment which was subsequently financed under an
operating lease in the 1996 first quarter. The Company had the
operating lease agreement in place in 1995, however this particular
equipment had not been designated to be financed under that agreement
until the first quarter of 1996. The reclassification treats the $1.5
million as a temporary deposit on the October 28, 1995 balance sheet,
subsequently reimbursed to the Company from the proceeds of the
operating lease. In the 1996 nine-month period, the $1.5 million is
treated in the statement of cash flows as a reduction of other current
assets which results in cash provided by operating activities.
Certain other 1995 amounts have been reclassified to conform to the
1996 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 28, 1995 regarding
reclassifications of 1995 amounts for discontinued operations.
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2. Inventories (In Thousands):
July 27, October 28,
1996 1995
--------- -----------
Raw materials $ 14,339 $ 13,909
Work-in-process 18,725 18,334
Finished goods 24,485 16,486
--------- -----------
TOTAL $ 57,549 $ 48,729
========= ===========
3. Long-Term Debt
As discussed in Note 12 of the Notes to Consolidated Financial Statements
in the Company's Annual Report on Form 10-K for the fiscal year ended
October 28, 1995, the senior credit facility (or a similar credit facility)
is essential for the Company's continued operations. The existing senior
credit facility was scheduled to expire on November 1, 1996. Accordingly,
the Company has negotiated an extension of that facility. On September 6,
1996, the senior credit facility was amended to, among other things, extend
its expiration date and reduce the interest rate by 0.25%. Under the terms
of the amended credit agreement, the senior credit facility expires on
March 1, 1997 if the Company has not commenced a case under chapter 11 of
the Bankruptcy Code. If such a case is commenced on or prior to March 1,
1997, the senior credit facility will expire on the earlier of November 1,
1997 or the effective date of a reorganization under chapter 11 of the
Bankruptcy Code. The Company has classified the $86.2 million outstanding
under its senior credit facility revolving line of credit as a current
liability because the facility may terminate on March 1, 1997 as noted
above. In addition, the loan covenants were amended to be based upon the
activities of the consolidated operating subsidiaries (JPS Converter and
Industrial Corp. and JPS Elastomerics Corp.) rather than the consolidated
Company (i.e. excludes the assets and liabilities of the parent company and
other non-operating subsidiaries). The amended credit agreement does not
permit additional borrowings by the operating subsidiaries for, among other
things, payment of the parent company's interest on its notes and
debentures. As a result of the aforementioned restriction on the use of
proceeds of revolving loans, the Company does not expect to have the
ability to make the interest payments of approximately $1.9 million on its
subordinated debentures on November 15, 1996. The terms of the indentures
governing all of the Company's subordinated debt provide that such a
failure to pay interest when due will result in an event of default on all
such indebtedness. Because such an event of default is foreseeable and
would result in such obligations becoming immediately due and payable, all
of the Company's notes and debentures are classified as current liabilities
in the accompanying consolidated balance sheet as of July 27, 1996.
As discussed in the Company's 1995 Annual Report, it was the Company's
intention to engage advisors in order to expeditiously reach an
understanding with its bondholders about an extension, replacement or
refinancing of its debt securities. On May 8, 1996, the Company engaged
The Blackstone Group L.P. to act as its financial advisor in connection
with a potential financial restructuring. In addition, at the request of
the holders of a substantial majority of its outstanding bonds, the Company
engaged Houlihan, Lokey, Howard & Zukin, Inc., effective April 10, 1996,
to act as financial advisor to the holders of such debt securities in
connection with such a financial restructuring. Fees for these advisors
and other fees and expenses associated with this matter are classified in
the statement of operations as debt restructuring fees and expenses.
The Company's ability to accomplish a restructuring of the terms of its
debt securities or any refinancing will depend on a number of factors,
including its operating performance, market conditions and the terms of any
extension, replacement or refinancing. Management is unable to predict the
Company's ability to accomplish the foregoing extension, replacement or
refinancing of its debt securities.
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4. Discontinued Operations
On November 16, 1995, pursuant to the terms of an Asset Transfer Agreement
dated as of November 16, 1995, by and among the Company, JPS Carpet Corp.
("Carpet"), a wholly-owned subsidiary of the Company, Gulistan Holdings
Inc. and Gulistan Carpet Inc., a wholly-owned subsidiary of Gulistan
Holdings Inc. (collectively, with Gulistan Holdings Inc., "Gulistan"), the
Company and Carpet consummated the sale of substantially all of the assets
of Carpet used in the business of designing and manufacturing tufted
carpets for sale to residential, commercial and hospitality markets (the
"Carpet Business"). Pursuant to the Asset Transfer Agreement, Gulistan
agreed to assume substantially all of the liabilities and obligations
associated with the Carpet Business. Gulistan was formed and its common
stock is owned by certain members of the former management team at Carpet.
