<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 12, 1997
REGISTRATION NO. 333-38261
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
----------------
JPS TEXTILE GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2221 57-0868166
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NO.)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION)
555 N. PLEASANTBURG DRIVE, SUITE 202
GREENVILLE, SOUTH CAROLINA 29607
(864) 239-3900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DAVID H. TAYLOR
C/O JPS TEXTILE GROUP, INC.
555 N. PLEASANTBURG DRIVE, SUITE 202
GREENVILLE, SOUTH CAROLINA 29607
(864) 239-3900
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
COPY TO:
SIMEON GOLD, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153
(212) 310-8000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: From time to time after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
PROSPECTUS
JPS TEXTILE GROUP, INC.
10,000,000 SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE
----------------
This Prospectus relates to the offering from time to time (the "Offering")
by certain selling stockholders (the "Selling Stockholders") of shares of
common stock, $.01 par value (the "Common Stock"), of JPS Textile Group, Inc.,
a Delaware corporation ("JPS"). The shares of Common Stock being registered
hereunder were issued by JPS under the Joint Plan of Reorganization, as
amended (the "Plan of Reorganization"), proposed by JPS and JPS Capital Corp.,
a Delaware corporation and a wholly-owned subsidiary of JPS ("JPS Capital"),
under chapter 11, title 11 of the United States Code (the "Bankruptcy Code").
The Plan of Reorganization was confirmed by the United States Bankruptcy Court
for the Southern District of New York (the "Bankruptcy Court") on September 9,
1997 and was substantially consummated on October 9, 1997 (the "Effective
Date"). See "THE COMPANY--The 1997 Restructuring."
All shares of Common Stock being offered for resale hereby are being so
offered for the accounts of the Selling Stockholders. JPS will not receive any
proceeds from any resale of the Common Stock offered or sold pursuant hereto.
Application has been made for inclusion of the Common Stock in the Nasdaq
National Market under the trading symbol "JPST." Prior to the Offering, there
has been no public market for the Common Stock.
----------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS THAT SHOULD
BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES OFFERED
HEREBY.
----------------
The Selling Stockholders directly, through agents designated from time to
time, or through dealers or underwriters to be designated, may sell the Common
Stock from time to time on terms to be determined at the time of sale. To the
extent required, the specific amount of Common Stock to be sold, the names of
the Selling Stockholders, the purchase price and public offering price, the
names of any resale agent, dealer or underwriter, and the terms of any amount
of any applicable commission or discount with respect to a particular offer
will be set forth in a Prospectus Supplement and/or post-effective amendment
to the Registration Statement of which this Prospectus constitutes a part. See
"PLAN OF DISTRIBUTION."
JPS has agreed to bear all expenses of registration of the Common Stock
under federal and state securities laws and to indemnify the Selling
Stockholders against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See "PLAN OF
DISTRIBUTION."
The Selling Stockholders and any broker-dealers, agents or underwriters that
participate with the Selling Stockholders in the distribution of the Common
Stock may be deemed to be "underwriters" within the meaning of the Securities
Act, and any commissions received by them and any profit on the resale of the
Common Stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
----------------
The date of this Prospectus is December 15, 1997.
<PAGE>
ADDITIONAL INFORMATION
JPS has filed with the Securities and Exchange Commission (the "Commission")
a Registration Statement on Form S-1 (the "Registration Statement") under the
Securities Act, with respect to the Common Stock offered for resale hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to JPS and the Common Stock, reference is hereby made
to such Registration Statement, exhibits and schedules. Statements contained
in this Prospectus as to the contents of any agreement, instrument or other
document are not necessarily complete, and, in each instance, reference is
made to the copy of such agreement, instrument or document filed as an exhibit
to the Registration Statement, each such statement being qualified in its
entirety by such reference. The Registration Statement, including all exhibits
and schedules thereto, may be inspected and copied at the public reference
facilities maintained by the Commission at its principal office located at 450
Fifth Street, N.W., Washington, D.C. 20549, the New York Regional Office,
located at 7 World Trade Center, New York, New York 10048, and the Chicago
Regional Office, located at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can
be obtained from the public reference section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such material may
also be accessed electronically by means of the Commission's home page on the
Internet at http://www.sec.gov.
In connection with the Plan of Reorganization, JPS prepared certain
financial projections of capitalization, results of operations and cash flows
for the period ending October 2000. The projections are contained in the
Disclosure Statement, dated June 25, 1997 relating to the Plan of
Reorganization, which was approved by order of the Bankruptcy Court entered on
September 9, 1997. Such projections, which are also contained in a Form 8-K
filed by JPS with the Commission on July 2, 1997, reflect that consummation of
the confirmed Plan of Reorganization and the adoption of "fresh start"
reporting will positively affect JPS's and its subsidiaries' net income. The
projections were prepared solely for purposes of the Plan of Reorganization
and not for purposes of this Offering. JPS does not intend to update or
otherwise revise the projections. The projections are based upon a variety of
estimates and assumptions which, though considered reasonable by JPS's
management at the time of dissemination, may not be realized, and are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond JPS's control. JPS
cautions that no assurances can be made as to the accuracy of these financial
projections or to JPS's ability to achieve the projected results. Actual
results may vary substantially from those contained in the projections. Any
holder of Common Stock should understand that, while the projections represent
the best estimates of JPS's management at the time they were made, and under
the circumstances and conditions then prevailing, such estimates and the
circumstances and conditions affecting JPS, are likely to change substantially
with the passage of time.
JPS will furnish its shareholders with annual reports containing audited
financial statements and an opinion thereon expressed by independent certified
public accountants and with quarterly reports for the first three quarters of
each fiscal year containing unaudited summary financial information.
DISCLOSURES REGARDING FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical fact, included in this
Prospectus, including, without limitation, the statements under "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations," are, or may be deemed to be, forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Various
economic and competitive factors could cause actual results to differ
materially from those discussed in such forward-looking statements
("Cautionary Statements"), including, without limitation, price competition
and other competitive pressures, general economic conditions, the ability of
JPS and its subsidiaries to retain key customers, the cyclical nature of the
industries in which many of such customers compete and the availability and
cost of raw materials. All subsequent written and oral forward-looking
statements attributable to JPS and its subsidiaries or persons acting on
behalf of them are expressly qualified in their entirety by such Cautionary
Statements.
2
<PAGE>
PROSPECTUS SUMMARY
This Summary is qualified in its entirety by the more detailed information
and financial statements contained elsewhere in this Prospectus. All
capitalized terms used and not defined herein have the respective meanings
assigned to them elsewhere in this Prospectus. Unless the context otherwise
requires, the terms "JPS" and the "Company," as used in this Prospectus mean
JPS Textile Group, Inc., and JPS Textile Group, Inc., together with its
subsidiaries, respectively.
THE COMPANY
The Company is one of the largest domestic manufacturers of textile and
textile-related products for the apparel, industrial and home fashion markets.
The Company conducts its operations from ten manufacturing plants in five
states and employs approximately 3,700 people.
Apparel Fabrics and Products. The Company is a leading manufacturer of greige
goods (unfinished woven fabrics) and yarn. The Company's products are used in
the manufacture of a broad range of consumer apparel products including
blouses, dresses, sportswear and undergarments.
Industrial Fabrics and Products. The Company manufactures products used by
the building construction industry and a broad range of woven fabrics with
specialty applications. Principal construction products include single-ply
membrane roofing and fiberglass reinforcement fabrics. In addition, the Company
produces membranes for use primarily in environmental containment systems and
specialty urethane products for use in the manufacture of various products such
as athletic shoes, "bulletproof" glass, disposable intravenous bags, seamless
welded drive belts and tubing. Other fabrics produced in this segment are used
in the manufacture of such products as flame retardant clothing, filtration
products, tarpaulins, awnings, athletic tapes, printed circuit boards and
advanced composites.
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.
In April 1991, JPS restructured its indebtedness pursuant to a confirmed plan
of reorganization under chapter 11 of the Bankruptcy Code. Since the 1991
restructuring, the Company has adopted and implemented various strategies aimed
at improving and realizing value in its operating subsidiaries. These
strategies have included, among other things, the exit, through asset sales or
otherwise, of certain unprofitable product lines. See "THE COMPANY--Disposition
of Assets; Plant Closing."
During the years following the 1991 restructuring and as a result of the
continued downturn in the apparel fabrics market and various other factors, JPS
determined that it would be unable to meet certain debt obligations on its
public bonds that would come due commencing in June 1997. Accordingly, in 1996,
JPS and JPS Capital commenced negotiations with an unofficial committee (the
"Unofficial Bondholder Committee") comprised of institutions that owned, or
represented holders that beneficially owned, approximately 60% of JPS's
outstanding public debt securities (the "Old Debt Securities"). On May 15,
1997, the parties reached an agreement in principle on the terms of a
restructuring of these obligations to be accomplished pursuant to the Plan of
Reorganization proposed by JPS and JPS Capital. On June 26, 1997, JPS and JPS
Capital commenced a solicitation of votes on the Plan of Reorganization by
holders of impaired claims and impaired equity interests entitled to vote
thereon. The Plan of Reorganization was overwhelmingly accepted by each class
that voted and a voluntary chapter 11 case was commenced by JPS on August 1,
1997 in the Bankruptcy Court. The Plan of Reorganization was confirmed by the
Bankruptcy Court pursuant to an order entered on September 9, 1997, and the
Plan of Reorganization which, among other things, resulted in the issuance of
the Common Stock, became effective on October 9, 1997. See "THE COMPANY--The
1997 Restructuring."
3
<PAGE>
THE OFFERING
COMMON STOCK OFFERED FOR
RESALE...................
10,000,000 shares. See "DESCRIPTION OF THE COMMON
STOCK."
COMMON STOCK OUTSTANDING
ON THE CONSUMMATION DATE
OF THE PLAN OF
REORGANIZATION...... 10,000,000 shares.
NASDAQ SYMBOL FOR COMMON
STOCK............... Application has been made for inclusion of the Com-
mon Stock in the Nasdaq National Market under the
trading symbol "JPST".
USE OF PROCEEDS........... All shares of Common Stock being offered for resale
hereby are being so offered for the accounts of the
Selling Stockholders. JPS will not receive any pro-
ceeds from the sale of the Common Stock hereby.
RISK FACTORS
Purchasers of the Common Stock offered hereby should carefully consider the
factors set forth under "RISK FACTORS" as well as the other information set
forth in this Prospectus.
4
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table presents consolidated historical financial data for the
Company as of the dates and for the fiscal periods indicated. The summary
historical financial data for each of the five years ended November 2, 1996 has
been derived from the Consolidated Financial Statements of the Company for such
periods, which have been audited. 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 Consolidated Financial Statements of the Company at Item 15 in this
Registration Statement. The summary historical financial data for the nine
months ended August 2, 1997 and July 27, 1996 have been derived from the
unaudited Consolidated Financial Statements of the Company and, in the opinion
of management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the financial condition and
results of operations of the Company for such periods. The summary unaudited
pro forma financial data for the fiscal year ended November 2, 1996 and the
nine months ended August 2, 1997 give effect to the reorganization and adoption
of fresh start reporting as if they had occurred on October 29, 1995 and
November 3, 1996, respectively. Such summary unaudited pro forma financial data
has been derived from the "Pro Forma Financial Statements" included elsewhere
herein. The unaudited pro forma condensed consolidated balance sheet
information as of August 2, 1997 is based upon the historical balance sheet as
of August 2, 1997, and includes pro forma adjustments as if the reorganization
and adoption of fresh start reporting had been completed on that date. The
following information should be read in conjunction with the Consolidated
Financial Statements of the Company and Notes thereto, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Pro Forma
Financial Statements" presented elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
---------------------------------------------------------------- -------------------------------
10/31/92 10/30/93 10/29/94 10/28/95 11/2/96 11/2/96 7/27/96 8/2/97 8/2/97
(52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) PRO FORMA (39 WEEKS) (39 WEEKS) PRO FORMA
---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............. $476,326 $457,552 $461,871 $472,565 $448,824 $448,824 $333,444 $301,188 $301,188
Cost of sales.......... 404,547 396,160 397,921 406,070 397,804 385,020 294,635 258,654 250,842
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit........... 71,779 61,392 63,950 66,495 51,020 63,804 38,809 42,534 50,346
Selling, general and
administrative
expenses.............. 37,391 39,023 39,805 39,586 40,579 42,089 30,601 29,863 30,995
Other expense, net..... 1,372 1,236 2,914 6,248 2,498 2,498 2,078 485 485
Charges for plant
closing, loss on sale
of certain operations
and writedown of
certain long-lived
assets................ -- -- -- -- 30,028 30,028 30,055 -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Operating profit
(loss)................ 33,016 21,133 21,231 20,661 (22,085) (10,811) (23,925) 12,186 18,866
Valuation allowance on
Gulistan securities... -- -- -- -- (4,242) -- (5,463) (5,070)
Interest income........ 1 48 749 2,821 2,856 1,974 2,102 2,232 1,570
Interest expense....... (58,513) (60,407) (55,570) (39,946) (40,510) (9,405) (29,647) (30,309) (6,538)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
reorganization items,
income taxes,
discontinued
operations,
extraordinary items
and cumulative effects
of accounting
changes(1)............ (25,496) (39,226) (33,590) (16,464) (63,981) (18,242) (56,933) (20,961) 13,898
Reorganization items--
professional fees and
expenses.............. -- -- -- -- (2,255) -- (902) (6,476) --
-------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
---------------------------------------------------------------------- ----------------------------------
10/31/92 10/30/93 10/29/94 10/28/95 11/2/96 11/2/96 7/27/96 8/2/97 8/2/97
(52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) PRO FORMA (39 WEEKS) (39 WEEKS) PRO FORMA
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA (CONTINUED):
Income (loss)
before income
taxes,
discontinued
operations,
extraordinary
items and
cumulative effects
of accounting
changes........... $ (25,496) $ (39,226) $ (33,590) $ (16,464) $ (66,236) $ (18,242) $ (57,835) $ (27,437) $ 13,898
Income taxes
(benefit)......... 1,446 1,782 2,800 1,200 (300) (300) (374) 684 5,985
--------- --------- --------- --------- --------- ---------- --------- --------- ----------
Income (loss)
before
discontinued
operations,
extraordinary
items and
cumulative effects
of accounting
changes........... (26,942) (41,008) (36,390) (17,664) (65,936) (17,942) (57,461) (28,121) 7,913
Discontinued
operations, net of
taxes:
Income (loss) from
discontinued
operations....... 16,089 24,165 23,628 (7,079) -- -- -- -- --
Net gain (loss) on
sale of
discontinued
operations....... -- -- 132,966 (26,241) (1,500) (1,500) (1,500) -- --
Extraordinary gain
(loss), net of
taxes............. -- -- (7,410) 20,120 -- -- -- -- --
Cumulative effects
of accounting
changes, net of
taxes............. -- (4,988) (708) -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------- --------- --------- ----------
Net income (loss).. $ (10,853) $ (21,831) $ 112,086 $ (30,864) $ (67,436) $ (19,442) $ (58,961) $ (28,121) $ 7,913
========= ========= ========= ========= ========= ========== ========= ========= ==========
Income (loss)
applicable to
common stock...... $ (13,312) $ (24,694) $ 108,753 $ (34,695) $ (71,941) $ (19,442) $ (62,262) $ (31,948) $ 7,913
========= ========= ========= ========= ========= ========== ========= ========= ==========
Weighted average
number of shares
outstanding....... 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 10,000,000 1,000,000 1,000,000 10,000,000
========= ========= ========= ========= ========= ========== ========= ========= ==========
Earnings (loss) per
common share:
Loss before
discontinued
operations,
extraordinary
items and effects
of accounting
changes.......... $ (29.40) $ (43.87) $ (39.73) $ (21.50) $ (70.44) $ (1.79) $ (60.76) $ (31.95) $ 0.79
Discontinued
operations, net of
taxes:
Income (loss) from
discontinued
operations....... 16.09 24.17 23.63 (7.08) -- -- -- -- --
Net gain (loss) on
sale of
discontinued
operations....... -- -- 132.97 (26.24) (1.50) (.15) (1.50) -- --
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
---------------------------------------------------------------------- ---------------------------------
10/31/92 10/30/93 10/29/94 10/28/95 11/2/96 11/2/96 7/27/96 8/2/97 8/2/97
(52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) PRO FORMA (39 WEEKS) (39 WEEKS) PRO FORMA
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA
(CONTINUED):
Extraordinary
gain (loss), net
of taxes........ -- -- (7.41) 20.12 -- -- -- -- --
Cumulative
effects of
accounting
changes, net of
taxes........... -- (4.99) (0.71) -- -- -- -- -- --
-------- --------- -------- -------- --------- ---------- --------- --------- --------
Net income
(loss).......... $ (13.31) $ (24.69) $ 108.75 $ (34.70) $ (71.94) $ (1.94) $ (62.26) $ (31.95) $ 0.79
======== ========= ======== ======== ========= ========== ========= ========= ========
<CAPTION>
10/31/92 10/30/93 10/29/94 10/28/95 11/2/96 7/27/96 8/2/97
(52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) (39 WEEKS) (39 WEEKS) PRO FORMA
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
DATA:
Working capital
(deficiency),
excluding net
assets held for
sale............ $ 61,431 $ 63,821 $ 65,855 $ 72,670 $(257,866)(2) $(250,593) $ (9,588) $ 75,077(3)
Total assets..... 511,535 532,608 452,811 412,822 335,927 340,793 322,297 310,421
Total long-term
debt and notes
payable, less
current
portion......... 488,280 522,947 335,472 327,668 4,226(2) 5,087 2,876 123,939(3)
Senior redeemable
preferred
stock........... 18,144 21,007 24,340 28,171 32,676 31,472 36,504 --
Shareholders'
(deficit)
equity.......... (86,409) (111,103) (2,350) (37,045) (108,986) (99,308) (140,935) 123,330
- --------
(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.
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
---------------------------------------------------------------------- ---------------------------------
10/31/92 10/30/93 10/29/94 10/28/95 11/2/96 11/2/96 7/27/96 8/2/97 8/2/97
(52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) PRO FORMA (39 WEEKS) (39 WEEKS) PRO FORMA
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Certain non-cash
charges to
income:
Depreciation.... $ 19,736 $ 19,799 $ 22,242 $ 20,820 $ 21,756 $ 9,235 $ 16,720 $ 13,746 $ 6,131
Amortization of
goodwill and
other.......... 975 969 964 965 983 2,493 724 724 1,834
Product
liability
charge......... -- -- -- 5,000 -- -- -- -- --
Writedown of
certain
long-lived
assets......... -- -- -- -- 17,554 17,554 18,554 -- --
Valuation
allowance on
Gulistan
securities..... 4,242 5,463 5,070 --
Other non-cash
charges to
income......... 888 1,957 131 371 -- -- 318 606 606
Non-cash
interest....... 18,502 11,729 11,161 8,818 10,088 406 7,219 7,181 301
-------- --------- -------- -------- --------- ---------- --------- --------- --------
$ 40,101 $ 34,454 $ 34,498 $ 35,974 $ 54,623 $ 29,688 $ 48,998 $ 27,327 $ 8,872
======== ========= ======== ======== ========= ========== ========= ========= ========
</TABLE>
- --------
(2) As discussed in Note 6 of the Notes to Consolidated Financial Statements
included in Item 15 herein, all of the Company's senior credit facility
revolving line of credit ($85,639) and all of the Company's subordinated
Notes and debentures ($237,661) are classified as current liabilities as of
November 2, 1996.
(3) The amounts to be outstanding under the Revolving Credit Facility (as
defined below) are classified as long-term liabilities in the pro forma
presentation.
7
<PAGE>
RISK FACTORS
Prospective purchasers of the Common Stock should carefully consider the
following risk factors, as well as other information set forth in this
Prospectus, prior to making an investment decision with respect to the Common
Stock. Unless the context otherwise requires, references to the "Company"
shall mean JPS collectively with its subsidiaries on a consolidated basis.
COMPETITION IN THE TEXTILE INDUSTRY
The Company is one of the largest domestic manufacturers of textile and
textile-related products for the apparel, industrial and home fashion markets.
The textile industry is highly competitive and includes a number of
participants with aggregate sales and financial resources greater than that of
the Company including certain of the companies which compete directly with the
Company. At present, however, most market segments are dominated by a small
number of competitors with no single company dominating the industry. See
"BUSINESS--Marketing and Competition."
SIGNIFICANT MARKETS
The Company's business plan is premised upon the existence of certain
conditions in the largest of the markets in which it participates, including
women's apparel, roofing, and fiberglass products for electrical
circuitboards, as well as the Company's ability to expand into the Mexican,
European, and Asian markets. There are no assurances that such conditions will
be maintained or occur or that the Company's expansion into new markets will
be successful.
POTENTIAL UNAVAILABILITY OF CERTAIN RAW MATERIALS
Certain of the Company's products are manufactured using raw materials
which, due to brand recognition or customer specification, are not available
from more than one source. If an interruption in the supply of raw materials
were to occur, there is no assurance that the Company could obtain alternate
adequate supplies of raw materials and, thus, the Company's ability to produce
certain of its products could be adversely affected. See "BUSINESS--Raw
Materials."
SIGNIFICANT CUSTOMERS
Although no customer accounts for more than 10% of the Company's sales, the
loss of certain customers could have a material adverse effect on the
Company's sales. There can be no assurance that the Company's reliance on such
customers, and consequently the importance of the loss of such customers, will
not increase in the future. See "BUSINESS--Customers."
CYCLICAL NATURE OF CERTAIN INDUSTRIES
The industries in which many of the Company's customers compete, such as the
construction industry, are cyclical in nature and are subject to changes in
general economic conditions which affect market demand, and a significant
downturn in these industries would have an adverse effect on the Company's
results of operations. See "BUSINESS--Seasonality."
CAPITAL EXPENDITURES
The Company's business is expected to have substantial capital expenditure
needs. While the Company expects that it will generate sufficient funds to
meet its capital expenditure needs for the foreseeable future, the Company's
ability to gain access to additional capital, if needed, cannot be assured,
particularly in view of competitive factors and industry conditions.
8
<PAGE>
INFLATION
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 may not allow the Company
to continue this practice in the future. See "MANAGEMENT DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Inflation and Tax
Matters."
LIMITED PUBLIC MARKET
On the Effective Date, JPS entered into a registration rights agreement in
accordance with which it is seeking to register the Common Stock pursuant to a
"shelf registration." In addition, JPS has applied to have the Common Stock
included for listing on Nasdaq, has filed with the Commission a Form 8-A for
the registration of the Common Stock under the Exchange Act, and has agreed to
use its best efforts to maintain its status as a reporting company under the
Exchange Act. Prior to this offering, there has been only sporadic trading of
the Common Stock in the over-the-counter market. While a Nasdaq listing is
expected to facilitate the trading of the Common Stock, there can be no
assurance that an active trading market will develop and continue. In
addition, there can be no assurance as to the degree of price volatility in
the market for the Common Stock. Accordingly, no assurance can be given that a
holder of Common Stock will be able to sell such securities in the future or
as to the price at which any such sale may occur. If such markets were to
exist, the Common Stock could trade at prices higher or lower than the value
ascribed to them in this Registration Statement, depending upon many factors,
including prevailing interest rates, markets for similar securities, industry
conditions, and the performance of, and investor expectations for, JPS and its
subsidiaries. See "PLAN OF DISTRIBUTION."
DIVIDEND POLICY AND RESTRICTIONS
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 (including,
without limitation, indebtedness evidenced by the Revolving Credit Facility
(as defined below) and refundings and refinancings thereof) and other factors
deemed relevant by JPS's Board of Directors. See "DESCRIPTION OF THE CREDIT
FACILITY."
The Company's ability to pay cash dividends is dependent on its earnings and
cash flow. The subsidiaries that are borrowers under the Revolving Credit
Facility are restricted from paying cash dividends to JPS with respect to
their capital stock unless, among other things, JPS and its subsidiaries
satisfy certain specified financial tests. See "DESCRIPTION OF THE CREDIT
FACILITY."
RESTRICTIONS ARISING UNDER THE REVOLVING CREDIT FACILITY; ACCESS TO ADDITIONAL
CAPITAL
The Revolving Credit Facility agreement contains financial covenants
relating to minimum levels of EBITDA, minimum interest coverage ratio, minimum
fixed charge coverage ratio and maximum capital expenditures. In addition, the
occurrence of certain events (including, without limitation, failure to pay
principal or interest, failure to comply with covenants, certain defaults
under or acceleration of other indebtedness, certain events of bankruptcy or
insolvency and a "change in control" of JPS (as defined therein)), in certain
cases after notice and grace periods, would constitute events of default
permitting acceleration of the indebtedness under the Revolving Credit
Facility. See "DESCRIPTION OF THE CREDIT FACILITY."
9
<PAGE>
THE COMPANY
GENERAL
The Company is one of the largest domestic manufacturers of textile and
textile-related products for the apparel, industrial and home fashion markets.
The Company conducts its operations from ten manufacturing plants in five
states and employs approximately 3,700 people.
Apparel Fabrics and Products. The Company is a leading manufacturer of
greige goods (unfinished woven fabrics) and yarn. The Company's products
are used in the manufacture of a broad range of consumer apparel products
including blouses, dresses, sportswear and undergarments.
Industrial Fabrics and Products. The Company manufactures products used
by the building construction industry and a broad range of woven fabrics
with specialty applications. Principal construction products include
single-ply membrane roofing and fiberglass reinforcement fabrics. In
addition, the Company produces membranes for use primarily in environmental
containment systems and specialty urethane products for use in the
manufacture of various products such as athletic shoes, "bulletproof"
glass, disposable intravenous bags, seamless welded drive belts and tubing.
Other fabrics produced in this segment are used in the manufacture of such
products as flame retardant clothing, filtration products, tarpaulins,
awnings, athletic tapes, printed circuit boards and advanced composites.
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.
JPS's wholly-owned operating subsidiaries include JPS Elastomerics Corp.
("Elastomerics") and JPS Converter and Industrial Corp. ("C&I"). JPS's other
wholly-owned subsidiaries do not have any significant operations: JPS Capital,
International Fabrics, Inc. ("Fabrics"), JPS Auto, Inc. ("Auto"), and JPS
Carpet Corp. ("Carpet"). The operating subsidiaries each have independent
administrative, manufacturing, and marketing capabilities for all material
aspects of their operations, including product design, customer service,
purchasing, and collections. JPS provides all finance and strategic planning
services and handles the legal, tax, and regulatory affairs for its
subsidiaries. JPS Capital was formed in 1994 as a special purpose subsidiary
to hold (and invest) $39.5 million, representing a portion of the proceeds
received from the sale of the assets of JPS's automotive division in June
1994, including the assets of Auto. These funds were set aside to satisfy
possible contingent tax liabilities incurred in connection with that sale, and
will serve as the primary source of payment of any such liabilities. Prior to
the Effective Date, the funds held by JPS Capital aggregated approximately $48
million, of which $14 million was distributed to holders of certain issues of
Old Debt Securities on the Effective Date. The funds held by JPS Capital
currently aggregate approximately $34 million. In connection with the
implementation of the Plan of Reorganization, $34 million in aggregate
principal amount (subject to adjustment on the maturity date thereof) of
Contingent Payment Notes ("Contingent Notes") were issued by JPS Capital on
the Effective Date to holders of certain issues of Old Debt Securities.
