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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 September 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 (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.
(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 September 30, 2000 there were 5,558,505 shares of Common Stock
outstanding.
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JPS PACKAGING COMPANY
FORM 10-Q
September 30, 2000
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INTRODUCTORY COMMENTS
---------------------
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 SEPTEMBER 30, 2000 AND 1999
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
2000 1999 2000 1999
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net Sales $23,060 $20,103 $65,952 $61,319
Cost of Goods Sold 21,002 18,823 59,837 55,477
----------------- ----------------- ----------------- -----------------
Gross Profit 2,058 1,280 6,115 5,842
Selling, General and
Administrative Expenses 2,003 2,054 6,384 6,709
----------------- ----------------- ----------------- -----------------
Operating Income (Loss) 55 (774) (269) (867)
Interest Income (Expense),
Net 5 (31) (26) (35)
----------------- ----------------- ----------------- -----------------
Income (Loss) from
Continuing Operations
Before Income Taxes 60 (805) (295) (902)
Income Taxes - - - -
----------------- ----------------- ----------------- -----------------
Income (Loss) from
Continuing Operations 60 (805) (295) (902)
Discontinued Operation (net
of tax):
Gain on sale of
discontinued operation - - - 415
----------------- ----------------- ----------------- -----------------
Net Income (Loss) $ 60 $ (805) $ (295) $ (487)
================= ================= ================= =================
Net Income (Loss) Per Share
From Continuing Operations:
Basic and Diluted $ 0.01 $ (0.14) $ (0.05) $ (0.16)
Net Income (Loss) Per Share:
Basic and Diluted $ 0.01 $ (0.14) $ (0.05) $ (0.09)
Average Number of Common
Shares Outstanding 5,558 5,587 5,556 5,553
</TABLE>
See accompanying notes to financial statements.
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JPS PACKAGING COMPANY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(In thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
----------------------- -----------------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 1,398 $ 34
Accounts receivable, net 12,651 10,420
Inventories (Note 3) 12,130 12,141
Other current assets 771 658
Current deferred income taxes 355 355
----------------------- -----------------------
Total current assets 27,305 23,608
Property, plant and equipment 72,205 70,302
Less: Accumulated depreciation 47,350 43,699
----------------------- -----------------------
Property, plant and equipment, net 24,855 26,603
OTHER ASSETS
Goodwill, net 1,836 2,056
Prepaid pension 375 410
Other 6 37
----------------------- -----------------------
Total other assets 2,217 2,503
----------------------- -----------------------
Total Assets $54,377 $52,714
======================= =======================
</TABLE>
See accompanying notes to financial statements.
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JPS PACKAGING COMPANY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(In thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
----------------------- -----------------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Bank overdrafts $ - $ 1,417
Accounts payable 6,079 3,775
Accrued customer rebates 1,603 1,034
Accrued vacation 751 766
Other accrued liabilities 2,074 1,570
----------------------- -----------------------
Total current liabilities 10,507 8,562
Deferred income taxes 3,850 3,850
----------------------- -----------------------
Total liabilities 14,357 12,412
STOCKHOLDERS' EQUITY (Note 1)
Common stock, par value $0.01, 15,000,000 shares
authorized; issued and outstanding 5,558,505
shares at September 30, 2000 and 5,555,205 at
December 31, 1999 56 56
Additional paid-in capital 47,767 47,754
Retained earnings (deficit) (7,803) (7,508)
----------------------- -----------------------
Total Stockholders' Equity 40,020 40,302
----------------------- -----------------------
Total Liabilities and Stockholders' Equity $54,377 $52,714
======================= =======================
</TABLE>
See accompanying notes to financial statements.
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JPS PACKAGING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, 2000 September 30, 1999
---------------------- ----------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (295) $ (487)
Adjustments To Reconcile Net Loss to Net Cash
Provided (Used) by Operating Activities:
Depreciation and Amortization 3,972 3,841
Gain on Sale of Discontinued Operation - (415)
Loss (Gain) on Disposal of Equipment (5) 16
Changes in Assets and Liabilities:
Accounts receivable, net (2,231) (2,033)
Inventories 11 (3,139)
Accounts payable 2,304 506
Other 1,012 (202)
---------------------- ----------------------
Net Cash Provided (Used) by Continuing Operations 4,768 (1,913)
Net Cash Used by Discontinued Operation - (285)
---------------------- ----------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 4,768 (2,198)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (2,018) (2,574)
Proceeds from Sale of Discontinued Operations - 402
Proceeds from Sales of Equipment 18 -
---------------------- ----------------------
NET CASH USED IN INVESTING ACTIVITIES (2,000) (2,172)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Bank Overdrafts (1,417) 981
Net Borrowing under Credit Line - 1,000
Proceeds from exercise of Stock Options 13 10
---------------------- ----------------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (1,404) 1,991
---------------------- ----------------------
Net Increase (Decrease) In Cash 1,364 (2,379)
CASH, Beginning of Period 34 2,414
---------------------- ----------------------
CASH, End of Period $ 1,398 $ 35
====================== ======================
Supplemental Cash Flow Information:
Cash Paid During the Period for
Interest $ 48 $ 52
Income Taxes - -
</TABLE>
See accompanying notes to financial statements.