The Company and its subsidiaries have agreed, for a three-year period, not
to compete directly or indirectly with the business that was sold. The
Consolidated Statements of Operations and Cash Flows for 1995 have been
reclassified to reflect the Carpet Business as discontinued operations.
The consideration for the Carpet Business consisted of approximately $22.5
million in cash, subject to certain post-closing adjustments based on the
audited amount of working capital transferred on November 16, 1995, and
other debt and equity securities of Gulistan as follows: a $10 million
Promissory Note due in November 2001, $5 million of preferred stock
redeemable in November 2005 and warrants to purchase 25% of the common
stock of Gulistan. Based on an independent valuation, the Company
determined the fair value of these debt and equity securities to be
approximately $11.3 million. These debt and equity securities are included
in other non-current assets on the April 27, 1996 balance sheet. Since the
disposal of the Carpet Business occurred subsequent to the end of Fiscal
1995, the net assets of the Carpet Business (adjusted to estimated net
realizable value) have been classified as "net assets held for sale" on the
October 28, 1995 balance sheet. As of October 28, 1995, the Company
adjusted the net assets of the Carpet Business to their estimated net
realizable value, which resulted in a charge to the 1995 Consolidated
Statement of Operations of $30.7 million, classified as loss on sale of
discontinued operations. The loss on the sale is not currently
recognizable for tax purposes and the Company has recorded no net tax
benefit as a result of this loss due to uncertainties regarding the ability
to utilize these losses in future years.
In May 1996, the Company and Gulistan agreed on the amount of the
post-closing adjustment. As a result, the Company paid a post-closing
adjustment of $3.5 million and has recognized in fiscal 1996 an additional
loss of $1.5 million on the sale of discontinued operations. The final
amount of net cash proceeds applied by the Company to reduce outstanding
borrowings under its senior credit facility was approximately $16.7 million
(net of fees, expenses and the post-closing adjustment resulting from the
level of working capital transferred at the closing date).
Net sales from the discontinued operations of the Carpet Business were
$31.0 million and $89.8 million in the third quarter and nine-month period
of 1995, respectively. 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 of interest expense was approximately $0.5
million and $1.4 million in the third quarter and nine-month period of
1995, respectively.
In the 1996 nine-month period, Gulistan reported net losses of
approximately $5.8 million before interest expense on the promissory note
held by the Company. Accordingly, the Company did not record interest
income on the $10 million promissory note or income from the accretion of
the discounts recorded to adjust the promissory note and the $5 million
redeemable preferred stock of Gulistan to their fair value on November 16,
1995. Also, in accordance with relevant accounting literature, the Company
has recorded a valuation allowance against its investment in the Gulistan
securities and a corresponding charge to income of $5.5 million as a result
of the net loss ($5.8 million reduced by the $0.3 million of common equity
held by Gulistan management) incurred by Gulistan during the 1996 nine-
month period. The relevant accounting literature requires the Company to
record the loss incurred by Gulistan as a valuation allowance reducing the
carrying value of the Gulistan securities held by the Company. The
valuation allowance will be increased or reduced (but not below zero) with
a corresponding charge or credit to income to give effect to future losses
or earnings of Gulistan as those losses or earnings occur.
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5. Contingencies
The Company has provided for all estimated future costs associated with
certain defective roofing products sold by the Predecessor Stevens Division
operations. The liability for future costs associated with these defective
roofing products is subject to management's best estimate, including
factors such as expected future claims by geographic region and roofing
compound applied; expected costs to repair or replace such roofing
products; estimated remaining length of time that such claims will be made
by customers; and the estimated costs to litigate and settle certain claims
now in litigation and those that may result in future litigation. Based on
warranties that were issued on the roofs, the Company estimates that the
defective roofing product claims will be substantially settled by 2000.
The liability for such defective products was $9.3 million at October 28,
1995 and $6.5 million at July 27, 1996. 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 defective roofing products quarterly and if it is
deemed that an adjustment to the reserve is required, it will be charged to
operations in the period in which such determination is made.
