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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 29, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
------------ ------------
Commission File Number 33-27038
JPS TEXTILE GROUP, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 57-0868166
- ---------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
555 North Pleasantburg Drive, Suite 202, Greenville, South Carolina 29607
- --------------------------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number (803) 239-3900
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------ ------
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 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. Yes X No
------ ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 490,000 shares of the
Company's Class A Common Stock and 510,000 shares of Class B Common Stock were
outstanding as of June 9, 1995.
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JPS TEXTILE GROUP, INC.
INDEX
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Page
PART I. FINANCIAL INFORMATION Number
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Item 1. Condensed Consolidated Balance Sheets April 29, 1995 (Unaudited)
and October 29, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations Three Months and
Six Months Ended April 29, 1995 and April 30, 1994 (Unaudited) . . . . 4
Condensed Consolidated Statements of Cash Flows Six Months
Ended April 29, 1995 and April 30, 1994 (Unaudited) . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements (Unaudited) . . . . . . 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 11
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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2
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Item 1. Financial Statements
JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
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April 29, October 29,
1995 1994
------------ ------------
(Unaudited)
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ASSETS
Current Assets:
Cash 800 $ 2,873
Accounts Receivable 92,965 102,804
Inventories 79,005 74,966
Prepaid expenses and other 1,648 1,783
-------- --------
Total current assets 174,418 182,426
Property, plant and equipment, net 205,691 204,094
Excess of cost over fair value of net assets acquired, net 31,972 32,454
Other assets 49,106 49,016
-------- --------
Total $461,187 $467,990
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 35,388 $ 41,013
Accrued interest 10,085 12,448
Accrued salaries, benefits and withholdings 16,298 15,271
Other accrued expenses 13,625 15,403
Current portion of long-term debt 2,882 2,347
-------- --------
Total current liabilities 78,278 86,482
Long-term debt 326,780 335,472
Deferred income taxes 5,577 3,565
Other long-term liabilities 19,041 20,481
-------- --------
Total liabilities 429,676 446,000
-------- --------
Senior redeemable preferred stock 26,240 24,340
-------- --------
Shareholders' equity (deficit):
Junior preferred stock 250 250
Common stock 10 10
Additional paid-in capital 31,544 33,444
Deficit (26,533) (36,054)
-------- --------
Total shareholders' equity (deficit) 5,271 (2,350)
-------- --------
Total $461,187 $467,990
======== ========
</TABLE>
Note: The condensed consolidated balance sheet at October 29, 1994 has been
extracted from the audited financial statements.
See notes to condensed consolidated financial statements.
3
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JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
(Unaudited)
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<CAPTION>
Three Months Ended Six Months Ended
-------------------------- -------------------------
April 29, April 30, April 29, April 30,
1995 1994 1995 1994
----------- ----------- ----------- ----------
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Net sales $ 152,016 $ 151,383 $ 299,249 $ 285,449
Cost of sales 128,920 130,467 255,198 246,711
---------- ---------- ---------- ----------
Gross profit 23,096 20,916 44,051 38,738
Selling, general and administrative expenses 16,019 16,039 31,913 31,410
---------- ---------- ---------- ----------
Income from operations 7,077 4,877 12,138 7,328
Interest expense 9,507 15,671 19,572 31,157
Other income (expense), net (275) 24 (669) 41
---------- ---------- ---------- ----------
Loss before income taxes, income from
discontinued operations, extraordinary gain
and cumulative effect of accounting change (2,705) (10,770) (8,103) (23,788)
Income taxes 636 1,152 936 1,434
---------- ---------- ---------- ----------
Loss before income from discontinued
operations, extraordinary gain and
cumulative effect of accounting change (3,341) (11,922) (9,039) (25,222)
Income from discontinued operations,
net of taxes - 11,146 - 17,085
Gain on sale of discontinued operations, net
of taxes 1,040 - 1,040 -
---------- ---------- ---------- ----------
Loss before extraordinary item and cumulative
effect of accounting change (2,301) (776) (7,999) (8,137)
Extraordinary gain on early extinguishment
of debt, net of taxes - - 17,520 -
Cumulative effect of accounting change,
net of taxes - - - (1,000)
---------- ---------- ---------- ----------
Net income (loss) (2,301) (776) 9,521 (9,137)
Senior redeemable preferred stock in-kind
dividends and discount accretion 970 818 1,900 1,627
---------- ---------- ---------- ----------
Income (loss) applicable to common stock $ (3,271) $ (1,594) $ 7,621 $ (10,764)
========== ========== ========== ==========
Weighted average common shares outstanding 1,000,000 1,000,000 1,000,000 1,000,000
========== ========== ========== ==========
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4
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JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(Dollars in Thousands Except Per Share Data)
(Unaudited)
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Three Months Ended Six Months Ended
-------------------------- -------------------------
April 29, April 30, April 29, April 30,
1995 1994 1995 1994
----------- ----------- ----------- ----------
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Earnings (loss) per common share:
Loss before income from discontinued
operations, extraordinary gain and
cumulative effect of accounting change $(4.31) $(12.74) $(10.94) $(26.85)
Income from discontinued operations - 11.15 - 17.09
Gain on sale of discontinued operations 1.04 - 1.04 -
Extraordinary gain on early extinguishment
of debt - - 17.52 -
Cumulative effect of accounting change - - - (1.00)
------ ------- ------- -------
Net loss $(3.27) $ (1.59) $ 7.62 $(10.76)
====== ======= ======= =======
</TABLE>
See notes to condensed consolidated financial statements.