Auto and Carpet formerly owned and operated JPS's automotive products and
carpet businesses, respectively. The assets of those businesses were sold in
1994 and 1995, respectively. See "--Disposition of Assets; Plant Closing."
In addition to its direct ownership interest in the foregoing domestic
corporations, JPS has an indirect ownership interest in a foreign corporation.
Specifically, in 1996, JPS's wholly-owned subsidiary, Fabrics, acquired a 50%
ownership interest in the Mexican corporation, Ingenieria Textil Mexicana,
S.A. de C.V. ("ITM"), which is engaged in the manufacture and sale of textile
products for the apparel industry in Mexico.
The principal executive offices of JPS are located at 555 North Pleasantburg
Drive, Suite 202, Greenville, South Carolina 29607; telephone number (864)
239-3900.
10
<PAGE>
THE 1988 ACQUISITION
On May 9, 1988, the Company acquired substantially all the assets of certain
operating divisions of J.P. Stevens & Co., Inc. ("J.P. Stevens") in exchange
for approximately $527 million in cash and reorganized the newly acquired
divisions into wholly-owned subsidiaries. At that time, JPS raised $100
million by issuing certain public debt and equity securities in order to
partially finance the acquisition. In June 1989, JPS raised $323.6 million by
issuing certain public debt and equity securities to refinance certain
outstanding notes and a portion of the indebtedness incurred in connection
with the acquisition. Due to prevailing market conditions, the securities were
priced for sale at higher rates than JPS anticipated would be necessary at the
time of the acquisition. As a result of the high interest rates and a weak
business environment for certain of the subsidiaries, JPS realized lower than
expected operating earnings and cash flow which, in turn, materially impaired
its ability to service its outstanding debt and fund capital expenditures.
THE 1991 RESTRUCTURING
In 1990, JPS negotiated the terms of a recapitalization proposal with a
steering committee comprised of institutional holders of a substantial amount
of the then-outstanding securities, which culminated in JPS's prepetition
solicitation of votes to accept or reject a chapter 11 plan of reorganization.
The plan was overwhelmingly accepted. On February 7, 1991, JPS filed a
petition for relief under the Bankruptcy Code, and approximately 42 days
thereafter, JPS's plan was confirmed by the bankruptcy court and JPS emerged
from chapter 11 on April 2, 1991. Pursuant to that plan, in exchange for JPS's
outstanding debt securities and JPS's equity securities, JPS issued (i) $100
million in principal amount of senior secured notes due June 1, 1995 and June
1, 1996 (all of which were redeemed in 1994), (ii) $151.1 million in principal
amount of 10.85% Senior Subordinated Discount Notes due June 1, 1999 (the
"10.85% Notes"), (iii) $125 million in principal amount of 10.25% Senior
Subordinated Notes due June 1, 1999 (the "10.25% Notes"), (iv) $75 million in
principal amount of 7% Subordinated Debentures due May 15, 2000 (the "7%
Subordinated Debentures"), (v) 390,719 shares of Series A Senior Preferred
Stock (the "Old Senior Preferred Stock"), (vi) 10,000 shares of Series B
Junior Preferred Stock (the "Old Junior Preferred Stock"), (vii) 490,000
shares of class A common stock, par value $0.01 per share (the "Class A Common
Stock") and (viii) 510,000 shares of class B common stock, par value $0.01 per
share (the "Class B Common Stock" and, together with the Class A Common Stock,
the "Old Common Stock"). The 1991 restructuring did not significantly reduce
the amount of JPS's outstanding indebtedness.
DISPOSITIONS OF ASSETS; PLANT CLOSING
Since the 1991 restructuring, JPS has adopted and implemented various
strategies aimed at improving and realizing value in its operating
subsidiaries. These strategies have included, among other things, the exit,
through asset sales or otherwise, of certain unprofitable product lines.
The Automotive Asset Sale. On June 28, 1994, the Company sold the businesses
and assets of Auto and the synthetic industrial fabrics division of C&I and
JPS's investment in common stock of the managing general partner of Cramerton
Automotive Products, L.P. (an 80% owned joint venture) for approximately $283
million.
The Carpet Asset Sale. On November 16, 1995, JPS and Carpet transferred
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") to Gulistan Holdings Inc.
("Gulistan Holdings") and Gulistan Carpet Inc., a wholly-owned subsidiary of
Gulistan Holdings Inc. ("Gulistan Carpet" and, together with Gulistan
Holdings, "Gulistan"), for approximately $19 million in cash, a promissory
note due November 2001 issued by Gulistan Holdings in the original principal
amount of $10 million and payable to the order of Carpet, $5 million of
preferred stock of Gulistan Holdings, and warrants to purchase 25% of the
common stock of Gulistan Holdings (collectively, the "Gulistan Securities").
On August 28, 1997, the Company sold the Gulistan Securities to Gulistan for
$2 million in cash.
11
<PAGE>
Plant Closing. On August 28, 1996, the Company implemented a plan to close
its Dunean plant in Greenville, South Carolina, as a result of management's
determination that a permanent decline in the Company's spun apparel business
had occurred. This plant had been operating on a reduced schedule due to poor
market conditions and financial projections indicated it would continue to do
so. This plant was closed on October 28, 1996 and sold on August 14, 1997 for
approximately $1.2 million in cash.
The Rubber Products Group Sale. On September 30, 1996, Elastomerics sold
substantially all the assets of its rubber products division, a business
engaged in the manufacture and sale of natural and synthetic elastic for use
in apparel products, diaper products and specialty industrial applications to
Elastomer Technologies Group, Inc. for approximately $5.1 million in cash.
THE 1997 RESTRUCTURING
On May 15, 1997, JPS, JPS Capital, and the Unofficial Bondholder Committee
reached an agreement in principle on the terms of a restructuring to be
accomplished under chapter 11 of the Bankruptcy Code which culminated in the
Plan of Reorganization. Pursuant to a disclosure statement, dated June 25,
1997 (the "Disclosure Statement"), on June 26, 1997, JPS and JPS Capital
commenced a prepetition solicitation of votes by the holders of Old Debt
Securities and Old Senior Preferred Stock to accept or reject the Plan of
Reorganization. Under the Plan of Reorganization, the holders of Old Debt
Securities and Old Senior Preferred Stock were the only holders of impaired
claims and impaired equity interests entitled to receive a distribution, and
therefore, pursuant to section 1126 of the Bankruptcy Code, were the only
holders entitled to vote on the Plan of Reorganization. At the conclusion of
the 32-day solicitation period, the Plan of Reorganization had been accepted
by holders of more than 99% of the Old Debt Securities that voted on the Plan
of Reorganization and by holders of 100% of the Old Senior Preferred Stock
that voted on the Plan of Reorganization.
On August 1, 1997, JPS commenced its voluntary reorganization case under
chapter 11 of the Bankruptcy Code in the Bankruptcy Court, and filed the Plan
of Reorganization and the Disclosure Statement. None of JPS's subsidiaries,
including JPS Capital which was a co-proponent of the Plan of Reorganization,
commenced a case under the Bankruptcy Code. Pursuant to orders of the
Bankruptcy Court entered on September 9, 1997, the Bankruptcy Court (i)
approved the Disclosure Statement and the solicitation of votes on the Plan of
Reorganization and (ii) confirmed the Plan of Reorganization. The Plan of
Reorganization became effective on October 9, 1997 resulting in, among other
things, the issuance of the Common Stock.
Through the implementation of the Plan of Reorganization as of the Effective
Date, JPS's most significant financial obligations were restructured:
$240,091,318 in face amount of outstanding Old Debt Securities were converted
to, among other things, $14 million in cash, 99.25% of the shares of Common
Stock and $34 million in aggregate principal amount (subject to adjustment on
the maturity date) of Contingent Notes; the Old Senior Preferred Stock, the
Old Junior Preferred Stock and the Old Common Stock were cancelled; warrants
to purchase up to 5% of the common stock of JPS (the "New Warrants") with an
initial purchase price of $98.76 per share were issued in respect of the Old
Senior Preferred Stock; and the obligations of JPS under its former working
capital facility were satisfied and the Revolving Credit Facility was
obtained. JPS's senior management received approximately 0.75% of the Common
Stock in lieu of payment under the contractual retention bonus agreements
described in Note 9 to the Consolidated Financial Statements. As a result of
the restructuring, JPS's only significant debt obligation is its guaranty of
the obligations of its operating subsidiaries under the Revolving Credit
Facility.
12
<PAGE>
USE OF PROCEEDS
JPS will not receive any of the proceeds from the sale of shares of Common
Stock offered hereby, all of which will be received by the Selling
Stockholders.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
MARKET INFORMATION
Pursuant to the Plan of Reorganization, the Old Debt Securities were
converted into, among other things, $14 million in cash, 99.25% of the shares
of Common Stock and $34 million in aggregate principal amount (subject to
adjustment on the maturity date) of Contingent Notes. In addition, New
Warrants to purchase up to 5% of JPS's common stock were issued to holders of
JPS's Old Senior Preferred Stock in place thereof, and JPS's Old Senior
Preferred Stock, Old Junior Preferred Stock and Old Common Stock were
cancelled. On the Effective Date, 10,000,000 shares of Common Stock and New
Warrants to purchase up to 526,316 shares of common stock of JPS were issued
by JPS and distributed pursuant to the Plan of Reorganization.
Prior to the offering made hereby, there has been only sporadic trading of
the Common Stock in the over-the-counter market. Based upon limited
information available, the Company believes that trades of the Common Stock
have been in the range of $10.50 to $14.50 per share. Application has been
made for inclusion of the Common Stock in the Nasdaq National Market System.
HOLDERS
The number of record holders of Common Stock as of the Effective Date was
approximately 18.
DIVIDENDS
Each share of Common Stock is entitled to participate equally in any
dividend declared by the Board of Directors and paid by JPS.
13
<PAGE>
CAPITALIZATION
The following table summarizes the consolidated capitalization of the
Company as of the Effective Date. This table should be read in conjunction
with the Consolidated Financial Statements of the Company and related Notes
thereto included elsewhere in this Prospectus.
PRO FORMA CAPITALIZATION
AUGUST 2, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
AS ADJUSTED FOR
THE REORGANIZATION
AND FRESH
HISTORICAL START REPORTING
---------- ------------------
<S> <C> <C>
Long-term debt:
Borrowings under old credit facility........... $ 84,729
Borrowings under new credit facility........... $ 87,117
10.25% Senior Subordinated Notes............... 81,997
10.85% Senior Subordinated Discount Notes...... 114,665
7% Subordinated Debentures..................... 47,877
Contingent Notes Payable....................... 33,946
Equipment financing............................ 5,026 5,026
--------- --------
Total long-term debt......................... 334,294 126,089
--------- --------
Senior redeemable preferred stock................ 36,504
---------
Shareholders' equity (deficit):
Junior preferred stock......................... 250
Common stock (historical):
Class A, $.01 par value, 490,000 shares
issued and outstanding...................... 5
Class B $.01 par value, 510,000 shares issued
and outstanding............................. 5
Common stock (pro forma):
$.01 par value 22,000,000 shares authorized,
10,000,000 shares issued and outstanding.... 100
Additional paid-in capital..................... 21,280 123,230
Deficit........................................ (162,475)
--------- --------
Total shareholders' equity (deficit)......... (140,935) 123,330
--------- --------
Total capitalization....................... $ 229,863 $249,419
========= ========
</TABLE>
14
<PAGE>
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 periods indicated. The
selected historical financial data for each of the five years ended November
2, 1996 has been derived from the Consolidated Financial Statements of the
Company for such periods, which have been audited. 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 Consolidated Financial Statements of the Company at
Item 15 in this Registration Statement. The selected historical financial data
for the nine months ended August 2, 1997 and July 27, 1996 have been derived
from the unaudited Consolidated Financial Statements of the Company and, in
the opinion of management, include all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of the financial
condition and results of operations of the Company for such periods. The
selected unaudited pro forma financial data for the fiscal year ended November
2, 1996 and the nine months ended August 2, 1997 give effect to the
reorganization and adoption of fresh start reporting as if they had occurred
on October 29, 1995 and November 3, 1996, respectively. Such selected pro
forma financial data has been derived from the "Pro Forma Financial
Statements" for the respective periods included elsewhere herein. The
unaudited pro forma condensed consolidated balance sheet information as of
August 2, 1997 is based upon the historical balance sheet as of August 2,
1997, and includes pro forma adjustments as if the reorganization and adoption
of fresh start reporting had been completed on that date. The following
information should be read in conjunction with the Consolidated Financial
Statements of the Company and Notes thereto, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Pro Forma
Financial Statements" presented elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
---------------------------------------------------------------- -------------------------------
10/31/92 10/30/93 10/29/94 10/28/95 11/2/96 11/2/96 7/27/96 8/2/97 8/2/97
(52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) PRO FORMA (39 WEEKS) (39 WEEKS) PRO FORMA
---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............. $476,326 $457,552 $461,871 $472,565 $448,824 $448,824 $333,444 $301,188 $301,188
Cost of sales......... 404,547 396,160 397,921 406,070 397,804 385,020 294,635 258,654 250,842
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit.......... 71,779 61,392 63,950 66,495 51,020 63,804 38,809 42,534 50,346
Selling, general and
administrative
expenses............. 37,391 39,023 39,805 39,586 40,579 42,089 30,601 29,863 30,995
Other expense, net.... 1,372 1,236 2,914 6,248 2,498 2,498 2,078 485 485
Charges for plant
closing, loss on sale
of certain operations
and writedown of
certain long-lived
assets............... -- -- -- -- 30,028 30,028 30,055 -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Operating profit
(loss)............... 33,016 21,133 21,231 20,661 (22,085) (10,811) (23,925) 12,186 18,866
Valuation allowance on
Gulistan securities.. -- -- -- -- (4,242) -- (5,463) (5,070)
Interest income....... 1 48 749 2,821 2,856 1,974 2,102 2,232 1,570
Interest expense...... (58,513) (60,407) (55,570) (39,946) (40,510) (9,405) (29,647) (30,309) (6,538)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
reorganization items,
income taxes,
discontinued
operations,
extraordinary items
and cumulative
effects of accounting
changes(1)........... (25,496) (39,226) (33,590) (16,464) (63,981) (18,242) (56,933) (20,961) 13,898
Reorganization items--
professional fees and
expenses............. -- -- -- -- (2,255) -- (902) (6,476) --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes,
discontinued
operations,
extraordinary items
and cumulative
effects of accounting
changes.............. (25,496) (39,226) (33,590) (16,464) (66,236) (18,242) (57,835) (27,437) 13,898
Income taxes
(benefit)............ 1,446 1,782 2,800 1,200 (300) (300) (374) 684 5,985
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
discontinued
operations,
extraordinary items
and cumulative
effects of accounting
changes.............. (26,942) (41,008) (36,390) (17,664) (65,936) (17,942) (57,461) (28,121) 7,913
Discontinued
operations, net of
taxes:
Income (loss) from
discontinued
operations.......... 16,089 24,165 23,628 (7,079) -- -- -- -- --
Net gain (loss) on
sale of discontinued
operations.......... -- -- 132,966 (26,241) (1,500) (1,500) (1,500) -- --
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------------------------
10/31/92 10/30/93 10/29/94 10/28/95 11/2/96 11/2/96
(52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) PRO FORMA
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA
(CONTINUED):
Extraordinary
gain (loss), net
of taxes........ $ -- $ -- $ (7,410) $ 20,120 $ -- $ --
Cumulative
effects of
accounting
changes, net of
taxes........... -- (4,988) (708) -- -- --
--------- --------- --------- --------- --------- ----------
Net income
(loss).......... $ (10,853) $ (21,831) $ 112,086 $ (30,864) $ (67,436) $ (19,442)
========= ========= ========= ========= ========= ==========
Income (loss)
applicable to
common stock.... $ (13,312) $ (24,694) $ 108,753 $ (34,695) $ (71,941) $ (19,442)
========= ========= ========= ========= ========= ==========
Weighted average
number of shares
outstanding..... 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 10,000,000
========= ========= ========= ========= ========= ==========
Earnings (loss)
per common
share: Loss
before
discontinued
operations,
extraordinary
items and
effects of
accounting
changes......... $ (29.40) $ (43.87) $ (39.73) $ (21.50) $ (70.44) $ (1.79)
Discontinued
operations, net
of taxes:
Income (loss)
from
discontinued
operations..... 16.09 24.17 23.63 (7.08) -- --
Net gain (loss)
on sale of
discontinued
operations..... -- -- 132.97 (26.24) (1.50) (.15)
Extraordinary
gain (loss), net
of taxes........ -- -- (7.41) 20.12 -- --
Cumulative
effects of
accounting
changes, net of
taxes........... -- (4.99) (0.71) -- -- --
--------- --------- --------- --------- --------- ----------
Net income
(loss).......... $ (13.31) $ (24.69) $ 108.75 $ (34.70) $ (71.94) $ (1.94)
========= ========= ========= ========= ========= ==========
<CAPTION>
10/31/92 10/30/93 10/29/94 10/28/95 11/2/96
(52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficiency),
excluding net
assets held for
sale............ $ 61,431 $ 63,821 $ 65,855 $ 72,670 $(257,866)(2)
Total assets..... 511,535 532,608 452,811 412,822 335,927
Total long-term
debt and notes
payable, less
current
portion......... 488,280 522,947 335,472 327,668 4,226(2)
Senior redeemable
preferred
stock........... 18,144 21,007 24,340 28,171 32,676
Shareholders'
(deficit)
<CAPTION>equity.......... (86,409) (111,103) (2,350) (37,045) (108,986)
NINE MONTHS ENDED
-------------------------------------
7/27/96 8/2/97 8/2/97
(39 WEEKS) (39 WEEKS) PRO FORMA
----------- ----------- -------------
<S> <C> <C> <C>
INCOME STATEMENT
DATA
(CONTINUED):
Extraordinary
gain (loss), net
of taxes........ $ -- $ -- $ --
Cumulative
effects of
accounting
changes, net of
taxes........... -- --
----------- ----------- -------------
Net income
(loss).......... $ (58,961) $ (28,121) $ 7,913
=========== =========== =============
Income (loss)
applicable to
common stock.... $ (62,262) $ (31,948) $ 7,913
=========== =========== =============
Weighted average
number of shares
outstanding..... 1,000,000 1,000,000 10,000,000
=========== =========== =============
Earnings (loss)
per common
share: Loss
before
discontinued
operations,
extraordinary
items and
effects of
accounting
changes......... $ (60.76) $ (31.95) $ 0.79
Discontinued
operations, net
of taxes:
Income (loss)
from
discontinued
operations..... -- -- --
Net gain (loss)
on sale of
discontinued
operations..... (1.50) -- --
Extraordinary
gain (loss), net
of taxes........ -- -- --
Cumulative
effects of
accounting
changes, net of
taxes........... -- -- --
----------- ----------- -------------
Net income
(loss).......... $ (62.26) $ (31.95) $ 0.79
=========== =========== =============
<CAPTION>
7/27/96 8/2/97 8/2/97
(39 WEEKS) (39 WEEKS) PRO FORMA
----------- ----------- -------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficiency),
excluding net
assets held for
sale............ $(250,593) $ (9,588) $ 75,077(3)
Total assets..... 340,793 322,297 310,421
Total long-term
debt and notes
payable, less
current
portion......... 5,087 2,876 123,939(3)
Senior redeemable
preferred
stock........... 31,472 36,504 --
Shareholders'
(deficit)
equity.......... (99,308) (140,935) 123,330
- -------
(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.
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------------------------
10/31/92 10/30/93 10/29/94 10/28/95 11/2/96 11/2/96
(52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) PRO FORMA
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Certain non-cash
charges to
income:
Depreciation.... $ 19,736 $ 19,799 $ 22,242 $ 20,820 $ 21,756 $ 9,235
Amortization of
goodwill and
other.......... 975 969 964 965 983 2,493
Product
liability
charge......... -- -- -- 5,000 -- --
Writedown of
certain long-
lived assets... -- -- -- -- 17,554 17,554
Valuation
allowance on
Gulistan
securities..... 4,242 --
Other non-cash
charges to
income......... 888 1,957 131 371 -- --
Non-cash
interest........ 18,502 11,729 11,161 8,818 10,088 406
--------- --------- --------- --------- --------- ----------
$ 40,101 $ 34,454 $ 34,498 $ 35,974 $ 54,623 $ 29,688
========= ========= ========= ========= ========= ==========
<CAPTION>
NINE MONTHS ENDED
-------------------------------------
7/27/96 8/2/97 8/2/97
(39 WEEKS) (39 WEEKS) PRO FORMA
----------- ----------- -------------
<S> <C> <C> <C>
INCOME STATEMENT
DATA:
Certain non-cash
charges to
income:
Depreciation.... $ 16,720 $ 13,746 $ 6,131
Amortization of
goodwill and
other.......... 724 724 1,834
Product
liability
charge......... -- -- --
Writedown of
certain long-
lived assets... 18,554 -- --
Valuation
allowance on
Gulistan
securities..... 5,463 5,070
Other non-cash
charges to
income......... 318 606 606
Non-cash
interest........ 7,219 7,181 301
----------- ----------- -------------
$ 48,998 $ 27,327 $ 8,872
=========== =========== =============
</TABLE>
- -------
(2) As discussed in Note 6 of the Notes to Consolidated Financial Statements
included in Item 15 herein, all of the Company's senior credit facility
revolving line of credit ($85,639) and all of JPS's Old Debt Securities
($237,661) are classified as current liabilities as of November 2, 1996.
(3) The amounts to be outstanding under the Revolving Credit Facility are
classified as long-term liabilities in the pro forma presentation.
16
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
The unaudited pro forma condensed consolidated balance sheet and unaudited
pro forma condensed consolidated statements of operations presented on the
following pages are based upon the historical results of operations of the
Company for the year ended November 2, 1996 and the historical financial
position and results of operations of the Company as of and for the nine
months ended August 2, 1997. The pro forma adjustments made to the historical
results of operations for the year ended November 2, 1996 and the nine months
ended August 2, 1997 give effect to the Plan of Reorganization as if the
transactions had occurred on October 29, 1995 and November 3, 1996,
respectively. In addition, since the reorganization has been effectuated
pursuant to chapter 11 of the Bankruptcy Code, the provisions of Statement of
Position (SOP) 90-7, "Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code," which require the application of fresh start reporting,
have been reflected in the statements of operations for the year ended
November 2, 1996 and as of and for the nine months ended August 2, 1997. The
unaudited pro forma condensed consolidated balance sheet as of August 2, 1997
presented below is based upon the historical balance sheet as of August 2,
1997, and includes pro forma adjustments as if the reorganization and adoption
of fresh start reporting had been completed on that date. The pro forma
condensed consolidated statements of operations and condensed consolidated
balance sheet are unaudited and were derived by adjusting the historical
Consolidated Financial Statements of the Company for certain transactions as
described in the respective notes thereto. These pro forma financial
statements are provided for informational purposes only and should not be
construed to be indicative of the financial conditions or results of
operations of the Company had the transactions described therein been
consummated on the respective dates indicated and are not intended to be
predictive of the financial condition or results of operations of the Company
at any future date or for any future period.
The pro forma adjustments are based on available information and upon
certain assumptions that the Company believes are reasonable under the
circumstances. The pro forma financial data and accompanying notes should be
read in conjunction with the historical Consolidated Financial Statements of
the Company, including the Notes thereto, and the other information pertaining
to the Company appearing elsewhere in this Prospectus which forms a part of
the Registration Statement.
17
<PAGE>
JPS TEXTILE GROUP, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
AUGUST 2, 1997
---------------------------------------------------------------
REORGANIZATION FRESH START
HISTORICAL ADJUSTMENTS ADJUSTMENTS(E) PRO FORMA
---------- -------------- -------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash.................... $ 1,229 $ 1,229
Receivables............. 61,685 61,685
Inventory............... 54,091 54,091
Sundry current assets... 2,685 2,685
--------- --------
Total current assets.. 119,690 119,690
--------- --------
Property, plant and
equipment, net......... 117,188 $(15,453)(f) 101,735
Deferred financing
costs.................. 149 $ 1,685 (b) 1,834
Prepaid pension cost.... 3,472 (1,611)(g) 1,861
Existing goodwill of net
assets acquired........ 29,782 (29,782)
Other assets............ 52,016 (16,000)(c) (2,027)(i) 33,989
Deferred income tax
asset.................. 6,080 (d) 6,080
Excess reorganization
value.................. 45,232 45,232
--------- --------- -------- --------
Total assets.......... $ 322,297 $ (8,235) $ (3,641) $310,421
========= ========= ======== ========
LIABILITIES AND SHARE-
HOLDERS' EQUITY
Accounts payable........ $ 20,621 $ 20,621
Accrued interest........ 234 $ (18)(a) 216
Accrued salaries,
benefits and
withholdings........... 9,628 (1,518)(a) 8,110
Other accrued expenses.. 11,916 1,600 (b) 13,516
Senior credit facility,
revolving line of
credit................. 84,729 (84,729)(a)(b)
Current portion of long-
term debt.............. 2,150 2,150
--------- --------- --------
Total current
liabilities.......... 129,278 (84,665) 44,613
--------- --------- --------
Long-term debt.......... 2,876 87,117 (a)(b) 89,993
Contingent notes
payable................ 33,946 (a) 33,946
Deferred income tax
liability.............. 3,665 (3,665)(d)
Pension liability.......
