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 quarter ended June 28, 1997
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 33-75510-01; 1-12944
JPS AUTOMOTIVE L.P.
JPS AUTOMOTIVE PRODUCTS CORP.
(State or other Jurisdiction of (IRS Employer Identification
incorporation or Organization) No. 57-1060375
Delaware No. 57-0993690)
Delaware
701 McCullough Drive
Charlotte, NC 28262
Telephone (704) 547-8500
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____ .
JPS Automotive L.P. and JPS Automotive Products Corp. meet the conditions set
forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore
filing this form with the reduced disclosure format.
As of August 14, 1997, the number of outstanding shares of JPS Automotive
Products Corp. common stock was 100.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
QUARTER ENDED SIX MONTHS ENDED
PREDECESSOR PREDECESSOR
COMPANY COMPANY
JUNE 28, JUNE 30, JUNE 28, JUNE 30,
1997 1996 1997 1996
Net sales............................................... $ 62,119 $ 65,174 $ 120,143 $ 124,041
Cost of goods sold...................................... 51,688 53,437 102,052 101,918
--------- --------- ---------- ----------
Gross profit............................................ 10,431 11,737 18,091 22,123
Selling, general and administrative expenses............ 4,258 4,950 8,710 9,443
--------- --------- ---------- ----------
Income from operations.................................. 6,173 6,787 9,381 12,680
Interest expense, net................................... 2,436 5,154 5,609 10,407
Other (income) expense, net............................. - 8 (5) (2)
Minority interest in consolidated subsidiary............ - 270 - 572
--------- --------- ---------- ----------
Income before income taxes.............................. 3,737 1,355 3,777 1,703
Income tax provision.................................... 1,616 88 1,773 175
--------- --------- ---------- ----------
Income from continuing operations....................... 2,121 1,267 2,004 1,528
Income from discontinued operations, net of
income tax of $587, $23, $1,044 and $46.............. 913 995 1,584 2,045
--------- --------- ---------- ----------
Income before extraordinary loss........................ 3,034 2,262 3,588 3,573
Extraordinary loss, net of income tax of $442........... (721) - (721) -
--------- --------- ---------- ----------
Net income.............................................. $ 2,313 $ 2,262 $ 2,867 $ 3,573
========= ========= ========== ==========
See accompanying notes.
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JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(Unaudited)
June 28, December 28,
ASSETS 1997 1996
Current assets:
Cash and cash equivalents................................... $ - $ 198
Accounts receivable, net.................................... 36,743 26,840
Inventories................................................. 15,461 14,290
Net assets of discontinued operations....................... 52,855 50,418
Other current assets........................................ 10,497 9,764
---------- ----------
Total current assets...................................... 115,556 101,510
---------- ----------
Property, plant and equipment, net............................. 59,082 59,512
Goodwill, net.................................................. 113,110 114,769
Other assets................................................... 9,908 10,557
---------- ----------
$ 297,656 $ 286,348
========== ==========
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 17,325 $ 12,014
Accrued expenses............................................ 22,364 21,996
Loan from C&A Products...................................... 4,980 -
---------- ----------
Total current liabilities................................. 44,669 34,010
---------- ----------
Long-term debt................................................. 92,346 117,175
Other liabilities.............................................. 12,016 12,638
Commitments and contingencies..................................
Owners' equity:
General partner............................................. 48,073 48,073
Limited partner............................................. 100,552 74,452
---------- ----------
Total owners' equity.................................... 148,625 122,525
---------- ----------
$ 297,656 $ 286,348
========== ==========
See accompanying notes.
I-2
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
(IN THOUSANDS)
SIX MONTHS ENDED
PREDECESSOR
COMPANY
JUNE 28, JUNE 30,
1997 1996
OPERATING ACTIVITIES
Net income $ 2,867 $ 3,573
Adjustments to reconcile net income to net cash provided by operating
activities:
Income from discontinued operations.......................... (1,584) (2,045)
Extraordinary loss, net...................................... 721 -
Depreciation and amortization................................ 4,344 5,988
Interest accretion and debt issuance cost
amortization............................................... (170) 587
Other, net .................................................. 279 14
Changes in operating assets and liabilities ................. (5,763) (3,053)
----------- -----------
Net cash provided by continuing operations................. 694 5,064
----------- -----------
Net cash provided by discontinued operations...................... 698 2,889
----------- -----------
Net cash provided by operating activities.................. 1,392 7,953
----------- -----------
INVESTING ACTIVITIES
Capital expenditures.............................................. (4,115) (2,678)
Other, net ....................................................... (5) 37
----------- -----------
Net cash used in investing activities...................... (4,120) (2,641)
----------- -----------
FINANCING ACTIVITIES
Repayments of long-term debt...................................... (23,645) (316)
Capital contributions from partners............................... 23,233 -
Repayments of revolving loans..................................... - (6,712)
Net borrowings from C&A Products.................................. 4,980
Other, net ....................................................... (2,038) -
----------- -----------
Net cash provided by (used in) financing activities 2,530 (7,028)
----------- -----------
Net increase in cash and cash equivalents......................... (198) (1,716)
Cash and cash equivalents at beginning of period.................. 198 2,837
----------- -----------
Cash and cash equivalents at end of period........................ $ - $ 1,121
=========== ===========
See accompanying notes.
