1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 2, 1997
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.
(DEBTOR-IN-POSSESSION)
(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 8, 1997.
2
JPS TEXTILE GROUP, INC.
(DEBTOR-IN-POSSESSION)
INDEX
Page
PART I. FINANCIAL INFORMATION Number
Item 1. Condensed Consolidated Balance Sheets
August 2, 1997 (Unaudited) and November 2, 1996.................. 3
Condensed Consolidated Statements of Operations
Three Months and Nine Months Ended August 2, 1997 and
July 27, 1996 (Unaudited)........................................ 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended August 2, 1997 and
July 27, 1996 (Unaudited)........................................ 5
Notes to Condensed Consolidated Financial Statements (Unaudited)..... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 13
PART II. OTHER INFORMATION.................................................... 20
Page -2-
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Item 1. Financial Statements
JPS TEXTILE GROUP, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
August 2, November 2,
1997 1996
(Unaudited)
----------- -----------
ASSETS
Current Assets:
Cash $ 1,229 $ 1,460
Accounts receivable 63,565 75,166
Inventories (Note 4) 54,091 48,374
Prepaid expenses and other 2,685 1,967
--------- ---------
Total current assets 121,570 126,967
Property, plant and equipment, net 117,188 124,004
Excess of cost over fair value of net assets acquired, net 29,782 30,506
Other assets (Note 6) 53,757 54,450
--------- ---------
Total $ 322,297 $ 335,927
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Liabilities not subject to compromise:
Current liabilities:
Accounts payable $ 20,621 $ 24,708
Accrued interest 234 9,608
Accrued salaries, benefits and withholdings 9,628 10,440
Other accrued expenses 11,916 13,987
Senior credit facility, revolving line of credit (Note 5) 84,729 85,639
Current portion of long-term debt 2,150 240,451
--------- ---------
Total current liabilities 129,278 384,833
Long-term debt 2,876 4,226
Deferred income taxes 3,665 3,665
Other long-term liabilities 19,828 19,513
--------- ---------
Total liabilities not subject to compromise 155,647 412,237
--------- ---------
Liabilities subject to compromise (Note 3) 271,082 --
--------- ---------
Total liabilities 426,729 412,237
Senior redeemable preferred stock subject to compromise (Note 7) 36,503 32,676
--------- ---------
Shareholders' deficit:
Junior preferred stock 250 250
Common stock 10 10
Additional paid-in capital 21,280 25,108
Deficit (162,475) (134,354)
--------- ---------
Total shareholders' deficit (140,935) (108,986)
--------- ---------
Total $ 322,297 $ 335,927
========= =========
See notes to condensed consolidated financial statements.
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JPS TEXTILE GROUP, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Three Months Ended Nine Months Ended
-------------------------- --------------------------
August 2, July 27, August 2, July 27,
1997 1996 1997 1996
----------- ----------- ----------- -----------
Net sales $ 95,883 $ 110,266 $ 301,188 $ 333,444
Cost of sales 80,682 95,908 258,654 294,635
----------- ----------- ----------- -----------
Gross profit 15,201 14,358 42,534 38,809
Selling, general and administrative expenses 10,256 9,888 29,863 30,601
Other expense, net 102 129 485 2,078
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) 4,843 (25,714) 12,186 (23,925)
Valuation allowance on Gulistan securities (Note 8) (2,982) (1,395) (5,070) (5,463)
Interest income 761 714 2,232 2,102
Interest expense (Note 1) (10,086) (10,082) (30,309) (29,647)
Debt restructuring fees and expenses (Note 1) (3,332) (727) (6,476) (902)
----------- ----------- ----------- -----------
Loss before income taxes, discontinued
operations and extraordinary gain (10,796) (37,204) (27,437) (57,835)
Income tax expense (benefit) 275 (582) 684 (374)
----------- ----------- ----------- -----------
Loss before discontinued operations
and extraordinary gain (11,071) (36,622) (28,121) (57,461)
Loss on sale of discontinued operations,
net of taxes -- -- -- (1,500)
----------- ----------- ----------- -----------
Net loss (11,071) (36,622) (28,121) (58,961)
Senior redeemable preferred stock in-kind
dividends and discount accretion 1,285 1,109 3,827 3,301
----------- ----------- ----------- -----------
Loss applicable to common stock $ (12,356) $ (37,731) $ (31,948) $ (62,262)
=========== =========== =========== ===========
Weighted average common shares outstanding 1,000,000 1,000,000 1,000,000 1,000,000
=========== =========== =========== ===========
Loss per common share:
Loss before discontinued operations
and extraordinary gain $ (12.36) $ (37.73) $ (31.95) $ (60.76)
Loss on sale of discontinued operations -- -- -- (1.50)
----------- ----------- ----------- -----------
Net loss $ (12.36) $ (37.73) $ (31.95) $ (62.26)
=========== =========== =========== ===========
See notes to condensed consolidated financial statements.
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JPS TEXTILE GROUP, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Nine Months Ended
--------------------
August 2, July 27,
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(28,121) $(58,961)
-------- --------
Adjustments to reconcile net 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 on sale of discontinued operations -- 1,500
Depreciation and amortization, except amounts included
in interest expense 14,470 17,444
Interest accretion and debt issuance cost amortization 7,181 7,219
Valuation allowance on Gulistan securities 5,070 5,463
Deferred income taxes (500) (500)
Other, net (1,724) 3,061
Changes in assets and liabilities:
Accounts receivable 11,601 16,915
Inventory (5,717) (8,821)
Prepaid expenses and other assets (2,939) (184)
Accounts payable (4,087) (2,139)
Accrued expenses and other liabilities 14,494 (13,262)
-------- --------
Total adjustments 37,849 56,751
-------- --------
Net cash provided by (used in) operating activities 9,728 (2,210)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment additions (6,959) (7,391)
Cash provided by discontinued operations, net -- 364
Proceeds from sales of discontinued operations, net -- 16,778
-------- --------
Net cash provided by (used in) investing activities (6,959) 9,751
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Financing costs incurred (100) (301)
Revolving credit facility repayments, net (910) (5,494)
Proceeds from issuance of long-term debt -- 29
Repayment of long-term debt (1,990) (1,931)
-------- --------
Net cash used in financing activities (3,000) (7,697)
-------- --------
Net decrease in cash (231) (156)
Cash at beginning of period 1,460 1,352
-------- --------
Cash at end of period $ 1,229 $ 1,196
======== ========
Supplemental cash flow information:
Interest paid $ 5,960 $ 28,217
Income taxes paid 147 680
Non-cash financing activity - Senior redeemable preferred
stock dividends-in-kind -- 2,319
See notes to condensed consolidated financial statements.
