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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended October 30, 1999
[ ] 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 INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 57-0868166
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
555 North Pleasantburg Drive, Suite 202, Greenville, SC 29607
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (864) 239-3900
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 per share, 22,000,000 shares authorized;
10,000,000 shares issued and outstanding
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: /X/
Indicate by check mark if disclosure of delinquent filers, pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K: /_/
As of January 14, 2000, the aggregate market value of the Registrant's
Common Stock held by non-affiliates, based upon the closing price of the Common
Stock on January 15, 2000, as reported by the Nasdaq National Market, was
approximately $19,115,738.
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 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: /X/
As of the date hereof, 10,000,000 of the registrant's Common Stock $.01
par value per share, were issued and outstanding.
The Registrant's Definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on February 29, 2000 is incorporated by reference in
Part III of this Form 10-K to the extent stated herein.
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JPS INDUSTRIES, INC.
Table of Contents
PART I
Item 1. BUSINESS.......................................................... 3
Item 2. PROPERTIES........................................................ 12
Item 3. LEGAL PROCEEDINGS................................................. 13
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS................ 13
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS....................................... 13
Item 6. SELECTED HISTORICAL FINANCIAL DATA................................ 14
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS......................................... 17
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK......... 27
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................... 28
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE............................... 59
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................ 59
Item 11. EXECUTIVE COMPENSATION............................................ 59
Item 12. SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT....... 59
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................... 59
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.... 59
INDEX TO EXHIBITS................................................. 61
SIGNATURES........................................................ 67
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PART I
ITEM 1. BUSINESS
GENERAL
Effective June 24, 1999, JPS Textile Group, Inc. changed its name to JPS
Industries, Inc. to reflect its changing strategic direction. Unless the context
otherwise requires, the terms "JPS" and the "Company" as used in this Form 10-K
mean JPS Industries, Inc. and JPS Industries, Inc. together with its
subsidiaries, respectively.
The Company is a major U.S. manufacturer of extruded urethanes, polypropylenes
and mechanically formed glass substrates for specialty industrial applications;
and apparel fabrics. JPS specialty industrial products are used in a wide range
of applications, including: commercial and institutional roofing; reservoir and
landfill liners and covers; printed circuit boards; advanced composite
materials, tarpaulins, awnings, tile backings; security glazing; athletic shoes;
and medical, automotive and industrial components. JPS apparel fabrics are
comprised of acetate, rayon, polyester and Tencel(R) fibers and are primarily
for use in the women's dress and sportswear markets. Headquartered in
Greenville, South Carolina, the Company has six manufacturing plants in four
states.
JPS is a Delaware Corporation incorporated in 1986 and has been publicly held
since the completion of its financial restructuring in October 1997. The
Company's common stock is listed in the Nasdaq National Market System under the
stock symbol "JPST."
THE 1997 RESTRUCTURING
In 1997, as a result of the continued downturn in the apparel fabrics market and
various other factors, JPS determined that it would be unable to meet certain
debt obligations on its public bonds that would become due commencing in June
1997. Accordingly, on May 15, 1997, JPS, JPS Capital Corp., a wholly-owned
subsidiary of JPS ("JPS Capital") and an unofficial committee (the "Unofficial
Bondholder Committee") comprised of institutions that owned, or represented
owners that beneficially owned, approximately 60% of the 10.85% Senior
Subordinated Discount Notes due June 1, 1999 (the "10.85% Notes"), the 10.25%
Senior Subordinated Notes due June 1, 1999 (the "10.25% Notes"), and the 7%
Subordinated Debentures due May 15, 2000 ("the 7% Notes") (together with the
10.85% Notes and the 10.25% Notes, the "Old Debt Securities") reached an
agreement in principle on the terms of a restructuring to be accomplished under
chapter 11 of the Bankruptcy Code which culminated in a Joint Plan of
Reorganization (as amended, the "Plan of Reorganization") proposed by JPS and
JPS Capital 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 390,719 shares of 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 for the Southern District of
New York (the "Bankruptcy Court"), and filed the Plan of Reorganization and the
Disclosure Statement. None of JPS's subsidiaries, including JPS Capital which
was a co-proponent of the Plan of Reorganization, commenced a case under the
Bankruptcy Code. Pursuant to orders of the Bankruptcy Court entered on September
9, 1997, the Bankruptcy Court (i) approved the Disclosure Statement and the
solicitation of votes on the Plan of Reorganization and (ii) confirmed the Plan
of Reorganization. The
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Plan of Reorganization became effective on October 9, 1997 (the "Effective
Date") resulting in, among other things, the cancellation of the Old Senior
Preferred Stock, 10,000 shares Series B Junior Preferred Stock (the "Old Junior
Preferred Stock"), 490,000 shares of Class A common stock and 510,000 shares of
Class B common stock (together with Class A common stock, the "Old Common
Stock"), and the issuance of 10,000,000 shares of Common Stock $.01 par value
per share (the "Common Stock").
Through the implementation of the Plan of Reorganization as of the Effective
Date, JPS's most significant financial obligations were restructured:
$240,091,318 in face amount of outstanding Old Debt Securities were exchanged
for, among other things, $14.0 million in cash, 99.25% of the shares of Common
Stock and $34.0 million in aggregate principal amount (subject to adjustment on
the maturity date) of contingent payment notes issued by JPS Capital (the
"Contingent Notes"); the Old Senior Preferred Stock, the Old Junior Preferred
Stock and the Old Common Stock were canceled; warrants to purchase up to 5% of
the common stock of JPS (the "New Warrants") with an initial purchase price of
$98.76 per share were issued in respect of the Old Senior Preferred Stock; and
the obligations of JPS under its former working capital facility were satisfied
and the Revolving Credit Facility was obtained. JPS's senior management received
approximately 0.75% of the Common Stock in lieu of payment under their
contractual retention bonus agreements. As a result of the restructuring, JPS's
only significant debt obligation is its guaranty of the obligations of its
operating subsidiaries under the Revolving Credit Facility. The equipment loan
contracts, which are long-term obligations of the operating subsidiaries, are
not guaranteed by, or otherwise obligations of, JPS. In August 1998, the Company
reduced its long-term debt and related investments by repaying all of the
approximately $34.0 million in principal amount of JPS Capital's Contingent
Notes.
CURRENT YEAR DEVELOPMENTS
During the year ended October 30, 1999 ("Fiscal 1999"), the Company took certain
actions to reposition itself from a textile-oriented enterprise to a diversified
manufacturing and marketing company that is focused on a broad array of
industrial applications. This was accomplished by successfully streamlining the
ongoing apparel fabric business and exiting three other textile businesses while
intensifying its focus on the two businesses with growth potential, JPS
Elastomerics and JPS Glass.
An essential component in the recasting of the Company was the organization
make-up and structure. On March 1, 1999, Michael L. Fulbright joined the Company
as Chairman, President and Chief Executive Officer. Following an intensive
60-day internal analysis, the Company was organized into three comprehensive
business units from what had been six profit centers. Two new division
presidents were named in May to lead JPS Apparel and JPS Glass, Reid McCarter
and Gary Wallace, respectively. Along with Bruce Wilby, President of JPS
Elastomerics, the Company was from a structure standpoint positioned to begin
execution of the strategic business plan developed during the 60-day
Company-wide assessment. Further organization changes were made in the Fall when
Allen Ollis and Ellis Jackson were named Corporate Controller/Secretary and
Corporate Treasurer, respectively. The last significant organization issue was
the design and implementation of a Company-wide incentive program for Fiscal
2000. The plan covers all the Company's employees, ties a portion of each
associate's compensation with Company-wide and division level financial
performance, and, importantly, is aligned with performance measures designed to
improve shareholder value through improved Company earnings.
On March 2, 1999, the Company exited its home fashion woven fabrics business by
completing the sale of its Boger City manufacturing plant. This business
accounted for sales of $30.9 million, $22.8 million and $7.3 million in Fiscal
1997, 1998 and 1999, respectively. Pursuant to the terms of an Asset Purchase
Agreement dated January 11, 1999 between JPS Converter and Industrial Corp.
("C&I") and Belding Hausman, Incorporated, as amended, C&I sold substantially
all of the assets of the Boger City plant located in Lincolnton, North Carolina.
The consideration for the sale consisted of approximately $7.9 million in cash.
A charge of approximately $12.5 million related principally to the loss on
impairment of long-lived assets, including related reorganization value in
excess of amounts allocable to identifiable assets, was recorded in the results
of operations in Fiscal 1998. The
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net proceeds from the sale were used to reduce the Company's outstanding
indebtedness on its Revolving Credit Facility and an equipment loan.
The Company closed its Angle manufacturing facility located in Rocky Mount,
Virginia, in its 1999 third fiscal quarter and sold the plant on September 3,
1999, thereby streamlining the apparel fabrics business. The determination to
close the Angle plant resulted in a charge in Fiscal 1998 of approximately $4.3
million related principally to a loss on impairment of the long-lived assets
including related reorganization value in excess of amounts allocable to
identifiable assets. The plant closing also resulted in an additional charge in
Fiscal 1999 of approximately $0.9 million related principally to employee
severance costs. The proceeds from the sale of the remaining plant facility of
approximately $0.2 million were used to reduce the Company's outstanding
indebtedness on its Revolving Credit Facility.
On July 23, 1999, the Company sold its Stanley manufacturing plant located in
Stanley, North Carolina, thereby exiting its yarn sales textile business. This
business accounted for sales of $20.3 million, $19.0 million and $11.0 million
in Fiscal 1997, 1998 and 1999, respectively. Pursuant to an Asset Purchase
Agreement dated July 2, 1999, between C&I and Belding Hausman, Incorporated, the
consideration for the Stanley sale consisted of approximately $2.0 million in
cash. A charge for loss on disposal of discontinued operations of approximately
$9.2 million was recorded in Fiscal 1999 related primarily to the writedown of
disposed plant assets to net realizable value, the writedown of related
reorganization value in excess of amounts allocable to identifiable assets,
employee severance costs, and other exit costs. The net proceeds from the sale
were used to reduce the Company's outstanding indebtedness on its Revolving
Credit Facility and an equipment loan.
On August 27, 1999, the Company sold its Borden manufacturing plant located in
Kingsport, Tennessee, thereby exiting its cotton commercial products textile
business. This business generated sales of $34.1 million, $33.7 million and
$18.4 million in Fiscal 1997, 1998 and 1999, respectively. Pursuant to an Asset
Purchase Agreement dated June 24, 1999, as amended, among JPS, C&I and Chiquola
Fabrics, LLC, the consideration for the Borden sale consisted of approximately
$3.2 million in cash and a $2.0 million subordinated promissory note which was
recorded at its estimated fair value. A charge for loss on disposal of
discontinued operations of approximately $8.9 million was recorded in Fiscal
1999 related primarily to the writedown of disposed plant assets to net
realizable value, the writedown of related reorganization value in excess of
amounts allocable to identifiable assets, employee severance costs, and other
exit costs. The net proceeds from the sale were used to reduce the Company's
outstanding indebtedness on its Revolving Credit Facility.
With these changes, the Company's organization has been scaled down to
approximately 1,900 employees at fiscal year-end compared with approximately
3,200 employees at the beginning of the fiscal year. See additional discussion
regarding the disposition of these businesses in Item 7 of this Form 10-K,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Company has also taken action to substantially reduce costs in its remaining
businesses, including general and administrative support. JPS is now focused on
improving the performance and profitability of its remaining core
businesses--JPS Elastomerics, JPS Glass and JPS Apparel.
BUSINESS SEGMENTS
The Company currently operates in three reportable business segments (each of
which constitutes a separate and distinct division)--JPS Elastomerics, JPS Glass
and JPS Apparel. Item 7 of this Form 10-K, "Management's Discussion and Analysis
of Financial Condition and Results of Operation," discloses the sales,
profitability and net assets of each segment. The following discussion provides
general information as it relates to each division:
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JPS Elastomerics
Through its JPS Elastomerics division, the Company is a market leader in the
manufacturing and marketing of scrim-reinforced, heat-weldable, single-ply
roofing membrane that is sold globally through a network of roofing
distributors. The Company offers two roofing products: a Hypalon(R)
(chlorosulfonated polyethylene)-based material and a polypropylene-based
material. Both products, marketed under Stevens(R) Roofing Systems, are sold
primarily to roofing distributors and contractors who install new and
retrofitted roofs for commercial, industrial and institutional construction.
The Company is also a manufacturer of Environmental Geomembranes that are sold
on a global basis. As with the roofing products, the Company offers two
geomembrane products: Hypalon(R)-based material and a polypropylene-based
material. Geomembranes are sold to a limited number of fabricators/installers,
and are used primarily as floating covers and liners for potable water
reservoirs, landfill caps, wastewater liners, and floating covers and mining
heap leach pads.
The Company is a major manufacturer and marketer of polyurethane film, sheet,
tubing, cord, and profile for a myriad of applications in athletic, automotive,
medical industrial, and consumer products industries.
JPS Glass
Through its JPS Glass segment, the Company manufactures and markets mechanically
formed substrates of fiberglass and other specialty fibers. Fiberglass
substrates exhibit dimensional stability, moisture resistance, high strength,
fire and chemical resistance, low dielectric properties and thermal
conductivity, and as a result of these many attributes, they provide the perfect
platform for the construction of printed circuit boards, substrates for exterior
insulation facing systems, power generation filtration bags, composite materials
for cabin interiors and cargo liners, and other numerous technical, industrial
applications.
The Company is a leading producer of AstroQuartz substrates formed from quartz
yarns to produce sophisticated electronic circuit boards and extremely high
temperature thermal insulation for the defense and civilian aerospace
industries.
JPS Apparel
Through its JPS Apparel segment, the Company is a leading manufacturer of
cellulosic-based woven fabrics. The Company's products are used in the
manufacture of a broad range of consumer apparel products including blouses,
dresses and sportswear. The Company also produces fabrics from spun and filament
yarns that are formed from a variety of fibers, including flax, rayon, tencel,
acetate and polyester, and primarily sold to other textile manufacturers for use
in producing printed and dyed fabrics.
SUBSIDIARIES
JPS's wholly-owned operating subsidiaries include JPS Elastomerics and C&I.
JPS's other wholly-owned subsidiaries do not have any significant operations:
JPS Capital, International Fabrics, Inc. ("Fabrics"), JPS Auto, Inc. ("Auto")
and JPS Carpet Corp. ("Carpet"). JPS business units are managed in three
separate divisions: Elastomerics, Glass and Apparel. Each division has
independent administrative, manufacturing and marketing capabilities for all
material aspects of their operations, including product design, technical
development, customer service, purchasing, and collections. JPS's parent company
corporate group is responsible for finance, strategic planning, legal, tax, and
regulatory affairs for its subsidiaries. Corporate costs are allocated to the
divisions for segment reporting purposes.
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MANUFACTURING
The Company currently operates six facilities in four states utilizing
state-of-the-art manufacturing equipment. The majority of the Company's
manufacturing equipment is automated and computer controlled for maximum
efficiency, cost control and consistency.
Following are comments on manufacturing as they relate to each of the Company's
divisions:
JPS Elastomerics
The Elastomerics division operates two facilities and employs approximately 275
employees. Construction products are produced from raw materials, where they are
blended to proprietary specifications along with fire-retardant and UV
stabilizers and then calendered on state-of-the-art equipment.
Polyurethane is extruded in highly automated, computer controlled, blown film
and sheet-fed extrusion processes from raw urethane resins. Depending on end
uses, some materials are manufactured in clean zone environments.
JPS Glass
The Glass division operates one facility and employs approximately 480
employees. The Company purchases fiberglass and other specialty yarns to
mechanically form into substrates which have proprietary finishes applied to
meet individual customer specifications. These proprietary finishes are designed
to act as the bonding agent between the fiberglass substrate and the customer's
value-added application. In almost every case, the customer's product would have
lower or unacceptable performance without the proprietary finish. These finishes
are customer specific and developed over years of trial and development. All
products are manufactured to customer specification and require certification to
either military specification or customer specification prior to shipment.
JPS Apparel
The Apparel division operates three facilities and employs approximately 1,150
employees in the manufacture of woven cellulosic fabrics. The Company purchases
synthetic and natural fibers and spins them into yarn or purchases filament yarn
for processing. In addition, the Company purchases certain spun yarns. Yarns are
then sized or directly woven into unfinished fabric. Upon completion of the
weaving process, fabrics are generally shipped to customers who dye, finish and
cut those fabrics for resale.
RAW MATERIALS
The Company maintains good relationships with its suppliers and has, where
possible, diversified its supplier base so as to avoid a disruption of supply.
In most cases, the Company's raw materials are staple goods that are readily
available from numerous domestic fiber and chemical manufacturers. For several
products, however, branded goods or other circumstances prevent such a
diversification, and an interruption of the supply of these raw materials could
have a significant negative impact on the Company's ability to produce certain
products. The construction products group has negotiated comprehensive supply
agreements for all its polymer, chemical and accessory products, with multiple
production sites assuring an uninterrupted supply. The urethane products group
purchases under contract from all major thermoplastic polyurethane suppliers.
The Company believes that its practice of purchasing such items from large,
stable companies minimizes the risk of interrupting the supply of raw materials.
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MARKETING AND COMPETITION
The following is a discussion of marketing and competitive factors as they
relate to each of the Company's divisions:
JPS Elastomerics
The commercial roofing industry is highly competitive with a number of major
participants in all segments of the industry. Many of the Company's competitors
are significantly larger in terms of aggregate sales. In the specialty segment
of the single-ply market where the Company competes, there are more than 10
competitors, with the Company having the largest market share in this segment.
Due to the success of the Company's EP product line and new product
introductions slated for 2000, management expects continued growth in this
sector.
The Company markets it products under the Stevens(R) brand name using a
push-pull strategy: pushing products through distribution to the roofing
contractor and pulling products through the market by creating demand on the
part of building owners, architects and specifiers.
The Company has approximately 20 field sales staff as well as a network of
independent representatives, distributors and distributor-representatives as its
sales force. In addition, the Company operates a sales office in the United
Kingdom, has an extensive distribution network in Europe, and a strong licensing
program in Asia. Marketing efforts in the roofing industry include (i) new
product development to meet changing market demands, (ii) providing proprietary
accessory products, (iii) implementing several contractor-specific programs, and
(iv) a comprehensive marketing communications effort.
Geomembrane products are sold to a select group of fabricators and installers.
The Company's marketing efforts are focused exclusively on supporting those
companies in a variety of ways.
The Company's urethane products are also marketed through both direct sales
personnel and a nationwide network of independent representatives. None of the
Company's products are sold "off the shelf," as each application has specific
end-use performance requirements. As with the construction products, marketing
efforts for urethane are multifaceted with new product development and
engineering being critical factors to the success of these products.
JPS Glass
The glass substrate business is highly competitive and globally influenced
because of the significant capacity that exists in Europe, Asia and North
America. The Company believes itself to be the third largest North American
producer of glass substrates, where the majority of its products are sold.
Importantly, it is very well-positioned because of the balance between its
electrical components, fiberglass reinforced composites, construction, and
insulation product lines. Additionally, within the electrical substrate product
line (i.e., printed circuit boards) the Company's ability to commit in excess of
75% of its capacity to light weight substrates is a market strength because they
are used in a vast array of growing consumer product markets, such as cell
phones, computers, pagers, as well as the electronic infrastructure for the
internet.
The Company's glass products are marketed through a combination of direct sales
and distributors, with the central focus being development of customer specific
finishes that enhance their respective value added processes.
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JPS Apparel
The textile industry is highly competitive and includes a number of domestic and
international participants. The Company generally competes on the basis of
price, quality, design and customer service. Many companies compete in limited
segments of the textile market. In recent years, a large and growing percentage
of domestic consumer apparel demand has been met by foreign competitors whose
products, both fabrics and garments, are imported into the United States. The
Company is well-positioned due to its ability to respond quickly to changing
styling and fashion trends. This ability generally provides advantages for
domestic textile manufacturers. Although no single company dominates the
industry, most market segments are dominated by a small number of competitors.
The Company believes it has a significant market share in the market for rayon
and acetate apparel fabrics.
The Company markets its spun and filament fabrics to converters who finish
and/or dye these products prior to shipping to apparel manufacturers. The
Company has sought to maintain a relatively high proportion of such sales in
product areas where its manufacturing flexibility can provide a competitive
advantage.
CUSTOMERS
Sales to Hargro Fabrics, Inc. represented approximately 13%, 9% and 6% of the
Company's consolidated net sales in Fiscal 1999, 1998 and 1997, respectively. No
other customer accounts for more than 10% of the Company's sales. However, the
loss of certain other customers could have a material adverse effect on sales.
PRODUCT DEVELOPMENT
The following is a discussion of product development as it relates to each of
the Company's divisions:
JPS Elastomerics
On-going product development and process improvement activities include a
constant evaluation of new advanced polymers and polymer compounds, as well as
the evaluation and analysis of material additives required in the manufacture of
commercial roofing products, geomembranes and thermoplastic polyurethane. As
appropriate, additives are required to ensure long-term UV stability, fire or
chemical resistance or to ensure that a specific product can be used in contact
with drinking water.