I-3
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
CONDENSED CONSOLIDATED FINANCIAL STATEMENT
The condensed consolidated financial statements include the accounts of
JPS Automotive L.P. and its subsidiaries ("JPS Automotive"). In the opinion of
management of JPS Automotive, the accompanying condensed consolidated financial
statements reflect all adjustments considered necessary for a fair presentation
of the consolidated financial position, results of operations and cash flows.
Results of operations for interim periods are not necessarily indicative of
results for the full year. Certain reclassifications have been made to these
condensed consolidated financial statements for the quarter and six months ended
June 30, 1996 to conform to the fiscal 1997 presentation and are related to the
Air Restraint and Technical Products Division ("Airbag") being classified as a
discontinued operation. See Note 5. For further information, refer to the
consolidated financial statements and notes thereto included in JPS Automotive's
Transition Report on Form 10-K for the transition period from January 1, 1996 to
December 28, 1996.
THE 1996 ACQUISITION
On December 11, 1996, Collins & Aikman Corporation ("C&A"), through its
subsidiaries, acquired JPS Automotive from Foamex International Inc. ("Foamex")
pursuant to an Equity Purchase Agreement dated August 28, 1996, as amended
December 11, 1996 (the "1996 Acquisition"). The purchase price for the 1996
Acquisition was an aggregate of approximately $220 million, subject to
postclosing adjustment, consisting of approximately $195 million of indebtedness
of JPS Automotive and approximately $25 million in cash paid to Foamex.
In the 1996 Acquisition, Collins & Aikman Products Co. ("C&A
Products"), a wholly owned subsidiary of C&A, acquired a .9999% limited
partnership interest in JPS Automotive from Foamex and a 99% limited partnership
interest in JPS Automotive from Foamex - JPS Automotive L.P. ("FJPS"). PACJ,
Inc., a wholly owned subsidiary of C&A Products, acquired a .0001% general
partnership interest in JPS Automotive from JPSGP Inc. ("JPSGP"). Accordingly,
100% of the partnership interests in JPS Automotive are owned by PACJ, Inc. and
C&A Products, which are, respectively, indirect and direct wholly owned
subsidiaries of C&A.
In addition, on December 11, 1996, C&A Products purchased from Seiren
Co. Ltd. and its affiliates for $10 million, the 20% minority interest in
Cramerton Automotive Products, L.P. ("Cramerton") not held by JPS Automotive.
JPS Automotive subsequently acquired the 20% minority interest previously held
by the Seiren entities.
In connection with the 1996 Acquisition, C&A, through its subsidiaries,
acquired approximately $68 million of JPS Automotive's outstanding 11-1/8%
Senior Notes due 2001 (the "Senior Notes"), which were subsequently retired by
JPS Automotive. In addition, at the time of closing, approximately $15 million
of JPS Automotive's outstanding debt was repaid. The Senior Notes formerly held
by C&A and the funds used to repay JPS Automotive's outstanding bank
indebtedness were recorded as capital contributions to JPS Automotive from C&A
and its subsidiaries.
THE 1994 ACQUISITION
JPS Automotive L.P. was formed on May 17, 1994 (JPS Automotive L.P., as
it existed prior to the 1996 Acquisition being hereinafter referred to as the
"Predecessor Company"), for the purpose of acquiring a 100% ownership interest
in JPS Automotive Products Corp. ("Products Corp."), which was purchased for
nominal consideration on May 25, 1994. On June 28, 1994, FJPS and JPSGP, the
owners of a 99% limited partnership
I-4
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
interest and a 1% general partnership interest in the Predecessor Company,
respectively, made capital contributions of approximately $90.0 million to the
Predecessor Company which, in turn, made a capital contribution of approximately
$90.0 million to Products Corp. FJPS and JPSGP were indirect wholly owned
subsidiaries of Foamex.