5
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JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
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Six Months Ended
-------------------------
April 29, April 30,
1995 1994
--------- ---------
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 9,521 $ (9,137)
-------- --------
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Income from discontinued operations - (17,085)
Gain on sale of discontinued operations (1,040) -
Extraordinary gain on early extinguishment of debt (17,520) -
Cumulative effect of accounting change - 1,000
Depreciation and amortization, except amounts included
in interest expense 13,908 12,944
Interest accretion and debt issuance cost amortization 4,554 5,825
Other, net (277) 1,451
Changes in assets and liabilities:
Accounts receivable 9,839 15,415
Inventory (4,039) (7,245)
Prepaid expenses and other assets 97 (1,508)
Accounts payable (5,625) 349
Accrued expenses and other liabilities (2,819) 900
-------- --------
Total adjustments (2,922) 12,046
-------- --------
Net cash provided by operating activities 6,599 2,909
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment additions (15,022) (14,882)
Receipts from discontinued operations, net - 11,499
Proceeds from sale of discontinued operations 1,040 -
-------- --------
Net cash used in investing activities (13,982) (3,383)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Financing costs incurred (25) (311)
Revolving credit facility borrowings, net 43,427 997
Proceeds from issuance of long-term debt 5,000 -
Repayment of other long-term debt (43,092) (1,072)
-------- --------
Net cash provided by (used in) financing activities 5,310 (386)
-------- --------
Net decrease in cash (2,073) (860)
Cash at beginning of period 2,873 2,080
-------- --------
Cash at end of period $ 800 $ 1,220
======== ========
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6
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JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In Thousands)
(Unaudited)
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Six Months Ended
------------------------
April 29, April 30,
1995 1994
--------- ---------
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Supplemental cash flow information:
Interest paid $18,731 $25,282
Income taxes paid 3,365 544
Non-cash financial activities:
Senior redeemable preferred stock dividends-in-kind 1,446 1,361
</TABLE>
See notes to condensed consolidated financial statements.
7
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JPS TEXTILE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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1. The Company has prepared, without audit, the interim condensed
consolidated financial statements and related notes. In the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and cash flows at April 29, 1995 and for all
periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the fiscal year ended
October 29, 1994. The results of operations for the interim periods
are not necessarily indicative of the operating results of the full
year.
During the fourth quarter of fiscal 1994, the Company changed,
effective as of the beginning of fiscal 1994, its accounting policy
with respect to other postemployment benefits to comply with Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits". This change is more fully explained in Note
9 of the Notes to Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the fiscal year ended October 29, 1994.
The fiscal 1994 amounts included in this report have been restated,
where applicable, to reflect the adoption of these changes as of
October 31, 1993. The effect of the restatement was to increase the
net loss for the six months ended April 30, 1994 by $1,000,000 from
$8,137,000 to $9,137,000 as a result of the cumulative effect of the
accounting change. There was no material effect on income from
operations for the six months ended April 30, 1994 as a result of the
accounting change.
Certain 1994 amounts have been reclassified to conform to the 1995
presentation. In addition, see Note 3 of the Notes to Consolidated
Financial Statements in the Company's Annual Report on Form 10-K for
the fiscal year ended October 29, 1994 regarding reclassification of
1994 amounts for discontinued operations.