For its roofing products, the Company continues to develop advanced material
products that meet fire, wind and other building code requirements on a global
basis. Such building codes vary from country to country, and even regionally,
presenting a challenge to the manufacturer. Geomembranes must also meet
stringent code requirements of several countries, particularly when used in
potable water reservoirs.
The Company offers both aliphatic and aromatic polyurethane products. Aliphatic,
which is used in glass clad polycarbonate laminates for security-glazing
applications, is extruded in a clean zone environment to ensure maximum product
cleanliness. Aromatic materials are extruded by blown film and flat sheet fed
technologies. The Company spends a considerable amount of R&D effort to develop
material additives that enable end products to be more fire resistant, more
breathable, more permeable, etc. In addition, the Company must provide specific
surface finishes and textures that may be required for end-use applications.
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JPS Glass
R&D efforts include the continued refinement of silane chemistry for high Tg
resin systems in the printed circuit board industry, development of soft
moldable finishes for the building products industry, high-flex finishes to
extend the life of filtration substrates for the power generation industry, and
new low cost materials for the mechanically needled insulation industry. The
product development effort is an ongoing customer specific process that is
enhanced by the involvement of the division's vendor partners with the
division's highly skilled research department.
JPS Apparel
In general, the textile industry expends its efforts on design innovation and
capital expenditures for process enhancements rather than on basic research,
relying on fiber suppliers or machinery manufacturers for basic research.
The Company's research and development activities are directed toward the
development of new fabrics and styles which meet specific styling requirements.
Significant time is spent by employees in activities such as meeting with
stylists, designers, customers, suppliers and machinery manufacturers, as well
as producing samples and running trials in order to develop new products and
markets. These activities are performed at various levels and at various
locations, and their specifically identifiable incremental costs are not
material in relation to the Company's total operating costs.
BACKLOG
Unfilled open orders, which the Company believes are firm, were $33.5 million at
October 30, 1999 and $38.5 million at October 31, 1998. The backlog at October
31, 1998 included approximately $8.0 million associated with the businesses
which were exited in Fiscal 1999. Excluding these effects, the backlog actually
increased $3.0 million at October 30, 1999. The Company generally fills its open
orders in the following fiscal year and the Company expects that all of the open
orders as of October 30, 1999, will be filled in the 52-week period ending
October 28, 2000 ("Fiscal 2000"). The increase is primarily due to an increase
in customer demand for certain apparel fabrics. The Company believes that the
amount of backlog provides some indication of the sales volume that can be
expected in coming months, although changes in economic conditions may result in
deferral or acceleration of orders which may affect sales volume for a period.
No significant portion of the Company's business is subject to renegotiation of
profits, or termination of contracts or subcontracts at the election of the
government.
PATENTS, LICENSES AND TRADEMARKS
The following is a discussion of patent licenses and trademarks as they relate
to each of the Company's divisions:
JPS Elastomerics
Products, such as commercial roofing, geomembranes and polyurethane, are
marketed under the "Stevens" brand name. As such, the Company is in the process
of securing U.S. trademarks for the following names: Stevens Roofing
Systems(TM), Stevens Geomembranes(TM) and Stevens Urethane(TM). In addition, the
Company currently holds U.S. trademarks on the names Hi-Tuff(R) and Hi-Tuff
Plus(R). The Company also holds trademarks for the Hi-Tuff name in Canada,
Mexico and certain European and Asian countries.
In terms of product licensing, the Company is currently involved with two
manufacturing licensees: Tsutsunaka Plastics Industries ("TPI") of Japan and
Protan A/S of Norway. The Company has licensed roofing technology
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to Protan for manufacturing and marketing TPO-based roofing products in the
Scandinavian countries. In addition, Stevens roofing and geomembrane compound
and manufacturing technologies have been licensed to TPI for the production and
marketing of membranes in Japan.
JPS Glass
A total of three patents and 30 trademarks are secured or in the process of
being secured by the Company for its Glass business. These include, but are not
limited to: alkali resistant meshes for Exterior Insulation Facing Systems
trademarked under the names of Versaflex(R), Duraflex(R), Ultraflex(R) and
Standardflex(R); filtration products trademarked under the names AcidFlex(TM)
and Ultraflex(R); and substrates meeting high temperature requirements
trademarked under the name Tempratex(R).
JPS Apparel
Certain products are sold under registered trademarks which have been licensed
royalty-free to the Company from J.P. Stevens until May 2013, including
trademarks for certain products using the "J.P. Stevens" name. Patented
processes used in the manufacturing process are not a significant part of these
segments. The segments do not license their name or products to others except
for the licenses of certain trade names granted royalty free to operations that
the Company has sold.
EMPLOYEES
As of October 30, 1999, the Company had approximately 1,900 employees of which
approximately 1,550 were hourly and approximately 350 were salaried. The
Company's employees are not represented by unions. The Company believes its
relations with its employees to be good.
ENVIRONMENTAL AND REGULATORY MATTERS
The Company is subject to various federal, state and local government laws and
regulations concerning, among other things, the discharge, storage, handling and
disposal of a variety of hazardous and non-hazardous substances and wastes. The
Company's plants generate small quantities of hazardous waste that are either
recycled or disposed of off-site by or at licensed disposal or treatment
facilities.
The Company believes that it is in substantial compliance with all existing
environmental laws and regulations to which it is subject. In addition, the
Company is subject to liability under environmental laws relating to the past
release or disposal of hazardous materials. To date, and in management's belief
for the foreseeable future, liability under and compliance with existing
environmental laws has not had and will not have a material adverse effect on
the Company's financial or competitive positions. No representation or assurance
can be made, however, that any change in federal, state or local requirements or
the discovery of unknown problems or conditions will not require substantial
expenditures by the Company.
SEASONALITY
Certain portions of the business of the Company are seasonal (principally
construction products) and sales of these products tend to decline during winter
months in correlation with construction activity. These declines have
historically tended to result in lower sales and operating profits in the first
and second quarters than in the third and fourth quarters of the Company's
fiscal year.
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WORKING CAPITAL
Information regarding the Company's working capital position and practices is
set forth in Item 7 of this Form 10-K under the caption "Liquidity and Capital
Resources."
Financial information for the JPS Elastomerics, JPS Glass and JPS Apparel
segments is set forth in Note 11 to the Consolidated Financial Statements
included in Item 8 herein.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this Item 1 "Business" and Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
are not historical facts are forward-looking statements subject to the safe
harbor created by the Private Securities Litigation Reform Act of 1995. The
Company cautions readers of this Annual Report on Form 10-K that a number of
important factors could cause the Company's actual results in Fiscal 2000 and
beyond 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 Company's industry, the Company's ability to
meet its debt service obligations, the seasonality of the Company's sales, the
volatility of the Company's raw materials cost, and the Company's dependence on
key personnel and certain large customers.
ITEM 2. PROPERTIES.
The following table sets forth certain information relating to the Company's
principal facilities (segment information relates to principal use). All of the
facilities owned or leased by the Company are used for manufacturing, except for
the facility in New York which is used as a sales office and a Greenville
facility which is used as a divisional headquarters. Except as noted, all of the
Company's facilities are owned in fee and substantially all owned facilities are
pledged as collateral for the Company's bank financing arrangement.
Square Square
Location Footage Location Footage
-------- ------- -------- -------
JPS Elastomerics JPS Glass
---------------- ---------
Westfield, NC 237,000 Slater, SC 433,000
Easthampton, MA 50,000
JPS Apparel
-----------
Laurens, SC 475,000
Greenville, SC 460,000
S. Boston, VA 286,000
Greenville, SC 18,640
New York, NY (1) 9,000
(1) The New York, NY facility is leased by the Company under a lease
agreement which expires in 2006.
The Company also leases certain other warehouse facilities, various regional
sales offices and a subsidiary's divisional headquarters. The Company believes
that all of its facilities are suitable and adequate for the current and
anticipated conduct of its operations.
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ITEM 3. LEGAL PROCEEDINGS.
The Company is a party to lawsuits in the normal course of its business. The
Company believes that it has meritorious defenses in all lawsuits in which the
Company or its subsidiaries is a defendant. Except as discussed below,
management believes that none of this litigation, if determined unfavorable to
the Company, would have a material adverse effect on the financial condition or
results of operations of the Company.
In June 1997, Sears Roebuck and Co. ("Sears") filed a multi-count complaint, in
the Circuit Court of Cook County, Illinois (Case No. 97C8586), against
Elastomerics and two other defendants alleging an unspecified amount of damages
in connection with the alleged premature deterioration of the Company's roofing
membrane installed on approximately 150 Sears stores. No trial date has been
established. The Company believes it has meritorious defenses to the claims and
intends to continue to defend the lawsuit vigorously. Management, however,
cannot determine the outcome of the lawsuit or estimate the range of loss, if
any, that may occur. An unfavorable resolution of the actions could have a
material adverse effect on the business, results of operations or financial
condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
No matters were submitted to a vote of securityholders during the fourth quarter
of Fiscal 1999.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The common stock of the Company was approved for listing and trading on the
Nasdaq National Market System under the stock symbol "JPST," effective January
30, 1998. Prior to that time, there was only sporadic trading of the common
stock in the over-the-counter market. The following table presents the high and
low sales prices for the common stock for each full quarterly period since the
common stock became eligible for trading on Nasdaq.
FISCAL 1998 HIGH LOW
----------- ---- ---
Second Quarter $13 3/8 $11 3/4
Third Quarter 14 1/2 11 1/2
Fourth Quarter 13 3 3/4
FISCAL 1999 HIGH LOW
----------- ---- ---
First Quarter $ 5 1/2 $ 4
Second Quarter 5 5/8 2 3/4
Third Quarter 4 3/4 3
Fourth Quarter 3 1/4 2 1/4
As of January 15, 2000, there were approximately 14 holders of record of the
Company's common stock.
The Company has never paid a dividend on its common stock. The Company presently
intends to retain earnings to fund working capital and for general corporate
purposes and therefore, does not intend to pay cash dividends on shares of the
common stock in the foreseeable future. The payment of future cash dividends, if
any, would be made only from assets legally available therefor, and would also
depend on the Company's financial condition, results of operations, current and
anticipated capital requirements, restrictions under the existing indebtedness
(including, without limitation, indebtedness evidenced by the Revolving Credit
Facility (as later defined) and
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refundings and refinancings thereof) and other factors deemed relevant by JPS's
Board of Directors. The Company's ability to pay cash dividends is dependent on
its earnings and cash flow. The subsidiaries that are borrowers under certain
credit agreements are restricted from paying cash dividends to JPS with respect
to their capital stock unless, among other things, JPS and its subsidiaries
satisfy certain specified financial tests.
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA.
(Dollars in Thousands Except Per Share Data)
The following table presents selected consolidated historical financial data for
the Company as of the dates and for the fiscal years or periods indicated. The
selected historical financial data for each of the two years ended October 28,
1995 and November 2, 1996, the period from November 3, 1996 to October 9, 1997,
the period from October 10, 1997 to November 1, 1997, and the years ended
October 31, 1998 and October 30, 1999 have been derived from the Consolidated
Financial Statements of the Company for such periods, which have been audited.
The presentation of certain previously reported amounts has been reclassified to
conform to the current presentation and to reflect discontinued operations of
the carpet business (sold on November 16, 1995), the yarn sales business (sold
on July 23, 1999), and the cotton commercial products business (sold on August
27, 1999), as discussed in Note 3 to the Consolidated Financial Statements of
the Company at Item 8 in this Form 10-K. The financial statements for the period
from October 10, 1997 to November 1, 1997 and for the years ended October 31,
1998 and October 30, 1999 reflect the Company's emergence from chapter 11 and
were prepared utilizing the principles of fresh start accounting contained in
the American Institute of Certified Public Accountants' Statement of Position
90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code." As a result of the implementation of fresh start accounting, certain of
the selected financial data for the period from October 10, 1997 to November 1,
1997 and for the years ended October 31, 1998 and October 30, 1999 are not
comparable to the selected financial data of prior periods. Therefore, selected
financial data for the "Reorganized Company" has been separately identified from
that of the "Predecessor Company." The following information should be read in
conjunction with the Consolidated Financial Statements of the Company and Notes
thereto, and "Management's Discussion and Analysis of Financial Conditions and
Results of Operations" presented elsewhere herein.
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Predecessor Company Reorganized Company
------------------------------------------- | ----------------------------------------------
Fiscal Year Fiscal Year Period from | Period from Fiscal Year Fiscal Year
Ended Ended November 3, | October 10, Ended Ended
October 28, November 2, 1996 to | 1997 to October 31, October 30,
1995 1996 October 9, | November 1, 1998 1999
INCOME STATEMENT DATA: (52 Weeks) (53 Weeks) 1997 | 1997 (52 Weeks) (52 Weeks)
----------- ----------- ----------- | ------------ ------------ ------------
|
Net sales $ 403,692 $ 391,845 $ 329,482 | $ 34,442 $ 336,512 $ 292,193
Cost of sales 343,694 343,387 281,079 | 26,477 283,535 246,996
----------- ----------- ----------- | ------------ ------------ ------------
Gross profit 59,998 48,458 48,403 | 7,965 52,977 45,197
Selling, general and |
administrative expenses 35,973 37,739 34,766 | 2,236 37,455 35,489
Other expense (income), net 6,248 2,498 622 | (11) (592) 323
Charges for plant closing, loss |
on sale of certain operations, |
write-down of certain long- |
lived assets and |
restructuring costs - 30,028 (574) | - 19,245 3,718
----------- ----------- ----------- | ------------ ------------ ------------
Operating profit (loss) 17,777 (21,807) 13,589 | 5,740 (3,131) 5,667
Valuation allowance on |
Gulistan securities - (4,242) (5,070) | - - -
Interest income 2,821 2,856 2,744 | 93 1,038 -
Interest expense (39,946) (40,510) (32,164) | (584) (8,592) (7,546)
----------- ----------- ----------- | ------------ ------------ ------------
Income (loss) before |
reorganization items, |
income taxes, discontinued |
operations and extraordinary |
items (19,348) (63,703) (20,901) | 5,249 (10,685) (1,879)
Reorganization items: |
Fair-value adjustments - - (4,651) | - - -
Professional fees and |
expenses - (2,255) (8,420) | - - -
----------- ----------- ----------- | ------------ ------------ ------------
Income (loss) before income |
taxes, discontinued |
operations and |
extraordinary items (19,348) (65,958) (33,972) | 5,249 (10,685) (1,879)
Income taxes (benefit) 1,200 (300) (8,822) | 2,007 765 569
----------- ----------- ----------- | ------------ ------------ ------------
Income (loss) before |
discontinued operations and |
extraordinary items (20,548) (65,658) (25,150) | 3,242 (11,450) (2,448)
Discontinued operations |
(net of taxes): |
Income (loss) from |
discontinued operations (4,195) (278) 1,193 | (525) 786 (898)
Loss on disposal of |
discontinued operations (26,241) (1,500) - | - - (18,096)
----------- ----------- ----------- | ------------ ------------ ------------
Income (loss) before |
extraordinary items (50,984) (67,436) (23,957) | 2,717 (10,664) (21,442)
Extraordinary gain on early |
extinguishment of debt 20,120 - 100,235 | - - -
----------- ----------- ----------- | ------------ ------------ ------------
|
Net income (loss) $ (30,864) $ (67,436) $ 76,278 | $ 2,717 $ (10,664) $ (21,442)
=========== =========== =========== | ============ ============ ============
|
Income (loss) applicable |
to common stock $ (34,695) $ (71,941) $ 72,451 | $ 2,717 $ (10,664) $ (21,442)
=========== =========== =========== | ============ ============ ============
|
Weighted average number |
of shares outstanding (1) 1,000,000 1,000,000 1,000,000 | 10,000,000 10,000,000 10,000,000
=========== =========== =========== | ============ ============ ============
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Predecessor Company Reorganized Company
------------------------------------------- | ----------------------------------------------
Fiscal Year Fiscal Year Period from | Period from Fiscal Year Fiscal Year
Ended Ended November 3, | October 10, Ended Ended
October 28, November 2, 1996 to | 1997 to October 31, October 30,
1995 1996 October 9, | November 1, 1998 1999
INCOME STATEMENT DATA: (52 Weeks) (53 Weeks) 1997 | 1997 (52 Weeks) (52 Weeks)
----------- ----------- ----------- | ------------ ------------ ------------
|
Basic and diluted income (loss) |
per common share: (1) |
Income (loss) before |
discontinued operations and |
extraordinary items $ (24.38) $ (70.16) $ (28.98) | $ 0.32 $ (1.15) $ (0.24)
Discontinued operations |
(net of taxes): |
Income (loss) from |
discontinued operations (4.20) (0.28) 1.19 | (0.05) 0.08 (0.09)
Loss on disposal of |
discontinued operations (26.24) (1.50) - | - - (1.81)
Extraordinary gain 20.12 - 100.24 | - - -
--------- --------- ---------- | -------- -------- --------
Net income (loss) $ (34.70) $ (71.94) $ 72.45 | $ 0.27 $ (1.07) $ (2.14)
========= ========= ========== | ======== ======== ========
BALANCE SHEET DATA: October 28, November 2, November 1, October 31, October 30,
1995 1996 1997 1998 1999
----------- ----------- ----------- ----------- -----------
Working capital (deficiency),
excluding net assets held
for sale $ 72,670 $(257,866)(2) $ 82,132 $ 90,516 $ 63,507
Total assets 412,822 335,927 322,381 267,663 226,856
Total long-term debt, less
current portion 327,668 4,226(2) 94,891 98,693 79,806
Senior redeemable preferred stock 28,171 32,676 - - -
Shareholders' equity (deficit) (37,045) (108,986) 126,047 109,528 94,653
(1) In accordance with the provisions of SFAS No. 128, the presentation of
earnings per share data for all periods presented has been restated to
conform to SFAS No. 128.
(2) All of the Company's senior credit facility revolving line of credit and
all of the Company's subordinated notes and debentures are classified as
current liabilities as of November 2, 1996.
(3) The following non-cash charges have been included in the determination of
income (loss) before reorganization items, income taxes, discontinued
operations and extraordinary items for the periods shown above:
Predecessor Company Reorganized Company
------------------------------------------- | ----------------------------------------------
Fiscal Year Fiscal Year Period from | Period from Fiscal Year Fiscal Year
Ended Ended November 3, | October 10, Ended Ended
October 28, November 2, 1996 to | 1997 to October 31, October 30,
1995 1996 October 9, | November 1, 1998 1999
(52 Weeks) (53 Weeks) 1997 | 1997 (52 Weeks) (52 Weeks)
----------- ----------- ----------- | ------------ ------------ ------------
|
Certain non-cash charges to |
income: |
Depreciation $ 17,613 $ 18,765 $ 14,765 | $ 569 $ 9,338 $ 9,112
Amortization of goodwill |
and other 769 787 738 | 125 2,077 1,725
Product liability charge 5,000 - - | - - -
Plant closing, loss on sale of |
certain operations, writedown |
of certain long-lived assets |
and restructuring costs - 17,554 - | - 19,245 3,718
Early retirement offer - 1,125 - | - - -
Valuation allowance on |
Gulistan securities - 4,242 5,070 | - - -
Other non-cash charges to income 371 769 1,092 | 127 533 844
Non-cash interest 8,818 10,088 7,303 | 20 329 414
--------- ---------- ----------- | ----------- ---------- -------
$ 32,571 $ 53,330 $ 28,968 | $ 841 $ 31,522 $15,813
========= ========== =========== | =========== ========== =======
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
On October 9, 1997, JPS consummated a Plan of Reorganization as discussed in
Item 1 herein under the caption "The 1997 Restructuring." The following
discussion should be read in conjunction with Item 1 and with the Consolidated
Financial Statements of the Company and the Notes thereto included in Item 8
herein. The presentation of certain previously reported amounts has been
reclassified to conform to the current presentation and to reflect discontinued
operations of the yarn sales business (sold on July 23, 1999) and the cotton
commercial products business (sold on August 27, 1999).