The Company estimates that, as of July 27, 1996, it would have net
operating loss carryforwards for tax regular federal income purposes of
approximately $82 million. The net operating losses expire in years 2005
through 2008. The Company's ability to utilize its net operating losses
may be significantly limited under the income tax laws should there be
changes in the ownership of the Company's stock which constitute an
ownership change for tax purposes. The effect of such an ownership change
would be to significantly limit the annual utilization of the net operating
loss carryforwards and certain built-in losses to an amount equal to the
value of the Company immediately prior to the time of the change (subject
to certain adjustments) multiplied by the Federal long-term tax exempt
rate. The Company does not believe that its losses are currently subject
to this limitation on utilization of the loss carryforwards. However,
there can be no assurance that this limitation will not apply in the
future. Due to the Company's operating history, it is uncertain that it
will be able to utilize all deferred tax assets. Therefore, a valuation
allowance has been provided equal to the deferred tax assets remaining
after deducting all deferred tax liabilities, exclusive of those related to
certain deferred state tax liabilities.
6. Early Retirement Offer
On February 15, 1996, the Company extended an offer of special early
retirement termination benefits to approximately 50 salaried employees who
met certain criteria as of that date. Approximately $2.2 million of
pension benefits were paid in lump-sums by the Company's defined benefit
pension plan to the 28 employees who accepted the offer. Other expense for
the second quarter of 1996 includes a charge of $1.1 million representing
the actuarial cost to the pension plan of such early retirement at the time
such offers were accepted by the employees. The expense reduced prepaid
pension costs which are classified as other non-current assets.
7. Sale of Certain Operations, Plant Closing and Write Down of Certain
Long-Lived Assets
The Company has entered into negotiations to sell a division which
accounted for $20.7 million of sales and a $2.0 million loss from operations
in fiscal 1995 and $13.6 million in sales and a $2.0 million loss from
operations through July 27, 1996. The contract for the sale of the
division has not yet been completed; however, management expects that
contract negotiations will be completed and the sale will close in
September 1996. Under the terms of the proposed agreement, the buyer will
pay the Company approximately $5 million in cash, subject to certain
adjustments based on the audited amount of working capital transferred on
the closing date. The net proceeds after fees and expenses are expected to
be approximately $4.8 million. The accompanying consolidated statement of
operations for the three months ended July 27, 1996 includes a charge,
"loss on sale of certain operations", of $7.9 million, which is the
estimated loss for the expected sale of this division.
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On August 28, 1996, the Company announced its intention to close a plant in
Greenville, South Carolina within 60 days. This closing results from what
management believes is a permanent decline in the Company's spun apparel
business. This plant has been operating on a reduced production schedule
as a result of poor market conditions and will continue to do so until its
closure on approximately October 28, 1996. The accompanying consolidated
statement of operations for the three months ended July 27, 1996 includes a
charge, "charge for plant closing", of approximately $14.0 million related
principally to the estimated loss on the impairment of the plant in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of", employee severance
costs and estimated costs for equipment relocation.
Also, in connection with the Company's review of present and expected
conditions in the markets which it serves, management believes that its
plant in Kingsport, Tennessee, which manufactures 100% cotton fabrics, is
impaired under the criteria of SFAS No. 121. SFAS No. 121 requires a write
down to fair value in circumstances in which the expected future net cash
flows from the operation of the plant are less than its carrying value.
The accompanying consolidated statement of operations for the third quarter
ended July 27, 1996 includes a charge, "write down of certain long-lived
assets", of $8.1 million for the excess of the carrying amount of the plant
over its estimated fair value.
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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
28, 1995. The statements contained herein that are not historical facts may be
forward-looking statements subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. The Company cautions readers of this
Quarterly Report on Form 10-Q that a number of important factors could cause
the Company's actual results in future periods to differ materially from those
expressed in any such forward-looking statements. These factors include,
without limitation, the general economic and business conditions affecting the
textile industry, competition from other existing or new textile manufacturers
and the Company's ability to meet debt service obligations and other liquidity
needs.