Page -5-
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JPS TEXTILE GROUP, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
JPS Textile Group, Inc. ("JPS" or the "Holding Company") and
subsidiaries (collectively with JPS, the "Company") have prepared,
without audit, the interim condensed consolidated financial statements
and related notes. In the opinion of management, all adjustments (which
consist of normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at August
2, 1997 and for all periods presented have been made.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended
November 2, 1996. The results of operations for the interim period are
not necessarily indicative of the operating results for the full year.
As discussed in Note 2, JPS filed on August 1, 1997 its voluntary
petition for relief under chapter 11 of title 11 of the United States
Code (the "Bankruptcy Code") in the United States Bankruptcy Court for
the Southern District of New York (Case No. 97-45133). This petition
was filed at the Holding Company level only. The Company's operating
subsidiaries are not a party to and are not debtors in the chapter 11
case and their operations are unaffected thereby. The financial
statements of the Company are prepared on a going concern basis which
contemplates continuity of operations, realization of assets and
satisfaction of liabilities in the ordinary course of business.
The Company's financial statements as of August 2, 1997 have been
prepared in accordance with Statement of Position 90-7, "Financial
Reporting By Entities in Reorganization Under the Bankruptcy Code",
issued by the American Institute of Certified Public Accountants ("SOP
90-7"). In accordance with SOP 90-7, all prepetition liabilities of JPS
that are subject to compromise under the plan of reorganization are
segregated in the Company's condensed consolidated balance sheet as
liabilities subject to compromise. These liabilities are recorded at
the amounts expected to be allowed as claims in the chapter 11 case
rather than as estimates of the amounts for which those allowed claims
may be settled as a result of the Plan of Reorganization (as defined in
Note 2). As of the effective date of the Plan of Reorganization, the
Company will adopt "fresh start" reporting as defined in SOP 90-7. In
accordance with "fresh start" reporting, the reorganization value of
the Company will be allocated to the emerging entity's specific
tangible and identified intangible assets. Any excess reorganization
value will be reported as "reorganization value in excess of amounts
allocable to identifiable assets". The Company intends to amortize such
excess, if any, over a twenty-year period. As a result of the adoption
of such "fresh start" reporting, the Company's post-emergence financial
statements ("successor") will not be comparable with its pre-emergence
financial statements ("predecessor"), including the historical
financial statements included in this quarterly report.
Page -6-
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The accompanying statements of operations reflect certain restructuring
fees and expenses consisting of professional fees and expenses directly
related to the debt restructuring and reorganization. Interest expense
on the Holding Company's Old Debt Securities (as defined in Note 2) has
been reported to August 1, 1997, the petition date. Such interest
expense was not reported subsequent to that date because it will not be
paid during the bankruptcy case and will not be an allowed claim under
the Plan of Reorganization. The difference between reported interest
expense and stated contractual interest expense is approximately
$178,000 for this two-day period.
In accordance with SOP 90-7, a significant portion of the Company's
outstanding debt and related accrued interest are classified as
"liabilities subject to compromise" at August 2, 1997. Comparable items
in the prior year have not been reclassified to the presentation
required by SOP 90-7. See Note 3 for a complete description of
liabilities subject to compromise.
The accompanying condensed consolidated financial statements include
the financial position and results of operations of the operating
subsidiaries of the Company which are not parties to the chapter 11
filing. The following condensed financial statements of JPS have been
prepared using the equity method of accounting for reporting the
results of operations of all wholly-owned subsidiaries of the Company
which are not debtors in the chapter 11 case.
JPS Textile Group, Inc. (Holding Company)
Debtor-in-Possession
Condensed Balance Sheet (Unaudited)
(In Thousands)
August 2, 1997
--------------
ASSETS
Current assets $ 144
Property, plant and equipment, net 14
Prepaid pension costs 52
Investment in subsidiaries, net 168,919
---------
Total $ 169,129
=========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Liabilities not subject to compromise:
Current liabilities $ 2,380
Long term liabilities 99
---------
Total liabilities not subject to compromise 2,479
Liabilities subject to compromise 271,082
Redeemable preferred stock subject to compromise 36,503
Shareholders' deficit (140,935)
Total $ 169,129
=========
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JPS Textile Group, Inc. (Holding Company)
Debtor-in-Possession
Condensed Statement of Operations (Unaudited)
(In Thousands)
Three Months Ended Nine Months Ended
August 2, 1997 August 2, 1997
------------------ -----------------
Selling, general and administrative expenses $ 715 $ 2,362
Equity in earnings of subsidiaries (976) (4,770)
Interest expense 8,000 24,053
Debt restructuring fees and expenses 3,332 6,476
-------- --------
Net loss (11,071) (28,121)
Preferred stock dividends-in-kind and discount accretion 1,285 3,827
-------- --------
Net loss applicable to common stock $(12,356) $(31,948)
======== ========
2. Financial Restructuring and Chapter 11 Case
On May 16, 1997, JPS, JPS Capital Corp., a wholly-owned subsidiary of
JPS ("JPS Capital"), and an informal committee (the "Unofficial
Bondholder Committee") of institutions that owned, or represented
beneficial holders that owned, approximately 60% of the Company's
outstanding 10.85% senior subordinated discount notes, 10.25% senior
subordinated notes and 7% subordinated debentures (collectively, the
"Old Debt Securities"), reached an agreement in principle on the terms
of a restructuring to be accomplished pursuant to a joint plan of
reorganization for JPS proposed by JPS and JPS Capital (the "Plan of
Reorganization") under chapter 11 of the Bankruptcy Code. Pursuant to a
disclosure statement, dated June 25, 1997 (the "Disclosure Statement"),
on June 26, 1997, JPS and JPS Capital commenced a prepetition
solicitation of votes by the holders of Old Debt Securities and the
Series A Senior Preferred Stock (the "Old Senior Preferred Stock") to
accept or reject the Plan of Reorganization. Under the Plan of
Reorganization, the holders of Old Debt Securities and Old Senior
Preferred Stock were the only holders of impaired claims and impaired
equity interests entitled to receive a distribution, and therefore,
pursuant to section 1126 of the Bankruptcy Code, were the only holders
entitled to vote on the Plan of Reorganization. At the conclusion of
the 32-day solicitation period, the Plan of Reorganization had been
accepted by holders of more than 99% of the Old Debt Securities that
voted on the Plan of Reorganization and by holders of 100% of the Old
Senior Preferred Stock that voted on the Plan of Reorganization.