On June 28, 1994, Products Corp. acquired the assets of the automotive
products and industrial fabrics divisions of JPS Textile Group, Inc. ("JPS
Textile") (the "1994 Acquisition"). Effective October 3, 1994, Products Corp.
transferred and assigned substantially all of its assets, subject to
substantially all of its liabilities, to the Predecessor Company, which agreed
to assume such liabilities.
2. INVENTORIES:
The components of inventories consist of:
JUNE 28, DECEMBER 28,
1997 1996
------------------ ------------------
Raw materials and supplies $ 4,417 $ 4,210
Work-in-process 8,449 7,323
Finished goods 2,595 2,757
------------------ ------------------
Total $ 15,461 $ 14,290
================== ==================
3. GOODWILL:
Goodwill, representing the excess of purchase price over the fair value
of net assets acquired in the 1996 Acquisition, is being amortized on a
straight-line basis over the period of forty years. Amortization of goodwill for
the quarter and six months ended June 28, 1997 was $.7 million and $1.5 million,
respectively. Accumulated amortization at June 28, 1997 was $1.7 million. The
carrying value of goodwill will be reviewed periodically based on the
nondiscounted cash flows and pretax income over the remaining amortization
periods. Should this review indicate that the goodwill balance will not be
recoverable, JPS Automotive's carrying value of the goodwill will be reduced. At
June 28, 1997, JPS Automotive believes its goodwill of $113.1 million was fully
recoverable.
4. FACILITY CLOSING COSTS:
In connection with the 1996 Acquisition, C&A has developed preliminary
plans for JPS Automotive to rationalize certain manufacturing locations, as well
as marketing and administrative functions. These plans have not been finalized.
Costs accrued at December 28, 1996, for the shutdown of facilities and severance
and other personnel costs were $2.2 million and $7.0 million, respectively.
During the quarter and six months ended June 28, 1997, JPS Automotive expended
approximately $.7 million and $1.3 million, respectively, for the shutdown of
facilities and severance and other personnel costs.
5. DISCONTINUED OPERATIONS:
On July 1, 1997, C&A announced that JPS Automotive had entered into an
agreement to sell Airbag to Safety Components International, Inc. for a purchase
price of $56.3 million, subject to adjustment. This sale was completed on July
24, 1997. See Note 8. JPS Automotive has accounted for the financial results and
net
I-5
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
assets of Airbag as a discontinued operation. Accordingly, previously reported
financial results for all periods presented have been restated to reflect Airbag
as a discontinued operation. Airbag reported income of $.9 million and $1.6
million for the quarter and six months ended June 28, 1997, respectively, and
reported income of $1.0 million and $2.0 million for the quarter and six months
ended June 30, 1996, respectively.
6. RELATED PARTY TRANSACTIONS:
At June 28, 1997, C&A Products has pledged the ownership interests in
its significant subsidiaries, including its partnership interest in JPS
Automotive, as security for debt of C&A Products totaling $485.6 million. C&A
Products currently provides general administrative services to JPS Automotive
pursuant to a preexisting Services Agreement assigned to C&A Products by Foamex
(the "Existing Services Agreement"). In addition, in connection with the 1996
Acquisition, C&A has developed preliminary plans for JPS Automotive to
rationalize certain manufacturing locations as well as marketing and
administrative functions. In effecting these plans, C&A and its affiliates
currently contemplate entering into certain arrangements with JPS Automotive and
its affiliates, including (i) the provision by C&A Products pursuant to the
Existing Services Agreement of certain administrative and management functions
previously conducted by JPS Automotive, (ii) the provision by C&A Products of
certain marketing and program management functions to JPS Automotive, (iii) the
purchase from and the sale to C&A Products of certain manufacturing assets, (iv)
the transfer of certain automotive programs, or manufacturing responsibility for
them, from JPS Automotive and Cramerton to C&A Products and its subsidiaries and
from C&A Products to JPS Automotive and (v) a guarantee by C&A Products in favor
of JPS Automotive of the value to be received by JPS Automotive for certain
idled assets of JPS Automotive.
Where automotive programs are transferred from C&A Products or JPS
Automotive to the other party, the manufacturer is expected to pay a royalty to
the party that originally obtained the transferred contract or, where
manufacturing responsibility for an automotive program is transferred, the
manufacturer is expected to receive a manufacturing fee based on its costs plus
a predetermined fee. It is expected that any payments made by JPS Automotive in
the case of outsourcing of manufacturing will not exceed JPS Automotive's
current cost to produce such product.
