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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 28, 2000
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to .
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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, 9,157,333 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 11, 2001, 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 11, 2001, as reported by the Nasdaq National Market, was
approximately $33,626,351.
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 9,156,833 were outstanding.
The Registrant's Definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on February 27, 2001 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......................................................................................... 9
Item 3. LEGAL PROCEEDINGS.................................................................................. 10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS................................................. 10
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.......................... 10
Item 6. SELECTED HISTORICAL FINANCIAL DATA................................................................. 11
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............. 13
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.......................................... 20
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................................................ 21
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE............... 43
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................................................. 43
Item 11. EXECUTIVE COMPENSATION............................................................................. 43
Item 12. SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT........................................ 43
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................................................... 43
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K..................................... 43
INDEX TO EXHIBITS.................................................................................. 45
SIGNATURES......................................................................................... 49
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PART I
ITEM 1. BUSINESS
GENERAL
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.
JPS specialty industrial products are used in a wide range of applications,
including: printed electronic circuit boards; advanced composite materials;
aerospace components; filtration and insulation products; surf boards;
tarpaulins and awnings; construction substrates; high performance glass
laminates for security and transportation applications; plasma display screens;
athletic shoes; commercial and industrial roofing; reservoir covers; and
medical, automotive and industrial components. Headquartered in Greenville,
South Carolina, the Company operates manufacturing locations in Slater, South
Carolina; Westfield, North Carolina; and Easthampton, Massachusetts.
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, 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 of 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 28, 2000 ("Fiscal 2000"), the Company sold its
Apparel Division and completed its exit from the textile business in order to
focus on its Glass and Elastomerics industrial businesses.
With these changes, the Company's organization has been scaled down to
approximately 750 employees at fiscal year-end compared with approximately 1,900
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 and JPS Glass.
BUSINESS SEGMENTS
The Company currently operates in two reportable business segments (each of
which constitutes a separate and distinct division)--JPS Elastomerics and JPS
Glass. 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. 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 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. The following discussion provides general information as it
relates to each division:
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
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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 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, and plasma screens.
JPS Glass
Through its JPS Glass segment, the Company manufactures and markets mechanically
formed fiberglass substrates. 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, filtration
products, surfboard substrates, composite materials for aircraft cabin interiors
and cargo liners, and other numerous technical, industrial applications.
The Company is a leading producer of AstroQuartz(R) substrates formed from
quartz filaments to produce sophisticated electronic circuit boards and
extremely high temperature thermal insulation for the defense and civilian
aerospace industries.
JPS's wholly-owned operating subsidiaries include JPS Elastomerics and JPS
Converter and Industrial Corp. ("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 two separate divisions: Elastomerics and Glass.
MANUFACTURING
JPS Elastomerics
The Elastomerics division operates two facilities and employs approximately 280
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 470
employees. The Company purchases fiberglass and other specialty materials to
mechanically form 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.
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 domestic and international fiberglass and chemical manufacturers.
For several products, however, branded goods or other circumstances prevent such
a diversification, and an interruption of the supply
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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.
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 in Fiscal 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
substantially all 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.
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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.
CUSTOMERS
No 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.
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.
BACKLOG
Unfilled open orders, which the Company believes are firm, were $24.5 million at
October 28, 2000 and $21.9 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 28, 2000, will be filled in the 52-week
period ending October 27, 2001 ("Fiscal 2001"). 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.
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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 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).
EMPLOYEES
As of October 28, 2000, the Company had approximately 750 employees of which
approximately 564 were hourly and approximately 186 were salaried. None of the
Company's employees are 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.
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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.
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 and JPS Glass segments is set
forth in Note 10 to the Consolidated Financial Statements included in Item 8
herein.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain 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 2001 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 industries, the Company's ability to
meet its debt service obligations, the seasonality of the Company's sales, the
volatility of the Company's raw material costs, and the Company's dependence on
key personnel and certain large customers.
Shareholders, potential investors and other readers are urged to consider these
factors carefully in evaluating the forward-looking statements are cautioned not
to place undue reliance on such forward-looking statements. The forward-looking
statements made herein are only made as of the date of this report and the
Company undertakes no obligation to publicly update such forward-looking
statements to reflect subsequent events or circumstances.
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 are owned and are used for manufacturing.
Square Square
Location Footage Location Footage
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JPS Elastomerics JPS Glass
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Westfield, NC 237,000 Slater, SC 433,000
Easthampton, MA 50,000
The Company also leases certain other warehouse facilities, various regional
sales offices and its corporate 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 140 Sears stores. The Company believes it
has meritorious defenses to the claims and intends to continue to defend the
lawsuit vigorously. Management cannot determine the outcome of the lawsuit or
estimate the range of loss, if any, that may occur and no provision for losses
has been established in the Company's financial statements. An unfavorable
resolution of the actions could have a material adverse effect on the business,
results of operations and 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 2000.
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 1999 HIGH LOW
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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
FISCAL 2000 HIGH LOW
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First Quarter $4 $ 2.75
Second Quarter 3.938 2.875
Third Quarter 5.688 3.125
Fourth Quarter 5.75 3.875
As of January 16, 2001, 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 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
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Revolving Credit Facility (as later defined) and refundings and refinancings
thereof) and other factors deemed relevant by JPS's Board of Directors. The
Company's 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 the year ended 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, October 30, 1999
and October 28, 2000 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 yarn sales business (sold on July 23, 1999), the cotton commercial products