(In Thousands)
Three Months Ended Nine Months Ended
-------------------------- -------------------------
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
----------- ----------- ---------- ----------
NET SALES
Apparel Fabrics and Products $ 51,227 $ 53,789 $ 167,213 $ 182,948
Industrial Fabrics and Products 51,618 48,412 141,074 141,405
Home Fashion Textiles 7,421 6,916 25,157 25,179
----------- ----------- ---------- ----------
Net Sales $ 110,266 $ 109,117 $ 333,444 $ 349,532
=========== =========== ========== ==========
OPERATING PROFIT
Apparel Fabrics and Products:
Before charges for plant closing and
loss on sale of certain operations $ 576 $ 2,957 $ (707) $ 13,486
Charges for plant closing and loss on
sale of certain operations (20,421) - (20,421) -
Industrial Fabrics and Products:
Before charge for write down of certain
long-lived assets and loss on sale of
certain operations 4,730 3,451 11,123 8,137
Charge for write down of certain
long-lived assets and loss on sale of
certain operations (9,634) - (9,634) -
Home Fashion Textiles 335 420 603 1,287
Indirect Corporate Expenses, net (1,300) (1,365) (4,889) (4,149)
----------- ----------- ---------- ----------
Operating Profit (loss) (25,714) 5,463 (23,925) 18,761
Valuation allowance on Gulistan securities (1,395) - (5,463) -
Interest income 714 776 2,102 2,127
Interest expense (10,082) (9,754) (29,647) (29,820)
Restructuring fees and expenses (727) - (902) -
----------- ----------- ---------- ----------
Loss before income taxes, discontinued
operations and extraordinary gain $ (37,204) $ (3,515) $ (57,835) $ (8,932)
=========== =========== ========== ==========
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RESULTS OF OPERATIONS
Three Months Ended July 27, 1996 (the "1996 Third Quarter") Compared To The
Three Months Ended July 29, 1995 (the "1995 Third Quarter"):
- -------------------------------------------------------------------------------
Consolidated net sales for the 1996 third quarter increased 1.1% to $110.3
million from $109.1 million in the 1995 third quarter. Net sales in the
Apparel Fabrics and Products segment decreased 4.8% to $51.2 million for the
1996 third quarter from $53.8 million for the 1995 third quarter principally
due to lower average selling prices for the Company's greige apparel fabric.
Apparel unit volume was relatively flat with the 1995 third quarter.
Industrial Fabrics and Products sales increased 6.6% to $51.6 million for the
1996 third quarter from $48.4 million for the 1995 third quarter as sales
increases for construction products and fiberglass industrial fabrics were
partially offset by sales decreases in cotton and synthetic industrial fabrics.
Net sales of fiberglass fabrics increased $2.0 million to $16.5 million for the
1996 third quarter due to increased demand and stronger pricing for fabrics
used in the manufacture of electronic circuit boards and filtration systems.
Sales of single-ply roofing and environmental containment membrane ("liner")
products increased $4.5 million to $18.3 million for the 1996 third quarter due
to the continued increase in demand for the Company's roofing products and
improved demand during the 1996 third quarter for liner products. Sales of
cotton industrial fabric decreased $2.4 million to $8.2 million in the 1996
third quarter due to significantly lower product demand. Synthetic industrial
fabric sales declined $1.5 million to $2.0 million for the 1996 third quarter
due to lower demand and the Company's decision to exit the markets for certain
unprofitable types of fabrics. Home Fashion Textiles sales increased 7.3% to
$7.4 million for the 1996 third quarter from $6.9 million for the 1995 third
quarter due to an increased demand for yarn sold to other manufacturers.
Operating profit or loss in the 1996 third quarter fell to a loss of $25.7
million from a profit of $5.5 million for the 1995 third quarter generally due
to $30.1 million in special charges for plant closing, loss on the sale of one
of the Company's divisions and the write down of the Company's plant in
Kingsport, Tennessee to its fair value. Operating profit before the special
charges fell $1.1 million to $4.3 million for the 1996 third quarter generally
due to a less favorable apparel fabric market environment. Operating profit
before special charges in the Apparel Fabrics and Products segment was $0.6
million for the 1996 third quarter as compared to a $3.0 million profit for the
1995 third quarter due to a less favorable product mix and lower selling prices
and higher raw material costs. The product mix in the 1996 third quarter
included a higher ratio of commodity-type fabrics with lower margins than was
experienced in the 1995 third quarter. This represents the continuation of the
trend the Company has experienced since the second half of Fiscal 1995. The
apparel market has been marked by poorer retail apparel sales, increased
competitive pressures from abroad (particularly in commodity-type fabrics) and
generally lower margins. Management does not expect the weak markets for its
commodity apparel fabrics to strengthen in the near term. As a result, the
Company announced its intention to close one of its plants which was engaged in
the manufacture of such apparel fabrics, thereby reducing its participation in
these markets. The Company anticipates that this action will improve
profitability in the Apparel Fabrics and Products segment in the future.
Operating profits before the write down of long-lived assets for Industrial
Fabrics and Products increased 37% to $4.7 million in the 1996 third quarter
from $3.5 million in the 1995 third quarter as a result of a more profitable
product mix, increased selling prices for electrical composite and filtration
fabrics and increased roofing sales volume. Home Fashion Textiles experienced
a $0.1 million decrease in operating profits in the 1996 third quarter to $0.3
million from $0.4 million in the 1995 third quarter due to a less favorable
product mix of fabrics sold in 1996.
