<PAGE> 1
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, 1995
[ ] 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)
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: None.
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: /X/
As of January 19, 1996, there were 490,000 shares of the registrant's
Class A Common Stock, $.01 par value per share (the "Class A Common Stock"),
held by non-affiliates of the registrant. There is no established public
trading market for such shares.
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, 490,000 shares of Class A Common Stock and
510,000 shares of the registrant's Class B Common Stock, $.01 par value per
share, were issued and outstanding.
<PAGE> 2
JPS TEXTILE GROUP, INC.
Table of Contents
<TABLE>
<CAPTION>
PART I
<S> <C> <C>
Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . . . 9
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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . 45
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . . . 45
Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Item 12. SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT . . . . . . . . . . . . . . . . 50
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 52
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 52
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
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PART I
ITEM 1. BUSINESS.
HISTORICAL BACKGROUND
JPS Textile Group, Inc. ("JPS" or the "Company") is a Delaware corporation,
incorporated in December 1986, with its principal executive offices located at
555 North Pleasantburg Drive, Suite 202, Greenville, South Carolina 29607;
telephone number (864)239-3900.
On March 14, 1988, the Company executed a merger agreement providing for the
acquisition of J.P. Stevens & Co., Inc. ("J.P. Stevens"). On March 15, 1988,
the Company commenced a tender offer pursuant to such merger agreement for all
of the outstanding stock of J.P. Stevens. Subsequently, the Company terminated
its tender offer and J.P. Stevens agreed to be acquired by another entity.
Simultaneously therewith, J.P. Stevens agreed to sell to the Company the
business and substantially all of the assets of five J.P. Stevens divisions:
the Converter and Yarn division; the Automotive Products division; the
Elastomerics division; the Carpet division; and the Industrial Fabrics division
(the "Predecessor Stevens Divisions"), for approximately $527.0 million (the
"Acquisition").
Subsequent to the Acquisition, due to certain financial concerns, the Company
engaged certain financial advisors in March 1990 to advise the Company
concerning a possible restructuring of its debts and equity capitalization. In
furtherance thereof, the Company, together with its legal and financial
advisors, met with representatives of the Company's senior lenders and with the
respective legal and financial representatives of certain large institutional
holders of the Company's (i) Senior Variable Rate notes due June 1, 1996, (ii)
Senior Subordinated Discount Notes due June 1, 1999, (iii) 15.25% Senior
Subordinated Notes due June 1, 1999, and (iv) 14.25% Subordinated Debentures
due May 15, 2000 (collectively, the "Old Debt Securities"), to discuss the
Company's general business and financial status, and to explore various
financial restructuring alternatives.
In November 1990, the Company and representatives of the holders of the Old
Debt Securities determined that a transaction involving the exchange of the Old
Debt Securities for a significant percentage of "new" common stock and "new"
debt securities with a fixed lower per annum interest rate, together with the
issuance to the holders of the Company's Series A Exchangeable Adjustable Rate
Preferred Stock and Series B Junior Preferred Stock (together, the "Old
Securities") of a significant percentage of the Company's "new" preferred
equity securities, would improve the Company's financial condition and overall
creditworthiness and simplify its capital structure, and that such transaction
would best be accomplished pursuant to a pre-petition solicitation of votes to
accept or reject a voluntary plan of reorganization (the "Plan of
Reorganization") under chapter 11 of title 11 ("Chapter 11") of the United
States Code (the "Bankruptcy Code").
The Company's solicitation was successfully completed and the Chapter 11 case
was commenced in early February 1991 before the United States Bankruptcy Court
for the Southern District of New York (the "Bankruptcy Court"). The Plan of
Reorganization was confirmed by the Bankruptcy Court pursuant to a court order
signed on March 21, 1991 and the Plan of Reorganization became effective on
April 2, 1991. As part of the Plan of Reorganization, the Company, together
with its senior bank lenders, agreed to restructure the then-existing bank debt
of the Company.
On June 28, 1994, pursuant to the terms of an Asset Purchase Agreement dated
May 25, 1994, as amended, (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
2
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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). Pursuant to 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 in North, Central and South America with the businesses that
were sold.
The sale price for the Automotive Assets was approximately $283 million,
consisting of $264 million of cash paid at closing, $15 million of assumed debt
as of June 28, 1994, and certain post-closing adjustments which resulted in a
net gain of $4.4 million recognized in 1995. The sale of the Automotive Assets
resulted in an approximate gain of $137.4 million, net of income taxes of $2.9
million.
The net cash proceeds 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 $217 million,
and such proceeds were used by the Company to reduce its outstanding
indebtedness.
On November 16, 1995, pursuant to the terms of an Asset Transfer Agreement
dated as of November 16, 1995, by and among the Company, JPS Carpet Corp.
("Carpet"), a wholly-owned subsidiary of the Company, Gulistan Holdings Inc.
and Gulistan Carpet Inc., a wholly-owned subsidiary of Gulistan Holdings Inc.
(collectively, "Gulistan"), the Company and Carpet consummated the sale of
substantially all the assets of Carpet used in the business of designing and
manufacturing tufted carpets for sale to residential, commercial and
hospitality markets (the "Carpet Business"). Pursuant to the Asset Transfer
Agreement, Gulistan agreed to assume substantially all of the liabilities and
obligations associated with the Carpet Business. Gulistan was formed and its
common stock is owned by certain members of the former management team at
Carpet. The Company and its subsidiaries have agreed, for a three-year period,
not to compete in certain specified geographic areas directly or indirectly
with the business that was sold.
The consideration received for the Carpet Business consisted of approximately
$22.5 million in cash, subject to certain post-closing adjustments based on the
audited amount of working capital transferred which are expected to result in a
reduction to net cash proceeds of approximately $3.5 million, and other debt
and equity securities of Gulistan as follows: a $10 million Promissory Note due
in November 2001, $5 million preferred stock redeemable in November 2005, and
warrants to purchase 25% of the common stock of Gulistan. Based on an
independent valuation, the Company has estimated the fair value of these debt
and equity securities to be approximately $11.3 million.
The Carpet Assets were reduced to their net realizable value as of October 28,
1995 and such reduction was reflected as a loss on sale of discontinued
operations of $30.7 million in the 1995 consolidated financial statements.
Estimated amounts of post-closing adjustments and other cash flows from October
28, 1995 to the closing date were included in the determination of net
realizable value.
The net cash proceeds from the disposition of the Carpet Assets were used to
reduce outstanding borrowings under the Company's bank credit agreement. See
Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
3
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GENERAL
The Company is one of the largest diversified domestic manufacturers of textile
and textile related products, principally for the apparel, industrial and home
fashion markets. JPS conducts its operations from 12 manufacturing plants in
five states and employs approximately 4,500 people. The Company competes in
three industry segments; apparel fabrics and products, industrial fabrics and
products and home fashion textiles. Certain financial information about the
Company's industry segments for each of the last three fiscal years is included
in Note 11 of the Notes to Consolidated Financial Statements included in Item 8
herein.
APPAREL FABRICS AND PRODUCTS
The Company is a leading manufacturer of greige goods (unfinished woven
fabrics), yarn and elastic products. The Company's products are used in the
manufacture of a broad range of consumer apparel products including blouses,
dresses, sportswear, undergarments and disposable diapers.
Greige Goods. The Company produces fabrics from spun and filament yarns that
are used ultimately in the manufacture of apparel such as blouses, dresses and
sportswear. Greige goods are produced from rayon, acetate, polyester and
cotton yarns, and are primarily sold to other textile manufacturers for use in
producing printed and dyed fabrics.
Yarn. The Company produces a variety of rayon and polyester spun yarns for its
own use and for sale to manufacturers of knitted apparel.
Elastic Products. The Company manufactures a number of elastic products from
natural and synthetic rubber compounds. Elastic thread is sold to
manufacturers of undergarments for use in waistbands and similar applications,
while other elastic products are used in the manufacture of disposable infant
diapers.
INDUSTRIAL FABRICS AND PRODUCTS
Commercial Roofing Products. The Company is a well-established manufacturer of
single-ply membrane roofs that are made from woven synthetic fabrics and
rubber-based or polypropylene specialty polymer compounds which are sold
principally to roofing distributors for use in both the new and replacement
commercial markets.
Other Building Construction Products. The Company is a producer of fabrics
made from glass and synthetic fibers that are used in a number of applications
in the building construction industry. Products include various scrims used
for wallboard tapes and certain roofing applications, and reinforcement
substrates used for the installation of internal and external tiles and
synthetic wall surfaces. The Company produces and sells membrane products
(similar to commercial roofing products) for use in environmental containment
applications such as reservoir liners and covers.
Other Industrial Products. The Company produces a wide variety of other
industrial textile products that are used in many industries for many different
end uses. Many of these products have characteristics that provide insulation
or filtration properties. These specialty fabrics are used in the manufacture
of such products as flame-retardant clothing, filtration products, tarpaulins,
awnings, athletic tapes, printed circuit boards and advanced composites. In
addition, the Company produces urethane products for use in the manufacture of
various products such as "bulletproof" glass, disposable intravenous bags,
seamless welded drive belts and tubing.
4
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HOME FASHION TEXTILES
The Company produces a variety of unfinished woven fabrics and yarns for use in
the manufacture of draperies, curtains and lampshades and is a major producer
of solution-dyed drapery fabrics.
OPERATIONS
Each operating unit of the Company has individual administrative, manufacturing
and marketing capabilities and all material aspects of operations, including
product design, customer service, purchasing and credit and collection are
coordinated by each operating unit. Corporate support services include
finance, strategic planning, legal, tax and regulatory affairs.
Following the Acquisition and through the date hereof, management's business
plans have included many cost-reduction activities aimed at improving return
on assets. These activities included consolidating manufacturing operations,
exiting unprofitable product lines, more aggressive capital spending programs
to improve quality and productivity and reorganizing certain manufacturing
operations. The Company plans to continue its manufacturing modernization
program to improve efficiency and productivity and further reduce its cost
structure.
The Company's corporate headquarters is located in Greenville, South Carolina.
The Company maintains a sales office in New York City for certain of its
operations. Five additional regional sales offices are maintained by the
Company, principally for its roofing and building construction products. See
Item 2, "PROPERTIES".
MANUFACTURING
The Company's experienced work force and wide variety of yarn making, fabric
forming and other manufacturing equipment allow the Company to rapidly and
efficiently change its product mix to meet style and seasonal requirements.
The Company's activities generally encompass all phases of manufacturing its
products.
In the manufacture of woven textile products, the Company purchases synthetic
and natural fibers and spins them into yarn or purchases filament yarn for
processing. In addition, the Company purchases certain spun yarns. Yarns are
then coated, sized or directly woven into unfinished fabric. Upon completion
of the weaving process, fabric is generally shipped to customers who dye,
finish, coat and cut those fabrics for resale.
The Company's elastic products are manufactured from natural and synthetic
rubber compounds that are purchased from outside suppliers and are processed
through a variety of production operations including slitting and calendering.
Single-ply membrane roofing is made by processing a Company-manufactured woven
substrate with specialty polymers. Other industrial fabric products are
produced from either woven fiberglass or cotton and synthetic fibers, which
fibers are processed into yarn, woven and finished into fabrics by the Company.
Other specialty industrial products are produced by extrusion of urethane
resins.
The Company believes that its manufacturing facilities are sufficient for its
present and reasonably foreseeable future production requirements.
5
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RAW MATERIALS
The Company generally has good relationships with its suppliers and has, where
possible, diversified its supplier base so as to avoid a disruption of supply.
In most cases, the Company's raw materials are staple goods that are readily
available from numerous domestic fiber and chemical manufacturers. For several
products, however, branded goods or other circumstances prevent such a
diversification, and an interruption of the supply of these raw materials could
have a significant negative impact on the Company's ability to produce certain
products. The Company believes that its practice of purchasing such items from
large, stable companies minimizes the risk of such an interruption in supply.
MARKETING AND COMPETITION
The textile industry is highly competitive and includes a number of
participants with aggregate sales and financial resources greater than the
Company's. The Company generally competes on the basis of price, quality,
design and customer service. Many companies compete in limited segments of the
textile market. The Company is well-positioned due to its ability to respond
quickly to changing styling and fashion trends. This ability generally
provides advantages for domestic textile manufacturers. Although no single
company dominates the industry, most market segments are dominated by a small
number of competitors. The Company believes it has a significant market share
in the market for rayon and acetate apparel fabrics, rayon yarn, solution-dyed
satin fabrics and quartz fabrics.
The Company's marketing efforts include the development of new product designs
and styles which meet customer needs. Each of the Company's operating units
has been an established supplier to each of its markets for many years and is
taking advantage of well-established customer relationships to increase product
development with its customers. The "J.P. Stevens" trade name, which the
Company has a non-exclusive, royalty-free license to use (see "--Patents,
Licenses and Trademarks" below), is widely recognized throughout the textile
industry. The Company believes that its relatively broad base of manufacturing
operations provides it with a competitive advantage in developing new textile
products. In addition to its direct marketing capabilities, the Company
markets certain of its products through distributors.
The following is a discussion of marketing and competitive factors as they
relate to each of the Company's segments.
Apparel Fabrics and Products
Greige Goods. The Company markets its spun and filament fabrics to converters
who finish and/or dye these products prior to shipping to finished apparel
manufacturers. The Company has sought to maintain a relatively high proportion
of such sales in product areas where its manufacturing flexibility can provide
a competitive advantage.
Yarn. The Company competes with a large number of companies which sell yarn to
woven and knit goods manufacturers. Yarns are generally sold on a direct
basis, and the Company believes that quality and price are the primary
competitive factors.
Elastic Products. The Company's elastic products are sold on a direct basis
primarily to diaper and undergarment manufacturers as well as to outerwear
manufacturers. The Company believes that price is the primary competitive
factor in this market.
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Industrial Fabrics and Products
Construction Products. The Company markets its single-ply roofing products on
a direct basis to roofing distributors. The Company competes with
manufacturers of this and other types of roofing products. The Company
believes that its product's ease of installation and warranty are important
competitive factors.
Other Products. Other industrial fabrics and products are marketed directly to
other manufacturers and distributors. The Company believes that price and its
ability to meet customer technical specifications are important competitive
factors.
Home Fashion Textiles
The Company's home fashion operations compete with a large number of
manufacturers of similar woven fabric products. In general, product markets
are differentiated on the basis of price and quality. The Company believes
that design and style features are important competitive factors.
CUSTOMERS
No customer accounts for more than 5% of the Company's sales. There are
customers the loss of which could have a material adverse effect on sales.
PRODUCT DEVELOPMENT
In general, the textile industry expends its efforts on design innovation and
capital expenditures for process enhancements rather than on basic research,
relying on fiber suppliers or machinery manufacturers for basic research.
The Company's research and development activities are directed toward the
development of new fabrics and styles which meet specific styling requirements
(in the case of apparel and home furnishing fabrics and products) or other
specific properties such as insulation, weight, strength, filtration or
laminate adherence (in the case of industrial fabrics and products).
Significant time is spent by employees in activities such as meeting with
stylists, designers, customers, suppliers and machinery manufacturers, as well
as producing samples and running trials in order to develop new products and
markets. These activities are performed at various levels and at various
locations, and their specifically identifiable incremental costs are not
material in relation to the Company's total operating costs.
BACKLOG
Unfilled open orders, which the Company believes are firm, were $50.5 million
at October 28, 1995 and $84.6 million at October 29, 1994 (1995 and 1994
amounts are adjusted to exclude the discontinued operations of the Carpet
Business sold in November 1995). 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, 1995 will be filled in the 53-week period ending
November 2, 1996 ("Fiscal 1996"). Unfilled open orders, which the Company
believes are firm, were $68.0 million at December 30, 1995 compared to $85.9
million at December 31, 1994. The decrease in open orders in 1995 as compared
to 1994 primarily is due to a decrease in customer demands for apparel fabrics
and products and is representative of a change in the timing of the acceptance
of certain orders by the Company. 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
Certain of the Company's products are sold under registered trademarks which
have been licensed royalty-free to the Company from J.P. Stevens until May
2013, including trademarks for certain products using the "J.P. Stevens" name.
Patented processes used in the manufacturing process are not a significant part
of the Company's business. The Company does not license its name or products
to others except for the licenses of certain trade names granted royalty free
to operations that the Company has sold.
EMPLOYEES
The Company currently has approximately 4,500 employees of which approximately
3,900 are hourly and approximately 600 are salaried. The Company's employees
are not represented by unions. The Company believes its relations with its
employees to be good and has not had any work stoppages or strikes.
ENVIRONMENTAL AND REGULATORY MATTERS
The Company is subject to various federal, state and local government laws and
regulations concerning, among other things, the discharge, storage, handling
and disposal of a variety of hazardous and non-hazardous substances and wastes.
The Company's plants generate small quantities of hazardous waste that are
either recycled or disposed of off-site by or at licensed disposal or treatment
facilities.
The Company believes that it is in substantial compliance with all existing
environmental laws and regulations to which it is subject. In addition, the
Company is subject to liability under environmental laws relating to the past
release or disposal of hazardous materials. To date, and in management's
belief for the foreseeable future, liability under and compliance with existing
environmental laws has not had and will not have a material adverse effect on
the Company's financial or competitive positions. No representation or
assurance can be made, however, that any change in federal, state or local
requirements or the discovery of unknown problems or conditions will not
require substantial expenditures by the Company.
SEASONALITY
Certain portions of the business of the Company are seasonal (principally
construction products) and sales of these products tend to decline during
winter months in correlation with construction activity. These declines have
historically tended to result in lower sales and operating profits in the first
and second quarters than in the third and fourth quarters of the Company's
fiscal year.
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."
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ITEM 2. PROPERTIES.
The following table sets forth certain information relating to the Company's
principal facilities (segment information relates to principal use) excluding
the facilities of the Carpet Business sold on November 16, 1995. All of the
facilities owned or leased by the Company are used for manufacturing, except
for the facility in New York, New York, which is used for sales offices.
Except as noted, all of the Company's facilities are owned in fee and
substantially all owned facilities are pledged as collateral for the Company's
bank financing arrangement.
<TABLE>
<CAPTION>
Square Square
Location Footage Location Footage
-------- ------- -------- -------
Apparel Fabrics and Products Industrial Fabrics and Products
---------------------------- -------------------------------
<S> <C> <C> <C>
Greenville, SC 399,000 Kingsport, TN 625,000
Laurens, SC 475,000 Slater, SC 433,000
Greenville, SC 460,000 Westfield, NC 237,000
Stanley, NC 338,000 Easthampton, MA 50,000
S. Boston, VA 286,000
Stuart, VA 133,000 All Segments
Rocky Mount, VA 81,000 ------------
New York, NY(1) 10,000
Home Fashion Textiles
---------------------
Lincolnton, NC 387,000
</TABLE>
(1) The New York, NY facility is leased by the Company under a lease agreement
which was extended for two years effective June 1, 1995 and expires on May
30, 1997.
The Company also leases certain other warehouse facilities, various regional
sales offices, a subsidiary's corporate office 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.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in various legal proceedings which are routine
litigations incidental to the conduct of its business. Management believes
that none of this litigation, if determined adversely to the Company, would
have a material adverse effect on the financial condition or results of
operations of the Company. No proceeding was terminated in the fourth quarter
of Fiscal 1995 that had a material adverse effect on the financial condition or
results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
No matters were submitted to a vote of securityholders during the fourth
quarter of Fiscal 1995.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
There is currently no established public trading market for the Company's Class
A Common Stock, $.01 par value per share (the "Class A Common Stock"), or the
Company's Class B Common Stock, $.01 par value per share (the "Class B Common
Stock" and together with the Class A Common Stock, the "Common Stock").
As of January 15, 1996, there were 12 holders of record of Class A Common Stock
and 2 holders of record of Class B Common Stock.
As a holding company, the Company's ability to pay cash dividends is dependent
on the earnings and cash flows of its subsidiaries and the ability of its
subsidiaries to make funds available to the Company for such purpose. Under
the terms of its outstanding indebtedness, the Company is currently prohibited
from paying cash dividends on the Common Stock.
The Company presently intends to retain earnings to fund working capital and
for general corporate purposes, and, therefore, does not intend to pay cash
dividends on shares of the Common Stock in the foreseeable future. The payment
of future cash dividends, if any, would be made only from assets legally
available therefor, and would also depend on the Company's financial condition,
results of operations, current and anticipated capital requirements,
restrictions under then-existing indebtedness and other factors deemed relevant
by the Company's Board of Directors.
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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 indicated. The
presentation of certain previously reported amounts have been reclassified to
conform to the current presentation and to reflect discontinued operations of
the Automotive Assets (sold in 1994) and the Carpet Business (sold on November
16, 1995) as discussed in Note 3 to the financial statements at Item 8 in this
From 10-K.