business (sold on August 27, 1999), and the Apparel Division (sold on November
17, 2000), 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, October 30, 1999 and October 28,
2000 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, October 30, 1999 and October 28, 2000 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 Period from Period from Fiscal Year Fiscal Year Fiscal Year
Ended November 3, October 10, Ended Ended Ended
November 2, 1996 to 1997 to October 31, October 30, October 28,
1996 October 9, November 1, 1998 1999 2000
INCOME STATEMENT DATA: (53 Weeks) 1997 1997 (52 Weeks) (52 Weeks) (52 Weeks)
------------ ------------- ------------- ------------- ------------- ------------
Net sales $ 169,631 $ 146,926 $ 14,724 $ 155,944 $ 156,867 $ 167,978
Cost of sales 131,930 109,760 10,602 119,727 121,579 126,380
----------- ----------- ------------ ------------ ------------ -----------
Gross profit 37,701 37,166 4,122 36,217 35,288 41,598
Selling, general and
administrative expenses 26,093 23,094 1,744 25,134 26,978 27,368
Other expense (income), net 485 302 (1) (67) 1,663 (18)
Charges for plant closing, loss on
sale of certain operations, write-
down of certain long-lived assets
and restructuring costs 8,847 -- -- -- -- --
----------- ----------- ------------ ------------ ------------ -----------
Operating profit 2,276 13,770 2,379 11,150 6,647 14,248
Valuation allowance on
Gulistan securities (4,242) (5,070) -- -- -- --
Interest income 2,856 2,744 94 1,038 -- --
Interest expense (37,437) (29,425) (507) (4,013) (3,511) (3,442)
----------- ----------- ------------ ------------ ------------ -----------
Income (loss) before
reorganization items, income
taxes, discontinued operations
and extraordinary items (36,547) (17,981) 1,966 8,175 3,136 10,806
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 (38,802) (31,052) 1,966 8,175 3,136 10,806
Income taxes (benefit) (300) (8,821) 1,177 3,462 1,997 4,517
----------- ----------- ------------ ------------ ------------ -----------
Income (loss) from continuing
operations (38,502) (22,231) 789 4,713 1,139 6,289
Discontinued operations (net of
taxes):
Income (loss) from
discontinued operations (27,434) (1,726) 1,928 (15,377) (4,485) (104)
Loss on disposal of discontinued
operations (1,500) -- -- -- (18,096) (47,415)
----------- ----------- ------------ ------------ ------------ -----------
Income (loss) before
extraordinary items (67,436) (23,957) 2,717 (10,664) (21,442) (41,230)
Extraordinary gain on early
extinguishment of debt -- 100,235 -- -- -- --
----------- ----------- ------------ ------------ ------------ -----------
Net income (loss) $ (67,436) $ 76,278 $ 2,717 $ (10,664) $ (21,442) $ (41,230)
=========== =========== ============ ============ ============ ===========
Income (loss) applicable to
common stock $ (71,941) $ 72,451 $ 2,717 $ (10,664) $ (21,442) $ (41,230)
=========== =========== ============ ============ ============ ===========
Weighted average number
of shares outstanding (1) 1,000,000 1,000,000 10,000,000 10,000,000 10,000,000 9,940,000
=========== =========== ============ ============ ============ ===========
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13
Predecessor Company Reorganized Company
----------------------------- -------------------------------------------------------------
Fiscal Year Period from Period from Fiscal Year Fiscal Year Fiscal Year
Ended November 3, October 10, Ended Ended Ended
November 2, 1996 to 1997 to October 31, October 30, October 28,
1996 October 9, November 1, 1998 1999 2000
INCOME STATEMENT DATA: (53 Weeks) 1997 1997 (52 Weeks) (52 Weeks) (52 Weeks)
------------ ------------- ------------- ------------- ------------- ------------
Basic income (loss) per common share:
Income (loss) from continuing
operations $(43.00) $(26.06) $0.08 $ 0.47 $0.11 $ 0.63
Discontinued operations (net of
taxes):
Income (loss) from
discontinued operations (27.44) (1.73) 0.19 (1.54) (0.44) (0.01)
Loss on disposal of discontinued
operations (1.50) -- -- -- (1.81) (4.77)
Extraordinary gain -- 100.24 -- -- -- --
------- ------- ----- ------ ------ ------
Net income (loss) $(71.94) $ 72.45 $0.27 $(1.07) $(2.14) $(4.15)
======= ======= ===== ====== ====== ======
BALANCE SHEET DATA: November 2, November 1, October 31, October 30, October 28,
1996 1997 1998 1999 2000
-------------- -------------- ------------ ------------ ------------
Working capital (deficiency), excluding net
assets held for sale $(257,866)(1) $ 27,281 $ 29,606 $ 29,148 $ 28,734
Total assets 335,927 300,051 255,284 216,316 148,242
Total long-term debt, less current portion 4,226 (1) 94,891 98,693 79,806 51,529
Senior redeemable preferred stock 32,676 -- -- -- --
Shareholders' equity (deficit) (108,986) 126,047 109,528 94,653 52,408
(1) 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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction 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), the cotton
commercial products business (sold on August 27, 1999), and the Apparel Division
(sold on November 17, 2000).
Fiscal Year FiscalYear Fiscal Year
Ended Ended Ended
October 31, October 30, October 28,
1998 1999 2000
----------- ----------- -----------
NET SALES
Elastomerics $ 83,708 $ 80,035 $ 86,595
Glass 79,323 83,453 87,319
--------- --------- ---------
163,031 163,488 173,914
Less intersegment sales (1) (7,087) (6,621) (5,936)
--------- --------- ---------
Net sales $ 155,944 $ 156,867 $ 167,978
========= ========= =========
(Table continued on next page)
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(Table continued from previous page)
Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended
October 31, October 30, October 28,
1998 1999 2000
----------- ----------- -----------
OPERATING PROFIT (2)
Elastomerics $ 6,290 $ 4,889 $ 7,458
Glass 4,860 1,758 6,790
-------- -------- --------
Operating profit 11,150 6,647 14,248
Interest expense, net (2,975) (3,511) (3,442)
-------- -------- --------
Income before income taxes and
discontinued operations $ 8,175 $ 3,136 $ 10,806
======== ======== ========
OTHER DATA
EBITDA (3)
Elastomerics $ 8,692 $ 8,786 $ 10,369
Glass 7,146 5,934 10,036
-------- -------- --------
Total EBITDA $ 15,838 $ 14,720 $ 20,405
======== ======== ========
(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. The Company's
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.
(3) EBITDA represents operating income plus depreciation and amortization and
certain other charges. 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. The
other charges added back to operating income represent severance and
restructuring charges of $1.7 million in Fiscal 1999.
RESULTS OF OPERATIONS
INTRODUCTION
The Company has repositioned itself from being 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 exiting
the apparel fabric business and two other textile businesses, while intensifying
its focus on the two businesses with growth potential, JPS Glass and JPS
Elastomerics. On November 17, 2000, the Company sold its Apparel Division,
thereby exiting the apparel fabrics business. On March 2, 1999, the
14
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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 of 1999 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 Borden manufacturing plant,
thereby exiting its cotton commercial products segment. The apparel, 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 is now
focusing solely on improving the performance and profitability of its remaining
core businesses: JPS Elastomerics and JPS Glass.
FISCAL 2000 COMPARED WITH FISCAL 1999
Consolidated net sales increased $11.1 million, or 7.1%, from $156.9 million in
Fiscal 1999 to $168.0 million in Fiscal 2000. Consolidated operating income
increased $7.6 million from $6.6 million in Fiscal 1999 to $14.2 million in
Fiscal 2000. Total selling, general and administrative expenses decreased from
17.2% of sales in Fiscal 1999 to 16.3% of sales in Fiscal 2000. Fiscal 2000
included $2.5 million of incentive payments while Fiscal 1999 included $1.7
million of severance and restructuring costs. The percentage decrease results
primarily from cost reduction efforts and a higher revenue base.
JPS Elastomerics
Net sales in Fiscal 2000 in the Elastomerics segment, which includes single-ply
roofing and extruded urethane products, increased $6.6 million, or 8.3%, from
$80.0 million in Fiscal 1999 to $86.6 million in Fiscal 2000. 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,
strengthening sales management in key territories, and taking actions to reduce
operating costs. Sales of urethane products increased due to higher demand for
certain of the Company's extruded sheet products used in security glass and
athletic footwear.
Operating profit in Fiscal 2000 for the Elastomerics segment increased $2.6
million from $4.9 million in Fiscal 1999 to $7.5 million in Fiscal 2000. The
increase resulted principally from 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 $3.8 million, or 4.6%, from $83.5 million in Fiscal 1999
to $87.3 million in Fiscal 2000. The electronics industry represents the largest
customer base for the Company's fiberglass products. Strong worldwide demand
resulted in favorable market conditions for the Company's electronic substrates.
Further, strong demand for the Company's patented fitration products boosted
sales along with increased orders for high quality quartz fabrics and certain
other products. The Company has also taken actions to reduce costs, improve
manufacturing productivity and improve the quality of its products and services
which have offset raw material price increases.
Operating profit in Fiscal 2000 for the Glass segment increased $5.0 million
from $1.8 million in Fiscal 1999 to $6.8 million in Fiscal 2000 resulting from
improved margins, higher manufacturing efficiencies and cost reduction efforts.
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16
Other
Interest expense in Fiscal 2000 is consistent with the Fiscal 1999 amounts.
Long-term debt was reduced by approximately $28.3 million in Fiscal 2000 as a
result of operating performance and significant working capital improvements.