12
13
The Company has entered into negotiations to sell a division which accounted
for $20.7 million of sales and a $2.0 million loss from operations in fiscal \
1995 and $13.6 million in sales and a $2.0 million loss from operations through
July 27, 1996. The contract for the sale of the division has not yet been
completed; however, management expects that contract negotiations will be
completed and the sale will close in September 1996. Under the terms of the
proposed agreement, the buyer will pay the Company approximately $5 million in
cash, subject to certain adjustments based on the audited amount of working
capital transferred on the closing date. The net proceeds after fees and
expenses are expected to be approximately $4.8 million. The accompanying
consolidated statement of operations for the three months ended July 27, 1996
includes a charge, "loss on sale of certain operations", of $7.9 million, which
is the estimated loss for the sale of this division.
On August 28, 1996, the Company announced its intention to close a plant in
Greenville, South Carolina within 60 days. This closing results from what
management believes is a permanent decline in the Company's spun apparel
business. This plant has been operating on a reduced production schedule as a
result of poor market conditions and will continue to do so until its closure
on approximately October 28, 1996. The accompanying consolidated statement of
operations for the three months ended July 27, 1996 includes a charge, "charge
for plant closing", of approximately $14.0 million related principally to the
estimated loss on the impairment of the plant in accordance with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of", employee severance costs and estimated costs for equipment
relocation.
Also, in connection with the Company's review of present and expected
conditions in the markets which it serves, management believes that its plant
in Kingsport, Tennessee, which manufactures 100% cotton fabrics, is impaired
under the criteria of SFAS No. 121. SFAS No. 121 requires a write down to
fair value in circumstances in which the expected future net cash flows from
the operation of the plant are less than its carrying value. The accompanying
consolidated statement of operations for the third quarter ended July 27, 1996
includes a charge, "write down of certain long-lived assets", of $8.1 million
for the excess of the carrying amount of the plant over its estimated fair
value.
Indirect corporate expenses for the 1996 third quarter were consistent with the
1995 third quarter, decreasing slightly less than $0.1 million to $1.3 million.
In the third quarter of 1996, Gulistan reported net losses of approximately
$1.4 million before interest expense on the promissory note held by the
Company. Accordingly, the Company did not record interest income on the $10
million promissory note due in November 2001 from Gulistan or income from the
accretion of the discounts recorded to adjust the promissory note and the $5
million redeemable preferred stock of Gulistan to their fair value on November
16, 1995. Also, in accordance with relevant accounting literature, the Company
has recorded a valuation allowance against its investment in the Gulistan
securities and a corresponding charge to income of $1.4 million as a result of
the net loss incurred by Gulistan during the 1996 third quarter. The relevant
accounting literature requires the Company to record the loss incurred by
Gulistan as a valuation allowance reducing the carrying value of the Gulistan
securities held by the Company. The valuation allowance will be increased or
reduced (but not below zero) with a corresponding charge or credit to income to
give effect to future losses or earnings of Gulistan as those losses or
earnings occur.
Interest expense for the 1996 third quarter of $10.1 million was $0.3 million
higher than the 1995 third quarter due to higher non-cash charges for
amortization of financing costs and accretion of subordinated debt discounts.
Lower interest rates on the revolving credit facility were mostly offset by
higher borrowings.
Restructuring fees and expenses in the 1996 third quarter represent amounts
paid to financial advisors and counsel involved in the Company's potential
financial restructuring.
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14
Nine Months Ended July 27, 1996 (the "1996 Nine-Month Period") Compared To The
Nine Months Ended July 29, 1995 (the "1995 Nine-Month Period"):
- -------------------------------------------------------------------------------
Consolidated net sales for the 1996 nine-month period decreased 4.6% to $333.4
million from $349.5 million in the 1995 nine-month period primarily as a result
of weaker markets for the Company's apparel fabrics and products. Net sales in
the Apparel Fabrics and Products segment decreased 8.6% to $167.2 million for
the 1996 nine-month period from $182.9 million for the 1995 nine-month period
principally due to lower demand resulting in lower pricing and a less favorable
product mix. Competitive pressures and a lackluster retail environment have
caused this lower demand for apparel fabrics, continuing a sales decline which
began in the second half of 1995. Industrial Fabrics and Products sales of
$141.1 million for the 1996 nine-month period were generally flat with the 1995
nine-month period sales of $141.4 million as increases in certain product lines
were offset by decreases in others. Net sales of fiberglass fabrics increased
$6.1 million to $48.0 million due to increased demand and stronger pricing for
electrical composite and filtration fabrics.