For the quarter and six months ended June 28, 1997, JPS Automotive was
charged $.8 million and $1.5 million, respectively, by C&A Products for certain
administrative and management services in accordance with the Existing Services
Agreement. No amounts were paid or accrued by JPS Automotive for any other
current or proposed arrangements during the second quarter or first six months
of 1997.
During the six months ended June 28, 1997, C&A Products and JPS
Automotive entered into a revolving credit arrangement whereby JPS Automotive
may borrow up to $5 million from C&A Products. JPS Automotive is charged
interest on any outstanding balance at a rate equal to the rate charged to C&A
Products under its revolving credit agreement with The Chase Manhattan Bank.
During the quarter ended June 28, 1997, JPS Automotive was charged $.1 million
in interest related to this revolving credit arrangement, reflecting an average
interest rate during the quarter of 7.7%.
As a result of the 1996 Acquisition, holders of the Senior Notes had
the right to put their notes to JPS Automotive at a price of 101% of their
principal amount plus accrued interest. Approximately $3.9 million principal
amount of Senior Notes were so put to JPS Automotive and then purchased and
retired by JPS Automotive in the first quarter of 1997. During the quarter ended
June 28, 1997, an additional $19.4 million principal amount of Senior Notes were
purchased by JPS Automotive on the open market and retired. To fund these
purchases (including premium and interest paid), C&A Products made capital
contributions of approximately $19.2 million as well as loaned funds in
accordance with the revolving credit arrangement previously discussed.
I-6
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
PREDECESSOR COMPANY
The Predecessor Company regularly entered into transactions with its
affiliates in the ordinary course of business.
JPS Automotive had a supply agreement (the "Supply Agreement") with
Foamex. Pursuant to the terms of the Supply Agreement, at the option of JPS
Automotive, Foamex purchased certain raw materials which are necessary for the
manufacture of JPS Automotive's products, and would resell such raw materials to
JPS Automotive at a price equal to net cost plus reasonable out of pocket
expenses. During the quarter and six months ended June 30, 1996, JPS Automotive
purchased approximately $24.7 million and $47.0 million, respectively, of raw
materials under the Supply Agreement.
7. COMMITMENTS AND CONTINGENCIES:
See "PART II - OTHER INFORMATION, Item 1. Legal Proceedings." The
ultimate outcome of the legal proceedings to which JPS Automotive is a party
will not, in the opinion of JPS Automotive's management based on the facts
presently known to it, have a material adverse effect on the consolidated
financial condition or result of operations of JPS Automotive.
JPS Automotive is subject to various federal, state and local
environmental laws and regulations that (i) affect ongoing operations and may
increase capital costs and operating expenses and (ii) impose liability for the
costs of investigation and remediation and certain other damages related to
on-site and off-site soil and groundwater contamination. JPS Automotive believes
it has obtained or applied for the material permits necessary to conduct its
business. To date, compliance with applicable environmental laws has not had
and, in the opinion of management, based on the facts presently known to it, is
not expected to have a material adverse effect on JPS Automotive's consolidated
financial condition or results of operations.
Although not named as a potentially responsible party for any
environmentally contaminated sites, JPS Automotive has accrued environmental
costs at June 28, 1997, of $4.3 million, $.6 million of which is included in
current liabilities.
Although it is possible that new information or future events could
require JPS Automotive to reassess its potential exposure relating to pending
environmental matters, management believes that, based on the facts presently
known to it, the resolution of such environmental matters will not have a
material adverse effect on JPS Automotive's consolidated financial condition or
results of operations. The possibility exists, however, that new environmental
legislation may be passed or environmental regulations may be adopted, or other
environmental conditions may be found to exist, that may require expenditures
not currently anticipated which may be material, and there can be no assurance
that JPS Automotive has identified or properly assessed all potential
environmental liability arising from its activities or properties.
I-7
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
(UNAUDITED)
8. SUBSEQUENT EVENT:
On July 1, 1997, C&A announced that JPS Automotive had entered into an
agreement to sell Airbag to Safety Components International, Inc. This sale was
completed on July 24, 1997 for a purchase price of $56.3 million, subject to
adjustment. Pursuant to the indenture governing the Senior Notes, in connection
with the sale of Airbag, C&A currently intends to cause JPS Automotive to make
an offer to purchase (up to the amount of the net proceeds from the sale) the
Senior Notes at 100% of their principal amount as soon as practicable. From the
date of the 1996 Acquisition through August 11, 1997, however, the Senior Notes
have traded at values in excess of 100% of their principal amount. Accordingly,
C&A currently expects to cause JPS Automotive to use the proceeds remaining from
the sale of Airbag after the termination of the offer to purchase to make a
distribution to C&A Products, to the extent allowed under the restricted
payments provisions of the Senior Notes indenture. JPS Automotive currently
estimates that approximately $40 million of such proceeds will be available to
pay such distribution.