On August 1, 1997, JPS commenced its voluntary reorganization case
under chapter 11 of the Bankruptcy Code in the Bankruptcy Court, and
filed the Plan of Reorganization and the Disclosure Statement. None of
JPS's subsidiaries, including JPS Capital which is a co-proponent of
the Plan of Reorganization, has commenced a case under the Bankruptcy
Code. Pursuant to orders of the Bankruptcy Court entered on September
9, 1997, after notice and hearings thereon, the Bankruptcy Court
approved the Disclosure Statement and the solicitation of votes on the
Plan of Reorganization, and confirmed the Plan of Reorganization. JPS
anticipates that the Plan of Reorganization will become effective
before the end of September 1997 (the date of such effectiveness being
the "Effective Date").
Through the implementation of the Plan of Reorganization on and after
the Effective Date, JPS's most significant financial obligations will
be restructured. As a result of the restructuring: $240,091,318 in face
amount of outstanding Old Debt Securities will be converted to, among
other things, $14 million in cash, 99.25% of the shares of JPS's new
common stock to be issued on the Effective Date and $34 million in
Page -8-
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aggregate principal amount (subject to adjustment on the maturity date)
of contingent payment notes to be issued by JPS Capital on the
Effective Date (the "Contingent Notes"); the Old Senior Preferred
Stock, the Series B Junior Preferred Stock and the old common stock
will be canceled; warrants to purchase up to 5% of the new common stock
(the "New Warrants') will be issued to holders of Old Senior Preferred
Stock; and the obligations of the Company under its working capital
facility will be satisfied and a new working capital facility will be
obtained. JPS's senior management will receive approximately 0.75% of
the new common stock in lieu of payment under the contractual retention
bonus agreements described in Note 9 to the Consolidated Financial
Statements in the Company's Annual Report on Form 10-K. As a result of
the restructuring, the Company's only significant debt obligation will
be its obligations under the new working capital facility.
3. Liabilities Subject to Compromise
Liabilities included in the accompanying condensed consolidated balance
sheet at August 2, 1997, which are subject to compromise under the
terms of the Plan of Reorganization are as follows:
10.85% Senior Subordinated Discount Notes $109,247
10.25% Senior Subordinated Notes 76,773
7% Subordinated Debentures 54,071
Unamortized reorganization discount (9,489)
Accrued interest 40,480
--------
Total liabilities subject to compromise $271,082
========
4. Inventories (In Thousands):
August 2, November 2,
1997 1996
--------- -----------
Raw materials and supplies $ 12,973 $ 13,155
Work-in-process 16,866 16,912
Finished goods 24,252 18,307
-------- --------
Total $ 54,091 $ 48,374
======== ========
5. Long-Term Debt
As a result of the Holding Company's commencement of a chapter 11 case
on August 1, 1997, the Company's existing senior credit facility, which
was scheduled to expire on August 8, 1997, was by its terms
automatically extended to the earlier of November 1, 1997 or the
effective date of the chapter 11 reorganization. The Company has
classified amounts outstanding under its senior credit facility as a
current liability in the accompanying condensed consolidated balance
sheet.
Because of the restrictions on the use of borrowings under the existing
credit facility as described in Note 6 to the consolidated financial
statements in the Company's annual report on Form 10-K, JPS did not
make scheduled November 15, 1996 and May 15, 1997 interest payments of
approximately $1.9 million each on its subordinated debentures and did
not make scheduled December 1, 1996 and June 1, 1997 interest payments
of approximately $5.4 million each on its senior subordinated discount
notes and approximately $3.6 million each on its senior subordinated
notes. In addition, JPS failed to mandatorily redeem, on June 1, 1997,
approximately $37.8 million in aggregate principal amount of its senior
subordinated discount notes and approximately $31.2 million in
aggregate principal amount of its senior subordinated notes.
Page -9-
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The indentures governing the notes and debentures provide for the
payment of interest on overdue installments of interest and principal,
payable on demand at the rate of 1% per annum in excess of the interest
rate then in effect. In the three months and nine months ended August
2, 1997, the Company accrued approximately $0.6 million and $1.1
million under these provisions, all of which remained unpaid as of
August 2, 1997. All such interest is subject to being restructured
pursuant to the Plan of Reorganization. Such amounts are included in
liabilities subject to compromise in the accompanying condensed
consolidated balance sheet.
A revolving credit facility similar to the existing senior credit
facility under the restated credit agreement is essential for the
Company's continued operations. On the Effective Date, the Company
expects to obtain a new revolving credit facility. On August 11, 1997,
the Company accepted a proposal from Citicorp Securities, Inc. for a
$135 million secured revolving credit facility with a five-year term.
Availability under the new facility would be subject to a borrowing
base comprised of eligible receivables and inventory and a portion of
fixed assets. A letter of credit subfacility in an amount of $20
million would be available as part of the new facility with undrawn
face amount of outstanding letters of credit reserved against the total
availability under the new facility.
The new credit facility is subject to completion of Citicorp's
collateral review, the approval of the terms and conditions thereof by
the Unofficial Bondholder Committee, and the occurrence of the
Effective Date of the Plan of Reorganization.
6. Contingencies
Warranty Liabilities - 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 roofing products, the Company estimates that
substantially all the defective roofing product claims will be resolved
by 2000. The liability for such defective products was approximately
$4.8 million at August 2, 1997 and $6.2 million at November 2, 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 current year 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 is charged to
operations in the period in which such determination is made.
Net Operating Loss Carryforwards - At August 2, 1997, the Company
estimates it had regular net operating loss carryforwards for tax
purposes of approximately $100.0 million. However, these losses will be
substantially reduced and limited in use as a result of the
implementation of the Company's Plan of Reorganization (discussed in
Note 2). In general, the Internal Revenue Code provides that a debtor
in a bankruptcy case, such as the Company's, must reduce its tax
attributes--such as its NOL carryforwards and current year NOLs, tax
credits, and tax basis in certain assets--by any cancellation of
indebtedness ("COD"). COD is the amount by which the indebtedness
discharged exceeds any consideration given in exchange therefor. Any
reduction in tax attributes generally occurs on a separate company
basis. The Company anticipates that it will recognize significant COD,
which will result in significant attribute reduction as a result of the
exchanges occurring under the Plan of Reorganization. Such attribute
reduction will substantially reduce the NOL carryforwards that might
otherwise be available to offset future income.