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------------------
11/2/91 10/31/92 10/30/93 10/29/94 10/28/95
INCOME STATEMENT DATA: (52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks)
---------- ---------- ---------- ---------- ----------
<C> <C> <C> <C> <C>
Net sales $ 459,158 $ 476,326 $ 457,552 $ 461,871 $ 472,565
Cost of sales 389,387 404,547 396,160 397,921 406,070
--------- --------- --------- --------- ---------
Gross profit 69,771 71,779 61,392 63,950 66,495
Selling, general and administrative expenses 36,892 37,391 39,023 39,805 39,586
Other expense (income), net (122) 1,372 1,236 2,914 6,248
--------- --------- --------- --------- ---------
Operating profit 33,001 33,016 21,133 21,231 20,661
Interest income 8 1 48 749 2,821
Interest expense (67,654) (58,513) (60,407) (55,570) (39,946)
--------- --------- --------- --------- ---------
Loss before reorganization items, income
taxes, discontinued operations, extraordinary
items and cumulative effects of accounting
changes (1) (34,645) (25,496) (39,226) (33,590) (16,464)
Reorganization items - professional fees and
expenses 10,878 - - - -
--------- --------- --------- --------- ---------
Loss before income taxes, discontinued
operations, extraordinary items and
cumulative effects of accounting changes (45,523) (25,496) (39,226) (33,590) (16,464)
Income taxes - 1,446 1,782 2,800 1,200
--------- --------- --------- --------- ---------
Loss before discontinued operations,
extraordinary items and cumulative effects
of ccounting changes (45,523) (26,942) (41,008) (36,390) (17,664)
Discontinued operations, net of taxes:
Income (loss) from discontinued operations 1,620 16,089 24,165 23,628 (7,079)
Net gain (loss) on sale of discontinued
operations - - - 132,966 (26,241)
Extraordinary gain (loss), net of taxes 35,265 - - (7,410) 20,120
Cumulative effects of accounting changes,
net of taxes - - (4,988) (708) -
--------- --------- --------- --------- ---------
Net income (loss) $ (8,638) $ (10,853) $ (21,831) $ 112,086 $ (30,864)
========= ========= ========= ========= =========
Income (loss) applicable to common stock $ (12,407) $ (13,312) $ (24,694) $ 108,753 $ (34,695)
========= ========= ========= ========= =========
(Continued)
</TABLE>
11
<PAGE> 13
INCOME STATEMENT DATA (CONTINUED):
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------------
11/2/91 10/31/92 10/30/93 10/29/94 10/28/95
(52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Weighted average number of shares
outstanding 590,700 1,000,000 1,000,000 1,000,000 1,000,000
======== ========= ========= ========= =========
Earnings (loss) per common share:
Loss before discontinued operations,
extraordinary items and effects of
accounting changes $ (83.44) $ (29.40) $ (43.87) $ (39.73) $ (21.50)
Discontinued operations, net of taxes:
Income (loss) from discontinued
operations 2.74 16.09 24.17 23.63 (7.08)
Net gain (loss) on sale of discontinued
operations - - - 132.97 (26.24)
Extraordinary gain (loss), net of taxes 59.70 - - (7.41) 20.12
Cumulative effects of accounting changes,
net of taxes - - (4.99) (0.71) -
-------- --------- --------- --------- ---------
Net income (loss) $ (21.00) $ (13.31) $ (24.69) $ 108.75 $ (34.70)
======== ========= ========= ========= =========
BALANCE SHEET DATA:
Working capital, excluding net assets
held for sale $ 60,699 $ 61,431 $ 63,821 $ 65,855 $ 72,670
Total assets 533,772 511,535 532,608 452,811 412,822
Total long-term debt, less current portion 499,452 488,280 522,947 335,472 327,668
Senior redeemable preferred stock 15,685 18,144 21,007 24,340 28,171
Shareholders' deficit (73,097) (86,409) (111,103) (2,350) (37,045)
</TABLE>
(1) The following non-cash charges have been included in the determination of
loss before reorganization items, income taxes, discontinued operations,
extraordinary items and cumulative effects of accounting changes for the
periods shown above.
<TABLE>
<CAPTION>
11/2/91 10/31/92 10/30/93 10/29/94 10/28/95
(52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Certain non-cash charges to income:
Depreciation $ 16,945 $ 19,736 $ 19,799 $ 22,242 $ 20,820
Amortization of goodwill and other 975 975 969 964 965
Product liability charge - - - - 5,000
Other non-cash charges to income 1,496 888 1,957 131 371
Non-cash interest 24,916 18,502 11,729 11,161 8,818
-------- -------- -------- -------- --------
$ 44,332 $ 40,101 $ 34,454 $ 34,498 $ 35,974
======== ======== ======== ======== ========
</TABLE>
12
<PAGE> 14
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.
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------
10/30/93 10/29/94 10/28/95
--------- --------- --------
(In Thousands)
<S> <C> <C> <C>
NET SALES
Apparel fabrics and products $ 262,499 $ 254,810 $ 247,846
Industrial fabrics and products 156,763 169,736 191,985
Home fashion textiles 38,290 37,325 32,734
--------- --------- ---------
$ 457,552 $ 461,871 $ 472,565
========= ========= =========
OPERATING PROFIT
Apparel fabrics and products $ 21,791 $ 18,487 $ 16,667
Industrial fabrics and products 3,582 7,618 7,590
Home fashion textiles 4,242 2,564 1,749
Indirect corporate expenses, net (8,482) (7,438) (5,345)
--------- --------- ---------
Operating profit 21,133 21,231 20,661
Interest income 48 749 2,821
Interest expense (60,407) (55,570) (39,946)
--------- --------- ---------
Loss before income taxes, discontinued operations,
extraordinary items and cumulative effects of
accounting changes(1) $ (39,226) $ (33,590) $ (16,464)
========= ========= =========
(1) The following non-cash charges have been included in the determination of loss for the periods presented:
1993 1994 1995
---- ---- ----
(In Thousands)
Depreciation $ 19,799 $ 22,242 $ 20,820
Amortization of goodwill and other 969 964 965
Product liability charge (industrial fabrics and products
segment) - - 5,000
Other non-cash charges to income 1,957 131 371
Interest accretion and debt issuance cost amortization 11,729 11,161 8,818
--------- --------- ---------
$ 34,454 $ 34,498 $ 35,974
========= ========= =========
</TABLE>
13
<PAGE> 15
RESULTS OF OPERATIONS
FISCAL 1995 COMPARED TO FISCAL 1994 (RESTATED FOR EFFECT OF CLASSIFYING CARPET
BUSINESS AS DISCONTINUED OPERATIONS)
Consolidated net sales from continuing operations increased $10.7 million
(2.3%) from $461.9 million in Fiscal 1994 to $472.6 million in Fiscal 1995.
Operating profit from continuing operations decreased $0.6 million (2.7%) from
$21.2 million in Fiscal 1994 to $20.7 million in Fiscal 1995. Excluding a $5
million charge to income in Fiscal 1995 for product liability costs (discussed
below), operating income would have increased $4.5 million in Fiscal 1995 over
Fiscal 1994. Substantially all of these increases in consolidated net sales
and operating profits occurred in the first two fiscal quarters of 1995. The
last two fiscal quarters of 1995 saw declines in operating results from
comparable prior year levels. This second half decline is primarily due to
very weak market conditions for the Company's apparel fabrics which conditions
are expected to continue to negatively impact consolidated results of
operations in Fiscal 1996.
Net sales in Fiscal 1995 in the apparel fabrics and products segment, which
includes unfinished woven apparel fabrics (greige goods) primarily for women's
wear, yarn sales and elastic products for various apparel uses, declined $7.0
million (2.7%) from $254.8 million in Fiscal 1994 to $247.8 million in Fiscal
1995. Fiscal 1995 results in the apparel fabrics and products segment were
marked by two distinct halves. During the first two fiscal quarters of 1995,
the Company reported results which were stronger than the comparable 1994
quarters primarily as a result of the Company's change in its product offering
to emphasize specialty fabrics with more fashion and styling characteristics.
Although overall apparel market conditions were not strong, these fabrics
commanded higher average selling prices and margins than commodity type fabrics
and allowed the Company to improve its margins in the face of the continued
flood of imported commodity apparel fabrics, primarily from Chinese and Eastern
European sources. The recent passage of the General Agreement on Tariffs and
Trade (GATT) will likely foster such foreign competition in the commodity
apparel fabrics market in the future. During the second half of Fiscal 1995,
consumer demand for apparel products weakened significantly which in turn has
led to a much weaker market for the Company's fabrics. As a result of this
lower unit demand for all fabric styles, the impact of the aforementioned
change in product offering was much less apparent in the second half. These
weak market conditions have led to a number of recent business failures and
will continue to impact all areas of the apparel markets. The Company, along
with other textile manufacturers involved in the apparel industry, has
curtailed production in the first quarter of 1996 in response to this poor
demand. Market conditions have continued to weaken into Fiscal 1996 and no
reversal of this trend is expected in the near term. As a result, sales and
operating income in the apparel fabrics and products segment are expected to be
substantially less in Fiscal 1996 than in Fiscal 1995.
Operating profit in the apparel fabrics and products segment declined by $1.8
million (9.8%) from $18.5 million in Fiscal 1994 to $16.7 million in Fiscal
1995. This decrease is primarily the result of lower unit volume and poor
average selling prices for the Company's apparel fabrics and products. In
addition to the weak market conditions, the Company has experienced significant
price increases for many of its most important raw materials, including rayon
and polyester fiber.
Net sales in Fiscal 1995 in the industrial fabrics and products segment, which
includes single-ply roofing and environmental membrane, woven fabrics
constructed of cotton, synthetics and fiberglass for insulation, filtration,
and lamination applications, and extruded urethane products for industrial
uses, increased $22.3 million (13.1%) to $192.0 million from $169.7 million in
Fiscal 1994. Sales of fiberglass fabrics for electrical circuit boards and
construction-related scrims increased $7.0 million. The market for fiberglass
fabrics, particularly those used in the manufacture of electronic circuit
boards has been growing in connection with the rapidly expanding worldwide
consumer demand for electronic products. This growing global demand for
electronic devices which has fueled the increased sales and profitability for
the Company's fiberglass product line is not expected to slow for the
14
<PAGE> 16
foreseeable future. As a result, the Company has and will continue to expand
and enhance productive capacity in this area. Sales of cotton industrial
fabrics increased $6.7 million as a result of higher unit volume in the first
fiscal quarter and the pass-through of relatively higher cotton costs in Fiscal
1995. Sales of roofing membrane increased $4.9 million primarily as a result
of the continued success of the Company's new line of roofing products
introduced in late 1993. This new product's competitive price and improved
performance characteristics have fueled its sales growth. The Company expects
that sales of roofing membrane will continue to increase as this product gains
further market acceptance.
Operating profit in Fiscal 1995 for the industrial fabrics and products segment
was level with Fiscal 1994 at $7.6 million. The operating profit in Fiscal
1995 was reduced as a result of a $5 million charge for product liability costs
for which there was no comparable charge to income in Fiscal 1994.
During the fourth quarter of Fiscal 1995, management determined that the
estimate of the future costs associated with providing services and materials
to repair or replace certain defective roofing products sold by the Company's
predecessor prior to 1987 required revision. In 1988, the Company estimated
the aggregate future costs to repair or replace those defective roofing
products to be approximately $34.1 million. This estimate was based on a
number of factors, including assumed claim rates and costs to repair or
replace. Through October 28, 1995, approximately $29.8 million has been
incurred and charged to this liability. The Company reevaluated the exposure
based on recent experience and claims in process. The liability for future
costs associated with these defective roofing products is subject to
management's best estimate, including factors such as expected future claims
experience by geographic region and roofing compound applied; expected costs to
repair or replace such roofing products; estimated remaining length of time
that such claims will be made by customers; and the estimated costs to litigate
and settle certain claims now in litigation and those that may result in future
litigation. Based on warranties that were issued on the roofs, the Company
estimates that the defective roofing product claims will be substantially
settled by 2000. Based on management's estimate of a range of future costs of
approximately $9.3 million to $11.4 million, the Company recorded a $5.0
million addition to the liability for such defective products increasing such
liability to $9.3 million at October 28, 1995.
Operating profit in Fiscal 1995 in the industrial fabrics and products segment,
excluding the aforementioned charge for product liability costs, increased $5.0
million (65.3%) to $12.6 million from $7.6 million in Fiscal 1994. The
increase in operating profit is primarily a result of the higher sales volumes
described above combined with the effects of improved manufacturing and
operating efficiencies. The Company continuously evaluates its operating
processes and capabilities in order to improve performance. Enhancements,
which include modernizing plant and equipment and optimum utilization of human
resources, are expected in all segments of the Company's operations and
particularly in the industrial segment in which a very broad array of product
lines and customers is served. As a result, margins in the industrial fabrics
and products segment, which improved in Fiscal 1995, are expected to continue
to reflect improvement in the future.
Net sales in Fiscal 1995 in the home fashion textiles segment, which includes
woven drapery fabrics and yarns for the home furnishings industry declined by
$4.6 million (12.3%) to $32.7 million from $37.3 million in Fiscal 1994. The
decline in volume results from weak demand for the Company's woven fabrics used
in home decoration, a continuation of a trend in home fashion textile use for
several years, combined with the weak soft goods market in 1995.
15
<PAGE> 17
Operating profit in Fiscal 1995 in the home fashion textile segment declined by
$0.8 million (31.8%) to $1.7 million primarily as a result of the lower sales
volume described above and lower average selling prices for the Company's
fabrics.
Indirect corporate expenses in Fiscal 1995 declined $2.1 million from $7.4
million in Fiscal 1994 to $5.3 million in Fiscal 1995, primarily as a result of
lower professional fees and lower depreciation and amortization.
Interest expense for Fiscal 1995 is $15.6 million lower than it was for Fiscal
1994. Giving effect to the reduction of debt associated with the use of the
net proceeds from the sale of the Automotive Assets in Fiscal 1994 on a pro
forma basis would reduce interest expense by $14.1 million in Fiscal 1994.
Such pro forma reduction includes $1.3 million representing interest accretion
and debt issuance cost amortization. After giving pro forma effect to the debt
reduction described above, interest expense decreased approximately $1.5
million in Fiscal 1995 from Fiscal 1994. In Fiscal 1995, a $3.4 million
decrease in interest expense as a result of the lower debt balances caused by
the Company's open market purchases of certain of its previously outstanding
notes and debentures (as discussed below) was offset to the extent of $1.9
million due primarily to higher average interest rates and the compounding
effect of accretion of debt discounts and non-cash interest.
During the first quarter of Fiscal 1995, the Company expended $36.6 million to
make open market purchases of certain of its outstanding notes and debentures
with an aggregate face value of $66.6 million and a carrying value (including
interest due at maturity) of $59.2 million. The Company recognized a gain from
early extinguishment of debt of $20.1 million, net of expenses of $1.9 million
and income taxes of $0.6 million. The Company has made no further open market
purchases and is not currently seeking to make any such purchases.
The terms of the Asset Purchase Agreement dated May 25, 1994, as amended,
regarding the sale of the Automotive Assets on June 28, 1994, provided that the
selling price be adjusted based on the net assets sold. During Fiscal 1995,
such amount was finalized and resulted in additional cash proceeds to the
Company of $4.5 million. Such amount, net of $0.1 million of tax, has been
included as gain on sale of discontinued operations in Fiscal 1995.
On November 16, 1995, pursuant to the terms of an Asset Transfer Agreement
dated as of November 16, 1995, by and among the Company, JPS Carpet Corp.
("Carpet"), a wholly-owned subsidiary of the Company, Gulistan Holdings Inc.,
and Gulistan Carpet Inc., a wholly-owned subsidiary of Gulistan Holdings Inc.
(collectively, "Gulistan"), the Company and Carpet consummated the sale of
substantially all of the assets of Carpet used in the business of designing and
manufacturing tufted carpets for sale to residential, commercial and
hospitality markets (the "Carpet Business"). Pursuant to the Asset Transfer
Agreement, Gulistan agreed to assume substantially all of the liabilities and
obligations associated with the Carpet Business.
The consideration for the Carpet Business consisted of approximately $22.5
million in cash, subject to certain post- closing adjustments based on the
audited amount of working capital transferred on November 16, 1995, and other
debt and equity securities of Gulistan as follows: a $10 million Promissory
Note due in November 2001, $5 million of preferred stock redeemable in November
2005, and warrants to purchase 25% of the common stock of Gulistan. Based on
an independent valuation, the Company has determined the fair value of these
debt and equity securities to be approximately $11.3 million. Since the
disposal of the Carpet Business occurred subsequent to the end of Fiscal 1995,
the net assets of the Carpet Business (adjusted to net realizable value) have
been classified as "net assets held for sale" on the October 28, 1995
Consolidated Balance Sheet. As of October 28, 1995, the Company adjusted the
net assets of the Carpet Business to their net realizable value, which resulted
in a charge to the 1995 Consolidated Statement of Operations of $30.7 million,
classified as loss on sale of discontinued operations. The loss on the sale is
not currently recognizable for tax purposes and the Company has recorded no net
tax benefit as a result of this loss due to uncertainties regarding the ability
to utilize these losses in future years.
16
<PAGE> 18
FISCAL 1994 COMPARED TO FISCAL 1993 (BOTH YEARS RESTATED FOR EFFECT OF
CLASSIFYING CARPET BUSINESS AS DISCONTINUED OPERATIONS)
Consolidated net sales from continuing operations increased $4.3 million (0.9%)
from $457.6 million in Fiscal 1993 to $461.9 million in Fiscal 1994. Operating
profit from continuing operations increased $0.1 million to $21.2 million in
Fiscal 1994. In general, lower margins on sales of apparel fabrics and
products and home fashion textiles were offset by increases in sales and
margins for industrial fabrics and products.
Net sales in Fiscal 1994 in the apparel fabrics and products segment declined
by $7.7 million (2.9%) from $262.5 million in Fiscal 1993 to $254.8 million.
Increased foreign competition in the market for commodity apparel fabrics,
primarily from Eastern European and Chinese sources, resulted in lower average
selling prices and lower unit volumes in this market segment. During 1994, the
Company responded to these changes in its business environment by changing its
product offering dramatically, emphasizing specialty fabrics with more fashion
and styling characteristics. These changes involved enhancing the Company's
manufacturing capabilities and responsiveness to its customers. The markets
for such specialty, styled fabrics, in which quality, product development,
responsiveness and speed of delivery are more critical do not allow foreign
competitors the type of cost advantage which they enjoy in commodity markets.
Operating profit in Fiscal 1994 in the apparel fabrics and products segment
declined by $3.3 million (15.2%) from Fiscal 1993 primarily as a result of the
lower average selling prices for much of the Company's apparel fabrics product
line, as discussed above. In addition, lower volume and a weaker product mix
in sales of apparel elastic products accounted for $1.1 million of the decline
in operating profit.
Net sales in Fiscal 1994 in the industrial fabrics and products segment
increased $12.9 million (8.3%) to $169.7 million from $156.8 million in Fiscal
1993. This increase was primarily the result of increased demand for
fiberglass fabrics used in commercial construction and electronic circuit
boards ($6.6 million) and due to the introduction in late 1993 of the Company's
new product for the single-ply roofing market ($4.3 million).
Operating profit in Fiscal 1994 in the industrial fabrics and products segment
increased $4.0 million (112.7%) to $7.6 million from $3.6 million in Fiscal
1993 due to the higher sales volume discussed above and improved product mix in
Fiscal 1994.
Net sales in Fiscal 1994 in the home fashion textiles segment decreased $1.0
million to $37.3 million from $38.3 million in Fiscal 1993 primarily as a
result of lower unit sales of drapery fabric, reflecting a continuation of a
trend away from such fabrics in home decoration.
Operating profit in Fiscal 1994 in the home fashion textiles segment declined
$1.6 million (39.5%) to $2.6 million from $4.2 million in Fiscal 1993 as a
result of the aforementioned decline in unit sales and a less profitable
product mix in home fashion fabrics.
Indirect corporate expenses in Fiscal 1994 declined $1.1 million to $7.4
million from $8.5 million in Fiscal 1993 due primarily to lower professional
fees and lower depreciation and amortization expense.
17
<PAGE> 19
Interest expense for Fiscal 1994 is $4.8 million lower than it was for Fiscal
1993. Giving effect to the reduction of debt associated with the use of the
net proceeds from the sale of the Automotive Assets (as discussed above) on a
pro forma basis would reduce interest expense by $21.6 million in Fiscal 1993
and $14.1 million in Fiscal 1994. Such pro forma reductions include $3.1
million and $1.3 million in Fiscal 1993 and 1994, respectively, representing
interest accretion and debt issuance cost amortization. After giving pro forma
effect to the debt reduction, interest expense increased approximately $2.6
million in Fiscal 1994 from Fiscal 1993 due primarily to additional revolver
loan borrowings and the compounding effect of accretion of debt discounts and
non-cash interest.
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), which in connection with the sale of the Carpet Business on
November 16, 1995, was reduced to a maximum of $118 million from $135 million.
At October 28, 1995, the Company had $40.5 million available for borrowing
under the Revolving Credit Facility. Borrowings under the Revolving Credit
Facility are made or repaid on a daily basis in amounts equal to the net cash
requirements or proceeds for that business day.