I-8
JPS AUTOMOTIVE PRODUCTS CORP.
(A WHOLLY-OWNED SUBSIDIARY OF JPS AUTOMOTIVE L.P.)
BALANCE SHEETS
(Unaudited)
June 28, December 28
1997 1996
(in thousands)
ASSETS
Current Assets - Cash..................................... $ 1 $ 1
=========== ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities .............................................. $ - $ -
----------- ------------
Shareholder's equity:
Common stock, par value $0.01 per share;
10,000,000 shares authorized,
100 shares issued and outstanding................ - -
Additional paid-in capital........................... 1 1
----------- ------------
Total shareholder's equity....................... 1 1
----------- ------------
$ 1 $ 1
=========== ============
See accompanying notes.
I-9
JPS AUTOMOTIVE PRODUCTS CORP.
(A WHOLLY-OWNED SUBSIDIARY OF JPS AUTOMOTIVE L.P.)
NOTE TO BALANCE SHEETS (UNAUDITED)
1. Commitments and Contingencies
JPS Automotive Products Corp. ("Products Corp.") is a joint obligor
(and co-registrant) with JPS Automotive L.P. of 11 1/8% senior notes due 2001
with an outstanding principal balance of $88.6 million as of June 28, 1997.
I-10
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Pursuant to General Instruction H(2)(a) to Form 10-Q, the following
discussion is a management's narrative analysis of the results of operations
explaining the reasons for material changes in the amount of revenue and expense
items between the most recent fiscal year-to-date period presented and the
corresponding year-to-date period in the preceding fiscal year.
JPS Automotive manufactures and supplies textiles and specialty textile
products for passenger car and light truck production in North America. On June
28, 1994, JPS Automotive acquired the assets of the automotive products and
industrial fabrics divisions of JPS Textile in the 1994 Acquisition. On December
11, 1996, C&A, through its subsidiaries, acquired JPS Automotive from Foamex in
the 1996 Acquisition. The following discussion should be read in conjunction
with the condensed consolidated financial statements and related notes thereto
of JPS Automotive and Products Corp. included in this report.
On July 1, 1997, C&A announced that JPS Automotive had entered into an
agreement to sell Airbag to Safety Components International, Inc. This sale was
completed on July 24, 1997 for a purchase price of $56.3 million, subject to
adjustment. Pursuant to the indenture governing the Senior Notes, in connection
with the sale of Airbag, C&A currently intends to cause JPS Automotive to make
an offer to purchase (up to the amount of the net proceeds from the sale) the
Senior Notes at 100% of their principal amount as soon as practicable. From the
date of the 1996 Acquisition through August 11, 1997, however, the Senior Notes
have traded at values in excess of 100% of their principal amount. Accordingly,
C&A currently expects to cause JPS Automotive to use the proceeds remaining from
the sale of Airbag after the termination of the offer to purchase to make a
distribution to C&A Products, to the extent allowed under the restricted
payments provisions of the Senior Notes indenture. C&A currently estimates that
approximately $40 million of such proceeds will be available to pay such
distribution.
The consolidated balance sheets as of June 28, 1997 and December 28,
1996, the consolidated statements of operations for the quarter and six months
ended June 28, 1997 and the statement of cash flows for the six months ended
June 28, 1997, pertain to JPS Automotive. The consolidated statements of
operations for the quarter and six months ended June 30, 1996 and the statement
of cash flows for the six months ended June 30, 1996, pertain to the Predecessor
Company.
Following the 1994 Acquisition, Foamex and its affiliates provided JPS
Automotive with certain legal, accounting, auditing and other administrative
services pursuant to the Existing Services Agreement between Foamex and its
affiliates and JPS Automotive. The Existing Services Agreement was transferred
to and assumed by C&A in connection with the 1996 Acquisition. In addition, C&A
is expected to provide a greater level of services than were provided by Foamex.
Therefore, historical amounts for selling, general and administrative expenses
may not be directly comparable to amounts reported by JPS Automotive after the
1996 Acquisition.
SIX MONTHS ENDED JUNE 28, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996.