Pro-Forma (6) Reorganized Company (4)
(Unaudited) ----------------------------------
Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended
November 1, October 31, October 30,
1997 1998 1999
--------- --------- ---------
NET SALES
Elastomerics $ 87,872 $ 83,708 $ 80,035
Glass 81,260 79,323 83,453
Apparel 202,269 182,181 137,597
--------- --------- ---------
371,401 345,212 301,085
Less intersegment sales (1) (7,477) (8,700) (8,892)
--------- --------- ---------
Net sales $ 363,924 $ 336,512 $ 292,193
========= ========= =========
OPERATING PROFIT (2)
Elastomerics $ 9,316 $ 7,303 $ 6,608
Glass 9,994 5,686 3,014
Apparel 6,498 (16,120)(5) (3,955)
--------- --------- ---------
Operating profit (loss) 25,808 (3,131) 5,667
Interest income 1,192 1,038 -
Interest expense (8,676) (8,592) (7,546)
--------- --------- ---------
Income (loss) before reorganization
items, income taxes, discontinued
operations and extraordinary items $ 18,324 $ (10,685) $ (1,879)
========= ========= =========
OTHER DATA
EBITDA (3)
Elastomerics $ 11,374 $ 9,677 $ 9,859
Glass 11,980 7,988 6,734
Apparel 11,971 9,863 4,476
--------- --------- ---------
Total EBITDA $ 35,325 $ 27,528 $ 21,069
========= ========= =========
(1) Intersegment sales consist primarily of the transfer of certain scrim
products manufactured by the Glass segment to the Elastomerics segment.
All intersegment revenues and profits are eliminated in the accompanying
condensed consolidated financial statements.
(2) The operating profit (loss) of each business segment includes a
proportionate share of indirect corporate expenses. JPS's parent company
corporate group is responsible for finance, strategic planning, legal,
tax and regulatory affairs for the business segments. Such expense
consists primarily of salaries and employee benefits, professional fees
and amortization of reorganization costs in excess of amounts allocable
to identifiable assets.
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(3) EBITDA represents operating income plus depreciation, amortization and
certain other charges (credits) aggregating approximately ( $0.6
million), $19.2 million and $3.7 million in Fiscal 1997, 1998 and 1999,
respectively. These other charges (credits) represent the "plant closing,
loss on sale of certain operations, writedown of certain long-lived
assets and restructuring costs" as presented separately in the
Consolidated Financial Statements of the Company and Notes thereto, and
in Item 6, "Selected Historical Financial Data" presented elsewhere
herein. EBITDA as determined by the Company may not be comparable to the
EBITDA measure as reported by other companies. This presentation of
EBITDA is not intended to represent cash flow from operations as defined
by GAAP and should not be considered as an indicator of operating
performance or an alternative to cash flow or operating income (as
measured by GAAP) or as a measure of liquidity. In addition, this measure
does not represent funds available for discretionary use. It is included
herein to provide additional information with respect to ability of the
Company to meet its future debt service, capital expenditures and working
capital requirements.
(4) The financial statements subsequent to October 9, 1997 reflect the
Company's emergence from chapter 11 and were prepared utilizing the
principles of fresh start reporting contained in the American Institute
of Certified Public Accountants' Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code." As a
result of the implementation of fresh start accounting, the financial
information for the period from October 10, 1997 to November 1, 1997 and
the years ended October 31, 1998 and October 30, 1999 is not comparable
to the financial information of prior periods.
(5) The Fiscal 1998 operating profit for Apparel includes charges of
approximately $18.5 million for writedown of certain long-lived assets
including excess reorganization costs and approximately $0.7 million for
certain restructuring costs. Fiscal 1999 operating profit for Apparel
includes charges of approximately $3.7 million for certain restructuring
costs.
(6) The pro forma financial information was prepared for comparison purposes
and gives effect to the Plan of Reorganization as if the transactions had
occurred on November 3, 1996 (for Fiscal 1997). The unaudited pro forma
financial information was derived by adjusting the historical
consolidated financial statements of the Company for the effects of fresh
start accounting as described in Note 1 to the Consolidated Financial
Statements included in Item 8 herein. Such adjustments primarily relate
to decreased depreciation expense resulting from revaluation of the
Company's fixed assets, decreased interest expense resulting from
extinguishment of Old Debt Securities in the reorganization, increased
amortization resulting from reorganization value in excess of amounts
allocable to identifiable assets and the elimination of reorganization
items, and their related tax effects. This pro forma information is
provided for informational purposes only and should not be construed to
be indicative of the results of operations of the Company had the
transactions been consummated on the respective dates indicated and are
not intended to be predictive of the results of operations of the Company
for any future period.
RESULTS OF OPERATIONS
INTRODUCTION
The Company has repositioned itself from one that was largely textile oriented
to a diversified manufacturing and marketing company that is focused on a broad
array of industrial applications. This has been accomplished by successfully
streamlining the ongoing apparel fabric business and exiting three other textile
businesses, while intensifying its focus on the two businesses with growth
potential, JPS Glass and JPS Elastomerics. On March 2, 1999, the Company sold
its Boger City manufacturing plant, thereby exiting the home fashions woven
fabrics business. The Company closed its Angle manufacturing facility in the
third quarter and sold the remaining plant on September 3, 1999, thereby
streamlining the apparel business. On July 23, 1999, the Company sold its
Stanley manufacturing plant, thereby exiting its yarn sales segment. On August
27, 1999, the Company sold its
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Borden manufacturing plant, thereby exiting its cotton commercial products
segment. The yarn sales and cotton commercial products segments are reported in
the accompanying condensed consolidated financial statements as discontinued
operations. Additionally, Company-wide cost reduction measures were implemented
at the beginning of Fiscal 1999, which included the elimination of certain jobs
at estimated annualized savings of approximately $1.3 million. The Company
changed its name to JPS Industries, Inc. and is now focusing solely on improving
the performance and profitability of its remaining core businesses: JPS
Elastomerics, JPS Glass and JPS Apparel.
FISCAL 1999 COMPARED WITH FISCAL 1998
Consolidated net sales decreased $44.3 million, or 13.2%, from $336.5 million in
Fiscal 1998 to $292.2 million in Fiscal 1999. Consolidated operating income
(loss) increased $8.8 million from an operating loss of $3.1 million in Fiscal
1998 to an operating profit of $5.7 million in Fiscal 1999. Fiscal 1998 and
Fiscal 1999 results include charges for loss on writedown of certain long-lived
assets and certain restructuring charges of approximately $19.2 million and $3.7
million, respectively. Excluding such charges for comparative purposes,
operating profit in Fiscal 1999 was $9.4 million compared with $16.1 million in
Fiscal 1998.
JPS Elastomerics
Net sales in Fiscal 1999 in the Elastomerics segment, which includes single-ply
roofing and environmental membrane and extruded urethane products, decreased
$3.7 million, or 4.4%, from $83.7 million in Fiscal 1998 to $80.0 million in
Fiscal 1999. Sales of roofing products decreased $6.3 million in Fiscal 1999.
The domestic roofing market continues to be characterized by intense competition
driven by aggressive entrants into this market. The Company has addressed this
challenge by instituting aggressive pricing strategies, development of new
products slated to be commercially available in 2000, strengthening sales
management in key territories, and taking strong actions to reduce operating
costs. Sales of urethane products increased $1.7 million in Fiscal 1999 due to
higher demand for certain of the Company's extruded sheet products used in
security glass and athletic footwear.
Operating profit in Fiscal 1999 for the Elastomerics segment decreased $0.7
million from $7.3 million in Fiscal 1998 to $6.6 million in Fiscal 1999. The
decrease resulted principally from decreased roofing products sales, mitigated
to a large degree by increased sales and improved margins on urethane products,
implementation of cost reduction measures, and improved inventory management.
JPS Glass
Net sales in the Glass segment, which includes substrates constructed of
synthetics and fiberglass for lamination, insulation and filtration
applications, increased $4.2 million, or 5.3%, from $79.3 million in Fiscal
1998 to $83.5 million in Fiscal 1999. The electronics industry represents the
largest customer base for the Company's fiberglass products. In Fiscal 1998,
global consumer demand for electronic products did not meet expectations and,
combined with other factors, including the weakness in Asian economies, led to a
slowdown in demand for certain fiberglass fabrics used in the manufacture of
electrical circuit boards. To counteract these factors, the Company took a
number of actions to broaden its customer base in electrical substrates and
increased its market share in building products. In Fiscal 1998, the Company
completed its capacity expansion and modernization program allowing the Company
to gain market share. These actions led to improved sales in Fiscal 1999
compared with Fiscal 1998. The Company has also taken strong actions to reduce
costs, improve manufacturing productivity and improve the quality of its
products and services.
Operating profit in Fiscal 1999 for the Glass segment decreased $2.7 million
from $5.7 million in Fiscal 1998 to $3.0 million in Fiscal 1999 resulting from
continued pricing pressures involving electrical substrates and the impact of
production curtailments to reduce inventories to targeted levels.
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JPS Apparel
Net sales in the Apparel segment, which include unfinished woven apparel fabrics
primarily for women's wear, decreased $44.6 million, or 24.5%, from $182.2
million in Fiscal 1998 to $137.6 million in Fiscal 1999. Apparel fabrics are
produced primarily from yarns consisting chiefly of rayon, acetate and Tencel(R)
fibers. Market conditions for these apparel fabrics weakened significantly
during Fiscal 1999. High levels of apparel imports negatively impacted the
demand for domestically produced fabrics. In response to these conditions, the
Company streamlined its apparel business through the closure and sale of its
Angle manufacturing facility in order to better match apparel production
capacity with market demand. In addition, the Company implemented significant
cost reduction plans and focused on dramatically reducing inventory levels.
Operating profit (loss) in Fiscal 1999 for the Apparel segment improved $12.1
million from an operating loss of $16.1 million in Fiscal 1998 to an operating
loss of $4.0 million in Fiscal 1999. Fiscal 1998 and Fiscal 1999 results
included charges of approximately $19.2 million and $3.7 million, respectively,
for writedown of certain long-lived assets and restructuring charges. Excluding
such charges for comparative purposes, operating loss was $0.3 million in Fiscal
1999 compared with operating profit of $3.1 million in Fiscal 1998. This
decrease is primarily attributable to the lower sales volume, lower unit prices
and the effects of production curtailment to reduce inventories to targeted
levels.
The determination to close the Angle facility, as discussed above, resulted in a
charge in Fiscal 1998 of approximately $4.3 million related principally to a
loss on impairment of the plant in accordance with Statement of Financial
Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This plant
closing was completed in the third quarter of Fiscal 1999. Accordingly, an
additional charge of approximately $0.9 million was recorded in Fiscal 1999
related principally to employee severance costs. The plant facility was sold in
Fiscal 1999 for approximately $0.2 million.
Other
Pursuant to the terms of an Asset Purchase Agreement dated as of January 11,
1999, as amended, between JPS Converter and Industrial Corp., a wholly-owned
subsidiary of JPS, and Belding Hausman, Incorporated, JPS Converter and
Industrial Corp. sold substantially all of the assets of its Boger City Plant
which was engaged primarily in the manufacture and sale of home fashion
textiles. This business accounted for sales of $30.9 million, $22.8 million and
$7.3 million in Fiscal 1997, 1998 and 1999, respectively. The consideration for
the sale consisted of approximately $7.9 million cash. The cash proceeds were
used by the Company to reduce outstanding borrowings under its Revolving Credit
Facility and an equipment loan. In accordance with SFAS No. 121, the results of
operations for Fiscal 1998 included a charge for writedowns of certain
long-lived assets of approximately $12.5 million for the excess of the carrying
value of the plant over its fair value and related reorganization value in
excess of amounts allocable to identifiable assets.
Additionally, in Fiscal 1998 and Fiscal 1999, the Company implemented cost
reduction measures which included, among other things, personnel reductions and
the idling of certain manufacturing equipment. The results of operations for
Fiscal 1998 and Fiscal 1999 include restructuring charges of approximately $2.4
million and $2.8 million, respectively.
Interest expense in Fiscal 1999 is consistent with the Fiscal 1998 amounts after
giving effect to the repayment of the Contingent Notes in Fiscal 1998. Long-term
debt was reduced by approximately $19.0 million in Fiscal 1999 with most of this
decrease occurring in the last half of the year. The impact of this reduction
was offset by higher weighted-average interest rates.
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21
In Fiscal 1999, the Company implemented a plan to exit its cotton commercial
products and yarn sales segments. Accordingly, a charge for loss on disposal of
discontinued operations of approximately $18.1 million was recorded in Fiscal
1999. This charge consists primarily of the writedown of disposed plant assets
to net realizable value, the writedown of related reorganization value in excess
of amounts allocable to identifiable assets, employee severance costs and other
exit costs. On July 23, 1999, the Company completed the sale of its Stanley
plant, thereby exiting the yarn sales segment. This business accounted for sales
of $20.3 million, $19.0 million and $11.0 million in Fiscal 1997, 1998 and 1999,
respectively. Pursuant to an Asset Purchase Agreement dated July 2, 1999,
between C&I, a wholly-owned subsidiary of the Company, and Belding Hausman,
Incorporated, the consideration for the Stanley sale consisted of approximately
$2.0 million in cash. On August 27, 1999, the Company completed the sale of its
Borden plant, thereby exiting its cotton commercial products segment. This
business accounted for sales of $34.1 million, $33.7 million and $18.4 million
in Fiscal 1997, 1998 and 1999, respectively. Pursuant to an Asset Purchase
Agreement dated June 24, 1999, as amended, among JPS, C&I and Chiquola Fabrics,
LLC, the consideration for the Borden sale consisted of approximately $3.2
million cash and a $2.0 million subordinated promissory note which was recorded
at its estimated fair value. The proceeds from these sales were used to reduce
the Company's outstanding indebtedness under its Revolving Credit Facility and
an equipment loan.
FISCAL 1998 COMPARED WITH FISCAL 1997 (PRO FORMA)
The financial statements for the periods subsequent to the consummation of the
Plan of Reorganization were prepared under the principles of fresh start
reporting for companies emerging from a plan of reorganization and are not
comparable to prior periods. The Company believes that the most meaningful
comparisons to Fiscal 1998 are made using the pro forma financial information
for Fiscal 1997 and therefore this discussion addresses such pro forma
information.
Consolidated net sales decreased $27.4 million, or 7.5% from $363.9 million in
Fiscal 1997 to $336.5 million in Fiscal 1998. Operating income (loss) decreased
$28.9 million from a pro forma operating profit of $25.8 million in Fiscal 1997
to an operating loss of $3.1 million in Fiscal 1998. Fiscal 1998 results include
charges for loss on writedown of certain long-lived assets and certain
restructuring charges which totaled approximately $19.2 million. Excluding such
charges for comparative purposes, operating profit in Fiscal 1998 was $16.1
million compared with pro forma operating profit of $25.8 million in Fiscal
1997.
JPS Elastomerics
Net sales in the Elastomerics segment decreased $4.2 million, or 4.8%, from
$87.9 million in Fiscal 1997 to $83.7 million in Fiscal 1998. Net sales of
roofing membrane increased $0.3 million in Fiscal 1998 although the domestic
roofing market was characterized by intense competition and market consolidation
as growth rates receded from the double-digit levels of the mid 1990's. Sales of
urethane products decreased $3.5 million in Fiscal 1998, as a result of the
decline in demand for certain of the Company's products used in the manufacture
of athletic footwear. The athletic footwear industry was depressed in Fiscal
1998 as a result of shifting consumer preference in casual footwear. Sales of
liner membrane decreased $1.0 million in Fiscal 1998 due to declining unit
volume and unit selling prices.
Operating profit in Fiscal 1998 for the Elastomerics segment decreased $2.0
million from $9.3 million in Fiscal 1997 to $7.3 million in Fiscal 1998. This
decrease was attributable to pricing pressures in the domestic roofing segment
and the overall decline in sales volume.
JPS Glass
Net sales in the Glass segment decreased $2.0 million, or 2.5%, from $81.3
million in Fiscal 1997 to $79.3 million in Fiscal 1998. Global consumer demand
for electronic products did not meet expectations and, combined with the
weakness in Asian economies, created a slowdown in the demand for certain
fiberglass products used in the manufacture of circuit boards.
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22
Operating profit in Fiscal 1998 for the Glass segment decreased $4.3 million
from $10.0 million in Fiscal 1997 to $5.7 million in Fiscal 1998. This decrease
is directly attributable to the decline in unit sales volume and lower unit
prices.
JPS Apparel
Net sales of apparel fabrics decreased $20.1 million, or 9.9%, from $202.3
million in Fiscal 1997 to $182.2 million in Fiscal 1998. Market conditions for
apparel fabrics constructed primarily of filament yarn weakened during Fiscal
1998 producing unit volumes and average reduced selling prices well below
prior-year levels. Apparel imports and shifting consumer preference in women's
apparel reduced demand for domestically produced imported polyester fabrics for
acetate-rich fabrics. Sales of fabric constructed primarily of spun yarns
exceeded expectations for Fiscal 1998 increasing from $68.4 million in Fiscal
1997 to $72.8 million in Fiscal 1998.
Operating profit (loss) in Fiscal 1998 for the apparel fabrics group decreased
$22.6 million from pro forma operating profit of $6.5 million in Fiscal 1997 to
operating loss of $16.1 million in Fiscal 1998. Fiscal 1998 included charges of
approximately $19.2 million for certain restructuring costs and writedown of
certain long-lived assets. Excluding the effects of such charges, operating
profit decreased $3.4 million principally due to the lower sales volume, lower
unit prices and the effects of production curtailment to manage inventory
levels.
See the discussion under the caption "Fiscal 1999 Compared With Fiscal 1998" for
an explanation of the charges in Fiscal 1998 related to the closing of the Angle
facility, the sale of the Company's Boger City facility and certain
restructuring charges.
Other
Reorganization-related fees and expenses incurred in Fiscal 1997 totaled $8.4
million. Such fees and expenses, which represent fees and expenses of the
Company's financial advisor, legal counsel and other professionals associated
with the Company's 1997 financial restructuring and the financial advisor and
legal counsel for the holders of a substantial majority of the Company's old
outstanding bonds, have been excluded from the Fiscal 1997 pro forma financial
statements. No such expenses were incurred in Fiscal 1998.
Because of Gulistan's recurring losses during Fiscal 1997, the Company sold its
debt and equity securities of Gulistan Holdings, consisting of a $10.0 million
Promissory Note due in November 2001, $5.0 million of preferred stocks
redeemable in November 2005, and warrants to purchase up to 25% of the common
stock of Gulistan Holdings. Proceeds from the sale were $2.0 million. The
writedown of the carrying value of the Gulistan securities to $2.0 million was
reported in the period from November 3, 1996 to October 9, 1997. Such writedown,
which totaled $5.1 million in Fiscal 1997, has been excluded from the Fiscal
1997 pro forma financial statements.
As a result of the application of fresh start accounting as required by
Statement of Position 90-7 ("SOP 90-7") of the American Institute of Certified
Public Accountants, entitled "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code," a gain on early extinguishment of debt of
approximately $100.2 million and reorganization items of approximately $13.1
million were recorded as of the Effective Date. The reorganization items include
professional fees and expenses of approximately $8.4 million (discussed above)
and fair value adjustments of approximately $4.7 million. These items have been
excluded from the Fiscal 1997 pro forma financial information.
Interest income and expense in Fiscal 1998 are consistent with the pro forma
Fiscal 1997 amounts.
22
23
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). On October 9, 1997, JPS Elastomerics and C&I (the "Borrowing
Subsidiaries") and JPS entered into the Credit Facility Agreement (the "Credit
Agreement"), by and among the financial institutions party thereto, Citibank, as
agent, and Bank of America, as co-agent. The Credit Agreement 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) $133 million
and (b) a specified borrowing base (the "Borrowing Base"), which is based upon
eligible receivables, eligible inventory, and a specified dollar amount
(currently $37,000,000 (subject to reduction) based on fixed assets of the
Borrowing Subsidiaries), except that (i) no Borrowing Subsidiary may borrow an
amount greater than the Borrowing Base attributable to it (less any reserves as
specified in the Credit Agreement) and (ii) letters of credit may not exceed $20
million in the aggregate. The Credit Agreement contains restrictions on
investments, acquisitions and dividends unless, among other things, the Company
satisfies a specified pro forma fixed charge coverage ratio and maintains a
specified minimum availability under the Revolving Credit Facility for a stated
period of time, and no default exists under the Credit Agreement. The Credit
Agreement also restricts, among other things, indebtedness, liens, affiliate
transactions, operating leases, fundamental changes, and asset sales other than
the sale of up to $35 million of fixed assets, subject to the satisfaction of
certain conditions. The Credit Agreement contains financial covenants relating
to minimum levels of EBITDA, minimum interest coverage ratio, minimum fixed
charge coverage ratio, and maximum capital expenditures. The maturity date of
the Revolving Credit Facility is October 9, 2002. Subsequent to October 9, 1997,
the Credit Agreement has been amended to, among other things (i) modify the
financial covenants relating to minimum levels of EBITDA, minimum interest
coverage ratio, minimum fixed charge coverage ratio, and maximum capital
expenditures, (ii) modify the interest rate margin and unused commitment fees,
and (iii) provide additional reduction of the fixed asset portion of the
Borrowing Base. As of October 30, 1999, the Company was in compliance with these
restrictions and all financial covenants, as amended. All loans outstanding
under the Revolving Credit Facility, as amended, bear interest at either the
Eurodollar Rate (as defined in the Credit Agreement) or the Base Rate (as
defined in the Credit Agreement) plus an applicable margin (the "Applicable
Margin") based upon the Company's fixed charge coverage ratio (which margin will
not exceed 2.50% for Eurodollar Rate borrowings and 1.00% for Base Rate
borrowings). The weighted average interest rate at October 30, 1999 is
approximately 7.8%. The Company pays a fee of .25% per annum and a letter of
credit fee equal to the Applicable Margin for Eurodollar Rate borrowings.