The Company and its operating subsidiaries (being hereinafter collectively
referred to as the "Borrowing Subsidiaries") are parties to the Fourth Amended
and Restated Credit Agreement, dated as of June 24, 1994, as amended (the
"Restated Credit Agreement"), by and among the financial institutions party
thereto, Citibank, N.A. ("Citibank"), as administrative agent and co-agent, and
General Electric Capital Corporation ("GECC"), as collateral agent and
co-agent. The Restated Credit Agreement, as amended in connection with the
sale of the Carpet Business which occurred on November 16, 1995, provides for a
revolving credit loan facility and letters of credit (the "Revolving Credit
Facility") in a maximum principal amount equal to a lesser of (a) $118 million
and (b) a specified borrowing base, which is based upon eligible receivables
and inventory of the Borrowing Subsidiaries (the "Borrowing Base"), except that
(i) no Borrowing Subsidiary may borrow an amount greater than the Borrowing
Base attributable to it, (ii) letters of credit may not exceed $15 million in
the aggregate, and (iii) $20 million of the Revolving Credit Facility is
available, not subject to the Borrowing Base, to purchase property, plant and
equipment or to finance or refinance such purchases ("Capex Loans"), provided
that the aggregate of all revolving credit loans, including Capex Loans, and
letters of credit may not exceed the lesser of (A) $118 million and (B) the sum
of the Borrowing Base plus $25 million (subject to certain reductions).
Net cash provided by operations improved to $6.5 million in Fiscal 1995
compared to a use of $10.4 million in Fiscal 1994 primarily due to a $14.5
million decrease in interest payments. Cash used for increases in working
capital (exclusive of the Carpet Business) and payments on long-term roofing
liabilities totaled $10.9 million. Accrued interest declined by $2.6 million
primarily as a result of lower outstanding amounts of notes and debentures at
October 28, 1995. Net receipts from discontinued operations, which in Fiscal
1995 represents the net cash flow from the Carpet Business totaled $3.5
million. Such amount includes a reduction in the working capital employed in
the Carpet Business of $5.2 million during Fiscal 1995. Net cash from
operations, receipts from discontinued operations, and increased borrowings
under the Revolving Credit Facility funded property and equipment additions of
approximately $20.3 million. In response to the expectation of lower operating
cash flows in the future, management expects to reduce such capital spending in
Fiscal 1996 to approximately $11 million.
18
<PAGE> 20
On November 16, 1995 at the closing of the sale of the Carpet Business as
discussed above, the Company received approximately $22.5 million in cash, net
of expenses, which it applied to reduce outstanding borrowings under its bank
credit agreement. The cash proceeds are subject to certain post-closing
adjustments based on net assets (as defined) as of the closing date. The
Company has estimated the amount of such adjustment to be approximately $3.5
million payable to Gulistan. Therefore, the final amount of net cash proceeds
to be applied by the Company to reduce outstanding borrowings under its bank
credit agreement is expected to be approximately $19.0 million (net of fees,
expenses and the estimated post-closing adjustment resulting from the level of
working capital transferred at the closing date) based on management's best
estimate of the certain post-closing adjustments for the working capital
transferred.
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.
Provisions of the Company's indentures governing its debt securities (the
"Indentures") place significant restrictions on certain corporate acts such as
mergers, consolidations, acquisitions, repurchases of stock, the making of
certain restricted payments, including the payment of cash dividends on the
Company's capital stock, transactions with affiliates and the sale of assets.
The Company must maintain minimum levels of "net worth", defined to be total
assets minus liabilities plus the subordinated notes and debentures and other
adjustments. The Indentures place limitations on the Company's ability to
incur additional debt, grant a security interest in its assets and require the
Company to apply the proceeds from the sale of assets, outside the ordinary
course of business, towards reducing outstanding debt. The payment of
dividends is prohibited. Other customary covenants, conditions and default
provisions are also present. The Company was in compliance with the
restrictions and financial covenants of its debt agreements at October 28,
1995.
Management believes that the Company's capital resources and expected cash
flows will be adequate to meet its operating and working capital needs during
Fiscal 1996. The Revolving Credit Facility (or a similar credit facility) is
essential for the Company's continued operations. Prior to the expiration of
the Company's Revolving Credit Facility on December 1, 1996, management will
discuss extension of the facility with its banks. Mandatory principal payments
of approximately $69 million on the Company's senior subordinated discount
notes and senior subordinated notes are due June 1, 1997. Although such
principal payments are not scheduled until June 1997, the Company's projected
cash flows and capital resources are insufficient to satisfy such obligations.
The Company cannot predict what effect, if any, that the mandatory payments on
the debt securities in June 1997 will have on the negotiations with the banks
to extend the Revolving Credit Facility beyond December 1, 1996. However, the
Company does not expect that an extension of its Revolving Credit Facility
beyond May 31, 1997 will be negotiated unless such debt securities are
extended, replaced or refinanced. Accordingly, management expects to engage
advisors and discuss extension, replacement or refinancing of the debt
securities with its securityholders. The Company's ability to accomplish a
restructuring of the terms of its debt securities or any refinancing will
depend on a number of factors, including its operating performance, market
conditions and the terms of any extension, replacement or refinancing.
Management is unable to predict the Company's ability to accomplish the
foregoing extension of its bank financing and extension, replacement or
refinancing of its debt securities.
The Company expects that its planned capital expenditures in Fiscal 1996 of
approximately $11 million will be funded by cash from operations, bank and
other equipment financing sources. Should such capital resources be inadequate
or unavailable, however, management would defer certain of its planned capital
expenditures or take other appropriate actions to preserve liquidity. At
October 28, 1995, the Company has commitments for capital expenditures of
approximately $1.6 million.
19
<PAGE> 21
INFLATION AND TAX MATTERS
The Company is subject to the effects of changing prices. It has generally
been able to pass along inflationary increases in its costs by increasing the
prices for its products; however, market conditions sometimes preclude this
practice. The application of purchase accounting in connection with the
Acquisition in 1988 mitigates the effects of changing costs on the Company's
Consolidated Financial Statements because assets and liabilities were adjusted
to fair values at the date of the Acquisition, and costs of sales and
depreciation have been adjusted accordingly.
The Company provided $1.2 million for income taxes on continuing operations in
Fiscal 1995. No tax expense resulted from applying the statutory tax rate to
the loss before income taxes. However, the Company was not able to fully
offset subsidiary income in all tax jurisdictions with net operating losses of
the Company or other subsidiaries or operating loss carryovers and, as a
result, a provision for state income taxes was required. During Fiscal 1994,
the Company utilized approximately $141 million of net operating loss
carryforwards to offset the gain on sale of the Automotive Assets. Income tax
expense incident to the sale was reduced by approximately $49 million as a
result of such utilization. Federal alternative minimum and state taxes of
approximately $2.8 million were recognized as a result of the sale. The
Company's ability to utilize its net operating losses may be significantly
limited under the income tax laws should there be changes in the ownership of
the Company's stock which constitute an ownership change for tax purposes. The
effect of such an ownership change would be to significantly limit the annual
utilization of the remaining net operating loss to an amount equal to the value
of the Company immediately prior to the time of the change (subject to certain
adjustments) multiplied by the Federal long-term tax exempt rate. The Company
does not believe that this potential limitation on net operating loss
carryforwards is applicable. However, the Company has provided a 100%
valuation allowance of $26 million for its remaining deferred tax asset, net of
existing taxable "temporary differences," except those related to certain
deferred state tax liabilities. The gross deferred tax asset relates primarily
to the benefit of the net operating loss carryforward and losses from
discontinued operations not currently recognizable for tax purposes. In the
Company's opinion, the valuation allowance is required as realization of the
tax benefit is not assured based on prior operating history.
Although the Company believes use of its net operating losses to offset the
gain on the Automotive Assets will more likely than not be sustained under
existing tax laws, uncertainty exists primarily due to the fact that applicable
regulations under Internal Revenue Code Section 382 have not been issued.
Therefore, in accordance with provisions of the Indentures, the Company set
aside, in a special-purpose subsidiary, a portion ($39.5 million) of the net
proceeds from the sale of the Automotive Assets to satisfy, if necessary, these
possible contingent tax liabilities. These funds have been invested in U.S.
Government securities and are classified as other assets in the Company's
Consolidated Balance Sheets.
In the first quarter of Fiscal 1995, the Company estimated that the open market
purchases of certain of its debt securities would result in additional tax
liabilities of approximately $3.2 million. Such amount was recorded as a
reduction of the extraordinary gain from early extinguishment of debt in the
first fiscal quarter. This amount of tax was based on management's best
estimate at that time of alternative minimum taxable income for Fiscal 1995.
During the fourth fiscal quarter, management's estimate of Fiscal 1995
alternative minimum taxable income was revised downward. Accordingly, the
Company reduced the $3.2 million tax estimate by $2.6 million to $0.6 million
during the fourth quarter of Fiscal 1995.
The loss recorded on the disposition of the Carpet Business is not currently
recognizable for tax purposes. The Company has recorded no net tax benefit in
its financial statements due to uncertainties surrounding the Company's ability
to utilize such losses in future years.
20
<PAGE> 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
JPS Textile Group, Inc.:
We have audited the accompanying consolidated balance sheets of JPS Textile
Group, Inc. and subsidiaries (the "Company") as of October 28, 1995 and October
29, 1994, and the related consolidated statements of operations, senior
redeemable preferred stock and shareholders' equity (deficit), and cash flows
for each of the three years in the period ended October 28, 1995. Our audits
also included the financial statement schedule listed in the index at page S-1.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at October 28, 1995
and October 29, 1994, and the results of its operations and its cash flows for
each of the three years in the period ended October 28, 1995 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
The accompanying consolidated financial statements for the year ended October
28, 1995 have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 12 to the consolidated financial statements, the
Company has had recurring net losses from continuing operations since
inception, has a net shareholders' deficiency and the Company's senior
revolving credit facility expires on December 1, 1996. The Company's ability
to extend the senior revolving credit facility or obtain alternative sources of
financing is uncertain due to the significant mandatory principal payments
described in Note 12. These matters raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 12. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
January 15, 1996
21
<PAGE> 23
JPS TEXTILE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
October 29, October 28,
1994 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 1,844 $ 1,352
Accounts receivable, less allowance of $2,577 in 1994 and
$2,131 in 1995 (Note 5) 87,100 88,186
Inventories (Notes 4 and 5) 48,044 48,729
Prepaid expenses and other 1,221 1,024
Net assets held for sale (Note 3) 69,684 28,932
--------- ---------
Total current assets 207,893 168,223
PROPERTY, PLANT AND EQUIPMENT, net (Notes 4 and 5) 163,448 162,957
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS
ACQUIRED, less accumulated amortization of $5,912 in
1994 and $6,877 in 1995 32,454 31,489
OTHER ASSETS (Notes 4, 8 and 9) 49,016 50,153
--------- ---------
Total $ 452,811 $ 412,822
========= =========
</TABLE>
22
<PAGE> 24
<TABLE>
<CAPTION>
October 29, October 28,
1994 1995
-------------- --------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 30,665 $ 29,754
Accrued interest 12,448 9,895
Accrued salaries, benefits and withholdings (Note 8) 12,541 11,503
Other accrued expenses (Notes 4, 8 and 10) 14,353 12,699
Current portion of long-term debt (Note 5) 2,347 2,770
--------- ---------
Total current liabilities 72,354 66,621
LONG-TERM DEBT (Note 5) 335,472 327,668
DEFERRED INCOME TAXES (Note 7) 3,565 4,165
OTHER LONG-TERM LIABILITIES (Notes 4, 8 and 9) 19,430 23,242
--------- ---------
Total liabilities 430,821 421,696
--------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 3, 5, 7 and 8)
SENIOR REDEEMABLE PREFERRED STOCK, redemption
value of $48,374 in 1994 and $51,324 in 1995 (Note 6) 24,340 28,171
--------- ---------
SHAREHOLDERS' EQUITY (DEFICIT) (Note 6):
Junior preferred stock 250 250
Common stock:
Class A, 490,000 shares issued and outstanding 5 5
Class B, 510,000 shares issued and outstanding 5 5
Additional paid-in capital 33,444 29,613
Deficit (36,054) (66,918)
--------- ---------
Total shareholders' deficit (2,350) (37,045)
--------- ---------
Total $ 452,811 $ 412,822
========= =========
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 25
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------
October 30, October 29, October 28,
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 457,552 $ 461,871 $ 472,565
Cost of sales 396,160 397,921 406,070
--------- --------- ---------
Gross profit 61,392 63,950 66,495
Selling, general and administrative expenses (Note 10) 39,023 39,805 39,586
Other expense, net (Note 8) 1,236 2,914 6,248
--------- --------- ---------
Operating Profit 21,133 21,231 20,661
Interest income 48 749 2,821
Interest expense (Note 5) (60,407) (55,570) (39,946)
--------- --------- ---------
Loss before income taxes, discontinued operations,
extraordinary items and cumulative effects
of accounting changes (39,226) (33,590) (16,464)
Income taxes (Note 7) 1,782 2,800 1,200
--------- --------- ---------
Loss before discontinued operations, extraordinary items
and cumulative effects of accounting changes (41,008) (36,390) (17,664)
Discontinued operations:
Income (loss) from discontinued operations, net of taxes
of $218 in 1993 and none in 1994 and 1995 24,165 23,628 (7,079)
Net gain (loss) on sales of discontinued operations,
net of taxes of $2,800 in 1994 and $100 in 1995 (Note 3) - 132,966 (26,241)
--------- --------- ---------
Income (loss) before extraordinary items and
cumulative effects of accounting changes (16,843) 120,204 (50,984)
Extraordinary gain (loss) on early extinguishment of debt,
net of taxes of $600 in 1995 (Note 5) - (7,410) 20,120
Cumulative effects of accounting changes,
net of taxes of $165 in 1993 and none in 1994 (Note 9) (4,988) (708) -
--------- --------- ---------
Net income (loss) (21,831) 112,086 (30,864)
Senior redeemable preferred stock in-kind
dividends and discount accretion (Note 6) (2,863) (3,333) (3,831)
--------- --------- ---------
Income (loss) applicable to common stock $ (24,694) $ 108,753 $ (34,695)
========= ========= =========
Weighted average number of common shares outstanding 1,000,000 1,000,000 1,000,000
========= ========= =========
Earnings (loss) per common share:
Loss before discontinued operations, extraordinary items
and cumulative effects of accounting changes $ (43.87) $ (39.73) $ (21.50)
Discontinued operations:
Income (loss) from discontinued operations 24.17 23.63 (7.08)
Net gain (loss) on sales of discontinued operations - 132.97 (26.24)
--------- --------- ---------
Income (loss) before extraordinary items and cumulative
effects of accounting changes (19.70) 116.87 (54.82)
Extraordinary gain (loss) on early extinguishment of debt - (7.41) 20.12
Cumulative effects of accounting changes (4.99) (0.71) -
--------- --------- ---------
Net income (loss) $ (24.69) $ 108.75 $ (34.70)
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
24
<PAGE> 26
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF SENIOR REDEEMABLE PREFERRED STOCK
AND SHAREHOLDERS' EQUITY (DEFICIT)
(In Thousands)
<TABLE>
<CAPTION>
Shareholders' Equity (Deficit)
Senior --------------------------------------------------
Redeemable Junior Additional
Preferred Common Preferred Paid-In
Stock Stock Stock Capital Deficit
------------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Balance - October 31, 1992 $ 18,144 $ 10 $ 250 $ 39,640 $ (126,309)
Net loss for 52 weeks (21,831)
Preferred stock in-kind dividends
and discount accretion 2,863 (2,863)
-------- ---- ------ --------- ----------
Balance - October 30, 1993 21,007 10 250 36,777 (148,140)
Net income for 52 weeks 112,086
Preferred stock in-kind dividends
and discount accretion 3,333 (3,333)
-------- ---- ------ --------- ----------
Balance - October 29, 1994 24,340 10 250 33,444 (36,054)
Net loss for 52 weeks (30,864)
Preferred stock in-kind dividends
and discount accretion 3,831 (3,831)
-------- ---- ------ --------- ----------
Balance - October 28, 1995 $ 28,171 $ 10 $ 250 $ 29,613 $ (66,918)
======== ==== ====== ========= ==========
</TABLE>
See notes to consolidated financial statements.
25
<PAGE> 27
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------
October 30, October 29, October 28,
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (21,831) $ 112,086 $ (30,864)
--------- --------- ---------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Loss (income) from discontinued operations (24,165) (23,628) 7,079
Loss (gain) on sales of discontinued operations - (132,966) 26,241
Extraordinary loss (gain) on early extinguishment of
debt - 7,410 (20,120)
Cumulative effects of accounting changes 4,988 708 -
Depreciation and amortization, except amounts
included in interest expense 20,768 23,206 21,785
Interest accretion and debt issuance cost amortization 11,729 11,161 8,818
Product liability charge - - 5,000
Deferred income taxes 1,082 1,227 -
Financing costs incurred (6,016) (2,943) (25)
Other, net 2,701 (2,970) (498)
Changes in assets and liabilities:
Accounts receivable (2,548) 426 (1,086)
Inventories (6,729) (179) (685)
Prepaid expenses and other assets (1,415) (1,248) (984)
Accounts payable (1,496) 228 (911)
Accrued expenses and other liabilities (5,602) (2,951) (7,202)
--------- --------- ---------
Total adjustments (6,703) (122,519) 37,412
--------- --------- ---------
Net cash provided by (used in) operating activities (28,534) (10,433) 6,548
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment additions (18,267) (18,423) (20,332)
Receipts from discontinued operations, net 13,532 17,115 3,453
Proceeds from sale of discontinued operations, net - 259,044 4,415
Purchase of long-term investments - (39,500) -
--------- --------- ---------
Net cash provided by (used in) investing activities (4,735) 218,236 (12,464)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 5,898 285 5,000
Revolving credit facility borrowings (repayments), net 30,463 (41,666) 41,808
Purchases and repayment of other long-term debt (2,569) (166,044) (41,384)
--------- --------- ---------
Net cash provided by (used in) financing activities 33,792 (207,425) 5,424
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH 523 378 (492)
Cash at beginning of year 943 1,466 1,844
--------- --------- ---------
Cash at end of year $ 1,466 $ 1,844 $ 1,352
========= ========= =========
(Continued)
</TABLE>
26
<PAGE> 28
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------
October 30, October 29, October 28,
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
SUPPLEMENTAL INFORMATION ON CASH FLOWS
FROM CONTINUING OPERATIONS:
Interest paid $ 49,455 $ 48,219 $ 33,681
Income taxes paid 480 376 3,314
Reorganization items paid 162 - -
Non-cash financing activities:
Senior redeemable preferred stock dividends-in-kind 2,604 2,765 2,936
</TABLE>
See notes to consolidated financial statements.
27
<PAGE> 29
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND BASIS OF PRESENTATION
JPS Textile Group, Inc. (the "Company") purchased from J.P. Stevens &
Co., Inc. ("J.P. Stevens") substantially all of the property, plant
and equipment, inventories, certain other assets and the business of
five former divisions of J.P. Stevens (the "Predecessor Stevens
Divisions") on May 9, 1988 (the "Acquisition"). The purchase was
financed through long-term borrowings and the sale of preferred and
common stock. The Company operates principally as a manufacturer of
apparel fabrics and products, industrial fabrics and products and home
fashion textiles.
A Plan of Reorganization (the "Plan") which was distributed to the
Company's bondholders and preferred stockholders (the
"Securityholders") on December 21, 1990, was approved by the
securityholders in early February 1991 and in accordance with the
Plan, the Company filed a voluntary petition for reorganization under
Chapter 11 of the United States Bankruptcy Code. Subsequently, in
March 1991, the bankruptcy court confirmed the Plan and it became
effective April 2, 1991. The Plan provided for, among other things,
the cancellation of certain existing debt and preferred stock
securities in exchange for 490,000 shares of new Class A common stock
along with new debt instruments and new preferred stock with lower
interest and dividend rates. Since the Company's reorganization did
not meet the criteria for "fresh-start" accounting, the primary
adjustment to historical carrying values as a result of the
reorganization was to state the new long-term debt and senior
redeemable preferred stock at present values of amounts to be paid
determined at appropriate current interest rates as of April 2, 1991,
the effective date of the Plan. The resulting present value discount
is amortized as interest expense or dividends over the life of the
related debt or senior redeemable preferred stock instrument using the
interest method.
As described in Note 3, the Company completed the sale of the assets
and business of its wholly-owned subsidiary, JPS Carpet Corp., on
November 16, 1995 (subsequent to year end). Also described in Note 3,
the Company sold the assets and businesses of its wholly-owned
subsidiary, JPS Auto Inc., and its 80% owned joint venture and the
synthetic industrial fabrics division of JPS Converter & Industrial
Corp. (another of the Company's wholly-owned subsidiaries) in June
1994.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements
include JPS Textile Group, Inc. and its subsidiaries, all of which are
wholly owned. Significant intercompany transactions and accounts have
been eliminated.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
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.
28
<PAGE> 30
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:
<TABLE>
<S> <C>
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
</TABLE>
For tax reporting purposes, the Company uses the Modified Accelerated
Cost Recovery System to compute depreciation.
Excess of Cost Over Fair Value of Net Assets Acquired - Excess of cost
over fair value of net assets acquired is being amortized on a
straight-line basis over a period of forty years. Periodically, the
Company evaluates the realizability of the excess of cost over fair
value of net assets acquired based upon expectations of undiscounted
future cash flows and comparing such future cash flows to the carrying
amount of the related asset.
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 ten 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.