Single-ply roofing product sales increased 17.9% ($6.1 million) to $39.9
million for the 1996 nine-month period due to the continued increase in demand
for the Company's roofing products and slightly higher average selling prices
for such roofing products. Cotton industrial fabric sales decreased $8.9
million to $22.8 million due to significantly lower product demand for
bookbinding and laminating fabrics combined with increased foreign imports of
athletic tape fabrics. Synthetic industrial fabric sales declined $5.6 million
to $6.8 million for the 1996 nine-month period due to lower demand and the
Company's decision to exit the markets for certain unprofitable types of
fabrics. Improved demand resulted in a $0.6 million increase in extruded
urethane product sales to $16.2 million for the 1996 nine-month period. Home
Fashion Textiles sales of $25.2 million for the 1996 nine-month period were
flat with the 1995 nine-month period.
Operating profit or loss in the 1996 nine-month period fell to a loss of $23.9
million from a profit of $18.8 million for the 1995 nine-month period. The
1996 loss includes $30.1 million in special charges for plant closing, loss on
sale of certain operations and write down of certain long-lived assets. The
Apparel Fabrics and Products segment operated at a loss of $0.7 million before
special charges for the 1996 nine-month period as compared to a $13.5 million
profit for the 1995 nine-month period due to lower sales volume, lower selling
prices and a less favorable product mix. The product mix in the 1996
nine-month period included a higher ratio of commodity-type fabrics than was
experienced in the 1995 nine-month period. This represents the continuation of
the trend the Company experienced during the second half of Fiscal 1995. This
period, including the 1996 nine-month period, has been marked by poorer retail
apparel sales, increased competitive pressures from abroad (particularly in
commodity-type fabrics), falling margins and higher raw material costs. In
addition, the Company curtailed production in many of its apparel fabric
manufacturing plants during the 1996 nine-month period in response to lower
customer demand. Operating profits for Industrial Fabrics and Products before
special charges increased 37% to $11.1 million in the 1996 nine-month period
from $8.1 million in the 1995 nine-month period as a result of a more
profitable product mix, increased selling prices for electrical composite
fabrics, increased sales of roofing product and manufacturing improvements.
Home Fashion Textiles experienced a $0.7 million decrease in operating profits
in the 1996 nine-month period to $0.6 million from $1.3 million in the 1995
nine-month period due to weaker demand for home furnishing fabrics and a less
favorable product mix of fabrics sold in 1996. The special charges for plant
closing, loss on sale of certain operations and write down of certain
long-lived assets were explained above in the discussion of the 1996 third
quarter compared to the 1995 third quarter.
Indirect corporate expenses increased $0.7 million to $4.9 million for the 1996
nine-month period as compared to the 1995 nine-month period due to the $1.1
million cost of the early retirement offer accepted by certain employees net of
lower employee compensation costs in 1996.
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15
In the first nine months of 1996, Gulistan reported net losses of approximately
$5.8 million before interest expense on the promissory note held by the
Company. Accordingly, the Company did not record interest income on the $10
million promissory note due from Gulistan or income from the accretion of the
discounts recorded to adjust the promissory note and the $5 million redeemable
preferred stock of Gulistan to their fair value on November 16, 1995. Also, in
accordance with relevant accounting literature, the Company has recorded a
valuation allowance against its investment in the Gulistan securities and a
corresponding charge to income of $5.5 million as a result of the net loss
($5.8 million reduced by the $0.3 million of common equity held by Gulistan
management) incurred by Gulistan during the 1996 nine-month period.
Interest expense decreased 0.6% to $29.6 million for the 1996 nine-month period
from $29.8 million for the 1995 nine-month period principally due to the
reduction in debt resulting from the reductions in outstanding principal
amounts of the Company's notes and debentures as the Company purchased a
portion of its debt securities during 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. A lower average
interest rate on the revolving credit facility in the 1996 nine-month period
was offset by higher average revolver borrowings.
LIQUIDITY AND CAPITAL RESOURCES
As discussed in Note 12 of the Notes to Consolidated Financial Statements in
the Company's Annual Report on Form 10-K for the fiscal year ended October 28,
1995, the senior credit facility (or a similar credit facility) is essential
for the Company's continued operations. The existing senior credit facility
was scheduled to expire on November 1, 1996. Accordingly, the Company has
negotiated an extension of that facility. On September 6, 1996, the senior
credit facility was amended to, among other things, extend its expiration date
and reduce the interest rate by 0.25%. Under the terms of the amended credit
agreement, the senior credit facility expires on March 1, 1997 if the Company
has not commenced a case under chapter 11 of the Bankruptcy Code. If such a
case is commenced on or prior to March 1, 1997, the senior credit facility will
expire on the earlier of November 1, 1997 or the effective date of a
reorganization under chapter 11 of the Bankruptcy Code. The Company has
classified the $86.2 million outstanding under its senior credit facility
revolving line of credit as a current liability because the facility may
terminate on March 1, 1997 as noted above. In addition, the loan covenants
were amended to be based upon the activities of the consolidated operating
subsidiaries (JPS Converter and Industrial Corp. and JPS Elastomerics Corp.)
