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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the Quarter Ended June 30, 2000
Commission file number 0-24415
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JPS Packaging Company
(Exact name of registrant as specified in its charter)
Delaware 31-1311495
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4200 Somerset Drive, Suite 208
Prairie Village, KS 66208
913-381-0008
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 (of 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.
(1) Yes [X] No [ ] (2) Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, [X]
As of June 30, 2000 there were 5,555,205 shares of Common Stock outstanding.
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JPS PACKAGING COMPANY
FORM 10-Q
June 30, 2000
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INTRODUCTORY COMMENTS
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The Consolidated Financial Statements included herein have been prepared by
Management, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although Management believes that the
disclosures are adequate to enable a reasonable understanding of the information
presented. It is recommended that these Consolidated Financial Statements be
read in conjunction with the financial statements and the notes thereto included
in the Company's Annual Report filed March 15, 2000 on Form 10-K for the year
ended December 31, 1999.
Except for historical information contained herein, the matters set forth
in this report or in oral statements made by officers of the Company are
forward-looking statements that involve certain risks and uncertainties that
could cause actual results to differ materially from those in the forward-
looking statements. The Company's expectations respecting future revenues and
profits assume, among other things, reasonable continued growth in the general
economy which affects demand for the Company's products, reasonable stability in
raw material pricing, changes in which affect customer purchasing decisions as
well as the Company's revenues and margins. Investors are advised to consider
these and other risks and uncertainties that may be discussed in documents filed
by the Company with the Securities and Exchange Commission.
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JPS PACKAGING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED JUNE 30, 2000 AND 1999
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Sales $22,190 $20,502 $42,892 $41,215
Cost of Goods Sold 19,749 18,354 38,835 36,651
------- ------- ------- -------
Gross Profit 2,441 2,148 4,057 4,564
Selling, General and
Administrative Expenses 2,135 2,258 4,381 4,658
------- ------- ------- -------
Operating Income (Loss) 306 (110) (324) (94)
Interest Expense, Net (13) (24) (31) (4)
------- ------- ------- -------
Income (Loss) from
Continuing Operations
Before Income Taxes 293 (134) (355) (98)
Income Taxes - - - -
------- ------- ------- -------
Income (Loss) from
Continuing Operations 293 (134) (355) (98)
Discontinued Operation (net
of tax):
Gain on sale of
discontinued operation - 415 - 415
------- ------- ------- -------
Net Income (Loss) $ 293 $ 281 $ (355) $ 317
======= ======= ======= =======
Net Income (Loss) Per Share
From Continuing Operations:
Basic and Diluted $ 0.05 $ (0.02) $ (0.06) $ (0.02)
Net Income (Loss) Per Share:
Basic and Diluted $ 0.05 $ 0.05 $ (0.06) $ 0.05
Average Number of Common 5,555 5,592 5,555 5,566
Shares Outstanding
</TABLE>
See accompanying notes to financial statements.
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JPS PACKAGING COMPANY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
(In thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
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(Unaudited)
CURRENT ASSETS
<S> <C> <C>
Cash and equivalents $ 1 $ 34
Accounts receivable, net 13,739 10,420
Inventories (Note 3) 13,273 12,141
Other current assets 522 658
Current deferred income taxes 355 355
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Total current assets 27,890 23,608
Property, plant and equipment 71,455 70,302
Less: Accumulated depreciation 46,129 43,699
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Property, plant and equipment, net 25,326 26,603
OTHER ASSETS
Goodwill, net 1,909 2,056
Prepaid pension 387 410
Other 7 37
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Total other assets 2,303 2,503
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Total Assets $55,519 $52,714
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</TABLE>
See accompanying notes to financial statements.