Postretirement Benefits - Effective November 1, 1992, the Company
adopted Statement of Financial Accounting Standards ("SFAS") No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions". SFAS No. 106 requires that the projected future cost of
providing postretirement benefits, such as health care and life
insurance, be recognized as an expense as employees render service
instead of when claims are incurred, as had been the Company's
practice. See Note 9 for a further description of the accounting for
postretirement benefits.
Postemployment Benefits - Effective October 31, 1993, the Company
adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits". SFAS No. 112 requires that the cost of benefits provided
to former or inactive employees after employment but before retirement
be recognized on the accrual basis of accounting instead of when paid,
as had been the Company's practice. See Note 9 for a further
description of the accounting for postemployment benefits.
Revenue Recognition - The Company recognizes revenue from product
sales when it has shipped the goods or ownership has been transferred
to the customer for goods to be held for future shipment at the
customer's request.
Income Taxes - The Company accounts for income taxes using the
principles of SFAS No. 109, "Accounting for Income Taxes". Under SFAS
No. 109, deferred taxes represent the future income tax effect of
temporary differences between the book and tax bases of the Company's
assets and liabilities, assuming they will be realized and settled at
the amount reported in the Company's financial statements.
29
<PAGE> 31
Earnings Per Share - Earnings per share is computed by dividing
earnings applicable to common stock (net income or loss adjusted by
senior redeemable preferred stock dividends) by the weighted average
number of shares of common stock outstanding during the period.
Cash Flows - For purposes of reporting cash flows, cash includes cash
on hand and in banks. The Company has no investments that are deemed
to be cash equivalents.
Fiscal Year - The Company's operations are based on a fifty-two or
fifty-three week fiscal year ending on the Saturday closest to October
31. The 1993, 1994 and 1995 fiscal years each consisted of 52 weeks.
Reclassifications - Certain 1993 and 1994 amounts have been
reclassified to conform to the 1995 presentation. In addition, see
Note 3 regarding reclassifications of 1993 and 1994 amounts for
discontinued operations.
3. SALE OF DISCONTINUED OPERATIONS
Carpet Business - On November 16, 1995, pursuant to the terms of an
Asset Transfer Agreement dated as of November 16, 1995, by and among
the Company, JPS Carpet Corp. ("Carpet"), a wholly-owned subsidiary of
the Company, Gulistan Holdings Inc. and Gulistan Carpet Inc., a
wholly-owned subsidiary of Gulistan Holdings Inc. (collectively,
"Gulistan"), the Company and Carpet consummated the sale of
substantially all of the assets of Carpet used in the business of
designing and manufacturing tufted carpets for sale to residential,
commercial and hospitality markets (the "Carpet Business"). Pursuant
to the Asset Transfer Agreement, Gulistan agreed to assume
substantially all of the liabilities and obligations associated with
the Carpet Business. Gulistan was formed and its common stock is
owned by certain members of the former management team at Carpet. The
Company and its subsidiaries have agreed, for a three-year period, not
to compete directly or indirectly with the business that was sold.
The Consolidated Balance Sheets and Statements of Operations and Cash
Flows for 1993 and 1994 have been reclassified to reflect the Carpet
Business as discontinued operations.
The consideration for the Carpet Business consisted of approximately
$22.5 million in cash, subject to certain post-closing adjustments
based on the audited amount of working capital transferred on November
16, 1995, and other debt and equity securities of Gulistan as follows:
a $10 million Promissory Note due in November 2001, $5 million of
preferred stock redeemable in November 2005, and warrants to purchase
25% of the common stock of Gulistan. Based on an independent
valuation, the Company has determined the fair value of these debt and
equity securities to be approximately $11.3 million. Since the
disposal of the Carpet Business occurred subsequent to the end of
Fiscal 1995, the net assets of the Carpet Business (adjusted to net
realizable value) have been classified as "net assets held for sale"
on the October 28, 1995 balance sheet. As of October 28, 1995, the
Company adjusted the net assets of the Carpet Business to their net
realizable value, which resulted in a charge to the 1995 Consolidated
Statement of Operations of $30.7 million, classified as loss on sale
of discontinued operations. The loss on the sale is not currently
recognizable for tax purposes and the Company has recorded no net tax
benefit as a result of this loss due to uncertainties regarding the
ability to utilize these losses in future years. Net sales from the
discontinued operations of the Carpet Business were $140.2 million,
$141.6 million and $120.1 million in fiscal years 1993, 1994 and 1995,
respectively.
30
<PAGE> 32
The final amount of net cash proceeds applied by the Company to reduce
outstanding borrowings under its bank credit agreement is expected to
be approximately $19.0 million (net of fees, expenses and the
estimated post- closing adjustment resulting from the level of working
capital transferred at the closing date) based on management's best
estimate of the certain post-closing adjustments for the working
capital transferred (see Note 5 herein).
Automotive Textiles Business - On June 28, 1994, pursuant to the
terms of an Asset Purchase Agreement dated May 25, 1995 (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 Consolidated Balance Sheet and
Statements of Operations and Cash Flows for 1993 have been reclassified
to reflect the Automotive Assets as discontinued operations.
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 the discontinued operations of the Automotive Assets
were $287.9 million in fiscal year 1993 and $224.9 million for the
eight months ended June 28, 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
period of four years, not to directly or indirectly compete in North,
Central and South America with the businesses that were sold.
The sale price for the Automotive Assets was approximately $283
million, consisting of $264 million of cash paid at closing, $15
million of assumed debt as of June 28, 1994 and certain post-closing
adjustments which resulted in a gain of $4.4 million, net of $0.1
million of taxes, recognized in 1995. The sale of the Automotive
Assets resulted in an approximate total gain of $137.4 million, net of
income taxes of $2.9 million.
The net cash proceeds 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 $217 million and such proceeds were used by the Company
to reduce its outstanding indebtedness.
The Company has allocated to the discontinued operations of the
Automotive Assets and the Carpet Business a pro-rata portion of the
interest expense of its senior credit facility, which pro-rata
portions were approximately $4.3 million, $3.4 million and $1.6
million in 1993, 1994 and 1995, respectively.
31
<PAGE> 33
4. BALANCE SHEET COMPONENTS
The components of certain balance sheets accounts are (in thousands):
<TABLE>
<CAPTION>
October 29, October 28,
1994 1995
------------ ------------
<S> <C> <C>
Inventories:
Raw materials and supplies $ 13,782 $ 13,909
Work-in-process 18,414 18,334
Finished goods 15,848 16,486
--------- ---------
$ 48,044 $ 48,729
========= =========
Property, plant and equipment, net:
Land and improvements $ 7,291 $ 7,349
Buildings and improvements 51,837 53,649
Machinery and equipment 194,917 205,614
Furniture, fixtures and other 7,467 7,725
--------- ---------
261,512 274,337
Less accumulated depreciation (101,224) (118,866)
--------- ---------
160,288 155,471
Construction in progress 3,160 7,486
--------- ---------
$ 163,448 $ 162,957
========= =========
Other noncurrent assets:
Unamortized debt issuance costs $ 2,012 $ 1,092
Prepaid pension costs 5,100 5,973
Investments (see Note 8) 40,238 42,885
Other 1,666 203
--------- ---------
$ 49,016 $ 50,153
========= =========
Other accrued expenses:
Roofing product liability costs $ 4,300 $ 4,000
Taxes payable other than income taxes 1,413 1,433
Income taxes 4,816 2,753
Other 3,824 4,513
--------- ---------
$ 14,353 $ 12,699
========= =========
Other long-term liabilities:
Roofing product liability costs and deferred warranty income $ 13,987 $ 15,700
Accrued other postretirement and postemployment benefits 5,443 5,298
Other - 2,244
--------- ---------
$ 19,430 $ 23,242
========= =========
</TABLE>
32
<PAGE> 34
5. LONG-TERM DEBT
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
October 29, October 28,
1994 1995
------------ ------------
<S> <C> <C>
Senior credit facility, revolving line of credit $ 49,918 $ 91,726
Senior subordinated discount notes (including interest due
at maturity of $3,395 and $4,370, respectively) 130,179 113,617
Senior subordinated notes (including interest due at maturity
of $4,404 and $4,347, respectively) 109,283 81,120
Subordinated debentures 75,000 54,071
Equipment financing 7,658 9,780
--------- ---------
Total 372,038 350,314
Less reorganization discount:
Senior subordinated discount notes (8,109) (5,171)
Senior subordinated notes (8,723) (4,435)
Subordinated debentures (17,387) (10,270)
--------- ---------
Total long-term debt 337,819 330,438
Less current portion (2,347) (2,770)
--------- ---------
Long-term portion $ 335,472 $ 327,668
========= =========
</TABLE>
Senior Credit Facility - In connection with the sale of the Carpet
Business (see Note 3), the Company amended its senior credit facility
to provide for a $118 million revolving line of credit and modify
existing restrictive covenants. The senior credit facility, as
amended, is scheduled to terminate on December 1, 1996. The Company
pays a fee of 1/2 of 1% per annum of the average unused line of
credit. All senior borrowings bear interest at a Base Rate (as
defined) plus 1.0% per annum (9.75% at October 28, 1995) or at the
Eurodollar Rate (as defined) plus 2.50% per annum (approximately 8.4%
at October 28, 1995). Borrowings under the revolving line of credit
(other than for loans used to purchase property, plant and equipment
or to finance or refinance such purchases ("Capex Loans")) are limited
to specified percentages of eligible accounts receivable and
inventories, as defined, and such borrowings plus letters of credit
outstanding and Capex Loans may not exceed the lesser of $118 million
and the borrowing base plus an additional amount of $25,000,000. As
of October 28, 1995, unused letters of credit issued and outstanding
totalled $2,430,000. The outstanding unused letters of credit reduce
the funds available under the revolving line of credit. At October
28, 1995, the Company had $40,494,000 available for borrowing under
the revolving credit agreement.
The senior credit facility also provides that net cash proceeds from
the sale of assets (as defined and excluding the sale or transfer of
the Automotive Assets and the Carpet Business) will be used to
permanently repay obligations thereunder to the extent such proceeds
from March 1994 forward cumulatively exceed $35 million. No such
asset sales occurred during fiscal years 1994 or 1995.
During the first quarter of Fiscal 1995, the Company borrowed
$36,607,000 under the revolving line of credit and made open market
purchases of certain of its outstanding notes and debentures with an
aggregate face value (including interest due at maturity) of
$68,318,000 and a carrying value of $59,225,000. The Company
recognized an extraordinary gain from early extinguishment of debt of
$20,120,000, net of expenses of $1,898,000 and income taxes of
$600,000.
Senior Subordinated Discount Notes - The Company issued the discount
notes in the 1991 reorganization. The discount notes began accruing
interest on June 1, 1993 at 10.85% with 9.85% paid semi-annually and
1% payable at maturity. Interest payable at maturity compounds
semi-annually at the annual rate of 10.85%. In connection with the
1991 reorganization, the carrying value of the discount
33
<PAGE> 35
notes was reduced to its estimated net present value using an
effective interest rate of 13%.
Mandatory redemption payments equal to $37,777,000, plus accrued
interest, are due on each of June 1, 1997 and June 1, 1998 prior to
maturity on June 1, 1999 with optional early redemption available.
Senior Subordinated Notes - The senior subordinated notes bear
interest at 10.25% with 9.25% paid semi-annually and 1% payable at
maturity and were issued in the 1991 reorganization. Interest payable
at maturity compounds semi-annually at the annual rate of 10.25%. In
connection with the 1991 reorganization, the notes were adjusted to
their estimated net present value by recording a discount resulting in
an effective interest rate of 13%. Mandatory redemption payments
equal to $31,250,000, plus accrued interest, are due on each of June
1, 1997 and June 1, 1998 with optional early redemption available.
Subordinated Debentures - The subordinated debentures bear interest at
7%, payable semi-annually, with a mandatory redemption payment of
principal of $37,500,000 due May 15, 1999, prior to maturity on May
15, 2000, with optional early redemption available. The subordinated
debentures were issued in the 1991 reorganization. In connection with
the 1991 reorganization, the debentures were adjusted to an estimated
net present value by recording a discount of $24,390,000 resulting in
an effective interest rate of 13.5%.
Equipment Financing - The Company has financed a portion of its
equipment purchases with loans from a finance company and certain
equipment vendors at fixed interest rates ranging from 7.6% to 9.7%.
Monthly principal payments are due in various amounts as determined by
the terms of the loans which have final maturity dates ranging from
October 1997 through December 2001.
Restrictive Covenants - Provisions of the senior credit agreement and
the Company's other debt indentures place significant restrictions on
certain corporate acts such as mergers, consolidations, acquisitions,
repurchases of stock, the making of certain other restricted payments,
transactions with affiliates and the sale of assets and prohibit the
payment of cash dividends. The Company must maintain minimum levels
of "net worth", defined to be total assets (excluding investments
designated by management to satisfy possible contingent tax
liabilities) minus total liabilities plus the subordinated notes and
debentures and other adjustments, which vary quarterly from $205
million at October 28, 1995 to $156 million in the fourth quarter of
1996. In addition, the senior credit agreement contains requirements
to meet certain financial ratios which vary quarterly or annually and
place limitations on the Company's ability to incur additional debt or
grant a security interest in its assets. Other customary covenants,
conditions and default provisions are also present in the agreement
and indentures. The Company was in compliance with the restrictions
and financial covenants of its senior credit agreement and its
long-term debt indentures at October 28, 1995.
Fair Value - The fair value of the Company's long-term debt based on
estimated quoted prices, compared to the carrying values (at
discounted amounts), is as follows (in thousands):
<TABLE>
<CAPTION>
October 29, 1994 October 28, 1995
--------------------- ----------------------
Carrying Fair Carrying Fair
Value Value Value Value
--------- --------- --------- -------
<S> <C> <C> <C> <C>
10.85% Senior Subordinated Discount Notes $122,070 $93,186 $108,446 $96,138
10.25% Senior Subordinated Notes 100,560 77,086 76,685 66,025
7% Subordinated Debentures 57,613 33,750 43,081 32,443
</TABLE>
34
<PAGE> 36
As of January 15 1996, the fair value of the long-term debt had
declined to approximately $84 million for the 10.85% notes, $58
million for the 10.25% notes and $26 million for the 7% debentures.
Other - Substantially all of the Company's assets are pledged as
collateral for the senior credit facilities or the equipment
financing.
Interest expense includes $11,729,000 in 1993, $11,161,000 in 1994,
and $8,818,000 in 1995 representing amortization of debt issuance
expenses and accretion of interest on the discounted notes and accrued
product liability costs (see Note 8).
In 1994, the Company recorded a $7,410,000 loss on early
extinguishment of debt in connection with the retirement of certain
debt with a portion of the proceeds of the Automotive Assets sale as
discussed above. The loss represents deferred financing fees and
reorganization discounts associated with the retired debt along with
expenses of the transactions.
Subsequent Events - On November 16, 1995, the Company closed on the
sale of its Carpet Business and used the proceeds received at the
closing to paydown on its revolving line of credit (see Note 3).
Maturities - Aggregate principal maturities of all long-term debt are
as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ending
------------------
<S> <C>
1996 $ 2,770
1997 166,865
1998 73,858
1999 88,307
2000 17,204
Thereafter 1,310
----------
$ 350,314
==========
</TABLE>
6. SENIOR REDEEMABLE PREFERRED STOCK AND EQUITY SECURITIES
Certain information on senior redeemable preferred stock and equity
securities at October 28, 1995 is as follows:
<TABLE>
<CAPTION>
Shares
Par Value Issued and
Per Share Authorized Outstanding
--------- ---------- -----------
<S> <C> <C> <C>
Series A Senior Redeemable Preferred Stock $.01 700,000(1) 507,031
Series B Junior Preferred Stock .01 700,000(1) 10,000
Class A Common Stock .01 700,000 490,000
Class B Common Stock .01 700,000 510,000
</TABLE>
(1) The aggregate number of authorized shares of preferred stock is
700,000, including both the senior redeemable preferred stock and
the junior preferred stock.
35
<PAGE> 37
The senior redeemable preferred stock must be redeemed on May 15,
2003. Its holders vote with the junior preferred stockholders as a
single class to elect two directors, otherwise, except in the event of
default, the senior redeemable preferred stock is non-voting. The
senior redeemable preferred stock is redeemable at the option of the
Company prior to maturity at 103% of the liquidation preference of
$100 per share. Dividends are cumulative and are calculated based on
an annual rate of 6% of the liquidation preference and are paid
quarterly. Under the terms of various credit agreements, dividends
must be in the form of additional shares until 1998. In connection
with the 1991 reorganization, the senior redeemable preferred stock
was discounted to its estimated net present value with the net
discount of $23,351,000 reflected as an adjustment of additional
paid-in capital. The difference between the net carrying value of the
senior redeemable preferred stock and its mandatory redemption value
is being amortized using the interest method of amortization over the
life of the shares by charges to additional paid-in capital or, if
available, by charges to retained earnings. The effective dividend
rate on the senior redeemable preferred stock is 15.0%. The
unamortized discount was approximately $24,034,000 at October 29, 1994
and $23,153,000 at October 28, 1995. Because of the lack of recent
trading activity and disparities in potential valuation methodologies,
determination of the fair value of the Company's senior redeemable
preferred stock is impractical.
The junior preferred stock has a liquidation preference of $25 per
share. Its holders vote with the senior redeemable preferred
stockholders as a single class to elect two directors, otherwise,
except in the event of default, the junior preferred stock is
non-voting. The liquidation preference increases $15 per share for
each year that the Company attains certain specified earnings levels
for each of the first five fiscal years ended after April 2, 1991. No
increase in the liquidation preference occurred because actual
earnings were less than the specified earnings levels in each of the
years. Dividends are non-cumulative and are payable at the same rate
as is paid on the common stock, if any. As of October 28, 1995, no
dividends had been paid. The Company's senior credit agreement
prohibits the payment of cash dividends.
The Class A and Class B common stocks have substantially the same
voting rights except in the election of directors. The Class A common
stockholders, voting separately as a class, have the right to elect
three out of the seven Company directors.
7. INCOME TAXES
The 1993, 1994 and 1995 provision for income taxes on continuing
operations included in the consolidated statements of operations
consists of the following (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ 34
State 666 $ 1,573 $ 1,200
Deferred state 1,082 1,227 -
-------- ------- -------
Provision for income taxes $ 1,782 $ 2,800 $ 1,200
======== ======= =======
</TABLE>
The 1993 current Federal income tax provision relates to alternative
minimum taxes. This amount can be carried forward indefinitely and be
claimed as a credit against Federal income taxes in subsequent years.
36
<PAGE> 38
A reconciliation between income taxes at the statutory Federal income
tax rate (34.83% for 1993 and 35% for 1994 and 1995) and the provision
for income taxes for the years ended 1993, 1994 and 1995 is as follows
(in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
----------- ------------ ----------
<S> <C> <C> <C>
Income tax benefit at Federal statutory rate $ (13,662) $ (11,757) $ (5,762)
Increase in income taxes arising from effect of:
State and local income taxes 1,748 2,800 1,200
Amortization of goodwill 314 316 316
Other 308 250 212
Losses not resulting in tax benefits 13,074 11,191 5,234
---------- --------- --------
Provision for income taxes $ 1,782 $ 2,800 $ 1,200
========== ========= ========
</TABLE>
Presented below are the elements which comprise deferred tax assets
and liabilities (in thousands):
<TABLE>
<CAPTION>
1994 1995
------------ -----------
<S> <C> <C>
Gross deferred assets:
Estimated allowance for doubtful accounts $ 594 $ 476
Excess of tax over financial statement basis of inventory 759 634
Accruals deductible for tax purposes when paid 2,384 2,263
Deferred compensation deductible for tax purposes when paid 178 39
Postretirement benefits deductible for tax purposes when paid 1,657 2,177
Miscellaneous 50 56
Alternative minimum tax credit carryforward available 2,100 2,300
Deferred financial statement income recognized for tax purposes
when received 6,757 5,432
Allowance for loss on discontinued operations not currently
recognized for tax purposes - 11,231
Excess of tax basis of intangibles over financial statement basis 7,283 8,004
Net operating loss carryover 22,928 23,519
Less valuation allowance (11,697) (26,020)
---------- ---------
Gross deferred assets 32,993 30,111
---------- ---------
Gross deferred liabilities:
Pension asset recognized for book purposes (1,641) (2,208)
Excess of financial statement over tax basis of property, plant,
and equipment (23,807) (21,550)
Excess of tax over financial statement basis of debt instruments
(net of deferred financing fees) (6,266) (6,353)
Excess of financial statement over tax basis of discontinued operations (1,064) -
Deferred state taxes resulting from filing separate subsidiary
returns in some jurisdictions (3,565) (4,165)
Miscellaneous (215) -
---------- ---------
Gross deferred liabilities (36,558) (34,276)
---------- ---------
Net deferred tax liability $ (3,565) $ (4,165)
========== =========
</TABLE>
The net deferred tax liability is included in the accompanying
consolidated balance sheet as a non-current liability.
37
<PAGE> 39
At October 28, 1995, the Company had net operating loss carryforwards
for tax purposes of approximately $63,600,000. The net operating
losses expire in years 2005 through 2008. The Company also has
alternative minimum tax net operating losses of approximately
$6,000,000 which expire in 2007. During the year, the Company
utilized approximately $4,500,000 of alternative minimum tax net
operating loss carryovers to offset income from the extraordinary gain
on early extinguishment of debt. As previously noted, alternative
minimum taxes can be carried forward indefinitely and used as a credit
against regular federal taxes.