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. As of October 30, 1999, unused and outstanding letters of credit
totaled $1,525,000. The outstanding letters of credit reduce the funds available
under the Revolving Credit Facility. At October 30, 1999, the Company had
approximately $22.6 million available for borrowing under the Revolving Credit
Facility.
Net cash provided by operations decreased by approximately $2.4 million in
Fiscal 1999 compared with Fiscal 1998 primarily due to lower operational
activity resulting from the disposal of certain businesses in Fiscal 1999.
Working capital at October 30, 1999 was approximately $64.0 million compared
with $100.2 million at October 31, 1998. The Fiscal 1998 amounts included
certain assets held for sale. In addition, Fiscal 1999 reflects substantial
decreases in accounts receivable and inventories resulting from lower operating
activity and a focused effort on reducing inventory levels. Accounts receivable
decreased by approximately $7.0 million at October 30, 1999 compared with
October 31, 1998 due principally to a decrease in sales in Fiscal 1999 and the
timing of customer receipts. Inventories decreased by approximately $10.6
million in Fiscal 1999 as a result of the internal efforts to reduce inventory
levels. Accounts payable and accrued expenses decreased approximately $6.9
million in Fiscal 1999 principally due to lower operating activity in the later
part of the year.
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24
The principal non-operating uses of cash in Fiscal 1999 were for property, plant
and equipment expenditures of $5.5 million for upgrade of the Company's
manufacturing operations and the repayment of long-term debt of approximately
$19.0 million. During Fiscal 1999, the Company received approximately $13.1
million in proceeds from the sale of its Boger City, Stanley, Borden and Angle
facilities as discussed under the caption "Fiscal 1999 Compared With Fiscal
1998." Such funds were used to reduce the Company's outstanding indebtedness
under its Revolving Credit Facility and certain equipment loans. As of October
30, 1999, the Company had commitments of $0.5 million for capital expenditures.
The Company anticipates making capital expenditures in Fiscal 2000 of
approximately $5.0 million and expects such amounts to be funded by cash from
operations, bank and other equipment financing sources.
On August 31, 1998, the Company reduced its long-term debt and related
investments by repaying all of the approximately $34.0 million in principal
amount of JPS Capital's Contingent Notes.
In Fiscal 1998, the Company entered into a seven-year lease agreement
(classified as capital lease) for certain machinery and equipment. The total
cost of the assets to be covered by the lease is limited to approximately $5.0
million. The total cost of assets under lease at October 30, 1999 was
approximately $5.0 million. The lease provides for an early buyout option at the
end of six years and includes purchase and renewal options at fair market value
at the end of the lease term.
Based upon the Company's ability to generate working capital through its
operations and its Revolving Credit Facility, the Company believes that it has
the financial resources necessary to pay its capital obligations and implement
its business plan for at least Fiscal 2000.
INFLATION AND TAX MATTERS
The Company is subject to the effects of changing prices. It has generally been
able to pass along inflationary increases in its costs by increasing the prices
for its products; however, market conditions sometimes preclude this practice.
For Fiscal 1999, the Company recorded a tax expense of $0.6 million even though
the Company had losses from continuing operations. The expense resulted from the
impact of non-deductible items, principally the amortization of excess
reorganization value and from state income taxes arising in jurisdictions where
separate returns are filed. As a result of valuation allowances, no benefit was
recorded on the loss from discontinued operations. The Company had approximately
$53.0 million of regular Federal net operating loss carryforwards as of October
30, 1999. As described below, a portion of these losses are subject to
limitations on usage as a result of the ownership change that occurred under the
Plan of Reorganization. Additional limitations could occur should the Company
undergo another ownership change, as determined under the Internal Revenue Code
of 1986, as amended (the "Code").
For the Fiscal Year Ended October 31, 1998, the Company recorded a tax expense
of $0.8 million. A tax expense was recorded even though the Company had current
year losses. This expense was due to the nondeductibility of certain expenses
for tax purposes and the recording of an additional valuation allowance on the
Company's deferred tax assets. The nondeductible items consist primarily of
reorganization value in excess of amounts allocable to identifiable assets. The
additional valuation allowance was provided based on management's assessment of
the ability to recognize the net deferred tax assets. See Note 8 to the
Consolidated Financial Statements for additional information.
For the period from October 10, 1997 to November 1, 1997, the Company recorded a
tax expense of $2.0 million. The tax expense for the period ending November 1,
1997 includes the utilization of a portion of the deferred tax asset, which was
recorded as of the Effective Date of the Plan of Reorganization of the Company.
The effective tax rate exceeds the statutory federal income tax rate due to the
impact of items not deductible for federal income tax purposes and because of
state income taxes.
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25
The Company recorded a tax benefit for the period ending October 9, 1997 of
approximately $8.8 million. This consists of a benefit from the implementation
of the Plan of Reorganization, net of state taxes on subsidiary operations that
could not be offset by operating loss carryovers or current year losses of JPS
or its subsidiaries. See Note 8 to the Consolidated Financial Statements for
additional information.
The Code provides that there are no taxes payable on gains such as the
extraordinary gain on early extinguishment of debt that was realized on the
reorganization of the Company in the period from November 3, 1996 to October 9,
1997. However, the Company was required under provisions of the Code to reduce
certain net operating loss carryforwards and certain other tax attributes as a
result of such gain. Beginning net operating loss carryovers were reduced by
approximately $64.0 million. In addition, alternative minimum tax credit
carryovers were reduced by approximately $0.7 million. As a result of valuation
allowances on these assets, there was no tax expense attributable to such
reductions. In addition to attribute reduction, any remaining net operating loss
carryforwards and certain other tax attributes are subject to the limitations
imposed by Section 382 of the Code. The effect of these limitations was to limit
the utilization of the approximately $20.0 million of the current net operating
loss carryovers and certain other attributes to an annual amount of
approximately $6.6 million (subject to certain adjustments).
YEAR 2000 COMPLIANCE
Description of Year 2000 Issue
As a result of the existence of computer programs and chips embedded in process
control equipment that use two digits rather than four to define the applicable
year, a concern commonly known as "Year 2000" has arisen globally. Computer
programs and equipment having time-sensitive software or imbedded processors may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in system failures or miscalculations causing disruptions of
operations, such as production shutdowns, or a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
Mission-critical applications which could be impacted include purchasing and
inventory management, production control, general ledger accounting, billing,
payroll, and disbursements.
The Company's Plan
In Fiscal 1997, the Company conducted a comprehensive review of its computer
systems to identify those systems that could be affected by the Year 2000 issue.
Since that date, the Company developed, implemented and completed its plan to
address the Year 2000 issue. Task teams led by senior executives identified six
project phases including (i) inventory of systems and process exposure, (ii)
risk assessment and prioritization, (iii) remediation of non-compliant systems,
(iv) testing and development of compliant systems, (v) maintenance once
compliance is achieved, and (vi) contingency planning.
Remediation involved repair of existing systems and equipment and, in some
cases, complete replacement with purchased systems and equipment that are Year
2000 compliant. Replaced and modified systems have been subjected to rigorous
testing in a non-production environment in parallel with production data and,
once deployed, are continually monitored for compliance. Activities to maintain
such compliance included monitoring of reprogrammed systems once back in
production, internal and third party audits of critical systems, vendor
compliance certifications, and testing of contingency plans. Management also
reviewed production equipment used in its operations and performed a written
survey of its critical equipment vendors in an attempt to certify that the
systems imbedded in sophisticated production equipment are Year 2000 compliant.
In addition, all new equipment purchases were, and continue to be, screened for
Year 2000 compliance.
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26
Contingency plans were developed, tested and implemented as necessary over the
year-end cutover. The contingency plans addressed (i) the development of a
contingency planning framework, including common approaches and criteria, (ii)
clear assignment of accountability for executing the contingency planning
framework, (iii) monitoring of results, and (iv) testing and validation.
The Company corresponded and met with critical vendors and service providers to
discern their Year 2000 compliance status and testing procedures. Most of these
vendors and service providers supply raw materials and equipment to the Company.
All responses were received and followed up as necessary.
The Company has completed all of the aforementioned phases for all critical IT
and process systems, and, as of this date, there have been no failures of IT or
process systems causing significant disruptions of Company business. Further, we
are aware of no third party failures that have significantly impacted Company
systems or processes. It is possible, however, that additional problems may
manifest themselves in the next several months, particularly any related to the
February 29th leap year day. To preserve compliance of remediated and tested
systems, testing of IT and process systems will continue through March 2000.
Costs Associated with Year 2000 Compliance
The incremental cost of addressing the Year 2000 issue has been substantially
absorbed in the normal budget for improvement in management information systems
and by normal costs for administrative and technical employees. The Company,
however, retains contract programmers to work on discrete projects and will
continue this practice into the foreseeable future. The incremental cost of
addressing the Year 2000 issue is estimated at $130,000, substantially all of
which has been spent as of December 31, 1999. Most of these expenditures have
been for remediation or replacement of existing systems. At this time,
management believes that the final cost of Year 2000 modifications will not
materially exceed this amount. There can be no assurances, however, that these
estimates will not change. Specific factors that could cause material cost
increases include, but are not limited to, additional problems that may surface
in the next year and any remaining impacts from problems with systems and
processes of third parties, of which we are currently unaware.
Risks Presented by Year 2000 Issues
There can be no assurance given that any or all of the Company's systems are or
will continue to be Year 2000 compliant. Despite its best efforts, a failure by
the Company to have resolved a material Year 2000 issue could result in an
interruption in, or failure of, normal business operations and could materially
and adversely affect the Company's financial condition. In addition, due to the
uncertainties inherent in the Year 2000 problem, the Company cannot insure that
its most important vendors, customers and service providers will continue to be
Year 2000 compliant. The failure of critical third parties to correct all Year
2000 problems could materially and adversely affect the Company's operations and
financial condition, even resulting in an interruption in normal business
operations. However, as a result of the activities described above, and our
experience to date, management believes that the Year 2000 issue will not pose
significant operational problems for the Company's computer or process systems.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires companies to record
derivatives on the balance sheet as assets or liabilities, measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
would be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. SFAS No. 133 will be effective for the Company
in Fiscal 2000. Management of the Company has not yet evaluated the effects of
this statement on the Company's financial position, results of operations or
cash flows.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate risk. The Company has exposure to interest rate changes primarily
relating to interest rate changes under its Revolving Credit Facility. The
Company's Revolving Credit Facility bears interest at rates which vary with
changes in (i) the London Interbank Offered Rate (LIBOR) or (ii) a rate of
interest announced publicly by Citibank in New York, New York. The Company does
not speculate on the future direction of interest rates. As of October 30, 1999,
approximately $75.4 million of the Company's debt bore interest at variable
rates. The Company believes that the effect, if any, of reasonably possible
near-term changes in interest rates on the Company's consolidated financial
position, results of operations or cash flows would not be significant.
Raw material price risk. A portion of the Company's raw materials are staple
goods that are affected by raw material pricing and are, therefore, subject to
price volatility caused by weather, production problems, delivery difficulties,
and other factors which are outside the control of the Company. In most cases,
essential raw materials are available from several sources. For several raw
materials, however, branded goods or other circumstances may prevent such
diversification and an interruption of the supply of these raw materials could
have a significant impact on the Company's ability to produce certain products.
The Company has established long-term relationships with key suppliers and may
enter into purchase contracts or commitments of one year or less for certain raw
materials. Such agreements generally include a pricing schedule for the period
covered by the contract or commitment. The Company believes that any changes in
raw material pricing, which cannot be adjusted for by changes in its product
pricing or other strategies, would not be significant.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
JPS Industries, Inc.
We have audited the accompanying consolidated balance sheets of JPS Industries,
Inc. (formerly JPS Textile Group, Inc.) and subsidiaries (the "Company") as of
October 30, 1999 and October 31, 1998, and the related statements of operations,
shareholders' equity, and cash flows for the years then ended and for the period
from October 10, 1997 to November 1, 1997 (Reorganized Company consolidated
operations), and the consolidated statements of operations, senior redeemable
preferred stock and shareholders' equity (deficit) and of cash flows for the
period from November 3, 1996 to October 9, 1997 (Predecessor Company
consolidated operations). Our audits also included the financial statement
schedule listed in the index at page S-1. These financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1 to the consolidated financial statements, on September 9,
1997, the Bankruptcy Court entered an order confirming the Company's plan of
reorganization, which became effective after the close of business on October 9,
1997. The accompanying consolidated financial statements subsequent to October
9, 1997 were prepared in conformity with AICPA Statement of Position 90-7,
"Financial Reporting for Entities in Reorganization Under the Bankruptcy Code."
Accordingly, the Reorganized Company is a new entity with assets, liabilities,
and a capital structure having carrying values not comparable with prior periods
as described in Noten1.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at October 30, 1999 and
October 31, 1998, and the results of its operations and its cash flows for the
years then ended and the period from October 10, 1997 to November 1, 1997
(Reorganized Company) and for the period from November 3, 1996 to October 9,
1997 (Predecessor Company) in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
December 3, 1999
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JPS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
October 31, October 30,
1998 1999
-------- --------
ASSETS (Note 6)
CURRENT ASSETS:
Cash $ 1,549 $ 1,343
Accounts receivable, less allowance of $1,565
in 1998 and 1999 62,556 55,529
Inventories (Notes 2 and 5) 46,836 36,250
Net assets of discontinued operations (Note 4) 14,575 -
Prepaid expenses and other (Note 5) 4,101 4,711
Net assets held for sale (Note 4) 9,653 504
-------- --------
Total current assets 139,270 98,337
PROPERTY, PLANT AND EQUIPMENT, net
(Notes 2 and 5) 88,720 85,792
REORGANIZATION VALUE IN EXCESS
OF AMOUNTS ALLOCABLE TO IDENTIFIABLE
ASSETS, less accumulated amortization of
$2,438 in 1998 and $3,566 in 1999 (Notes 1, 2, and 4) 36,532 31,066
OTHER ASSETS (Note 5) 3,141 11,661
-------- --------
Total assets $267,663 $226,856
======== ========
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October 31, October 30,
1998 1999
---------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 19,890 $ 17,064
Accrued interest 1,055 865
Accrued salaries, benefits and withholdings
(Note 9) 6,835 6,438
Other accrued expenses (Notes 5 and 9) 10,274 8,984
Current portion of long-term debt (Note 6) 1,047 975
--------- ---------
Total current liabilities 39,101 34,326
LONG-TERM DEBT (Note 6) 98,693 79,806
OTHER LONG-TERM LIABILITIES
(Notes 5, 9 and 10) 20,341 18,071
--------- ---------
Total liabilities 158,135 132,203
--------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 6 and 9)
SHAREHOLDERS' EQUITY (Note 7):
Common stock, $.01 par value; authorized -
22,000,000 shares; outstanding - 10,000,000
shares in 1998 and 1999 100 100
Additional paid-in capital 123,230 123,942
Accumulated other comprehensive loss (Note 10) (5,855) -
Accumulated deficit (7,947) (29,389)
--------- ---------
Total shareholders' equity 109,528 94,653
--------- ---------
Total liabilities and shareholders' equity $ 267,663 $ 226,856
========= =========
See notes to consolidated financial statements.
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JPS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
Predecessor |
Company | Reorganized Company
----------- | ---------------------------------------------------
Period from | Period from Fiscal Fiscal
November 3, | October 10, Year Year
1996 to | 1997 to Ended Ended
October 9, | November 1, October 31, October 30,
1997 | 1997 1998 1999
--------- | -------- --------- ---------
|
Net sales $ 329,482 | $ 34,442 $ 336,512 $ 292,193
Cost of sales 281,079 | 26,477 283,535 246,996
--------- | -------- --------- ---------
Gross profit 48,403 | 7,965 52,977 45,197
Selling, general and administrative |
expenses (Note 9) 34,766 | 2,236 37,455 35,489
Other expense (income), net (Note 9) 622 | (11) (592) 323
Charges for plant closing, loss on sale |
of certain operations, writedown of |
certain long-lived assets and |
restructuring costs |
(Notes 2 and 4) (574) | - 19,245 3,718
--------- | -------- --------- ---------
Operating profit (loss) 13,589 | 5,740 (3,131) 5,667
Valuation allowance on Gulista| |
securities (Note 3) (5,070) | - - -
Interest income 2,744 | 93 1,038 -
Interest expense (Note 6) (32,164) | (584) (8,592) (7,546)
--------- | -------- --------- ---------
Income (loss) before reorganization |
items, income taxes, discontinued |
operations and extraordinary items (20,901) | 5,249 (10,685) (1,879)
Reorganization items (Note 1): |
Fair-value adjustments (4,651) | - - -
Professional fees and expenses (8,420) | - - -
--------- | -------- --------- ---------
|
|
Income (loss) before income taxes, |
discontinued operations and |
extraordinary items (33,972) | 5,249 (10,685) (1,879)
Provision (benefit) for income taxes |
(Note 8) (8,822) | 2,007 765 569
--------- | -------- --------- ---------
Income (loss) before discontinued |
operations and extraordinary items (25,150) | 3,242 (11,450) (2,448)
Discontinued operations (net of taxes) (Note 3): |
Income (loss) from discontinued operations 1,193 | (525) 786 (898)
Loss on disposal of discontinued |
operations - | - - (18,096)
--------- | -------- --------- ---------
Income (loss) before extraordinary items (23,957) | 2,717 (10,664) (21,442)
Extraordinary gain on early extinguishment |
of debt, $0 taxes (Notes 1 and 6) 100,235 | - - -
--------- | -------- --------- ---------
Net income (loss) 76,278 | 2,717 (10,664) (21,442)
Senior redeemable preferred stock in-kind |
dividends and discount accretion 3,827 | - - -
--------- | -------- --------- ---------
Income (loss) applicable to common stock 72,451 | 2,717 (10,664) (21,442)
Other comprehensive income (net of tax): |
Minimum pension liability adjustments - | - (5,855) 5,855
--------- | -------- --------- ---------
Comprehensive income (loss) $ 72,451 | $ 2,717 $ (16,519) $ (15,587)
========= | ======== ========= =========
31
32
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
Predecessor |
Company | Reorganized Company
----------- | -------------------------------------------------------
Period from | Period from Fiscal Fiscal
November 3, | October 10, Year Year
1996 to | 1997 to Ended Ended
October 9, | November 1, October 31, October 30,
1997 | 1997 1998 1999
----------- | ------------- -------------- ---------------
|
Weighted average number of common |
shares outstanding 1,000,000 | 10,000,000 10,000,000 10,000,000
============= | ============== ============== ==============
Basic and diluted income (loss) per |
common share: |
Income (loss) before discontinued |
operations and extraordinary items $ (28.98) | $ 0.32 $ (1.15) $ (0.24)
Discontinued operations (net of taxes): |
Income (loss) from discontinued operations 1.19 | (0.05) 0.08 (0.09)
Loss on disposal of discontinued |
operations - | - - (1.81)
Extraordinary gain 100.24 | - - -
------------- | -------------- -------------- --------------
Net income (loss) $ 72.45 | $ 0.27 $ (1.07) $ (2.14)
============= | ============== ============== ==============
See notes to consolidated financial statements.
32
33
JPS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SENIOR REDEEMABLE PREFERRED STOCK
AND SHAREHOLDERS' EQUITY (DEFICIT)
(In Thousands)
Shareholders' Equity (Deficit)
-------------------------------------------------------------------------
Senior Accumulated
Redeemable Junior Additional Other
Preferred Common Preferred Paid-In Comprehensive Accumulated
Stock Stock Stock Capital Loss Deficit
Predecessor Company ---------- ---------- ---------- --------- ------------- -------------
- -------------------
Balance - November 2, 1996 $ 32,676 $ 10 $ 250 $ 25,108 $ 0 $(134,354)
Net income for the period from
November 3, 1996 to
October 9, 1997 76,278
Preferred stock-in-kind dividends
and discount accretion (Note 7) 3,827 (3,827)
Fresh start adjustments (Note 1) (36,503) 90 (250) 101,949 58,076
---------- ---------- --------- -------- ----------- ---------
Reorganized Company
- --------------------
Balance - October 9, 1997 0 100 0 123,230 0 0
Net income for the period from
October 10, 1997 to November 1,
1997 2,717
---------- ---------- ---------- -------- ----------- ---------
Balance - November 1, 1997 0 100 0 123,230 0 2,717
Additional minimum pension liability
adjustment (5,855)
Net loss for 52 weeks (10,664)
---------- ---------- ---------- -------- ----------- ----------
Balance - October 31, 1998 0 100 0 123,230 (5,855) (7,947)
Additional paid in capital 712
Additional minimum pension liability
adjustment 5,855
Net loss for 52 weeks (21,442)
---------- ---------- --------- -------- ----------- ---------
Balance - October 30, 1999 $ 0 $ 100 $ 0 $123,942 $ 0 $ (29,389)
========== ========== ========= ======== =========== ==========
See notes to consolidated financial statements.