Other long-term
liabilities............ 19,827 (1,288)(h) 18,539
--------- --------- -------- --------
Total liabilities not
subject to
compromise........... 155,646 32,733 (1,288) 187,091
--------- --------- -------- --------
Liabilities subject to
compromise............. 271,082 (271,082)(a)
--------- ---------
Total Liabilities..... 426,728 (238,349) (1,288) 187,091
Senior redeemable
preferred stock subject
to compromise.......... 36,504 (36,504)(a)
--------- --------- --------
Capital Stock........... 21,540 101,790 (a) 123,330
Retained earnings
(deficit).............. (162,475) 164,828 (a)(b)(c)(d) (2,353)
--------- --------- -------- --------
Total................. (140,935) 266,618 (2,353) 123,330
--------- --------- -------- --------
Total liabilities &
equity............... $ 322,297 $ (8,235) $ (3,641) $310,421
========= ========= ======== ========
</TABLE>
18
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS UNLESS OTHERWISE NOTED)
(a) The Plan of Reorganization provides for a deleveraging of JPS through an
exchange of the 10.25% Notes, the 10.85% Notes, and the 7% Subordinated
Debentures for $14 million in cash, 9,924,623 shares of Common Stock, and
approximately $34 million in aggregate principal amount (subject to adjustment
on the maturity date therefor) of Contingent Notes. In addition, the Old
Senior Preferred Stock was exchanged for warrants to purchase 526,316 shares
of common stock of JPS, and the Old Senior Preferred Stock, the Old Junior
Preferred Stock and the Old Common Stock were cancelled. The Contingent Notes
are payable out of the assets of JPS Capital. The amount shown on the pro
forma consolidated balance sheet reflects the assets of JPS as they existed on
August 2, 1997. As part of the reorganization, retention bonuses payable to
members of the Management Group pursuant to the amended and restated
agreements set forth in Exhibit H to the Plan of Reorganization, were paid in
a combination of cash and Common Stock. The impact of the foregoing on JPS's
balance sheet as of August 2, 1997 is as follows:
<TABLE>
<CAPTION>
ACCRUED LONG-TERM DEBT
SALARIES, (REVOLVING LIABILITIES CONTINGENT SENIOR
ACCRUED BENEFITS & LINE OF SUBJECT TO NOTES PREFERRED CAPITAL RETAINED
INTEREST WITHHOLDINGS CREDIT) COMPROMISE PAYABLE STOCK STOCK EARNINGS
-------- ------------ -------------- ----------- ---------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(1) $(18) $(271,082) $33,946 $122,400 $114,754
(2) $(36,504) 36,504
(3) (21,540) 21,540
(4) $(1,518) $ 588 930
----- ------- ----- --------- ------- -------- -------- --------
$(18) $(1,518) $ 588 $(271,082) $33,946 $(36,504) $101,790 $172,798
===== ======= ===== ========= ======= ======== ======== ========
</TABLE>
- --------
(1) Reflects the exchange of the 10.25% Notes, the 10.85% Notes, and the 7%
Subordinated Debentures for $14 million in cash, 9,924,623 shares of
Common Stock and Contingent Notes. Such reorganization value is based upon
the following valuation methodologies: (i) a comparison of the Company and
its projected performance to how the market values companies in comparable
lines of business, and (ii) a calculation of the present value of the free
cash flows under the projections, including an assumption for a terminal
value. The market-based approach involves identifying a group of publicly
traded companies whose businesses or product lines are comparable to the
Company as a whole or significant portions of the Company's operations,
and then calculating ratios of various financial results to the public
market values of the companies. The ranges of ratios derived are then
applied to the Company's projected financial results (on a consolidated
basis) to derive a range of implied values. The discounted cash flow
approach involves deriving the unleveraged free cash flows that the
Company (on a consolidated basis) would generate assuming the projections
were realized. These cash flows and an estimated value of the Company (on
a consolidated basis) at the end of the projected period are discounted to
the present at the Company's estimated post-Effective Date weighted
average cost of capital to determine the Company's enterprise value (on a
consolidated basis). In addition, the Company retained certain net
operating loss ("NOL") carryforwards through the restructuring. Subject to
certain limitations, the Company believes that it will be able to offset
taxable income in determining its cash tax liability. The value of these
cash tax savings has been added to the Company's estimated enterprise
value. In addition, prepaid trustee fees were expensed. The accrued
interest and carrying values of the various note issues were as follows
immediately prior to the Effective Date:
<TABLE>
<CAPTION>
INTEREST
FACE DUE AT REORGANIZATION CARRYING ACCRUED
VALUE MATURITY DISCOUNT VALUE INTEREST
-------- -------- -------------- -------- --------
<S> <C> <C> <C> <C> <C>
10.25% Notes............ $ 76,773 $ 6,621 $(1,397) $ 81,997 $ 8,670
10.85% Notes............ 109,247 7,317 (1,899) 114,665 13,148
7% Subordinated
Debentures............. 54,071 (6,194) 47,877 4,724
Prepaid agency fee...... (18)
-------- ------- ------- -------- --------
Total................. $240,091 $13,938 $(9,490) $244,539 $ 26,524
======== ======= ======= ======== ========
</TABLE>
19
<PAGE>
(2) Reflects the cancellation of Old Senior Preferred Stock. For purposes of
this Prospectus, the New Warrants have not been assigned a value.
(3) Reflects the cancellation of the Old Junior Preferred Stock and the Old
Common Stock.
(4) Reflects payment of management retention bonuses pursuant to new
employment agreements between JPS and certain members of senior management
in a combination of cash and 75,377 shares of Common Stock.
(b) On the Effective Date, reorganized JPS obtained the Revolving Credit
Facility and paid fees and expenses related thereto. The impact of such costs
on JPS's balance sheet is as follows:
<TABLE>
<CAPTION>
LONG-TERM DEBT
DEFERRED ACCRUED (REVOLVING RETAINED
FINANCING COSTS EXPENSES LINE OF CREDIT) EARNINGS
--------------- -------- --------------- --------
<S> <C> <C> <C> <C>
(1) $ (115) $ (115)
(2) 1,800 $1,800
(3) $1,600 (1,600)
------ ------ ------ -------
$1,685 $1,600 $1,800 $(1,715)
====== ====== ====== =======
</TABLE>
- --------
(1) Reflects the write-off of deferred financing fees related to the existing
credit agreement (the "Credit Agreement").
(2) Reflects the payment of new financing fees in connection with JPS
obtaining a post-reorganization working capital facility. JPS will
amortize such fees over the five-year term of the facility. The revolving
line of credit was reclassified from current to long-term to reflect the
five-year term.
(3) Reflects the Effective Date accrual of fees and expenses payable to
professionals retained in the chapter 11 case with borrowings under the
Revolving Credit Facility.
(c) On August 28, 1997, the Company sold the Gulistan Securities to Gulistan
for $2 million in cash. As of August 2, 1997, these securities were written
down to their net realizable value of $2 million. This adjustment reflects the
elimination of these assets from the Company's balance sheet and the $14
million cash distribution in respect of 10.25% Notes and 10.85% Notes.
(d) Implementation of the Plan of Reorganization substantially deleveraged
reorganized JPS. Accordingly, the reserve established against the Company's
deferred tax assets that was required due to the Company's operating history
was significantly reduced. However, the deferred tax asset attributable to the
Company's NOL carryforwards was also reduced as a result of the reduction in
NOL carryforwards that is required for reorganizations such as that provided
in the Plan of Reorganization. The reduction in reserves exceeded the
reduction in the gross deferred tax asset by a net amount of $9,745.
(e) The Company has accounted for the reorganization and the related
transactions using the principles of fresh start accounting as required by
Statement of Position 90-7 ("SOP 90-7") issued by the American Institute of
Certified Public Accountants (the "AICPA"). The Company estimated a range of
reorganization value, excluding any amounts related to the assets or
liabilities of JPS Capital, between $194 million and $238 million. For
purposes of determining reorganization value, the Company used the midpoint of
that range ($216 million), $123.3 million of which value is attributable to
shareholders' equity.
In accordance with SOP 90-7, the reorganization value has been allocated to
specific tangible and identifiable intangible assets and liabilities. The
unallocated portion of the reorganization value is classified as Excess
Reorganization Value and is amortized over a specified period. The Company
will amortize the Excess Reorganization Value over 20 years. For the purposes
of this presentation, book values have been assumed to equal fair values
except for specific items in which quantifiable data is currently available.
Such differences are detailed in footnotes (f), (g) and (h) below. The Company
is currently performing independent appraisals of various assets, which could
lead to additional pro forma adjustments to book values and result in a
different Excess Reorganization Value. The amount of shareholders' equity in
the fresh start balance sheet is not an estimate of the trading value of the
Common Stock or the New Warrants after the Effective Date. Such trading
20
<PAGE>
value is subject to many uncertainties and cannot be reasonably estimated at
this time. The Company does not make any representation as to the trading
value of shares or warrants issued pursuant to the Plan of Reorganization.
The timing and amount of payments due pursuant to the Contingent Notes will
depend upon the amount of cash on hand at JPS Capital plus the market value of
certain permitted investments at maturity, which in turn will depend on the
ultimate resolution of certain possible contingent tax liabilities of JPS. The
Contingent Notes were issued in an aggregate initial principal amount of $34
million subject to adjustment in the following circumstances: In the event the
aggregate funds held by JPS Capital are less than $34 million following the
date on which the possible contingent tax liability in respect of the
Company's 1994 fiscal year is finally resolved, and to the extent of any such
liability, satisfied, the aggregate remaining principal amount of the
Contingent Notes will be reduced to equal the aggregate funds held by JPS
Capital. Interest will be payable under the Contingent Notes to the extent the
aggregate funds held by JPS Capital on the date of the principal payment (if
any) as provided above exceeds $34 million. If, on such date, the aggregate
principal amount is $0, the Contingent Notes will be deemed automatically
cancelled and no longer an obligation of JPS Capital.
(f) The value shown here as a pro forma adjustment could change once
appraisals are finalized resulting in additional pro forma adjustments to book
values and a different Excess Reorganization Value.
(g) As of the Effective Date, unamortized gains and losses related to the
Company's pension plan were fully recognized.
(h) As of the Effective Date, unamortized gains and losses related to the
Company's non-pension post-retirement employee benefit plans were fully
recognized.
(i) As of the Effective Date, the Company's investment in a Mexican joint
venture was reduced to zero based on an evaluation of the future cash flows of
the joint venture.
21
<PAGE>
JPS TEXTILE GROUP, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 2, 1996 NINE MONTHS ENDED AUGUST 2, 1997
--------------------------------------------------- --------------------------------------------------
REORGANIZATION FRESH START REORGANIZATION FRESH START
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------- -------------- ----------- --------- ---------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............. $448,824 $448,824 $301,188 $301,188
Cost of sales.......... 397,804 $(12,784)(g) 385,020 258,654 $(7,812)(g) 250,842
-------- ------- -------- -------- -------- ------- ------- --------
Gross profit........... 51,020 12,784 63,804 42,534 7,812 50,346
Selling, general &
administrative........ 40,579 1,510 (h) 42,089 29,863 1,132 (h) 30,995
Other expenses, net.... 2,498 2,498 485 485
Charges for plant
closing, loss on sale
of certain operations
and writedown of
certain long-lived
assets................ 30,028 30,028
-------- ------- -------- -------- -------- ------- ------- --------
Operating profit
(loss)................ (22,085) 11,274 (10,811) 12,186 6,680 18,866
Valuation allowance on
Gulistan securities... (4,242) $ 4,242 (a) (5,070) $ 5,070 (a)
Interest income........ 2,856 (882)(b) 1,974 2,232 (662)(b) 1,570
Interest expense....... (40,510) 31,105 (c) (9,405) (30,309) 23,771 (c) (6,538)
-------- ------- -------- -------- -------- ------- ------- --------
Income (loss) before
reorganization items,
income taxes and
discontinued
operations............ (63,981) 34,465 11,274 (18,242) (20,961) 28,179 6,680 13,898
Reorganization items--
professional fees and
expenses.............. (2,255) 2,255 (d) (6,476) 6,476 (d)
-------- ------- -------- -------- -------- ------- ------- --------
Income (loss) before
income taxes and
discontinued
operations............ (66,236) 36,720 11,274 (18,242) (27,437) 34,655 6,680 13,898
Provision (benefit) for
income taxes.......... (300) (300) 684 5,301(f) 5,985
-------- ------- -------- -------- -------- ------- ------- --------
Income (loss) from
continuing
operations............ (65,936) 36,720 11,274 (17,942) (28,121) 29,354 6,680 7,913
Loss on sale of
discontinued
operations, net of
taxes................. (1,500) (1,500)
-------- ------- -------- -------- -------- ------- ------- --------
Net income (loss)...... (67,436) 36,720 11,274 (19,442) (28,121) 29,354 6,680 7,913
Senior redeemable
preferred stock
dividends............. (4,505) 4,505 (e) (3,827) 3,827 (e)
-------- ------- -------- -------- -------- ------- ------- --------
Income (loss)
applicable to common
stock................. $(71,941) $41,225 $ 11,274 $(19,442) $(31,948) $33,181 $ 6,680 $ 7,913
======== ======= ======== ======== ======== ======= ======= ========
OTHER DATA:
Income (loss) per
share applicable to
common shareholders.. $ (71.94) $ (1.94) $ (31.95) $ .79
Average outstanding
and equivalent
shares............... 1,000 10,000 1,000 10,000
EBITDA................ $ 29,552 $ 2,255 $ 263 $ 32,070 $ 20,403 $ 6,476 $ 132 $ 27,011
</TABLE>
22
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS UNLESS OTHERWISE NOTED)
(a) Reflects the elimination of the valuation allowance on Gulistan
Securities since these assets are eliminated from the Company's balance sheet
as a result of their sale in connection with the reorganization.
(b) Reflects the elimination of interest income on the $14 million cash
distribution to the holders of 10.25% Notes and 10.85% Notes
(c) The following table details the net adjustment to interest expense
related to the reorganization.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
NOVEMBER 2, 1996 AUGUST 2, 1997
---------------- --------------
<S> <C> <C>
Decrease in interest expense due to
exchange of the Company's 10.25% Notes,
10.85% Notes and 7% Subordinated
Debentures................................ $32,301 $25,617
Elimination of amortization of deferred
financing costs of the existing Credit
Facility.................................. 1,314 272
Amortization of deferred financing costs of
a new Credit Facility..................... (360) (270)
Increase in interest expense resulting from
additional borrowings under a new Credit
Facility.................................. (203) (277)
Interest expense on the Contingent Notes... (1,947) (1,571)
------- -------
Net decrease in interest expense........... $31,105 $23,771
======= =======
</TABLE>
(d) Reflects the elimination of debt restructuring fees and expenses.
(e) Reflects the elimination of stock dividends on the Old Senior Preferred
Stock which was cancelled pursuant to the Plan of Reorganization.
(f) Records the estimated income tax effects reflecting the reorganization
and the application of fresh start accounting. Pro forma income tax expense is
calculated using a 38% effective tax rate times taxable income before
amortization of excess reorganization value. Cash tax expense is calculated
after giving effect to certain differences in taxable income for tax purposes
including the amortization of excess reorganization value and differences in
depreciation expense and pension expense. In addition, the Company anticipates
utilizing its NOL carryforward, subject to limitation under Section 382 of the
Internal Revenue Code of 1986, as amended (the "Code") of the Company and any
adjustments required by reason of examination by any taxing authority, to
partially offset its tax liability. It should be noted that the historical
deferred tax asset was significantly reduced as a result of the reorganization
due to the required reduction in net operating loss carryforwards.
(g) The following table details the net adjustment to cost of goods sold
related to fresh start reporting:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
NOVEMBER 2, 1996 AUGUST 2, 1997
---------------- --------------
<S> <C> <C>
Decrease in depreciation expense reflecting
revaluation of the Company's property,
plant and equipment....................... $(12,521) $(7,615)
Decrease in pension costs reflecting the
full recognition of unamortized gains and
losses on the Effective Date.............. (352) (264)
Increase in post-retirement costs
reflecting the full recognition of
amortized gains and losses on the
Effective Date............................ 89 67
-------- -------
Net decrease in cost of goods sold......... $(12,784) $(7,812)
======== =======
</TABLE>
(h) Reflects the elimination of the amortization of goodwill ($1.0 million
in the year ended November 2, 1996 and $0.7 million in the nine months ended
August 2, 1997) and the addition of the amortization of reorganization value
in excess of amounts allocable to identifiable assets assuming a 20-year life
($2.5 million in the year ended November 2, 1996 and $1.8 million in the nine
months ended August 2, 1997).
23
<PAGE>
CERTAIN NON-RECURRING CHARGES (GAINS) NOT REFLECTED IN THE PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
Certain material non-recurring charges (gains) related to the reorganization
are not reflected in the Pro Forma Condensed Consolidated Statements of
Operations as they are not expected to have a continuing impact on the
Company's operations. These charges (gains) will be included in the Company's
operating results prior to the Company's emergence from chapter 11 on the
Effective Date and are summarized below (in millions).
<TABLE>
<S> <C>
Extraordinary gains on exchange of debt for equity (including the
elimination of accrued interest as of the petition date)......... $100.7
Reorganization costs.............................................. 1.6
Write-off of deferred financing costs related to the terminated
credit facility.................................................. 0.1
Tax benefit resulting from reduction of valuation allowance
against Federal deferred tax assets.............................. 9.7
Loss on disposition of securities of Gulistan Holdings Inc ....... 2.0
Fresh Start Accounting Adjustments................................ (2.4)
</TABLE>
24
<PAGE>
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 JPS and the Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
---------------------------- ---------------------
10/29/94 10/28/95 11/2/96 7/27/96 8/2/97
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET SALES
Apparel fabrics and
products............... $254,810 $247,846 $221,799 $167,213 $131,693
Industrial fabrics and
products............... 169,736 191,985 193,001 141,074 141,584
Home fashion textiles... 37,325 32,734 34,024 25,157 27,911
-------- -------- -------- -------- --------
$461,871 $472,565 $448,824 $333,444 $301,188
======== ======== ======== ======== ========
OPERATING PROFIT (LOSS)
Apparel fabrics and
products............... $ 18,487 $ 16,667 $(22,422)(1) $(21,128)(1) $ 1,376
Industrial fabrics and
products............... 7,618 7,590 5,947 (2) 1,489 (2) 12,393
Home fashion textiles... 2,564 1,749 647 603 1,649
Indirect corporate
expenses, net.......... (7,438) (5,345) (6,257) (4,889) (3,232)
-------- -------- -------- -------- --------
Operating Profit
(Loss)............... 21,231 20,661 (22,085) (23,925) 12,186
Valuation allowance on
Gulistan Securities.... -- -- (4,242) (5,463) (5,070)
Interest income......... 749 2,821 2,856 2,102 2,232
Interest expense........ (55,570) (39,946) (40,510) (29,647) (30,309)
Restructuring fees and
expenses............... -- -- (2,255) (902) (6,476)
-------- -------- -------- -------- --------
Loss before income
taxes, discontinued
operations,
extraordinary items and
cumulative effects of
accounting changes..... $(33,590) $(16,464) $(66,236) $(57,835) $(27,437)
======== ======== ======== ======== ========
</TABLE>
- --------
(1) The Fiscal 1996 operating loss for apparel fabrics and products includes
charges of approximately $14.2 million for plant closing and $6.2 million
for loss on sale of certain operations.
(2) The Fiscal 1996 operating profit for industrial fabrics and products
includes charges of approximately $8.1 million for writedown of certain
long-lived assets and $1.5 million for loss on sale of certain operations.
RESULTS OF OPERATIONS
Nine Months Ended August 2, 1997 (the "1997 Nine-Month Period") Compared To
The Nine Months Ended July 27, 1996 (the "1996 Nine-Month Period")
Consolidated net sales for the 1997 nine-month period decreased 9.7% to
$301.2 million from $333.4 million in the 1996 nine-month period with all the
decline occurring in apparel fabrics and products. Net sales in the Apparel
Fabrics and Products segment decreased 21.2% to $131.7 million in the 1997
nine-month period from $167.2 million in the 1996 nine-month period
principally due to the sale in September 1996 of the Company's rubber products
division and a decline in unit volume especially for certain commodity-type
products. Overall, the apparel industry has declined in the 1997 nine-month
period resulting in lower selling prices and unit volumes for the Company's
products. The rubber products division, which produced and sold elastic
apparel products, generated sales of $10.2 million in the 1996 nine-month
period. Because of a generally weak market environment, increased competition
from abroad (particularly in commodity-type fabrics) and decreasing margins,
the Company closed its Dunean facility in Greenville, South Carolina in
October 1996 and curtailed production at other facilities. These events
accounted for decreased sales of approximately $17.1
25
<PAGE>
million in the 1997 nine-month period. The Company has taken a number of steps
to improve profitability in the apparel fabrics and products segment,
including equipment modernization programs designed to reduce manufacturing
costs and the asset sale and plant shutdown discussed above. In addition, the
Company has seen improvement in its open order position for apparel products
in recent weeks and expects its operating results in this segment to improve
in the future.
Net sales in the Industrial Fabrics and Products segment increased 0.4% to
$141.6 million in the 1997 nine-month period from $141.1 million in the 1996
nine-month period. Sales of fiberglass fabrics increased 4.0% to $57.5 million
in the 1997 nine-month period from $55.3 million in the 1996 nine-month period
principally due to the increase in sales of electrical composite fabrics in
circuit boards. Demand for these products increased steadily as global
requirements for electronic products has grown. Management expects this trend
to continue in the foreseeable future. Sales of roofing membrane increased
3.8% to $41.4 million in the 1997 nine-month period from $39.9 million in the
1996 nine-month period due to the increased demand for the Company's "Hi-
Tuff/EP" roofing products which was introduced in late 1993. The Company
expects roofing sales to continue to grow as the Company capitalizes on market
acceptance of its roofing products. Sales of cotton industrials increased 5.7%
to $24.1 million in the 1997 nine-month period from $22.8 million in the 1996
nine-month period due to an increase in average selling prices and an expanded
customer base. Sales of extruded products increased 21.6% to $19.7 million in
the 1997 nine-month period from $16.2 million in the 1996 nine-month period as
a result of increased demand and new product offerings for certain urethane
products used in athletic footwear and in the food processing industry. Sales
of industrial rubber products decreased $3.4 million in the 1997 nine-month
period due to the sale of the Company's rubber products business in 1996.
Net sales for the Home Fashion Textile segment increased 10.7% to $27.9
million in the 1997 nine-month period from $25.2 million in the 1996 nine-
month period due to the stronger retail market, expanded customer base and
enhanced product offerings.
Consolidated operating results in the 1997 nine-month period improved to a
profit of $12.2 million from a loss of $23.9 million in the 1996 nine-month
period. The Apparel Fabrics and Products segment operated at a profit of $1.4
million in the 1997 nine-month period compared to a loss of $21.1 million in
the 1996 nine-month period. Included in the 1996 nine-month period are charges
of approximately $14.2 million for plant closing and $6.2 million for loss on
sale of certain operations. Excluding the effects of these charges, the
Apparel Fabrics and Products segment operated at a profit of $1.4 million in
the 1997 nine-month period compared to a loss of $0.7 million in the 1996
nine-month period. This improvement is attributable to the sale of the rubber
products business which generated a $1.7 million operating loss in the 1996
nine-month period and the closing of the Dunean facility which improved the
cost effectiveness of the Company's operations.
Operating profit for the Industrial Fabrics and Products segment improved to
$12.4 million in the 1997 nine-month period from $1.5 million in the 1996
nine-month period. Included in the 1996 nine-month period are charges of
approximately $8.1 million for writedown of certain long-lived assets and $1.5
million for loss on sale of certain operations. Excluding the effects of these
charges, the Industrial Fabrics and Products segment operated at a profit of
$12.4 million in the 1997 nine-month period compared to $11.1 million in the
1996 nine-month period principally due to improved manufacturing and operating
efficiencies and a more favorable mix of products sold.
Operating profit for the Home Fashion Textile segment improved to $1.6
million in the 1997 nine-month period from $0.6 million in the 1996 nine-month
period due to the increase in sales volume and improving margin from a more
favorable product mix.
Indirect corporate expenses decreased to $3.2 million in the 1997 nine-month
period from $4.9 million in the 1996 nine-month period principally due to the
$1.1 million charge to other expense in the 1996 nine-month period for an
early retirement offer accepted by certain employees and lower professional
and management fees in the 1997 nine-month period.
26
<PAGE>
As of August 2, 1997 the Company held various securities from the sales, in
a prior year, of the assets and business of JPS Carpet Corp., its wholly-owned
subsidiary, to Gulistan Holdings Inc. The Company has not recorded interest
income on any of the Gulistan securities and has recorded a valuation
allowance against its investment in the securities. On August 28, 1997, the
Company sold these securities to Gulistan for $2.0 million in cash.
Accordingly, the valuation allowance was increased by $2.8 million as of
August 2, 1997, to reduce the carrying value of the securities to the net
realizable value of $2.0 million. The total valuation allowance against the
Gulistan Securities in the 1996 nine-month period was $5.1 million compared to
$5.5 million in the 1996 nine-month period.
Interest expense in the 1997 nine-month period was $30.3 million or $0.7
million higher than the 1996 nine-month period due to the compounding effects
of accretion of debt discounts and non-cash interest and the interest on
overdue installments of interest and principal. The Company did not report
interest expense, on its Old Debt Securities subsequent to August 1, 1997,
since such interest was not paid during the chapter 11 case. The difference
between the reported interest and stated contractual interest on the Old Debt
Securities was approximately $178,000 for this two-day period.
Debt restructuring fees and expenses were $6.5 million in the 1997 nine-
month period compared to $0.9 million in the 1996 nine-month period. Such
expenses represent fees and expenses of the Company's financial advisor and
legal counsel, the financial advisor and legal counsel of the Unofficial
Bondholder Committee and other professionals. The increase is due to the
higher level of the activity of professionals associated with JPS's financial
restructuring and chapter 11 case.
Fiscal 1996 Compared To Fiscal 1995
Consolidated net sales from continuing operations declined $23.8 million
(5.0%) from $472.6 million in Fiscal 1995 to $448.8 million in Fiscal 1996.
Operating profit (loss) from continuing operations decreased $42.8 million
from an operating profit of $20.7 million in Fiscal 1995 to an operating loss
of $22.1 million in Fiscal 1996. Excluding charges for plant closings, loss on
sale of certain operations, and charges for writedown of certain long-lived
assets, operating profit would have been $7.9 million, compared to $25.7
million in Fiscal 1995 (excluding the product liability charge). Substantially
all of the declines in sales and operating profits are attributable to the
apparel fabrics segment which has been severely impacted by lower unit volumes
and margins.
Net sales in Fiscal 1996 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 $26.0
million (10.5%) from $247.8 million in Fiscal 1995 to $221.8 million in Fiscal
1996. Fiscal 1996 saw the continuation of the trend of weakened demand for
apparel fabrics which began during the second half of Fiscal 1995.
Apparel fabric sales declined $22.3 million in Fiscal 1996 as a result of
lower unit volume combined with lower average selling prices. Fiscal 1996 has
been marked by generally poor retail women's apparel sales, increased
competitive pressures from abroad (particularly in commodity-type fabrics),
and falling margins. As a result of this weaker demand, the Company curtailed
production for most of its apparel fabrics, and experienced a less favorable
product mix with a higher ratio of commodity-type fabrics than was experienced
in Fiscal 1995. These and other conditions led management to conclude in the
third fiscal quarter of 1996 that one of its facilities in Greenville, South
Carolina should be closed. The plant, which was closed on October 28, 1996,
had been operating on a significantly reduced production schedule and was not
cost-effective. The accompanying consolidated statement of operations for
Fiscal 1996 includes a "charge for plant closing" of approximately $14.2
million related principally to the loss on impairment of the plant in
accordance with SFAS No. 121, employee severance costs and estimated costs of
equipment relocation. The Company expects that the plant closure will result
in improved earnings and cash flow from operations in the future.
