<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________.
Commission File Number 33-27038
JPS TEXTILE GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 57-0868166
- ---------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
555 North Pleasantburg Drive, Suite 202, Greenville, South Carolina 29607
- ---------------------------------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number (864) 239-3900
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ----- -----
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
------ ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 10,000,000 shares of the
Company's Common Stock were outstanding as of March 17, 1998.
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JPS TEXTILE GROUP, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Page
Number
<S> <C> <C>
Item 1. Condensed Consolidated Balance Sheets
January 31, 1998 (Unaudited) and November 1, 1997 . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
Three Months Ended January 31, 1998 (Reorganized Company) and
February 1, 1997 (Predecessor Company) (Unaudited) . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended January 31, 1998 (Reorganized Company) and
February 1, 1997 (Predecessor Company) (Unaudited) . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements (Unaudited) . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 10
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
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Item 1. Financial Statements
JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
January 31, November 1,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,575 $ 3,888
Accounts receivable 74,825 79,569
Inventories (Note 2) 46,706 44,770
Prepaid expenses and other (Note 4) 38,143 37,085
---------- ----------
Total current assets 162,249 165,312
Property, plant and equipment, net 106,799 104,554
Reorganization value in excess of amounts
allocable to identifiable assets 45,116 45,690
Other assets 6,790 6,825
---------- ----------
Total assets $ 320,954 $ 322,381
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,090 $ 24,353
Accrued interest 1,436 421
Accrued salaries, benefits and withholdings 8,086 9,148
Other accrued expenses 11,525 13,182
Current portion of long-term debt (Notes 3 and 4) 35,845 36,076
---------- ----------
Total current liabilities 79,982 83,180
Long-term debt (Note 3) 94,914 94,891
Other long-term liabilities 18,319 18,263
---------- ----------
Total liabilities 193,215 196,334
---------- ----------
Shareholders' equity:
Common stock 100 100
Additional paid-in capital 123,230 123,230
Retained earnings 4,409 2,717
---------- ----------
Total shareholders' equity 127,739 126,047
---------- ----------
Total liabilities and shareholders' equity $ 320,954 $ 322,381
========== ==========
</TABLE>
Note: The condensed consolidated balance sheet at November 1, 1997 has been
extracted from the audited financial statements.
See notes to condensed consolidated financial statements.
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JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Share and Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
Reorganized Predecessor
Company Company
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January 31, February 1,
1998 1997
------------- ------------
<S> <C> <C>
Net sales $ 100,800 $ 97,166
Cost of sales 85,414 84,933
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Gross profit 15,386 12,233
Selling, general and administrative expenses 10,509 9,314
Other income (expense), net 24 (6)
------------- -----------
Operating profit 4,901 2,913
Valuation allowance on Gulistan securities - (1,299)
Interest income 325 737
Interest expense (2,284) (10,174)
Reorganization fees and expenses - (1,162)
------------- -----------
Income (loss) before income taxes 2,942 (8,985)
Provision for income taxes 1,250 157
------------- -----------
Net income (loss) $ 1,692 $ (9,142)
============= ===========
Weighted average number of common shares outstanding (A) 10,000,000
=============
Basic earnings per common share (A) $ 0.17
=============
</TABLE>
(A) Share and per share data are not meaningful for periods ending prior to the
Effective Date of the Plan of Reorganization due to the significant change
in the capital structure of the Company in connection with the Plan of
Reorganization.
See notes to condensed consolidated financial statements.
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JPS TEXTILE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
Reorganized Predecessor
Company Company
------------- ------------
January 31, February 1,
1998 1997
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,692 $ (9,142)
---------- ---------
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization, except amounts included
in interest expense 2,979 4,684
Interest accretion and debt issuance cost amortization 81 2,431
Valuation allowance on Gulistan securities - 1,299
Other, net (198) 844
Changes in assets and liabilities:
Accounts receivable 4,744 3,943
Inventories (1,936) 495
Prepaid expenses and other assets (775) (1,431)
Accounts payable (1,262) (2,544)
Accrued expenses and other liabilities (1,778) 3,649
---------- ---------
Total adjustments 1,855 13,370
---------- ---------
Net cash provided by operating activities 3,547 4,228
---------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES
Property and equipment additions (4,651) (1,165)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Revolving credit facility repayments, net 229 (3,081)
Repayment and purchases of long-term debt (438) (411)
---------- ---------
Net cash used in financing activities (209) (3,492)
---------- ---------
Net decrease in cash (1,313) (429)
Cash at beginning of period 3,888 1,460
---------- ---------
Cash at end of period $ 2,575 $ 1,031
========== =========
Supplemental cash flow information:
Interest paid $ 1,188 $ 1,566
Income taxes paid 488 213
</TABLE>
See notes to condensed consolidated financial statements.