33
34
JPS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Predecessor |
Company | Reorganized Company
----------- | --------------------------------------------------
Period from | Period from Fiscal Fiscal
November 3, | October 10, Year Year
1996 to | 1997 to Ended Ended
October 9, | November 1, October 31, October 30,
1997 | 1997 1998 1999
--------- | ----------- ----------- -----------
|
CASH FLOWS FRO |
OPERATING ACTIVITIES |
Net income (loss) $ 76,278 | $ 2,717 $(10,664) $(21,442)
--------- | -------- -------- --------
Adjustments to reconcile net income |
(loss) to net cash provided by (used in) |
operating activities: |
Extraordinary gain on |
early extinguishment of debt (100,235) | - - -
Charges for plant closing, loss on sale |
of certain operations, writedown of |
certain long-lived assets and |
restructuring costs (574) | - 19,245 3,718
Loss (income) from discontinued |
operations (1,193) | 525 (786) 898
Loss on disposal of |
discontinued operations - | - - 18,096
Depreciation and amortization, except amounts |
included in interest expense 15,503 | 694 11,415 10,837
Interest accretion and debt |
issuance cost amortization 7,303 | 20 329 414
Reorganization charges 5,581 | - - -
Tax benefit from reduction |
of valuation allowance (9,745) | - - -
Deferred income tax |
provision (benefit) - | 1,256 (817) 284
Valuation allowance on |
Gulistan securities 5,070 | - - -
Other, net (434) | (749) (1,805) (2,451)
Changes in assets and liabilities: |
Accounts receivable 10,599 | (15,002) 11,620 7,027
Inventories (6,920) | 9,664 (9,884) 10,586
Prepaid expenses and other assets (18,565) | 816 (123) (9,096)
Accounts payable 1,243 | (1,599) (1,419) (2,826)
Accrued expenses and other liabilities 15,432 | 650 (2,777) (4,147)
--------- | -------- -------- --------
Total adjustments (76,935) | (3,725) 24,998 33,340
--------- | -------- -------- --------
Net cash provided by (used in) |
operating activities (657) | (1,008) 14,334 11,898
--------- | -------- -------- --------
34
35
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Predecessor |
Company | Reorganized Company
----------- | ------------------------------------------------
Period from | Period from Fiscal Fiscal
November 3, | October 10, Year Year
1996 to | 1997 to Ended Ended
October 9, | November 1, October 31, October 30,
1997 | 1997 1998 1999
----------- | ------------ ----------- -----------
|
CASH FLOWS FROM |
INVESTING ACTIVITIES |
Property and equipment additions (13,692) | (1,537) (21,079) (5,490)
Proceeds from disposal of |
discontinued operations, net - | - - 4,658
Proceeds from disposal of certain other |
operations 988 | - - 8,491
Proceeds from sale of long-term |
investments 49,500 | - 35,382
Purchase of investments (33,500) | - - -
-------- | ------- -------- --------
Net cash provided by (used in) |
investing activities 3,296 | (1,537) 14,303 7,659
-------- | ------- -------- --------
|
CASH FLOWS FROM |
FINANCING ACTIVITIES |
Financing costs incurred (1,465) | (66) (146) (731)
Revolving credit facility |
borrowings (repayments), net 3,361 | 3,245 1,849 (18,700)
Repayment of other |
long-term debt (2,655) | (86) (32,679) (332)
-------- | ------- -------- --------
Net cash provided by (used in) |
financing activities (759) | 3,093 (30,976) (19,763)
-------- | ------- -------- --------
|
NET INCREASE (DECREASE) |
IN CASH 1,880 | 548 (2,339) (206)
CASH AT BEGINNING OF PERIOD 1,460 | 3,340 3,888 1,549
-------- | ------- -------- --------
CASH AT END OF PERIOD $ 3,340 | $ 3,888 $ 1,549 $ 1,343
======== | ======= ======== ========
|
SUPPLEMENTAL INFORMATION |
ON CASH FLOWS FROM |
CONTINUING OPERATIONS: |
Interest paid $ 7,944 | $ 24 $ 7,629 $ 7,323
Income taxes paid (received), net (46) | (8) 1,044 570
Non-cash financing activities: |
Capital lease obligation - | - 3,519 1,307
See notes to consolidated financial statements.
35
36
JPS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Effective June 24, 1999, JPS Textile Group, Inc. changed its name to
JPS Industries, Inc. to reflect its changing strategic direction.
Unless the context otherwise requires, the terms "JPS" and the
"Company" as used in these Consolidated Financial Statements mean JPS
Industries, Inc. and JPS Industries, Inc. together with its
subsidiaries, respectively.
The 1997 Restructuring - In 1996, JPS and JPS Capital Corp., a
wholly-owned subsidiary of JPS ("JPS Capital") commenced negotiations
with an unofficial committee (the "Unofficial Bondholder Committee")
comprised of institutions that owned, or represented holders that
beneficially owned, approximately 60% of the 10.85% Senior Subordinated
Discount Notes due June 1, 1999 (the "10.85% Notes"), the 10.25% Senior
Subordinated Notes due June 1, 1999 (the "10.25% Notes"), and the 7%
Subordinated Debentures (the "7% Notes") (together with the 10.85%
Notes and the 10.25% Notes, the "Old Debt Securities"). On May 15,
1997, the parties reached an agreement in principle on the terms of a
restructuring to be accomplished under chapter 11 of the Bankruptcy
Code which culminated in a Joint Plan of Reorganization (as amended the
"Plan of Reorganization") proposed by JPS and JPS Capital under 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 390,719 shares of 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.
The Plan of Reorganization was accounted for pursuant to Statement of
Position 90-7 ("SOP 90-7") of the American Institute of Certified
Public Accountants entitled "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code." The accompanying
consolidated financial statements reflect the use of "fresh start"
reporting as required by SOP 90-7, in which assets and liabilities were
adjusted to their fair values and resulted in the creation of a new
reporting entity (the "Company" or the "Reorganized Company") with no
retained earnings or accumulated deficit as of October 9, 1997 (the
"Effective Date"). Accordingly, the consolidated financial statements
for the periods prior to October 9, 1997 (the "Predecessor Company")
are not comparable to consolidated financial statements presented
subsequent to October 9, 1997. A black line has been drawn on the
accompanying consolidated financial statements and notes thereto to
distinguish between the Reorganized Company and Predecessor Company
balances.
The total reorganization value assigned to the Company's assets was
determined, by independent valuation, by calculating projected cash
flows before debt service requirements, for a three-year period, plus
an estimated terminal value of the Company (calculated using a multiple
of projected EBITDA), each discounted back to its present value using a
discount rate of 10% (estimating the after-tax weighted average cost of
capital). The above calculations resulted in an estimated
reorganization value attributable to the common stock of approximately
$123.3 million of which the Excess Reorganization Value was
approximately $45.9 million.
36
37
As a result of the restructuring and the application of fresh start
accounting as required by SOP 90-7, a gain on early extinguishment of
debt of approximately $100.2 million and reorganization items of
approximately $13.1 million were recorded in the Predecessor Company
period ending October 9, 1997.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements
include JPS Industries, Inc. and its direct subsidiaries, all of which
are wholly owned. Significant intercompany transactions and accounts
have been eliminated.
Use of Estimates - 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 amounts of revenues and expenses during the reporting period.
The Company's most significant financial statement estimates include
the estimate of the allowance for doubtful accounts, reserve for
self-insurance liabilities, and the reserve for roofing products sold
under warranties, including those sold by former divisions of J.P.
Stevens & Co., Inc. ("Predecessor Stevens Divisions") (discussed in
Note 9). Management determines its estimate of the allowance for
doubtful accounts considering a number of factors, including historical
experience, aging of the accounts and the current creditworthiness of
its customers. The Company self-insures, with various insured stop-loss
limitations, its health claims and certain workers' compensation and
general liability claims. Management determines its estimate of the
reserve for self-insurance considering a number of factors, including
historical experience and third party claims administrator and
actuarial assessment of the liabilities for reported claims and claims
incurred but not reported. Management determines its estimate of the
reserve for roofing products sold under warranties by reviewing factors
such as expected future claims by geographic region and roofing
compound applied; expected costs to repair and 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. Management believes that its estimates provided in the
financial statements, including those for the above-described items,
are reasonable and adequate. However, actual results could differ from
those estimates.
Inventories - Inventories are stated at the lower of cost or market.
Cost, which includes labor, material and factory overhead, is
determined on the first-in, first-out basis.
Property, Plant and Equipment - As a result of the adoption of fresh
start accounting as described in Note 1, property, plant and equipment
was adjusted to estimated fair value as of October 9, 1997 and
historical accumulated depreciation was eliminated. Property, plant and
equipment is recorded at cost and depreciation is recorded using the
straight-line method for financial reporting purposes. The estimated
useful lives used in the computation of depreciation are as follows:
Land improvements 10 to 45 years
Buildings and improvements 25 to 45 years
Machinery and equipment 3 to 15 years
Furniture, fixtures and other 5 to 10 years
The Company assesses its long-lived assets for impairment whenever
facts and circumstances indicate that the carrying amount may not be
fully recoverable. To analyze recoverability, the Company projects
future cash flows, undiscounted and before interest, over the remaining
life of such assets. If these projected cash flows are less than the
carrying amount, an impairment would be recognized, resulting in a
writedown of assets with a corresponding charge to earnings. The
impairment loss is measured based upon the difference between the
carrying amount and the fair value of the assets.
37
38
Capital Leases - Assets under capital leases are amortized in
accordance with the Company's normal depreciation policy and the charge
to earnings is included in depreciation expense in the accompanying
consolidated financial statements.
Reorganization Value in Excess of Amounts Allocable to Identifiable
Assets - Reorganization value in excess of amounts allocable to
identifiable assets results from the application of "fresh start"
reporting, as discussed in Note 1, which requires the Predecessor
Company's unidentified intangibles, net of amortization, to be reduced
to zero and a new amount to be recorded equaling the excess of the fair
value of the Company over the fair value allocated to its identifiable
assets. This excess is classified as reorganization value in excess of
amounts allocable to identifiable assets and is being amortized over a
20-year period. In Fiscal 1998 and 1999, the Company wrote off
approximately $6.9 million and $3.7 million, respectively, of the
reorganization value in excess of amounts allocable to identifiable
assets in relation to the plant sales and plant closure discussed in
Notes 3 and 4.
The Company assesses reorganization value in excess of amounts
allocable to identifiable assets for impairment whenever facts and
circumstances indicate that the carrying amount may not be fully
recoverable. To analyze recoverability, the Company projects future
cash flows, undiscounted and before interest, over the remaining life
of the excess reorganization value. If these projected cash flows are
less than the carrying amount of the excess reorganization value, an
impairment would be recognized, resulting in a writedown of excess
reorganization value with a corresponding charge to earnings. The
impairment loss is measured based upon the difference between the
carrying amount of the excess reorganization value and the undiscounted
future cash flows before interest.
Debt Issuance Costs - Costs incurred in securing and issuing long-term
debt are deferred and amortized over the terms of the related debt in
amounts which approximate the interest method of amortization.
Product Warranties - On certain of its products, the Company provides a
warranty against defects in materials and workmanship under separately
priced extended warranty contracts generally for a period of 10 to 15
years. Revenue from such extended warranty contracts is deferred and
recognized as income on a straight-line basis over the contract period.
The cost of servicing such product warranties is charged to expense as
incurred.
Pension and Postretirement Benefits - The Company accounts for pension
and other postretirement benefits using the principles of SFAS No. 87,
88 and 106. Such standards require that the projected future costs of
providing pension and other postretirement benefits be recognized as
expense as employees render service. Effective November 1, 1998, the
Company adopted SFAS No. 132, "Employers' Disclosures About Pension and
Other Postretirement Benefits - an Amendment of FASB Statements No. 87,
88 and 106." SFAS No. 132 revises disclosures about pension and other
postretirement benefit plans, but it does not change the measurement or
recognition of those plans and therefore does not impact the Company's
financial position, results of operations or cash flows. Prior year
disclosures have been reclassified to reflect the impact of adopting
SFAS No. 132. See Note 10 for a further description of the accounting
for pension and other postretirement benefits.
Postemployment Benefits - The Company accounts for postemployment
benefits using the principles of SFAS No. 112, "Employers' Accounting
for Postemployment Benefits." SFAS No. 112 requires that the cost of
benefits provided to former or inactive employees after employment but
before retirement be recognized on the accrual basis of accounting. See
Note 10 for a further description of the accounting for postemployment
benefits.
38
39
Fair Value of Financial Instruments - The carrying amounts of all
financial instruments approximate their estimated fair values in the
accompanying Balance Sheets. The carrying amounts of cash, accounts
receivable, accounts payable, and accrued expenses approximate fair
value because of the short maturity of these items. The carrying value
of financial instruments such as debt and notes receivable approximates
fair value because interest rates on these instruments change with
market rates.
Revenue Recognition - The Company recognizes revenue from product sales
when it has shipped the goods or ownership has been transferred to the
customer for goods to be held for future shipment at the customer's
request.
Advertising Costs - The Company defers advertising related costs until
the advertising is first run in magazines or other publications or in
the case of brochures, until the brochures are printed and available
for distribution. Advertising costs expensed were approximately
$1,947,000 and $122,000 in the period from November 3, 1996 to October
9, 1997 and the period from October 10, 1997 to November 1, 1997,
respectively, $1,581,000 in Fiscal 1998 and $1,956,000 in Fiscal 1999.
Income Taxes - The Company accounts for income taxes using the
principles of SFAS No. 109, "Accounting for Income Taxes." Under SFAS
No. 109, deferred taxes represent the future income tax effect of
temporary differences between the book and tax bases of the Company's
assets and liabilities, assuming they will be realized and settled at
the amount reported in the Company's financial statements.
Comprehensive Income - Effective November 1, 1998, the Company adopted
SFAS No. 130, "Reporting Comprehensive Income," which establishes
standards for reporting and display of changes in equity during a
period from transactions and other events from nonowner sources. The
statement requires certain items, such as minimum pension liability
adjustments, unrealized gains or losses on available for sale
securities, and foreign currency translation adjustments, to be
included in other comprehensive income. Prior year information has been
reclassified to reflect the impact of adopting SFAS No. 130. In Fiscal
1998, the Company had other comprehensive loss comprised of an
additional minimum pension liability. This liability was not required
at October 30, 1999. Accordingly, this amount was credited in Fiscal
1999 as other comprehensive income.
Earnings Per Share - In 1997, the Financial Accounting Standards Board
(FASB) issued SFAS No. 128, "Earnings Per Share." SFAS No. 128 replaced
the previously required primary and fully diluted earnings per share
with basic and diluted earnings per share. Basic earnings per share is
computed using the weighted average number of common shares. Diluted
earnings per share is computed using the weighted average number of
common shares and potentially dilutive common shares outstanding during
the period. Potentially dilutive common shares consist primarily of
stock options and warrants. In the period from October 10, 1997 to
November 1, 1997 and the years ended October 31, 1998 and October 30,
1999, the inclusion of additional shares assuming the exercise of stock
options and warrants are antidilutive. Therefore, basic and diluted
earnings per share are the same. All earnings per share amounts for all
periods have been presented, and where necessary, restated to conform
to SFAS No. 128 requirements.
Cash Flows - For purposes of reporting cash flows, cash includes cash
on hand and in banks. The Company has no investments that are deemed to
be cash equivalents.
Segment Reporting - Effective in Fiscal 1999, the Company adopted SFAS
No. 131, "Disclosures About Segments of an Enterprise and Related
Information," which requires publicly-held companies to report
financial and other information about key revenue-producing segments of
the enterprise for which such information is available by the chief
operating decision maker in allocating resources and assessing
performance. Prior year disclosures have been reclassified to conform
to the current segment reporting presentation. See Note 11 for further
discussion regarding segment reporting. The adoption of SFAS No. 131
had no significant impact on the Company's financial position, results
of operation or cash flow.
39
40
Effects of Recent Accounting Pronouncements - In June 1998, the FASB
issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement requires companies to record derivatives on
the balance sheet as assets or liabilities, measured at fair value.
Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. SFAS No. 133
will be effective for the Company in Fiscal 2000. Management of the
Company has not yet evaluated the effects of this statement on the
Company's financial position, results of operations or cash flows.
Fiscal Year - The Company's operations are based on a 52 or 53-week
fiscal year ending on the Saturday closest to October 31. The 1997
fiscal year ("Fiscal 1997") consisted of 52 weeks including the period
from November 3, 1996 to October 9, 1997 (Predecessor Company) and the
period from October 10, 1997 to November 1, 1997 (Reorganized Company).
Fiscal 1998 and 1999 each had 52 weeks.
Reclassifications - Certain Fiscal 1997 and 1998 amounts have been
reclassified to conform to the 1999 presentation.
3. SALE OF DISCONTINUED OPERATIONS
Yarn Sales Business - On July 23, 1999, the Company sold its Stanley
manufacturing plant, thereby exiting its yarn sales business. This
business accounted for sales of $20.3 million, $19.0 million and $11.0
million in Fiscal 1997, 1998 and 1999, respectively. Pursuant to an
Asset Purchase Agreement dated July 2, 1999, between C&I and Belding
Hausman, Incorporated, the consideration for the Stanley sale consisted
of approximately $2.0 million in cash. A charge for loss on disposal of
discontinued operations of approximately $9.2 million was recorded in
Fiscal 1999 related primarily to the writedown of disposed plant assets
to net realizable value, the writedown of related reorganization value
in excess of amounts allocable to identifiable assets, employee
severance costs, and other exit costs. The net proceeds from the sale
were used to reduce the Company's outstanding indebtedness on its
Revolving Credit Facility and an equipment loan.
Cotton Commercial Products Business - On August 27, 1999, the Company
sold its Borden manufacturing plant, thereby exiting its cotton
commercial products. This business generated sales of $34.1 million,
$33.7 million and $18.4 million in Fiscal 1997, 1998 and 1999,
respectively. Pursuant to an Asset Purchase Agreement dated June 24,
1999, as amended, between JPS, C&I and Chiquola Fabrics, LLC, the
consideration for the Borden sale consisted of approximately $3.2
million in cash and a $2.0 million subordinated promissory note which
was recorded at its estimated fair value. A charge for loss on disposal
of discontinued operations of approximately $8.9 million was recorded
in Fiscal 1999 related primarily to the writedown of disposed plant
assets to net realizable value, the writedown of related reorganization
value in excess of amounts allocable to identifiable assets, employee
severance costs, and other exit costs. The net proceeds from the sale
were used to reduce the Company's outstanding indebtedness on its
Revolving Credit Facility.
4. SALE OF CERTAIN OPERATIONS, PLANT CLOSING, WRITEDOWN OF CERTAIN
LONG-LIVED ASSETS AND RESTRUCTURING COSTS
On August 28, 1996, the Company implemented a plan to close its Dunean
plant in Greenville, South Carolina, as a result of management's
determination that a permanent decline in the Company's spun apparel
business had occurred. This plant had been operating on a reduced
schedule due to poor market conditions and financial projections
indicated it would continue to do so. As a result of the plant closing,
the Company recorded a loss of approximately $14.2 million in Fiscal
1996 related principally to the estimated loss on the impairment of
long-lived assets and employee severance costs. The plant closing was
completed on October 28, 1996 and the remaining plant facility was sold
on August 14, 1997 for approximately $1.2 million in cash.
40
41
On March 2, 1999, the Company completed the sale of its Boger City
manufacturing plant, thereby exiting the home fashions woven fabrics
business. This business accounted for sales of $30.9 million, $22.8
million and $7.3 million in Fiscal 1997, 1998 and 1999, respectively.
Pursuant to the terms of an Asset Purchase Agreement dated January 11,
1999, as amended, among JPS, Converter and Industrial Corp. ("C&I") and
Belding Hausman, Incorporated, C&I sold substantially all of the assets
of the Boger City plant located in Lincolnton, North Carolina. The
consideration for the sale consisted of approximately $7.9 million in
cash. A charge of approximately $12.5 million related principally to
the loss on impairment of long-lived assets, including related
reorganization value in excess of amounts allocable to identifiable
assets, was recorded in the results of operations in Fiscal 1998. The
net proceeds from the sale were used to reduce the Company's
outstanding indebtedness on its Revolving Credit Facility and an
equipment loan.