On November 17, 2000 the Company sold the assets of its greige apparel fabric
business which included three manufacturing facilities in South Boston,
Virginia; Greenville, South Carolina; and Laurens, South Carolina; and
administrative offices in Greenville, South Carolina, New York and Los Angeles,
thereby exiting its apparel business. The business accounted for sales of $182.2
million, $137.6 million, and $125.4 million in Fiscal 1998, 1999 and 2000,
respectively. The consideration for the sale consisted of approximately $27.1
million in cash and future consideration in the form of an earn-out based on
earnings before interest, depreciation and amortization, as defined, for the
24-month period following the transaction plus certain assumed liabilities. The
Company has accounted for the results of the apparel fabric business as a
discontinued operation and a charge for loss on disposal of discontinued
operations of $47.4 million was recorded in Fiscal 2000 related primarily to the
writedown of disposed plant assets and related reorganization value in excess of
amounts allocable to identifiable assets, and other exit costs. The net proceeds
from the sale of $26.2 million were used to reduce the Company's outstanding
indebtedness on its Revolving Credit Facility (as defined below) which was
amended in connection with the transaction to reflect the Company's lower
borrowing requirements.
FISCAL 1999 COMPARED WITH FISCAL 1998
Consolidated net sales increased $0.9 million, or 0.6% from $156.0 million in
Fiscal 1998 to $156.9 million in Fiscal 1999. Operating profit decreased $4.5
million from $11.1 million in Fiscal 1998 to $6.6 million in Fiscal 1999. Total
selling, general and administrative expenses increased from 16.1% of sales in
Fiscal 1998 to 17.2% of sales in Fiscal 1999 primarily as a result of $1.7
million of severance and restructuring costs incurred in Fiscal 1999.
JPS Elastomerics
Net sales in the Elastomerics segment decreased $3.7 million, or 4.4%, from
$83.7 million in Fiscal 1998 to $80.0 million in Fiscal 1999. The domestic
roofing market was again characterized by intense competition and market
consolidation as growth rates receded from the double-digit levels of the mid
1990's. The Company also experienced a 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. Liner membrane sales decreased due to declining
unit volume and unit selling prices.
Operating profit in Fiscal 1999 for the Elastomerics segment decreased $1.4
million from $6.3 million in Fiscal 1998 to $4.9 million in Fiscal 1999. 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 increased $4.1 million, or 5.2%, from $79.3
million in Fiscal 1998 to $83.4 million in Fiscal 1999. The Company benefited
from increased global consumer demand for electronic products in 1999 as
compared with slower demand for certain fiberglass products used in the
manufacture of circuit boards as a result of the Asian economic weaknesses in
1998.
16
17
Operating profit in Fiscal 1999 for the Glass segment decreased $3.1 million
from $4.9 million in Fiscal 1998 to $1.8 million in Fiscal 1999. This decrease
is directly attributable to the decline in unit sales volume and lower unit
prices.
Other
In 1999, JPS 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.
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. 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. The proceeds from these sales of $5.2 million
were used to reduce the Company's outstanding indebtedness under its Revolving
Credit Facility and an equipment loan.
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 $2.0 million, respectively. These amounts are now in discontinued
operations except for $1.7 million of severance and restructuring costs in
Fiscal 1999. Interest expense in Fiscal 1999 is consistent with the Fiscal 1998
amounts.
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"), as amended, by and among the financial institutions party thereto,
Citibank, as agent, and Bank of America, as co-agent. As amended, on November
17, 2000, 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) $45 million and (b) a specified borrowing base
(the "Borrowing Base"), which is based upon eligible receivables, eligible
inventory, and a specified dollar amount (currently $14,000,000 (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 contains
17
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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 November 12,
2001. 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, (iii) provide additional reduction of the fixed asset
portion of the Borrowing Base and (iv) allow the Company to repurchase its
common stock under certain circumstances. As of October 28, 2000, 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). At October 28, 2000, the Company had approximately $17.0
million available for borrowing under the Revolving Credit Facility.
Net cash provided by continuing operations increased by approximately $12.0
million in Fiscal 2000 compared with Fiscal 1999 primarily due to enhanced
profitability. Working capital, excluding assets held for sale, at October 28,
2000 was approximately $28.7 million compared with $29.1 million at October 30,
1999. Fiscal 2000 reflects continued reductions in inventory offset by a slight
increase in receivables as a result of sales increases. Accounts payable and
accrued expenses increased approximately $4.0 million in Fiscal 2000 principally
due to timing differences. The discontinued apparel business generated $17.7
million of net cash provided by operations.
The principal non-operating uses of cash in Fiscal 2000 were for property, plant
and equipment expenditures of $2.6 million for upgrade of the Company's
manufacturing operations and the repayment of long-term debt of approximately
$28.3 million. The Company also used $1.3 million to repurchase outstanding
shares of its common stock. On November 17, 2000, the Company received
approximately $27.1 million in proceeds from the sale of its Apparel division as
discussed under the caption "Fiscal 2000 Compared With Fiscal 1999." Such funds
were used to further reduce the Company's outstanding indebtedness under its
Revolving Credit Facility and certain equipment loans. As of October 28, 2000,
the Company had commitments of $0.3 million for capital expenditures. The
Company anticipates making capital expenditures in Fiscal 2001 of approximately
$5.0 to $6.0 million and expects such amounts to be funded by cash from
operations, bank and other equipment financing sources.
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 assets under lease at October 28, 2000 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 2001.
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 or by increasing manufacturing efficiencies; however, market
conditions sometimes preclude raising prices.
18
19
For Fiscal 2000, the Company recorded a tax expense from continuing operations
of $4.5 million, a 42% effective rate, and a tax benefit on sale of discontinued
operations of $4.2 million. The Company also reduced the valuation allowance
applicable to net operating losses arising prior to the Plan of Reorganization
by $11.4 million and, under applicable accounting guidelines, reduced excess
reorganization value by this amount. The Company had net operating loss
carryovers of approximately $55 million as of October 28, 2000. 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 on
usage could occur on net operating losses or other deferred tax assets should
the Company undergo another ownership change, as determined under the Internal
Revenue Code of 1996, as amended. See Note 7 to the consolidated financial
statements for additional information. The effective tax rates for Fiscal 1999
and 1998 were, 64% and 42%, respectively. The effective rates for all years are
higher than the combined federal and state statutory rate due primarily to the
impact of nondeductible excess reorganization costs.
RECENT ACCOUNTING PRONOUNCEMENTS
On October 29, 2000, the Company adopted 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. The Company did not have any derivatives which were
required to be recorded on the balance sheet.
On May 12, 1999, the Company repriced certain stock options which, under
Financial Accounting Standards Board Interpretation Number 44 ("FIN 44"),
requires them to be accounted for under variable plan accounting. The
application of FIN 44, which was effective July 1, 2000, can result in the
recognition of non-cash compensation expense. Although there was no compensation
expense in Fiscal Year 2000 as a result of applying FIN 44, FIN 44 could result
in significant future non-cash compensation expense. Any expense will be added
back to operating income to determine the Company's EBITDA, as previously
defined.
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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 28, 2000,
approximately $48.0 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
commodities 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.
General Economic Conditions. Demand for the Company's products is affected by a
variety of economic factors including, but not limited to, the cyclical nature
of the construction industry, demand for electronic and aerospace products which
ultimately utilize components manufactured by the Company, and general consumer
demand. Adverse economic developments could affect the financial performance of
the Company.