The Company's ability to utilize its net operating losses may be
significantly limited under the income tax laws should there be
changes in the ownership of the Company's stock which constitute an
ownership change for tax purposes. The effect of such an ownership
change would be to significantly limit the annual utilization of the
net operating loss carryforwards to an amount equal to the value of
the Company immediately prior to the time of the change (subject to
certain adjustments) multiplied by the Federal long-term tax exempt
rate. The Company does not believe this potential limitation on
utilization of the net operating loss carryforwards applies. However,
due to the Company's operating history, it is uncertain that it will
be able to utilize all deferred tax assets. Therefore, a valuation
allowance has been provided equal to the deferred tax assets remaining
after deducting all deferred tax liabilities, exclusive of those
related to certain deferred state tax liabilities.
8. COMMITMENTS AND CONTINGENCIES
The Company leases office facilities, machinery and computer equipment
under noncancellable operating leases. Rent expense was approximately
$2,585,000 in 1993, $2,810,000 in 1994 and $3,411,000 in 1995.
Future minimum payments, by year and in the aggregate, under the
noncancellable operating leases with terms of one year or more consist
of the following at October 28, 1995 (in thousands):
<TABLE>
<S> <C>
1996 $ 2,960
1997 2,109
1998 1,526
1999 1,343
2000 988
Thereafter 290
--------
$ 9,216
========
</TABLE>
The Company has planned expenditures of approximately $11 million for
property, plant and equipment additions in Fiscal 1996.
The Company has established long-term incentive compensation plans for
certain of its key executives. One plan provides for payments to
participants at retirement or termination based on the increase of the
fair value, as defined, of the common stock of the Company over
certain established levels, as determined by the Company's Board of
Directors. No amounts have been earned under the provisions of this
plan, except for termination and death benefits accrued and paid of
$99,000 and $203,000 in Fiscal 1993 and 1994, respectively. Another
plan, effective November 1, 1994, provides for payments to covered
participants from amounts accumulated in individual award banks.
Awards are determined based on the achievement of specified returns on
net assets employed. Awards may be either positive or negative in any
given year and are added or subtracted each year from each
participant's respective award bank. A percentage of each
participant's award bank balance is paid out annually beginning after
Fiscal 1996. The payout percentage is 33% in Fiscal 1997, 50% in
Fiscal 1998 and 33% for fiscal years thereafter.
38
<PAGE> 40
No awards are expected to be paid out under this plan for operating
results through October 28, 1995. The Company's policy is to accrue
the cost of the plans as the fair value of the common stock increases
over the established levels or as actual earnings occur if the
cumulative earnings for the periods included under the plan are
expected to reach the specified levels necessary for bonuses to be
payable.
The Company has provided for all estimated future costs associated
with certain defective roofing products sold by the Predecessor
Stevens Division operations. The liability for future costs
associated with these defective roofing products is subject to
management's best estimate, including factors such as expected future
claims by geographic region and roofing compound applied; expected
costs to repair or replace such roofing products; estimated remaining
length of time that such claims will be made by customers; and the
estimated costs to litigate and settle certain claims now in
litigation and those that may result in future litigation. Based on
warranties that were issued on the roofs, the Company estimates that
the defective roofing product claims will be substantially settled by
2000. Based on management's estimate of a range of future costs of
approximately $9.3 million to $11.4 million, the Company recorded a
$5,000,000 addition to the liability for such defective products,
charged to other expense in the accompanying statement of operations
increasing such liability to $9,270,000 at October 28, 1995 (the
liability was $8,207,000 at October 29, 1994). The Company records
the costs of meeting these obligations as a reduction of the balance
of the recorded liability and, accordingly, such costs are not
reflected in results of operations. Payments on accrued product
liability claims were $5,240,000, $3,870,000 and $4,040,000 in fiscal
years 1993, 1994 and 1995, respectively. Management updates its
assessment of the adequacy of the remaining reserve for defective
roofing products quarterly and if it is deemed that an adjustment to
the reserve is required, it will be charged to operations in the
period in which such determination is made.
In connection with the sale of the Automotive Assets in June 1994, the
Company invested $39.5 million of the sale proceeds in long-term
securities (principally United States Treasury Securities maturing in
1997) designated by management to be available to satisfy possible
contingent tax liabilities. The investments are classified as
"held-to-maturity" and recorded at amortized cost. As of October 28,
1995 and October 29, 1994, their aggregate fair value was
approximately $43,400,000 and $39,600,000, respectively, with a gross
unrealized holding gain of approximately $500,000 in 1995 and a gross
unrealized holding loss of approximately $600,000 in 1994.
The Company is exposed to a number of asserted and unasserted
potential claims encountered in the normal course of business. In the
opinion of management, the resolution of these matters will not have a
material adverse effect on the Company's financial position or future
results of operations.
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
Automotive Assets which were sold by the Company on June 28, 1994 and
the Carpet Business sold on November 16, 1995 subsequent to the end of
Fiscal 1995. The benefits of these former employees were "frozen" at
their respective dates of sale. Accordingly, these former employees
will retain benefits earned through June 28, 1994 and November 16,
1995, respectively; however, they will not accrue additional benefits.
The plan provides pension benefits that are based on the employees'
compensation during the last ten years of employment. The Company's
policy is to fund the annual contribution required by applicable
regulations.
39
<PAGE> 41
Assets of the pension plan are invested in common and preferred
stocks, government and corporate bonds, real estate and various
short-term investments.
A reconciliation as of the most recent measurement date (November 1,
1994) of the funded status of the plan with amounts reported in the
Company's consolidated balance sheets follows (in thousands):
<TABLE>
<CAPTION>
October 29, October 28,
1994 1995
------------ ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $ 79,185 $ 89,236
Non-vested 710 613
-------- --------
Accumulated benefit obligation 79,895 89,849
Provision for future pay increases 8,926 6,232
-------- --------
Total projected benefit obligation 88,821 96,081
Plan assets at fair value 80,072 91,996
-------- --------
Projected benefit obligation greater than plan assets (8,749) (4,085)
Unrecognized net loss 7,611 4,460
Prior service cost not yet recognized in net periodic
pension cost 6,238 5,598
-------- --------
Pension asset in accompanying financial statements $ 5,100 $ 5,973
======== ========
</TABLE>
<TABLE>
<CAPTION>
Components of net periodic pension cost: 1993 1994 1995
-------- -------- ---------
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 2,123 $ 2,925 $ 2,483
Interest cost on projected benefit obligation 7,135 6,987 7,131
Return on plan assets (9,998) 3,802 (15,628)
Net amortization and deferral 3,317 (10,291) 8,478
-------- ------- --------
Net periodic pension cost 2,577 3,423 2,464
Cost allocated to discontinued operations 780 1,051 444
-------- ---------- --------
Net periodic pension cost for continuing operations $ 1,797 $ 2,372 $ 2,020
======== ======= ========
</TABLE>
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation at October 29, 1994
was 8.4% and at October 28, 1995 was 7.8%. The expected long-term
rate of return on assets was 9% at October 29, 1994 and October 28,
1995. The assumed rate of increase in compensation levels was based
on age-related tables at October 29, 1994 and October 28, 1995. The
assumed rates of compensation increases are a half percent lower in
the 1995 table than in the 1994 table. Effective November 1, 1993,
the Company amended the benefit formula for salaried employees to
provide for an additional benefit on compensation in excess of the
average social security wage base.
401(k) Savings Plan - The Company also has a savings, investment and
profit-sharing plan available to employees meeting eligibility
requirements. Effective January 1, 1994, the Company amended the plan
to include coverage of hourly wage employees (previously the plan
covered substantially only salaried employees). The plan is a tax
qualified plan under Section 401(k) of the Internal Revenue Code. The
Company makes a matching contribution of 25% of each participant's
contribution with a maximum matching contribution of 1-1/2% of the
participant's base compensation. Company contributions were
approximately $245,000 in 1993, $536,000 in 1994 and $589,000 in 1995.
40
<PAGE> 42
Postretirement Benefits - Effective November 1, 1992, the Company
adopted SFAS No. 106, which requires that the projected future cost of
providing postretirement benefits, such as health care and life
insurance, be recognized as an expense as employees render service
instead of when claims are incurred as had been the Company's
practice. The cumulative effects as of November 1, 1992 of adopting
SFAS No. 106 were to increase accrued postretirement benefit costs by
approximately $5,208,000 and charge income in 1993 for approximately
$4,988,000 after income taxes. The effect of adopting SFAS No. 106
on income from operations in 1993 was not significant.
The Company has several unfunded defined benefit 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
financial statements (in thousands):
Accumulated postretirement benefit obligation (APBO):
<TABLE>
<CAPTION>
October 29, October 28,
1994 1995
------------ ------------
<S> <C> <C>
Retirees $ 2,656 $ 2,974
Fully eligible active plan participants 1,413 1,242
Other active plan participants 614 551
Unrecognized gain 680 482
------- -------
Accrued postretirement benefit plan cost $ 5,363 $ 5,249
======= =======
</TABLE>
Net periodic postretirement benefit expense included the following
components (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Service cost for benefits earned $ 3 $ 7 $ 1
Interest cost on APBO 355 352 357
------ ----- -----
Net periodic postretirement cost $ 358 $ 359 $ 358
====== ===== =====
</TABLE>
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.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 8.0% and 7.8% as of October 29,
1994 and October 28, 1995, respectively.
Postemployment Benefits - Effective October 31, 1993, the Company
adopted SFAS No. 112, which requires that the cost of benefits
provided to former or inactive employees after employment but before
retirement be recognized on the accrual basis of accounting instead of
when paid, as had been the Company's practice.
The cumulative effects as of October 31, 1993 of adopting SFAS No. 112
were to increase accrued postemployment benefit costs by approximately
$708,000 and charge income for approximately $708,000. Income taxes
were not applicable. The effect of adopting SFAS No. 112 on income
from operations in 1994 was not significant.
41
<PAGE> 43
10. RELATED PARTIES
The Company incurred fees of $1,250,000 each year in 1993 and 1994 and
$1,000,000 in 1995 for management services provided by a certain
shareholder pursuant to a management services agreement. The balance
sheets as of October 29, 1994 and October 28, 1995 include accrued
fees of $1,250,000 and $1,000,000, respectively, in other accrued
expenses. The agreement provides for payments of fees to a
shareholder of $1,000,000 in 1995 and annually thereafter through the
year 2001.
An investment banking company that owns common stock of the Company
charged the Company approximately $361,000 in 1993 for various
services.
11. BUSINESS SEGMENTS
The Company competes in three industry segments: Apparel Fabrics and
Products, Industrial Fabrics and Products and Home Fashion Textiles.
The apparel fabrics and products segment manufactures a broad range of
apparel fabrics and apparel related products, including unfinished
woven apparel fabrics (greige goods) for men's, women's and children's
wear, and spun yarns for use in apparel and elastic products for use
in undergarments and diapers. The industrial fabrics and products
segment manufactures commercial roofing products made from woven
synthetic fabrics and rubber-based specialty polymer compounds, other
building construction products made from glass and synthetic fibers,
various industrial products which generally have insulation or
filtration characteristics, and other rubber products and various
extruded polyurethane products. The home fashion textiles segment
manufactures a variety of unfinished woven fabrics and yarns for use
in the manufacturing of draperies, curtains and lampshades and is a
major producer of solution-dyed drapery fabrics.
Export sales are approximately 3% of net sales and the Company has no
significant foreign operations. Earnings by business segment
represent operating profit, excluding net unallocated corporate
operating expenses. Identifiable segment assets are those assets used
in the operations of the segment. Corporate assets are cash and other
assets.
42
<PAGE> 44
Industry segment information (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
---------- ---------- -----------
<S> <C> <C> <C>
Net sales:
Apparel fabrics and products $ 262,499 $ 254,810 $ 247,846
Industrial fabrics and products 156,763 169,736 191,985
Home fashion textiles 38,290 37,325 32,734
---------- ---------- ---------
$ 457,552 $ 461,871 $ 472,565
========== ========== =========
Operating profit:
Apparel fabrics and products $ 21,791 $ 18,487 $ 16,667
Industrial fabrics and products 3,582 7,618 7,590
Home fashion textiles 4,242 2,564 1,749
---------- ---------- ---------
Total operating profit of segments 29,615 28,669 26,006
Interest income 48 749 2,821
Interest expense (60,407) (55,570) (39,946)
Indirect corporate expenses and other (8,482) (7,438) (5,345)
---------- ---------- ---------
Loss before income taxes, discontinued operations,
extraordinary items, and cumulative effects of
accounting changes $ (39,226) $ (33,590) $ (16,464)
========== ========== =========
Identifiable assets:
Apparel fabrics and products $ 173,304 $ 171,164 $ 165,622
Industrial fabrics and products 103,323 106,124 115,710
Home fashion textiles 30,337 24,752 20,731
---------- ---------- ---------
Total segments 306,964 302,040 302,063
Corporate and other 40,108 81,087 81,827
---------- ---------- ---------
347,072 383,127 383,890
Net assets held for sale 185,536 69,684 28,932
---------- ---------- ---------
$ 532,608 $ 452,811 $ 412,822
========== ========== =========
Depreciation and amortization expense:
Apparel fabrics and products $ 11,357 $ 13,329 $ 12,722
Industrial fabrics and products 4,939 6,103 5,690
Home fashion textiles 2,367 2,359 2,394
---------- ---------- ---------
Total segments 18,663 21,791 20,806
Corporate and other 2,105 1,415 979
---------- ---------- ---------
$ 20,768 $ 23,206 $ 21,785
========== ========== =========
Capital expenditures:
Apparel fabrics and products $ 9,966 $ 8,120 $ 10,373
Industrial fabrics and products 5,556 6,171 9,312
Home fashion textiles 2,726 4,122 643
---------- ---------- ---------
Total segments 18,248 18,413 20,328
Corporate and other 19 10 4
---------- ---------- ---------
$ 18,267 $ 18,423 $ 20,332
========== ========== =========
</TABLE>
43
<PAGE> 45
12. LIQUIDITY AND GOING CONCERN
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern which
contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. The
Company has had recurring net losses from continuing operations since
its inception, has a net shareholder's deficiency of approximately
$37,045,000 at October 28, 1995 and the Company's senior revolving
credit facility expires on December 1, 1996. Further, mandatory
principal payments of approximately $69,027,000 on the Company's
senior subordinated discount notes and senior subordinated notes are
due on June 1, 1997. The Company's ability to extend the senior
revolving credit facility or obtain alternative sources of financing
is uncertain. Further, the Company's existing capital resources and
projected cash flow are insufficient to make the mandatory principal
payments which are due on June 1, 1997, other than through additional
borrowings under a renegotiated revolving credit facility or some
other source of financing. Accordingly, the Company's ability to
secure financing beyond December 1, 1996 raises substantial doubt
about the Company's ability to continue as a going concern.
Management believes that the Company's capital resources and expected
cash flows will be adequate to meet its operating and working capital
needs during Fiscal 1996. The revolving credit facility (or a similar
credit facility) is essential for the Company's continued operations.
Prior to the expiration of the Company's revolving credit facility on
December 1, 1996, management will discuss extension of the facility
with its banks. The Company cannot predict what effect, if any, that
the mandatory payments on the debt securities in June 1997 will have
on the negotiations with the banks to extend the revolving credit
facility beyond December 1, 1996. However, the Company does not
expect that an extension of its revolving credit facility beyond May
31, 1997, the first mandatory redemption payment date on the Company's
debt securities, will be negotiated unless the maturities of such debt
securities are extended, replaced or refinanced. Management expects
to engage advisors and discuss extension, replacement or refinancing
of the debt securities with its securityholders. The Company's
ability to accomplish a restructuring of the terms of its debt
securities or any refinancing will depend on a number of factors,
including its operating performance, market conditions and the terms
of any extension, replacement or refinancing. Management is unable to
predict the Company's ability to accomplish the foregoing extension of
its bank financing and extension, replacement or refinancing of its
debt securities.
44
<PAGE> 46
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 following table sets forth certain information with respect to the persons
who are members of the Board of Directors or executive officers of the Company.
Each director serves until a successor is elected and qualified. Directors
receive no compensation for their services.
<TABLE>
<CAPTION>
Name Age Position(s) Held
- ---- --- ----------------
<S> <C> <C>
Steven M. Friedman 41 Director and Chairman of the Board
Jerry E. Hunter 58 Director, President and Chief Executive Officer
David H. Taylor 40 Director, Executive Vice President--Finance and Secretary
Muzzafar Mirza 37 Director
Alain M. Oberrotman 44 Director
Marc C. Particelli 50 Director
</TABLE>
The business experience of each of the directors and executive officers during
the past five years is as follows:
Steven M. Friedman was elected as the Chairman of the Board of the Company in
April 1991. He has been a director of the Company since May 1988. He served
as Chief Executive Officer of the Company from April 1991 to November 1994.
Mr. Friedman became a general partner of EOS Partners, L.P. ("EOS Partners")
(a private investment firm) on January 1, 1994. Prior thereto, he was a
general partner of Odyssey Partners, a private investment partnership with
substantial capital invested in marketable securities and closely-held
businesses, since July 1988. He is also a director of Forstmann & Company,
Inc., a manufacturer of textiles and textile-related products, MICOM
Communications Corp., a supplier of data communications and networking
products, Eagle Food Centers, Inc., a chain of grocery stores, The Leslie Fay
Companies, Inc., a women's wear designer and manufacturer, Rickel Home Centers,
Inc., a chain of home center retail stores, and The Caldor Corporation, a chain
of discount retail stores.
Jerry E. Hunter was appointed as a director of the Company on April 6, 1993 and
was appointed Chief Executive Officer on November 29, 1994. Mr. Hunter has
served as President of the Company since September 1988. Prior to that time,
from May 1988 to September 1988, he was Executive Vice-President - Operations.
He also serves as a Vice-President of each of the Company's subsidiaries. From
April 1986 to May 1988 he was Vice-President - Technical Services at J.P.
Stevens. From March 1983 to March 1986, he was Senior Vice President at Cannon
Mills, Inc., a textile manufacturer. Prior to March 1983, he was employed by
Springs Industries, a textile manufacturer, for twenty-one years.
45
<PAGE> 47
David H. Taylor was appointed as a director of the Company on April 15, 1993.
Mr. Taylor has served as Executive Vice-President - Finance and Secretary of
the Company since June 1991, and prior thereto he was Controller and Assistant
Secretary of the Company since May 1988. Prior to that time, he was a Senior
Manager at Deloitte Haskins & Sells, a public accounting firm by which he was
employed from June 1977 through May 1988. In addition, Mr. Taylor serves as a
Vice-President and Assistant Secretary of each of the Company's subsidiaries.
Alain M. Oberrotman was appointed as a director of the Company on January 25,
1994. He has been a principal of Odyssey Partners since October 1992. From
September 1990 to October 1992, he was a principal of Hambro International
Equity Partners, a venture capital firm. Prior thereto, Mr. Oberrotman was the
President of TVI Group, Inc., an interim management and consulting firm.
Muzzafar Mirza was appointed as a director of the Company on October 25, 1993.
He has been a principal of Odyssey Partners since July 1993. From May 1988 to
June 1993, he was employed by General Electric Capital Corporation, as head of
Merchant Banking for the GE Capital Corporate Finance Group. From 1983 to
1988, he was a Vice President of Marine Midland Bank, N.A. Mr. Mirza is also a
director of The Scotsman Group, Inc. and its parent, Scotsman Holdings, Inc., a
lessor of mobile office units.
Marc C. Particelli was appointed as a director of the Company on November 29,
1994. He has been a principal of Odyssey Partners since October 1, 1994.
Prior thereto, he was worldwide Practice Leader for the Consumer Products group
at Booz, Allen & Hamilton, an international management consulting firm by which
he was employed from 1974 to 1994.
The Company's directors are elected annually to serve until the next annual
meeting of stockholders and until their successors have been elected and
qualified.
None of the directors or executive officers listed herein is related to any
other such director or executive officer.
46
<PAGE> 48
ITEM 11. EXECUTIVE COMPENSATION.
The following summary compensation table sets forth information concerning
compensation for the last three years for services in all capacities awarded
to, earned by or paid to the Company's Chief Executive Officer and the four
other most highly compensated executive officers of the Company during Fiscal
1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Annual Compensation
--------------------------- All Other
Principal Position Year Salary Bonus Compensation(3)
- ------------------ ---- --------- ---------- ------------
<S> <C> <C> <C> <C>
Jerry E. Hunter 1995 $ 306,075 $ 195,902 $ 3,228
President and Chief Executive 1994 291,500 292,793 5,219
Officer 1993 265,000 108,942 8,823
Carl Rosen 1995 243,750 83,000 3,046
President, JPS Converter & 1994 217,708 60,000 4,354
Industrial Corp.(1) 1993 175,500 50,000 7,076
David H. Taylor 1995 196,350 118,139 2,238
Executive Vice President - 1994 187,000 162,631 3,271
Finance and Secretary 1993 170,000 48,921 6,704
Monnie L. Broome 1995 155,925 91,822 2,250
Vice President-Human Resources 1994 148,500 122,590 3,029
1993 135,000 33,299 6,058
Paul B. Comiskey 1995 175,000 - 2,023
President, JPS Carpet Corp. (1)(2) 1994 175,000 1,000 3,062
1993 175,000 21,500 6,763
</TABLE>
_________________
(1) Such executive officers of the Company's subsidiaries perform certain
policy-making functions for the Company and are therefore included
herein pursuant to Item 402(a)(3) of Regulation S-K and Rule 36-7
under the Exchange Act.