Many participants in the domestic women's apparel industry have suffered
from falling margins in recent years as a result of a number of factors,
including increased imports of both fabric and garments, generally
27
<PAGE>
relaxed consumer attitudes regarding fashion, and price pressures from a
troubled retail industry. Many of the Company's customers for apparel fabric
(converters) have seen their importance to the industry diminish and their
volumes decline. The Company has taken steps to broaden its sales distribution
in its apparel fabrics segment to include export sales to Mexico, Europe and
other continents. Exports have not comprised a significant portion of the
Company's sales in the past. In addition, the Company expects to increase its
level of capital investment in this segment, with such investments focused
primarily on cost reduction and productivity improvements.
Sales of elastic apparel products declined $4.6 million to $12.8 million in
Fiscal 1996 from $17.4 million in Fiscal 1995. As discussed below, the Company
sold its rubber products business, which produced these elastic products, in
September 1996. Discontinuation in Fiscal 1996 of certain unprofitable product
lines, changes in customer requirements to non-rubber elastomers, and less
than a full year's sales in Fiscal 1996 caused the decline in elastic sales
from Fiscal 1995.
Operating loss in Fiscal 1996 for the apparel fabrics and products segment
decreased by $39.1 million to a $22.4 million loss from a $16.7 million
profit. Included in the Fiscal 1996 operating loss are charges of
approximately $14.2 million for plant closing and $6.2 million for loss on
sale of certain operations. Operating results in Fiscal 1996 for the apparel
fabrics and products segment before the charges for plant closing and loss on
sale of certain operations declined by $18.7 million to a $2.0 million loss
from a $16.7 million profit in Fiscal 1995. Such decline results from the
significantly lower unit volume and the lower margins associated with the
Fiscal 1996 product mix.
Net sales in Fiscal 1996 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, increased $1.0
million (0.5%) to $193.0 million from $192.0 million in Fiscal 1995. Sales of
fiberglass fabrics increased $7.7 million from Fiscal 1995 as a result of the
continued growth in demand for fabrics used in the manufacture of electrical
circuit boards. The growing global demand for electronic products has fueled
significant increases in sales of fiberglass fabric for the last several
years. The Company expects this demand to continue in the foreseeable future.
The Company has expanded and enhanced its productive capacity in the
fiberglass weaving area in order to satisfy this demand and improve product
quality. Sales of roofing membrane increased $8.8 million from Fiscal 1995, as
a result of the continued success of the Company's "Hi-Tuff/EP" line of
roofing products, which was introduced in late 1993. This product's
competitive price and improved performance characteristics have driven its
sales growth, and the product now accounts for 75% of the Company's roofing
sales. The Company expects roofing sales to continue to grow as the Company
capitalizes on the market acceptance of its roofing products to gain market
share. Sales of extruded urethane products increased $1.9 million from Fiscal
1995 as a result of the Company's expanded productive capacity and success in
developing and satisfying the specification-driven customer requirements for
urethane products. Sales of cotton industrial fabrics declined $12.8 million
as a result of weak markets and intense foreign competition, particularly from
China. Sales of other industrial fabrics and products declined $4.6 million
primarily as a result of exiting certain industrial fabric markets during late
1995.
Operating profit in Fiscal 1996 for the industrial fabrics and products
segment decreased by $1.7 million from $7.6 million in 1995 to $5.9 million in
1996. Included in the Fiscal 1996 operating profit are charges of
approximately $8.1 million for writedown of certain long-lived assets and $1.5
million for loss on sale of certain operations. Operating profit in Fiscal
1996 for the industrial fabrics and products segment before the charge for the
writedown of certain long-lived assets and loss on sale of certain operations
increased $8.0 million (105%) to $15.6 million from $7.6 million in Fiscal
1995. Fiscal 1995 operating profit reflects a charge of $5 million related to
product liability costs. No such charge occurred in Fiscal 1996. The
aforementioned sales volume increases in roofing, fiberglass, and extruded
urethane products, combined with improved manufacturing and operating
efficiencies, increased operating profits. Partially offsetting these
improvements, however, are the effects of lower sales volumes of cotton
industrial fabrics and other synthetic industrial fabrics. Curtailed
production schedules in the Company's cotton manufacturing facility and the
resulting under-absorption of costs were negative influences on operating
profit.
28
<PAGE>
As a result of the Company's assessment of the market conditions for its
cotton industrial fabrics, management concluded that the Company's plant in
Kingsport, Tennessee, which manufactures such fabrics, is impaired under the
criteria of Statement of Financial Accounting Standard ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of". SFAS No. 121 requires a writedown to fair value in
circumstances in which the expected future net cash flows from the operation
of the plant are less than its carrying value. The consolidated statement of
operations for Fiscal 1996 includes a charge, "writedown of certain long-lived
assets", of $8.1 million for the excess of the carrying amount of this plant
over its estimated fair value.
Pursuant to the terms of an Asset Purchase Agreement dated September 30,
1996, between JPS Elastomerics Corp., a wholly owned subsidiary of JPS, and
Elastomer Technologies Group, Inc. and a Receivables Purchase Agreement dated
September 30, 1996 between JPS Elastomerics Corp. and the Bank of New York
Commercial Corporation, JPS Elastomerics Corp. consummated the sale of
substantially all of the assets of its rubber products division, a business
engaged in the manufacture and sale of natural and synthetic elastics for use
in apparel products, diaper products, and specialty industrial applications
(the "Rubber Products Business"). Pursuant to the Asset Purchase Agreement,
Elastomer Technologies Group, Inc. agreed to assume substantially all of the
liabilities and obligations associated with the Rubber Products Business.
The consideration for the sale of the Rubber Products Business consisted of
approximately $5.1 million in cash, subject to certain post-closing
adjustments based on the amount of working capital transferred. The net cash
proceeds of approximately $4.8 million were used by the Company to reduce
outstanding borrowings under its credit facility. Revenues of the Rubber
Products Business for Fiscal 1994, Fiscal 1995 and Fiscal 1996 were $22.6
million, $20.7 million and $16.8 million, respectively.
Net sales in Fiscal 1996 in the home fashion textiles segment, which
includes woven drapery fabrics and yarns for the home furnishings industry
increased $1.3 million (3.9%) to $34.0 million from $32.7 million in Fiscal
1995 due primarily to an increase in yarn sales. Sales of home furnishings
fabrics in Fiscal 1996 were approximately flat with Fiscal 1995. Demand for
the Company's woven fabrics used in home decoration has been in decline for
several years.
Operating profit in Fiscal 1996 in the home fashion textile segment declined
by $1.1 million (64%) to $0.6 million from $1.7 million in Fiscal 1995
primarily as a result of lower margins on fabric sales.
Indirect corporate expenses in Fiscal 1996 increased $1.0 million from $5.3
million in Fiscal 1995 to $6.3 million in Fiscal 1996 primarily as a result of
the $1.1 million cost of an early retirement offer extended to certain
salaried employees. Lower corporate employee compensation costs in Fiscal 1996
partially offset this increase.
Debt restructuring fees and expenses totaled $2.3 million in Fiscal 1996.
There were no comparable charges in Fiscal 1995. Such expenses represent fees
and expenses of the Company's financial advisor, the financial advisor for the
holders of a substantial majority of its outstanding bonds, the Company's
legal counsel and other professionals associated with the Company's financial
restructuring.
During Fiscal 1996, Gulistan reported net losses of approximately $4.5
million before interest expense on the promissory note held by the Company.
Accordingly, no interest income on any of the Gulistan Securities was recorded
by the Company. Also, in accordance with relevant accounting literature, the
Company has recorded a valuation allowance against its investment in the
Gulistan Securities and a corresponding charge to income of $4.2 million as a
result of the net loss ($4.5 million reduced by the $0.3 million of common
equity held by Gulistan management) incurred by Gulistan during Fiscal 1996.
Interest expense in Fiscal 1996 was $40.5 million, or $0.6 million more than
Fiscal 1995 due primarily to the compounding effect of accretion of debt
discounts and non-cash interest.
29
<PAGE>
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 $0.5 million (2.4%) 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.
Net sales in Fiscal 1995 in the apparel fabrics and products segment
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 passage of the General
Agreement on Tariffs and Trade (GATT) is expected to 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.
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
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. 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.
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 was 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
30
<PAGE>
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.
Net sales in Fiscal 1995 in the home fashion textiles segment 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.
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 in Fiscal 1995 was $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 would
reduce interest expense by $14.1 million in Fiscal 1994. Such 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. As of the Effective Date, all of JPS's Old Debt
Securities were cancelled.
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
31
<PAGE>
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 sale of the Carpet Business consisted of
approximately $19.0 million in cash, as adjusted, 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. (These securities
were subsequently sold on August 28, 1997 to Gulistan for $2 million in cash).
Based on an independent valuation, the Company determined the fair value of
these debt and equity securities to be approximately $11.3 million. The net
assets of the Carpet Business (adjusted to net realizable value) were
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 cash consideration was
adjusted in Fiscal 1996 pursuant to the terms of the Asset Transfer Agreement
based on the audited amount of working capital transferred, which adjustment
resulted in a reduction of $3.5 million in the cash consideration and an
additional charge to income in Fiscal 1996 of $1.5 million. The final amount
of net cash proceeds (net of fees, expenses and the post-closing adjustment)
of $16.7 million was applied by the Company to reduce outstanding borrowings
under its credit facility.
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. At August 2, 1997, the Company had $9.7 million available for
borrowing under the Old Revolving Credit Facility. Borrowings under the Old
Revolving Credit Facility were made or repaid on a daily basis in amounts
equal to the net cash requirements or proceeds for that business day. The
working capital deficit at November 2, 1996 of $257.9 million reflects the
classification of the amount outstanding under the Old Revolving Credit
Facility ($85.6 million) and the carrying value of notes and debentures
($237.7 million) as current liabilities. The working capital deficit at August
2, 1997 of $9.6 million reflects the classification of the amount outstanding
under the Old Revolving Credit Facility as a current liability. The carrying
value of the Old Debt Securities and debentures and related accrued interest
as of August 2, 1997 is classified as liabilities subject to compromise.
Until the Effective Date, JPS and its operating subsidiaries (being
hereinafter collectively referred to as the "Borrowing Subsidiaries") were
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, provided for a revolving credit loan facility and letters of credit
(the "Old Revolving Credit Facility") in a maximum principal amount equal to
the lesser of (a) $118 million and (b) a specified borrowing base, which was
based upon eligible receivables and inventory of the Borrowing Subsidiaries
(the "Borrowing Base"), except that (i) no Borrowing Subsidiary could borrow
an amount greater than the Borrowing Base attributable to it, (ii) letters of
credit could not exceed $15 million in the aggregate, and (iii) $20 million of
the Old Revolving Credit Facility was 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 did not exceed the
lesser of (A) $118 million and (B) the sum of the Borrowing Base plus $25
million (subject to certain reductions).
On May 15, 1997, JPS, JPS Capital, and the Unofficial Bondholder Committee
reached an agreement in principle on the terms of a restructuring to be
accomplished under chapter 11 of the Bankruptcy Code which culminated in the
Plan of Reorganization. Pursuant to the Disclosure Statement, on June 26,
1997, JPS and JPS Capital commenced a prepetition solicitation of votes by the
holders of Old Debt Securities and Old Senior Preferred Stock to accept or
reject the Plan of Reorganization. Under the Plan of Reorganization, the
holders of Old Debt Securities and Old Senior Preferred Stock were the only
holders of impaired claims and impaired equity
32
<PAGE>
interests entitled to receive a distribution, and therefore, pursuant to
section 1126 of the Bankruptcy Code, were the only holders entitled to vote on
the Plan of Reorganization. At the conclusion of the 32-day solicitation
period, the Plan of Reorganization had been accepted by holders of more than
99% of the Old Debt Securities that voted on the Plan of Reorganization and by
holders of 100% of the Old Senior Preferred Stock that voted on the Plan of
Reorganization.
On August 1, 1997, JPS commenced its voluntary reorganization case under
chapter 11 of the Bankruptcy Code in the Bankruptcy Court, and filed the Plan
of Reorganization and the Disclosure Statement. None of JPS's subsidiaries,
including JPS Capital which was a co-proponent of the Plan of Reorganization,
commenced a case under the Bankruptcy Code. Pursuant to orders of the
Bankruptcy Court entered on September 9, 1997, the Bankruptcy Court (i)
approved the Disclosure Statement and the solicitation of votes on the Plan of
Reorganization and (ii) confirmed the Plan of Reorganization. The Plan of
Reorganization became effective on the Effective Date resulting in, among
other things, the issuance of the Common Stock.
Through the implementation of the Plan of Reorganization as of the Effective
Date, JPS's most significant financial obligations were restructured:
$240,091,318 in face amount of outstanding Old Debt Securities were converted
to, among other things, $14 million in cash, 99.25% of the shares of Common
Stock and $34 million in aggregate principal amount (subject to adjustment on
the maturity date) of Contingent Notes; the Old Senior Preferred Stock, the
Old Junior Preferred Stock and the Old Common Stock were cancelled; the New
Warrants were issued in respect of the Old Senior Preferred Stock; and the
obligations of the Company under its former credit facility were satisfied and
the Revolving Credit Facility was obtained. JPS's senior management received
approximately 0.75% of the Common Stock in lieu of payment under the
contractual retention bonus agreements described in Note 9 to the Consolidated
Financial Statements. As a result of the restructuring, JPS's only significant
debt obligation is its guaranty of the obligations of its operating
subsidiaries under the Revolving Credit Facility as discussed below.
JPS and the Borrowing Subsidiaries are parties to the Credit Facility
Agreement, dated as of the Effective Date (the "Credit Agreement"), by and
among the financial institutions party thereto, Citibank, as agent and
collateral agent, and NationsBank, N.A., as co-agent. The Credit Agreement
provides for a revolving credit loan facility and letters of credit (the
"Revolving Credit Facility") in a maximum principal amount equal to the lesser
of (a) $135 million and (b) a specified borrowing base (the "Borrowing Base"),
which is based upon eligible receivables, eligible inventory and a specified
dollar amount ($55,000,000 (subject to reduction) based on fixed assets of the
Borrowing Subsidiaries), except that (i) no Borrowing Subsidiary may borrow an
amount greater than the Borrowing Base attributable to it (less any reserves
as specified in the Credit Agreement) and (ii) letters of credit may not
exceed $20 million in the aggregate. The maturity date of the Revolving Credit
Facility is October 9, 2002. All borrowings under the Revolving Credit
Facility will initially bear interest at either (i) the Eurodollar Rate (as
defined in the Credit Agreement) plus 1.5% per annum or (ii) the Base Rate (as
defined in the Credit Agreement) and, thereafter, will bear interest at the
Base Rate or the Eurodollar Rate plus an applicable margin (the "Applicable
Margin") based upon the Company's consolidated leverage ratio (which margin
will not exceed .25% for Base Rate borrowings and 1.75% for Eurodollar Rate
borrowings). The Company will pay a fee of .375% per annum on the average
unused commitments under the Revolving Credit Facility (reduced to .25% per
annum if a specified leverage ratio is satisfied) and a letter of credit fee
equal to the Applicable Margin for Eurodollar Rate borrowings.
The Credit Agreement contains restrictions on investments, acquisitions and
dividends unless, among other things, the Company and its consolidated
subsidiaries satisfy a specified pro forma fixed charge coverage ratio and
maintain a specified minimum availability under the Revolving Credit Facility
for a stated period of time, and are not in default under the Credit
Agreement. The Credit Agreement also restricts, among other things,
indebtedness, liens, affiliate transactions, operating leases, fundamental
changes and asset sales other than the sale of up to $35 million of fixed
assets, subject to the satisfaction of certain conditions.
The Credit Agreement contains financial covenants relating to minimum levels
of EBITDA, minimum interest coverage ratio, minimum fixed charge coverage
ratio and maximum capital expenditures.
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<PAGE>
The loans and extensions of credit to the Borrowing Subsidiaries under the
Credit Agreement are guaranteed by JPS and its other existing subsidiaries
other than JPS Capital, and are secured by the assets of JPS (excluding the
stock of JPS Capital) and its existing subsidiaries other than JPS Capital.
The occurrence of certain events (including, without limitation, failure to
pay principal or interest, failure to comply with covenants, certain defaults
under or acceleration of (or right to accelerate) other indebtedness, certain
events of bankruptcy or insolvency, and a "change of control" of JPS (as
defined in the Credit Agreement), after any applicable notice or grace period)
would constitute events of default permitting acceleration of the loans under
the Credit Agreement.
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 Company recorded a net $0.3 million income tax benefit on continuing
operations in Fiscal 1996. The Company had a $0.5 million deferred state tax
benefit from the charge for the plant closing and writedown of certain long-
lived assets. While no tax expense resulted from applying the statutory tax
rate to the loss before income taxes, the Company was not able to fully offset
subsidiary income in all tax jurisdictions with NOL of the Company or other
subsidiaries or operating loss carryovers. As a result, a $0.2 million current
year provision for state income taxes was required. During Fiscal 1994, the
Company utilized approximately $141 million of NOL 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. Although the Company believes use of its
NOL 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 the 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
noncurrent assets in the Company's consolidated balance sheets. As of August
2, 1997 and November 2, 1996, the aggregate fair value of the United States
Treasury Securities was approximately $48.0 million and $46.2 million,
respectively. Under the terms of the Plan of Reorganization, the holders of
JPS's 10.25% Notes and 10.85% Notes received $14 million in cash from these
investments and Contingent Notes with an aggregate principal amount of $34
million (subject to adjustment on the maturity date), payable from these
investments upon the occurrence of certain events. The respective amounts of
the cash distribution and the initial principal amount of the Contingent Notes
were determined based on the assumptions used to determine the original amount
set aside for contingent tax liabilities related to the 1994 sale of the
Company's automotive business with adjustments for certain events arising
subsequent to the sale and such original determination.
The Company's existing NOL carryforwards will be substantially reduced and
limited in use as a result of the implementation of JPS's Plan of
Reorganization. In general, the Internal Revenue Code provides that a debtor
in a bankruptcy case, such as the Company's, must reduce its tax attributes--
such as its NOL carryforwards and current year NOLs, tax credits, and tax
basis in certain assets--by any cancellation of indebtedness ("COD"). COD is
the amount of by which the indebtedness discharged exceeds any consideration
given in exchange therefor. Any reduction in tax attributes generally occurs
on a separate company basis. The Company has recognized significant COD, which
resulted in significant attribute reduction as a result of the exchanges which
occurred under the Plan of Reorganization. Such attribute reduction
substantially reduced the NOL carryforwards that might otherwise be available
to offset future income.
In addition, any NOL carryforwards and certain other tax attributes
remaining after the attribute reduction outlined above will be subject to the
limitations imposed by Section 382 of the Internal Revenue Code. Such
34
<PAGE>
limitations apply on certain changes in ownership, including changes such as
those occurring under the Plan of Reorganization. The effect of these
limitations is to limit the utilization of the NOL carryforwards and certain
built-in losses to an amount equal to the value of the Company immediately
after the ownership change resulting from the consummation of the Plan of
Reorganization (subject to certain adjustments) multiplied by the Federal
long-term tax exempt rate. Even before giving effect to the limitations
occurring under the Plan of Reorganization, due to the Company's operating
history, it was uncertain that it would be able to utilize all deferred tax
assets. Therefore, a valuation allowance had 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.
35
<PAGE>
BUSINESS
APPAREL FABRICS AND PRODUCTS
The Company is a leading manufacturer of greige goods (unfinished woven
fabrics) and yarn. The Company's products are used in the manufacture of a
broad range of consumer apparel products including blouses, dresses,
sportswear and undergarments.
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.
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 athletic shoes, "bulletproof" glass,
disposable intravenous bags, seamless welded drive belts and tubing.
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 subsidiary of the Company has individual administrative,
manufacturing and marketing capabilities for all material aspects of
operations, including product design, customer service, purchasing and credit
and collection. Corporate support services include finance, strategic
planning, legal, tax and regulatory affairs.
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 and three distribution
centers are maintained by the Company, principally for its roofing and
building construction products. See "--Property."
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<PAGE>
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.
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.
RAW MATERIALS
The Company maintains good relationships with its suppliers and has, where
possible, diversified its supplier base so as to avoid a disruption of supply.
In most cases, the Company's raw materials are staple goods that are readily
available from 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. In recent years, a large and growing percentage of domestic
consumer apparel demand has been met by foreign competitors whose products,
both fabrics and garments, are imported into the United States. 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
markets.
The Company's marketing efforts include the development of new product
designs and styles which meet customer needs. The Company's operating units
have been established suppliers to each of its markets for many years and are
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"), 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.
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<PAGE>
Apparel Fabrics and Products
Greige Goods. The Company markets its spun and filament fabrics to
converters which 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. The Company has
a 50% ownership interest in a joint venture with a Mexican company involved in
dyeing, printing and finishing fabrics primarily for use in Mexico. The
Company expects its sales of greige goods to Mexico to grow significantly as a
result of this venture.
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.
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 products' 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 textile operations compete with a large number of
manufacturers of similar carpet and woven fabric products. In general, product
markets are differentiated on the basis of price and quality. In addition, the
Company believes that design and style features are important competitive
factors.
CUSTOMERS
No customer accounts for more than 10% of the Company's sales. However, the
loss of certain customers 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 $74.3
million at August 2, 1997 and $52.6 million at November 2, 1996. The Company
generally fills its open orders in the following twelve-month period. The
increase in open orders at August 2, 1997 as compared to November 2, 1996 is
primarily due to an increase in customer demand for certain apparel and cotton
industrial fabrics and products and is representative of a
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<PAGE>
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.
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 tradenames granted
royalty-free to operations that the Company has sold.
EMPLOYEES
The Company currently has approximately 3,700 employees, of which
approximately 3,200 are hourly and approximately 500 are salaried. Of these
employees, eight are employed directly by JPS. The Company's employees are not
represented by unions. The Company believes its relations with its employees
are good and has not had any work stoppages or strikes.
ENVIRONMENTAL AND REGULATORY MATTERS
The Company is subject to various federal, state and local environmental
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.
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<PAGE>
PROPERTY
The following table sets forth certain information relating to the Company's
principal facilities (segment information relates to principal use). 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 under the
Company's Revolving Credit Facility.
<TABLE>
<CAPTION>
APPAREL FABRICS AND PRODUCTS
- --------------------------------
SQUARE
LOCATION FOOTAGE
- -------- -------
<S> <C>
Laurens, SC............. 475,000
Greenville, SC.......... 460,000
Stanley, NC............. 338,000
S. Boston, VA........... 286,000
Rocky Mount, VA......... 81,000
HOME FASHION TEXTILES
- ---------------------
Lincolnton, NC.......... 387,000
</TABLE>
<TABLE>
<CAPTION>
INDUSTRIAL FABRICS AND PRODUCTS
- --------------------------------
SQUARE
LOCATION FOOTAGE
- -------- -------
<S> <C>
Kingsport, TN........... 625,000
Slater, SC.............. 433,000
Westfield, NC........... 237,000
Easthampton, MA......... 50,000
ALL SEGMENTS
- ------------
New York, NY(1)......... 10,000
</TABLE>
- --------
(1) The New York, NY facility is leased by the Company under a lease agreement
which expires on May 30, 1999.
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.
LEGAL PROCEEDINGS
The Company is involved in various legal proceedings which are routine
litigations incidental to the conduct of its business or JPS's chapter 11
case. 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.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
persons who are members of the Board of Directors or executive officers of
JPS. Each director took office as of the Effective Date and will serve until a
successor is elected and qualified or until his earlier resignation or
removal.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
---- --- ----------------
<S> <C> <C>
Robert J. Capozzi................. 33 Director
Jeffrey S. Deutschman............. 40 Director
Nicholas P. DiPaolo............... 56 Director
Michael L. Fulbright.............. 47 Director
Jerry E. Hunter................... 60 Chairman of the Board, Director,
Chief Executive Officer and President
John M. Sullivan, Jr. ............ 51 Director
David H. Taylor................... 42 Director, Executive Vice President--
Finance and Secretary
</TABLE>
The business experience of each of the directors and executive officers
during the past five years is as follows:
Mr. Capozzi became a director of JPS on the Effective Date and is a Managing
Director of Magten Asset Management Corp. ("Magten"), an investment advisory
firm established in 1978. Magten, a registered investment adviser under the
Investment Advisers Act of 1940, as amended, beneficially owns approximately
19.05% of the Common Stock of JPS as of December 3, 1997. See "Security
Ownership of Principal Stockholders and Management." Mr. Capozzi has been with
Magten since 1986. Currently, Mr. Capozzi serves as a member of the Board of
Directors of Magten Offshore Fund Ltd.
Mr. Deutschman became a director of JPS on the Effective Date and is a
private investor and merchant banker. From 1992 to 1995, he was a Managing
Director with Aurora Capital Partners, L.P. Prior to that, he was a Managing
Director and principal of Deutschman Clayton & Company. Mr. Deutschman has
been Co-Chairman of the Board of Directors of The Cherokee Group, a designer,
manufacturer, and marketer of casual apparel, and an officer and director of
Fair Holdings Corporation and Fair Lanes, Inc., a manager and operator of
bowling centers.
Mr. DiPaolo became a director of JPS on the Effective Date and was Chairman
of the Board, President and Chief Executive Officer of Salant Corporation, a
diversified apparel company listed on the New York Stock Exchange from March
1991 until his retirement in May 1997. Prior to that, Mr. DiPaolo served as
President and Chief Operating Officer of Salant Corporation since June 1988.
From 1985 to 1988, Mr. DiPaolo served as President and Chief Operating Officer
of Manhattan Industries, which was merged into Salant Corporation in 1988.
Prior to that he was Chairman and Chief Executive Officer of the Villager, a
women's sportswear company, from 1979 to 1985. Mr. DiPaolo has served on the
Board of Directors of Manhattan Far East, a trading company based in Hong
Kong. He is also a member of the Board of Directors of the American Apparel
Manufacturers Association and other industry associations.
Mr. Fulbright became a director of JPS on the Effective Date and has served
as President and Chief Executive Officer of The Bibb Company, a diversified
textile company, since August 1996. Prior to that, he served as President of
the Denim Division of Cone Mills, Inc. from December 1994 to August 1996.
Prior to that, Mr. Fulbright was employed with Springs Industries, serving as
President of the Greige Manufacturing Division from August 1992 to November
1994, as President of Wamsutta/Pacific Home Products from July 1986 to July
1992, and as Executive Vice President of Wamsutta/Pacific Home Products from
December 1985 to July 1986. Prior to that, Mr. Fulbright was employed by M.
Lowenstein Corporation and WestPoint Pepperell.