2. Inventories (In Thousands):
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April 29, October 29,
1995 1994
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Raw materials $13,793 $17,104
Work-in-process 31,824 29,059
Finished goods 33,388 28,803
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Total $79,005 $74,966
======= =======
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8
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3. Long-Term Debt and Purchases of Company Debt Securities
Long-term debt consists of (in thousands):
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April 29, October 29,
1995 1994
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Senior credit facility revolving line of credit $ 93,345 $ 49,918
Senior subordinated discount notes (including interest due at
maturity of $3,631 and $3,395, respectively) 112,878 130,179
Senior subordinated notes (including interest due at maturity of
$3,773 and $4,404, respectively) 80,546 109,283
Subordinated debentures 54,071 75,000
Equipment financing 11,273 7,658
-------- --------
Total 352,113 372,038
Reorganization discount:
Senior subordinated discount notes (5,993) (8,109)
Senior subordinated notes (5,203) (8,723)
Subordinated debentures (11,255) (17,387)
-------- --------
Total long-term debt 329,662 337,819
Less current portion 2,882 2,347
-------- --------
Long-term portion $326,780 $335,472
======== ========
</TABLE>
During the first quarter of fiscal 1995, the Company expended
$36,607,000 to make open market purchases of certain of its
outstanding notes and debentures with an aggregate face value of
$66,571,000 and a carrying value (including interest due at maturity)
of $59,225,000. The Company recognized a gain from early
extinguishment of debt of $17,520,000, net of expenses of $1,898,000
and income taxes of $3,200,000.
4. Discontinued Operations
On June 28,1994, pursuant to the terms of an Asset Purchase Agreement
dated May 25, 1994 (the "Asset Purchase Agreement"), by and among the
Company, JPS Auto Inc., a wholly-owned subsidiary of the Company
("Auto"), JPS Converter and Industrial Corp., a wholly-owned
subsidiary of the Company ("C&I"), Foamex International Inc.
("Foamex") and JPS Automotive Products Corp., an indirect,
wholly-owned subsidiary of Foamex ("Purchaser"), the Company
consummated the disposition of its Automotive Assets (as described
below) to the Purchaser.
The Automotive Assets consisted of the businesses and assets of Auto
and the synthetic industrial fabrics division of C&I, and the
Company's investment in common stock of the managing general partner
of Cramerton Automotive Products, L.P. (an 80% owned joint venture).
Net sales from such discontinued operations were $165.6 million in the
six months ended April 30, 1994. Pursuant to the terms of the Asset
Purchase Agreement, the Purchaser agreed to assume substantially all
of the liabilities and obligations associated with the Automotive
Assets. In addition, the Company and its affiliates agreed, for a
four year period, not to directly or indirectly compete with the sold
businesses in North, Central and South America.
The sale price for the Automotive Assets was approximately $279
million, consisting of $264 million of cash paid at closing and $15
million of assumed debt as of June 28, 1994, subject to certain post-
9
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closing adjustments. The sale of the Automotive Assets resulted in an
approximate gain of $133 million, net of income taxes of $2.8 million,
in the third quarter of fiscal 1994. In February 1995, the Company
received $1.1 million as a partial post-closing adjustment to the sale
price. This post-closing adjustment was recorded as a gain on sale of
discontinued operations in the amount of $1.0 million, net of income
taxes of $0.1 million. Additional post-closing adjustments to the
sale price may occur and result in a gain to be recognized in a future
period.
The net cash proceeds in the third quarter of fiscal 1994 from the
disposition of the Automotive Assets (after deductions for fees, other
expenses and amounts designated by management to satisfy possible
contingent tax liabilities) were approximately $213 million and such
proceeds were used by the Company to reduce its outstanding
indebtedness. See Note 5 of the Notes to Consolidated Financial
Statements in the Company's Annual Report on Form 10-K for the fiscal
year ended October 29, 1994.
The Company allocated to the discontinued operations a pro-rata
portion of the interest expense of its senior credit facility, which
pro-rata portion was approximately $1.5 million in the six months
ended April 30, 1994.
10
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- -------------------------------------------------------------------------------
The following should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing in Item 7
of the Company's Annual Report on Form 10-K for the fiscal year ended October
29, 1994.