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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. and subsidiaries (the "Company") as of October 28, 2000 and October 30,
1999, and the related statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended October 28, 2000. 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 auditing standards generally accepted
in the United States of America. 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.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at October 28, 2000 and
October 30, 1999, and the results of its operations and its cash flows for each
of the three years in the period ended October 28, 2000 in conformity with
accounting principles generally accepted in the United States of America. 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
November 29, 2000
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JPS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
October 30, October 28,
1999 2000
----------- -----------
ASSETS
CURRENT ASSETS:
Cash $ 427 $ 2,216
Accounts receivable, less allowance of $659
in 1999 and $1,024 in 2000 26,951 27,640
Inventories 20,452 18,583
Prepaid expenses and other 4,033 6,993
Net assets of discontinued operations 91,857 27,539
-------- --------
Total current assets 143,720 82,971
PROPERTY, PLANT AND EQUIPMENT, net 45,743 43,439
REORGANIZATION VALUE IN EXCESS
OF AMOUNTS ALLOCABLE TO IDENTIFIABLE
ASSETS, less accumulated amortization of $3,566 in
1999 and $5,286 in 2000 15,192 2,971
OTHER ASSETS 11,661 18,861
-------- --------
Total assets $216,316 $148,242
======== ========
See notes to consolidated financial statements.
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October 30, October 28,
1999 2000
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 11,545 $ 13,303
Accrued interest 865 759
Accrued salaries, benefits and withholdings 3,092 6,776
Other accrued expenses 6,238 4,924
Current portion of long-term debt 975 936
--------- ---------
Total current liabilities 22,715 26,698
LONG-TERM DEBT 79,806 51,529
OTHER LONG-TERM LIABILITIES 19,142 17,607
--------- ---------
Total liabilities 121,663 95,834
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value; authorized - 22,000,000 shares; issued -
10,000,000 shares; outstanding - 10,000,000 shares in 1999
and 9,732,500 shares in 2000 100 100
Additional paid-in capital 123,942 124,190
Treasury stock (at cost) - 267,500 shares -- (1,263)
Accumulated deficit (29,389) (70,619)
--------- ---------
Total shareholders' equity 94,653 52,408
--------- ---------
Total liabilities and shareholders' equity $ 216,316 $ 148,242
========= =========
See notes to consolidated financial statements.
23
24
JPS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
Fiscal Fiscal Fiscal
Year Year Year
Ended Ended Ended
October 31, October 30, October 28,
1998 1999 2000
------------- ------------- ------------
Net sales $ 155,944 $ 156,867 $ 167,978
Cost of sales 119,727 121,579 126,380
------------- ------------- ------------
Gross profit 36,217 35,288 41,598
Selling, general and administrative expenses 25,134 26,978 27,368
Other expense (income), net (67) 1,663 (18)
------------- ------------- ------------
Operating profit 11,150 6,647 14,248
Interest expense, net (2,975) (3,511) (3,442)
------------- ------------- ------------
Income before income taxes and
discontinued operations 8,175 3,136 10,806
Provision for income taxes 3,462 1,997 4,517
------------- ------------- ------------
Income from continuing operations 4,713 1,139 6,289
Discontinued operations (net of taxes):
Loss from discontinued operations (15,377) (4,485) (104)
Loss on disposal of discontinued operations -- (18,096) (47,415)
------------- ------------- ------------
Net loss (10,664) (21,442) (41,230)
Other comprehensive income (net of tax):
Minimum pension liability adjustments (5,855) 5,855 --
------------- ------------- ------------
Comprehensive loss $ (16,519) $ (15,587) $ (41,230)
============= ============= ============
Weighted average number of common
shares outstanding: Basic 10,000,000 10,000,000 9,940,000
============= ============= ============
Diluted 10,000,000 10,000,000 10,045,698
============= ============= ============
Basic income (loss) per common share:
Income from continuing operations $ 0.47 $ 0.11 $ 0.63
Discontinued operations (net of taxes):
Loss from discontinued operations (1.54) (0.44) (0.01)
Loss on disposal of discontinued operations -- (1.81) (4.77)
------------- ------------- ------------
Net loss $ (1.07) $ (2.14) $ (4.15)
============= ============= ============
Diluted income (loss) per common share:
Income from continuing operations $ 0.47 $ 0.11 $ 0.63
Discontinued operations (net of taxes):
Loss from discontinued operations (1.54) (0.44) (0.01)
Loss on disposal of discontinued operations -- (1.81) (4.72)
------------- ------------- ------------
Net loss $ (1.07) $ (2.14) $ (4.10)
============= ============= ============
See notes to consolidated financial statements.
24
25
JPS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars In Thousands)
Accumulated Retained
Additional Other Earnings
Common Paid-In Treasury Comprehensive (Accumulated
Stock Capital Stock Loss Deficit)
-------- ----------- -------- ------------- ------------
Balance - November 1, 1997 $ 100 $123,230 $ -- $ -- $ 2,717
Additional minimum pension liability
adjustment (5,855)
Net loss (10,664)
-------- -------- ------- ------- --------
Balance - October 31, 1998 100 123,230 -- (5,855) (7,947)
Stock compensation expense 712
Additional minimum pension liability
adjustment 5,855
Net loss (21,442)
-------- -------- ------- ------- --------
Balance - October 30, 1999 100 123,942 -- -- (29,389)
Stock compensation expense 248
Shares reacquired and held in treasury (1,263)
Net loss (41,230)
-------- -------- ------- ------- --------
Balance - October 28, 2000 $ 100 $124,190 $(1,263) $ -- $(70,619)
======== ======== ======= ======= ========
See notes to consolidated financial statements.
25
26
JPS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
Fiscal Fiscal Fiscal
Year Year Year
Ended Ended Ended
October 31, October 30, October 28,
1998 1999 2000
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(10,664) $(21,442) $(41,230)
-------- -------- --------
Adjustments to reconcile net loss
to net cash provided by operating activities:
Loss from discontinued operations 15,377 4,485 104
Loss on disposal of discontinued operations -- 18,096 47,415
Depreciation and amortization 4,688 6,382 6,157
Amortization of deferred financing costs 329 414 272
Deferred income tax provision (benefit) 2,853 (1,753) 2,532
Other, net (3,771) (1,793) (3,918)
Changes in assets and liabilities:
Accounts receivable 1,600 752 (689)
Inventories (4,442) 3,571 1,869
Prepaid expenses and other assets (1,782) (156) (269)
Accounts payable 2,700 (1,872) 1,758
Accrued expenses and other liabilities (1,799) (2,062) 2,264
-------- -------- --------
Total adjustments 15,753 26,064 57,495
-------- -------- --------
Net cash provided by continuing
operating activities 5,089 4,622 16,265
Net cash from discontinued operations 4,668 5,694 17,712
-------- -------- --------
Net cash provided by operating activities 9,757 10,316 33,977
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment additions (15,453) (4,071) (2,609)
Proceeds from disposal of discontinued operations, net -- 4,658 --
Proceeds from disposal of certain other operations -- 8,491 --
Proceeds from sale of long-term investments 35,382 -- --
-------- -------- --------
Net cash provided by (used in) investing activities 19,929 9,078 (2,609)
-------- -------- --------
(Table continued on next page)
26
27
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued from previous page) (Dollars In
Thousands)
Fiscal Fiscal Fiscal
Year Year Year
Ended Ended Ended
October 31, October 30, October 28,
1998 1999 2000
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Financing costs incurred (146) (732) --
Purchase of treasury stock -- -- (1,263)
Revolving credit facility borrowings (repayments), net 1,452 (18,628) (27,394)
Repayment of other long-term debt (32,679) (332) (922)
-------- -------- --------
Net cash used in financing activities (31,373) (19,692) (29,579)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH (1,687) (298) 1,789
CASH AT BEGINNING OF YEAR 2,412 725 427
-------- -------- --------
CASH AT END OF YEAR $ 725 $ 427 $ 2,216
======== ======== ========
SUPPLEMENTAL INFORMATION ON CASH
FLOWS FROM CONTINUING OPERATIONS:
Interest paid $ 7,629 $ 7,323 $ 6,361
Income taxes paid, net 1,044 570 402
Non-cash financing activities:
Capital lease obligation 3,519 1,307 --
See notes to consolidated financial statements.