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JPS PACKAGING COMPANY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
(In thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
(Unaudited)
CURRENT LIABILITIES
<S> <C> <C>
Bank overdrafts $ 2,113 $ 1,417
Accounts payable 6,195 3,775
Accrued customer rebates 950 1,034
Accrued vacation 762 766
Other accrued liabilities 1,702 1,570
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Total current liabilities 11,722 8,562
Deferred income taxes 3,850 3,850
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Total liabilities 15,572 12,412
STOCKHOLDERS' EQUITY (Note 1)
Common stock, par value $0.01, 15,000,000 shares
authorized; issued and outstanding 5,555,205
shares at June 30, 2000 and December 31, 1999. 56 56
Preferred stock, par value $0.01, 1,000,000
shares authorized; none outstanding - -
Additional paid-in capital 47,754 47,754
Retained earnings (deficit) (7,863) (7,508)
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Total Stockholders' Equity 39,947 40,302
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Total Liabilities and Stockholders' Equity $ 55,519 $ 52,714
-------- --------
</TABLE>
See accompanying notes to financial statements.
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JPS PACKAGING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND JUNE 30, 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (355) $ 317
Adjustments To Reconcile Net Income (Loss) to Net Cash
Provided (Used) by Operating Activities:
Depreciation and Amortization 2,632 2,559
Gain on Sale of Discontinued Operation - (415)
Loss on Disposal of Equipment 12 13
Changes in Assets and Liabilities:
Accounts receivable, net (3,319) (2,635)
Inventories (1,132) (3,958)
Accounts payable 2,420 2,055
Other 234 (435)
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Net Cash Provided (Used) by Continuing Operations 492 (2,499)
Net Cash Used by Discontinued Operation - (285)
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 492 (2,784)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (1,221) (1,783)
Proceeds from Sale of Discontinued Operations - 402
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NET CASH USED IN INVESTING ACTIVITIES (1,221) (1,381)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Bank Overdrafts 696 819
Net Borrowing under Credit Line - 969
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NET CASH PROVIDED BY FINANCING ACTIVITIES 696 1,788
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Net Decrease In Cash (33) (2,377)
CASH, Beginning of Period 34 2,414
------- -------
CASH, End of Period $ 1 $ 37
======= =======
Supplemental Cash Flow Information:
Cash Paid During the Period for
Interest $ 44 $ 15
Income Taxes - -
</TABLE>
See accompanying notes to financial statements.
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JPS PACKAGING COMPANY
JUNE 30, 2000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements include the accounts of
JPS Packaging and its wholly owned subsidiary (the Company). The entity
operates facilities in San Leandro, California and Akron, Ohio.
The information included in these condensed consolidated financial
statements reflects all adjustments (consisting only of normal recurring
accruals) which, in the opinion of management, are necessary for a fair
statement of the results for the interim periods presented.
NOTE 2 - ACCOUNTING PRINCIPLES AND POLICIES
The accompanying financial statements have been prepared consistent with the
accounting principles and policies described more fully in Note 1 of the
Company's Annual Report for the year ended December 31, 1999.
NOTE 3 - INVENTORIES
Inventories are stated at lower of cost or market. In the third quarter of
1999 the Company elected to change from the last-in, first-out (LIFO) method to
the first-in, first-out (FIFO) method of inventory valuation. There was no
effect on the financial statements for the interim periods in 1999. The Company
believes the change to the FIFO method of valuation results in better matching
of raw material cost to the selling price of finished goods and better reflects
the current inventory value at period-end dates. Work in process and finished
goods inventories include the cost of material, labor and factory overhead
required in the production of the Company's products. Inventories at June 30,
2000 and December 31, 1999 were:
<TABLE>
<CAPTION>
(In thousands)
---------------------------------------
<S> <C> <C>
June 30, December 31,
2000 1999
------------ ---------------
Raw materials $ 4,353 $ 3,996
Work in process 4,468 3,163
Finished goods 4,452 4,982
------------ ---------------
Total inventory $13,273 $12,141
============ ===============
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations
Three months ended June 30, 2000 and June 30, 1999
Sales for the quarter were $22.2 million in 2000 and $20.5 in 1999, an
increase of $1.7 million. Sales in the fresh produce market were up
approximately $1.3 million, which represented 77% of the total increase in
sales. Increases in labeling and liquid of approximately $600,000 offset the
decline in lidding and specialty sales.