(2) The Company has terminated Paul B. Comiskey's position as a result of
the sale of the Carpet Business which occurred on November 16, 1995.
(3) Employer matching 401(k) plan contribution and employer-provided life
insurance premiums.
47
<PAGE> 49
LONG-TERM INCENTIVE PLAN
The Company and certain of its subsidiaries (the "Subsidiary Participants")
have adopted a Long-Term Incentive Plan for certain officers and key employees
effective November 1, 1994. The plan provides for annual awards which are
accumulated in individual award banks. Awards may be either positive or
negative in any given year and are added or subtracted each year from each
participant's respective award bank. A percentage of each participant's award
bank balance is paid out annually beginning after Fiscal 1996. Awards are
based on the achievement of certain financial performance targets by the
Company and the Subsidiary Participants. Such financial performance targets
are established on a rolling 3-year basis and are subject to change at the
discretion of the Boards of Directors of the Company and the Subsidiary
Participants.
The following employees named in the Summary Compensation Table are currently
employee participants in the Long-Term Incentive Plan: Jerry E. Hunter, Carl
Rosen, David H. Taylor and Monnie L. Broome. As of January 26, 1996, there
have been no awards granted under this plan.
RETIREMENT PENSION PLAN
The Company maintains a Retirement Pension Plan for all employees (the "Pension
Plan"), including its salaried employees. The Pension Plan is a defined
benefit pension plan providing a formula benefit with contributions determined
on an actuarial basis. The Pension Plan generally covers all employees 21
years of age or older who have completed one year of service with the Company.
The Pension Plan generally takes into account annual compensation earned under
certain predecessor plans of J.P. Stevens.
The following table indicates the approximate amounts of annual retirement
income that would be payable to a salaried employee under the Pension Plan
based on the compensation levels and years of credited service shown. There
would be no social security or other offset deducted from the amounts shown.
PENSION PLAN TABLE*
<TABLE>
<CAPTION>
Years of Service
-------------------------------------------------------------
Remuneration 15 Years 20 Years 25 Years 30 Years 35 Years
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000 $20,167 $26,890 $33,612 $40,334 $47,057
150,000 and above 24,667 32,890 41,112 49,334 57,557
</TABLE>
* Assumes individual retires at age 65 in 1995 with the indicated years
of service and compensation. The social security integration level of
such individuals would be $25,920. The social security integration
level is adjusted annually.
Credited years of service for benefit accrual under the Pension Plan as of
October 28, 1995 for the following executive officers are:
<TABLE>
<S> <C>
Jerry E. Hunter . . . . . . . . . . . . . 9 years
Carl Rosen . . . . . . . . . . . . . . . . 4 years
David H. Taylor . . . . . . . . . . . . . 7 years
Monnie L. Broome . . . . . . . . . . . . . 7 years
Paul B. Comiskey . . . . . . . . . . . . . 13 years
</TABLE>
48
<PAGE> 50
Annual retirement benefits for salaried employees are generally computed as the
sum of 0.6% of a participant's average compensation (the annual average of five
consecutive, complete plan years of highest compensation during the last 10
plan years of service) multiplied by the years of benefit service plus 0.6% of
a participant's compensation which exceeds the Participant's Social Security
Integration Level (equal to $25,920 in 1995) multiplied by the participant's
years of benefit service. The Pension Plan provides that each participant's
benefits fully vest after five years of service or the attainment of age 65.
This table may understate the benefits available to certain participants
because salaried employees who were covered by the Pension Plan before July 1,
1989 are entitled to the greater of the benefit formula noted above or the
prior benefit formula, plus additional accrued benefits under the new formula
since July 1, 1989. Under the prior formula, a participant's annual pension
payable as of normal retirement age was equal to 1% of the portion of "final
average compensation" which was equal to the "social security integration
level" in effect for the year of retirement, plus 1.5% of the portion of the
participant's final average compensation in excess of the social security
integration level, the sum of which was multiplied by the number of years of
credited service not exceeding 35. In addition, as noted below, the table
assumes that covered compensation was limited to the current allowable amount
for all years while benefits may have been accrued in years when limitations
were higher.
Compensation covered by the Pension Plan consists of all payments made to a
participant for personal services rendered as an employee of the Company which
are subject to federal income tax withholding, excluding imputed income
attributable to certain fringe benefit programs. In accordance with the
Revenue Reconciliation Act of 1993 with respect to salaried employees, plan
compensation covers up to a maximum of $150,000 as adjusted per individual for
the plan year beginning November 1, 1994. Plan compensation was subject to
substantially higher limits in previous years ($235,840 for 1994). The amounts
shown are also subject to possible maximum limitations under Section 415 of the
Internal Revenue Code of 1986, as amended (the "Code") and are subject to
possible reduction for amounts payable under other JPS qualified plans.
COMPENSATION OF DIRECTORS
Members of the Board of Directors receive no compensation for their services.
MANAGEMENT AGREEMENT
Pursuant to a management agreement (the "Management Agreement"), dated as of
April 2, 1991, between the Company and Odyssey Investors, Inc., a Delaware
corporation and an affiliate of Odyssey Partners ("Odyssey Investors"), the
Company agreed to pay Odyssey Investors a $1.0 million fee for Fiscal 1995 and
for each fiscal year thereafter through April 2, 2001, in exchange for certain
management services provided by Odyssey Investors. Such services include
continual financial advisory and business management services in order to
maximize the efficiency of operations and enhance profitability.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a compensation committee or other board committee
performing equivalent functions thereto. However, Odyssey Investors, as part
of its duties under the Management Agreement, from time to time during the past
fiscal year has participated in certain discussions with Jerry E. Hunter, the
President, Chief Executive Officer and a Director of the Company, David H.
Taylor, Executive Vice President-Finance and Director of the Company and Monnie
L. Broome, Vice President-Human Resources of the Company in determining
certain business and financial objectives and other criteria to enable the
Company to set compensation awards and Long Term Incentive Plan targets for the
Company's executive officers.
49
<PAGE> 51
ITEM 12. SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT.
The following table sets forth information as of December 29, 1995 with respect
to the beneficial ownership of shares of (i) Senior Preferred Stock; (ii)
Junior Preferred Stock; (iii) Class A Common Stock; and (iv) Class B Common
Stock by (a) each person or group that is known to the Company to be the
beneficial owner of more than 5% of the outstanding shares, (b) each director
of the Company, and (c) all directors and executive officers of the Company as
a group.
<TABLE>
<CAPTION>
Senior Preferred Stock Junior Preferred Stock Class A Common Stock Class B Common Stock
---------------------- ---------------------- -------------------- --------------------
Number Percent Number Percent Number Percent Number Percent
Name of 5% of of of of of of of of
Beneficial Owner Shares Class Shares Class Shares Class(1) Shares Class(1)
---------------- ------ ----- ------ ----- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Bear Stearns Securities Corp. (4) 76,608 15.11%
% ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Presidential Life 51,461 10.15%
Insurance Company
c/o The Bank of New York
Post Office Box 16203
New York, NY 10249
Franklin Funds 50,742 10.00%
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
State Street Research 51,109 9.93%
and Management (6)
One Financial Center
Boston, MA 02111-2690
Executive Life Ins. Co. 47,821 9.43%
Base Assets Trust
11444 Olympic Blvd.
Los Angeles, CA 90064
Citibank, N.A. (4) 26,794 5.21%
P. O. Box 1530, Grand Central
111 Wall Street
20th FL., Zone 9
New York, NY 10043
Lehman Brothers 25,755 5.00%
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Odyssey Partners, L.P. (2) 5,000 50.00% 340,000 34.00%
31 West 52nd Street
New York, NY 10019
DLJ Capital Corp. (3) 170,000 17.00%
140 Broadway
New York, NY 10005-1285
Messrs. Grant M. Wilson, 5,000 50.00%
William J. DeBrule
and Yehochai Schneider
111 Pond Street
Cohasset, MA 02025
</TABLE>
50
<PAGE> 52
<TABLE>
<CAPTION>
Senior Preferred Stock Junior Preferred Stock Class A Common Stock Class B Common Stock
---------------------- ---------------------- -------------------- --------------------
Number Percent Number Percent Number Percent Number Percent
Name of 5% of of of of of of of of
Beneficial Owner Shares Class Shares Class Shares Class(1) Shares Class(1)
---------------- ------ ----- ------ ----- ------ -------- ------ --------
<S> <C> <C> <C> <C>
Hare & Co. 79,940 7.99%
Bank of New York
P. O. Box 11203
New York, NY 10249
Lutheran Brotherhood 70,180 7.02%
Research Corp.
625 Fourth Avenue South
Minneapolis, MN 55415
Everest Capital Fund, L.P. 51,223 5.12%
c/o Morgan Stanley & Co., Inc.
One Pierpont Plaza
Brooklyn, NY 11201
Directors and executive 510,000 51.0%
officers as a group (5)
(6 persons)
</TABLE>
(1) Percentages represented hereunder are based on the combined Class A
Common Stock and Class B Common Stock issued and outstanding.
(2) Represents shares of Class B Common Stock and Junior Preferred Stock
owned by Odyssey Partners. In addition, Odyssey Partners has voting
control with respect to the 5,000 shares of Junior Preferred Stock
held by Grant M. Wilson, William J. DeBrule and Yehochai Schneider.
The Class B Common Stock shares are subject to a Stockholders'
Agreement, which provides, among other things, for certain
restrictions on the voting and transfer of such shares. Leon Levy,
Jack Nash, Stephen Berger, Joshua Nash, the Nash Family Partnership
and Brian Wruble, by virtue of being general partners of Odyssey
Partners, share voting and dispositive power with respect to the Class
B Common Stock and Junior Preferred Stock owned by Odyssey Partners
and, accordingly, may each be deemed to own beneficially such stock
owned by Odyssey Partners. Each of such persons has expressly
disclaimed any such beneficial ownership (within the meaning of Rule
13d-3(a) under the Securities and Exchange Act of 1934, as amended
(the "Exchange Act")) which exceeds the proportionate interest in the
Class B Common Stock and Junior Preferred Stock which he or it may be
deemed to own as a general partner of Odyssey Partners. Mr. Friedman
has an indirect fractional financial interest in the shares of Class B
Common Stock owned by Odyssey Partners; however, he has no voting or
dispositive power over any shares owned by Odyssey Partners.
(3) Such shares are subject to the Stockholders' Agreement, which
provides, among other things, for certain restrictions on the voting
and transfer of such shares. In addition, pursuant to the Voting
Trust Agreement, dated as of April 2, 1991, between DLJ and Lincoln
National, DLJ conferred the right to vote 120,000 of such shares of
Class B Common Stock to Lincoln National, as voting trustee. Such
shares include shares held by DLJ First ESC L.L.C. which is an
"employee securities corporation" formed to hold securities on behalf
of participants in certain DLJ incentive compensation plans.
(4) Shown is the nominee recordholder of such shares. It is not known if
all shares are held for one beneficial owner.
(5) None of Jerry E. Hunter, Carl Rosen, David H. Taylor, Monnie L. Broome
or Paul B. Comiskey, the executive officers listed above in Item 11,
"-- Executive Compensation -- Summary Compensation Table," beneficially
own, or may be deemed to own, any shares of capital stock of the
Company, and therefore are not listed in this table.
(6) Disclaims beneficial ownership.
51
<PAGE> 53
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
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, 1995 and October
29, 1994.
(iii) Consolidated Statements of Operations for the fiscal years
ended October 28, 1995, October 29, 1994 and October 30, 1993.
(iv) Consolidated Statements of Senior Redeemable Preferred Stock
and Shareholders' Equity (Deficit) for the fiscal years ended
October 28, 1995, October 29, 1994 and October 30, 1993.
(v) Consolidated Statements of Cash Flows for the fiscal years
ended October 28, 1995, October 29, 1994 and October 30, 1993.
(vi) Notes to Consolidated Financial Statements.
The registrant is primarily a holding company and all subsidiaries are wholly
owned.
(2) The financial statement schedule required by Item 8 is listed
on Index to Financial Statement Schedule, starting at page S-1 of this report.
(3) The exhibits required by Item 601 of Regulation S-K are listed
in the accompanying Index to Exhibits. Registrant will furnish to any
securityholder, upon written request, any exhibit listed in the accompanying
Index to Exhibits upon payment by such securityholder of registrant's
reasonable expenses in furnishing any such exhibit.
(b) Report on Form 8-K dated December 1, 1995, containing
disclosure of the Company's disposition of the Carpet Business
on November 16, 1995, including an unaudited pro forma balance
sheet as of July 29, 1995 and proforma income statements for
the periods ended July 29, 1995 and October 29, 1994 giving
effect to the disposition, and a press release dated November
16, 1995 regarding the disposition.
(c) Reference is made to Item 14(a)(3) above.
(d) Reference is made to Item 14(a)(2) above.
52
<PAGE> 54
INDEX TO EXHIBITS
The following is a complete list of Exhibits filed as part of this report,
which are incorporated herein:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
2.1(i) Plan of Reorganization of JPS Textile Group, Inc., a Delaware corporation (the "Company"), filed
pursuant to Chapter 11 of the United States Bankruptcy Code, dated February 7, 1991 (the "Plan).*
2.1(ii) Revised Technical and Conforming Amendment to the Company's Plan, dated March 20, 1991.*
3.1 Restated Certificate of Incorporation of the Company, filed with the Secretary of State of the State
of Delaware on April 1, 1991.*
3.2 By-laws of the Company.*
3.3 Certificate of Designations of the Company's Series A Senior Preferred Stock (the "Senior Preferred Stock").*
3.4 Certificate of Designations of the Company's Series B Junior Preferred Stock.*
4.1 Indenture, dated as of April 2, 1991 (the "Discount Note Indenture"), between the Company and First
Trust National Association ("First Trust"), as Trustee, relating to the Company's Senior
Subordinated Discount Notes due June 1, 1999 (the "Discount Notes").*
4.2 Form of Discount Note, incorporated by reference to Exhibit A to the Discount Note Indenture.*
4.3 Indenture, dated as of April 2, 1991 (the "Subordinated Note Indenture"), between the Company and
First Trust, as Trustee, relating to the Company's 10.25% Senior Subordinated Notes due June 1, 1999
(the "Subordinated Notes").*
4.4 Form of Subordinated Note, incorporated by reference to Exhibit A to the Subordinated Note Indenture.*
4.5 Indenture, dated as of April 2, 1991 (the "Debenture Indenture"), between the Company and First Bank
National Association, as Trustee, relating to the Company's 7% Subordinated Debentures due May 15,
2000 (the "Debentures").*
4.6 Form of Debenture, incorporated by reference to Exhibit A to the Debenture Indenture.*
4.7 Stockholders' Agreement, dated as of April 2, 1991, among Odyssey Partners, L.P. ("Odyssey Partners"), DLJ
Capital Corp. ("DLJ Capital") and Lincoln National Bank and Trust Company of Fort Wayne ("Lincoln National").*
</TABLE>
53
<PAGE> 55
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
4.8 Letter Agreement, dated April 2, 1991 regarding certain rights of "co-sale" granted by Odyssey
partners, DLJ Capital and Lincoln National to the holders of the Company's Class A Common Stock.*
4.9 Letter Agreement, dated April 2, 1991, among Odyssey Partners, Grant M. Wilson, William J. DeBrule
and Yehochai Schneider.*
9.1 Voting Trust Agreement, dated as of April 2, 1991, between DLJ Capital and Lincoln National.*
10.1 Management Agreement, dated as of April 2, 1991, between the Company and Odyssey Investors, Inc.*
10.2 Registration Rights Agreement, dated as of April 2, 1991, by and among the Company and the holders
of the Company's Senior Notes, Discount Notes, Subordinated Notes, Senior Preferred Stock and Class
A Common Stock (collectively, the "Securities").*
10.3 Loan and Security Agreement, dated as of October 30, 1991, (the "CIT Loan Agreement"), between JPS
Converter and Industrial Corp., a Delaware corporation ("JCIC") and The CIT Group/Equipment
Financing, Inc. ("CIT").*
10.4 First Amendment to the CIT Loan Agreement, dated as of June 26, 1992, by and between JCIC and CIT.*
10.5 Second Amendment to the CIT Loan Agreement, dated as of December 22, 1992, by and between JCIC and CIT.*
10.6 Agreement of Lease, dated as of June 1, 1988, by and between 1185 Avenue of the Americas Associates
("1185 Associates") and JCIC.*
10.7 Lease Modification and Extension Agreement, dated as of April 2, 1991, by and between 1185
Associates and JCIC.*
10.8 Third Amendment to the CIT Loan Agreement, dated as of August 6, 1993, by and between JCIC and CIT.**
10.9 Trademark License Agreement, dated as of May 9, 1988, by and between J.P. Stevens and JPS
Acquisition Corp. (predecessor to the Company.)**
10.10 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.**
</TABLE>
54
<PAGE> 56
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.11 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.**
10.12 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.***
10.13 Fourth Amended and Restated Credit Agreement (the "Existing Credit Agreement"), dated as of June 24,
1994, by and among the Company, JCIC, JPS Elastomerics Corp., a Delaware corporation ("JEC"), JPS
Carpet Corp., a Delaware corporation ("JCC"), the financial institutions listed on the signature
pages thereof, Citibank, N.A. ("Citibank") as Agent and Administrative Agent, and General Electric
Capital Corporation ("GECC") as Co-Agent and Collateral Agent.****
10.14 First Amendment to the Existing Credit Agreement, dated as of November 4, 1994, by and among the
Company, JCIC, JEC, JCC, the financial institutions listed on the signature pages thereof, Citibank,
as Agent and Administrative Agent, and GECC, as Co-Agent and Collateral Agent.*****
10.15 Second Amendment to the Existing Credit Agreement, dated as of December 21, 1994, by and among the
Company, JCIC, JEC, JCC, the financial institutions listed on the signature pages thereof, Citibank,
as Agent and Administrative Agent, and GECC as Co-Agent and Collateral Agent.*****
10.16 Fourth Amendment to CIT Loan Agreement, dated as of December 29, 1994, by and between JCIC and CIT.*****
10.17 Lease Modification and Extension Agreement, dated as of April 30, 1993, by and between 1185
Associates and JCIC.*****
10.18 Long-Term Incentive Plan of the Company effective November 1, 1994.******
10.19 Third Amendment to Existing Credit Agreement, dated as of May 31, 1995 by and among the Company,
JCIC, JEC, JCC, the financial institutions listed on the signature pages thereof, Citibank, as Agent
and Administrative Agent, and GECC, as Co-Agent and Collateral Agent.********
10.20 Fourth Amendment to Existing Credit Agreement, dated as of October 28, 1995 by and among the
Company, JCIC, JEC, JCC, the financial institutions listed on the signature pages thereof, Citibank,
as Agent and Administrative Agent, and GECC, as Co-Agent and Collateral Agent.*********
10.21 Lease Modification and Extension Agreement, dated as of November 17, 1994, by and between 1185
Associates and JCIC.*********
</TABLE>
55
<PAGE> 57
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.22 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.**********
11.1 Statement re: Computation of Per Share Earnings - not required since such computation can be clearly
determined from the material contained herein.
12.1 Computation of Ratio of Earnings to Fixed Charges - not required for Form 10-K per Item 503(d) of
Regulation S-K.
12.2 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends--not
required for Form 10-K per Item 503(d) of Regulation S-K.
21.1 List of Subsidiaries of the Company.*****
27.1 Financial data schedule (for SEC use only).*********
</TABLE>
________
* 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.
** Previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the year ended October 30, 1993.
*** Previously filed as an exhibit to the Company's Quarterly
Report on Form 10-Q for the quarter ended April 30, 1994.
**** Previously filed as an exhibit to the Company's Quarterly
Report on Form 10-Q for the quarter ended July 30, 1994.
***** Previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the year ended October 29, 1994.
****** Previously filed as an exhibit to the Company's Quarterly
Report on Form 10-Q for the quarter ended January 28, 1995.
******* Previously filed as an exhibit to Post-Effective Amendment
No. 3 to Registration Statement No. 33- 58272 on Form S-1,
declared effective by the SEC on June 7, 1995 and
incorporated herein by reference.
******** Previously filed as an exhibit to the Company's Quarterly
Report on Form 10-Q for the quarter ended April 29, 1995.
********* Filed herewith.
********** Previously filed as an exhibit to the Company's Current
Report on Form 8-K dated December 1, 1995.
56
<PAGE> 58
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 TEXTILE GROUP, INC.