The Company closed its Angle manufacturing facility in the Fiscal 1999
third quarter and sold the remaining plant on September 3, 1999,
thereby streamlining the apparel business. The determination to close
the Angle plant resulted in a charge in Fiscal 1998 of approximately
$4.3 million related principally to a loss on impairment of the
long-lived assets including related reorganization value in excess of
amounts allocable to identifiable assets. The plant closing also
resulted in an additional charge in Fiscal 1999 of approximately $0.9
million related principally to employee severance costs. The proceeds
from the sale of the plant facility of approximately $0.2 million were
used to reduce the Company's outstanding indebtedness under its
Revolving Credit Facility.
Additionally, in Fiscal 1998 and 1999, the Company implemented cost
reduction measures which included, among other things, personnel
reductions and the idling of certain manufacturing equipment. The
results of operations for Fiscal 1998 includes a "charge for writedown
of certain long-lived assets" of approximately $1.7 million for the
impairment of idled equipment and a "charge for restructuring costs" of
approximately $0.7 million related to employee severance costs. The
results of operations for Fiscal 1999 include a "charge for writedown
of certain long-lived assets" of approximately $1.5 million for the
impairment of idled equipment and a "charge for restructuring costs" of
approximately $1.3 million related primarily to employee severance
costs. As of October 30, 1999, approximately $0.3 million of cash
restructuring costs remain unpaid.
5. BALANCE SHEET COMPONENTS
The components of certain balance sheet accounts are (in thousands):
October 31, October 30,
1998 1999
----------- -----------
Inventories:
Raw materials and supplies $ 9,449 $ 6,640
Work-in-process 14,618 11,809
Finished goods 22,769 17,801
----------- -----------
$ 46,836 $ 36,250
=========== ===========
Prepaid expenses and other:
Deferred current tax $ 1,509 $ 1,509
Prepaid insurance 883 687
Other 1,709 2,515
----------- -----------
$ 4,101 $ 4,711
=========== ===========
(Table continued on next page)
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42
(Table continued from previous page)
October 31, October 30,
1998 1999
----------- -----------
Property, plant and equipment, net:
Land and improvements $ 2,637 $ 2,697
Buildings and improvements 10,741 11,108
Machinery and equipment 79,999 85,667
Furniture, fixtures and other 1,320 1,545
----------- -----------
94,697 101,017
Less accumulated depreciation (7,410) (16,452)
------------ ------------
87,287 84,565
Construction in progress 1,433 1,227
----------- -----------
$ 88,720 $ 85,792
=========== ===========
Other noncurrent assets:
Deferred financing fees $ 1,255 $ 1,573
Prepaid pension costs - 8,486
Deferred income tax 1,886 1,602
----------- -----------
$ 3,141 $ 11,661
=========== ===========
Other accrued expenses:
Roofing product liability costs $ 2,000 $ 643
Taxes payable other than income taxes 1,125 1,123
Income taxes 2,813 2,487
Other 4,336 4,731
----------- -----------
$ 10,274 $ 8,984
=========== ===========
Other long-term liabilities:
Roofing product liability costs and
deferred warranty income $ 14,974 $ 15,691
Accrued pension costs 2,036 -
Accrued postretirement and
postemployment benefit plan liability 3,331 2,380
----------- -----------
$ 20,341 $ 18,071
=========== ===========
6. LONG-TERM DEBT
Long-term debt consists of (in thousands):
October 31, October 30,
1998 1999
------------ -----------
Senior credit facility, revolving line
of credit $ 94,095 $ 75,394
Equipment financing 2,249 1,125
Capital lease obligation 3,396 4,262
------------ -----------
Total 99,740 80,781
Less current portion (1,047) (975)
------------ -----------
Long-term portion $ 98,693 $ 79,806
============ ===========
Senior Credit Facility - On October 9, 1997, JPS Elastomerics and C&I
(the "Borrowing Subsidiaries") and JPS entered into the Credit Facility
Agreement (the "Credit Agreement"), by and among the financial
institutions party thereto, Citibank, as agent, and Bank of America, as
co-agent. The Credit Agreement 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) $133 million and
(b) a specified borrowing base (the "Borrowing Base"), which is based
upon eligible receivables, eligible inventory, and a specified
42
43
dollar amount (currently $37,000,000 (subject to reduction) based on
fixed assets of the Borrowing Subsidiaries), except that (i) no
Borrowing Subsidiary may borrow an amount greater than the Borrowing
Base attributable to it (less any reserves as specified in the Credit
Agreement) and (ii) letters of credit may not exceed $20 million in the
aggregate. The Credit Agreement contains restrictions on investments,
acquisitions and dividends unless, among other things, the Company
satisfies a specified pro forma fixed charge coverage ratio and
maintains a specified minimum availability under the Revolving Credit
Facility for a stated period of time, and no default exists under the
Credit Agreement. The Credit Agreement also restricts, among other
things, indebtedness, liens, affiliate transactions, operating leases,
fundamental changes, and asset sales other than the sale of up to $35
million of fixed assets, subject to the satisfaction of certain
conditions. The Credit Agreement contains financial covenants relating
to minimum levels of EBITDA, minimum interest coverage ratio, minimum
fixed charge coverage ratio, and maximum capital expenditures. The
maturity date of the Revolving Credit Facility is October 9, 2002.
Subsequent to October 9, 1997, the Credit Agreement has been amended
to, among other things (i) modify the financial covenants relating to
minimum levels of EBITDA, minimum interest coverage ratio, minimum
fixed charge coverage ratio, and maximum capital expenditures, (ii)
modify the interest rate margin and unused commitment fees, and (iii)
provide additional reduction of the fixed asset portion of the
Borrowing Base. As of October 30, 1999, the Company was in compliance
with these restrictions and all financial covenants, as amended. All
loans outstanding under the Revolving Credit Facility, as amended, bear
interest at either the Eurodollar Rate (as defined in the Credit
Agreement) or the Base Rate (as defined in the Credit Agreement) plus
an applicable margin (the "Applicable Margin") based upon the Company's
fixed charge coverage ratio (which margin will not exceed 2.50% for
Eurodollar Rate borrowings and 1.00% for Base Rate borrowings). The
weighted average interest rate at October 30, 1999 is approximately
7.8%. The Company pays a fee of .25% per annum and a letter of credit
fee equal to the Applicable Margin for Eurodollar Rate borrowings.
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. As of October 30, 1999, unused and outstanding
letters of credit totaled $1,525,000. The outstanding letters of credit
reduce the funds available under the Revolving Credit Facility. At
October 30, 1999, the Company had approximately $22.6 million available
for borrowing under the Revolving Credit Facility.
The loans and extensions of credit to the Borrowing Subsidiaries under
the Credit Agreement are guaranteed by JPS and its other existing
subsidiaries other than JPS Capital, and are secured by the assets of
JPS (excluding the stock of JPS Capital) and its existing subsidiaries
other than JPS Capital.
Equipment Financing - The Company has financed a portion of its
equipment purchases with loans from a finance company and certain
equipment vendors at fixed interest rates ranging from 7.6% to 9.7%.
Monthly principal payments are due in various amounts as determined by
the terms of the loans which have final maturity dates through December
2001.
Capital Lease Obligation - In Fiscal 1998, the Company entered into a
seven-year lease agreement (classified as a capital lease) for certain
machinery and equipment. The total costs of assets under lease at
October 30, 1999 was approximately $5.0 million. The lease provides for
an early buyout option at the end of six years and includes purchase
and renewal options at the end of the lease term. The lease has an
implied interest rate of approximately 7.4%. See Note 9 for obligations
under capital leases.
Substantially all of the Company's assets are pledged as collateral for
the Credit Agreement and the equipment financing.
43
44
Interest expense includes $7,303,000 in the period from November 3,
1996 to October 9, 1997, $19,000 in the period from October 10, 1997 to
November 1, 1997, $329,000 in Fiscal 1998, and $414,000 in Fiscal 1999
representing amortization of debt issuance expenses and accretion of
interest on the discounted notes and accrued product liability costs
(see Note 9).
Maturities - Aggregate principal maturities of all long-term debt,
exclusive of the capital lease obligation, are as follows (in
thousands):
Fiscal Year Ending
------------------
2000 $ 454
2001 439
2002 75,626
--------
$ 76,519
========
7. EQUITY SECURITIES AND SENIOR REDEEMABLE PREFERRED STOCK
Through the implementation of the Plan of Reorganization as of the
Effective Date, approximately $240 million in face amount of
outstanding debt securities were exchanged for, among other things, $14
million in cash, 9,924,623 shares of Common Stock, and approximately
$34.0 million in aggregate principal amount of Contingent Notes. The
Old Senior Preferred Stock, Old Junior Preferred Stock and Old Common
Stock were canceled. Warrants to purchase up to 5% of the Common Stock
exercisable until October 9, 2000 with an initial purchase price of
$98.76 per share were issued in respect of the Old Senior Preferred
Stock. Senior management received 75,377 shares of Common Stock on the
Effective Date in lieu of payment under their contractual retention
bonus arrangements.
Certain information on equity securities at October 31, 1998 and
October 30, 1999 is as follows:
Shares Issued and Outstanding
-----------------------------
Par Value October 31, October 30,
Per Share Authorized 1998 1999
--------- ---------- ------------ -------------
Common Stock .01 22,000,000 10,000,000 10,000,000
Until the Effective Date, the Old Senior Preferred Stock was
redeemable, prior to its maturity date of May 15, 2003, at 103% of the
liquidation preference of $100 per share. Dividends were cumulative and
calculated based on an annual rate of 6% of the liquidation preference.
Under the terms of various credit agreements, dividends had to be in
the form of additional shares until 1998. In connection with the 1991
restructuring, the Old Senior Preferred Stock was discounted to its
estimated net present value with the net discount of $23,351,000
reflected as an adjustment of additional paid-in capital.
The difference between the net carrying amount of the Old Senior
Preferred Stock and its mandatory value was amortized using the
interest method of amortization over the life of the shares by charges
to additional paid-in capital or, if available, by charges to retained
earnings.
1997 Incentive and Capital Accumulation Plan
As of the Effective Date, the Company adopted the 1997 Incentive and
Capital Accumulation Plan (the "Incentive Plan") which provides certain
key employees and non-employee directors of the Company the right to
acquire shares of Common Stock or monetary payments based on the value
of such shares.
44
45
Pursuant to the Incentive Plan, approximately 853,000 shares of Common
Stock were initially reserved for issuance to the participants in the
form of stock options, stock appreciation rights, stock awards,
performance awards, and stock units that may be granted by the
compensation committee comprised of certain members of the Company's
Board of Directors. On April 7, 1999, the Shareholders increased the
number of shares reserved for issuance from 853,485 to 1,353,485. The
Incentive Plan will terminate 10 years from the date of adoption.
On October 30, 1997, options to acquire approximately 569,000 shares of
the shares reserved pursuant to the Incentive Plan were granted to
senior management of the Company. These options included a combination
of time vesting options which vest solely on the lapse of time and
performance options which vest upon achievement of specified corporate
performance goals and the lapse of time. These options vest according
to specific vesting schedules as set forth in individual participant's
grant letters. In addition, on the Effective Date, each non-employee
director (except one, who waived his right to receive such options)
received options to purchase 25,000 shares of Common Stock. These
options vest equally in amounts of 5,000 shares per director, on the
Effective Date and the first, second, third and fourth anniversaries of
the Effective Date. On October 31, 1998, 94,009 options were canceled
due to the failure of the Company to meet its specified performance
goals for Fiscal 1998.
During Fiscal 1999, option grants were made to certain individuals upon
their appointment to executive offices within the Company. Total grants
in 1999, exclusive of repricing grants described below, were 595,000.
There were no exercises of options in Fiscal 1999. Options, other than
those connected with the repricing, totaling 171,665 were cancelled
during 1999 as a result of employees voluntarily terminating employment
with the Company or lapses in options following terminations where an
additional exercise period was allowed.
On May 12, 1999 the Compensation Committee of the Board of Directors
approved a plan to reprice stock options held by certain employees and
Directors. Effective on that date, 349,150 options with an exercise
price of $12.33 per share were repriced. The "repricing" is an
effective cancellation and re-issuance of affected options. The
repriced options were reissued at an exercise price of $4.375 per
share, the fair market value per share on the date of repricing. In
conjunction with the repricing, all repriced options of employees were
changed from a combination of performance and time vested options to
solely time-vested options. The repriced options are shown as a
separate cancellation and reissuance in the chart below. In Fiscal
1999, no compensation expense resulted from the repriced options.
A summary of the activity in the Company's stock options for the period
from the Effective Date to November 1, 1997 and the years ended October
31, 1998 and October 30, 1999 is presented below:
Weighted Average
Number of Shares Exercise Price
---------------- --------------
Options granted on the Effective Date 100,000 $ 12.33
Options granted during the period from the
Effective Date to November 1, 1997 568,990 12.33
Options exercised - -
Options canceled - -
--------- --------
Outstanding at November 1, 1997 668,990 12.33
Options granted - -
Options exercised - -
Options canceled (94,009) 12.33
--------- --------
(Table continued on next page)
45
46
(Table continued from previous page)
Weighted Average
Number of Shares Exercise Price
---------------- --------------
Outstanding at October 31, 1998 574,981 12.33
Options granted 595,000 3.29
Options exercised - -
Options canceled (171,665) 12.33
Options canceled - repriced (349,150) 12.33
Options granted - repriced 349,150 4.38
----------- --------
Outstanding at October 30, 1999 998,316 $ 4.162
=========== ========
Exercisable at October 30, 1999 436,996
===========
Exercisable at October 31, 1998 139,009
===========
Exercisable at November 1, 1997 20,000
===========
Weighted average remaining contractual life (years)
at October 30, 1999 9
===========
The Company applies the principles of APB Opinion 25 in accounting for
employee stock option plans. The time vesting options are fixed as to
the number of shares that may be acquired and the amount to be paid by
the employee. Under APB Opinion 25, the Company generally recognizes no
compensation expense with respect to such awards because the quoted
market price and the amount to be paid by the employee are the same on
the date of grant. In Fiscal 1999, the Company did recognize
compensation expense of approximately $0.7 million under APB Opinion 25
related to time vesting options. The Company's Chief Executive Officer
was granted 500,000 options on February 28, 1999. However, the
measurement date was April 7, 1999, the date the shareholders approved
an amendment to the Incentive Plan increasing the number of shares that
could be offered. The compensation expense was measured as the
difference in the market value of the Company's stock between the grant
date and the measurement date. This expense is being recognized over
the two-year vesting period.
Pro forma information regarding net income (loss) and earnings (loss)
per share is required by SFAS 123, "Accounting For Stock Based
Compensation." This information is required to be determined as if the
Company had accounted for its stock options under the fair value method
of that statement.
The fair value of options granted in the period from October 10, 1997
to November 1, 1997 and Fiscal 1999 reported below has been estimated
at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions:
Stock Option Plans
------------------
Fiscal Fiscal
1997 1999
---- ----
Option life (in years) 4.4 4.1
Risk-free interest rate .7% 5.2%
Stock price volatility .38 .50
Dividend yield - -
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47
The following is a summary of the per share weighted average fair value
of stock options granted in the periods listed below:
Period from
October 10, 1997 Fiscal
to November 1, 1997 1999
---------------------- ------
Options granted $4.88 $1.66
The Company applies APB Opinion No. 25 in accounting for its stock
option plan and, except as noted above, no compensation expense has
been recognized for the options in the accompanying consolidated
financial statements. Had the Company determined compensation expense
based on the fair value at the grant date for its options under SFAS
No. 123, the Company's net income (loss) and net earnings (loss) per
share would have been reduced to the amounts indicated below (in
thousands):
Period from
October 10, 1997 Fiscal Fiscal
to November 1, 1997 1998 1999
------------------- --------------- -----------
Net income (loss)
As reported $ 2,717 $ (10,664) $ (21,442)
Pro forma $ 2,647 $ (11,242) $ (22,304)
Net income (loss) per share
As reported $ 0.27 $ (1.07) $ (2.14)
Pro forma $ 0.26 $ (1.12) $ (2.23)
8. INCOME TAXES
The provision (benefit) for income taxes on continuing operations
included in the consolidated statements of operations consists of the
following (in thousands):
Predecessor |
Company | Reorganized Company
-------------- | -------------------------------------------------
Period from | Period from
November 3, | October 10,
1996 to | 1997 to
October 9, | November 1, Fiscal Fiscal
1997 | 1997 1998 1999
------------- | ----------- ------------ -----------
|
Current state provision (benefit) $ 923 | $ (17) $ 139 $ 285
Deferred federal provision (benefit) (6,080) | 1,714 440 75
Deferred state provision (benefit) (3,665) | 310 186 209
------------- | ----------- ------------ -----------
Provision (benefit) for income |
taxes $ (8,822) | $ 2,007 $ 765 $ 569
============= | =========== ============ ===========
There is no current provision for Federal income taxes.
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48
A reconciliation between income taxes at the 35% statutory Federal
income tax rate and the provision (benefit) for income taxes for the
period from November 3, 1996 to October 9, 1997, the period from
October 10, 1997 to November 1, 1997, Fiscal 1998 and Fiscal 1999 is as
follows (in thousands):
Predecessor |
Company | Reorganized Company
-------------- | ---------------------------------------------
Period from | Period from
November 3, | October 10,
1996 to | 1997 to
October 9, | November 1, Fiscal Fiscal
1997 | 1997 1998 1999
------------- | ----------- ------------ ---------
|
Income tax provision (benefit |
at Federal statutory rate $(11,473) | $1,653 $(3,740) $(658)
Increase (decrease) in income |
taxes arising from effect of: |
State and local income taxes (2,742) | 293 325 494
Non-deductible reorganization |
costs 2,947 | - - -
Amortization of and |
deductions for goodwill or |
excess reorganization value 312 | 57 3,138 638
Losses not resulting in tax |
benefits 8,158 | - - -
Change in valuation reserve (6,080) | - 939 -
Other 56 | 4 103 95
-------- | ------ ------- -----
Provision (benefit) for income |
taxes $ (8,822) | $2,007 $ 765 $ 569
======== | ====== ======= =====
Presented below are the elements which comprise deferred tax assets and
liabilities (in thousands):
October 31, October 30,
1998 1999
----------- -----------
Gross deferred assets:
Estimated allowance for doubtful accounts $ 306 $ 960
Excess of tax over financial statement basis of inventory 798 1,329
Accruals deductible for tax purposes when paid 2,202 1,305
Deferred compensation deductible for tax purposes when paid 323 615
Postretirement benefits deductible for tax purposes when paid 1,477 1,536
Pension liability deductible for tax purposes when paid 774 -
Miscellaneous - 28
Alternative minimum tax credit carryforward available 1,773 1,773
Deferred financial statement income recognized for tax purposes
when received 5,396 5,297
Excess of tax over financial statement carrying value of
investment in discontinued operation 982 638
Excess of tax basis of intangibles over financial statement basis 9,926 9,284
Net operating loss carryforward 11,813 21,815
Less valuation allowance (32,117) (30,470)
----------- -----------
Gross deferred assets 3,653 14,110
----------- -----------
(Table continued on next page)
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(Table continued from previous page)
October 31, October 30,
1998 1999
----------- -----------
Gross deferred liabilities:
Pension asset recognized for book purposes $ - $ (3,225)
Excess of financial statement over tax basis of property, plant,
and equipment (258) (7,774)
----------- -----------
Gross deferred liabilities (258) (10,999)
----------- -----------
Net deferred tax asset $ 3,395 $ 3,111
=========== ===========
Recognized in the accompanying consolidated balance sheets
as follows:
Prepaid expenses and other $ 1,509 $ 1,509
Other non-current assets 1,886 1,602
----------- -----------
$ 3,395 $ 3,111
=========== ===========
For the Fiscal Years Ended October 31, 1998 and October 30, 1999, the
Company recorded tax expense of approximately $0.8 and $0.6 million,
respectively. This expense is due to the fact that certain deductions,
principally the amortization of excess reorganization value, are not
allowed for tax purposes. The Company recorded a current state tax
expense of $0.1 million and $0.3 million in Fiscal 1998 and 1999,
respectively. The current state tax expense results from filing
separate tax returns in some jurisdictions and the inability to offset
profitable subsidiaries with losses from other subsidiaries. As a
result of a valuation allowance, no benefit was recorded on the
additional pension liability recorded as an adjustment to equity or
the loss from discontinued operations. This allowance was required due
to the financial accounting rules regarding benefit recognition when
the Company has, among other things, a history of recent losses.
For the period from October 10, 1997 to November 1, 1997, the Company
recorded a tax expense of $2.0 million. The tax expense for the period
ending November 1, 1997 includes the utilization of a portion of the
deferred tax asset, described below, which was recorded as of the
Effective Date of the Plan of Reorganization of the Company. The
effective tax rate exceeds the statutory federal income tax rate due
to the impact of items not deductible for federal income tax purposes
and because of state income taxes.