Page -10-
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In addition, any NOLs and carryforwards and certain other tax
attributes remaining after the attribute reduction outlined above will
be subject to the limitations imposed by Section 382 of the Internal
Revenue Code. Such limitations apply on certain changes in ownership,
including changes such as those occurring under the Plan of
Reorganization. The effect of these limitations is to limit the
utilization of the net operation loss carryforwards and certain
built-in losses to an amount equal to the value of the Company
immediately prior to the ownership change (subject to certain
adjustments) multiplied by the Federal long-term tax exempt rate. Even
before giving effect to the limitations occurring under the Plan of
Reorganization, 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.
Sale of Automotive Division/Contingent Notes - In connection with the
sale of its Automotive business in June 1994, the Company invested
$39.5 million of the sale proceeds in long-term securities (principally
United States Treasury Securities) designated by management to be
available to satisfy possible contingent tax liabilities. The
investments are classified as "held-to-maturity" and recorded at
amortized cost. As of August 2, 1997 and November 2, 1996, the
aggregate fair value of the United States Treasury Securities was
approximately $48.0 million and $46.2 million, respectively. As
described in Note 2, under the terms of the Plan of Reorganization, the
holders of the Holding Company's 10.25% senior subordinated notes and
10.85% senior subordinated discount notes will receive $14 million in
cash from these investments and Contingent Notes with an aggregate
principal amount of $34 million (subject to adjustment on the maturity
date), payable from these investments upon the occurrence of certain
events. The respective amounts of the cash distribution and the initial
principal amount of the Contingent Notes was determined based on the
assumptions used to determine the original amount set aside for
contingent tax liabilities related to the 1994 sale of the Company's
automotive business with adjustments for certain events arising
subsequent to the sale and such original determination.
7. Senior Preferred Stock
Dividends on the Company's Old Senior Preferred Stock are cumulative
and calculated based on an annual rate of 6% of the liquidation
preference and are paid quarterly. Under the terms of various credit
agreements, dividends must be in the form of additional shares until
1998. The Company did not declare and accordingly has not distributed
the scheduled November 15, 1996, February 15, 1997 and May 15, 1997
preferred stock dividends of 8,079 shares, 8,203 shares and 8,326
shares, respectively. Under the terms of the Plan of Reorganization
discussed in Note 2, on the Effective Date, Old Senior Preferred Stock
will be exchanged for warrants to purchase new common stock of the
reorganized Holding Company.
8. Subsequent Events
On August 12, 1997, pursuant to an agreement between JPS Converter and
Industrial Corp., a wholly-owned subsidiary of JPS, and Safety
Components Fabrics Technologies, Inc. ("Safety Components"), the
Company sold its Dunean manufacturing facility to Safety Components.
This facility was closed by the Company in October 1996 and all
production equipment and capacity was transferred to other plants. The
proceeds from the sale, after expenses and other costs, were
approximately $1.0 million.
Page -11-
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On August 28, 1997, pursuant to an agreement between JPS Carpet Corp.,
a wholly-owned subsidiary of JPS, Gulistan Holdings, Inc. ("Gulistan")
and Gulistan Carpet, Inc., the Company sold its debt and equity
securities of Gulistan consisting of 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.
Proceeds from the sale were $2 million. As of August 2, 1997, the
carrying value of these securities was reduced to the net realizable
value of $2 million resulting in a writedown of the carrying value of
the Gulistan securities of approximately $3.0 million. This writedown
of the carrying value of the Gulistan securities and writedowns
recorded in prior periods during the year are reflected in the
accompanying statements of operations for the three months and nine
months ended August 2, 1997.
Pursuant to orders of the Bankruptcy Court entered on September 9, 1997
after notice and hearings thereon, the Bankruptcy Court approved the
Disclosure Statement and the solicitation of votes on the Plan of
Reorganization and confirmed the Plan of Reorganization. JPS
anticipates that the Plan of Reorganization will become effective
before the end of September 1997.
Page -12-
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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 November
2, 1996. 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 complete its financial restructuring and otherwise meet its
debt service obligations and other liquidity needs.
(In Thousands)
Three Months Ended Nine Months Ended
---------------------- ----------------------
August 2, July 27, August 2, July 27,
1997 1996 1997 1996
--------- --------- --------- ---------
NET SALES
Apparel Fabrics and Products $ 36,813 $ 51,227 $ 131,693 $ 167,213
Industrial Fabrics and Products 50,836 51,618 141,584 141,074
Home Fashion Textiles 8,234 7,421 27,911 25,157
--------- --------- --------- ---------
Net Sales $ 95,883 $ 110,266 $ 301,188 $ 333,444
========= ========= ========= =========
OPERATING PROFIT (LOSS)
Apparel Fabrics and Products
Before charges for plant closing and
loss on sale of certain operations $ (428) $ 576 $ 1,376 $ (707)
Charges for plant closing and loss
on sale of certain operations -- (20,421) -- (20,421)
Industrial Fabrics and Products
Before charge for writedown of certain
long-lived assets and loss on sale of
certain operations 5,899 4,730 12,393 11,123
Charge for writedown of certain
long-lived assets and loss on sale of
certain operations -- (9,634) -- (9,634)
Home Fashion Textiles 380 335 1,649 603
Indirect Corporate Expenses, net (1,008) (1,300) (3,232) (4,889)
--------- --------- --------- ---------
Operating Profit (Loss) 4,843 (25,714) 12,186 (23,925)
Valuation allowance on Gulistan securities (2,982) (1,395) (5,070) (5,463)
Interest income 761 714 2,232 2,102
Interest expense (10,086) (10,082) (30,309) (29,647)
Restructuring fees and expenses (3,332) (727) (6,476) (902)
--------- --------- --------- ---------
Loss before income taxes, discontinued
operations and extraordinary gain $ (10,796) $ (37,204) $ (27,437) $ (57,835)
========= ========= ========= =========
Page -13-
14
RESULTS OF OPERATIONS
Three Months Ended August 2, 1997 (the "1997 Third Quarter") Compared to the
Three Months Ended July 27, 1996 (the "1996 Third Quarter")
Consolidated net sales in the 1997 third quarter decreased 13.0% to $95.9
million from $110.3 million in the 1996 third quarter. Net sales in the Apparel
Fabrics and Products segment decreased 28.1% to $36.8 million in the 1997 third
quarter from $51.2 million in the 1996 third quarter principally as a result of
the sale of the Company's rubber products business in September 1996 and lower
unit volume especially for certain commodity-type fabrics woven from spun and
filament yarns. Overall, the apparel market was very soft for the 1997 third
quarter with both selling prices and unit volume declining from the 1996 third
quarter. The rubber products business, which produced and sold elastic apparel
products, generated sales of $3.0 million in the 1996 third quarter. Because of
a generally weak market environment, increased competition from abroad
(particularly in commodity-type fabrics) and decreasing margins, the Company
closed its Dunean facility in Greenville, South Carolina in October 1996 and
curtailed production at other facilities. The Dunean facility, which produced
unfinished woven apparel fabrics, generated net sales in the 1996 third quarter
of $4.2 million. The Company has taken a number of steps to improve
profitability in the apparel fabrics and products segment, including equipment
modernization programs designed to reduce manufacturing cost and the asset sale
and plant shutdown described above. In addition, the Company has seen
improvement in its open order position for apparel fabrics in recent weeks and
expects its operating results in this segment to improve in the future.