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<CAPTION>
(In Thousands)
---------------------- ----------------------
Three Months Ended Six Months Ended
---------------------- ----------------------
April 29, April 30, April 29, April 30,
1995 1994 1995 1994
---------- ----------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES
Apparel Fabrics and Products $ 64,737 $ 63,828 $129,159 $124,270
Industrial Fabrics and Products 48,890 42,139 92,994 75,520
Home Fashion Textiles 38,389 45,416 77,096 85,659
-------- -------- -------- --------
Net Sales $152,016 $151,383 $299,249 $285,449
======== ======== ======== ========
OPERATING PROFIT
Apparel Fabrics and Products $ 5,445 $ 5,022 $ 10,530 $ 9,090
Industrial Fabrics and Products 3,292 1,227 4,686 1,039
Home Fashion Textiles (512) 564 (928) 1,215
Indirect Corporate Expenses, net (1,423) (1,912) (2,819) (3,975)
-------- -------- -------- --------
Operating Profit before interest expense
and provision for income taxes 6,802 4,901 11,469 7,369
Interest expense 9,507 15,671 19,572 31,157
-------- -------- -------- --------
Loss before income taxes, income from
discontinued operations, extraordinary gain
and cumulative effect of accounting change $ (2,705) $(10,770) $ (8,103) $(23,788)
======== ======== ======== ========
</TABLE>
RESULTS OF OPERATIONS
Three Months Ended April 29, 1995 (the "1995 Second Quarter") Compared To The
Three Months Ended April 30, 1994 (the "1994 Second Quarter"):
- -------------------------------------------------------------------------------
Consolidated net sales for the 1995 Second Quarter increased only slightly to
$152.0 million from $151.4 million in the 1994 Second Quarter. Apparel and
Industrial Fabrics and Products sales increased while Home Fashion Textiles
sales declined. Apparel Fabrics and Products sales increased 1.4% to $64.7
million for the 1995 Second Quarter from $63.8 million for the 1994 Second
Quarter principally due to the Company's change in its product offering to
emphasize specialty fabrics with more fashion and styling characteristics.
These specialty fabrics command a higher average selling price and margin than
commodity type fabrics. The 16.0% increase in Industrial Fabrics and Products
sales to $48.9 million for the 1995 Second Quarter from $42.1 million for the
1994 Second Quarter is due to increased demand for several of the Company's
various products. Sales of fiberglass and synthetic fabrics increased $2.4
million due to strong demand for construction related products and fabrics for
electrical circuitry. Single-ply roofing product sales increased $2.3 million
due to the continued increase in demand for a new roofing product introduced by
the Company in late 1993. Cotton industrial fabric
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sales increased $1.6 million due to higher selling prices, as a result of the
pass through of increases in cotton raw material prices resulting from a
worldwide cotton crop shortfall. Improved demand also caused a $0.4 million
increase in extruded urethane product sales. Home Fashion Textiles sales
decreased 15.5% to $38.4 million for the 1995 Second Quarter from $45.4 million
for the 1994 Second Quarter due to a decrease in carpet unit volume. The
Company's major polyester fiber vendor has discontinued its merchandising
support for carpet retailers and, as a result, the retailers are greatly
reducing their support for such branded carpet products. This situation has
dramatically affected the Company's carpet sales since many of the Company's
best selling carpet styles in the past year have been those made with this
branded polyester fiber yarn. Carpet sales decreased $7.0 million to $28.3
million for the 1995 first quarter compared to the 1994 first quarter.
Although the Company has moved to redirect its carpet product offering by
introducing a number of new styles with alternate fiber systems, no sales
benefit was yet realized in the 1995 Second Quarter due to lag time between
product introduction and order flow. Some sales benefit from these product
introductions is expected in the 1995 third quarter; however, the previously
described trend related to declines in demand for many of the Company's branded
products is expected to continue.
Operating profits in the 1995 Second Quarter increased 38.8% to $6.8 million
from $4.9 million for the 1994 Second Quarter. Profits from Apparel Fabrics
and Products of $5.4 million for the 1995 Second Quarter increased $0.4
million, or 8.4%, from the 1994 Second Quarter due to more favorable margins
for the Company's newer specialty fabrics than on commodity type apparel
fabrics. Operating profits for Industrial Fabrics and Products increased $2.1
million to $3.3 million in the 1995 Second Quarter from $1.2 million in the
1994 Second Quarter as a result of increased sales and improved gross margins.
Margins have improved due to higher throughput and a more profitable product
mix combined with increased demand and shortages of certain products resulting
in improved pricing on these products. Home Fashion Textiles experienced a
$1.1 million decrease in operating profits in the 1995 Second Quarter to a loss
of $0.5 million from a profit of $0.6 million in the 1994 Second Quarter due to
weak demand resulting in lower profit margins for home furnishing fabrics and
lower sales of carpet.
Indirect corporate expenses declined by $0.5 million to $1.4 million for the
1995 Second Quarter as compared to the 1994 Second Quarter due to lower
employee compensation, professional fees and amortization expense.