CONSOLIDATED RESULTS OF OPERATIONS
Net sales for the six months ended June 28, 1997 were $120.1 million as
compared to $124.0 million for the six months ended June 30, 1996. The $3.9
million decrease in net sales was primarily due to the loss of certain headliner
business and reduced production in the first six months of 1997 of the
automobile and light truck programs which JPS Automotive supplies.
I-11
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Gross profit as a percentage of net sales decreased to 15.1% for the
six months ended June 28, 1997 from 17.8% in the comparable period of 1996
primarily due to a shift towards lower margin automobile and light truck
programs that began in the second half of 1996 and continued through the first
half of 1997.
Selling, general and administrative expenses decreased to $8.7 million
for the six months ended June 28, 1997 from $9.4 million in the comparable 1996
period. This decrease is the result of lower administrative costs resulting from
the 1996 Acquisition.
Interest and debt issuance expense decreased to $5.6 million for the
six months ended June 28, 1997 from $10.4 million in the comparable period of
1996 primarily due to the lower overall outstanding debt levels following the
1996 Acquisition. In connection with the 1996 Acquisition, JPS Automotive's
revolving facilities were repaid and terminated and $68.0 million in Senior
Notes were retired. As a result of the 1996 Acquisition, holders of the Senior
Notes had a right to put their notes to JPS Automotive. Approximately $3.9
million principal amount of Senior Notes were so put to JPS Automotive and then
purchased and retired by JPS Automotive in the first quarter of 1997. In
addition, during the quarter ended June 28, 1997, approximately $19.4 million
principal amount of Senior Notes were purchased by JPS Automotive on the open
market and retired. During the first half of 1997, C&A Products and JPS
Automotive entered into a revolving credit arrangement whereby JPS Automotive
may borrow up to $5 million from C&A Products at interest rates equal to those
charged to C&A Products under its revolving credit facility with The Chase
Manhattan Bank. During the quarter and six months ended June 28, 1997, JPS
Automotive incurred $.1 million in interest charges in connection with this
revolving credit arrangement, reflecting an average interest rate of 7.7%.
Other (income) expense, net, for the six months ended June 28, 1997 and
1996, related to sales of fixed assets.
Minority interest expense of $.6 million in the six months ended June
30, 1996 related to the minority ownership interest in Cramerton. In connection
with the 1996 Acquisition, this minority interest was acquired by C&A Products,
and Cramerton is now 100% owned by JPS Automotive.
Income tax provision for the six months ended June 28, 1997 increased
to $1.8 million from $.2 million in the comparable period of 1996. The increase
resulted from the 1996 Acquisition whereby JPS Automotive was converted into an
association that is taxable as a corporation.
Income from discontinued operations for the six months ended June 28,
1997 decreased to $1.6 million from $2.0 million in the comparable prior year
period. This decrease resulted from an increase in the effective tax rate as a
result of the 1996 Acquisition which was partially offset by improved operating
results at Airbag.
Extraordinary loss of $.7 million, net of income taxes of $.4 million,
for the six months ended June 28, 1997 relates to the purchase of $19.4 million
principal amount of Senior Notes at prices in excess of carrying values.
Net income decreased to $2.9 million for the six months ended June 28,
1997 from $3.6 million in the comparable period in 1996 primarily due to the
reasons cited above.
LIQUIDITY AND CAPITAL RESOURCES
JPS Automotive's operating cash requirements consist principally of
working capital requirements, scheduled payments of principal and interest on
its outstanding indebtedness and capital expenditures. JPS Automotive believes
the cash flow from operating activities, cash on hand and periodic capital
contributions
I-12
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONCLUDED)
and borrowings, if necessary, will be adequate to meet operating cash
requirements. For a discussion of certain arrangements between C&A Products and
JPS Automotive, see Note 6 to the Notes to JPS Automotive's Condensed
Consolidated Financial Statements.
SAFE HARBOR STATEMENT
This Form 10-Q contains statements which, to the extent they are not
historical fact, constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of Securities Exchange
Act of 1934 (the "Safe Harbor Acts"). All forward-looking statements involve
risks and uncertainties. The forward-looking statements in this Form 10-Q are
intended to be subject to the safe harbor protection provided by the Safe Harbor
Acts.