Net sales in the Industrial Fabrics and Products segment decreased 1.4% to $50.8
million in the 1997 third quarter from $51.6 million in the 1996 third quarter
due to a variety of factors affecting the various industrial product lines.
Sales of fiberglass fabrics increased 7.3% to $20.6 million in the 1997 third
quarter from $19.2 million in the 1996 third quarter principally due to the
increase in sales of electrical composite fabrics used in circuit boards. Demand
for these products has increased steadily for the last several years as global
requirements for electronic products has grown. Management expects this demand
to continue in the foreseeable future. Sales of roofing membrane decreased 7.1%
to $15.7 million in the 1997 third quarter from $16.9 million in the 1996 third
quarter due to a lower priced mix of products sold in the 1997 third quarter.
The volume of yards shipped in the 1997 third quarter remained constant with the
1996 third quarter. Sales of cotton industrial products increased 2.4% to $8.4
million in the 1997 third quarter from $8.2 million in the 1996 third quarter
due to an increase in average selling prices. Sales of extruded products
increased 35.8% to $7.2 million in the 1997 third quarter from $5.3 million in
the 1996 third quarter due primarily to higher demand and new product offerings
for certain urethane products used in applications such as athletic footwear and
blown film products used in the food processing industry. Sales of industrial
rubber products decreased $1.3 million due to the sale of the Company's rubber
products business in September 1996.
Net sales for the Home Fashion Textile segment increased 10.8% to $8.2 million
in the 1997 third quarter from $7.4 million in the 1996 third quarter
principally due to a stronger retail market, development of new products and
expansion of the Company's customer base.
Operating results in the 1997 third quarter improved to a profit of $4.8 million
from a loss of $25.7 million in the 1996 third quarter. The Apparel Fabrics and
Products segment operated at a loss of $0.4 million in the 1997 third quarter
compared to a loss of $19.8 million in the 1996 third quarter. Included in the
1996 third quarter are charges of $14.2 million for plant closing and $6.2
million for loss on sale of certain operations. Excluding the effects of these
charges, the operating profit decreased to a loss of $0.4 million in the 1997
third quarter from $0.6 million in the 1996 third quarter. Such decrease is
attributable to lower selling prices and unit volume and to a $0.5 million
increase to the Company's allowances for doubtful accounts.
The Industrial Fabrics and Products segment operated at a profit of $5.9 million
in the 1997 third quarter compared to a loss of $4.7 million in the 1996 third
quarter. Included in the 1996 third quarter are charges of $8.1 million for
writedown of certain long-lived assets and $1.5 million for loss on sale of
certain operations.
Page -14-
15
Excluding the effects of these charges, the operating profit increased to $5.9
million in the 1997 third quarter from $4.9 million in the 1996 third quarter
principally due to improved manufacturing and operating efficiencies and a more
profitable product mix.
The Home Fashion Textile segment improved to an operating profit of $0.4 million
in the 1997 third quarter up slightly from $0.3 million in the 1996 third
quarter principally due to the increase in sales volume and improving margins
resulting from a more favorable product mix.
Indirect corporate expenses decreased to $1.0 million in the 1997 third quarter
compared to $1.3 million in the 1996 third quarter principally due to lower
professional and management fees.
As of August 2, 1997, the Company held various securities from the sale, in a
prior year, of the assets and business of JPS Carpet Corp., its wholly-owned
subsidiary, to Gulistan Holdings, Inc. The Company has not recorded interest
income on any of the Gulistan securities and, in accordance with relevant
accounting literature, has recorded a valuation allowance against its investment
in the securities. As discussed in Note 8 to the condensed consolidated
financial statements, the Company subsequently sold these securities to Gulistan
Carpet, Inc. for $2.0 million on August 28, 1997. Accordingly, the valuation
allowance was increased by approximately $3.0 million in the 1997 third quarter
to reduce the carrying value of the securities to the net realizable value of
$2.0 million as of August 2, 1997.
Interest expense in the 1997 second quarter was $10.1 million which was
consistent with the 1996 third quarter. As discussed in Note 5 to the condensed
consolidated financial statements, the Company accrued default interest expense
in the 1997 third quarter of approximately $0.6 million. As discussed in Note 1
to the condensed consolidated financial statements, the Company did not record
interest expense after August 1, 1997 (the petition date) on its old debt
securities. The difference between the reported interest and stated contractual
interest on the old debt securities was approximately $178,000 for this two-day
period.
Debt restructuring fees and expenses totaled $3.3 million in the 1997 third
quarter compared to $0.7 million in the 1996 third quarter. Such expenses
represent fees and expenses of the Company's financial advisor, the financial
advisor and legal counsel for the Unofficial Bondholder Committee, the Company's
legal counsel, and other professionals associated with the Company's financial
restructuring. The increase in such expenses in the 1997 third quarter is
attributable to the higher level of activity associated with completion of the
agreement with the Company's bondholders, solicitation of votes to approve the
Plan of Reorganization and commencement of the chapter 11 case on August 1,
1997.