Interest expense decreased 39.3% to $9.5 million for the 1995 Second Quarter
from $15.7 million for the 1994 quarter primarily due to the use of a portion
of the net proceeds from the sale of the Automotive Assets in the third quarter
of fiscal 1994 to reduce the Company's debt. Giving effect to this reduction
of debt on a pro forma basis would reduce interest expense by $5.6 million in
the 1994 Second Quarter to $10.1 million. Such pro forma reduction includes
$0.4 million representing interest accretion and debt issuance cost
amortization. After giving effect to the debt reduction described above,
interest expense decreased $0.6 million in the 1995 Second Quarter due to
reductions in outstanding principal amounts of the Company's notes and
debentures as the Company purchased a portion of its debt securities in the
1995 first quarter on the open market. These securities were purchased at
prices less than their carrying values using loan proceeds from the revolving
credit facility (see Note 3 of the Notes to Condensed Consolidated Financial
Statements for the 1995 Second Quarter).
Six Months Ended April 29, 1995 (the "1995 Six-Month Period") Compared To The
Six Months Ended April 30, 1994 (the "1994 Six-Month Period"):
- -------------------------------------------------------------------------------
Consolidated net sales for the 1995 Six-Month period increased 4.8% to $299.2
million from $285.4 million in the 1994 Six-Month period generally due to
increased sales of industrial fabrics, construction products and apparel
fabrics. Apparel Fabrics and Products sales increased 3.9% to $129.2 million
for the 1995 Six-Month period from $124.3 million for the 1994 Six-Month period
principally due to the Company's change in its product
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offering to emphasize specialty fabrics with more fashion and styling
characteristics. These specialty fabrics command a higher average selling
price and margin than commodity type fabrics. The 23.1% increase in Industrial
Fabrics and Products sales to $93.0 million for the 1995 Six-Month period from
$75.5 million for the 1994 Six-Month period is due to increased demand for
several of the Company's various products. Sales of fiberglass fabrics and
synthetic fabrics increased $5.0 million due to increased demand for
construction related products and fabrics for electrical components.
Single-ply roofing product sales increased $4.4 million due to the continued
increase in demand for a new roofing product introduced by the Company in late
1993. Cotton industrial fabric sales increased $4.5 million due to higher
selling prices and unit volume driven by improved product demand, particularly
in the book-cloth market, and the pass through of increases in cotton raw
material prices as a result of a worldwide cotton crop shortfall. Improved
demand also caused a $1.3 million increase in extruded urethane product sales.
Home Fashion Textiles sales decreased 10.0% to $77.1 million for the 1995
Six-Month period from $85.7 million for the 1994 Six-Month period due to a
decrease in carpet unit volume principally due to a major polyester fiber
vendor terminating its merchandising support for carpet retailers and, as a
result, the retailers are greatly reducing their support for such branded
carpet products. Carpet sales decreased $10.0 million to $57.0 million for the
1995 Six-Month period compared to the 1994 Six-Month period. Partially
offsetting the decline in carpet sales was a $2.4 million increase in sales of
yarn to home fashion customers for use in the manufacture of carpets and
fabrics.
Operating profits in the 1995 Six-Month period increased 55.6% to $11.5 million
from $7.4 million for the 1994 Six-Month period. Profits from Apparel Fabrics
and Products of $10.5 million for the 1995 Six-Month period increased $1.4
million, or 15.8%, from the 1994 Six-Month period due to more favorable margins
for the Company's newer specialty fabrics than on commodity type apparel
fabrics. Operating profits for Industrial Fabrics and Products increased $3.6
million to $4.7 million in the 1995 Six-Month period from $1.0 million in the
1994 Six-Month period as a result of increased sales from improved demand and
improved gross margins resulting from industry shortages of certain products
and a more profitable product mix. Home Fashion Textiles experienced a $2.1
million decrease in operating profits in the 1995 Six-Month period to a loss of
$0.9 million from a profit of $1.2 million in the 1994 Six-Month period due to
weak demand resulting in lower margins for home furnishing fabrics and lower
sales of carpet.
Indirect corporate expenses declined by $1.2 million to $2.8 million for the
1995 Six-Month period as compared to the 1994 Six-Month period due to lower
employee compensation, professional fees and amortization expense.