Risks and uncertainties that could cause actual results to vary
materially from those anticipated in the forward-looking statements included in
this Form 10-Q include industry-based factors such as possible declines in the
North American automobile and light truck build, labor strikes at JPS
Automotive's major customers, changes in consumer taste, dependence on
significant automotive customers, changes in the popularity of particular car
models, the loss of programs on particular car models and the level of
competition in the automotive supply industry, as well as factors more specific
to JPS Automotive, such as the substantial leverage of JPS Automotive and
limitations imposed by the Senior Notes. For a discussion of certain of these
and other important factors which may affect the operations, products and
markets of JPS Automotive, see JPS Automotive's Transition Report on Form 10-K
for the transition period from January 1, 1996 to December 28, 1996, including
without limitation, "Item 1. Business" and "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations," and Notes to
Condensed Consolidated Financial Statements contained therein, and see also JPS
Automotive's other filings with the Securities and Exchange Commission.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Omitted pursuant to General Instruction H(2)(c) to Form 10-Q.
I-13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There have been no material developments in legal proceedings
involving JPS Automotive or its subsidiaries since those reported, if any, in
JPS Automotive's Transition Report on Form 10-K for the transition period from
January 1, 1996 to December 28, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
2.1 Asset Purchase Agreement dated as of June 30, 1997 by and among JPS
Automotive L.P. and Safety Components International, Inc. is hereby
incorporated by reference to Exhibit 2.1 of the Current Report on Form
8-K of JPS Automotive and Products Corp. dated July 24, 1997.
2.2 Closing Agreement dated as of July 24, 1997 by and among JPS Automotive
L.P., Safety Components International, Inc. and Safety Components
Fabric Technologies, Inc. is hereby incorporated by reference to
Exhibit 2.2 of the Current Report on Form 8-K of JPS Automotive and
Products Corp. dated July 24, 1997.
3.1 Certificate of Incorporation of Products Corp. is hereby incorporated
by reference to Exhibit 3.1 of Products Corp.'s Registration Statement
on Form S-1, Registration No. 33-75510.
3.2 By-laws of Products Corp. are hereby incorporated by reference to
Exhibit 3.2 of Products Corp.'s Registration Statement on Form S-1,
Registration No. 33-75510.
3.3 Certificate of Limited Partnership of JPS Automotive is hereby
incorporated by reference to Exhibit 3.3 of Products Corp.'s
Registration Statement on Form S-1, Registration No. 33-75510.
3.4 First Amended and Restated Agreement of Limited Partnership of JPS
Automotive, dated as of June 27, 1994, is hereby incorporated by
reference to Exhibit 3.4 of the Form 10-K of JPS Automotive and
Products Corp. for fiscal 1994.
3.5 Certificate of Amendment of Certificate of Limited Partnership of JPS
Automotive dated December 11, 1996 is hereby incorporated by reference
to Exhibit 3.5 of the Form 10-K of JPS Automotive and Products Corp.
for the transition period from January 1, 1996 to December 28, 1996.
3.6 First Amendment to First Amended and Restated Agreement of Limited
Partnership of JPS Automotive dated as of December 11, 1996 is hereby
incorporated by reference to Exhibit 3.6 of the Form 10-K of JPS
Automotive and Products Corp. for the transition period from January 1,
1996 to December 28, 1996.
3.7 Second Amendment to First Amended and Restated Agreement of Limited
Partnership of JPS Automotive dated as of December 11, 1996, is hereby
incorporated by reference to Exhibit 3.7 of the Form 10-K of JPS
Automotive and Products Corp. for the transition period from January 1,
1996 to December 28, 1996.
4.1 Indenture, between Products Corp. and Shawmut Connecticut, as Trustee,
relating to $180,000,000 principal amount of 11-1/8% Senior Notes due
2001 (the "JPS Automotive Senior Notes"), including form of the JPS
Automotive Senior Note is hereby incorporated by reference to Exhibit
4.2 of Products Corp.'s Registration Statement on Form S-1,
Registration No.
33-75510.
4.2 First Supplemental Indenture, dated as of October 5, 1994, between
Products Corp., JPS Automotive and Shawmut Connecticut, as Trustee,
relating to the JPS Automotive Senior Notes is hereby
II-1
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
incorporated by reference to Exhibit 4.48A of Form 10-Q of JPS
Automotive and Products Corp. for the fiscal quarter ended October 2,
1994.
Certain instruments defining the rights of security holders have been
excluded herefrom in accordance with Item 601(b)(4)(iii) of Regulation
S-K. The Registrants hereby agree to furnish a copy of any such
instrument to the Commission upon request.
10.1 Services Agreement, by and between JPS Automotive and Foamex
International is hereby incorporated by reference to Exhibit 10.2 of
Products Corp.'s Registration Statement on Form S-1, Registration No.