27
28
JPS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. 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. 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.
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. 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. Management determines its estimate
of the reserve for self-insurance considering a number of factors,
including historical experience, third party claims administrator and
actuarial assessments and insurance coverages. 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; and the expected costs to repair
and replace such roofing products. Management believes that its
estimates provided in the financial statements 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 - 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. If required, an impairment loss is measured based
upon the difference between the carrying amount and the fair value of
the assets. 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 resulted from the application of "fresh start"
reporting in 1997 and is being amortized over a 20-year period. In
Fiscal 1998, 1999, and 2000, the Reorganization Value was decreased by
approximately $6.9 million, $3.7 million and $15.0 million,
respectively, in relation to the discontinued operations, plant sales
and plant closure discussed in Notes 2 and 3.
28
29
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 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.
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 by
contract 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
$1,554,000 in Fiscal 1998, $1,940,000 in Fiscal 1999, and $1,498,000 in
Fiscal 2000.
Income Taxes - The Company accounts for income taxes using the
principles of SFAS No. 109, "Accounting for Income Taxes." Deferred
income taxes result primarily from temporary differences between
financial and tax reporting. Deferred tax assets and liabilities are
determined based on the difference between the financial statement
bases and tax bases of assets and liabilities using enacted tax rates.
A valuation allowance is recorded to reduce a deferred tax asset to
that portion that is expected to more likely than not be realized.
Earnings Per Share - Potentially dilutive common shares consist
primarily of stock options. In 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 for those periods.
Fiscal Year - The Company's operations are based on a 52 or 53-week
fiscal year ending on the Saturday closest to October 31. Each of
fiscal years 1998, 1999, and 2000 had 52 weeks.
Reclassifications - Certain Fiscal 1998 and 1999 amounts have been
reclassified to conform to the Fiscal 2000 presentation.
Effects of Recent Accounting Pronouncements - On October 29, 2000, the
Company adopted 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. The Company did not have any derivatives which were
required to be recorded on the balance sheet.
2. 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. The consideration
for the Stanley sale
29
30
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 and related Reorganization Value to net realizable value,
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 business. This business generated sales of $34.1
million, $33.7 million and $18.4 million in Fiscal 1997, 1998 and 1999,
respectively. 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 and related Reorganization Value to
net realizable value, 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.
Apparel Fabric Business - On November 17, 2000 the Company sold the
assets of its greige apparel fabric business which included three
manufacturing facilities in South Boston, Virginia; Greenville, South
Carolina; and Laurens, South Carolina; and administrative offices in
Greenville, South Carolina, New York and Los Angeles, thereby exiting
its apparel business. The business accounted for sales of $182.2
million, $137.6 million, and $125.4 million in Fiscal 1998, 1999 and
2000, respectively. The consideration for the sale consisted of
approximately $27.1 million in cash and future consideration in the
form of an earn-out based on earnings before interest, depreciation and
amortization, as defined, for the 24-month period following the
transaction plus certain assumed liabilities. The Company has accounted
for the results of the Apparel Fabric Business as a discontinued
operation and a charge for loss on disposal of discontinued operations
of $47.4 million was recorded in Fiscal 2000 related primarily to the
writedown of disposed plant assets and related Reorganization Value to
realizable value and other exit costs. The net proceeds from the sale
of $26.2 million were used to reduce the Company's outstanding
indebtedness on its Revolving Credit Facility which was amended in
connection with the transaction to reflect the Company's lower
borrowing requirements.
3. SALE OF CERTAIN OPERATIONS, PLANT CLOSING, WRITEDOWN OF CERTAIN
LONG-LIVED ASSETS AND RESTRUCTURING COSTS
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.
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, is now included in the loss from discontinued
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 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. The plant closing also resulted
in an additional charge in Fiscal 1999 of approximately $0.9 million
related principally to employee severance costs, all of which is now
included in the loss from discontinued operations in Fiscal 1999. 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.
30
31
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 $1.7 million related primarily to employee severance
costs. Except for the $1.7 million of restructuring costs incurred in
Fiscal 1999, all such costs are now reflected in discontinued
operations.
4. BALANCE SHEET COMPONENTS
The components of certain balance sheet accounts are (in thousands):
October 30, October 28,
1999 2000
----------- -----------
Inventories:
Raw materials and supplies $ 4,929 $ 5,796
Work-in-process 5,207 5,135
Finished goods 10,316 7,652
----------- -----------
$ 20,452 $ 18,583
=========== ===========
Prepaid expenses and other:
Deferred current tax $ 1,509 $ 4,200
Prepaid insurance 527 324
Other 1,997 2,469
----------- -----------
$ 4,033 $ 6,993
=========== ===========
Property, plant and equipment, net:
Land and improvements $ 927 $ 972
Buildings and improvements 5,332 5,396
Machinery and equipment 45,967 48,836
Furniture, fixtures and other 888 890
----------- -----------
53,114 56,094
Less accumulated depreciation (8,542) (13,455)
----------- -----------
44,572 42,639
Construction in progress 1,171 800
----------- -----------
$ 45,743 $ 43,439
=========== ===========
Other noncurrent assets:
Deferred financing fees $ 1,573 $ 237
Prepaid pension costs 8,486 10,848
Deferred income tax 1,602 7,756
Other -- 20
----------- -----------
$ 11,661 $ 18,861
=========== ===========
Other accrued expenses:
Roofing product liability costs $ 643 $ 1,750
Taxes payable other than income taxes 307 477
Income taxes 2,487 575
Other 2,801 2,122
----------- -----------
$ 6,238 $ 4,924
=========== ===========
Other long-term liabilities:
Roofing product liability costs and deferred warranty income $ 15,691 $ 14,415
Accrued postretirement and postemployment benefit plan liability 3,451 3,192
----------- -----------
$ 19,142 $ 17,607
=========== ===========
31
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5. LONG-TERM DEBT
Long-term debt consists of (in thousands):
October 30, October 28,
1999 2000
----------- -----------
Senior credit facility, revolving line of credit $ 75,394 $ 48,000
Equipment financing 1,125 736
Capital lease obligation 4,262 3,729
----------- -----------
Total 80,781 52,465
Less current portion (975) (936)
----------- -----------
Long-term portion $ 79,806 $ 51,529
=========== ===========
Senior Credit Facility - On October 9, 1997, JPS Elastomerics and
Converter & Industrial Corp. ("C&I") (the "Borrowing Subsidiaries") and
JPS entered into the Credit Facility Agreement (the "Credit
Agreement"), as amended, by and among the financial institutions party
thereto, Citibank, as agent, and Bank of America, as co-agent.
Subsequent to the sale of the Apparel Division on November 17, 2000,
(which yielded cash proceeds of $26.2 million) and the resulting
amendment, 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) $45 million and (b)
a specified borrowing base (the "Borrowing Base"). The Borrowing Base
is based upon eligible receivables, eligible inventory, and a specified
dollar amount (currently $14,000,000 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 November 12,
2001. As of October 28, 2000, 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 28, 2000 is approximately
8.9%. The Company pays an unused commitment fee of .25% per annum and a
letter of credit fee equal to the Applicable Margin for Eurodollar Rate
borrowings.