Interest expense decreased 37.2% to $19.6 million for the 1995 Six-Month period
from $31.2 million for the 1994 Six-Month period primarily due to the use of a
portion of the net proceeds from the sale of the Automotive Assets in the third
quarter of 1994 to reduce the Company's debt. Giving effect to this reduction
of debt on a pro forma basis would reduce interest expense by $11.1 million in
the 1994 Six-Month period to $20.1 million. Such pro forma reduction includes
$0.8 million representing interest accretion and debt issuance cost
amortization. After giving effect to the debt reduction described above,
interest expense decreased $0.5 million in the 1995 Six-Month period due to
reductions in outstanding principal amounts of the Company's notes and
debentures as the Company purchased a portion of its debt securities in the
1995 first quarter on the open market. These securities were purchased at
prices less than their carrying values using loan proceeds from the revolving
credit facility (see Note 3 of the Notes to Condensed Consolidated Financial
Statements for the 1995 Second Quarter).
LIQUIDITY AND CAPITAL RESOURCES
At April 29, 1995, working capital was approximately the same as working
capital at October 29, 1994 at $96.1 million. Accounts receivable declined by
$9.8 million (9.6%) due to the seasonally lower sales in April than in October.
Inventories increased $4.0 million (5.4%) from October 29, 1994 to April 29,
1995 principally due to
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higher costs associated with the specialty fabrics to which the Company has
changed its focus in the Apparel Fabrics and Products segment and due to an
increase in yarn work in process in anticipation of increased production needs.
Accounts payable at April 29, 1995 were $5.6 million lower than at October 29,
1994 due to the lower level of production activity in April than in October and
the decline in raw material inventories as of April 1995. Accrued interest,
compensation and other liabilities decreased $2.8 million during the 1995
Six-Month period due to the scheduled timing of interest, annual incentive
compensation and other payments and reductions in 1995 in the long-term debt on
which cash interest expense is accrued.
The Company's principal sources of liquidity for operations and expansion are
funds generated internally and borrowings under the Company's $135 million
revolving credit facility. Revolving credit facility borrowings were used to
provide funds needed for capital expenditures and financing activities
(principally $36.6 million to purchase and retire certain of the Company's
outstanding notes and debentures) to the extent such funds were not provided
for by the net cash flow from operations during the 1995 Six-Month period. All
senior borrowings bear interest at a Base Rate, as defined, plus 1 1/2% per
annum (10.5% at April 29, 1995) or at the Eurodollar Rate, as defined, plus
3.0% per annum (approximately 9.2% at April 29, 1995). Effective May 31, 1995,
the senior credit facility agreement was amended to reduce interest rates so
that the interest rate charged is based on a Base Rate plus 1% or the
Eurodollar Rate plus 2.5%. Borrowings under the senior credit agreement are
limited to specified percentages of eligible accounts receivable and
inventories, as defined, plus an additional fixed amount of $25 million. The
Company had $39.4 million available for borrowing under the revolving credit
agreement on April 29, 1995. Borrowings under the revolving credit facility
are made or repaid on a daily basis in amounts equal to the net cash
requirements for that business day, thereby reducing net borrowings to the
maximum extent possible. During the 1995 Six-Month period, the Company
obtained a $5 million equipment loan from a commercial lender to finance
certain capital expenditures.
As previously discussed, the Company expended $36,607,000 during the first
quarter of fiscal 1995 to purchase and retire certain of its outstanding notes
and debentures with an aggregate face value of $66,571,000 and a carrying value
(including interest due at maturity) of $59,225,000. The Company recognized a
gain from early extinguishment of debt of $17,520,000, net of expenses of
$1,898,000 and income taxes of $3,200,000. The Company has made no further
open market purchases of its debt securities subsequent to the first quarter of
1995 and is not currently seeking to make any such purchases.
Management continually reviews various options for enhancing liquidity and its
cash flow to cash requirements coverage, both operationally and financially.
Such options include strategic dispositions and financing and refinancing
activities aimed at increasing cash flow and reducing cash requirements, the
principal items of which are interest and capital expenditures. Management
believes that expected cash flows and capital resources, including any
necessary refinancings will be adequate to meet future debt service
requirements and working capital needs.
14
<PAGE> 15
JPS TEXTILE GROUP, INC.
PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
Item
- ----
<S> <C> <C>
1. Legal Proceedings None
2. Changes in Securities None
3. Defaults upon Senior Securities None
4. Submission of Matters to a Vote of Security Holders None
5. Other Information None
6. Exhibits and Reports on Form 8-K:
</TABLE>
<TABLE>
<S> <C>
(a) Exhibits:
(10.1) Third Amendment to the Fourth Amended & Restated Credit Agreement, dated as of May 31, 1995, by and among the
Company, JPS Converter and Industrial Corp., JPS Elastomerics Corp., JPS Carpet Corp., the financial
institutions listed on the signature pages thereof, Citibank, N.A., as Agent and Administrative Agent, and
General Electric Capital Corporation, as Co-Agent and Collateral Agent.