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<PAGE>
Mr. Hunter was appointed as a director of JPS on April 6, 1993 and as Chief
Executive Officer of JPS on November 29, 1994. Mr. Hunter has served as
President of JPS since September 1988. Prior to that time, from May 1988 to
September 1988, he was Executive Vice-President--Operations. In addition, on
January 18, 1994, Mr. Hunter was appointed as Chief Operating Officer of JPS
Converter and Industrial Corp., a wholly owned subsidiary of JPS, and he also
serves as a Vice-President of each of JPS'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 21 years.
Mr. Sullivan became a director of JPS on the Effective Date and has served
as President of American Silk Mills Corp. since 1985, as President and Chief
Executive Officer of Gerli & Co., Inc. since 1987, as President of
International Silk Association (USA), N.Y., N.Y. since 1988, and as Co-
Chairman of the Home Furnishings Committee, I.S.A., Lyons France, since 1995.
From 1987 to 1991, Mr. Sullivan served as President of Cheney Brothers Inc.
Prior to that, he served as Executive Vice President (Merchandising, Marketing
& Sales) of Gerli & Co., Inc. from 1984 to 1987. Prior to that, Mr. Sullivan
served as President of A.H. Rice Company Inc., Pittsfield, Massachusetts from
1982 to 1989, as Vice President of Marketing and Sales for Gerli & Co., Inc.
from 1979-1982, and as Sales Manager of American Silk Mills Corp. from 1974 to
1979.
Mr. Taylor was appointed as a director of JPS on April 15, 1993. Mr. Taylor
has served as Executive Vice-President--Finance and Secretary of JPS since
June 1991, and prior thereto he was Controller and Assistant Secretary of JPS
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 JPS's subsidiaries.
None of the directors or executive officers listed herein is related to any
other such director or executive officer.
COMMITTEES OF THE BOARD OF DIRECTORS
Prior to the Effective Date, the Compensation Committee of the Board of
Directors consisted of certain members of the Board of Directors of JPS who,
as of the Effective Date, were replaced by the current Board of Directors of
JPS.
The Board of Directors has established an Audit Committee and a Compensation
Committee.
The Audit Committee, which consists of Messrs. Deutschman and Sullivan,
makes recommendations to the Board of Directors regarding the independent
auditors to be nominated for ratification by the stockholders, reviews the
independence of such auditors, approves the scope of the annual activities of
the independent auditors and reviews audit results.
The Compensation Committee, which consists of Messrs. Capozzi, DiPaolo and
Fulbright, recommends to the Board of Directors compensation plans and
arrangements with respect to the Company's executive officers and key
personnel.
42
<PAGE>
EXECUTIVE COMPENSATION
Summary of 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 JPS's Chief Executive Officer and the five other most
highly compensated executive officers of JPS during Fiscal 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND ------------------- ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2)
------------------ ---- ------------------- ---------------
<S> <C> <C> <C> <C>
Jerry E. Hunter....................... 1996 $ 332,025 $ -- $3,371
Chairman of the Board, President and 1995 306,075 195,902 3,228
Chief Executive Officer 1994 291,500 292,793 5,219
Carl Rosen............................ 1996 251,875 -- 3,131
President, JPS Converter & Industrial
Corp.(1) 1995 243,750 83,000 3,046
1994 217,708 60,000 4,354
David H. Taylor....................... 1996 204,783 -- 2,291
Executive Vice President--Finance and
Secretary 1995 196,350 118,139 2,238
1994 187,000 162,631 3,271
Monnie L. Broome...................... 1996 162,775 -- 2,295
Vice President--Human Resources 1995 155,925 91,822 2,250
1994 148,500 122,590 3,029
Bruce R. Wilby........................ 1996 161,474 57,761 6,040
President, JPS Elastomerics Corp.(1) 1995 140,359 -- 5,591
1994 139,669 75,000 6,173
Heyward D. Maddox..................... 1996 124,813 93,249 2,258
Vice President--Sales and Marketing, 1995 119,242 -- 1,724
JPS Converter & Industrial Corp.(1) 1994 114,321 54,000 1,530
</TABLE>
- --------
(1) Such executive officer of a JPS subsidiary performs certain policy-making
functions for that subsidiary and is therefore included herein pursuant to
Item 402(a)(3) of Regulation S-K and Rule 36-7 under the Exchange Act.
(2) Employer-matching 401(k) plan contribution, employer-provided life
insurance premiums and imputed lease value of company-provided
automobiles.
AGREEMENTS WITH EXECUTIVE OFFICERS
On the Effective Date, JPS entered into an employment agreement with Jerry
E. Hunter. The agreement, which provides that Mr. Hunter will serve as
President and Chief Executive Officer of JPS until the third anniversary of
the Effective Date (the "Termination Date"), shall automatically be extended
on an annual basis following the Termination Date unless either party elects
in advance not to extend the employment period. The initial base salary under
the agreement is $380,000 and may be increased but not reduced over the term
of the agreement. In addition, under the new employment agreement, on the
Effective Date Mr. Hunter received a retention grant cash payment of $256,274
and 32,852 shares of Common Stock. Mr. Hunter is eligible for an annual bonus
up to 50% of base salary based upon the Company's attainment of certain
performance goals specified in the 1997 Management Incentive Bonus Plan. If
JPS terminates Mr. Hunter's employment for reasons other than for cause (as
defined in the agreement), he will be entitled to severance benefits equal to
(i) his annual base salary continued through the Termination Date or for one
year from the date of termination, if later, (ii) his target annual bonus
continued through the Termination Date or for one year, if greater and (iii)
continuation of
43
<PAGE>
all health and life insurance benefits for up to twenty-four months following
the termination of employment. In the event JPS reduces Mr. Hunter's base
salary or bonus, materially changes the requirements of his position or
requires that he relocate his principal residence, or in the event Mr. Hunter
elects to terminate his employment no earlier than six months following a
change in control (as defined in the agreement), Mr. Hunter may voluntarily
terminate his employment with JPS with such termination being treated, for
purposes of severance benefits, as a termination by JPS.
On the Effective Date, JPS entered into substantially similar employment
agreements with David H. Taylor and Monnie L. Broome, with Mr. Taylor serving
as Executive Vice President--Finance and Secretary of JPS and Mr. Broome
serving as Vice President--Human Resources of JPS. Under the agreements, base
salary for Mr. Taylor is $225,000 and for Mr. Broome is $180,000. In addition,
under the new employment agreements, Mr. Taylor received a retention grant
cash payment of $163,694 and 20,984 shares of Common Stock and Mr. Broome
received a retention grant cash payment of $115,531 and 14,810 shares of
Common Stock. Each of Mr. Taylor and Mr. Broome is also eligible for an annual
bonus of up to 50% of his salary based upon the Company's attainment of
certain performance goals specified in the 1997 Management Incentive Bonus
Plan. The new employment agreements of Mr. Taylor and Mr. Broome do not
provide that within six months following a change in control, Mr. Taylor or
Mr. Broome (as the case may be) may voluntarily terminate their employment
with JPS, with such termination being treated, for purposes of severance
benefits, as a termination by JPS.
RETIREMENT PENSION PLAN
The Company maintains a retirement pension plan for substantially 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...................... $20,018 $26,691 $33,364 $40,036 $46,709
$150,000 and above............ 24,518 32,691 40,864 49,036 57,209
</TABLE>
- --------
* Assumes individual retires at age 65 in 1996 with the indicated years of
service and compensation. The social security integration level of such
individuals would be $27,576. The social security integration level is
adjusted annually.
Credited years of service for benefit accrual under the Pension Plan as of
November 2, 1996 for the following executive officers are:
<TABLE>
<S> <C>
Jerry E. Hunter................................................ 10 years
Carl Rosen..................................................... 5 years
David H. Taylor................................................ 8 years
Monnie L. Broome............................................... 8 years
Bruce R. Wilby................................................. 21 years
Heyward D. Maddox.............................................. 28 years
</TABLE>
44
<PAGE>
Annual retirement benefits for salaried employees are generally computed as
the sum of 0.6% of a participants 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 participants compensation which exceeds the Participant's Social Security
Integration Level (equal to $27,576 in 1996) 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 55.
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 Company qualified plans.
1997 MANAGEMENT INCENTIVE BONUS PLAN
The Company's 1997 Management Incentive Bonus Plan provides incentives for
key management employees of the Company and its subsidiaries based upon the
financial performance of the Company. The plan is designed to provide
incentives to maximize operating earnings while minimizing the net assets
required to generate those earnings. Targets are set annually for operating
earnings (defined as EBITDA before bonus expense and restructuring and
reorganization expenses) and net assets employed (defined as average total
assets less average current liabilities other than debt-related liabilities
such as accrued interest) for each fiscal year and for each operating
subsidiary. If actual operating earnings and net assets employed are equal to
the targets, a targeted bonus is paid to each participant. To the extent
actual operating earnings are greater than the target, amounts in excess of
the targeted bonuses are paid to each participant. Likewise, operating
earnings lower than target result in a bonus payment that is less then the
targeted bonus. A participant's bonus is reduced to zero if actual operating
earnings are 80% of target or less. The operating earnings target is adjusted
up or down by 12.5% of the excess or deficiency of actual net assets employed
compared to the target for net assets employed. Targeted bonus amounts
expressed as a percentage of salary for participants in the plan range from
15% to 50%. Individuals listed on the Summary Compensation Table have targeted
bonus amounts equal to 50% of salary.
1997 INCENTIVE AND CAPITAL ACCUMULATION PLAN
The Company's Incentive and Capital Accumulation Plan (the "Incentive Plan")
is intended to provide incentives that will attract, retain, and motivate
highly competent individuals as key employees of the Company and its
subsidiaries, by providing them with opportunities to acquire shares of Common
Stock or monetary payments based on the value of such shares. Pursuant to the
Incentive Plan, approximately 853,485 shares of Common Stock are reserved for
issuance to salaried key employees and non-employee directors of the Company
pursuant to benefits in the form of stock options, stock appreciation rights,
stock awards, performance awards, and stock units that may be granted by the
compensation committee comprised of disinterested members of the Company's
Board of Directors. The Incentive Plan will terminate on the tenth anniversary
of its adoption.
45
<PAGE>
Options to acquire approximately 586,990 of the shares reserved pursuant to
the Incentive Plan will be granted to members of senior management of the
Company as of the last day of the Company's 1997 fiscal year. There may be
different types of stock options, including among other types, performance
options, which vest upon achievement of specified corporate performance goals,
time vesting options, which vest solely on the lapse of time, or a combination
of the two. The options will be exercisable according to the vesting schedule
set forth in the individual grant letters approved by the Compensation
Committee.
In the event the employment of any of Jerry E. Hunter, David H. Taylor or
Monnie L. Broome, is terminated by the Company without "cause" or by such
employee for "good reason" (as such terms are defined in each such employee's
employment agreement), such employee's rights immediately will be fully vested
in 100% of the shares granted to him.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company will be paid $20,000
annually for his services as a director, $1,200 for attendance at each meeting
of the Board of Directors and each committee meeting which does not occur in
conjunction with a directors' meeting, and $1,000 annually for his or her
services as the chairman of any committee. In addition, each non-employee
director received on the Effective Date a grant of options to purchase 25,000
shares of common stock of JPS (other than Robert J. Capozzi who has waived his
right to receive such options) at an exercise price based on the per share
price of the Common Stock as of the Effective Date (which was $12.33 per
share). With respect to the options granted to each non-employee director on
the Effective Date, options to purchase 5,000 shares of common stock of JPS
vested on the Effective Date and with respect to the balance of the options so
granted, options to purchase 5,000 shares of common stock of JPS will vest on
each of the first, second, third and fourth anniversaries of the Effective
Date. Moreover, non-employee directors are eligible to participate in the
Incentive Plan. Under the Incentive Plan each non-employee director appointed
subsequent to the Effective Date will receive on the date such director is
appointed (the "Appointment Date") a grant of options to purchase 25,000
shares of common stock of JPS at an exercise price based on the per share
price of the common stock of JPS as of the Appointment Date. With respect to
the options granted to each non-employee director appointed subsequent to the
Effective Date, options to purchase 5,000 shares of common stock of JPS will
vest on the applicable Appointment Date and with respect to the balance of the
options so granted, options to purchase 5,000 shares of common stock of JPS
will vest on each of the first, second, third and fourth anniversaries of such
Appointment Date.
46
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
Based upon information known to JPS as of December 3, 1997, the following
table sets forth the ownership of the shares of Common Stock issued and
outstanding as of such date by (a) each person or group that is the beneficial
owner of more than 5% of such shares on such date, (b) each director of JPS on
such date and (c) all directors of JPS as a group on such date.
<TABLE>
<CAPTION>
COMMON STOCK(1)
-----------------------
NAME AND ADDRESS OF NUMBER OF PERCENT OF
BENEFICIAL OWNERS SHARES CLASS
------------------- --------- ----------
<S> <C> <C>
Magten Asset Management Corp.(2)................. 1,905,447 18.07%
35 East 21st Street
New York, New York 10010
Northeast Investors Trust........................ 1,038,823 9.85%
50 Congress Street, 10th Floor
Boston, Massachusetts 02109
TCW Shared Opportunity Fund II, L.P.(3).......... 568,376 5.39%
11100 Santa Monica Boulevard
Suite 2000
Los Angeles, California 90025
Swiss Bank Corporation, London Branch............ 1,027,214 9.74%
222 Broadway
New York, New York 10038
Merrill Lynch, Pierce, Fenner & Smith,
Incorporated.................................... 925,685 8.78%
250 Vesey Street
World Financial Center-North Tower
New York, New York 10281
Robert J. Capozzi(5)............................. 1,905,447 18.07%
Magten Asset Management Corp.
35 East 21st Street
New York, New York 10010
Jeffrey S. Deutschman............................ 5,000(4) 0.05%
10519 Ashton Avenue
Los Angeles, California 90024
Nicholas P. DiPaolo.............................. 5,000(4) 0.05%
4 Power Hill
Saddle River, New Jersey 07458
Michael L. Fulbright............................. 5,000(4) 0.05%
1940 Dinsmore Road
Alpharetta, Georgia 30201
Jerry E. Hunter.................................. 32,852 0.31%
JPS Textile Group, Inc.
555 North Pleasantburg Drive
Suite 202
Greensville, South Carolina 29607
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK(1)
-----------------------
NAME AND ADDRESS OF NUMBER OF PERCENT OF
BENEFICIAL OWNERS SHARES CLASS
------------------- --------- ----------
<S> <C> <C>
John M. Sullivan................................... 5,000(4) 0.05%
American Silk Mills Corp.
41 Madison Avenue
41st Floor
New York, New York 10010
David H. Taylor.................................... 20,984 0.20%
JPS Textile Group, Inc.
555 North Pleasantburg Drive
Suite 202
Greenville, South Carolina 29607
Directors and executive officers as a group........ 1,979,283(6) 18.77%
</TABLE>
- --------
(1) After giving effect to (i) the exercise in full of the New Warrants issued
on the Effective Date and (ii) the exercise in full of all options to
purchase shares of common stock of JPS which became vested on the
Effective Date (if any).
(2) Includes shares of the Common Stock held by Magten in accounts managed by
Magten on behalf of various investment advisory clients, including the
City of Los Angeles Fire and Police Pension Systems (719,411 shares, or
6.82%, of the Common Stock) and Hughes Retirement Plans Trust (575,617
shares, or 5.46%, of the Common Stock). Certain such shares are held for
the benefit of family interests of Talton R. Embry, the Chairman, a
director and controlling shareholder of Magten, or in employee plans with
respect to which Mr. Embry serves as a trustee. Magten has shared voting
and investment power over all of such 1,905,447 shares.
(3) The general partner and investment advisor of TCW Shared Opportunity Fund
II, L.P. ("SHOP II") is TCW Investment Management Company ("TIMCO").
Messrs. Mark L. Attanasio, Robert D. Beyer, Jean-Marc Chapus and Mark L.
Gold are portfolio managers of SHOP II and exercise voting and dispositive
power on its behalf. Messrs. Attanasio, Beyer, Chapus and Gold disclaim
any beneficial ownership of the capital stock of JPS.
(4) Represents options granted to non-employee directors of JPS (other than
Robert J. Capozzi) on the Effective Date. See "MANAGEMENT--Compensation of
Directors."
(5) By virtue of 1,905,447 shares of Common Stock of JPS beneficially owned by
Magten, of which Mr. Capozzi is Managing Director. Mr. Capozzi disclaims
beneficial ownership of all of these shares. Mr. Capozzi has informed JPS
that he has waived his entitlement to receive any options to purchase
shares of common stock of JPS to which each non-employee director will be
entitled on the Effective Date. See "MANAGEMENT--Compensation of
Directors."
(6) Includes 1,905,447 shares of Common Stock of JPS beneficially owned by
Magten. See Note 5.
48
<PAGE>
DESCRIPTION OF THE COMMON STOCK
JPS's Restated Certificate of Incorporation authorizes the issuance of
22,000,000 shares of common stock, par value $0.01 per share, of which
10,000,000 shares are issued and outstanding as of the date hereof.
The Amended and Restated By-laws of JPS (the "By-laws") provide that the
holders of shares of common stock of JPS are entitled to one vote, in person
or by proxy, for each share on all matter submitted to a vote of JPS's
stockholders. Except as the General Corporation Law of the State of Delaware
(the "General Corporation Law") or JPS's Restated Certificate of Incorporation
may otherwise provide, the holders of a majority in voting power of the issued
and outstanding shares of capital stock of JPS entitled to vote shall
constitute a quorum at a meeting of stockholders for the transaction of any
business. Under the By-laws, the stockholders present may adjourn the meeting
despite the absence of a quorum. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any stockholder. The
By-laws provide that directors of JPS are elected by a plurality of the votes
of the shares entitled to vote in the election of directors. There is no
provision in the Restated Certificate of Incorporation for cumulative voting
with respect to the election of directors of JPS. Under the By-laws, any
action required or permitted to be taken by the stockholders of JPS may be
effected at a duly called annual or special meeting of such stockholders, or
may be effected, except as otherwise required by the General Corporation Law
or the Restated Certificate of Incorporation, by a consent in writing by such
stockholders, setting forth the action so taken. The By-laws provide that
except as otherwise provided by the General Corporation Law, special meetings
of stockholders of JPS may be called only by the Board of Directors or by
stockholder holding together at least 25% in voting power of all the shares of
JPS entitled to vote at the meeting. Under the By-laws, subject to the
provisions of the General Corporation Law and the Restated Certificate of
Incorporation, dividends on the shares of capital stock of JPS may be declared
by the Board of Directors at any regular or special meeting, and may be paid
in cash, in property or in shares of stock of JPS, unless otherwise provided
by the General Corporation Law or the Restated Certificate of Incorporation.
The shares of Common Stock have no preemptive or conversion rights, redemption
rights or sinking fund provisions and are not subject to calls, assessments or
rights of redemption by JPS.
REGISTRATION RIGHTS
Pursuant to the terms of a registration rights agreement dated the Effective
Date (the "Registration Rights Agreement"), among JPS and the initial holders
of the Common Stock, JPS has agreed to use commercially reasonable efforts to
file this registration statement with the Commission registering the Common
Stock pursuant to a "shelf registration" within five days following the
Effective Date, to cause this registration statement to become effective
within 60 days thereafter, and to keep such shelf registration continuously
effective for three years, subject to the right to suspend the use of the
prospectus constituting part of this registration statement for designated
corporate purposes specified therein. Thereafter, holders who did not resell
Common Stock during the three-year period, but whose resales would have been
covered by this registration statement, will be entitled to exercise, over a
two-year period, up to three demand registrations and will be entitled to
piggyback registration rights as well during such period. In the event that
the shelf registration does not become effective within 60 days after the date
of the initial filing of this registration statement with the Commission,
holders of Registrable Common Stock (as defined in the Registration Rights
Agreement) whose resales would have been covered by this registration
statement will be entitled to exercise, over a two-year period, up to four
demand registrations and will be entitled to piggyback registration rights as
well during such period.
DESCRIPTION OF THE CREDIT FACILITY
JPS and the Borrowing Subsidiaries are parties to the Credit Facility
Agreement, dated as of the Effective Date (the "Credit Agreement"), by and
among the financial institutions party thereto, Citibank, as agent and
collateral agent, and NationsBank, N.A., as co-agent. The Credit Agreement
provides for a revolving credit loan facility and letters of credit (the
"Revolving Credit Facility") in a maximum principal amount equal to the lesser
49
<PAGE>
of (a) $135 million and (b) a specified borrowing base (the "Borrowing Base"),
which is based upon eligible receivables and eligible inventory of the
Borrowing Subsidiaries and a specified dollar amount ($55,000,000 (subject to
reduction) based on fixed assets of the Borrowing Subsidiaries), except that
(i) no Borrowing Subsidiary may borrow an amount greater than the Borrowing
Base attributable to it (less any reserves as specified in the Credit
Agreement) and (ii) letters of credit may not exceed $20 million in the
aggregate. The maturity date of the Revolving Credit Facility is October 9,
2002. All borrowings under the Revolving Credit Facility will initially bear
interest at either (i) the Eurodollar Rate (as defined) plus 1.5% per annum or
(ii) the Base Rate (as defined) and, thereafter, will bear interest at the
Base Rate or the Eurodollar Rate plus an applicable margin (the "Applicable
Margin") based upon the Company's leverage ratio (which margin will not exceed
.25% for Base Rate borrowings and 1.75% for Eurodollar Rate borrowings). The
Company will pay a fee of .375% per annum on the average unused commitments
under the Revolving Credit Facility (reduced to .25% per annum if a specified
leverage ratio is satisfied) and a letter of credit fee equal to the
Applicable Margin for Eurodollar Rate borrowings.
The Credit Agreement contains restrictions on investments, acquisitions and
dividends unless, among other things, the Company and its consolidated
subsidiaries satisfy a specified pro forma fixed charge coverage ratio and
maintain a specified minimum availability under the Revolving Credit Facility
for a stated period of time, and are not in default under the Credit
Agreement. The Credit Agreement also restricts, among other things,
indebtedness, liens, affiliate transactions, operating leases, fundamental
changes and asset sales other than the sale of up to $35 million of fixed
assets, subject to the satisfaction of certain conditions.
The Credit Agreement contains financial covenants relating to minimum levels
of EBITDA, minimum interest coverage ratio, minimum fixed charge coverage
ratio and maximum capital expenditures.
The loans and extensions of credit to the Borrowing Subsidiaries under the
Credit Agreement are guaranteed by JPS and its existing subsidiaries other
than JPS Capital, and are secured by the assets of JPS (excluding the stock of
JPS Capital) and its existing subsidiaries other than JPS Capital.
The occurrence of certain events (including, without limitation, failure to
pay principal or interest, failure to comply with covenants, certain defaults
under or acceleration of (or right to accelerate) other indebtedness, certain
events of bankruptcy or insolvency, and a "change of control" of JPS (as
defined), after any applicable notice or grace period) would constitute events
of default permitting acceleration of the loans under the Credit Agreement.
50
<PAGE>
SELLING STOCKHOLDERS
By amendment to the Registration Statement of which this Prospectus is a
part, JPS will provide certain required information with respect to the Common
Stock held by each Selling Stockholder.
51
<PAGE>
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the Offering. The Common
Stock may be sold from time to time to purchasers directly by any of the
Selling Stockholders. Alternatively, any of the Selling Stockholders may from
time to time offer the Common Stock through underwriters, dealers or agents
who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Stockholders and/or the purchasers
of Common Stock for whom they may act as agent. The Selling Stockholders and
any such underwriters, dealers or agents who participate in the distribution
of the Common Stock may be deemed to be underwriters, and any profits on the
sale of the Common Stock by them and any discounts, commissions or concessions
received by any such underwriters, dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act. To the extent
Selling Stockholders may be deemed to be underwriters, such Selling
Stockholders may be subject to certain statutory liabilities of the Securities
Act, including, but not limited to, Sections 11, 12 and 17 of the Securities
Act and Rule 10b-5 under the Exchange Act. At any time a particular offer of
the Common Stock is made, if required, a Prospectus Supplement will be
distributed that will set forth the aggregate amount of the Common Stock being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, any discounts, commissions and other items
constituting compensation from the Selling Stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers. Under
guidelines adopted by the National Association of Securities Dealers, Inc.
("NASD"), the maximum commission that any NASD member firm can receive in
connection with a distribution of the Common Stock, without further approval
from the NASD, is 8%. Such Prospectus Supplement and, if necessary, a post-
effective amendment to the Registration Statement of which this Prospectus is
a part will be filed with the Commission to reflect the disclosure of
additional information with respect to the distribution of the Common Stock.
The Common Stock may be sold from time to time in one or more transactions
at a fixed offering price, which may be changed, or at varying prices
determined at the time of sale or at negotiated prices. Such prices will be
determined by the Selling Stockholders or by agreement between the Selling
Stockholders and underwriters or dealers.
Prior to this offering, there has been only sporadic trading of the Common
Stock in the over-the-counter market, and there can be no assurance that an
active public or secondary market will develop for any of the Common Stock.
Pursuant to the Registration Rights Agreement, JPS will pay substantially
all of the expenses incident to the registration, offering and sale of the
Common Stock to the public other than commissions, fees and discounts of
underwriters, dealers or agents. Under the Registration Rights Agreement, the
Selling Stockholders and any underwriter they may utilize will be indemnified
by JPS against certain civil liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock offered hereby
will be passed upon for JPS by Weil, Gotshal & Manges LLP, 767 Fifth Avenue,
New York, New York 10153.