Gross profit as a percentage of net sales increased from 10.5% in 1999 to
11% in 2000, an increase of $293,000. Material costs have increased from the
second quarter 1999 due to continued rising material costs. The impact of
increased sales offset by raw material price increases, changes in product mix
and continuing pricing pressures form larger competitors, resulted in a slight
increase in the gross profit percentage.
Six months ended June 30, 2000 and June 30, 1999
Sales for the six months ended June 30 increased $1.7 million from $41.2
million in 1999 to $42.9 million in 2000. The increase of $2.6 million on fresh
produce sales offset a decrease of $900,000 in other markets.
Gross profit as a percentage of net sales decreased from 11.1% in 1999 to
9.5% in 2000, a decrease of $507,000. The decline in gross profit is
attributable to raw material increases, changes in the product mix, continued
pricing pressures from larger competitors and start up costs associated with new
business.
Selling, general and administrative expenses (SG&A) were $4.4 million for
the first six months of 2000 versus $4.7 million in 1999. The majority of the
decrease is the result of reduced corporate spending.
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Liquidity and Capital Resources
Net cash provided by continuing operations was $0.5 million for the six
months ended June 30, 2000 compared to cash used of $2.5 million for the same
time period in 1999. In the first six months of 1999 there was a $4.0 million
increase in inventories that did not occur in 2000. Capital expenditures have
decreased $500,000. The majority of expenditures in 2000 are for improvements to
production related equipment. In 1999, approximately 20% of the expenditures
were for computer related software and hardware, while the remaining amount was
for production related equipment.
The Company currently has a $15,000,000 credit facility, of which none was
borrowed against at June 30, 2000. The facility is secured by accounts
receivable, inventory, and property, plant, and equipment. Borrowings are
limited to a percentage of accounts receivable and inventory. As of June 30,
2000, the Company had $14.4 million in unused borrowing capacity. The revolving
credit facility includes financial covenants regarding minimum tangible net
worth, capital expenditures, EBITDA and cash flow. The covenants regarding
EBITDA were amended May 5, 2000. As of June 30, 2000 the Company was in
compliance with the all financial covenants, as amended. Management believes
that cash generated from operations and funds available under the Company's
credit facility will be adequate to meet foreseeable funding needs.
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PART II - OTHER INFORMATION
Item 1.) Legal Proceeding
None
Item 2.) Changes in Securities
None
Item 3.) Defaults Upon Senior Securities
None
Item 4.) Submission of Matters to a Vote of Securities Holders
At the Company's annual meeting held April 17, 2000, shareholders were
asked to vote on the election of directors and the appointment of independent
auditors. The following results were recorded:
1. Election of Directors
The shareholders were asked to elect the following slate of existing
directors to serve until their successors have been duly elected and qualified
or until their death, resignation or removal from office.
<TABLE>
<CAPTION>
Director For Withheld
--------- --- --------
<S> <C> <C>
G. Kenneth Baum 4,912,807 32,490
Leo Benatar 4,912,807 32,490
John T. Carper 4,913,375 31,922
D. Patrick Curran 4,913,338 31,959
N. Brian Stevenson 4,913,375 31,922
Charles A. Sullivan 4,913,338 31,959
William D. Thomas 4,913,107 32,390
</TABLE>
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2. Election of Independent Auditors
The Shareholders were asked to appoint KPMG LLP as independent
auditors of the Company for 2000. The proposal was approved with the following
votes:
For 4,933,222
Against 852
Withheld 11,223
Item 5.) Other Information
Brian Stevenson, the Company's CEO, resigned effective July 7, 2000.
Item 6.) Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the second quarter of
2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JPS PACKAGING COMPANY
Date: August 10, 2000 /s/ John T. Carper
----------------------
By: John T. Carper
President & CFO
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