Nine Months Ended August 2, 1997 (the "1997 Nine-Month Period") Compared To The
Nine Months Ended July 27, 1996 (the "1996 Nine-Month Period")
Consolidated net sales for the 1997 nine-month period decreased 9.7% to $301.2
million from $333.4 million in the 1996 nine-month period with all the decline
occurring in apparel fabrics and products. Net sales in the Apparel Fabrics and
Products segment decreased 21.2% to $131.7 million in the 1997 nine-month period
from $167.2 million in the 1996 nine-month period principally due to the sale in
September 1996 of the Company's rubber products division and a decline in unit
volume especially for certain commodity-type products. Overall, the apparel
industry has declined in the 1997 nine-month period resulting in lower selling
prices and unit volumes for the Company's products. The rubber products division
generated sales of $10.2 million in the 1996 nine-month period. The closing of
the Dunean facility in October 1996 and the curtailment of certain production at
other facilities accounted for decreased sales of approximately $17.1 million in
the 1997 nine-month period.
Page -15-
16
Net sales in the Industrial Fabrics and Products segment increased 0.4% to
$141.6 million in the 1997 nine-month period from $141.1 million in the 1996
nine-month period. Sales of fiberglass fabrics increased 4.0% to $57.5 million
in the 1997 nine-month period from $55.3 million in the 1996 nine-month period
due to the strong demand for electrical composite fabrics used in circuit
boards. Sales of roofing membrane increased 3.8% to $41.4 million in the 1997
nine-month period from $39.9 million in the 1996 nine-month period due to the
increased demand for the Company's "Hi-Tuff/EP" roofing products. Sales of
cotton industrials increased 5.7% to $24.1 million in the 1997 nine-month period
from $22.8 million in the 1996 nine-month period due to an increase in average
selling prices and an expanded customer base. Sales of extruded products
increased 21.6% to $19.7 million in the 1997 nine-month period from $16.2
million in the 1996 nine-month period as a result of increased demand and new
product offering for certain urethane products used in athletic footwear and in
the food processing industry. Sales of industrial rubber products decreased $3.4
million in the 1997 nine-month period due to the sale of the Company's rubber
products business in 1996.
Net sales for the Home Fashion Textile segment increased 10.7% to $27.9 million
in the 1997 nine-month period from $25.2 million in the 1996 nine-month period
due to the stronger retail market, expanded customer base and enhanced product
offerings.
Consolidated operating results in the 1997 nine-month period improved to a
profit of $12.2 million from a loss of $23.9 million in the 1996 nine-month
period. The Apparel Fabrics and Products segment operated at a profit of $1.4
million in the 1997 nine-month period compared to a loss of $21.1 million in the
1996 nine-month period. Included in the 1996 nine-month period are charges of
approximately $14.2 million for plant closing and $6.2 million for loss on sale
of certain operations. Excluding the effects of these charges, the Apparel
Fabrics and Products segment operated at a profit of $1.4 million in the 1997
nine-month period compared to a loss of $0.7 million in the 1996 nine-month
period. This improvement is attributable to the sale of the rubber products
business which generated a $1.7 million operating loss in the 1996 nine-month
period and the closing of the Dunean facility.
Operating profit for the Industrial Fabrics and Products segment improved to
$12.4 million in the 1997 nine-month period from $1.5 million in the 1996
nine-month period. Included in the 1996 nine-month period are charges of
approximately $8.1 million for writedown of certain long-lived assets and $1.5
million for loss on sale of certain operations. Excluding the effects of these
charges, the Industrial Fabrics and Products segment operated at a profit of
$12.4 million in the 1997 nine-month period compared to $11.1 million in the
1996 nine-month period principally due to improved manufacturing and operating
efficiencies and a more favorable mix of products sold.
Operating profit for the Home Fashion Textile segment improved to $1.6 million
in the 1997 nine-month period from $0.6 million in the 1996 nine-month period
due to the increase in sales volume and improving margin from a more favorable
product mix.
Indirect corporate expenses decreased to $3.2 million in the 1997 nine-month
period from $4.9 million in the 1996 nine-month period principally due to the
$1.1 million charge to other expense in the 1996 six-month period for an early
retirement offer accepted by certain employees and lower professional and
management fees in the 1997 nine-month period.
The valuation allowance against the Gulistan securities in the nine-month period
was $5.1 million compared to $5.5 million in the 1996 nine-month period. As
discussed in Note 8 to the condensed consolidated financial statements, these
securities were subsequently sold on August 28, 1997 for $2.0 million and the
valuation allowance at August 2, 1997 was adjusted to the net realizable value
of the securities.
Page -16-
17
Interest expense in the 1997 nine-month period was $30.3 million or $0.7 million
higher than the 1996 nine-month period due to the compounding effects of
accretion of debt discounts and non-cash interest and the interest on overdue
installments of interest and principal. As discussed in Note 1 to the condensed
consolidated financial statements, the Holding Company did not report interest
expense, totaling approximately $178,000, on its Old Debt Securities subsequent
to August 1, 1997, since such interest will not be paid during the bankruptcy
case and will not be an allowed claim.
Debt restructuring fees and expenses were $6.5 million in the 1997 nine-month
period compared to $0.9 million in the 1996 nine-month period due to the
increased activity of professionals associated with the Company's financial
restructuring and chapter 11 case.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity for operations and expansion are
funds generated internally and borrowings under its Revolving Credit Facility
(as defined below). At August 2, 1997, the Company had $9.7 million available
for borrowing under the Revolving Credit Facility. Borrowings under the
Revolving Credit Facility are made or repaid on a daily basis in amounts equal
to the net cash requirements or proceeds for that business day. The working
capital deficit at November 2, 1996 of $257.9 million reflects the
classification of the amount outstanding under the Revolving Credit Facility
($85.6 million) and the carrying value of notes and debentures ($237.7 million)
as current liabilities. The working capital deficit at August 2, 1997 of $7.2
million reflects the classification of the amount outstanding under the
Revolving Credit Facility as a current liability. As discussed in Notes 1 and 3
to the condensed consolidated financial statements, the carrying value of the
notes and debentures and related accrued interest as of August 2, 1997 is
classified as liabilities subject to compromise.