The Company recorded a tax benefit for the period from November 3,
1996 to October 9, 1997 of approximately $8.8 million. This consists
of a benefit from the implementation of the Plan of Reorganization net
of state taxes on subsidiary operations that could not be offset by
operating loss carryovers or current year losses of JPS or its
subsidiaries. The benefit arose as consummation of the Plan of
Reorganization substantially deleveraged JPS. The deferred tax asset
attributable to the net operating loss carryforwards was reduced as a
result of the reduction in net operating loss carryforwards that is
required for reorganizations such as that provided in the Plan of
Reorganization, and the reserve established against the deferred tax
assets that was required due to the operating history was also
significantly reduced. The reduction in reserves and reduction in
deferred tax liabilities during the period ended October 9, 1997
resulted in a deferred tax benefit of $9.7 million. The recording of
the tax benefit and the net deferred tax asset reflected the Company's
determination that it was more likely than not that these deferred tax
assets, net of the valuation allowance, would be realized based on
current income tax laws and expectations of future taxable income
stemming from operations or the reversal of deferred tax liabilities.
49
50
At October 30, 1999, the Company had regular federal net operating
loss carryforwards for tax purposes of approximately $53.0 million.
The net operating loss carryforwards expire in years 2003 through
2019. The Company also has federal alternative minimum tax net
operating loss carryforwards of approximately $62.0 million which
expire in 2004 through 2019. Alternative minimum tax credits can be
carried forward indefinitely and used as a credit against regular
federal taxes, subject to limitation. During 1997, the Company reduced
beginning net operating loss carryforwards by approximately $64.0
million due to the provisions of the Code requiring attribute
reduction in certain reorganizations, such as the Plan of
Reorganization. The Company was also required to reduce alternative
minimum tax credit carryforwards by approximately $737,000 as a result
of these provisions.
The Company's future ability to utilize a portion of its net operating
loss carryforwards is limited under the income tax laws as a result of
the change in the ownership of the Company's stock occurring as a part
of the reorganization. The effect of such an ownership change is to
limit the annual utilization of the net operating loss carryforwards
to an amount equal to the value of the Company immediately after the
time of the change (subject to certain adjustments) multiplied by the
Federal long-term tax exempt rate. 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.
Uncertainties surrounding income tax law changes, shifts in operations
between state taxing jurisdictions and future operating income levels
may, however, affect the ultimate realization of all or some portion
of these deferred income tax assets. In addition, a future change in
ownership could result in additional limitations on the ability of the
Company to utilize its net operating loss carryforwards. The Company
is required, under accounting guidelines, to reduce reorganization
value in excess of amounts allocable to identifiable assets by the
amount of any reduction in the valuation allowance established upon
completion of the Plan of Reorganization. The amount of valuation
allowance subject to such treatment was $28.4 million at October 30,
1999.
9. COMMITMENTS AND CONTINGENCIES
The Company leases office facilities, machinery and computer equipment
under noncancellable operating leases and, beginning in Fiscal 1998,
certain capital leases. Rent expense was approximately $5,178,000,
$399,000, $5,862,000 and $5,300,000 for the period from November 3,
1996 to October 9, 1997, the period from October 10, 1997 to November
1, 1997, Fiscal 1998, and Fiscal 1999, respectively.
Future minimum payments, by year and in the aggregate, under the
noncancellable capital and operating leases with terms of one year or
more consist of the following at October 30, 1999 (in thousands):
Capital Operating
Fiscal Year Ending Lease Leases
------------------ ----------- -----------
2000 $ 840 $ 3,424
2001 840 1,339
2002 840 391
2003 840 78
2004 1,638 -
Thereafter 380 -
---------- -----------
Total future minimum lease payments 5,378 $ 5,232
===========
Less: amount representing interest 1,116
----------
Present value of net minimum lease payments
(included in long-term debt - see Note 6) $ 4,262
==========
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51
The Company has planned expenditures of approximately $5.0 million for
property, plant and equipment additions in Fiscal 2000. At October 30,
1999, the Company had commitments for capital expenditures of
approximately $0.5 million.
The Company has provided for all estimated future costs associated with
certain roofing products sold by the Predecessor Stevens Division
operations. The liability for future costs associated with these
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. Based on warranties that were issued
on the roofs, the Company estimates that these roofing product claims
are substantially settled. Management updates its assessment of the
adequacy of the remaining reserve for these roofing products quarterly
and if it is deemed that an adjustment to the reserve is required, it
will be charged or credited to operations in the period in which such
determination is made. The Company charges the costs of settling these
roofing product claims as a reduction of the recorded liability balance
and, accordingly, such costs are not charged against the results of
operations. Costs associated with these product liability claims were
$1,815,000, $521,000, $1,053,000, and $377,000 for the period from
November 3, 1996 to October 9, 1997, the period from October 10, 1997
to November 1, 1997, Fiscal 1998 and Fiscal 1999, respectively.
Approximately $2.8 million and $2.4 million was accrued for these
estimated future costs at October 31, 1998 and October 30, 1999,
respectively.
The Company is exposed to a number of asserted and unasserted potential
claims encountered in the normal course of business. Except as
discussed below, management believes that none of this litigation, if
determined unfavorable to the Company, would have a material adverse
effect on the financial condition or results of operations of the
Company.
In June 1997, Sears Roebuck and Co. ("Sears") filed a multi-count
complaint against Elastomerics and two other defendants alleging an
unspecified amount of damages in connection with the alleged premature
deterioration of the Company's roofing membrane installed on
approximately 150 Sears stores. No trial date has been established. The
Company believes it has meritorious defenses to the claims and intends
to defend the lawsuit vigorously. Management, however, cannot determine
the outcome of the lawsuit or estimate the range of loss, if any, that
may occur. Accordingly, no provision has been made for any loss which
may result. An unfavorable resolution of the actions could have a
material adverse effect on the business, results of operations or
financial condition of the Company.
10. RETIREMENT PLANS
Defined Benefit Pension Plan - Substantially all of the Company's
employees are covered by a Company-sponsored defined benefit pension
plan. The plan also provides benefits to individuals employed by the
automotive businesses which were sold by the Company on June 28, 1994,
the carpet business sold on November 16, 1995, the rubber products
business sold on September 30, 1996, the home fashions woven fabrics
business sold on March 2, 1999, the yarn sales business sold on July
23, 1999, and the cotton commercial products business sold on August
27, 1999. The benefits of these former employees were "frozen" at the
respective dates of sale of the businesses. Accordingly, these former
employees will retain benefits earned through the respective disposal
dates; however, they will not accrue additional benefits. In addition,
the plan provides benefits to individuals employed by the Dunean plant
which was closed effective October 28, 1996, and the Angle plant which
was closed effective July 31, 1999. Benefits for employees who were
terminated as a result of the plant closing were also "frozen" as of
respective closure date and no additional benefits will accrue
subsequent to that date. The plan provides pension benefits that are
based on the employees' compensation during the last 10 years of
employment. The Company's policy is to fund the annual contribution
required by applicable regulations.
51
52
Assets of the pension plan are invested in an immunized bond portfolio
covering specific liabilities and in common and preferred stocks,
government and corporate bonds, real estate, and various short-term
investments. During Fiscal 1999, the pension plan also purchased
approximately 1.9 million shares of the Company's common stock in open
market and negotiated transactions. This common stock accounts for less
than 10% of the pension plan's total assets.
Components of net periodic pension cost include the following (in
thousands):
Predecessor |
Company | Reorganized Company
-------------- | ------------------------------------------------
Period from | Period from
November 3, | October 10,
1996 to | 1997 to
October 9, | November 1, Fiscal Fiscal
1997 | 1997 1998 1999
------------- | ----------- ------------ ------------
|
Components of net periodic |
pension cost: |
Service cost-benefits earned |
during the period $ 2,026 | $ 136 $ 2,239 $ 2,268
Interest cost on projected |
benefit obligation 6,683 | 449 7,505 7,321
Return on plan assets (7,184) | (483) (8,543) (9,198)
Net amortization and deferral 330 | - - -
Recognized actuarial loss - | - - 195
-------------- | ------------ ------------- -----------
Net periodic pension cost $ 1,855 | $ 102 $ 1,201 $ 586
============== | ============ ============= ===========
The weighted-average rates used in determining pension cost for the
plan are as follows:
Discount rate 7.80% 7.80% 6.75% 7.50%
Expected long-term rate of return
on plan assets 9.00% 9.00% 9.00% 9.00%
Rate of compensation increase Age-related Age-related Age-related Age-related
A reconciliation of the plan's projected benefit obligation, fair value
of plan assets, funding status, and other applicable information is as
follows (in thousands):
October 31, October 30,
1998 1999
--------- ---------
Change in benefit obligation:
Benefit obligation at beginning of year $ 96,299 $ 111,622
Service cost 2,239 2,269
Interest cost 7,505 7,322
Benefits paid (8,154) (8,957)
Actuarial (gain) or loss 13,733 (6,141)
--------- ---------
Benefit obligation at end of year 111,622 106,115
--------- ---------
Change in plan assets:
Fair value of plan assets at beginning of year 97,312 103,855
Actual return on plan assets 11,721 4,636
Employer contributions 2,976 5,254
Benefits paid (8,154) (8,957)
--------- ---------
Fair value of plan assets at end of year 103,855 104,788
--------- ---------
(Table continued on next page)
52
53
(Table continued from previous page)
October 31, October 30,
1998 1999
----------- ----------
Reconciliation of funded status:
Funded status $ (7,767) $(1,327)
Unrecognized actuarial loss 11,582 9,813
-------- -------
Prepaid benefit cost $ 3,815 $ 8,486
======== =======
Amounts recognized in the statement of financial position
consist of:
Prepaid benefit cost $ 8,486
Accrued benefit liability $ (2,037) -
Accrued benefit liability
Accumulated other comprehensive loss 5,852 -
-------- -------
Net amount recognized at year-end $ 3,815 $ 8,486
======== =======
Other comprehensive loss (income) attributable to change
in additional minimum liability recognition $ 5,852 $(5,852)
As of October 31, 1998, the Company reduced the weighted-average
discount rate used in determining the actuarial present value of the
projected benefit obligation from 7.8% to 6.75%, which more closely
approximated interest rates at that time on high-quality, long-term
obligations. The provisions of SFAS No. 87, "Employers' Accounting for
Pensions," required the Company to record an additional minimum pension
liability of approximately $5.9 million at October 31, 1998. The
liability represented the amount by which the accumulated benefit
obligation exceeded the sum of the fair market value of plan assets and
accrued amounts previously recorded. This amount was recorded as a
reduction to a separate component of shareholders' equity on the
accompanying Consolidated Balance Sheet as of October 31, 1998. As of
October 30, 1999, the Company increased the weighted-average discount
rate to 7.5% to reflect the current interest rate environment.
Accordingly, no additional minimum pension liability was required as of
October 30, 1999.
As a result of the application of fresh start accounting as described
in Note 1, all unamortized prior service costs and unrecognized gains
were immediately recognized as of October 9, 1997, and included in
reorganization items for the period then ended.
401(k) Savings Plan - The Company also has a savings, investment and
profit sharing plan available to employees meeting eligibility
requirements. The plan is a tax qualified plan under Section 401(k) of
the Internal Revenue Code. The Company makes a matching contribution of
25% of each participant's contribution with a maximum matching
contribution of 1-1/2% of the participant's base compensation. Company
contributions were approximately $523,000 in the period from November
3, 1996 to October 9, 1997, $47,000 in the period from October 10, 1997
to November 1, 1997, $598,000 in Fiscal 1998, and $516,000 in Fiscal
1999.
Postretirement Benefits - The Company has several unfunded
postretirement plans that provide certain health care and life
insurance benefits to eligible retirees. The plans are contributory,
with retiree contributions adjusted periodically, and contain
cost-sharing features such as deductibles and coinsurance. The
Company's life insurance plan provides benefits to both active
employees and retirees. Active employee contributions in excess of the
cost of providing active employee benefits are applied
53
54
to reduce the cost of retirees' life insurance benefits. The following
table sets forth the status of the Company's postretirement plans as
recorded in the accompanying Consolidated Financial Statements:
Net periodic postretirement benefit expense included the following
components (in thousands):
Predecessor |
Company | Reorganized Company
-------------- | -------------------------------------------------
Period from | Period from
November 3, | October 10,
1996 to | 1997 to
October 9, | November 1, Fiscal Fiscal
1997 | 1997 1998 1999
------------- | -------------- ------------- ------------
|
Service cost for benefits |
earned $ 5 | $ 6 $ 107 $ 143
Interest cost on APBO 229 | 16 267 294
Recognized actuarial loss - | - - 124
------------ | -------------- ------------- -----------
Net periodic postretirement |
cost $ 234 | $ 22 $ 374 $ 561
============ | =============== ============= ===========
The weighted-average rates used in determining postretirement medical
and life insurance costs are as follows:
Discount rate 7.8% 7.8% 6.75% 7.50%
A reconciliation of the postretirement medical and life insurance
plan's projected benefit obligation and funding status is as follows
(in thousands):
October 31, October 30,
1998 1999
----------- -----------
Change in benefit obligation:
Benefit obligation at beginning of year $ 3,599 $ 3,723
Service cost 107 143
Interest cost 267 294
Participant contributions 343 324
Benefits paid (806) (780)
Actuarial (gain) or loss 213 (442)
------- -------
Benefit obligation at end of year $ 3,723 $ 3,262
Reconciliation of funded status:
Funded status $(3,723) $(3,262)
Unrecognized actuarial (gain) or loss 452 (68)
------- -------
Net amount recognized at year-end $(3,271) $(3,330)
======= =======
As a result of the application of fresh start accounting as described
in Note 1, all unamortized gains were fully recognized as of October 9,
1997, and included in reorganization items for the period then ended.
Since the Company has capped its annual liability per person and all
future cost increases will be passed on to retirees, the annual rate of
increase in health care costs does not affect the postretirement
benefit obligation.
54
55
Postemployment Benefits - The Company provides certain benefits to
former or inactive employees after employment but before retirement. In
accordance with SFAS No. 112, these benefits are recognized on the
accrual basis of accounting. The liability for postemployment benefits
at October 31, 1998 and October 30, 1999 is included in other long-term
liabilities in the accompanying consolidated financial statements.
11. BUSINESS SEGMENTS
Effective in Fiscal 1999, the Company adopted SFAS No. 131. The
Company's reportable segments are Elastomerics, Glass and Apparel. The
reportable segments were determined using the Company's method of
internal reporting, which divides and analyzes the business by the
nature of the products manufactured and sold, the customer base,
manufacturing process, and method of distribution. The Elastomerics
segment principally manufactures and markets extruded products
including high performance roofing products, environmental
geomembranes, and various polyurethane products. The Glass segment
produces and markets specialty substrates mechanically formed from
fiberglass and other specialty yarns for a variety of applications such
as printed circuit boards, filtration, advanced composites, building
products, defense, and aerospace. The Apparel segment produces and
markets woven fabrics, principally cellulosic-based fibers, for use in
a broad range of consumer apparel products for use in the women's dress
and sportswear markets.
During the process of implementing SFAS No. 131, the Company identified
two other segments which met its criteria as reportable segments. These
two segments are the cotton commercial products segment and the yarn
sales segment. As discussed in Note 3, the Company has exited these
segments.
The Company evaluates the performance of its reportable segments and
allocates resources principally based on the segment's operating
profit, defined as earnings before interest and taxes. In the fourth
quarter of Fiscal 1999, the Company changed its presentation of
business segment information to include allocation of all indirect
corporate expenses to each business segment. Such allocation is based
on management's analysis of the costs attributable to each segment. All
periods presented have been restated to reflect the new presentation.
The following table presents certain information regarding the business
segments:
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56
Industry segment information (in thousands):
Predecessor |
Company | Reorganized Company
------------- | --------------------------------------------------
Period from | Period from Fiscal Fiscal
November 3, | October 10, Year Year
1996 to | 1997 to Ended Ended
October 9, | November 1, October 31, October 30,
1997 | 1997 1998 1999
------------- | ------------- ------------ ------------
|
Net sales: |
Elastomerics $ 80,456 | $ 7,416 $ 83,708 $ 80,035
Glass 73,333 | 7,926 79,323 83,453
Apparel 182,556 | 19,718 182,181 137,597
------------- | ------------- ------------ ------------
336,345 | 35,060 345,212 301,085
Less intersegment sales(1) (6,863) | (618) (8,700) (8,892)
------------- | ------------- ------------ ------------
Net sales $ 329,482 | $ 34,442 $ 336,512 $ 292,193
============= | ============= ============ ============
|
Operating profit (loss)(2) |
Elastomerics $ 8,290 | $ 845 $ 7,303 $ 6,608
Glass 7,395 | 1,744 5,686 3,014
Apparel (2,096) | 3,151 (16,120) (3,955)
------------- | ------------- ------------ ------------
Operating profit (loss) 13,589 | 5,740 (3,131) 5,667
Valuation allowance on Gulistan securities (5,070) | - - -
Interest income 2,744 | 93 1,038 -
Interest expense (32,164) | (584) (8,592) (7,546)
------------- | ------------- ------------ ------------
Income (loss) before reorganization items, |
income taxes, discontinued operations |
and extraordinary items $ (20,901) | $ 5,249 $ (10,685) $ (1,879)
============= | ============= ============ ============
|
Depreciation and amortization expense: |
Elastomerics $ 1,818 | $ 126 $ 2,381 $ 2,614
Glass 2,562 | 150 2,297 3,054
Apparel 11,123 | 418 6,737 5,169
------------- | ------------- ------------ ------------
$ 15,503 | $ 694 $ 11,415 $ 10,837
============= | ============= ============ ============
Capital expenditures: |
Elastomerics $ 1,420 | $ 517 $ 5,442 $ 2,278
Glass 2,005 | 606 10,024 1,976
Apparel 10,267 | 414 5,613 1,236
------------- | ------------- ------------ ------------
$ 13,692 | $ 1,537 $ 21,079 $ 5,490
============= | ============= ============ ============
56
57
Reorganized Company
-----------------------------------------------
November 1, October 31, October 30,
1997 1998 1999
------------ ----------- -----------
Identifiable assets:
Elastomerics $ 61,553 $ 54,319 $ 55,673
Glass 59,209 63,071 61,975
Apparel 196,959 151,176 110,081
Eliminations (1,149) (903) (873)
------------ ----------- -----------
$ 316,572 $ 267,663 $ 226,856
============ =========== ===========
(1) Intersegment sales consist primarily of the transfer of certain scrim
products manufactured by the Glass segment to the Elastomerics segment.
All intersegment revenues and profits are eliminated in the
accompanying condensed consolidated financial statements.
(2) The operating profit (loss) of each business segment includes a
proportionate share of indirect corporate expenses. JPS's parent
company corporate group is responsible for finance, strategic planning,
legal, tax, and regulatory affairs for the business segments. Such
expense consists primarily of salaries and employee benefits,
professional fees, and amortization of reorganization value in excess
of amounts allocable to identifiable assets.
During Fiscal 1999, sales to Hargro Fabrics, Inc. accounted for
approximately 13% of the Company's consolidated net sales.
Unaudited interim financial data (in thousands except per share amounts):
The results for each quarter include all adjustments which are, in the opinion
of management, necessary for a fair presentation of the results for interim
periods. The consolidated financial results on an interim basis are not
necessarily indicative of future financial results on either an interim or
annual basis. Selected consolidated financial data for each quarter within
Fiscal 1998 and Fiscal 1999 are as follows:
Reorganized Company
-----------------------------------------------------------
First Second Third Fourth
Year Ended October 31, 1998: Quarter Quarter Quarter Quarter
-------- -------- -------- --------
Net sales $ 87,875 $ 86,524 $ 74,734 $ 87,379
Cost of sales 73,529 71,291 62,263 76,452
-------- -------- -------- --------
Gross profit 14,346 15,233 12,471 10,927
Selling, general and administrative expenses 9,876 9,300 8,944 9,335
Other expense (income), net (24) (33) 62 (597)
Charges for plant closing, loss on sale of certain
operations, writedown of certain long-lived
assets and restructuring costs - - - 19,245
-------- -------- -------- --------
Operating profit (loss) 4,494 5,966 3,465 (17,056)
Interest income 325 239 324 150
Interest expense (2,283) (2,095) (2,133) (2,081)
-------- -------- -------- --------
Income (loss) before income taxes
and discontinued operations 2,536 4,110 1,656 (18,987)
Provision (benefit) for income taxes 1,078 1,785 937 (3,035)
-------- -------- -------- --------
(Table continued on next page)
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58
(Table continued from previous page)
Reorganized Company
----------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
Income (loss) before discontinued operations $ 1,458 $ 2,325 $ 719 $(15,952)
Discontinued operations 234 549 218 (215)
-------- -------- -------- --------
Net income (loss) $ 1,692 $ 2,874 $ 937 $(16,167)
======== ======== ======== ========
Net income (loss) per common share $ 0.17 $ 0.29 $ 0.09 $ (1.62)
======== ======== ======== ========
Year Ended October 30, 1999:
Net sales $ 70,384 $ 72,285 $ 69,468 $ 80,056
Cost of sales 59,488 61,167 59,047 67,294
-------- -------- -------- --------
Gross profit 10,896 11,118 10,421 12,762
Selling, general and administrative expenses 8,897 9,830 8,002 8,760
Other expense (income), net (139) 233 (104) 333
Charges for plant closing, loss on sale of certain
operations, writedown of certain long-lived
assets and restructuring costs - 3,718 - -
-------- -------- -------- --------
Operating profit (loss) 2,138 (2,663) 2,523 3,669
Interest expense (1,890) (1,886) (1,878) (1,892)
-------- -------- -------- --------
Income (loss) before income taxes
and discontinued operations 248 (4,549) 645 1,777
Provision (benefit) for income taxes (145) (1,105) 947 872
-------- -------- -------- --------
Income (loss) before discontinued operations 393 (3,444) (302) 905
Discontinued operations (536) (22,841) 3,834 549
-------- -------- -------- --------
Net income (loss) $ (143) $(26,285) $ 3,532 $ 1,454
======== ======== ======== ========
Net income (loss) per common share $ (0.01) $ (2.63) $ 0.35 $ 0.15
======== ======== ======== ========
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59
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by Item 10 of Form 10-K with respect to identification
of directors and executive officers is incorporated by reference from the
information contained in the section captioned "Ratification of Directors" in
the Company's definitive Proxy Statement for the Annual Meeting of Stockholders
to be held February 29, 2000 (the "Proxy Statement"), a copy of which will be
filed with the Securities and Exchange Commission before the meeting date.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 of Form 10-K is incorporated by reference
from the information contained in the section captioned "Executive Compensation
and Other Matters" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT.