EXPERTS
The Consolidated Financial Statements included in this Prospectus and the
related financial statement schedule included elsewhere in the Registration
Statement have been audited by Deloitte & Touche LLP, independent public
accountants, as stated in their report appearing herein, and have been so
included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
52
<PAGE>
JPS TEXTILE GROUP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Consolidated Balance Sheets as of October 28, 1995, November 2, 1996, and
August 2, 1997 (unaudited)............................................... F-3
Consolidated Statements of Operations for the fiscal years ended October
29, 1994, October 28, 1995 and November 2, 1996 and the nine months ended
July 27, 1996 and August 2, 1997 (unaudited)............................. F-4
Consolidated Statements of Senior Redeemable Preferred Stock and
Shareholders' Equity (Deficit) for October 30, 1993, October 29, 1994,
October 28, 1995, November 2, 1996 and August 2, 1997 (unaudited)........ F-5
Consolidated Statements of Cash Flows for fiscal years ended October 29,
1994, October 28, 1995 and November 2, 1996 and nine months ended July
27, 1996 and August 2, 1997 (unaudited).................................. F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
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 November 2, 1996 and
October 28, 1995, 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 November 2, 1996. 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 November 2,
1996 and October 28, 1995, and the results of its operations and its cash
flows for each of the three years in the period ended November 2, 1996 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 years ended
November 2, 1996 and October 28, 1995 have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 14 to the
consolidated financial statements, the Company has had recurring net losses
from continuing operations since inception, has a net shareholders'
deficiency, is in default on its senior subordinated discount notes, the
senior subordinated notes and the subordinated debentures and, under certain
conditions, the Company's senior revolving credit facility expires on March 1,
1997. The events of default entitle the holders of these debt securities to
accelerate payment on such debt. The Company's default on its notes and
debentures, its inability to service its debt without a restructuring thereof,
the uncertainty of the Company's ability to restructure its notes and
debentures and to meet the requirements for extension of its senior revolving
credit facility or to obtain alternative sources of financing as described in
Note 14 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 14. 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 17, 1997
F-2
<PAGE>
JPS TEXTILE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DEBTOR-IN-
POSSESSION
10/28/95 11/2/96 8/2/97
-------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash........................................ $ 1,352 $ 1,460 $ 1,229
Accounts receivable, less allowance of
$2,131 in 1995 and $2,511 in 1996 (Note
6)......................................... 88,186 75,166 61,685
Inventories (Notes 5 and 6)................. 48,729 48,374 54,091
Prepaid expenses and other.................. 2,545 1,967 2,685
Net assets held for sale (Note 3)........... 28,932 -- --
-------- --------- ---------
Total current assets.................... 169,744 126,967 119,690
Property, plant and equipment, net (Notes 5
and 6)....................................... 161,436 124,004 117,188
Excess of cost over fair value of net assets
acquired, less accumulated amortization of
$6,877 in 1995 and $7,860 in 1996............ 31,489 30,506 29,782
Other assets (Notes 5, 9, 10 and 13).......... 50,153 54,450 55,637
-------- --------- ---------
Total assets............................ $412,822 $ 335,927 $ 322,297
======== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................ 29,754 24,708 20,621
Accrued interest............................ 9,895 9,608 234
Accrued salaries, benefits and withholdings
(Note 9)................................... 11,503 10,440 9,628
Other accrued expenses (Notes 5, 9 and 11).. 12,699 13,987 11,916
Senior credit facility, revolving line of
credit (Note 6) ........................... -- 85,639 84,729
Current portion of long-term debt (Note 6).. 2,770 240,451 2,150
-------- --------- ---------
Total current liabilities............... 66,621 384,833 129,278
Long-term debt (Note 6)....................... 327,668 4,226 2,876
Deferred income taxes (Note 8)................ 4,165 3,665 3,665
Other long-term liabilities (Notes 5, 9 and
10).......................................... 23,242 19,513 19,827
-------- --------- ---------
Total liabilities not subject to
compromise............................. 421,696 412,237 155,646
-------- --------- ---------
Liabilities subject to compromise............. -- -- 271,082
-------- --------- ---------
Total liabilities....................... 421,696 412,237 426,728
-------- --------- ---------
Commitments and contingencies (Notes 4, 6, 8
and 9)
Senior redeemable preferred stock, redemption
value of $51,324 in 1995 and $54,520 in 1996
(Note 7)..................................... 28,171 32,676 36,504
-------- --------- ---------
Shareholders' equity (deficit) (Note 7)
Junior preferred stock...................... 250 250 250
Common stock:
Class A, 490,000 shares issued and
outstanding.............................. 5 5 5
Class B, 510,000 shares issued and
outstanding.............................. 5 5 5
Additional paid-in capital.................. 29,613 25,108 21,280
Deficit..................................... (66,918) (134,354) (162,475)
-------- --------- ---------
Total shareholders' deficit............. (37,045) (108,986) (140,935)
-------- --------- ---------
Total................................... $412,822 $ 335,927 $ 322,297
======== ========= =========
</TABLE>
See notes to Consolidated Financial Statements.
F-3
<PAGE>
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------- ---------------------
DEBTOR-IN-
POSSESSION
10/29/94 10/28/95 11/2/96 7/27/96 8/2/97
--------- --------- --------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales $ 461,871 $ 472,565 $ 448,824 $ 333,444 $ 301,188
Cost of sales........... 397,921 406,070 397,804 294,635 258,654
--------- --------- --------- --------- ---------
Gross profit............ 63,950 66,495 51,020 38,809 42,534
Selling, general and
administrative expenses
(Note 11).............. 39,805 39,586 40,579 30,601 29,863
Other expense, net
(Notes 9 and 10)....... 2,914 6,248 2,498 2,078 485
Charges for plant
closing, loss on sale
of certain operations
and writedown of
certain long-lived
assets (Note 4)........ -- -- 30,028 30,055 --
--------- --------- --------- --------- ---------
Operating profit
(loss)................. 21,231 20,661 (22,085) (23,925) 12,186
Valuation allowance on
Gulistan securities
(Note 3)............... -- -- (4,242) (5,463) (5,070)
Interest income......... 749 2,821 2,856 2,102 2,232
Interest expense (Note
6)..................... (55,570) (39,946) (40,510) (29,647) (30,309)
Debt restructuring fees
and expenses (Note 1).. -- -- (2,255) (902) (6,476)
--------- --------- --------- --------- ---------
Loss before income
taxes, discontinued
operations,
extraordinary items and
cumulative effects of
accounting changes..... (33,590) (16,464) (66,236) (57,835) (27,437)
Provision (benefit) for
income taxes (Note 8).. 2,800 1,200 (300) (374) 684
--------- --------- --------- --------- ---------
Loss before discontinued
operations,
extraordinary items and
cumulative effects of
accounting changes..... (36,390) (17,664) (65,936) (57,461) (28,121)
Discontinued operations:
Income (loss) from
discontinued
operations............ 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) (1,500) (1,500) --
--------- --------- --------- --------- ---------
Income (loss) before
extraordinary items and
cumulative effects of
accounting changes..... 120,204 (50,984) (67,436) (58,961) (28,121)
Extraordinary gain
(loss) on early
extinguishment of debt,
net of taxes of $600 in
1995 (Note 6).......... (7,410) 20,120 -- -- --
Cumulative effects of
accounting changes
(Note 10).............. (708) -- --
--------- --------- --------- --------- ---------
Net income (loss)....... 112,086 (30,864) (67,436) (58,961) (28,121)
Senior redeemable
preferred stock in-kind
dividends and discount
accretion (Note 7)..... (3,333) (3,831) (4,505) (3,301) (3,827)
--------- --------- --------- --------- ---------
Income (loss) applicable
to common stock........ $ 108,753 $ (34,695) $ (71,941) $ (62,262) $ (31,948)
========= ========= ========= ========= =========
Weighted average number
of common shares
outstanding............ 1,000,000 1,000,000 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............... $ (39.73) $ (21.50) $ (70.44) $ (60.76) $ (31.95)
Discontinued
operations:
Income (loss) from
discontinued
operations............ 23.63 (7.08) -- -- --
Net gain (loss) on
sales of discontinued
operations............ 132.97 (26.24) (1.50) (1.50) --
--------- --------- --------- --------- ---------
Income (loss) before
extraordinary items
and cumulative effects
of accounting
changes............... 116.87 (54.82) (71.94) (62.26) (31.95)
Extraordinary gain
(loss) on early
extinguishment of
debt.................. (7.41) 20.12 -- -- --
Cumulative effects of
accounting changes.... (0.71) -- -- -- --
--------- --------- --------- --------- ---------
Net income (loss)...... $ 108.75 $ (34.70) $ (71.94) $ (62.26) $ (31.95)
========= ========= ========= ========= =========
</TABLE>
F-4
<PAGE>
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 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)
Net loss for 53 weeks........ (67,436)
Preferred stock-in-kind
dividends and discount
accretion................... 4,505 (4,505)
------- --- ---- ------- ---------
Balance--November 2, 1996.... 32,676 10 250 25,108 (134,354)
Net loss for 39 weeks
(Unaudited)................. (28,121)
Preferred stock-in-kind
dividends and discount
accretion (Unaudited)....... 3,828 (3,828)
------- --- ---- ------- ---------
Balance--August 2, 1997
(Debtor-in-Possession)
(Unaudited)................. $36,504 $10 $250 $21,280 $(162,475)
======= === ==== ======= =========
</TABLE>
F-5
<PAGE>
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
----------------------------- --------------------
DEBTOR-IN-
POSSESSION
10/29/94 10/28/95 11/2/96 7/27/96 8/2/97
--------- -------- -------- -------- ----------
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss).......... $ 112,086 $(30,864) $(67,436) $(58,961) $(28,121)
--------- -------- -------- -------- --------
Adjustments to reconcile
net income (loss) to net
cash provided by (used in)
operating activities:
Charges for plant closing,
loss on sale of certain
operations and writedown
of certain long-lived
assets................... -- -- 30,028 -- --
Loss (income) from
discounted operations.... (23,628) 7,079 -- 30,055 --
Loss (gain) on sales of
discontinued operations.. (132,966) 26,241 1,500 1,500 --
Extraordinary loss (gain)
on early extinguishment
of debt.................. 7,410 (20,120) -- -- --
Cumulative effects of
accounting changes....... 708 -- -- -- --
Depreciation and
amortization, except
amounts included in
interest expense......... 23,206 21,785 22,739 17,444 14,470
Interest accretion and
debt issuance cost
amortization............. 11,161 8,818 10,088 7,219 7,181
Product liability charge.. -- 5,000 -- -- --
Deferred income tax
provision (benefit)...... 1,227 -- (500) (500) (500)
Valuation allowance on
Gulistan securities...... -- -- 4,242 5,463 5,070
Other, net................ (2,970) (498) (3,163) 3,061 (1,724)
Changes in assets and
liabilities:
Accounts receivable...... 426 (1,086) 10,372 16,915 11,601
Inventories.............. (179) (685) (2,635) (8,821) (5,717)
Prepaid expenses and
other assets............ (1,248) (2,505) (2,348) (184) (2,939)
Accounts payable......... 228 (911) (3,983) (2,139) (4,087)
Accrued expenses and
other liabilities....... (2,951) (7,202) (1,688) (13,262) 14,494
--------- -------- -------- -------- --------
Total adjustments........ (119,576) 35,916 64,652 56,751 37,849
--------- -------- -------- -------- --------
Net cash provided by (used
in) operating activities.. (7,490) 5,052 (2,784) (2,210) 9,728
--------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Property and equipment
additions................. (18,423) (18,811) (9,834) (7,391) (6,959)
Receipts from discontinued
operations, net........... 17,115 3,453 -- -- --
Proceeds from sale of
discontinued operations,
net....................... 259,044 4,415 17,077 364 --
Proceeds from sale of
certain operations........ -- -- 5,113 16,778 --
Purchase of long-term
investments............... (39,500) -- -- -- --
--------- -------- -------- -------- --------
Net cash provided by (used
in) investing activities.. 218,236 (10,943) 12,356 9,751 (6,959)
--------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Financing costs incurred... (2,943) (25) (614) (301) (100)
Proceeds from issuance of
long-term debt............ 285 5,000 29 29 --
Revolving credit facility
borrowings (repayments),
net....................... (41,666) 41,808 (6,087) (5,494) (910)
Purchases and repayment of
other long-term debt...... (166,044) (41,384) (2,792) (1,931) (1,990)
--------- -------- -------- -------- --------
Net cash provided by (used
in) financing activities.. (210,368) 5,399 (9,464) (7,697) (3,000)
--------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN
CASH...................... 378 (492) 108 (156) (231)
Cash at beginning of year.. 1,466 1,844 1,352 1,352 1,460
--------- -------- -------- -------- --------
Cash at end of year........ $ 1,844 $ 1,352 $ 1,460 $ 1,196 $ 1,229
========= ======== ======== ======== ========
SUPPLEMENTAL INFORMATION ON
CASH FLOWS FROM CONTINUING
OPERATIONS:
Interest paid.............. $ 48,219 $ 33,681 $ 30,709 $ 28,217 $ 5,960
Income taxes paid.......... 376 3,314 693 680 147
Non-cash financing
activities:
Senior redeemable
preferred stock
dividends-in-kind........ 2,765 2,936 3,114 2,319 --
</TABLE>
F-6
<PAGE>
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. These products are sold primarily to the domestic
clothing manufacturing and construction industries. As described in Notes 3
and 4, certain of the acquired businesses and operations have been
subsequently sold.
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 JPS's 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.
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.
The equity method of accounting is used to account for the Company's 50%
interest in a joint venture with a Mexican company (see Note 13). Under the
equity method, the Company's original investment is recorded at cost and is
adjusted by the Company's share of undistributed earnings or loss of the
investee.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The Company's most significant financial statement estimates
include the estimate of the allowance for doubtful accounts, reserve for self-
insurance liabilities and the reserve for certain defective roofing products
sold by the Predecessor Stevens Division operations (discussed in Note 9).
Management determines its estimate of the allowance for doubtful accounts
considering a number of factors, including historical experience, aging of the
accounts and the current creditworthiness of its customers. The Company self-
insures, with various insured stop-loss limitations, its workers'
compensation, general liability and health claims. Management determines its
estimate of the reserve for self-insurance considering a number of factors,
including historical experience and third party claims administrator and
actuarial assessment of the liabilities for reported claims and claims
incurred but not reported. Management believes that its estimates provided in
the financial statements, including those for the above-described items, are
reasonable and adequate. However, actual results could differ from those
estimates.
F-7
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Inventories--Inventories are stated at the lower of cost or market. Cost,
which includes labor, material and factory overhead, is determined on the
first-in, first-out basis.
Property, Plant and Equipment--Property, plant and equipment is recorded at
cost and depreciation is recorded using the straight-line method for financial
reporting purposes. The estimated useful lives used in the computation of
depreciation are as follows:
<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>
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--The Company accounts for postretirement benefits
other than pensions using the principles of 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. See Note 10 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 10 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.
Advertising Costs--The Company defers advertising related costs until the
advertising is first run in magazines or other publications or in the case of
brochures, until the brochures are printed and available for distribution.
Advertising costs were approximately $708,000, $1,225,000 and $1,856,000 in
Fiscal 1994, 1995 and 1996, respectively.
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.
F-8
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 1994
and 1995 fiscal years each consisted of fifty-two weeks and Fiscal 1996 had
fifty-three weeks.
Reclassifications--Certain Fiscal 1996, 1995 and 1994 amounts have been
reclassified to conform to the 1997 presentation. In addition, see Note 3
regarding reclassifications of Fiscal 1994 amounts for discontinued
operations.
Unaudited Interim Financial Data--The interim financial data relating to the
nine months ended July 27, 1996 and August 2, 1997 are unaudited; however, in
the opinion of the Company's management, the interim data includes all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the financial condition and results of operations of the
Company for such interim periods. The results for the nine months ended August
2, 1997 are not necessarily indicative of the results to be expected for the
full fiscal year or any other interim period. The financial statements as of
August 2, 1997 have been prepared in accordance with Statement of Position 90-
7, "Financial Reporting By Entities in Reorganization Under the Bankruptcy
Code," issued by the American Institute of Certified Public Accountants ("SOP
90-7"). In accordance with SOP 90-7, all prepetition liabilities of JPS that
are subject to compromise under the plan of reorganization are segregated in
the Company's consolidated balance sheet as liabilities subject to compromise.
These liabilities are recorded at the amounts expected to be allowed as claims
in the chapter 11 case rather than as estimates of the amounts for which those
allowed claims may be settled as a result of the Plan of Reorganization (see
Note 12).
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 Statements of
Operations and Cash Flows for Fiscal 1994 have been reclassified to reflect
the Carpet Business as discontinued operations.
The consideration for the sale of 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 at the asset
transfer date, the Company determined the fair value of these debt and equity
securities to be approximately $11.3 million. These debt and equity securities
are included in other non-current assets on the November 2, 1996 balance
sheet. Since the disposal of the Carpet Business occurred subsequent to the
end of Fiscal 1995, the net assets of the Carpet
F-9
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Business (adjusted to net realizable value) were 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 (net of tax), 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 $141.6 million and $120.1
million in Fiscal years 1994 and 1995, respectively.
In May 1996, the Company and Gulistan agreed on the amount of the post-
closing adjustment. As a result, the Company paid a post-closing adjustment of
$3.5 million (an estimated post-closing adjustment of $2.0 million was
included in the Fiscal 1995 loss on sale of discontinued operations) and has
recognized in Fiscal 1996 an additional loss of $1.5 million on the sale of
discontinued operations. The final amount of net cash proceeds applied by the
Company to reduce outstanding borrowings under its senior credit facility was
approximately $16.7 million (net of fees, expenses, and the post-closing
adjustment resulting from the level of working capital transferred at the
closing date).
In Fiscal 1996, Gulistan reported a net loss of approximately $4.5 million
before interest expense on the promissory note held by the Company.
Accordingly, the Company did not record interest income on any of the Gulistan
securities held by the Company. Also, in accordance with relevant accounting
literature, the Company has recorded a valuation allowance against its
investment in the Gulistan securities and a corresponding charge to income of
$4.2 million as a result of the net loss ($4.5 million reduced by the $0.3
million of common equity held by Gulistan management) incurred by Gulistan
during the 1996 fiscal year. The valuation allowance will be increased or
decreased (but not below zero) with a corresponding charge or credit to income
to give effect to future losses or earnings of Gulistan as those losses or
earnings occur.
Automotive Businesses--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"), C&I, Foamex International Inc. ("Foamex") and JPS Automotive
Products Corp., an indirect, wholly-owned subsidiary of Foamex ("Purchaser"),
the Company consummated the disposition of its Automotive Assets (as described
below) to the Purchaser.
The Automotive Assets consisted of the businesses and assets of Auto and the
synthetic industrial fabrics division of C&I, and the Company's investment in
common stock of the managing general partner of Cramerton Automotive Products,
L.P. (an 80% owned joint venture). Net sales from the discontinued operations
of the Automotive Assets were $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 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 Fiscal
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.
F-10
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 $3.4
million and $1.6 million in Fiscal 1994 and 1995, respectively.
4. SALE OF CERTAIN OPERATIONS, PLANT CLOSING AND WRITEDOWN OF CERTAIN LONG-
LIVED ASSETS
Pursuant to an Asset Purchase Agreement dated September 30, 1996 between JPS
Elastomerics Corp. ("Elastomerics") and Elastomer Technologies Group, Inc.
("Elastomer") and a Receivables Purchase Agreement dated September 30, 1996
between Elastomerics and the Bank of New York Commercial Corporation,
Elastomerics sold substantially all the assets of its rubber products
division, a business engaged in the manufacture and sale of natural and
synthetic elastic for use in apparel products, diaper products and specialty
industrial applications (the "Rubber Products Business"). The Rubber Products
Business had accounted for sales of $22.6 million, $20.7 million and $16.8
million in Fiscal 1994, 1995 and 1996 (eleven months), respectively. Under the
terms of the agreement, Elastomer agreed to assume substantially all the
liabilities and obligations associated with the Rubber Products Business. The
Company and its subsidiaries have agreed not to compete directly or indirectly
with the business that was sold for a period of two years. The consideration
for the Rubber Products Business consisted of approximately $5.1 million in
cash, subject to certain post-closing adjustments based on the audited amount
of working capital transferred on the closing date, and resulted in a loss of
approximately $7.7 million. This loss on sale was charged to operations in
Fiscal 1996. The net proceeds from the sale, after fees and expenses, was
approximately $4.8 million and was used to reduce the Company's outstanding
indebtedness.
On August 28, 1996, the Company implemented a plan to close its Dunean plant
in Greenville, South Carolina, as a result of management's determination that
a permanent decline in the Company's spun apparel business had occurred. This
plant had been operating on a reduced schedule due to poor market conditions
and financial projections indicated it would continue to do so. As a result of
the plant closing, the accompanying Consolidated Statement of Operations
includes a "charge for plant closing" of approximately $14.2 million for
Fiscal 1996 related principally to the estimated loss on the impairment of
long-lived assets in accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
employee severance costs and estimated costs for equipment relocation. As of
November 2, 1996, this plant closing was substantially complete. Of the
approximately $4.8 million in exit costs recognized in association with the
plant closing, approximately $2.3 million related to equipment relocation and
employee severance was not paid at November 2, 1996.
Also, in connection with the Company's review of present and expected
conditions in the markets it serves, management determined that its plant in
Kingsport, Tennessee, which manufactures cotton fabrics, is impaired under the
criteria of SFAS No. 121 because expected future cash flows from the operation
of the plant are less than the carrying value of the plant assets. The
accompanying Consolidated Statement of Operations for Fiscal 1996 includes a
"writedown of certain long-lived assets" of $8.1 million for the excess of the
carrying value of the plant over its estimated fair value. Estimated fair
value was determined based on an independent appraisal of the plant's
property, plant and equipment.
F-11
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. BALANCE SHEET COMPONENTS
The components of certain balance sheet accounts are (in thousands):
<TABLE>
<CAPTION>
(DEBTOR-IN
POSSESSION)
OCTOBER NOVEMBER 2, AUGUST 2,
28, 1995 1996 1997
--------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Inventories:
Raw materials and supplies................ $ 13,909 $ 13,155 $ 12,973
Work-in-process........................... 18,334 16,912 16,866
Finished goods............................ 16,486 18,307 24,252
--------- --------- ---------
$ 48,729 $ 48,374 $ 54,091
========= ========= =========
Property, plant and equipment, net:
Land and improvements..................... $ 7,349 $ 5,921 $ 5,921
Buildings and improvements................ 53,649 42,775 42,780
Machinery and equipment................... 205,345 183,320 182,215
Furniture, fixtures and other............. 7,725 8,116 8,090
--------- --------- ---------
274,068 240,132 239,006
Less accumulated depreciation............. (118,866) (117,642) (129,826)
--------- --------- ---------
155,202 122,490 109,180
Construction in progress.................. 6,234 1,514 8,008
--------- --------- ---------
$ 161,436 $ 124,004 $ 117,188
========= ========= =========
Other noncurrent assets:
Unamortized debt issuance costs........... $ 1,092 $ 351 $ 149
Prepaid pension costs..................... 5,973 1,055 3,472
Investments (Notes 3 and 9)............... 42,885 52,986 52,016
Other..................................... 203 58 --
--------- --------- ---------
$ 50,153 $ 54,450 $ 55,637
========= ========= =========
Other accrued expenses:
Roofing product liability costs........... $ 4,000 $ 3,000 $ 1,684
Taxes payable other than income taxes..... 1,433 1,250 889
Income taxes.............................. 2,753 2,150 2,689
Other..................................... 4,513 7,587 6,654
--------- --------- ---------
$ 12,699 $ 13,987 $ 11,916
========= ========= =========
Other long-term liabilities:
Roofing product liability costs and
deferred warranty income................. $ 15,700 $ 14,361 $ 14,919
Accrued postretirement benefit plan
liability................................ 5,249 4,808 4,294
Other..................................... 2,293 344 614
--------- --------- ---------
$ 23,242 $ 19,513 $ 19,827
========= ========= =========
</TABLE>
F-12
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
OCTOBER 28, NOVEMBER 2,
1995 1996
----------- -----------
<S> <C> <C>
Senior credit facility, revolving line of credit...... $ 91,726 $ 85,639
Senior subordinated discount notes (including interest
due at maturity of $4,370, and $6,002,
respectively)........................................ 113,617 115,249
Senior subordinated notes (including interest due at
maturity of $4,347 and $5,609, respectively)......... 81,120 82,382
Subordinated debentures............................... 54,071 54,071
Equipment financing................................... 9,780 7,016
-------- ---------
Total............................................... 350,314 344,357
Less reorganization discount:
Senior subordinated discount notes.................. (5,171) (3,308)
Senior subordinated notes........................... (4,435) (2,694)
Subordinated debentures............................. (10,270) (8,039)
-------- ---------
Total long-term debt................................ 330,438 330,316
Less current portion.................................. (2,770) (326,090)
-------- ---------
Long-term portion................................... $327,668 $ 4,226
======== =========
</TABLE>
Senior Credit Facility--On September 6, 1996, the senior credit facility was
amended to, among other things, extend its expiration date and reduce the
interest rate by 0.25%. Under the terms of the amended credit agreement, the
senior credit facility expires on March 1, 1997 (unless otherwise extended) if
the Company has not commenced a case under chapter 11 of the Bankruptcy Code.
If such a case is commenced on or prior to March 1, 1997 (or any extended
date), the senior credit facility will be extended automatically until the
earlier of November 1, 1997 or the effective date of a reorganization under
chapter 11 of the Bankruptcy Code. The Company has classified the $85.6
million outstanding under its senior credit facility revolving line of credit
as a current liability in the accompanying Consolidated Balance Sheet. In
addition, the loan covenants were amended to be based upon the activities of
the consolidated operating subsidiaries (JPS Converter and Industrial Corp.
and JPS Elastomerics Corp.) rather than the consolidated Company (i.e.
excludes the assets and liabilities of the parent company and other non-
operating subsidiaries). The amended credit agreement does not permit
additional borrowings by the operating subsidiaries for, among other things,
loans or dividends to the Company for the payment of interest on its notes and
debentures. As a result of this restriction, the Company did not make interest
payments of approximately $1.9 million on its subordinated debentures due
November 15, 1996, and did not make interest payments of approximately $5.4
million and $3.6 million on its senior subordinated discount notes and senior
subordinated notes, respectively, due December 1, 1996. The terms of the
indentures governing the Company's subordinated debt provide that such a
failure to pay interest when due results in an event of default on such
indebtedness and as a result, the holders of these debt securities are
entitled to accelerate the debt represented thereby. Accordingly, all of the
Company's notes and debentures have been classified as current liabilities as
of November 2, 1996. As discussed in Note 14, the Company has engaged
financial advisors regarding extension, replacement or refinancing of its debt
securities (see Note 15).
The senior credit facility provides for a $118 million revolving line of
credit. 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 (9.25% at November 2, 1996) or at the Eurodollar
Rate (as defined) plus 2.50% per annum (approximately 7.88% at November 2,
1996). 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
F-13
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 November 2,
1996, unused letters of credit issued and outstanding totaled $2,385,000. The
outstanding unused letters of credit reduce the funds available under the
revolving line of credit. At November 2, 1996, the Company had $18,656,000
available for borrowing under the revolving credit agreement.
The senior credit facility also permits, subject to certain conditions, the
sale of fixed assets to the extent the net cash proceeds of all such sales
made from March 1994 forward do not cumulatively exceed $35 million (excluding
the proceeds from the sale or transfer of the Automotive Assets and the Carpet
Business). As of November 2, 1996, such limit has not been exceeded.
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,
1992 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 notes was reduced to its estimated net present value using an
effective interest rate of 13%. Under the terms of the indenture, 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. However, due to the event of default
discussed above, all of the discount notes are classified as current
liabilities as of November 2, 1996.
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%. Under
the terms of the indenture, 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. However, due to the event of
default discussed above, all of the senior subordinated notes are classified
as current liabilities as of November 2, 1996.
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. 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%. Due
to the event of default discussed above, the subordinated debentures are
classified as current liabilities as of November 2, 1996.