JPS and its operating subsidiaries (being hereinafter collectively referred to
as the "Borrowing Subsidiaries") are parties to the Fourth Amended and Restated
Credit Agreement, dated as of June 24, 1994, as amended (the "Restated Credit
Agreement"), by and among the financial institutions party thereto, Citibank,
N.A. ("Citibank"), as administrative agent and co-agent, and General Electric
Capital Corporation ("GECC"), as collateral agent and co-agent. The Restated
Credit Agreement, as amended, provides for a revolving credit loan facility and
letters of credit (the "Revolving Credit Facility") in a maximum principal
amount equal to the lesser of (a) $118 million and (b) a specified borrowing
base, which is based upon eligible receivables and inventory of the Borrowing
Subsidiaries (the "Borrowing Base"), except that (i) no Borrowing Subsidiary may
borrow an amount greater than the Borrowing Base attributable to it, (ii)
letters of credit may not exceed $15 million in the aggregate, and (iii) $20
million of the Revolving Credit Facility is available, not subject to the
Borrowing Base, to purchase property, plant and equipment or to finance or
refinance such purchases ("Capex Loans"), provided that the aggregate of all
revolving credit loans, including Capex Loans, and letters of credit may not
exceed the lesser of (A) $118 million and (B) the sum of the Borrowing Base plus
$25 million (subject to certain reductions).
Based on the downturn in the apparel fabrics market, increased foreign
competition and falling margins, the Company determined that its financial
resources would be insufficient to satisfy mandatory redemption requirements of
certain of its debt securities due on June 1, 1997. Accordingly, 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 of its debt obligations. In
addition, at the request of the Unofficial Bondholder Committee, the Company
agreed to finance the retention of financial and legal advisors to advise the
Unofficial Bondholder Committee in connection with such a financial
restructuring.
Page -17-
18
The Company also had discussions with its bank lenders regarding the extension
of the term of its revolving credit facility, which had been scheduled to expire
on November 1, 1996. In 1996 and 1997, the Company obtained several amendments
to its existing credit agreement, which extended the expiration date to August
8, 1997 if the Company had not commenced a case under chapter 11 of the
Bankruptcy Code or to the earlier of November 1, 1997 or the effective date of a
reorganization under chapter 11 if a case under chapter 11 had been commenced
prior to August 8, 1997 (as described below, the Holding Company commenced a
case under chapter 11 of the Bankruptcy Code on August 1, 1997). These
amendments also restricted capital expenditures, eased certain financial
covenants, and prohibited additional borrowings for, among other things,
dividends or advances to the Company to pay interest on its notes and
debentures. Accordingly, the Holding Company did not make scheduled November 15,
1996 and May 15, 1997 interest payments of approximately $1.9 million each on
its subordinated debentures and did not make scheduled December 1, 1996 and June
1, 1997 interest payments of approximately $5.4 million each on its senior
subordinated discount notes and approximately $3.6 million each on its senior
subordinated notes. In addition, the Holding Company failed to mandatorily
redeem, on June 1, 1997, approximately $37.8 million in aggregate principal
amount of its senior subordinated discount notes and approximately $31.2 million
in aggregate principal amount of its senior subordinated notes. The failure to
make these scheduled payments constituted an event of default under the
indentures governing these debt securities.
On May 16, 1997, JPS, JPS Capital Corp., a wholly-owned subsidiary of JPS ("JPS
Capital"), and an informal committee (the "Unofficial Bondholder Committee") of
institutions that owned, or represented beneficial holders that owned,
approximately 60% of the Company's outstanding 10.85% senior subordinated
discount notes, 10.25% senior subordinated notes and 7% subordinated debentures
(collectively, the "Old Debt Securities"), reached an agreement in principle on
the terms of a restructuring to be accomplished pursuant to a joint plan of
reorganization for JPS proposed by JPS and JPS Capital (the "Plan of
Reorganization") under chapter 11 of the Bankruptcy Code. Pursuant to a
disclosure statement, dated June 25, 1997 (the "Disclosure Statement"), on June
26, 1997, JPS and JPS Capital commenced a prepetition solicitation of votes by
the holders of Old Debt Securities and the Series A Senior Preferred Stock (the
"Old Senior Preferred Stock") to accept or reject the Plan of Reorganization.
Under the Plan of Reorganization, the holders of Old Debt Securities and Old
Senior Preferred Stock were the only holders of impaired claims and impaired
equity interests entitled to receive a distribution, and therefore, pursuant to
section 1126 of the Bankruptcy Code, were the only holders entitled to vote on
the Plan of Reorganization. At the conclusion of the 32-day solicitation period,
the Plan of Reorganization had been accepted by holders of more than 99% of the
Old Debt Securities that voted on the Plan of Reorganization and by holders of
100% of the Old Senior Preferred Stock that voted on the Plan of Reorganization.
On August 1, 1997, JPS commenced its voluntary reorganization case under chapter
11 of the Bankruptcy Code in the Bankruptcy Court, and filed the Plan of
Reorganization and the Disclosure Statement. None of JPS's subsidiaries,
including JPS Capital which is a co-proponent of the Plan of Reorganization, has
commenced a case under the Bankruptcy Code. Pursuant to orders of the Bankruptcy
Court entered on September 9, 1997, after notice and hearings thereon, the
Bankruptcy Court approved the Disclosure Statement and the solicitation of votes
on the Plan of Reorganization, and confirmed the Plan of Reorganization. JPS
anticipates that the Plan of Reorganization will become effective before the end
of September 1997 (the date of such effectiveness being the "Effective Date").
Page -18-
19
Through the implementation of the Plan of Reorganization on and after the
Effective Date, JPS's most significant financial obligations will be
restructured. As a result of the restructuring: $240,091,318 in face amount of
outstanding Old Debt Securities will be converted to, among other things, $14
million in cash, 99.25% of the shares of JPS's new common stock to be issued on
the Effective Date and $34 million in aggregate principal amount (subject to
adjustment on the maturity date) of contingent payment notes to be issued by JPS
Capital on the Effective Date (the "Contingent Notes"); the Old Senior Preferred
Stock, the Series B Junior Preferred Stock and the old common stock will be
canceled; warrants to purchase up to 5% of the new common stock (the "New
Warrants') will be issued to holders of Old Senior Preferred Stock; and the
obligations of the Company under its working capital facility will be satisfied
and a new working capital facility will be obtained. JPS's senior management
will receive approximately 0.75% of the new common stock in lieu of payment
under the contractual retention bonus agreements described in Note 9 to the
Consolidated Financial Statements in the Company's Annual Report on Form 10-K.
As a result of the restructuring, the Company's only significant debt obligation
will be its obligations under the new working capital facility.
Page -19-
20
JPS TEXTILE GROUP, INC.