(11) Statement re: Computation of Per Share Earnings - not required since such computation can be clearly determined
from the material contained herein.
(27) Financial Data Schedule (for SEC use only)
(b) Current Reports on Form 8-K:
None
</TABLE>
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 TEXTILE GROUP, INC.
Date: June 13, 1995 /s/ David H. Taylor
-----------------------------
David H. Taylor
Executive Vice President - Finance,
Secretary and Chief Financial Officer
15
<PAGE> 1
Exhibit 10.1
EXECUTION COPY
THIRD AMENDMENT TO
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
This Third Amendment to Fourth Amended and Restated Credit
Agreement dated as of May 31, 1995 (this "Amendment"), is entered into among
JPS TEXTILE GROUP, INC., a Delaware corporation (the "Company"), JPS CARPET
CORP., a Delaware corporation ("JCC"), JPS ELASTOMERICS CORP., a Delaware
corporation ("JEC"), and JPS CONVERTER AND INDUSTRIAL CORP., a Delaware
corporation ("JCIC", and together with JCC and JEC, the "Borrowing
Subsidiaries"), the FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF
(collectively referred to herein, together with their respective successors and
assigns, as the "Senior Lenders" and individually as a "Senior Lender"),
CITIBANK, N.A., in its separate capacities as agent and administrative agent
for the Senior Lenders (in such capacities, the "Agent") and General Electric
Capital Corporation, in its separate capacities as co-agent and collateral
agent for the Senior Lenders (in such capacities, the "Collateral Agent"), and
amends the Fourth Amended and Restated Credit Agreement dated as of June 24,
1994, as amended by the First Amendment to Fourth Amended and Restated Credit
Agreement dated as of November 4, 1994 and the Second Amendment to Fourth
Amended and Restated Credit Agreement dated as of December 21, 1994 (as so
amended and as further amended hereby, the "Credit Agreement"), entered into
among the Company, the Borrowing Subsidiaries, the Senior Lenders, the Agent
and the Collateral Agent. Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Credit
Agreement.
W I T N E S S E T H:
WHEREAS, the Agent and the Collateral Agent have proposed to
the Company that the Senior Lenders reduce the Applicable Interest Rate payable
on each of the Revolving Loans pursuant to Section 2.04(a) of the Credit
Agreement;
NOW, THEREFORE, in consideration of the above premises, the
Company, the Borrowing Subsidiaries, the Senior Lenders, the Agent and the
Collateral Agent agree as follows:
SECTION 1. Amendment to the Credit Agreement. The Credit
Agreement is, effective as determined pursuant to Section 2 hereof, hereby
amended as follows:
1.01 The last sentence of Section 2.04(a)(i) of the Credit
Agreement is hereby deleted in its entirety and the following sentence is
substituted therefor:
<PAGE> 2
The Loans shall bear interest, subject to Section 2.04(d) and
paragraph (ii) below, as follows:
(A) If a Base Rate Loan, then at a rate per
annum equal to the sum of (I) 1.0% plus (II) the Base Rate as in
effect from time to time as interest accrues; and
(B) If a Eurodollar Rate Loan, then at a rate
per annum equal to the sum of (I) 2.50% plus (II) the Eurodollar Rate
determined for the applicable Eurodollar Interest Period.
SECTION 2. Conditions Precedent to the Effectiveness of this
Amendment. This Amendment shall become effective as of the date hereof on the
date (the "Third Amendment Effective Date") that the Agent shall have received
a copy of this Amendment duly executed by each Loan Party and by each of the
Senior Lenders when the following conditions precedent have been satisfied
(unless waived by the Requisite Senior Lenders or unless the deadline for
delivery has been extended by the Agent):
2.01 Each of the representations and warranties made by the
Company or the Borrowing Subsidiaries in or pursuant to the Credit Agreement,
as amended by this Amendment, the Collateral Documents and the other Loan
Documents to which the Company or any of the Borrowing Subsidiaries is a party
or by which the Company or any of the Borrowing Subsidiaries is bound, shall be
true and correct in all material respects on and as of the Third Amendment
Effective Date (except any such representations and warranties stated to be
given as of a specific date other than the Third Amendment Effective Date).
2.02 All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Amendment shall be satisfactory in all respects in form
and substance to the Agent, the Collateral Agent and each of the Senior
Lenders.
2.03 No Event of Default or Potential Event of Default shall
have occurred and be continuing on the Third Amendment Effective Date.