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
F-14
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 $100
million at November 2, 1996 to $105 million in the fourth quarter of 1997. 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 November 2, 1996. However, as discussed
above, subsequent to November 2, 1996, the Company did not make the scheduled
interest payments on its debt securities which constituted a default under the
indentures.
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 28, 1995 NOVEMBER 2, 1996
---------------- ----------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
10.85% Senior Subordinated Discount
Notes.................................. $108,446 $96,138 $111,941 $63,364
10.25% Senior Subordinated Notes........ 76,685 66,025 79,688 44,544
7% Subordinated Debentures.............. 43,081 32,443 46,032 10,820
</TABLE>
Because of the lack of significant trading activity of the Company's notes
and debentures, estimated quoted prices vary.
Other--Substantially all of the Company's assets are pledged as collateral
for the senior credit facility and the equipment financing.
Interest expense includes $11,161,000 in Fiscal 1994, $8,818,000 in Fiscal
1995 and $10,088,000 in Fiscal 1996 representing amortization of debt issuance
expenses and accretion of interest on the discounted notes and accrued product
liability costs (see Note 9).
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.
Maturities--Aggregate principal maturities of all long-term debt are as
follows (in thousands):
<TABLE>
<S> <C>
Fiscal Year Ending
1997............................................................ $340,132
1998............................................................ 1,580
1999............................................................ 689
2000............................................................ 638
2001............................................................ 638
Thereafter...................................................... 680
--------
$344,357
========
</TABLE>
F-15
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Unaudited Interim Financial Data--In accordance with SOP 90-7, a significant
portion of the Company's outstanding debt and related accrued interest are
classified as "liabilities subject to compromise" at August 2, 1997.
Comparable items in the prior year have not been reclassified to the
presentation required by SOP 90-7. See description of liabilities subject to
compromise below:
<TABLE>
<S> <C>
10.85% Senior Subordinated Discount Notes.......................... $109,247
10.25% Senior Subordinated Notes................................... 76,773
7% Subordinated Debentures......................................... 54,071
Unamortized reorganization discount................................ (9,489)
Accrued interest................................................... 40,480
--------
Total liabilities subject to compromise.......................... $271,082
========
</TABLE>
7. SENIOR REDEEMABLE PREFERRED STOCK AND EQUITY SECURITIES
Certain information on senior redeemable preferred stock and equity
securities at October 28, 1995 and November 2, 1996 is as follows:
<TABLE>
<CAPTION>
SHARES ISSUED AND
OUTSTANDING
-----------------------
PAR VALUE OCTOBER 28, NOVEMBER 2,
PER SHARE AUTHORIZED 1995 1996
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Series A Senior Redeemable
Preferred Stock............... $.01 700,000(1) 507,031 538,176
Series B Junior Preferred
Stock......................... .01 700,000(1) 10,000 10,000
Class A Common Stock........... .01 700,000 490,000 490,000
Class B Common Stock........... .01 700,000 510,000 510,000
</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.
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 $23,153,000 at October 28, 1995 and $21,844,000 at November 2,
1996. 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
F-16
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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
November 2, 1996, 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
directors of the Company.
8. INCOME TAXES
The Fiscal 1994, 1995 and 1996 provision (benefit) for income taxes on
continuing operations included in the consolidated statements of operations
consists of the following (in thousands):
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Current state.......................................... $1,573 $1,200 $ 200
Deferred state provision (benefit)..................... 1,227 -- (500)
------ ------ -----
Provision (benefit) for income taxes................... $2,800 $1,200 $(300)
====== ====== =====
</TABLE>
There is no provision for Federal income taxes.
A reconciliation between income taxes at the 35% statutory Federal income
tax rate and the provision (benefit) for income taxes for the fiscal years
ended 1994, 1995 and 1996 is as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1994 1995 1996
-------- ------- --------
<S> <C> <C> <C>
Income tax benefit at Federal statutory rate.. $(11,757) $(5,762) $(23,183)
Increase (decrease) in income taxes arising
from effect of:
State and local income taxes................ 2,800 1,200 (300)
Amortization of goodwill.................... 316 316 344
Other....................................... 250 212 109
Losses not resulting in tax benefits........ 11,191 5,234 22,730
-------- ------- --------
Provision (benefit) for income taxes.......... $ 2,800 $ 1,200 $ (300)
======== ======= ========
</TABLE>
F-17
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Presented below are the elements which comprise deferred tax assets and
liabilities (in thousands):
<TABLE>
<CAPTION>
OCTOBER 28, NOVEMBER 2,
1995 1996
----------- -----------
<S> <C> <C>
Gross deferred assets:
Estimated allowance for doubtful accounts............ $ 476 $ 412
Excess of tax over financial statement basis of
inventory........................................... 634 647
Accruals deductible for tax purposes when paid....... 2,263 2,497
Deferred compensation deductible for tax purposes
when paid........................................... 39 157
Postretirement benefits deductible for tax purposes
when paid........................................... 2,177 2,141
Miscellaneous........................................ 56 83
Alternative minimum tax credit carryforward
available........................................... 2,300 2,564
Deferred financial statement income recognized for
tax purposes when received.......................... 5,432 6,489
Excess of tax over financial statement carrying value
of investment in discontinued operation............. 11,231 13,474
Excess of tax basis of intangibles over financial
statement basis..................................... 8,004 8,817
Net operating loss carryforward...................... 23,519 33,291
Less valuation allowance............................. (26,020) (53,578)
-------- --------
Gross deferred assets.............................. 30,111 16,994
-------- --------
Gross deferred liabilities:
Pension asset recognized for book purposes........... (2,208) (411)
Excess of financial statement over tax basis of
property, plant, and equipment...................... (21,550) (11,898)
Excess of tax over financial statement basis of debt
instruments (net of deferred financing fees)........ (6,353) (4,685)
Deferred state taxes resulting from filing separate
subsidiary returns in some jurisdictions............ (4,165) (3,665)
-------- --------
Gross deferred liabilities......................... (34,276) (20,659)
-------- --------
Net deferred noncurrent tax liability.............. $ (4,165) $ (3,665)
======== ========
</TABLE>
At November 2, 1996, the Company had regular federal net operating loss
carryforwards for tax purposes of approximately $90,000,000. The net operating
losses expire in years 2005 through 2011. The Company also has federal
alternative minimum tax net operating losses of approximately $45,000,000
which expire in 2007 and 2011. During 1995, the Company utilized approximately
$6,000,000 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 future 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 currently applies.
However, there is no assurance that the Internal Revenue Service will not take
a contrary position or that such limitation will not become applicable for
subsequent taxable periods. Due to the Company's operating history, it is
uncertain that it will be able to utilize all deferred tax assets. Therefore,
a valuation
F-18
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
9. COMMITMENTS AND CONTINGENCIES
The Company leases office facilities, machinery and computer equipment under
noncancellable operating leases. Rent expense was approximately, $2,810,000 in
Fiscal 1994, $3,411,000 in Fiscal 1995 and $5,158,000 in Fiscal 1996.
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 November 2, 1996 (in thousands):
<TABLE>
<S> <C>
1997............................................................... $ 4,235
1998............................................................... 3,816
1999............................................................... 3,239
2000............................................................... 2,581
2001............................................................... 907
-------
$14,778
=======
</TABLE>
The Company has planned expenditures of approximately $23.5 million for
property, plant and equipment additions in Fiscal 1997.
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 a termination and death benefit
of $203,000 which was paid in Fiscal 1994. 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. No awards are expected to be paid
out under this plan for operating results through November 2, 1996. 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.
As required by the September 6, 1996 amendment to the senior credit
facility, the Company entered into retention bonus agreements with certain of
its executives and key employees during Fiscal 1996. The retention bonus
agreements provide specific individual awards if the participants continue
active employment with the Company for at least six months following the
completion of the proposed financial restructuring discussed in Note 14. Under
the terms of the agreements, an aggregate of approximately $675,000 will be
paid out on the effective date of a restructuring and an aggregate of
approximately $1,200,000 will be paid out six months after the effective date
of a restructuring. No amounts are considered earned until the effective date
of a restructuring. In Fiscal 1996, approximately $363,000 was accrued and
included in restructuring fees and expenses in the accompanying Consolidated
Statements of Operations (see Note 15).
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
F-19
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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. 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. Based
on management's estimate of a range of future costs, the Company recorded a
$5,000,000 addition to the liability for such defective products, charged to
other expense in the accompanying Fiscal 1995 Consolidated Statement of
Operations. No additional amounts were accrued in Fiscal 1996. The Company
charges the costs of settling these defective material obligations as a
reduction of the recorded liability balance and, accordingly, such costs are
not charged against the results of operations. Payments on the defective
product liability claims were $3,870,000, $4,040,000 and $3,111,000 in fiscal
years 1994, 1995 and 1996, respectively.
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 November 2, 1996, the aggregate fair value of
the United States Treasury Securities was approximately $43,400,000 and
$46,200,000, respectively, with gross unrealized holding gains of
approximately $500,000 and $400,000 in Fiscal 1995 and 1996, respectively.
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.
10. 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 Businesses which
were sold by the Company on June 28, 1994, the Carpet Business sold on
November 16, 1995 and the Rubber Products Business sold on September 30, 1996.
The benefits of these former employees were "frozen" at the respective dates
of sale of the businesses. Accordingly, these former employees will retain
benefits earned through the respective disposal dates, however, they will not
accrue additional benefits. In addition, the plan provides benefits to
individuals employed by the Dunean plant which was closed effective October
28, 1996. Benefits for employees who were terminated as a result of the plant
closing were also "frozen" as of October 28, 1996 and no additional benefits
will accrue subsequent to that date. 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.
Assets of the pension plan are invested in common and preferred stocks,
government and corporate bonds, real estate and various short-term
investments.
F-20
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A reconciliation as of the most recent measurement date (November 1, 1995)
of the funded status of the plan with amounts reported in the Company's
Consolidated Balance Sheets follows (in thousands):
<TABLE>
<CAPTION>
OCTOBER 28, NOVEMBER 2,
1995 1996
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested........................................... $89,236 $88,983
Non-vested....................................... 613 377
------- -------
Accumulated benefit obligation..................... 89,849 89,360
Provision for future pay increases................. 6,232 6,755
------- -------
Total projected benefit obligation............... 96,081 96,115
Plan assets at fair value.......................... 91,996 89,410
------- -------
Projected benefit obligation greater than plan
assets............................................ (4,085) (6,705)
Unrecognized net loss.............................. 4,460 4,212
Prior service cost not yet recognized in net
periodic pension cost............................. 5,598 3,548
------- -------
Pension asset in accompanying Consolidated Balance
Sheets............................................ $ 5,973 $ 1,055
======= =======
</TABLE>
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1994 1995 1996
-------- -------- -------
<S> <C> <C> <C>
Components of net periodic pension cost:
Service cost-benefits earned during the
period..................................... $ 2,925 $ 2,483 $ 2,378
Interest cost on projected benefit
obligation................................. 6,987 7,131 7,048
Return on plan assets....................... 3,802 (15,628) (7,674)
Net amortization and deferral............... (10,291) 8,478 451
-------- -------- -------
Net periodic pension cost................... 3,423 2,464 2,203
Cost allocated to discontinued operations... 1,051 444 --
-------- -------- -------
Net periodic pension cost for continuing
operations................................. $ 2,372 $ 2,020 $ 2,203
======== ======== =======
</TABLE>
On February 15, 1996, the Company offered special early retirement benefits
to approximately fifty salaried employees who met certain criteria.
Approximately $2.2 million of pension benefits were paid in lump-sums by the
plan to twenty-eight employees who accepted the offer. In Fiscal 1996 a charge
of $1,125,000 representing the actuarial cost to the plan of the early
retirement offer as accepted by the employees is included in other expense in
the accompanying Consolidated Statement of Operations.
In Fiscal 1996 the Company recognized losses of approximately $632,000 for
pension curtailment and special termination benefits in accordance with SFAS
No. 88, "Employees' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits", which related primarily
to the sale of the Rubber Products Business and the Dunean plant closing and
related termination of participation in the plan of these employees.
The weighted-average discount rate used in determining the actuarial present
value of the projected benefit obligation at October 28, 1995 and November 2,
1996 was 7.8%. The expected long-term rate of return on assets was 9% at
October 28, 1995 and November 2, 1996. The assumed rate of increase in
compensation levels was based on age-related tables at October 28, 1995 and
November 2, 1996. 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.
F-21
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 $536,000 in Fiscal 1994, $589,000 in Fiscal 1995 and $587,000 in
Fiscal 1996.
Postretirement Benefits--The Company has several unfunded postretirement
plans that provide certain health care and life insurance benefits to eligible
retirees. The plans are contributory, with retiree contributions adjusted
periodically, and contain cost-sharing features such as deductibles and
coinsurance. The Company's life insurance plan provides benefits to both
active employees and retirees. Active employee contributions in excess of the
cost of providing active employee benefits are applied to reduce the cost of
retirees' life insurance benefits. The following table sets forth the status
of the Company's postretirement plans as recorded in the accompanying
Consolidated Balance Sheets (in thousands):
Accumulated postretirement benefit obligation (APBO):
<TABLE>
<CAPTION>
OCTOBER 28, NOVEMBER 2,
1995 1996
----------- -----------
<S> <C> <C>
Retirees............................................. $2,974 $1,721
Fully eligible active plan participants.............. 1,242 1,075
Other active plan participants....................... 551 914
Unrecognized gain.................................... 482 1,098
------ ------
Accrued postretirement benefit plan liability........ $5,249 $4,808
====== ======
</TABLE>
Net periodic postretirement benefit expense included the following
components (in thousands):
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Service cost for benefits earned........................ $ 7 $ 1 $ 5
Interest cost on APBO................................... 352 357 297
---- ---- ----
Net periodic postretirement cost........................ $359 $358 $302
==== ==== ====
</TABLE>
In Fiscal 1996, the Company recognized a curtailment gain of approximately
$347,000 related to the sale of the Rubber Products Business and the Dunean
plant closing, and related termination of participation in the plans of these
employees.
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 7.8% as of October 28, 1995 and November
2, 1996.
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.
F-22
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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. The liability for postemployment benefits at October 28, 1995 and
November 2, 1996 is included in other long-term liabilities in the
accompanying Consolidated Balance Sheets.
11. RELATED PARTIES
The Company incurred fees of $1,250,000 in Fiscal 1994 and $1,000,000 in
each of Fiscal 1995 and 1996 for management services provided by a certain
shareholder pursuant to a management services agreement. The balance sheets as
of October 28, 1995 and November 2, 1996 include accrued fees of $1,000,000
each in other accrued expenses. The agreement provides for payments of
$1,000,000 to the shareholder annually through the year 2001. Payment of the
Fiscal 1996 accrued management fee is limited to $450,000 by the Company's
senior credit facility, as amended on September 6, 1996, with the balance to
be paid upon the earlier of the consummation of a financial restructuring as
discussed in Note 14 or completion of the Company's 1997 second fiscal
quarter.
12. BUSINESS SEGMENTS AND UNAUDITED INTERIM FINANCIAL DATA
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. 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 4% 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.
F-23
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Industry segment information (in thousands):
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales:
Apparel fabrics and products................... $254,810 $247,846 $221,799
Industrial fabrics and products................ 169,736 191,985 193,001
Home fashion textiles.......................... 37,325 32,734 34,024
-------- -------- --------
$461,871 $472,565 $448,824
======== ======== ========
Operating profit (loss):
Apparel fabrics and products................... $ 18,487 $ 16,667 $(22,422)
Industrial fabrics and products................ 7,618 7,590 5,947
Home fashion textiles.......................... 2,564 1,749 647
Indirect corporate expenses, net............... (7,438) (5,345) (6,257)
-------- -------- --------
Operating profit (loss)........................ 21,231 20,661 (22,085)
Valuation allowance on Gulistan Securities....... -- -- (4,242)
Interest income.................................. 749 2,821 2,856
Interest expense................................. (55,570) (39,946) (40,510)
Restructuring fees and expenses.................. -- -- (2,255)
-------- -------- --------
Loss before income taxes, discontinued
operations, extraordinary items and cumulative
effects on accounting changes................... $(33,590) $(16,464) $(66,236)
======== ======== ========
Depreciation and amortization expense:
Apparel fabrics and products................... $ 13,329 $ 12,722 $ 12,946
Industrial fabrics and products................ 6,103 5,690 6,282
Home fashion textiles.......................... 2,359 2,394 2,517
-------- -------- --------
Total segments............................... 21,791 20,806 21,745
Corporate and other............................ 1,415 979 994
-------- -------- --------
$ 23,206 $ 21,785 $ 22,739
======== ======== ========
Capital expenditures:
Apparel fabrics and products................... $ 8,120 $ 8,852 $ 4,389
Industrial fabrics and products................ 6,171 9,312 4,545
Home fashion textiles.......................... 4,122 643 899
-------- -------- --------
Total segments............................... 18,413 18,807 9,833
Corporate and other............................ 10 4 1
-------- -------- --------
$ 18,423 $ 18,811 $ 9,834
======== ======== ========
</TABLE>
F-24
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Industry segment information (in thousands):
<TABLE>
<CAPTION>
OCTOBER 29, OCTOBER 28, NOVEMBER 2,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Identifiable assets:
Apparel fabrics and products.............. $171,164 $165,622 $127,909
Industrial fabrics and products........... 106,124 115,710 101,376
Home fashion textiles..................... 24,752 20,731 21,333
-------- -------- --------
Total segments.......................... 302,040 302,063 250,618
Corporate and other....................... 81,087 81,827 85,309
-------- -------- --------
383,127 383,890 335,927
Net assets held for sale.................. 69,684 28,932 --
-------- -------- --------
$452,811 $412,822 $335,927
======== ======== ========
</TABLE>
F-25
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Unaudited interim financial data (in thousands):
The results for each quarter include all adjustments which are, in the
opinion of management, necessary for a fair presentation of the results for
interim periods. The consolidated financial results on an interim basis are
not necessarily indicative of future financial results on either an interim or
annual basis. Selected consolidated financial data for each quarter within
1995 and 1996 are as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
($ IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C>
Year Ended October 28, 1995:
Net sales.............................. $117,316 $123,099 $109,117 $123,033
Cost of sales.......................... 101,068 104,166 93,805 107,031
-------- -------- -------- --------
Gross profit........................... 16,248 18,933 15,312 16,002
Selling, general and administrative
expenses.............................. 10,429 10,794 9,633 8,730
Other expenses, etc. .................. 384 276 216 5,372
-------- -------- -------- --------
Operating profit....................... 5,435 7,863 5,463 1,900
Interest income........................ 666 685 776 694
Interest expense....................... (10,297) (9,769) (9,754) (10,126)
-------- -------- -------- --------
Loss before income taxes, discontinued
operations and extraordinary gain..... (4,196) (1,221) (3,515) (7,532)
Income taxes........................... 300 636 64 200
-------- -------- -------- --------
Loss before discontinued operations and
extraordinary gain.................... (4,496) (1,857) (3,579) (7,732)
Loss from discontinued operations...... (1,202) (1,484) (2,593) (1,800)
Gain (loss) on sale of discontinued
operations, net of taxes.............. 1,040 423 (27,704)
Extraordinary gain on early
extinguishment of debt, net of taxes.. 20,120 -- -- --
-------- -------- -------- --------
Net income (loss)...................... $ 14,422 $ (2,301) $ (5,749) $(37,236)
======== ======== ======== ========
Income (loss) applicable to common
stock................................. $ 13,492 $ (3,271) $ (6,708) $(38,208)
======== ======== ======== ========
Earnings (loss) per common share:
Loss before discontinued operations
and extraordinary gain............... $ (5.43) $ (2.82) $ (4.54) $ (8.71)
Loss from discontinued operations..... (1.20) (1.49) (2.59) (1.80)
Gain (loss) on sale of discontinued
operations........................... 1.04 0.42 (27.70)
Extraordinary gain on early
extinguishment of debt............... 20.12 -- -- --
-------- -------- -------- --------
Net income (loss)...................... $ 13.49 $ (3.27) $ (6.71) $ (38.21)
======== ======== ======== ========
Year Ended November 2, 1996:
Net sales.............................. $ 98,741 $124,437 $110,266 $115,380
Cost of sales.......................... 88,846 109,881 95,908 103,169
-------- -------- -------- --------
Gross profit........................... 9,895 14,556 14,358 12,211
Selling, general and administrative
expenses.............................. 9,875 10,838 9,888 9,978
Other expenses, etc.................... 241 1,708 129 420
Charges for plant closing, loss on sale
of certain operations and write down
of certain long-lived assets.......... -- -- 30,055 (27)
-------- -------- -------- --------
Operating profit (loss)................ (221) 2,010 (25,714) 1,840
Valuation allowance on Gulistan
Securities............................ (1,500) (2,568) (1,395) 1,221
Interest income........................ 695 693 714 754
Interest expense....................... (9,737) (9,828) (10,082) (10,863)
Debt restructuring fees and expenses... -- (175) (727) (1,353)
-------- -------- -------- --------
Loss before income taxes and
discontinued operations............... (10,763) (9,868) (37,204) (8,401)
Income taxes........................... 70 138 (582) 74
-------- -------- -------- --------
Loss before discontinued operations.... (10,833) (10,006) (36,622) (8,475)
Loss on sale of discontinued
operations, net of taxes.............. -- (1,500) -- --
-------- -------- -------- --------
Net loss............................... $(10,833) $(11,506) $(36,622) $ (8,475)
======== ======== ======== ========
Loss applicable to common stock........ $(11,916) $(12,615) $(37,731) $ (9,679)
======== ======== ======== ========
Loss per common share:
Loss before discontinued operations... $ (11.92) $ (11.11) $ (37.73) $ (9.68)
Loss on sale of discontinued
operations........................... -- (1.50) -- --
-------- -------- -------- --------
Net loss............................... $ (11.92) $ (12.61) $ (37.73) $ (9.68)
======== ======== ======== ========
</TABLE>
F-26
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During the first quarter of Fiscal 1995, the Company expended $36.6 million
to make open market purchases of its outstanding debentures, which resulted in
a gain on early extinguishment of debt of $20.1 million, net of expenses of
$1.9 million and income taxes of $0.6 million.
During the second, third and fourth quarters of Fiscal 1995, adjustments
were made to the selling price in the Asset Purchase Agreement dated May 25,
1994, as amended, which was the sale of the assets and operations of the
Automotive business. These adjustments resulted in gains of $1.0 million, $0.4
million and $3.0 million, respectively.
During the fourth quarter of Fiscal 1995, the Company entered into an Asset
Transfer Agreement dated November 16, 1995 to effect the sale of the assets
and operations of its Carpet business. This sale resulted in a loss on sale of
discontinued operations of $30.7 million.
During the second quarter of Fiscal 1996, the Company finalized the selling
price for the assets and operations of the Carpet business which resulted in
loss on sale of discontinued operations of $1.5 million.
13. JOINT VENTURE
In May 1996, the Company purchased a 50% ownership interest in a Mexican
corporation engaged in the manufacture and sale of textile products for the
apparel industry in Mexico. The investment is accounted for on the equity
method of accounting. As of November 2, 1996, the carrying value of the
investment was approximately $146,000. The effect of the joint venture on
Fiscal 1996 results of operations was not significant.
In 1996, the Company had sales to the joint venture of approximately $2.0
million. As of November 2, 1996, the Company's accounts receivable from the
joint venture was approximately $1.8 million.
14. 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 $108,986,000 at November 2, 1996, is in default on its senior
subordinated discount notes, senior subordinated notes and subordinated
debentures, and, under the circumstances discussed below, the Company's senior
revolving credit facility expires on March 1, 1997. The Company's senior
revolving credit facility (or a similar credit facility) is essential for the
Company's continued operations. On September 6, 1996, the senior credit
agreement was amended to, among other things, extend its expiration date and
reduce the interest rate by 0.25%. Under the terms of the amended credit
agreement, the senior credit facility expires on March 1, 1997 (unless
otherwise extended) if the Company has not commenced a case under chapter 11
of the Bankruptcy Code. If such a case is commenced on or prior to March 1,
1997, the senior credit facility will be extended automatically to the earlier
of November 1, 1997 or the effective date of a reorganization under chapter 11
of the Bankruptcy Code (see Note 15). In addition, the loan covenants were
amended to be based upon the activities of the consolidated operating
subsidiaries (JPS Converter and Industrial Corp. and JPS Elastomerics Corp.)
rather than the consolidated Company (i.e., excludes the assets and
liabilities of the parent company and other non-operating subsidiaries). The
amended credit agreement does not permit additional borrowings by the
borrowing subsidiaries for, among other things, loans or dividends to the
Company for the payment of interest on its notes and debentures. As a result
of the aforementioned restriction on the use of proceeds of revolving loans,
the Company did not make scheduled November 15, 1996 interest payments of
approximately $1.9 million on its subordinated debentures and did not make
scheduled December 1, 1996 interest payments of approximately $5.4 million on
its senior subordinated discount notes and approximately $3.6 million on its
senior subordinated notes. The failure to make these scheduled interest
F-27
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
payments constitutes an event of default under the indentures governing these
debt securities. As a result, the holders of these debt securities are
entitled to accelerate the debt represented thereby, among other things. The
Company does not have the ability to repay such indebtedness if the same were
to be accelerated.
On May 8, 1996, the Company engaged The Blackstone Group, L.P. to act as its
financial advisor in connection with a potential financial restructuring of
its debt obligations. In addition, at the request of the holders of a
substantial majority of its outstanding bonds, the Company engaged Houlihan,
Lokey, Howard & Zukin, Inc., effective April 10, 1996 to act as financial
advisors to the holders of the Company's debt securities in connection with
such a financial restructuring. The Company has provided substantial
information to these financial advisors on a confidential basis regarding the
Company's business, strategies, plans and prospects. In addition, the Company
is discussing the terms of a potential financial restructuring with these
advisors and the holders of a substantial majority of its outstanding bonds.
The Company's ability to accomplish a restructuring of the terms of its debt
securities or any refinancing thereof will depend on a number of factors,
including its operating performance, market conditions and the ability of the
Company and its bondholders to come to an agreement as to the appropriate
terms of any such restructuring. Although no agreement, formal or informal,
has been reached between the Company and its bondholders regarding the terms
of a potential financial restructuring, management is optimistic that a
restructuring will be accomplished. Management is unable to predict the impact
of any such restructuring on the accompanying financial statements. If the
Company is not successful in this regard, the default on the Company's debt
securities and its inability to service such debt as required raise
substantial doubt about the Company's ability to continue as a going concern.