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JPS PACKAGING COMPANY
SEPTEMBER 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 September
30, 2000 and December 31, 1999 were:
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<TABLE>
<CAPTION>
(In thousands)
-------------------------------------------------
September 30, December 31,
2000 1999
----------------------- -----------------------
<S> <C> <C>
Raw materials $ 4,157 $ 3,996
Work in process 2,792 3,163
Finished goods 5,181 4,982
----------------------- -----------------------
Total inventory $12,130 $12,141
======================= =======================
</TABLE>
NOTE 4 - EARNINGS PER SHARE
The computation of basic and diluted earnings per share is as follows: (in
thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 2000 September 30, 2000
<S> <C> <C>
Net Income (Loss) $ 60 $ 295
Basic Earnings (Loss) per Common Share $ 0.01 $(0.05)
Average Number of Basic Common Shares
Outstanding 5,556 5,556
Diluted Earnings (Loss) per Common Share ** $ 0.01 $(0.05)
Average Number of Diluted Common
Shares Outstanding ** 5,558 5,556
</TABLE>
** For the nine month period options outstanding were not included in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations
Three months ended September 30, 2000 and September 30, 1999
Sales for the quarter were $23.1 million in 2000 and $20.1 in 1999, an
increase of $3.0 million. Sales in the fresh produce market were up
approximately $1.3 million, which represented 43% of the total increase in
sales. The increase in fresh produce sales combined with an increase of $1.2
million in label sales accounts for 83% of the total increase in sales from the
same quarter of 1999.
Gross profit as a percentage of net sales increased from 6.4% in 1999 to
8.9% in 2000, an increase of $778,000. Increased sales volume offset in part
by changes in product mix and continuing pricing pressures from larger
competitors resulted in an increase in the gross profit percentage.
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Nine months ended September 30, 2000 and September 30, 1999
Sales for the nine months ended September 30 increased $4.7 million from
$61.3 million in 1999 to $66.0 million in 2000. An increase of $3.9 million in
fresh produce sales and $1.1 million in labeling sales offset declines in the
liquid and lidding markets.
Gross profit as a percentage of net sales decreased from 9.5% in 1999 to
9.3% in 2000. Higher material cost, primarily in the first quarter of 2000,
changes in the product mix and continued pricing pressures from larger
competitors have contributed to the decrease in gross profit percentage.
Increased sales volume offset some of the cost increases.
Selling, general and administrative expenses (SG&A) were $6.4 million for
the first nine months of 2000 versus $6.7 million in 1999. The majority of the
decrease is the result of reduced corporate spending.
Liquidity and Capital Resources
Net cash provided by continuing operations was $4.8 million for the nine
months ended September 30, 2000 compared to cash used of $1.9 million for the
same time period in 1999. In the first nine months of 1999 there was a $3.1
million increase in inventories that did not occur in 2000. Capital
expenditures have decreased $556,000. Approximately 95% of capital
expenditures in 2000 are for improvements to production related equipment. In
1999, approximately 13% 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 September 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 September
30, 2000, the Company had $13.8 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 September 30, 2000 the Company
was in compliance with the 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.
Subsequent Event
On October 13, 2000 Pechiney, JPS Acquisition Inc. and JPS Packaging Company
signed a definitive merger agreement for the acquisition of JPS Packaging
Company. On October 30, 2000 a cash tender offer was commenced for all the
outstanding shares of JPS Packaging Company stock at a price of $7.86 per JPS
Packaging share. The tender offer is
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scheduled to expire at 5:00 p.m., New York City time on Tuesday November 28,
2000, unless extended. The complete terms and conditions of the tender offer are
set forth in the offering documents filed with the Securities and Exchange
Commission on October 30, 2000.
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PART II - OTHER INFORMATION
Item 1.) Legal Proceedings
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
None
Item 5.) Other Information
None
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 third 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: November 10, 2000 /s/ John T. Carper
By: John T. Carper
President & CFO
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