As of October 28, 2000, unused and outstanding letters of credit
totaled $1.1 million. The outstanding letters of credit reduce the
funds available under the Revolving Credit Facility. At October 28,
2000, the Company had approximately $17.0 million available for
borrowing under the Revolving Credit Facility.
32
33
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 28, 2000 was approximately $4.8 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 8 for obligations
under capital leases.
Other - 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. Substantially all of the Company's
assets are pledged as collateral for the Credit Agreement and the
equipment financing lease.
Interest expense includes $329,000 in Fiscal 1998, $414,000 in Fiscal
1999, and $521,000 in Fiscal 2000 representing amortization of debt
issuance expenses. Interest expense allocated to discontinued
operations was $2.9 million in Fiscal 2000, $3.9 million in Fiscal 1999
and $4.3 million in Fiscal 1998 based upon the ratio of identifiable
net assets.
Maturities - Aggregate principal maturities of all long-term debt,
exclusive of the capital lease obligation, are as follows (in
thousands):
Fiscal Year Ending
------------------
2001 $ 361
2002 48,375
--------
$ 48,736
========
6. EQUITY SECURITIES
The Company has one class of stock issued and outstanding.
Share Repurchase Program
In 2000, the Board of Directors authorized the expenditure of up to $8
million for the repurchase of the Company's common stock. In November,
2000, this authorization was increased to $10 million. As of October
28, 2000, the Company had repurchased 267,500 shares at an aggregate
cost of $1.3 million (See Note 12). Management intends to make
purchases of its common stock from time to time in the open market or
in negotiated transactions, but there is no assurance that future
repurchases will be made and the repurchase program may be discontinued
at any time. There is no time limit on stock repurchases. The Company
may use the stock to meet its obligations under its employee stock
option program. There were no reissuances of treasury stock in 2000.
1997 Incentive and Capital Accumulation Plan
The 1997 Incentive and Capital Accumulation Plan (the "Incentive Plan")
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. Pursuant to the Incentive
Plan, approximately 853,000 shares of Common Stock were initially
reserved for issuance to the participants. On April 7, 1999, the
Shareholders increased the number of shares reserved for issuance from
853,485 to 1,353,485. 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.
33
34
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 reissued at an exercise price of $4.375
per share, the fair market value per share on the date of repricing.
All repriced options 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.
Under the provisions of Financial Accounting Standards Board
Interpretation 44 (FIN 44), the Company is required to record
compensation expense on the repriced options if the stock price exceeds
certain threshold amounts. The provisions of FIN 44 will continue to
apply until the repriced options are exercised, expire or are
cancelled. In Fiscal 1999 and 2000, no compensation expense resulted
from the repriced options.
Options grants totaling 206,500 shares were made in Fiscal 2000. There
were no exercises of options. There were cancellations of 135,831
options during Fiscal 2000 as a result of employees voluntarily
terminating employment with the Company or lapses in options following
terminations where an exercise period was allowed. Options for 25,000
shares at $12.33 per share granted to Mr. Fulbright in October, 1997
for service as a non-employee director (prior to his appointment as
President and CEO), were voluntarily cancelled by Mr. Fulbright. As of
October 28, 2000 option prices ranged from $2.94 to $4.38 per share.
A summary of the activity in the Company's stock options for the years
ended October 31, 1998, October 30, 1999 and October 28, 2000 is
presented below:
Weighted Average
Number of Shares Exercise Price
---------------- ----------------
Outstanding at November 1, 1997 668,990 $ 12.33
Options canceled (94,009) 12.33
----------- -----------
Outstanding at October 31, 1998 574,981 12.33
Options granted 595,000 3.29
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 4.16
Options granted 206,500 3.16
Options cancelled (160,831) 6.80
----------- -----------
Outstanding at October 28, 2000 1,043,985 $ 3.56
=========== ===========
Exercisable at October 28, 2000 644,320
===========
Exercisable at October 30, 1999 436,996
===========
Exercisable at October 31, 1998 139,009
===========
Weighted average remaining contractual life (years)
at October 28, 2000 8
===========
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. 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.
As such, compensation expense was measured as the difference in the
market value of the
34
35
Company's stock between the grant date and the measurement date and the
expense is being recognized over the two-year vesting period. The
Company recognized compensation expense of approximately $0.7 million
in Fiscal 1999 and $0.2 million in Fiscal 2000 relating to these
options.
The fair value of options granted has been estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted average assumptions:
Stock Option Plan
-----------------
Fiscal Fiscal
1999 2000
------ ------
Option life (in years) 4.1 3.0
Risk-free interest rate 5.2% 6.3%
Stock price volatility .50 .66
Dividend yield -- --
Proforma weighted average value using formula $ 1.66 $ 1.53
Actual weighted average exercise price $ 3.29 $ 3.16
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
loss and net loss per share would have been increased to the amounts
indicated below (in thousands):
Fiscal Fiscal Fiscal
1998 1999 2000
---------- ---------- ----------
Net loss
As reported $ (10,664) $ (21,442) $ (41,230)
Pro forma $ (11,242) $ (22,626) $ (41,330)
Net loss per share
As reported $ (1.07) $ (2.14) $ (4.15)
Pro forma $ (1.12) $ (2.26) $ (4.16)
7. INCOME TAXES
The provision for income taxes on continuing operations included in the
consolidated statements of operations consists of the following (in
thousands):
Fiscal Fiscal Fiscal
1998 1999 2000
-------- -------- --------
Current federal provision -- -- $ 10
Current state provision $ 139 $ 285 303
Deferred federal provision 3,188 1,503 4,150
Deferred state provision 135 209 54
-------- -------- --------
Provision for income taxes $ 3,462 $ 1,997 $ 4,517
======== ======== ========
35
36
A reconciliation between income taxes at the 35% statutory Federal
income tax rate and the provision (benefit) for income taxes for Fiscal
1998, Fiscal 1999 and Fiscal 2000 is as follows (in thousands):
Fiscal Fiscal Fiscal
1998 1999 2000
----------- ------------- ------------
Income tax provision at Federal statutory rate $ 2,861 $ 1,098 $ 3,782
Increase in income taxes arising from effect of:
State and local income taxes 274 494 357
Amortization of excess reorganization value 257 329 295
Other 70 76 83
----------- ------------- ------------
Provision for income taxes $ 3,462 $ 1,997 $ 4,517
=========== ============= ============
Presented below are the elements which comprise deferred tax assets and
liabilities (in thousands):
October 30, October 28,
1999 2000
----------- -----------
Gross deferred assets:
Estimated allowance for doubtful accounts $ 820 $ 959
Excess of tax over financial statement basis of inventory 683 549
Accruals deductible for tax purposes when paid 456 278
Deferred compensation deductible for tax purposes when paid 456 477
Postretirement benefits deductible for tax purposes when paid 1,536 1,587
Miscellaneous 28 0
Alternative minimum tax credit carryforward available 1,773 1,783
Deferred financial statement income recognized for tax purposes
when received 5,297 6,143
Excess of tax over financial statement carrying value of
investment in discontinued operation 5,444 13,915
Excess of tax basis of intangibles over financial statement basis 4,553 3,798
Net operating loss carryforward 21,815 22,399
Less valuation allowance (30,470) (29,180)
----------- -----------
Gross deferred assets 12,391 22,708
----------- -----------
Gross deferred liabilities:
Pension asset recognized for book purposes $ (3,225) $ (4,123)
Excess of financial statement over tax basis of property, plant,
and equipment (6,055) (6,629)
----------- -----------
Gross deferred liabilities (9,280) (10,752)
----------- -----------
Net deferred tax asset $ 3,111 $ 11,956
=========== ===========
Recognized in the accompanying consolidated balance sheets
as follows:
Prepaid expenses and other $ 1,509 $ 4,200
Other non-current assets 1,602 7,756
----------- -----------
$ 3,111 $ 11,956
=========== ===========
36
37
For Fiscal 2000, the Company recorded a tax expense on continuing
operations of $4.5 million. In conjunction with the sale of the
Apparel Division, the Company evaluated the valuation allowance on its
deferred tax asset. Based on historical and expected income of the
continuing operations, a determination was made that the valuation
allowances established in fresh start accounting should be reversed.