15. SUBSEQUENT EVENTS (UNAUDITED)
On May 15, 1997, the Company, JPS Capital, and the Unofficial Bondholder
Committee reached an agreement in principle on the terms of a restructuring to
be accomplished pursuant to the Plan of Reorganization under chapter 11 of the
Bankruptcy Code. Pursuant to a disclosure statement, dated June 25, 1997 (the
"Disclosure Statement"), on June 26, 1997, the Company and JPS Capital
commenced a prepetition solicitation of votes by the holders of Old Debt
Securities and Old Senior Preferred Stock to accept or reject the Plan of
Reorganization. Under the Plan of Reorganization, the holders of Old Debt
Securities and Old Senior Preferred Stock were the only holders of impaired
claims and impaired equity interests entitled to receive a distribution, and
therefore, pursuant to section 1126 of the Bankruptcy Code, were the only
holders entitled to vote on the Plan of Reorganization. At the conclusion of
the 32-day solicitation period, the Plan of Reorganization had been accepted
by holders of more than 99% of the Old Debt Securities that voted on the Plan
of Reorganization and by holders of 100% of the Old Senior Preferred Stock
that voted on the Plan of Reorganization.
On August 1, 1997, the Company commenced its voluntary reorganization case
under chapter 11 of the Bankruptcy Code in the Bankruptcy Court, and filed the
Plan of Reorganization and the Disclosure Statement. None of the Company's
subsidiaries, including JPS Capital which is a co-proponent of the Plan of
Reorganization, commenced a case under the Bankruptcy Code. Pursuant to orders
of the Bankruptcy Court entered on September 9, 1997, the Bankruptcy Court (i)
approved the Disclosure Statement and the solicitation of votes on the Plan of
Reorganization and (ii) confirmed the Plan of Reorganization which, among
other things, resulted in the issuance of the Common Stock. The Plan of
Reorganization became effective on October 9, 1997 (the "Effective Date").
Through the implementation of the Plan of Reorganization on and after the
Effective Date, the Company's most significant financial obligations were
restructured: $240,091,318 in face amount of outstanding Old Debt Securities
were converted to, among other things, $14 million in cash, 99.25% of the
shares of Common Stock and $34 million in aggregate principal amount (subject
to adjustment on the maturity date) of Contingent Notes; the Old Senior
Preferred Stock, the Old Junior Preferred Stock and the Old Common Stock were
cancelled;
F-28
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
warrants to purchase up to 5% of the Common Stock (the "New Warrants") were
issued to holders of Old Senior Preferred Stock; and the obligations of the
Company under its former capital facility were satisfied and a new working
capital facility was obtained. The Company's senior management received
approximately 0.75% of the Common Stock in lieu of payment under the
contractual retention bonus agreements described in Note 9. As a result of the
restructuring, the Company's only significant debt obligation is its guaranty
of the obligations of its operating subsidiaries under the new working capital
facility as discussed below.
The Company's old Revolving Credit Facility, which was scheduled to expire
on March 1, 1997, was amended to extend its expiration date to August 8, 1997
if the Company had not commenced a case under chapter 11 of the Bankruptcy
Code on or prior to such date. Since the chapter 11 case was commenced prior
to that date, the expiration date was automatically extended to the earlier of
November 1, 1997 or the effective date of the reorganization under chapter 11
of the Bankruptcy Code.
Because of the restrictions on the use of borrowings under the Old Revolving
Credit Facility as described in Note 6, the Company did not make a scheduled
May 15, 1997 interest payment of approximately $1.9 million on its
subordinated debentures and did not make scheduled June 1, 1997 interest
payments of approximately $5.4 million on its senior subordinated discount
notes and approximately $3.6 million on its senior subordinated notes. In
addition, the Company failed to mandatorily redeem, on June 1, 1997,
approximately $37.8 million in aggregate principal amount of its senior
subordinated discount notes and approximately $31.2 million in aggregate
principal amount of its senior subordinated notes. All such debt was
restructured pursuant to the Plan of Reorganization.
The indentures governing the notes and debentures provide for the payment of
interest on overdue installments of interest and principal, payable on demand
at the rate of 1% per annum in excess of the interest rate then in effect. In
the nine months ended August 2, 1997, the Company accrued approximately $1.1
million under these provisions, all of which remained unpaid as of August 2,
1997. All such interest was restructured pursuant to the Plan of
Reorganization.
Dividends on the Company's senior preferred stock are cumulative and
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. The Company did not declare
and accordingly has not distributed the scheduled November 15, 1996, February
15, 1997 and May 15, 1997 preferred stock dividends of 8,079 shares, 8,203
shares and 8,326 shares, respectively. Under the terms of the Plan of
Reorganization, all senior preferred stock was exchanged for warrants to
purchase new common stock of the reorganized company.
On the Effective Date, the Company obtained a new revolving credit facility.
The new credit facility provides for a $135 million secured revolving credit
facility with a five-year term. Availability under the new facility is subject
to a borrowing base comprised of eligible receivables and inventory and a
portion of fixed assets. A letter of credit sub-facility in an amount of $20
million is available as part of the new facility with undrawn face amount of
outstanding letters of credit reserved against the total availability under
the new facility.
As a result of the consummation of the Plan of Reorganization and the
transactions contemplated thereby, the Company will adopt the fresh start
principles of Statement of Position 90-7 ("SOP 90-7") issued by the American
Institute of Certified Public Accountants. The Company's reorganization value
will be allocated to specific tangibles and identifiable intangible assets.
Any unallocated portion of the reorganization value will be amortized over a
specific period, currently estimated to be 20 years. As a result of the
application of SOP 90-7, the financial condition and results of operations of
the reorganized company from and after the Effective Date may not be
comparable to the financial condition or results of operations reflected in
the historical financial statements set forth elsewhere herein.
F-29
<PAGE>
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On August 12, 1997, pursuant to an agreement between JPS Converter and
Industrial Corp., a wholly-owned subsidiary of JPS, and Safety Components
Fabrics Technologies, Inc. ("Safety Components"), the Company sold its Dunean
manufacturing facility to Safety Components. This facility was closed by the
Company in October 1996 and all production equipment and capacity was
transferred to their plants. The proceeds from the sale, after expenses and
other costs, were approximately $1.0 million.
On August 28, 1997, pursuant to an agreement between JPS Carpet Corp., a
wholly-owned subsidiary of the Company, Gulistan Holdings Inc. ("Gulistan")
and Gulistan Carpet Inc., the Company sold its debt and equity securities of
Gulistan consisting of 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. Proceeds from the sale were $2
million. As of August 2, 1997, the carrying value of these securities was
reduced to the net realizable value of $2 million resulting in a writedown of
the carrying value of the Gulistan securities of approximately $3.0 million.
This writedown of the carrying value of the Gulistan securities and writedowns
recorded in prior periods during the year are reflected in the accompanying
statements of operations for the three months and nine months ended August 2,
1997.
The Company's NOL carryforwards (see Note 8) will be substantially reduced
and limited in use as a result of the implementation of the Company's Plan of
Reorganization. In general, the Internal Revenue Code provides that a debtor
in a bankruptcy case, such as the Company's, must reduce its tax attributes--
such as its NOL carryforwards and current year NOLs, tax credits, and tax
basis in certain assets--by any cancellation of indebtedness ("COD"). COD is
the amount by which the indebtedness discharged exceeds any consideration
given in exchange therefor. Any reduction in tax attributes generally occurs
on a separate company basis. The Company recognized significant COD, which
will result in significant attribute reduction as a result of the exchanges
that occurred under the Plan of Reorganization. Such attribute reduction will
substantially reduce the NOL carryforwards that might otherwise be available
to offset future income.
In addition, any NOLs and carryforwards and certain other tax attributes
remaining after the attribute reduction outlined above are subject to the
limitations imposed by Section 382 of the Internal Revenue Code. Such
limitations apply on certain changes in ownership, including changes such as
those occurring under the Plan of Reorganization. The effect of these
limitations is to limit the utilization of the net operation loss
carryforwards and certain built-in losses to an amount equal to the value of
the Company immediately after the ownership change (subject to certain
adjustments) multiplied by the Federal long-term tax exempt rate. Even before
giving effect to the limitations occurring under the Plan of Reorganization,
due to the Company's operating history, it was uncertain it would be able to
utilize all deferred tax assets. Therefor, a valuation allowance had 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.
F-30
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMA-
TION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICI-
TATION OF AN OFFER TO BUY ANY OF THESE SECURITIES IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JU-
RISDICTION. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information................................................... 2
Disclosures Regarding Forward-Looking Statements......................... 2
Prospectus Summary....................................................... 3
Summary Historical Financial Data........................................ 5
Risk Factors............................................................. 8
The Company.............................................................. 10
Use of Proceeds.......................................................... 13
Price Range of Common Stock and Dividend Policy.......................... 13
Capitalization........................................................... 14
Selected Historical Financial Data....................................... 15
Pro Forma Financial Statements........................................... 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 25
Business................................................................. 36
Management............................................................... 41
Security Ownership of Principal Stockholders and Management.............. 47
Description of the Common Stock.......................................... 49
Registration Rights...................................................... 49
Description of the Credit Facility....................................... 49
Selling Stockholders..................................................... 51
Plan of Distribution..................................................... 52
Legal Matters............................................................ 52
Experts.................................................................. 52
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
JPS TEXTILE GROUP, INC.
10,000,000 SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE
---------------
PROSPECTUS
---------------
December 15, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF DISTRIBUTION.
The following table sets forth an estimate of the expenses that will be
incurred by the Registrant in connection with the distribution of the
securities being registered hereby:
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 37,373.00
NASD filing fees.............................................. $ 0.00
Legal fees and expenses....................................... $100,000.00
Accounting fees and expenses.................................. $250,000.00
Miscellaneous................................................. $105,000.00
-----------
Total....................................................... $492,373.00
===========
</TABLE>
ITEM 14. INDEMNIFICATION AND LIMITATION OF LIABILITY OF DIRECTORS AND
OFFICERS.
Generally, Section 145 of the General Corporation Law of the State of
Delaware (the "GCL") permits a corporation to indemnify certain persons made a
party to an action, by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise. In the case of an action by or in the right
of the corporation, no indemnification may be made in respect of any matter as
to which such person was adjudged liable for negligence or misconduct in the
performance of such person's duty to the corporation unless the Delaware Court
of Chancery or the court in which such action was brought determines that
despite the adjudication of liability such person is fairly and reasonably
entitled to indemnity for proper expenses. To the extent such person has been
successful in the defense of any matter, such person shall be indemnified
against expenses actually and reasonably incurred by him.
Section 102(b)(7) of the GCL enables a Delaware corporation to include a
provision in its certificate of incorporation limiting a director's liability
to the corporation or its stockholders for monetary damages for breaches of
fiduciary duty as a director. JPS' Amended and Restated Certificate of
Incorporation and By-laws that were adopted pursuant to the Plan of
Reorganization provide for indemnification of its officers and directors to
the full extent permitted under Delaware law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On October 9, 1997 (the Effective Date of the Joint Plan of Reorganization
proposed by JPS and JPS Capital Corp., a Delaware corporation and a wholly-
owned subsidiary of JPS, and confirmed by order of the Bankruptcy Court
entered on September 9, 1997), 10,000,000 shares of Common Stock, par value
$.01 per share, of JPS (the "Common Stock"), and warrants to purchase up to
526,316 shares of common stock of JPS at an initial purchase price of $98.76
per share were issued by JPS and distributed pursuant to the Plan of
Reorganization.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.
(a) Exhibits
The following is a complete list of Exhibits filed as part of this
Registration Statement, which are incorporated herein:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1(i) Joint Plan of Reorganization for JPS Textile Group, Inc., a Delaware
corporation ("JPS"), proposed by JPS and JPS Capital Corp., a
Delaware corporation, pursuant to chapter 11 of title 11 United
States Code (the "Bankruptcy Code"), dated August 1, 1997 (as
amended, the "Plan").(1)
2.1(ii) Revised Technical and Conforming Amendment to the Plan, dated
September 4, 1997.(2)
3.1 Restated Certificate of Incorporation of JPS, filed with the
Secretary of State of the State of Delaware on October 9, 1997.(1)
3.2 Amended and Restated By-laws of JPS.(1)
4.1 Indenture, dated as of October 9, 1997 (the "Contingent Note
Indenture"), between JPS Capital Corp. ("Capital") and First Trust
National Association ("First Trust"), as Trustee, relating to
Capital's Contingent Notes (the "Contingent Notes").(1)
4.2 Form of Contingent Note, incorporated by reference to Exhibit A to
the Contingent Note Indenture.(1)
10.1 Registration Rights Agreement, dated as of October 9, 1997, by and
among JPS and the holders of JPS's Common Stock.(1)
10.2 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").(3)
10.3 First Amendment to the CIT Loan Agreement, dated as of June 26, 1992,
by and between JCIC and CIT.(3)
10.4 Second Amendment to the CIT Loan Agreement, dated as of December 22,
1992, by and between JCIC and CIT.(3)
10.5 Agreement of Lease, dated as of June 1, 1988, by and between 1185
Avenue of the Americas Associates ("1185 Associates") and JCIC.(3)
10.6 Lease Modification and Extension Agreement, dated as of April 2,
1991, by and between 1185 Associates and JCIC.(3)
10.7 Third Amendment to the CIT Loan Agreement, dated as of August 6,
1993, by and between JCIC and CIT.(4)
10.8 Trademark License Agreement, dated as of May 9, 1988, by and between
J.P. Stevens and JPS Acquisition Corp. (predecessor to JPS).(4)
10.9 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.(4)
10.10 Purchase Agreement, dated as of April 24, 1988, by and among JPS
Holding Corp., JPS, Odyssey Partners, West Point-Pepperell, Inc., STN
Holdings Inc., Magnolia Partners, L.P. and J.P. Stevens.(4)
10.11 Asset Purchase Agreement, dated as of May 25, 1994, by and among JPS,
JPS Automotive Products Corp., a Delaware corporation, JCIC, JPS Auto
Inc., a Delaware corporation, and Foamex International Inc., a
Delaware corporation.(5)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.12 Fourth Amended and Restated Credit Agreement (the "Existing Credit
Agreement"), dated as of June 24, 1994, by and among JPS, 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.(6)
10.13 First Amendment to the Existing Credit Agreement, dated as of November
4, 1994, by and among JPS, 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.(7)
10.14 Second Amendment to the Existing Credit Agreement, dated as of
December 21, 1994, by and among JPS, 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.(7)
10.15 Fourth Amendment to CIT Loan Agreement, dated as of December 29, 1994,
by and between JCIC and CIT.(6)
10.16 Lease Modification and Extension Agreement, dated as of April 30,
1993, by and between 1585 Associates and JCIC.(7)
10.17 Third Amendment to the Existing Credit Agreement, dated as of May 31,
1995 by and among JPS, 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.(8)
10.18 Fourth Amendment to the Existing Credit Agreement, dated as of October
28, 1995 by and among JPS, 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.(12)
10.19 Lease Modification and Extension Agreement, dated as of November 17,
1994, by and between 1185 Associates and JCIC.(13)
10.20 Asset Transfer Agreement, dated as of November 16, 1995, by and among
JPS, 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.(10)
10.21 Fifth Amendment to the Existing Credit Agreement, dated as of May 6,
1996, by and among JPS, 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.(11)
10.22 Sixth Amendment to the Existing Credit Agreement, dated as of May 15,
1996, by and among JPS, 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.(11)
10.23 Seventh Amendment to the Existing Credit Agreement, dated as of July
22, 1996, by and among JPS, 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.(12)
10.24 Eighth Amendment to the Existing Credit Agreement, dated as of
September 6, 1996, by and among JPS, 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.(12)
10.25 Asset Purchase Agreement, dated as of September 30, 1996 between
Elastomer Technologies Group, Inc., a Delaware corporation, and
JEC.(13)
10.26 Receivables Purchase Agreement dated as of September 30, 1996 between
The Bank of New York Commercial Corporation, a New York corporation,
and JEC.(13)
10.27 Ninth Amendment to Existing Credit Agreement, dated as of February 21,
1997, by and among JPS, 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.(14)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.28 Tenth Amendment to the Existing Credit Agreement, dated as of April
29, 1997, by and among JPS, 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.(15)
10.29 Eleventh Amendment to the Existing Credit Agreement, dated as of May
15, 1997, by and among JPS, 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.(15)
10.30 Credit Facility Agreement, dated as of October 9, 1997, by and among
JPS, C&I, Elastomerics, the financial institutions listed on the
signature pages thereto, and the agent and co-agent party thereto.(9)
21 Subsidiaries of the Registrant.(9)
23.1 Consent of Deloitte & Touche LLP.
24.1 Power of Attorney relating to JPS (included as part of the signature
page hereof).(9)
27.1 Financial data schedule.(10)
</TABLE>
- --------
(1) Previously filed as an exhibit to JPS's Current Report on Form 8-K dated
July 2, 1997.
(2) Previously filed as an exhibit JPS's Registration Statement on Form 8-A
filed on September 8, 1997.
(3) Previously filed as an exhibit to JPS's Registration Statement No. 33-
58272 on Form S-1, declared effective by the SEC on July 26, 1993.
(4) Previously filed as an exhibit to JPS's Annual Report on Form 10-K for
the year ended October 30, 1993.
(5) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended April 30, 1994.
(6) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended July 30, 1994.
(7) Previously filed as an exhibit to JPS's Annual Report on Form 10-K for
the year ended October 29, 1994.
(8) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended April 29, 1995.
(9) Previously filed.
(10) Previously filed as an exhibit to JPS's Current Report on Form 8-K dated
December 1, 1995.
(11) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended April 27, 1996.
(12) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended July 27, 1996.
(13) Previously filed as an exhibit to JPS's Annual Report on Form 10-K for
the year ended November 2, 1996.
(14) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended February 1, 1997.
(15) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended May 3, 1997.
(b) Financial Statement Schedule:
Schedule II--Valuation and Qualifying Accounts
All other schedules are omitted because they are not required or are not
applicable, or the required information is shown in the Consolidated Financial
Statements or Notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of JPS pursuant to the provisions in Item 14 above, or otherwise, JPS
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in such act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by JPS of expenses incurred
or paid by a director or officer or controlling person of JPS in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, JPS will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in such act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the Plan of
Distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSON IN
THE CAPACITIES AND ON THE DATE INDICATED.
JPS Textile Group, Inc.
/s/ David H. Taylor
By: _________________________________
Name:David H. Taylor
Title:Executive Vice President--
Finance and Secretary
Date: December 12, 1997
SIGNATURE TITLE DATE
Director
* December 12,
_________________________________ 1997
ROBERT J. CAPOZZI
Director
* December 12,
_________________________________ 1997
JEFFREY S. DEUTSCHMAN
Director
* December 12,
_________________________________ 1997
NICHOLAS P. DIPAOLO
Director
* December 12,
_________________________________ 1997
MICHAEL L. FULBRIGHT
Chairman of the Board,
* Director, Chief Executive December 12,
_________________________________ Officer and President 1997
JERRY E. HUNTER
Director
* December 12,
_________________________________ 1997
JOHN M. SULLIVAN, JR.
Director, Executive Vice
/s/ David H. Taylor President--Finance and December 12,
_________________________________ Secretary 1997
DAVID H. TAYLOR
Controller
* December 12,
_________________________________ 1997
L. ALLEN OLLIS
*David H. Taylor
_____________________________
ATTORNEY-IN-FACT
II-6
<PAGE>
JPS TEXTILE GROUP, INC.
INDEX TO SCHEDULE
<TABLE>
<S> <C>
INDEX TO FINANCIAL STATEMENT SCHEDULE
For the Fiscal Years Ended October 29, 1994, October 28, 1995 and November
2, 1996
FINANCIAL STATEMENT SCHEDULE
II. Valuation and Qualifying Accounts and Reserves........................ S-1
</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.
<PAGE>
SCHEDULE II
JPS TEXTILE GROUP, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<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(A) DESCRIBE(B) PERIOD
- ------------------------ ---------- ---------- ----------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ALLOWANCES DEDUCTED FROM
ASSET TO WHICH THEY
APPLY:
Fiscal 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
====== ===== ====== ====== ======
Fiscal 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
====== ===== ====== ====== ======
Fiscal Year Ended
November 2, 1996 (53
Weeks)
Allowance for doubtful
accounts............. $1,950 $ 72 $ 563 $ 237 $2,348
Claims, returns and
other allowances..... 181 -- 338 356 163
------ ----- ------ ------ ------
$2,131 $ 72 $ 901 $ 593 $2,511
====== ===== ====== ====== ======
</TABLE>
- --------
(a) Change in various reserves charged to net sales.
(b) Uncollected receivables written off, net of recoveries.
S-1
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1(i) Joint Plan of Reorganization for JPS Textile Group, Inc., a Delaware
corporation ("JPS"), proposed by JPS and JPS Capital Corp., a
Delaware corporation, pursuant to chapter 11 of title 11 United
States Code (the "Bankruptcy Code"), dated August 1, 1997 (as
amended, the "Plan").(1)
2.1(ii) Revised Technical and Conforming Amendment to the Plan, dated
September 4, 1997.(2)
3.1 Restated Certificate of Incorporation of JPS, filed with the
Secretary of State of the State of Delaware on October 9, 1997.(1)
3.2 Amended and Restated By-laws of JPS.(1)
4.1 Indenture, dated as of October 9, 1997 (the "Contingent Note
Indenture"), between JPS Capital Corp. ("Capital") and First Trust
National Association ("First Trust"), as Trustee, relating to
Capital's Contingent Notes (the "Contingent Notes").(1)
4.2 Form of Contingent Note, incorporated by reference to Exhibit A to
the Contingent Note Indenture.(1)
10.1 Registration Rights Agreement, dated as of October 9, 1997, by and
among JPS and the holders of JPS's Common Stock.(1)
10.2 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").(3)
10.3 First Amendment to the CIT Loan Agreement, dated as of June 26, 1992,
by and between JCIC and CIT.(3)
10.4 Second Amendment to the CIT Loan Agreement, dated as of December 22,
1992, by and between JCIC and CIT.(3)
10.5 Agreement of Lease, dated as of June 1, 1988, by and between 1185
Avenue of the Americas Associates ("1185 Associates") and JCIC.(3)
10.6 Lease Modification and Extension Agreement, dated as of April 2,
1991, by and between 1185 Associates and JCIC.(3)
10.7 Third Amendment to the CIT Loan Agreement, dated as of August 6,
1993, by and between JCIC and CIT.(4)
10.8 Trademark License Agreement, dated as of May 9, 1988, by and between
J.P. Stevens and JPS Acquisition Corp. (predecessor to JPS).(4)
10.9 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.(4)
10.10 Purchase Agreement, dated as of April 24, 1988, by and among JPS
Holding Corp., JPS, Odyssey Partners, West Point-Pepperell, Inc., STN
Holdings Inc., Magnolia Partners, L.P. and J.P. Stevens.(4)
10.11 Asset Purchase Agreement, dated as of May 25, 1994, by and among JPS,
JPS Automotive Products Corp., a Delaware corporation, JCIC, JPS Auto
Inc., a Delaware corporation, and Foamex International Inc., a
Delaware corporation.(5)
10.12 Fourth Amended and Restated Credit Agreement (the "Existing Credit
Agreement"), dated as of June 24, 1994, by and among JPS, 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.(6)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.13 First Amendment to the Existing Credit Agreement, dated as of November
4, 1994, by and among JPS, 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.(7)
10.14 Second Amendment to the Existing Credit Agreement, dated as of
December 21, 1994, by and among JPS, 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.(7)
10.15 Fourth Amendment to CIT Loan Agreement, dated as of December 29, 1994,
by and between JCIC and CIT.(6)
10.16 Lease Modification and Extension Agreement, dated as of April 30,
1993, by and between 1585 Associates and JCIC.(7)
10.17 Third Amendment to the Existing Credit Agreement, dated as of May 31,
1995 by and among JPS, 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.(8)
10.18 Fourth Amendment to the Existing Credit Agreement, dated as of October
28, 1995 by and among JPS, 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.(12)
10.19 Lease Modification and Extension Agreement, dated as of November 17,
1994, by and between 1185 Associates and JCIC.(13)
10.20 Asset Transfer Agreement, dated as of November 16, 1995, by and among
JPS, 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.(10)
10.21 Fifth Amendment to the Existing Credit Agreement, dated as of May 6,
1996, by and among JPS, 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.(11)
10.22 Sixth Amendment to the Existing Credit Agreement, dated as of May 15,
1996, by and among JPS, 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.(11)
10.23 Seventh Amendment to the Existing Credit Agreement, dated as of July
22, 1996, by and among JPS, 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.(12)
10.24 Eighth Amendment to the Existing Credit Agreement, dated as of
September 6, 1996, by and among JPS, 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.(12)
10.25 Asset Purchase Agreement, dated as of September 30, 1996 between
Elastomer Technologies Group, Inc., a Delaware corporation, and
JEC.(13)
10.26 Receivables Purchase Agreement dated as of September 30, 1996 between
The Bank of New York Commercial Corporation, a New York corporation,
and JEC.(13)
10.27 Ninth Amendment to Existing Credit Agreement, dated as of February 21,
1997, by and among JPS, 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.(14)
10.28 Tenth Amendment to the Existing Credit Agreement, dated as of April
29, 1997, by and among JPS, 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.(15)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.29 Eleventh Amendment to the Existing Credit Agreement, dated as of May
15, 1997, by and among JPS, 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.(15)
10.30 Credit Facility Agreement, dated as of October 9, 1997, by and among
JPS, C&I, Elastomerics, the financial institutions listed on the
signature pages thereto, and the agent and co-agent party thereto.(9)
21 Subsidiaries of the Registrant.(9)
23.1 Consent of Deloitte & Touche LLP.
24.1 Power of Attorney relating to JPS (included as part of the signature
page hereof).(9)
27.1 Financial data schedule.(10)
</TABLE>
- --------
(1) Previously filed as an exhibit to JPS's Current Report on Form 8-K dated
July 2, 1997.
(2) Previously filed as an exhibit JPS's Registration Statement on Form 8-A
filed on September 8, 1997.
(3) Previously filed as an exhibit to JPS's Registration Statement No. 33-
58272 on Form S-1, declared effective by the SEC on July 26, 1993.
(4) Previously filed as an exhibit to JPS's Annual Report on Form 10-K for
the year ended October 30, 1993.
(5) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended April 30, 1994.
(6) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended July 30, 1994.
(7) Previously filed as an exhibit to JPS's Annual Report on Form 10-K for
the year ended October 29, 1994.
(8) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended April 29, 1995.
(9) Previously filed.
(10) Previously filed as an exhibit to JPS's Current Report on Form 8-K dated
December 1, 1995.
(11) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended April 27, 1996.
(12) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended July 27, 1996.
(13) Previously filed as an exhibit to JPS's Annual Report on Form 10-K for
the year ended November 2, 1996.
(14) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended February 1, 1997.
(15) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q for
the quarter ended May 3, 1997.
3
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of JPS Textile Group, Inc.
on Form S-1 of our report dated January 17, 1997, appearing in the Prospectus,
which is part of this Registration Statement.
We also consent to reference to us as "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
December 12, 1997