33-75510.
10.2 Supply Agreement, by and among Foamex International and certain of its
affiliates and JPS Automotive is incorporated by reference to Exhibit
10.8 of Products Corp.'s Registration Statement on Form S-1,
Registration No. 33-75510.
10.3 Tax-sharing Agreement, by and among JPS Automotive and its partners is
incorporated by reference to Exhibit 10.9 of Products Corp.'s
Registration Statement on Form S-1, Registration No. 33-75510.
10.4 Amended and Restated Agreement of Limited Partnership of Cramerton
Automotive Products, L.P., dated as of December 2, 1994, is
incorporated by reference to Exhibit 10.13 of Product Corp.'s
Registration Statement on Form S-1, Registration No. 33-75510.
10.5 First Amendment to Amended and Restated Agreement of Limited
Partnership of Cramerton Automotive Products, L.P., dated as of June
28, 1994, is hereby incorporated by reference to Exhibit 10.85 of the
Form 10-K of Foamex International Inc. for fiscal 1994.
10.6 Second Amendment to Amended and Restated Agreement of Limited
Partnership of Cramerton Automotive Products, L.P., dated as of October
5, 1994, is hereby incorporated by reference to Exhibit 10.86 of the
Form 10-K of Foamex International Inc.
for fiscal 1994.
10.7 Third Amendment to the Amended and Restated Agreement of Limited
Partnership of Cramerton Automotive Products, L.P., dated as of
December 11, 1996, is hereby incorporated by reference to Exhibit 10.8
of the Form 10-K of JPS Automotive and Products Corp. for the
transition period from January 1, 1996 to December 28, 1996.
10.8 Certificate of Amendment of Certificate of Limited Partnership of
Cramerton dated December 12, 1996, is hereby incorporated by reference
to Exhibit 10.9 of the Form 10-K of JPS Automotive and Products Corp.
for the transition period from January 1, 1996 to December 28, 1996.
10.9 Assignment dated as of December 11, 1996, from Foamex to C&A Products
relating to Services Agreement, is hereby incorporated by reference to
Exhibit 10.10 of the Form 10-K of JPS Automotive and Products Corp. for
the transition period from January 1, 1996 to December 28, 1996.
10.10 Assignment dated as of December 11, 1996, from Foamex-JPS Automotive
L.P. to C&A Products relating to Tax-Sharing Agreement, is hereby
incorporated by reference to Exhibit 10.11 of the Form 10-K of JPS
Automotive and Products Corp. for the transition period from January 1,
1996 to December 28, 1996.
II-2
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
10.11 Assignment dated as of December 11, 1996, from JPSGP, Inc. to C&A
Products relating to Tax-Sharing Agreement, is hereby incorporated by
reference to Exhibit 10.12 of the Form 10-K of JPS Automotive and
Products Corp. for the transition period from January 1, 1996 to
December 28, 1996.
10.12 Assignment dated as of December 11, 1996, from Foamex to C&A Products
relating to Supply Agreement, is hereby incorporated by reference to
Exhibit 10.13 of the Form 10-K of JPS Automotive and Products Corp. for
the transition period from January 1, 1996 to December 28, 1996.
10.13 Equity Purchase Agreement by and among JPSGP, Inc., Foamex - JPS
Automotive L.P. and Collins & Aikman Products Co. dated August 28,
1996, is hereby incorporated by reference to Exhibit 2.1 of Collins &
Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended
July 27, 1996.
10.14 Amendment No. 1 to Equity Purchase Agreement by and among JPSGP, Inc.,
Foamex - JPS Automotive L.P., Foamex International Inc. and Collins &
Aikman Products Co. dated as of December 11, 1996, is hereby
incorporated by reference to Exhibit 2.2 of Collins & Aikman
Corporation's Current Report on Form 8-K dated December 10, 1996.
27 Financial Data Schedules
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(b) Reports on Form 8-K.
During the quarter for which this Report on Form 10-Q is filed, JPS Automotive
and Products Corp. did not file any reports on Form 8-K.
II-3
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrants have duly caused this report to be signed
on their behalf by the undersigned, thereunto duly authorized on the 14th day of
August, 1997.
JPS AUTOMOTIVE L.P.
By: PACJ, Inc.
General Partner
By: /s/ J. Michael Stepp
J. Michael Stepp
Executive Vice President and
Chief Financial Officer
JPS AUTOMOTIVE PRODUCTS CORP.
By: /s/ J. Michael Stepp
J. Michael Stepp
Executive Vice President and
Chief Financial Officer