PART II - OTHER INFORMATION
Item
1. Legal Proceedings
JPS is currently a debtor-in-possession in a chapter 11 reorganization
case (No. 97-45133) pending in the Bankruptcy Court and has been
involved in routine proceedings attendant thereto. At a hearing held on
September 9, 1997, the Bankruptcy Court confirmed the Plan of
Reorganization. JPS anticipates (but can give no assurances) that the
Plan of Reorganization will become effective near the end of September
1997. In addition, the Company is involved in various legal proceedings
which are routine litigations incidental to the conduct of its
business. Management believes that none of this litigation, if
determined adversely to the Company, would have a material adverse
effect on the financial condition or results of operations of the
Company.
2. Changes in Securities
As of the effective date of the Company's chapter 11 reorganization, an
amended and restated certificate of incorporation will provide that the
total number of all classes of stock which the Company shall have
authority to issue is 25 million shares, of which 22 million will be
shares of new common stock and 3 million will be shares of preferred
stock, having a par value of $0.01 per share. All of the Company's
current outstanding shares of Class A Common Stock (490,000 shares),
Class B Common Stock (510,000 shares), Old Senior Preferred Stock
(538,176 shares) and Old Junior Preferred Stock (10,000 shares) will be
canceled on the effective date.
3. Defaults Upon Senior Securities
(a) The Company did not make scheduled November 15, 1996 and May 15,
1997 interest payments of approximately $1.9 million each on its
subordinated debentures and did not make scheduled December 1,
1996 and June 1, 1997 interest payments of approximately $5.4
million each on its senior subordinated discount notes and
approximately $3.6 million each on its senior subordinated notes.
In addition, the Company failed to mandatorily redeem, on June 1,
1997, approximately $37.8 million in aggregate principal amount of
its senior subordinated discount notes and approximately $31.2
million in aggregate principal amount of its senior subordinated
notes. The failure to make these scheduled payments constitutes an
event of default under the indentures governing these debt
securities. As a result, the holders of these debt securities are
entitled to accelerate the debt represented thereby. On May 16,
1997, the Company announced it had reached an agreement in
principle with the Unofficial Bondholder Committee.
(b) Dividends on the Company's Old Senior Preferred Stock are
cumulative and calculated based on an annual rate of 6% of the
liquidation preference and are paid quarterly. Under the terms of
various credit agreements, dividends must be in the form of
additional shares until 1998. The Company did not declare
and accordingly has not distributed the scheduled November 15,
1996, February 15, 1997 and May 15, 1997 Old Senior Preferred
Stock dividends of 8,079 shares, 8,203 shares and 8,326 shares,
respectively.
4. Submission of Matters to a Vote of Security Holders
On June 26, 1997, JPS and JPS Capital commenced a solicitation of votes
with respect to the Plan of Reorganization. On July 28, 1997, JPS and
JPS Capital completed such solicitation. See Note 2 to the condensed
consolidated financial statements for a description of the terms of the
Plan of Reorganization. The holders of JPS's Old Senior Subordinated
Discount Notes, Old Senior Subordinated Notes, Old Subordinated
Debentures and Old Senior Preferred Stock voted to accept the Plan by
the requisite majorities required by the Bankruptcy Code. Following is
a summary of the voting:
Page -20-
21
4. Submission of Matters to a Vote of Security Holders (Continued)
# of # of $Par $Par # of # of
Holders Holders Securities Securities Shares Shares
Voting in Voting Voting Voting Voting in Voting
Favor of Against in Favor of Against Favor of Against
the Plan the Plan the Plan the Plan the Plan the Plan
--------- -------- ----------- ---------- --------- --------
Old Senior 176 0 $122,081,420 0 -- --
Subordinated
Discount Notes
Old Senior 134 1 $ 82,996,256 $10,654 -- --
Subordinated
Notes
Old 28 3 $ 52,723,380 $583,717 -- --
Subordinated
Debentures
Old Senior -- -- -- -- 366,409 0
Preferred Stock
5. Other Information None
6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
(10.1) Twelfth amendment to the Fourth Amended & Restated Credit
Agreement, dated as of June 27, 1997, by and among the
Company, JPS Elastomerics Corp., JPS Converter &
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) Asset Purchase Agreement dated as of August 12, 1997
between JPS Converter and Industrial Corp. a Delaware
Corporation and wholly-owned subsidiary of the Company and
Safety Components Fabrics Technologies, Inc. a Delaware
Corporation.
(10.3) Securities Purchase Agreement dated as of August 28, 1997,
by and among Gulistan Holdings, Inc., a Delaware
Corporation, Gulistan Carpet Inc., a Delaware Corporation
and JPS Carpet Corp., a Delaware Corporation and
wholly-owned subsidiary of the Company.
(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
(99) Order Confirming Amended Joint Plan of Reorganization of
JPS Textile Group, Inc. and JPS Capital Corp. Under
Chapter 11 of The Bankruptcy Code.
Page -21-
22
6. Exhibits and Reports on Form 8-K: (Continued)
(b) Current Reports on Form 8-K:
(1) Report on Form 8-K dated May 16, 1997, containing disclosure
of the Company's agreement in principle with an unofficial
committee of bondholders, representing more than 60% of its
outstanding public debt, to convert 100% of its public bond
debt to equity.
(2) Report on Form 8-K dated June 26, 1997, containing disclosure
of the Company's commencement of a solicitation of votes by
the holders, as of June 20, 1997 record date, of JPS's 10.25%
Senior Subordinated Notes due June 1, 1999, 10.85% Senior
Subordinated Discount Notes due June 1, 1999, 7% Subordinated
Debentures due May 15, 2000, and Series A Senior Preferred
Stock, to accept or reject the Joint Plan of Reorganization of
JPS Textile Group and its wholly-owned subsidiary, JPS Capital
Corp.
(3) Report on Form 8-K dated August 1, 1997, containing disclosure
of the filing, on August 1, 1997, of the Joint Plan of
Reorganization of JPS Textile Group and its wholly-owned
subsidiary, JPS Capital Corp., with the United States
Bankruptcy Court for the Southern District of New York under
chapter 11, title 11, of the United States Code.
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.
(DEBTOR-IN POSSESSION)
Date: September 16, 1997 /s/ David H. Taylor
------------------- ----------------------------------------
David H. Taylor
Executive Vice President - Finance,
Secretary and Chief Financial Officer
Page -22-