rather than the consolidated Company (i.e. excludes the assets and liabilities
of the parent company and other non-operating subsidiaries). The amended
credit agreement does not permit additional borrowings by the operating
subsidiaries for, among other things, payment of the parent company's interest
on its notes and debentures. As a result of the aforementioned restriction on
the use of proceeds of revolving loans, the Company does not expect to have the
ability to make the interest payments of approximately $1.9 million on its
subordinated debentures on November 15, 1996. The terms of the indentures
governing all of the Company's subordinated debt provide that such a failure
to pay interest when due will result in an event of default on all such
indebtedness. Because such an event of default is foreseeable and would result
in such obligations becoming immediately due and payable, all of the Company's
notes and debentures are classified as current liabilities in the accompanying
consolidated balance sheet as of July 27, 1996.
Working capital decreased from $103.1 million at October 28, 1995 to a working
capital deficiency of $250.8 million at July 27, 1996 principally due to the
classification of the $86.2 million outstanding under the senior credit
facility and the $235.2 million carrying value of notes and debentures as
current liabilities at July 27, 1996 and the sale in November 1995 of the net
assets held for sale (see below). A 19.2% decline in accounts receivable
reduced working capital $16.9 million principally due to lower sales in July
1996 than in October 1995. Inventories increased $8.8 million (18.1%) from
October 28, 1995 to July 27, 1996 principally due to an increase in finished
goods, also resulting from the lower level of sales in July 1996 than in
October 1995.
15
16
On November 16, 1995, pursuant to the terms of an Asset Transfer Agreement
dated as of November 16, 1995, by and among the Company, JPS Carpet Corp.
("Carpet"), a wholly-owned subsidiary of the Company, Gulistan Holdings Inc.
and Gulistan Carpet Inc., a wholly-owned subsidiary of Gulistan Holdings Inc.
(collectively, with Gulistan Holdings Inc., "Gulistan"), the Company and Carpet
consummated the sale of substantially all of the assets of Carpet used in the
business of designing and manufacturing tufted carpets for sale to residential,
commercial and hospitality markets (the "Carpet Business"). Pursuant to the
Asset Transfer Agreement, Gulistan agreed to assume substantially all of the
liabilities and obligations associated with the Carpet Business. Gulistan was
formed and its common stock is owned by certain members of the former
management team at Carpet. The Company and its subsidiaries have agreed, for a
three-year period, not to compete directly or indirectly with the business that
was sold. Certain amounts in the Consolidated Statements of Operations and
Cash Flows for 1995 have been reclassified to reflect the Carpet Business as
discontinued operations.
The consideration for the Carpet Business consisted of approximately $22.5
million in cash, subject to certain post-closing adjustments based on the
audited amount of working capital transferred on November 16, 1995, and other
debt and equity securities of Gulistan as follows: a $10 million Promissory
Note due in November 2001, $5 million of preferred stock redeemable in November
2005 and warrants to purchase 25% of the common stock of Gulistan. Based on an
independent valuation, the Company determined the fair value of these debt and
equity securities to be approximately $11.3 million. These debt and equity
securities are included in other non-current assets on the April 27, 1996
balance sheet. Since the disposal of the Carpet Business occurred subsequent
to the end of Fiscal 1995, the net assets of the Carpet Business (adjusted to
net realizable value) have been classified as "net assets held for sale" on the
October 28, 1995 balance sheet.
In May 1996, the Company and Gulistan agreed on the amount of the post-closing
adjustment. As a result, the Company paid a post-closing adjustment of $3.5
million to Gulistan and has recognized an additional loss of $1.5 million on
the sale of discontinued operations. The final amount of net cash proceeds
applied by the Company to reduce outstanding borrowings under the credit
agreement for the senior credit facility was approximately $16.7 million (net
of fees, expenses and the post-closing adjustment resulting from the level of
working capital transferred at the closing date).