Date: January 26, 1996 By: /s/ Jerry E. Hunter
-------------------------
Jerry E. Hunter
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Steven M. Friedman Director and Chairman January 26, 1996
- ------------------------- of the Board
STEVEN M. FRIEDMAN
/s/ Jerry E. Hunter Director, President and January 26, 1996
- ------------------------------ Chief Executive Officer
JERRY E. HUNTER
/s/David H. Taylor Director, Executive January 26, 1996
- ----------------------------- Vice President-Finance,
DAVID H. TAYLOR Principal Financial Officer and
Secretary
/s/ Muzzafar Mirza Director January 26, 1996
- ---------------------------
MUZZAFAR MIRZA
/s/ Alain M. Oberrotman Director January 26, 1996
- -----------------------
ALAIN M. OBERROTMAN
/s/ Marc C. Particelli Director January 26, 1996
- -----------------------------
MARC. C. PARTICELLI
/s/ Allen A. Hodges Controller January 26, 1996
- -----------------------------
ALLEN A. HODGES
</TABLE>
57
<PAGE> 59
JPS TEXTILE GROUP, INC.
INDEX TO SCHEDULE
INDEX TO FINANCIAL STATEMENT SCHEDULE
For the Years Ended October 30, 1993, October 29, 1994 and October 28, 1995
FINANCIAL STATEMENT SCHEDULE
<TABLE>
<S> <C> <C>
II. Valuation and Qualifying Accounts and Reserves S-2
</TABLE>
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
<PAGE> 60
JPS TEXTILE GROUP, INC. SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C>
Allowances Deducted from Asset
to Which They Apply:
Year Ended October 30, 1993 (52 Weeks)
Allowance for doubtful accounts $ 1,912 $ 441 $ (92) $ 323 $ 1,938
Claims, returns and other allowances 701 528 452 777
------- ----- ------- -------- -------
$ 2,613 $ 441 $ 436 $ 775 $ 2,715
======= ====== ======= ======== =======
Year Ended October 29, 1994 (52 Weeks)
Allowance for doubtful accounts $ 1,938 $ 748 $ 847 $ 1,606 $ 1,927
Claims, returns and other allowances 777 (73) 369 423 650
------- ------ ------- -------- -------
$ 2,715 $ 675 $ 1,216 $ 2,029 $ 2,577
======= ====== ======= ======== =======
Year Ended October 28, 1995 (52 Weeks)
Allowance for doubtful accounts $ 1,927 $ (114) $ 206 $ 69 $ 1,950
Claims, returns and other allowances 650 175 644 181
------- ------ ------- -------- -------
$ 2,577 $ (114) $ 381 $ 713 $ 2,131
======= ====== ======== ======== =======
</TABLE>
(a) Change in various reserves charged to net sales.
(b) Uncollected receivables written off, net of recoveries.
S-2
<PAGE> 1
Exhibit 10.20
EXECUTION COPY
FOURTH AMENDMENT TO
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
This Fourth Amendment to Fourth Amended and Restated Credit
Agreement dated as of October 28, 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, the Second Amendment to Fourth Amended
and Restated Credit Agreement dated as of December 21, 1994 and the Third
Amendment to Fourth Amended and Restated Credit Agreement dated as of May 31,
1995 (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. Each of the parties hereto agrees that from and after the Fourth
Amendment Effective Date (as defined below) JCC shall cease to be a party to
the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Company and JCC have agreed to sell and transfer
the Carpet Assets (as defined below) to Gulistan Holdings Inc., a newly-formed
Delaware corporation which is owned by certain members of the existing
management of JCC ("Holdco"), and Holdco will subsequently contribute the
Carpet Assets to Gulistan Carpet Inc., a newly-formed Delaware corporation and
a wholly-owned subsidiary of Holdco ("Subco");
WHEREAS, certain proceeds of the sale of the Carpet Assets
shall constitute "Net Cash Proceeds" and shall be applied as a mandatory
prepayment to the outstanding Revolving Loans (without a corresponding
reduction of the Commitments);
<PAGE> 2
WHEREAS, the Company and JCC have requested that the Senior
Lenders permit the Agent and the Collateral Agent to release their respective
Liens on the Carpet Assets (including, without limitation, any capital stock
which is part of such Carpet Assets);
WHEREAS, the Company and the Borrowing Subsidiaries have
requested the Senior Lenders to amend the Credit Agreement to provide, among
other things, for (i) a decrease in the Revolving Credit Facility from
$135,000,000 to $118,000,000, (ii) an amendment of certain financial covenants
and (iii) other amendments, all as more fully described herein;
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 4 hereof, hereby
amended as follows:
1.01 Section 1.01 of the Credit Agreement is amended to add
the following definitions thereto:
"Carpet Asset Transfer Agreement" shall mean the Asset
Transfer Agreement to be entered into among JCC, the Company, Holdco and Subco
in connection with the Carpet Sale, as the same may be amended, supplemented or
otherwise modified from time to time.
"Carpet Assets" shall mean the Transferred Assets (as defined
in the Carpet Asset Transfer Agreement).
"Carpet Guaranty" shall mean the Amended and Restated Guaranty
dated as of March 18, 1993 executed by JCC, pursuant to which JCC has
guaranteed all of the Obligations of each Borrowing Subsidiary, as the same may
be amended, supplemented or otherwise modified from time to time.
"Carpet Pledge Agreement" shall mean the Pledge Agreement
dated as of the Fourth Amendment Effective Date between JCC and the Agent, as
the same may be amended, supplemented or otherwise modified from time to time.
"Carpet Sale" shall mean the purchase by Holdco and Subco and
sale by JCC, and the assumption by Holdco and Subco of substantially all of the
liabilities associated with, the Carpet Assets, all pursuant to and in
accordance with the terms of the Carpet Asset Transfer Agreement.
"Carpet Sale Amendatory Agreement" shall mean the Amendatory
Agreement and Release dated as of the Fourth Amendment Effective Date among the
Company, JCC, the Borrowing Subsidiaries, the Agent and the Collateral Agent,
as such agreement may be amended, supplemented or otherwise modified from time
to time.
<PAGE> 3
"Carpet Security Agreement" shall mean the Security Agreement
dated as of the Fourth Amendment Effective Date among JCC, the Collateral Agent
and the Agent, as the same may be amended, supplemented or otherwise modified
from time to time.
"Carpet Stockholders Agreement" shall mean the Stockholders
Agreement to be entered into among Holdco, JCC, as a stockholder of Holdco and
the other stockholders of Holdco party thereto in connection with the Carpet
Sale, as such agreement may be amended, supplemented or otherwise modified from
time to time.
"Carpet Transaction Documents" shall mean, collectively, (i)
the Carpet Asset Transfer Agreement, (ii) the Holdco Note, (iii) the Holdco
Preferred Stock, (iv) the Holdco Warrants and (v) the Carpet Stockholders
Agreement.
"Fourth Amendment Effective Date" shall mean the date on which
the Fourth Amendment to the Credit Agreement becomes effective pursuant to the
terms thereof.
"Holdco" shall mean Gulistan Holdings Inc., a Delaware
corporation.
"Holdco Note" shall mean the promissory note in the principal
amount of $10,000,000 (plus the amount of any deferred interest thereon) made
by Holdco in favor of JCC in connection with the Carpet Sale, as such note may
be amended, supplemented or otherwise modified from time to time.
"Holdco Preferred Stock" shall mean the Series A preferred
stock of Holdco, $.01 par value per share.
"Holdco Warrants" shall mean the warrants to acquire certain
shares of the common stock of Holdco issued to JCC pursuant to the Carpet Asset
Transfer Agreement.
"Subco" shall mean Gulistan Carpet Inc., a Delaware
corporation.
1.02 Section 1.01 of the Credit Agreement is further amended
as follows:
(a) The definition of "Borrowing Subsidiaries" is deleted in
its entirety and the following definition is substituted therefor:
"Borrowing Subsidiaries" shall mean JCIC and JEC.
(b) The definition of "Collateral Documents" in Section 1.01
of the Credit Agreement is hereby amended to add the phrase "the Carpet
Security Agreement, the Carpet Pledge Agreement, the Carpet Guaranty, the
Carpet Sale Amendatory Agreement" following the phrase "the JPS Auto Security
Agreement,".
-3-
<PAGE> 4
(c) The definition of "Deed of Charge" is deleted in its
entirety.
(d) The definition of "EBITDA" is deleted in its entirety and
the following definition is substituted therefor:
"EBITDA" shall mean, for any period, (i) the sum of the
amounts for such period of (A) Consolidated Net Income, (B)
depreciation, amortization expense and other non-cash charges, (C)
consolidated interest expense (including fees for Letters of Credit)
and (D) Federal, state, local and foreign income taxes; minus (ii)
gains (or plus losses) from asset sales calculated pursuant to GAAP
for such period plus solely with respect to the last fiscal quarter of
Fiscal Year 1995 and the first three fiscal quarters of Fiscal Year
1996, the extraordinary gain not in excess of $2,800,000 related to
the Auto Sale.
(e) The definition of "Fixed Asset Portion" in Section 1.01
of the Credit Agreement is hereby deleted in its entirety and the following
definition is substituted therefor:
"Fixed Asset Portion" shall mean $25,000,000; provided,
however, the amount of the Fixed Asset Portion shall be reduced by the
aggregate amount of each of the following: (i) the amount of any cash
proceeds from sales of assets (other than Inventory) sold in the
ordinary course of business that exceed Two Million Dollars
($2,000,000) in the aggregate in any Fiscal Year, net of (A) the costs
of sale, lease, assignment or other disposition, (B) any income,
franchise, transfer or other tax liability arising from such
transaction and (C) amounts applied to the repayment of Indebtedness
(other than the Obligations) secured by a Lien on the asset disposed
of; (ii) in the event of the sale of all or substantially all of the
capital stock or assets of any Borrowing Subsidiary (to the extent
otherwise permitted hereunder) (other than in connection with the Auto
Sale or the Carpet Sale), the amount of the Fixed Asset Value of such
Borrowing Subsidiary plus fifty percent (50%) of the amount, if any,
by which the Net Cash Proceeds from such sale exceed such Fixed Asset
Value; (iii) in the event of a Permitted Disposition, an amount equal
to fifty percent (50%) of the Net Cash Proceeds from such disposition;
and (iv) the amount of Net Cash Proceeds from sales of assets (other
than in connection with a Permitted Disposition, the Auto Sale or the
Carpet Sale).
(f) The definition of "Fixed Asset Value" is deleted in its
entirety and the following definition is substituted therefor:
"Fixed Asset Value" shall mean with respect to JCIC,
$23,644,068 and with respect to JEC, $1,355,932.
-4-
<PAGE> 5
(g) The definition of "JPS-U.K." is deleted in its entirety.
(h) The definition of "Net Worth" is hereby amended (i) to
insert the phrase "and the Carpet Sale" at the end of the parenthetical in
clause (iv) thereof and (ii) to insert the phrase "other than those gains
associated with the Company's repurchase of Subordinated Indebtedness" at the
end of the parenthetical in clause (v) thereof.
(i) The definition of "Permitted Disposition" is deleted in
its entirety and the following definition is substituted therefor:
"Permitted Dispositions" shall mean (i) Permitted Financings
and (ii) sales of fixed assets other than in the ordinary course of
business permitted pursuant to the first sentence of Section 7.02(a),
including sales that occur in connection with sale and leaseback
transactions; provided, however, the Net Cash Proceeds of the
transactions in both clauses (i) and (ii) above collectively shall
not exceed Thirty Five Million Dollars ($35,000,000) in the aggregate
since March 18, 1993 without the prior written consent of the
Requisite Senior Lenders; provided, further, a Permitted Disposition
shall not include the Auto Sale, the Carpet Sale or any transaction
prohibited by Section 7.07(a) and shall only include those
dispositions with respect to which each of the following conditions
shall have been met: (A) the Agent and the Collateral Agent shall
have received such landlord or mortgagee waivers, documents and
agreements as the Agent and the Collateral Agent have reasonably
deemed necessary to permit the Agent and the Collateral Agent to
protect and enforce their respective Liens on Collateral; (B) all
representation and warranties set forth in subsection (a) through
(dd) of Section 4.01 ((I) except to the extent such statements
expressly are made only as of the Effective Date or (II) other than for
changes permitted or contemplated by this Agreement), shall have been
true, correct and complete in all material respects as of the date of
such disposition; (C) on the date of such disposition, no Event of
Default or Potential Event of Default shall have occurred and be
continuing or would result from the consummation of such disposition;
and (D) the Net Cash Proceeds of such disposition shall have been
applied to the repayment of the Obligations pursuant to Section
2.06(b); provided, further, (a) in the event any Loan Party would
receive Net Cash Proceeds in excess of an aggregate amount of Ten
Million Dollars ($10,000,000) from the sale of any fixed assets
pursuant to the first sentence of Section 7.02(a) (other than in
connection with a sale and leaseback transaction) in a single
transaction or series of related transactions, such Loan Party shall
have submitted the documentation for such disposition to the Senior
Lenders and shall have obtained the prior written consent of the
-5-
<PAGE> 6
Requisite Senior Lenders to such disposition and (b) in the event of a
Permitted Financing or a sale of fixed assets in connection with a
sale and leaseback transaction by a Borrowing Subsidiary, such
Borrowing Subsidiary shall have submitted the documentation for such
disposition to the Senior Lenders and shall have obtained the prior
written consent of the Requisite Senior Lenders to such disposition,
but only if the Net Cash Proceeds of such disposition and all prior
dispositions of such type (other than the Auto Sale and the Carpet
Sale) received by such Borrowing Subsidiary since March 18, 1993
exceed in the aggregate (I) for JEC, Ten Million Dollars ($10,000,000)
and (II) for JCIC, Twenty-Five Million Dollars ($25,000,000).
(j) The definition of "Revolving Credit Facility" in Section
1.01 of the Credit Agreement is hereby amended to delete the dollar amount
"$135,000,000" and substitute the dollar amount "$118,000,000" therefor.
(k) The definition of "Transaction Documents" in Section 1.01
of the Credit Agreement is hereby amended to add the phrase "the Carpet
Transaction Documents," following the phrase "the New Auto Transaction
Documents,".
1.03 Section 2.06(b)(iii) of the Credit Agreement is hereby
amended to add the phrase "or the Carpet Sale" after the phrase "from the Auto
Sale" in the third line of the proviso in the first sentence thereof.
1.04 Section 7.02(a) of the Credit Agreement is hereby
amended to delete clause (B) thereof and substitute new clauses (B) and (C)
prior to the period at the end of clause (B) thereof as follows:
,(B) JCC shall be permitted to assign any of its interests in the
Holdco Note, the Holdco Preferred Stock and the Holdco Warrants, or any of
them, to any of the Borrowing Subsidiaries; provided that the Borrowing
Subsidiary to which such interests are transferred shall enter into
documentation pledging such interests in favor of the Agent in form and
substance satisfactory to the Agent and the Collateral Agent and deliver to the
Agent, the Collateral Agent and the Senior Lenders all legal opinions and
supporting documentation requested by the Agent and the Collateral Agent in
connection therewith and (C) JCC (or any Borrowing Subsidiary to which JCC
shall have transferred any of its interests pursuant to clause (B) above) shall
be permitted to sell any of its interests in the Holdco Note, the Holdco
Preferred Stock and the Holdco Warrants, or any of them, to a Person other than
a Loan Party; provided that the Net Cash Proceeds of such sale are applied as a
mandatory prepayment in accordance with Section 2.06(b) and such sale is made
on terms satisfactory to the Requisite Senior Lenders.
-6-
<PAGE> 7
1.05 Section 7.03 of the Credit Agreement is hereby
amended to (i) delete the word "and" following the semicolon at end of clause
(vii) thereof and (ii) delete in its entirety clause (viii) thereof and
substitute the following new clauses (viii) and (ix) therefor:.
(viii) Investments held by JCC or any of the Borrowing
Subsidiaries in the Holdco Note, the Holdco Preferred Stock and the
Holdco Warrants; and
(viii) Investments held by the Company in JPS Auto and JCC.
1.06 Section 7.04(vi) of the Credit Agreement is hereby
deleted in its entirety and the following clause is substituted therefor:
(vi) Accommodation Obligations arising in connection with the
Transaction Documents, including, without limitation, (A) the Assumed
Liabilities, (B) obligations owing by the Company in connection with
its indemnification obligations under the Purchase Agreement, any of
the New Auto Transaction Documents or any of the Carpet Transaction
Documents and obligations owing by JCC or any of its transferees in
connection with its indemnification obligations under any of the
Carpet Transaction Documents, (C) any purchase price or tax
adjustments payable by the Company pursuant to the terms of the
Purchase Agreement, any of the New Auto Transaction Documents or any
of the Carpet Transaction Documents
1.07 Section 7.07(a) of the Credit Agreement is hereby
amended to insert the following phrase prior to the period at the end thereof:
; provided that the Company shall be permitted to dissolve JCC at any
time after (i) the payment or receipt of all purchase price adjustments
pursuant to Section 2.3 of the Carpet Asset Transfer Agreement and (ii)
the transfer of all remaining assets of JCC, including, without
limitation, the Holdco Note, the Holdco Preferred Stock and the Holdco
Warrants, pursuant to Section 7.02(a) on terms satisfactory to the
Agent and the Collateral Agent
1.08 The last sentence of Section 7.07(c) of the Credit
Agreement is hereby deleted in its entirety and the following sentence is
substituted therefor:
The Company agrees that JPS Auto and JCC shall not engage in any
business or own or acquire any assets (other than, in the case of JCC,
the Holdco Note, the Holdco Preferred Stock and the Holdco Warrants).
-7-
<PAGE> 8
1.09 Section 7.16 of the Credit Agreement is hereby
deleted in its entirety and the following paragraph is substituted therefor:
7.16. Amendment of Transaction Documents.
Neither the Company nor any of its Subsidiaries shall amend, modify,
terminate or supplement any of the Transaction Documents to which they
are a party without the prior written consent of the Requisite Senior
Lenders or, as otherwise provided in this Agreement, without the prior
written consent of the Agent and the Collateral Agent (which consent,
with respect to the Purchase Agreement, the New Auto Transaction
Documents and the Carpet Transaction Documents, shall not be
unreasonably withheld); provided that no such consent shall be
required for any such amendment, modification or supplement which
affects solely a non-material provision or non-material provisions of
one or more New Auto Transaction Documents or Carpet Transaction
Documents in a manner which is not adverse to the Agent, the
Collateral Agent or any of the Senior Lenders.