The information required by Item 12 of Form 10-K is incorporated by reference
from the information contained in the section captioned "Security Ownership of
Principal Stockholders and Management" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K.
(a) (1) The following financial statements are included in Item 8:
(i) Independent Auditors' Report.
(ii) Consolidated Balance Sheets as of October 30, 1999
and October 31, 1998. (iii) Consolidated Statements
of Operations for the fiscal years ended October 30,
1999 (Reorganized Company), October 31, 1998
(Reorganized Company), the periods from October 10,
1997 to November 1, 1997 (Reorganized Company), and
November 3, 1996 to October 9, 1997 (Predecessor
Company).
(iv) Consolidated Statements of Senior Redeemable
Preferred Stock and Shareholders' Equity (Deficit)
for the fiscal years ended October 30, 1999
(Reorganized Company), October 31, 1998 (Reorganized
Company), the periods from October 10, 1997 to
November 1, 1997 (Reorganized Company), and November
3, 1996 to October 9, 1997 (Predecessor Company).
(v) Consolidated Statements of Cash Flows for the fiscal
years ended October 30, 1999 (Reorganized Company),
October 31, 1998 (Reorganized Company), the periods
from October 10, 1997 to November 1, 1997
(Reorganized Company), and November 3, 1996 to
October 9, 1997 (Predecessor Company).
(vi) Notes to Consolidated Financial Statements.
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60
The registrant is primarily a holding company and all direct subsidiaries are
wholly owned.
(2) The financial statement schedule required by Item 8 is listed
on Index to Financial Statement Schedule, starting at page S-1
of this report.
(3) The exhibits required by Item 601 of Regulation S-K are listed
in the accompanying Index to Exhibits. Registrant will furnish
to any securityholder, upon written request; any exhibit
listed in the accompanying Index to Exhibits upon payment by
such securityholder of registrant's reasonable expenses in
furnishing any such exhibit.
(b) No reports on Form 8-K were filed during the quarter ended October 30,
1999.
(c) Reference is made to Item 14(a)(3) above.
(d) Reference is made to Item 14(a)(2) above.
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61
INDEX TO EXHIBITS
The following is a complete list of Exhibits filed as part of this report, which
are incorporated herein:
Exhibit
Number Description
- ------ -----------
2.1(i) Joint Plan of Reorganization for JPS Textile Group, Inc., a
Delaware corporation ("JPS"), proposed by JPS and JPS Capital
Corp., a Delaware corporation, pursuant to chapter 11 of title 11
United States Code (the "Bankruptcy Code"), dated August 1, 1997
(as amended, the "Plan").(K)
2.1(ii) Revised Technical and Conforming Amendment to the Plan, dated
September 4, 1997.(L)
3.1 Restated Certificate of Incorporation of JPS, filed with the
Secretary of State of the State of Delaware on October 9,
1997.(P)
3.2 Amended and Restated By-laws of JPS.(P)
3.3 Certificate of Incorporation of JPS Industries, Inc. (T)
4.1 Indenture, dated as of October 9, 1997 (the "Contingent Note
Indenture"), between JPS Capital Corp. ("Capital") and First
Trust National Association ("First Trust"), as Trustee, relating
to Capital's Contingent Notes (the "Contingent Notes").(K)
4.2 Form of Contingent Note, incorporated by reference to Exhibit A
to the Contingent Note Indenture.(K)
10.1 Loan and Security Agreement, dated as of October 30, 1991, (the
"CIT Loan Agreement"), between JPS Converter and Industrial
Corp., a Delaware corporation ("JCIC") and The CIT
Group/Equipment Financing, Inc. ("CIT").(A)
10.2 First Amendment to the CIT Loan Agreement, dated as of June 26,
1992, by and between JCIC and CIT.(A)
10.3 Second Amendment to the CIT Loan Agreement, dated as of December
22, 1992, by and between JCIC and CIT.(A)
10.4 Agreement of Lease, dated as of June 1, 1988, by and between 1185
Avenue of the Americas Associates ("1185 Associates") and
JCIC.(A)
10.5 Lease Modification and Extension Agreement, dated as of April 2,
1991, by and between 1185 Associates and JCIC.(A)
10.6 Third Amendment to the CIT Loan Agreement, dated as of August 6,
1993, by and between JCIC and CIT.(B)
10.7 Trademark License Agreement, dated as of May 9, 1988, by and
between J.P. Stevens and JPS Acquisition Corp. (predecessor to
the Company.)(B)
61
62
Exhibit
Number Description
- ------ -----------
10.8 Omnibus Real Estate Closing Agreement, dated as of May 9, 1988,
by and among J.P. Stevens, JPS Acquisition Corp., JPS Acquisition
Automotive Products Corp., JPS Acquisition Carpet Corp., JPS
Acquisition Industrial Fabrics Corp., JPS Acquisition Converter
and Yarn Corp. and JPS Acquisition Elastomerics Corp.(B)
10.9 Purchase Agreement, dated as of April 24, 1988, by and among JPS
Holding Corp., the Company, Odyssey Partners, West
Point-Pepperell, Inc., STN Holdings Inc., Magnolia Partners, L.P.
and J.P. Stevens.(B)
10.10 Asset Purchase Agreement, dated as of May 25, 1994, by and among
the Company, JAPC, JCIC, JPS Auto Inc., a Delaware corporation,
and Foamex International Inc., a Delaware corporation.(C)
10.11 Fourth Amended and Restated Credit Agreement (the "Existing
Credit Agreement"), dated as of June 24, 1994, by and among the
Company, JCIC, JPS Elastomerics Corp., a Delaware corporation
("JEC"), JPS Carpet Corp., a Delaware corporation ("JCC"), the
financial institutions listed on the signature pages thereof,
Citibank, N.A. ("Citibank") as Agent and Administrative Agent,
and General Electric Capital Corporation ("GECC") as Co-Agent and
Collateral Agent.(D)
10.12 First Amendment to the Existing Credit Agreement, dated as of
November 4, 1994, by and among the Company, JCIC, JEC, JCC, the
financial institutions listed on the signature pages thereof,
Citibank, as Agent and Administrative Agent, and GECC, as
Co-Agent and Collateral Agent.(E)
10.13 Second Amendment to the Existing Credit Agreement, dated as of
December 21, 1994, by and among the Company, JCIC, JEC, JCC, the
financial institutions listed on the signature pages thereof,
Citibank, as Agent and Administrative Agent, and GECC as Co-Agent
and Collateral Agent.(E)
10.14 Fourth Amendment to CIT Loan Agreement, dated as of December 29,
1994, by and between JCIC and CIT.(E)
10.15 Lease Modification and Extension Agreement, dated as of April 30,
1993, by and between 1185 Associates and JCIC.(E)
10.16 Third Amendment to Existing Credit Agreement, dated as of May 31,
1995 by and among the Company, JCIC, JEC, JCC, the financial
institutions listed on the signature pages thereof, Citibank, as
Agent and Administrative Agent, and GECC, as Co-Agent and
Collateral Agent.(F)
10.17 Fourth Amendment to Existing Credit Agreement, dated as of
October 28, 1995 by and among the Company, JCIC, JEC, JCC, the
financial institutions listed on the signature pages thereof,
Citibank, as Agent and Administrative Agent, and GECC, as
Co-Agent and Collateral Agent.(G)
10.18 Lease Modification and Extension Agreement, dated as of November
17, 1994, by and between 1185 Associates and JCIC.(G)
62
63
Exhibit
Number Description
- ------ -----------
10.19 Asset Transfer Agreement, dated as of November 16, 1995, by and
among the Company, JPS Carpet Corp., a Delaware corporation,
Gulistan Holdings Inc. ("GHI"), a Delaware corporation and
Gulistan Carpet Inc., a Delaware Corporation and wholly-owned
subsidiary of GHI.(H)
10.20 Fifth Amendment to the Fourth Amended & Restated Credit
Agreement, dated as of May 6, 1996, by and among the Company, JPS
Elastomerics Corp., JPS Converter and Industrial Corp., JPS Auto
Inc., JPS Carpet Corp., International Fabrics, Inc., the
financial institutions listed on the signature pages thereof,
Citibank, N.A. as agent and Administrative Agent and General
Electric Capital Corporation as Co-Agent and Collateral Agent.(I)
10.21 Sixth Amendment to the Fourth Amended & Restated Credit
Agreement, dated as of May 15, 1996, by and among the Company,
JPS Elastomerics Corp., JPS Converter and Industrial Corp., JPS
Auto Inc., JPS Carpet Corp., International Fabrics, Inc., the
financial institutions listed on the signature pages thereof,
Citibank, N.A. as agent and Administrative Agent and General
Electric Capital Corporation as Co-Agent and Collateral Agent.(I)
10.22 Seventh Amendment to the Fourth Amended and Restated Credit
Agreement, dated as of July 22, 1996, by and among the Company,
JPS Elastomerics Corp., JPS Converter and Industrial Corp., JPS
Auto Inc., JPS Carpet Corp., International Fabrics, Inc., the
financial institutions listed on the signature pages thereof,
Citibank, N.A. as agent and Administrative Agent and General
Electric Capital Corporation as Co-Agent and Collateral Agent.(J)
10.23 Eighth Amendment to the Fourth Amended and Restated Credit
Agreement, dated as of September 6, 1996, by and among the
Company, JPS Elastomerics Corp., JPS Converter and Industrial
Corp., JPS Auto Inc., JPS Carpet Corp., International Fabrics,
Inc., the financial institutions listed on the signature pages
thereof, Citibank, N.A. as agent and Administrative Agent and
General Electric Capital Corporation as Co-Agent and Collateral
Agent.(J)
10.24 Employment Agreement dated October 9, 1997, between the Company
and Jerry E. Hunter. (P)
10.25 Employment Agreement dated October 9, 1997, between the Company
and David H. Taylor. (P)
10.26 Employment Agreement dated October 9, 1997, between the Company
and Monnie L. Broome.(P)
10.27 Employment Agreement, dated May 1, 1993 and amended September 11,
1995 between the Company and Carl Rosen.(J)
10.28 Employment Agreement, dated December 23, 1991 and amended August
20, 1996 and December 23, 1996 between the Company and Bruce
Wilby.(G)
10.29 Asset Purchase Agreement, dated as of September 30, 1996 between
Elastomer Technologies Group, Inc. a Delaware Corporation, and
JPS Elastomerics Corp., a Delaware Corporation and wholly-owned
subsidiary of the Company.(G)
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64
Exhibit
Number Description
- ------ -----------
10.30 Receivables Purchase Agreement dated as of September 30, 1996
between The Bank of New York Commercial Corporation, a New York
Corporation and JPS Elastomerics Corp., a Delaware Corporation
and wholly-owned subsidiary of the Company.(G)
10.31 Registration Rights Agreement, dated as of October 9, 1997, by
and among JPS and the holders of JPS's Common Stock.(P)
10.32 Ninth Amendment to Existing Credit Agreement, dated as of
February 21, 1997, by and among JPS, JCIC, JEC, JCC, the
financial institutions listed on the signature pages thereof,
Citibank, as agent and Administrative Agent and GECC as Co-Agent
and Collateral Agent.(N)
10.33 Tenth Amendment to the Existing Credit Agreement, dated as of
April 29, 1997, by and among JPS, JCIC, JEC, JCC, the financial
institutions listed on the signature pages thereof, Citibank, as
agent and Administrative Agent and GECC as Co-Agent and
Collateral Agent.(O)
10.34 Eleventh Amendment to the Existing Credit Agreement, dated as of
May 15, 1997, by and among JPS, JCIC, JEC, JCC, the financial
institutions listed on the signature pages thereof, Citibank, as
agent and Administrative Agent and GECC as Co-Agent and
Collateral Agent.(O)
10.35 Credit Facility Agreement, dated as of October 9, 1997, by and
among JPS, C&I, Elastomerics, the financial institutions listed
on the signature pages thereto, and the agent and co-agent party
thereto.(M)
10.36 1997 Incentive and Capital Accumulation Plan dated as of October
9, 1997.(P)
10.37 Warrant Agreement dated as of October 9, 1997.(P)
10.38 First Amendment to the Credit Facility Agreement, dated as of
October 30, 1998, by and among JPS, C&I, Elastomerics, the
financial institutions listed on the signature pages thereto, and
the agent and co-agent party thereto.(Q)
10.39 Asset Purchase Agreement, dated as of January 11, 1999, by and
between C&I and Belding Hausman, Incorporated.(Q)
10.40 Amendment No. 1 to Asset Purchase Agreement, dated as of February
8, 1999, by and between C&I and Belding Hausman, Incorporated.(Q)
10.41 JPS Guaranty Letter, dated as of January 11, 1999, by and between
JPS and Belding Hausman, Incorporated.(Q)
10.42 Employment Agreement dated November 11, 1998, between the Company
and John W. Sanders, Jr. (Q)
10.43 Separation Agreement, dated February 27, 1999, between the
Company and Jerry E. Hunter.(R)
10.44 Employment Agreement, dated February 29, 1999, between the
Company and Michael L. Fulbright.(R)
10.45 Stock Option Agreement, dated February 28, 1999, between the
Company and Michael L. Fulbright.(R)
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65
Exhibit
Number Description
- ------ -----------
10.46 Amendment to the JPS Textile Group, Inc. 1997 Incentive and First
Capital Accumulation Plan.(R)
10.47 Second Amendment to the Credit Facility Agreement, dated as of
April 30, 1999, by and among JPS, C&I, Elastomerics, the
financial institutions listed on the signature pages thereto, and
the agent and co-agent thereto.(S)
10.48 Third Amendment to the Credit Facility Agreement, dated as of
July 12, 1999, by and among JPS, C&I, Elastomerics, the financial
institutions listed on the signature pages thereto, and the agent
and co-agent thereto.(T)
10.49 Asset Purchase Agreement, dated as of July 2, 1999, by and
between C&I and Belding Hausman, Incorporated.(T)
10.50 Asset Purchase Agreement, dated as of June 24, 1999, by and
between C&I and Chiquola Fabrics, LLC.(T)
10.51 Special Warranty Deed, dated as of August 30, 1999, by and
between C&I and Richard N. Hodges and Jimmy Law.(U)
10.52 Separation Agreement dated September 29, 1999, between the
Company and John W. Sanders, Jr. (U)
10.53 Employment Agreement dated March 17, 1998, between the Company
and Reid A. McCarter.(U)
11.1 Statement re: Computation of Per Share Earnings - not required
since such computation can be clearly determined from the
material contained herein.
12.1 Computation of Ratio of Earnings to Fixed Charges - not required
for Form 10-K per Item 503(d) of Regulation S-K.
12.2 Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends--not required for Form 10-K per Item
503(d) of Regulation S-K.
21.1 List of Subsidiaries of the Company.(E)
24.1 Power of Attorney relating to JPS (included as part of the
signature page hereof).(M)
27.1 Financial data schedule (for SEC use only).(U)
- ---------------
(A) Previously filed as an exhibit to Registration Statement No. 33-58272 on
Form S-1, declared effective by the SEC on July 26, 1993, and incorporated
herein by reference.
(B) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended October 30, 1993.
(C) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended April 30, 1994.
(D) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended July 30, 1994.
(E) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended October 29, 1994.
65
66
(F) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended April 29, 1995.
(G) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended November 2, 1996.
(H) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated December 1, 1995.
(I) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended April 27, 1996.
(J) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended July 27, 1996.
(K) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated July 2, 1997.
(L) Previously filed as an exhibit to the Company's Registration Statement on
Form 8-A filed on September 8, 1997
(M) Previously filed.
(N) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended February 1, 1997.
(O) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended May 3, 1997.
(P) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended November 1, 1997.
(Q) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended October 31, 1998.
(R) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated March 4, 1999.
(S) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 1, 1999.
(T) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended July 31, 1999.
(U) Filed herewith.
66
67
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 INDUSTRIES, INC.
Date: January 28, 2000 By: /s/Michael L. Fulbright
--------------------------------------
MICHAEL L. FULBRIGHT
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the dates
indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Michael L. Fulbright Chairman of the Board, President and January 28, 2000
- ----------------------------- and Chief Executive Officer
MICHAEL L. FULBRIGHT
/s/ Robert J. Capozzi Director January 28, 2000
- -----------------------------
ROBERT J. CAPOZZI
/s/ Jeffrey S. Deutschman Director January 28, 2000
- -----------------------------
JEFFREY S. DEUTSCHMAN
/s/ Nicholas P. DiPaolo Director January 28, 2000
- -----------------------------
NICHOLAS P. DIPAOLO
/s/ John M. Sullivan, Jr. Director January 28, 2000
- -----------------------------
JOHN M. SULLIVAN, JR.
/s/ L. Allen Ollis Corporate Controller and Secretary January 28, 2000
- -----------------------------
L. ALLEN OLLIS
67
68
JPS INDUSTRIES, INC. INDEX TO SCHEDULE
INDEX TO FINANCIAL STATEMENT SCHEDULE
For the periods from November 3, 1996 to October 9, 1997 (Predecessor) and from
October 10, 1997 to November 1, 1997, Fiscal Years Ended October 31, 1998 and
October 30, 1999 (Reorganized Company).
FINANCIAL STATEMENT SCHEDULE
II. Valuation and Qualifying Accounts and Reserves S-2
Note: All other schedules are omitted because they are not applicable or not
required, or because the required information is shown either in the
consolidated financial statements or in the notes thereto.
S-1
69
JPS INDUSTRIES, INC. SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
Column A Column B Column C Column D Column E
- ------------------------------------- --------- ------------------------ ----------- ---------
Charged to
Balance at Charged to Other Balance at
Beginning Costs and Accounts Deductions End of
Classification of Period Expenses Describe Describe Period
- ------------------------------------- ---------- ---------- ---------- ---------- ----------
(a) (b)
Allowances Deducted from Asset to Which They Apply:
Predecessor
For the Period From November 3, 1996
to October 9, 1997
Allowance for doubtful accounts $ 2,348 $ 781 $(1,258) $ 24 $1,847
Claims, returns and other allowances 163 - 164 179 148
------- ------- ------- ------ ------
$ 2,511 $ 781 $(1,094) $ 203 $1,995
======= ======= ======= ====== ======
Reorganized Company
For the Period From October 10, 1997
to November 1, 1997
Allowance for doubtful accounts $ 1,847 $ - $ (945) $ - $ 902
Claims, returns and other allowances 148 - 7 4 151
------- ------- ------- ------ ------
$ 1,995 $ - $ (938) $ 4 $1,053
======= ======= ======= ====== ======
Fiscal Year Ended October 31, 1998 (52 Weeks)
Allowance for doubtful accounts $ 902 $ (28) $ 536 $ - $1,410
Claims, returns and other allowances 151 - 239 235 155
------- ------- ------- ------ ------
$ 1,053 $ (28) $ 775 $ 235 $1,565
======= ======= ======= ====== ======
Fiscal Year Ended October 30, 1999 (52 Weeks)
Allowance for doubtful accounts $ 1,410 $ 125 $ (223) $ 1 $1,311
Claims, returns and other allowances 155 38 333 272 254
------- ------- ------- ------ ------
$ 1,565 $ 163 $ 110 $ 273 $1,565
======= ======= ======= ====== ======
(a) Change in various reserves charged to net sales.
(b) Uncollected receivables written off, net of recoveries.
S-2