SECTION 3. Representations and Warranties. Each Loan Party
hereby represents and warrants to the Senior Lenders that (a) as of the date
hereof no Event of Default or Potential Event of Default under the Credit
Agreement shall have occurred and be continuing and (b) all of the
representations and warranties of the Loan Parties contained in subsections
4.01(a) through (dd) of the Credit Agreement and in any other Loan Document (as
defined under the Credit Agreement) continue to be true and correct as of the
date of execution hereof in all material respects, as though made on and as of
such date (unless stated to relate to a specific earlier date, in which case
such representations and
-2-
<PAGE> 3
warranties shall be true and correct as of such earlier date).
SECTION 4. Reference to and Effect on the Loan Documents.
4.01 Upon the effectiveness of this Amendment, on and after
the date hereof, each reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof" or words of like import, and each reference in the other
Loan Documents to the Credit Agreement, shall mean and be a reference to the
Credit Agreement as amended hereby.
4.02 Except as specifically amended above, all of the terms
of the Credit Agreement and all other Loan Documents shall remain unchanged and
in full force and effect.
4.03 The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver
of any right, power or remedy of any Senior Lender, the Agent or the Collateral
Agent under the Credit Agreement or any of the Loan Documents, nor constitute a
waiver of any provision of the Credit Agreement or any of the Loan Documents.
SECTION 5. Costs and Expenses. Each Loan Party agrees to pay
on demand in accordance with the terms of Section 11.03 of the Credit Agreement
all costs and expenses of the Agent in
-3-
<PAGE> 4
connection with the preparation, reproduction, execution and delivery of this
Amendment and all other Loan Documents entered into in connection herewith,
including the reasonable fees and out-of-pocket expenses of Sidley & Austin,
counsel for the Agent with respect thereof.
SECTION 6. Execution in Counterparts. This Amendment may be
executed and delivered in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original and all of which taken together shall constitute
one and the same original agreement.
SECTION 7. Governing Law. This Amendment shall be governed
by and construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, this Amendment has been duly executed on
the date set forth above.
JPS TEXTILE GROUP, INC.
By: /s/David H. Taylor
--------------------
Title:EVP - Finance & Secretary
JPS CARPET CORP.
By: /s/David H. Taylor
--------------------
Title:Vice President
JPS ELASTOMERICS CORP.
By: /s/David H. Taylor
--------------------
Title:Vice President
JPS CONVERTER AND INDUSTRIAL CORP.
By: /s/David H. Taylor
--------------------
Title:Vice President
-4-
<PAGE> 5
Senior Lenders:
--------------
CITIBANK, N.A., as Agent and as a Senior
Lender
By: /s/ Brenda Cotsen
--------------------
Attorney-in-fact
GENERAL ELECTRIC CAPITAL CORPORATION, as
Collateral Agent and as a Senior
Lender
By:/s/ Rick Luck
---------------------
Title:Vice President, G E Capital
Commercial Finance, Inc., Being duly
authorized
HELLER FINANCIAL, INC.
By:/s/ Frank J. Ross
---------------------
Title:
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
By:/s/ Michael Lustbader
---------------------
Title: Vice President
NATIONSBANK OF GEORGIA, N.A.
By:/s/ Betty Mills
---------------------
Title:Vice President
-5-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF JPS TEXTILE GROUP, INC. FOR THE SIX MONTHS ENDED APRIL
29, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-29-1994
<PERIOD-END> APR-29-1995
<CASH> 800
<SECURITIES> 0
<RECEIVABLES> 99,113
<ALLOWANCES> (6,148)
<INVENTORY> 79,005
<CURRENT-ASSETS> 174,418
<PP&E> 347,157
<DEPRECIATION> 141,466
<TOTAL-ASSETS> 461,187
<CURRENT-LIABILITIES> 78,278
<BONDS> 326,780
26,240
250
<COMMON> 10
<OTHER-SE> 5,011
<TOTAL-LIABILITY-AND-EQUITY> 461,187
<SALES> 299,249
<TOTAL-REVENUES> 299,249
<CGS> 255,198
<TOTAL-COSTS> 287,111
<OTHER-EXPENSES> 669
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,572
<INCOME-PRETAX> (8,103)
<INCOME-TAX> 936
<INCOME-CONTINUING> (9,039)
<DISCONTINUED> 1,040
<EXTRAORDINARY> 17,520
<CHANGES> 0
<NET-INCOME> 9,521
<EPS-PRIMARY> 7.62
<EPS-DILUTED> 7.62
</TABLE>