Accordingly, the Company reduced Reorganization Value by $11.4
million. The Company also recorded a tax benefit of $4.2 million on
the loss on sale of discontinued operations. A valuation allowance was
recorded on the remainder of this loss. The Company recorded tax
expense on continuing operations of approximately $3.5 in Fiscal 1998
and $2.0 million in Fiscal 1999.
At October 28, 2000, the Company had regular federal net operating
loss carryforwards for tax purposes of approximately $55 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 $65 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.
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. 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.
8. COMMITMENTS AND CONTINGENCIES
Leases - The Company leases office facilities, machinery and computer
equipment under noncancellable operating leases and capital leases.
Rent expense from continuing operations was approximately $2,077,000
in Fiscal 1998, $2,066,000 in Fiscal 1999, and $2,141,000 in Fiscal
2000.
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 28, 2000 (in thousands):
Capital Operating
Fiscal Year Ending Lease Leases
------------------ --------- ---------
2001 $ 840 $ 459
2002 840 273
2003 840 87
2004 1,587 5
2005 380 2
--------- ---------
Total future minimum lease payments 4,487 $ 826
=========
Less: amount representing interest (758)
---------
Present value of net minimum lease payments
(included in long-term debt - see Note 6) $ 3,729
=========
Litigation - The Company is exposed to a number of asserted and
unasserted potential claims encountered in the normal course of
business including certain asbestos based claims. 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.
37
38
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 140 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.
9. 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
businesses which were sold or plants which were closed by the Company.
The benefits of these former employees were "frozen" at the respective
dates of sale of the businesses or closure of the plants. Accordingly,
these former employees will retain benefits earned through the
respective disposal dates; however, they will not accrue additional
benefits. 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.
Assets of the pension plan are invested in a bond portfolio covering
specific liabilities and in common and preferred stocks, government and
corporate bonds, 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):
Fiscal Fiscal Fiscal
1998 1999 2000
-------- -------- --------
Components of net periodic
pension cost:
Service cost-benefits earned
during the period $ 2,239 $ 2,268 $ 1,678
Interest cost on projected
benefit obligation 7,505 7,321 7,455
Return on plan assets (8,543) (9,198) (9,264)
Recognized actuarial loss -- 195 --
-------- -------- --------
Net periodic pension cost (income) $ 1,201 $ 586 $ (131)
======== ======== ========
The weighted-average rates used in determining pension cost for the
plan are as follows:
Discount rate 6.75% 7.50% 7.75%
Expected long-term rate of return
on plan assets 9.00% 9.00% 9.00%
Rate of compensation increase Age-related Age-related Age-related
38
39
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 30, October 28,
1999 2000
----------- -----------
Change in benefit obligation:
Benefit obligation at beginning of year $ 111,622 $ 106,115
Service cost 2,269 1,678
Interest cost 7,322 7,455
Benefits paid (8,957) (8,953)
Actuarial gain (6,141) (5,100)
----------- -----------
Benefit obligation at end of year 106,115 101,195
----------- -----------
Change in plan assets:
Fair value of plan assets at beginning of year 103,855 104,788
Actual return on plan assets 4,636 8,096
Employer contributions 5,254 2,233
Benefits paid (8,957) (8,953)
----------- -----------
Fair value of plan assets at end of year 104,788 106,164
----------- -----------
Reconciliation of funded status:
Funded status $ (1,327) $ 4,969
Unrecognized actuarial loss 9,813 5,879
----------- -----------
Prepaid benefit cost, included in Other Assets $ 8,486 $ 10,848
=========== ===========
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, excluding the Apparel Division, were approximately
$180,000 in Fiscal 1998, $188,000 in Fiscal 1999, and $199,000 in
Fiscal 2000.
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 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):
Fiscal Fiscal Fiscal
1998 1999 2000
-------- -------- --------
Service cost for benefits earned $ 107 $ 143 $ 34
Interest cost on APBO 267 294 207
Recognized actuarial loss -- 124 286
-------- -------- --------
Net periodic postretirement cost $ 374 $ 561 $ 527
======== ========= ========
39
40
The weighted-average rates used in determining postretirement medical
and life insurance costs are as follows:
Discount rate 6.75% 7.50% 7.75%
A reconciliation of the postretirement medical and life insurance
plan's projected benefit obligation and funding status is as follows
(in thousands):
October 30, October 28,
1999 2000
----------- -----------
Change in benefit obligation:
Benefit obligation at beginning of year $ 3,723 $ 3,262
Service cost 143 34
Interest cost 294 207
Net benefits paid (456) (426)
Actuarial (gain) or loss (442) 497
----------- -----------
Benefit obligation at end of year $ 3,262 $ 3,574
=========== ===========
Reconciliation of funded status:
Funded status $ (3,262) $ (3,574)
Unrecognized actuarial (gain) or loss (68) 0
----------- -----------
Net amount recognized at year-end $ (3,330) $ (3,574)
=========== ===========
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.
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 30, 1999 and October 28, 2000 is included in other long-term
liabilities in the accompanying consolidated financial statements.
10. BUSINESS SEGMENTS
The Company's reportable segments are JPS Elastomerics and JPS Glass.
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 materials for a variety of applications
such as printed circuit boards, filtration, advanced composites,
building products, defense, and aerospace.
The Company previously identified three other segments which met its
criteria as reportable segments (the cotton commercial products, yarn
sales and apparel segments), all of which have been exited.
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. Indirect
corporate
40
41
expenses allocated to each business segment are based on management's
analysis of the costs attributable to each segment. The following table
presents certain information regarding the business segments:
Industry segment information (in thousands):
Fiscal Fiscal Fiscal
Year Year Year
Ended Ended Ended
October 31, October 30, October 28,
1998 1999 2000
----------- ----------- -----------
Net sales:
Elastomerics $ 83,708 $ 80,035 $ 86,595
Glass 79,323 83,453 87,319
----------- ----------- -----------
163,031 163,488 173,914
Less intersegment sales(1) (7,087) (6,621) (5,936)
----------- ----------- -----------
Net sales $ 155,944 $ 156,867 $ 167,978
=========== =========== ===========
Operating profit(2)
Elastomerics $ 6,290 $ 4,889 $ 7,458
Glass 4,860 1,758 6,790
----------- ----------- -----------
Operating profit 11,150 6,647 14,248
Interest expense, net (2,975) (3,511) (3,442)
----------- ----------- -----------
Income before income taxes and
discontinued operations $ 8,175 $ 3,136 $ 10,806
=========== =========== ===========
Depreciation and amortization expense:
Elastomerics $ 2,402 $ 3,007 $ 2,911
Glass 2,286 3,375 3,246
----------- ----------- -----------
$ 4,688 $ 6,382 $ 6,157
=========== =========== ===========
Capital expenditures:
Elastomerics $ 5,445 $ 2,281 $ 1,593
Glass 10,008 1,790 1,016
----------- ----------- -----------
$ 15,453 $ 4,071 $ 2,609
=========== =========== ===========
Identifiable assets:
Elastomerics $ 127,128 $ 108,365 $ 74,801
Glass 129,059 108,823 74,569
Eliminations (903) (872) (1,128)
----------- ----------- -----------
$ 255,284 $ 216,316 $ 148,242
=========== =========== ===========
(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 of each business segment includes a proportionate
share of indirect corporate expenses. The Company's 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.