1.10 Section 8.01 of the Credit Agreement is hereby deleted
in its entirety and the following paragraph is substituted therefor:
8.01. Minimum Net Worth. The Net Worth of the Company and
its Subsidiaries on a consolidated basis on the last day of each month
of each fiscal quarter set forth below shall not be less than the
minimum amount set forth opposite such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Minimum Amount
-------------- --------------
<S> <C>
Effective Date through
the third fiscal quarter
of Fiscal Year 1994 $310,000,000
The fourth fiscal quarter
of Fiscal Year 1994 268,000,000
The first fiscal quarter
of Fiscal Year 1995 210,000,000
The second fiscal quarter
of Fiscal Year 1995 209,000,000
The third fiscal quarter
of Fiscal Year 1995 208,000,000
The fourth fiscal quarter
of Fiscal Year 1995 205,000,000
The first fiscal quarter
of Fiscal Year 1996 157,435,000
</TABLE>
-8-
<PAGE> 9
<TABLE>
<S> <C>
The second fiscal quarter
of Fiscal Year 1996 158,129,000
The third fiscal quarter
of Fiscal Year 1996 157,563,000
The fourth fiscal quarter
of Fiscal Year 1996 156,172,000
</TABLE>
1.11 Section 8.02 of the Credit Agreement is hereby deleted
in its entirety and the following paragraphs are substituted therefor:
8.02. Minimum Total Interest Coverage Ratio. (A) Total
Interest Coverage Ratio of the Company and its Subsidiaries on a consolidated
basis, as determined as of the last day of each fiscal quarter set forth below
for the twelve month period ending on such day shall not be less than the
minimum ratio set forth opposite such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Minimum Ratio
-------------- -------------
<S> <C>
Effective Date through
the third fiscal quarter
of Fiscal Year 1994 1.55:1
The fourth fiscal quarter
of Fiscal Year 1994 1.60:1
The first fiscal quarter
of Fiscal Year 1995 1.65:1
The second fiscal quarter
of Fiscal Year 1995 1.55:1
The third fiscal quarter
of Fiscal Year 1995 1.60:1
The fourth fiscal quarter
of Fiscal Year 1995 1.70:1
The first fiscal quarter
of Fiscal Year 1996 1.56:1
The second fiscal quarter
of Fiscal Year 1996 1.44:1
The third fiscal quarter
of Fiscal Year 1996 1.54:1
The fourth fiscal quarter
of Fiscal Year 1996 1.48:1
</TABLE>
-9-
<PAGE> 10
(B) Total Operating Company Interest Coverage Ratio of the
Borrowing Subsidiaries on a consolidated basis, as determined as of
the last day of each fiscal quarter set forth below for the twelve
month period ending on such day, shall not be less than the minimum
ratio set forth opposite such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Minimum Ratio
-------------- -------------
<S> <C>
Effective Date through
the third fiscal quarter
of Fiscal Year 1994 8.80:1
The fourth fiscal quarter
of Fiscal Year 1994 10.00:1
The first fiscal quarter
of Fiscal Year 1995 8.50:1
The second fiscal quarter
of Fiscal Year 1995 6.70:1
The third fiscal quarter
of Fiscal Year 1995 5.50:1
The fourth fiscal quarter
of Fiscal Year 1995 5.00:1
The first fiscal quarter
of Fiscal Year 1996 7.08:1
The second fiscal quarter
of Fiscal Year 1996 6.30:1
The third fiscal quarter
of Fiscal Year 1996 6.37:1
The fourth fiscal quarter
of Fiscal Year 1996 6.04:1
</TABLE>
-10-
<PAGE> 11
1.12 Section 8.03 of the Credit Agreement is hereby
deleted in its entirety and the following paragraph is substituted therefor:
8.03. Minimum Fixed Charge Coverage Ratio. (A) The Minimum
Fixed Charge Coverage Ratio of the Company and its Subsidiaries on a
consolidated basis, as determined as of the last day of each fiscal
quarter set forth below for the twelve month period ending on such day
shall not be less than the minimum ratio set forth opposite such
fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Minimum Ratio
-------------- -------------
<S> <C>
Effective Date through
the third fiscal quarter
of Fiscal Year 1994 0.80:1
The fourth fiscal quarter
of Fiscal Year 1994 0.85:1
The first fiscal quarter
of Fiscal Year 1995 0.85:1
The second fiscal quarter
of Fiscal Year 1995 0.77:1
The third fiscal quarter
of Fiscal Year 1995 0.90:1
The fourth fiscal quarter
of Fiscal Year 1995 0.93:1
The first fiscal quarter
of Fiscal Year 1996 0.85:1
The second fiscal quarter
of Fiscal Year 1996 0.85:1
The third fiscal quarter
of Fiscal Year 1996 0.85:1
The fourth fiscal quarter
of Fiscal Year 1996 0.95:1
</TABLE>
-11-
<PAGE> 12
(B) The Operating Company Fixed Charge Coverage Ratio of the
Borrowing Subsidiaries on a consolidated basis, as determined as of
the last day of each fiscal quarter set forth below for the twelve
month period ending on such day shall not be less than the minimum
ratio set forth opposite such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Minimum Ratio
-------------- -------------
<S> <C>
Effective Date through
the third fiscal quarter
of Fiscal Year 1994 1.50:1
The fourth fiscal quarter
of Fiscal Year 1994 1.70:1
The first fiscal quarter
of Fiscal Year 1995 1.71:1
The second fiscal quarter
of Fiscal Year 1995 1.46:1
The third fiscal quarter
of Fiscal Year 1995 1.46:1
The fourth fiscal quarter
of Fiscal Year 1995 1.40:1
The first fiscal quarter
of Fiscal Year 1996 1.48:1
The second fiscal quarter
of Fiscal Year 1996 1.56:1
The third fiscal quarter
of Fiscal Year 1996 1.46:1
The fourth fiscal quarter
of Fiscal Year 1996 1.84:1
</TABLE>
-12-
<PAGE> 13
1.13 Section 8.05 of the Credit Agreement is hereby
deleted in its entirety and the following paragraph is substituted therefor:
8.05. Minimum Current Ratio. The Current Ratio of the
Company and its Subsidiaries on a consolidated basis shall not be less
than the minimum ratio set forth opposite such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Minimum Ratio
-------------- -------------
<S> <C>
Effective Date through
the third fiscal quarter
of Fiscal Year 1994 1.00:1
The fourth fiscal quarter
of Fiscal Year 1994 1.00:1
The first fiscal quarter
of Fiscal Year 1995 0.85:1
The second fiscal quarter
of Fiscal Year 1995 0.86:1
The third fiscal quarter
of Fiscal Year 1995 0.87:1
The fourth fiscal quarter
of Fiscal Year 1995 0.85:1
The first fiscal quarter
of Fiscal Year 1996 0.77:1
The second fiscal quarter
of Fiscal Year 1996 0.78:1
The third fiscal quarter
of Fiscal Year 1996 0.79:1
The fourth fiscal quarter
of Fiscal Year 1996 0.81:1
</TABLE>
1.14 Section 8.06 of the Credit Agreement is hereby
amended to delete the dollar amount "$24,500,000" set forth below opposite
Fiscal Year 1996 and substitute the dollar amount "13,000,000" therefor.
-13-
<PAGE> 14
1.15 Section 10.08(b) of the Credit Agreement is hereby
amended to insert the following phrase prior to the period at the end of the
first sentence thereof:
; or (vii) constituting fixed assets that are financed or
refinanced by Indebtedness permitted by Sections 7.01(v) and
(x)
SECTION 2. Amendments to Schedules to Credit Agreement.
2.01 Schedule 1.01-A to the Credit Agreement is deleted in
its entirety and Exhibit A hereto shall be substituted therefor.
SECTION 3. Consent of the Senior Lenders.
(a) The Senior Lenders hereby consent to the transactions
contemplated by the Carpet Transaction Documents, including, without
limitation, the sale of substantially all of the assets of JCC, subject to
certain liabilities, to Holdco pursuant to the Carpet Asset Transfer Agreement,
and the subsequent transfer of such assets by Holdco to Subco; provided,
however, that the Net Cash Proceeds received by JCC or any Loan Party in
connection with such transactions (including, without limitation, any
adjustments to the purchase price received by JCC pursuant to Section 2.3 of
the Carpet Asset Transfer Agreement) shall be applied to the repayment of the
Obligations pursuant to Section 2.06(b) of the Credit Agreement (without a
corresponding reduction in the Commitments).
(b) The Senior Lenders hereby instruct and direct the Agent
and the Collateral Agent, upon the consummation of the transactions
contemplated by the Carpet Asset Transfer Agreement and the satisfaction of the
conditions precedent in Section 4 hereof, to release all Liens made in favor of
the Agent and/or the Collateral Agent on the Carpet Assets, to terminate the
Subsidiary Security Agreement to which JCC is party and to enter into a
replacement security agreement substantially in the form of such Subsidiary
Security Agreement, to release the Agent and the Collateral Agent as loss payee
or co-insured, as the case may be, on any insurance policies covering the
Carpet Assets, to enter into the Carpet Sale Amendatory Agreement substantially
in the form of Exhibit B hereto and to take all actions as may be appropriate
(including, without limitation, the filing of releases with respect to Uniform
Commercial Code financing statements and the termination of all blocked account
agreements) in connection therewith.
SECTION 4. Conditions Precedent to the Effectiveness of this
Amendment. Section 1.02(c) hereof shall become effective as of the date hereof
solely with respect to calculations of
-14-
<PAGE> 15
EBITDA for the last fiscal quarter of Fiscal Year 1995 on the date that the
Agent shall have received a copy of this Amendment duly executed by each Loan
Party and by the Requisite Senior Lenders. The remaining sections of this
Amendment (including, without limitation, Section 1.02(c) with respect to
calculations of EBITDA for Fiscal Year 1996) shall become effective as of the
date hereof on the date (the "Fourth Amendment Effective Date") 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):
4.01 (a) Certain Documents. The Agent shall have
received on or before the Fourth Amendment Effective Date all of the following,
all of which, except as otherwise specifically described below, shall be in
form and substance satisfactory to the Requisite Senior Lenders and in
sufficient copies for each of the Senior Lenders:
(i) This Amendment, executed by the Company, JCC
and each Borrowing Subsidiary, each Senior Lender, the Agent
and the Collateral Agent, together with all exhibits and
schedules thereto;
(ii) A substitute Note payable to each Senior
Lender in a principal amount equal to such Senior Lender's Pro
Rata Share of $118,000,000;
(iii) The Carpet Sale Amendatory Agreement;
(iv) The Carpet Pledge Agreement;
(v) The Carpet Security Agreement;
(vi) The Amended and Restated Contribution Agreement;
(vii) Release of Liens on the trademarks of JCC
created pursuant to the Trademark Security Agreement executed
by JCC;
(viii) Release of Liens on the stock of JPS-U.K.
created pursuant to the Deed of Charge executed by JCC;
(ix) Releases of the Real Property Collateral
Documents, as may be required as a result of the transactions
contemplated by this Amendment, for each parcel of real
property owned by JCC and set forth on Schedule 1 hereto;
(x) Executed copies of each UCC-3 termination
statement signed by the Agent and the Collateral Agent, as
appropriate to be filed in each jurisdiction set forth on
Schedule 2 hereto;
-15-
<PAGE> 16
(xi) Executed copies of each UCC-1 Financing
Statement signed by JCC, the Agent and the Collateral Agent,
as appropriate to be filed in each jurisdiction set forth on
Schedule 3 hereto;
(xii) The Holdco Note to be pledged under the
Carpet Pledge Agreement (duly endorsed in favor of the Agent);
(xiii) Stock certificates representing the Holdco
Preferred Stock and the Holdco Warrants to be pledged under
the Carpet Pledge Agreement (with stock powers and warrant
transfer documents duly executed in blank);
(xiv) A favorable opinion of Weil, Gotshal &
Manges, counsel to the Loan Parties, International Fabrics,
JPS Auto and JCC, in form and substance satisfactory to the
Requisite Senior Lenders, and a letter entitling the Agent,
the Collateral Agent and the Senior Lenders to rely on any
opinion or opinions delivered by Weil, Gotshal & Manges in
connection with the Carpet Transaction Documents;
(xv) A copy of each of the Carpet Transaction
Documents, certified as of the Fourth Amendment Effective Date
by the Secretary or an Assistant Secretary of the Company (A)
to be a true, correct and complete copy of each such document
and (B) not to have been amended or rescinded;
(xvi) A certificate of the Secretary or Assistant
Secretary of the Company dated the Fourth Amendment Effective
Date certifying (A) the names and true signatures of the
incumbent officers of the Company authorized to sign this
Amendment and all other Transaction Documents executed by the
Company in connection with this Amendment, (B) the By-Laws of
the Company as in effect on the date of such certification,
(C) the resolutions of the Company's Board of Directors
approving and authorizing the execution, delivery and
performance of this Amendment and the other Transaction
Documents executed in connection with this Amendment to which
it is a party and (D) that there have been no changes in the
Certificate of Incorporation of the Company since the date of
the most recent certification thereof by the Secretary of
State of Delaware delivered to the Agent;
(xvii) A certificate of the Secretary or Assistant
Secretary of JCC dated the Fourth Amendment Effective Date
certifying (A) the names and true signatures of the incumbent
officers of JCC authorized to sign this Amendment and the
other Transaction Documents executed in connection with this
Amendment to which it is a party, (B) the By-laws of JCC as in
effect on the date of such certification, (C) the resolutions
of JCC's Board of Directors approving and authorizing the
execution, delivery and performance of this Amendment and the
other Transaction Documents executed in
-16-
<PAGE> 17
connection with this Amendment to which it is a party and (D)
that there have been no changes in the Certificate of
Incorporation of JCC since the date of the most recent
certification thereof by the Secretary of State of Delaware
delivered to the Agent;
(xviii) A certificate of the Secretary or Assistant
Secretary of each Borrowing Subsidiary, JPS Auto and
International Fabrics dated the Fourth Amendment Effective
Date certifying (A) the names and true signatures of the
incumbent officers of such Borrowing Subsidiary, JPS Auto and
International Fabrics authorized to sign this Amendment and
the other Transaction Documents executed in connection with
this Amendment to which it is a party, (B) the By-laws of such
Borrowing Subsidiary, JPS Auto and International Fabrics as in
effect on the date of such certification, (C) the resolutions
of such Borrowing Subsidiary's, JPS Auto's and International
Fabrics' Board of Directors approving and authorizing the
execution, delivery and performance of this Amendment and the
other Transaction Documents executed in connection with this
Amendment to which it is a party and (D) that there have been
no changes in the Certificate of Incorporation of such
Borrowing Subsidiary, JPS Auto and International Fabrics since
the date of the most recent certification thereof by the
Secretary of State of Delaware delivered to the Agent;
(xix) Good Standing Certificates certified by the
Secretary of State of Delaware relating to the Company, JCC,
International Fabrics, JPS Auto and each Borrowing Subsidiary;
and
(xx) Such additional documentation as the Agent,
the Collateral Agent or the Requisite Senior Lenders may
reasonably require.
(b) Obligations Paid. The Loan Parties and JCC shall
have used the Net Cash Proceeds of the Carpet Sale to make a mandatory
prepayment of Revolving Loans (without a corresponding reduction in the
Commitments).
(c) The Carpet Sale. The Agent, the Collateral Agent and
the Requisite Senior Lenders shall be satisfied that: (i) the Carpet Asset
Transfer Agreement and all other Carpet Transaction Documents shall have been
duly approved and executed and delivered by the parties thereto in form and
substance satisfactory to the Agent, the Collateral Agent and the Senior
Lenders, (ii) all conditions precedent to closing under the Carpet Asset
Transfer Agreement and the other Carpet Transaction Documents have been met
(and no modification or waiver of any such condition shall have been made
without the consent of the Agent and the Collateral Agent) and such documents
are, or simultaneously with the execution hereof, will be in full force and
effect, (iii) the sum received by the Company and/or JCC of
-17-
<PAGE> 18
Net Cash Proceeds from the Carpet Sale shall equal at least $22,000,000, (iv)
the Carpet Sale and the transactions contemplated thereby and by this Amendment
(including, without limitation, the application of the gross proceeds and Net
Cash Proceeds of the Carpet Sale, and the application of the proceeds of the
Revolving Loans) do not and will not contravene or constitute a default under
or in respect of the Senior Notes, any Subordinated Indebtedness or any other
Indebtedness of JCC or any of the Loan Parties, (v) the Loan Parties and the
other parties to the Loan Documents and the Carpet Transaction Documents are
(and, after giving effect to the Carpet Sale and the transactions contemplated
thereby and by this Amendment, will be) in compliance with all Requirements of
Law and all material Contractual Obligations and (vi) the Company and its
Subsidiaries have made adequate provision for the payment of all fees,
expenses, indemnities and other liabilities to be incurred by the Company and
its Subsidiaries in connection with the Carpet Sale and the transactions
contemplated thereby and by this Amendment.
4.02 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 Fourth Amendment
Effective Date (except any such representations and warranties stated to be
given as of a specific date other than the Fourth Amendment Effective Date).
4.03 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.
4.04 No Event of Default or Potential Event of Default shall
have occurred and be continuing on the Fourth Amendment Effective Date.
SECTION 5. Representations and Warranties.
5.01 The Carpet Asset Transfer Agreement is in full force and
effect and no material breach or default of any term or provision of any Carpet
Transaction Document by any of the Company and its Subsidiaries or (to the best
knowledge of the Loan Parties) by any other party thereto has occurred (except
for such breaches or defaults thereunder that have been waived by the parties
thereto not in default with the prior consent in writing by the Agent and the
Collateral Agent (which consent shall not have been unreasonably withheld)).
Except as permitted by Section 7.16, no provision of any Carpet Transaction
Document has been waived and no Carpet Transaction Document has been amended,
supplemented or otherwise modified.
-18-
<PAGE> 19
5.02 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 warranties shall
be true and correct as of such earlier date).
SECTION 6. Reference to and Effect on the Loan Documents.
6.01 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.
6.02 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.
6.03 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 7. 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 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 8. 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 9. Governing Law. This Amendment shall be governed
by and construed in accordance with, the laws of the State of New York.
-19-
<PAGE> 20
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
Senior Lenders:
CITIBANK, N.A., as Agent and as a Senior Lender
By: /s/ Brenda M. Cotsen
-------------------------------------
Title: Attorney in Fact
GENERAL ELECTRIC CAPITAL CORPORATION,
as Collateral Agent and as a Senior Lender
By: /s/ Rick Luck
-------------------------------------
Title: Vice President GE Capital
Commercial Finance, Inc.
HELLER FINANCIAL, INC.
By: /s/Frank Ross
-------------------------------------
Title:
-20-
<PAGE> 21
THE BANK OF NEW YORK COMMERCIAL CORPORATION
By: /s/ Michael Lustbader
-------------------------------------
Title: VP
NATIONSBANK OF GEORGIA, N.A.
By: /s/ Brian O'Fallon
-------------------------------------
Title: SVP
-21-
<PAGE> 1
Exhibit 10.21
LEASE MODIFICATION AND EXTENSION AGREEMENT
AGREEMENT made as of this 17th day of November, 1994, by and between
1185 AVENUE OF THE AMERICAS ASSOCIATES, a New York limited partnership, having
an office at 60 East 42nd Street, New York, New York 10165 (hereinafter
referred to as "Sublessor"), and JPS CONVERTER AND INDUSTRIAL CORP., a Delaware
corporation, having an office at 555 North Pleasantburg Drive, Greenville,
South Carolina 29607 (hereinafter referred to as "Sublessee").
W I T N E S S E T H:
WHEREAS, the parties hereto are Sublessor and Sublessee, respectively,
under that certain Agreement of Lease, dated as of June 1, 1988, as modified
and extended pursuant to Lease Modification and Extension Agreement, dated as
of April 8, 1991, and Lease Modification and Extension Agreement, dated as of
April 30, 1993 (which sublease, as modified and extended, is hereinafter called
the "Sublease") covering approximately 12,454 rentable square feet on the 14th
floor (the "Subleased Premises") in the building located at 1185 Avenue of the
Americas, New York, New York, (the "Building"); and
WHEREAS, the parties hereto wish to extend further the term of the
Sublease and to modify the terms thereof in the manner hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is agreed as follows:
1. The term of the Sublease is hereby extended for a period of
two (2) years (less one (1) day), commencing June 1, 1995 and expiring on May
30, 1997 (unless sooner terminated pursuant to the terms hereof), upon all of
the terms, covenants and conditions as are now provided in the Sublease (except
as provided in Paragraph 2 hereof), unless any such terms, covenants or
conditions shall hereafter be modified by agreement of the parties prior to May
30, 1997, it being expressly understood and agreed that: (I) the fixed annual
rent for the subleased premises shall be in the sum of $373,620 per year; and
(ii) the base tax year set forth in Article 42 for Tax Escalation rent and the
base year set forth in Article 43 for Operating Expense Escalation rent shall
remain unchanged during the extended term.
2. A. Provided that Sublessee is not in default under any of the
terms, covenants and conditions of the Sublease, Sublessee shall be granted a
rent credit against the fixed annual rent payable under the Sublease (excluding
the ERIF portion thereof referred to in Articled 44) in the total amount of
$62,270.00 to be applied in equal monthly amounts of $2,594.58 against each of
the twenty-four (24) monthly installments of fixed annual rent due under the
Sublease.
If the term of this Sublease is terminated by virtue
of default of Sublessee hereunder, then in such event, in additional to all
other damages and remedies herein provided and provided by law for Sublessor,
Sublessor shall also be entitled to the return of the total dollar amount of
the aforedescribed rent credit heretofore enjoyed by Sublessee hereunder, which
sum shall be deemed additional rent due and owing prior to such termination of
this Sublease. The obligation of Sublessee to pay such additional rent (or
damages) to Sublessor shall survive the expiration or sooner termination of the
term of this Sublease.
<PAGE> 2
B. The provisions of Articles 51 and 53 shall not
apply to this Agreement or to the extended term of the Sublease.
3. Sublessee understands and agrees that it will accept
possession of the Subleased Premises for the extended term of the Sublease in
its then "as is" condition, and Sublessor shall have no obligation to do any
work in and to the Subleased Premises in connection with this Agreement or the
extended term of the Sublease.
4. Sublessor and Sublessee each represents and warrants to the
other that it has neither consulted or negotiated with any broker or finder
with regard to the Subleased Premises, and Sublessor and Sublessee each agrees
to indemnify, defend and save harmless the other from and against any claims
for fees or commissions from anyone with whom it has dealt in connection with
the Subleased Premises or the Sublease.
5. Except as herein modified, all of the other terms, covenants
and conditions of the Sublease are and shall remain in full force and effect
and are hereby ratified and confirmed.
6. This Agreement shall be binding upon and inure to the benefit
of the parties hereto have caused this Agreement to be executed as of the day
and year first above written.
1185 AVENUE OF THE AMERICAS ASSOCIATES
(Sublessor)
By: W&M Properties, Inc., as Agent
By: /s/ Donald B. Kaplan
--------------------
Executive Vice President
JPS CONVERTER AND INDUSTRIAL CORP.
(Sublessee)
By: /s/ Carl Rosen
--------------
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF JPS TEXTILE GROUP, INC. CONTAINED IN THE BODY OF THE
ACCOMPANYING FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-28-1995
<PERIOD-END> OCT-28-1995
<CASH> 1,352
<SECURITIES> 0
<RECEIVABLES> 90,317
<ALLOWANCES> 2,131
<INVENTORY> 48,729
<CURRENT-ASSETS> 168,223
<PP&E> 281,823
<DEPRECIATION> 118,866
<TOTAL-ASSETS> 412,822
<CURRENT-LIABILITIES> 66,621
<BONDS> 327,668
28,171
250
<COMMON> 10
<OTHER-SE> (37,305)
<TOTAL-LIABILITY-AND-EQUITY> 412,822
<SALES> 472,565
<TOTAL-REVENUES> 472,565
<CGS> 406,070
<TOTAL-COSTS> 406,070
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,946
<INCOME-PRETAX> (16,464)
<INCOME-TAX> 1,200
<INCOME-CONTINUING> (17,664)
<DISCONTINUED> (33,320)
<EXTRAORDINARY> 20,120
<CHANGES> 0
<NET-INCOME> (30,864)
<EPS-PRIMARY> (34.70)
<EPS-DILUTED> (34.70)
</TABLE>