The Company's principal sources of liquidity for operations and expansion are
funds generated internally and borrowings by its subsidiaries, JPS Converter
and Industrial Corp. and JPS Elastomerics Corp., under a revolving credit
facility, which facility (the "Senior Credit Facility") provides for revolving
credit loans and letters of credit in a maximum principal amount of $118
million, subject to a specified borrowing base based upon the sum of (a) a
specified percentage of eligible accounts receivable and (b) the lesser of (i)
$22 million and (ii) a specified percentage of eligible inventory, except that
(A) neither borrower may borrow an amount greater than the borrowing base
attributable to it, (B) letters of credit may not exceed $15 million in the
aggregate and (C) $20 million of the revolving credit facility is available,
not subject to such borrowing base, to purchase property, plant and equipment
or to finance or refinance such purchases, provided that the aggregate of all
revolving credit loans may not exceed the lesser of (a) $118 million and (b)
the sum of the borrowing base plus $25 million (subject to certain reductions).
All loans borrowed under the Senior Credit Facility, subsequent to the
application of sales proceeds from the sale of the Carpet business to reduce
the outstanding balance under the Senior Credit Facility, were used to provide
funds needed for the operations and capital expenditures to the extent such
funds were not provided for by the net cash flow from operations during the
1996 nine-month period. All loans under the Senior Credit Facility (after
giving effect to the above-referenced amendment), bear interest at a Base Rate,
as defined, plus 1.0% per annum (9.25% at July 27, 1996, based on the
post-amendment interest rates) or at the Eurodollar Rate, as defined, plus 2.5%
per annum (approximately 7.94% at July 27, 1996, based on the post-amendment
interest rates). $17.2 million of the Senior Credit Facility was available for
borrowing on July 27, 1996. Loans made under the Senior 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.
16
17
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 the Company's capital resources and expected cash flows will be
adequate to meet its operating and working capital needs during Fiscal 1996 and
beyond, however, because of restrictions in the amended credit agreement as to
the use of proceeds of revolving loans, the Company does not expect to have the
resources to satisfy its existing obligations to pay scheduled interest and
principal payments on its subordinated notes and debentures. Management
expects to discuss appropriate modifications to the terms of its subordinated
indebtedness with its securityholders in the near future. In that regard, on
May 8, 1996, the Company engaged The Blackstone Group L.P. to act as its
financial advisor in connection with a potential financial restructuring. In
addition, at the request of the holders of a substantial majority of its
outstanding bonds, the Company engaged Houlihan, Lokey, Howard & Zukin, Inc.,
effective April 10, 1996, to act as financial advisor to the holders of such
debt securities in connection with such a financial restructuring.
The Company's ability to accomplish a restructuring of the terms of its debt
securities or any refinancing will depend on a number of factors, including its
operating performance, market conditions and the ability of the Company and its
bondholders to come to an agreement as to the appropriate terms of any
extension, replacement or refinancing. Management is unable to predict the
Company's ability to accomplish the foregoing extension, replacement or
refinancing of its debt securities.
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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 Securityholders None
5. Other Information None
6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
(10.1) Seventh Amendment totheFourth Amended and Restated Credit
Agreement, dated as of July 22, 1996, by and among the
Company, JPS Elastomerics Corp., JPS Converter and
Industrial Corp., JPS Auto Inc., JPS Carpet Corp.,
International Fabrics, Inc., the financial institutions
listed on the signature pages thereof, Citibank, N.A. as
agent and Administrative Agent and General Electric
Capital Corporation as Co-Agent and Collateral Agent.
(10.2) Eighth Amendment to the Fourth Amended and Restated
Credit Agreement, dated as of September 6,1996, by and
among the Company, JPS Elastomerics Corp., JPS Converter
and Industrial Corp., JPS Auto Inc., JPS Carpet Corp.,
International Fabrics, Inc., the financial institutions
listed on the signature pages thereof, Citibank, N.A. as
agent and Administrative Agent and General Electric
Capital Corporation as Co-Agent and Collateral Agent.
(10.3) Retention Bonus Agreement, dated July 12, 1996, between
the Company and Jerry E. Hunter.
(10.4) Retention Bonus Agreement, dated July 12, 1996, between
the Company and David H. Taylor.
(10.5) Retention Bonus Agreement, dated July 12, 1996 between
the Company and Monnie L. Broome.
(10.6) Employment Agreement, dated October 30, 1995, between the
Company and Jerry E. Hunter.
(10.7) Employment Agreement, dated October 30, 1995 between the
Company and David H. Taylor.
(10.8) Employment Agreement, dated October 30, 1995 between the
Company and Monnie L. Broome.
(10.9) Employment Agreement, dated May 1, 1993 and amended
September 11, 1995 between the Company and Carl Rosen
(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
(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 10, 1996 /s/ David H. Taylor
-----------------------------
David H. Taylor
Executive Vice President - Finance,
Secretary and Chief Financial Officer
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