41
42
11. 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 1999 and Fiscal 2000 are as follows:
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------
Year Ended October 30, 1999:
Net sales $ 35,398 $ 40,403 $ 39,375 $ 41,691
Cost of sales 27,205 32,044 30,328 32,002
--------- --------- --------- ---------
Gross profit 8,193 8,359 9,047 9,689
Selling, general and administrative expenses 6,421 7,626 6,145 6,786
Other expense (income), net (3) 1,348 (44) 362
--------- --------- --------- ---------
Operating profit (loss) 1,775 (615) 2,946 2,541
Interest expense (867) (877) (887) (880)
--------- --------- --------- ---------
Income (loss) before income taxes and discontinued operations 908 (1,492) 2,059 1,661
Provision (benefit) for income taxes 578 (950) 1,312 1,057
--------- --------- --------- ---------
Income (loss) from continuing operations 330 (542) 747 604
Discontinued operations (473) (25,743) 2,785 850
--------- --------- --------- ---------
Net income (loss) $ (143) $ (26,285) $ 3,532 $ 1,454
========= ========= ========= =========
Net income (loss) per common share $ (0.01) $ (2.63) $ 0.35 $ 0.15
========= ========= ========= =========
Year Ended October 28, 2000:
Net sales $ 35,137 $ 41,039 $ 43,825 $ 47,977
Cost of sales 26,767 30,288 32,988 36,337
--------- --------- --------- ---------
Gross profit 8,370 10,751 10,837 11,640
Selling, general and administrative expenses 6,167 6,889 7,090 7,222
Other income, net (3) (3) (6) (6)
--------- --------- --------- ---------
Operating profit 2,206 3,865 3,753 4,424
Interest expense (853) (845) (836) (908)
--------- --------- --------- ---------
Income before income taxes and discontinued operations 1,353 3,020 2,917 3,516
Provision for income taxes 498 1,524 953 1,542
--------- --------- --------- ---------
Income from continuing operations 855 1,496 1,964 1,974
Discontinued operations (143) 87 (548) (46,915)
--------- --------- --------- ---------
Net income (loss) $ 712 $ 1,583 $ 1,416 $ (44,941)
========= ========= ========= =========
Net income (loss) per common share $ 0.07 $ 0.16 $ 0.14 $ (4.56)
========= ========= ========= =========
12. SUBSEQUENT EVENT (Unaudited)
On December 19, 2000, the Company repurchased 575,617 shares of its
common stock at a cost of $2.1 million.
42
43
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 Company's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held February 27, 2001 (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 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 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 28, 2000
and October 30, 1999.
(iii) Consolidated Statements of Operations for the fiscal
years ended October 28, 2000, October 30, 1999 and
October 31, 1998.
(iv) Consolidated Statements of Shareholders' Equity for
the fiscal years ended October 28, 2000, October 30,
1999 and October 31, 1998.
(v) Consolidated Statements of Cash Flows for the fiscal
years ended October 28, 2000, October 30, 1999 and
October 31, 1998.
(vi) Notes to Consolidated Financial Statements.
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.
43
44
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 28,
2000.
(c) Reference is made to Item 14(a)(3) above.
(d) Reference is made to Item 14(a)(2) above.
44
45
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 Amended and Restated By-laws of JPS.(P)
3.2 Certificate of Incorporation of JPS Industries, Inc. (T)
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)
10.7 Trademark License Agreement, dated as of May 9, 1988, by and
between J.P. Stevens and JPS Acquisition Corp. (predecessor to the
Company.)(B)
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)
10.15 Lease Modification and Extension Agreement, dated as of April 30,
1993, by and between 1185 Associates and JCIC.(E)
10.18 Lease Modification and Extension Agreement, dated as of November
17, 1994, by and between 1185 Associates and JCIC.(G)
45
46
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)
10.25 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)
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)
10.35 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)
46
47
Exhibit
Number Description
- ------- -----------
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)
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)
10.54 Fourth Amendment to the Credit Facility Agreement, dated as of
February 29, 2000, by and among JPS, C&I, Elastomerics, the
financial institutions listed on the signature pages thereto, and
the agent and co-agent thereto.(U)
10.55 Asset Purchase Agreement dated as of November 16, 2000, by and
among JPS Industries, Inc., JPS Converter and Industrial Corp. and
JPSA Acquisition Corp.(V)
10.56 Employment Agreement dated May 31, 2000, between the Company and
Charles R. Tutterow.(W)
10.57 Fifth Amendment to the Credit Facility Agreement, dated as of
November 9, 2000, by and among JPS, C&I, Elastomerics, the
financial institutions listed on the signature pages thereto, and
the agent and co-agent thereto.(W)
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.
47
48
Exhibit
Number Description
- ------- -----------
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)
- -------------------
(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.
(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) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended January 29, 2000.
(V) Previously filed as an exhibit to the Company's Current Report on Form
8-K dated December 4, 2000.
(W) Filed herewith.
48
49
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 25, 2001 By: /s/ Charles R. Tutterow
-------------------------------------
CHARLES R. TUTTEROW
Executive Vice President, Chief Financial
Officer and Secretary
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 25, 2001
- --------------------------- Chief Executive Officer
MICHAEL L. FULBRIGHT
/s/ Robert J. Capozzi Director January 25, 2001
- ---------------------------
ROBERT J. CAPOZZI
/s/ Jeffrey S. Deutschman Director January 25, 2001
- ---------------------------
JEFFREY S. DEUTSCHMAN
/s/ Nicholas P. DiPaolo Director January 25, 2001
- ---------------------------
NICHOLAS P. DIPAOLO
/s/ John M. Sullivan, Jr. Director January 25, 2001
- ---------------------------
JOHN M. SULLIVAN, JR.
/s/ Charles R. Tutterow Executive Vice President, January 25, 2001
- --------------------------- Chief Financial Officer and Secretary
CHARLES R. TUTTEROW
49
50
JPS INDUSTRIES, INC. INDEX TO SCHEDULE
INDEX TO FINANCIAL STATEMENT SCHEDULE
For the fiscal years ended October 31, 1998, October 30, 1999, and October 28,
2000.
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
51
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:
Fiscal Year Ended October 31, 1998 (52 Weeks)
Allowance for doubtful accounts $ 526 $ (28) $ 294 $ -- $ 792
Claims, returns and other allowances 151 -- 239 235 155
----- ----- ----- ------ ------
$ 677 $ (28) $ 533 $ 235 $ 947
===== ===== ===== ====== ======
Fiscal Year Ended October 30, 1999 (52 Weeks)
Allowance for doubtful accounts $ 792 $ 125 $(511) $ 1 $ 405
Claims, returns and other allowances 155 38 333 272 254
----- ----- ----- ------ ------
$ 947 $ 163 $(178) $ 273 $ 659
===== ===== ===== ====== ======
Fiscal Year Ended October 28, 2000 (52 Weeks)
Allowance for doubtful accounts $ 405 $ 843 $ -- $ 548 $ 700
Claims, returns and other allowances 254 -- 331 261 324
----- ----- ----- ------ ------
$ 659 $ 843 $ 331 $ 809 $1,024
===== ===== ===== ====== ======
(a) Change in various reserves charged to net sales.
(b) Uncollected receivables written off, net of recoveries.
S-2