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JPS TEXTILE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
1. Basis of Presentation
Unless the context otherwise requires, the terms "JPS" and the
"Company" as used in these consolidated financial statements mean JPS
Textile Group and JPS Textile Group, Inc. together with its
subsidiaries, respectively.
The Company has prepared, without audit, the interim condensed
consolidated financial statements and related notes. In the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and cash flows at January 31, 1998 and for all
periods presented have been made.
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 amount of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the fiscal year ended
November 1, 1997. The results of operations for the interim period
are not necessarily indicative of the operating results for the full
year.
As discussed in Note 1 of the Notes to Consolidated Financial
Statements in the Company's Annual Report on Form 10-K for the fiscal
year ended November 1, 1997, on August 1, 1997, JPS (but no subsidiary
of JPS) commenced a voluntary reorganization case under chapter 11,
title 11 of the United States Code (the "Bankruptcy Code") in the
Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court") and filed a Joint Plan of Reorganization proposed
by JPS and its wholly-owned subsidiary, JPS Capital Corp. ("JPS
Capital"). The Plan of Reorganization was previously accepted,
pursuant to a prepetition solicitation of votes, by holders of more
than 99% of the public debt securities that voted thereon and holders
of 100% of the Series A Senior Preferred Stock that voted thereon (the
holders of JPS's public debt securities and Series A Senior Preferred
Stock being 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, the only holders entitled to
vote on the Plan of Reorganization). The Plan of Reorganization was
confirmed by the Bankruptcy Court on September 9, 1997 and became
effective on October 9, 1997 (the "Effective Date"), resulting in,
among other things, the cancellation of JPS's Series A Senior
Preferred Stock, Series B Junior Preferred Stock, class A common stock
and class B common stock, and the issuance by JPS of 10,000,000 shares
of common stock, $.01 par value per share (the "Common Stock").
Through the implementation of the Plan of Reorganization, (a) JPS's
public debt securities, having a face amount of approximately $241.1
million, were converted into $14 million of cash, 99.25% of the Common
Stock issued by JPS on the Effective Date, and $34 million in
aggregate principal amount (subject to adjustment on the maturity
date) of contingent payment notes of JPS Capital, (b) JPS issued, in
respect of its Series A Senior Preferred Stock, warrants to purchase
up to 5% of the Common Stock, (c) the obligations of JPS under its
former working capital facility were satisfied and a new revolving
credit
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agreement was obtained, and (d) JPS's senior management received
approximately 0.75% of the Common Stock issued by JPS on the Effective
Date.
The Plan of Reorganization was accounted for pursuant to Statement of
Position 90-7 ("SOP 90-7") of the American Institute of Certified
Public Accountants, entitled "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code." The accompanying
consolidated financial statements reflect the use of "fresh start"
reporting as required by SOP 90-7, in which assets and liabilities
were adjusted to their fair values and resulted in the creation of a
new reporting entity (the "Company" or the "Reorganized Company") with
no retained earnings or accumulated deficit as of October 9, 1997.
Accordingly, the consolidated financial statements for the period
prior to October 9, 1997 (the "Predecessor Company") are not
comparable to consolidated financial statements presented subsequent
to October 9, 1997. A black line has been drawn on the accompanying
consolidated financial statements and notes thereto to distinguish
between the Reorganized Company and Predecessor Company balances.
In the quarter ended February 1, 1997, the Company incurred
professional fees and expenses of approximately $1.2 million in
connection with the Plan of Reorganization. Such amounts are
classified in the accompanying condensed consolidated statements of
operations as "reorganization fees and expenses."
2. Inventories (in thousands):
<TABLE>
<CAPTION>
January 31, November 1,
1998 1997
---------- -----------
<S> <C> <C>
Raw materials and supplies $ 12,713 $ 12,508
Work-in-process 17,488 17,168
Finished goods 16,505 15,094
--------- ----------
Total $ 46,706 $ 44,770
========= ==========
</TABLE>
3. Long-Term Debt (in thousands):
<TABLE>
<CAPTION>
January 31, November 1,
1998 1997
---------- -------------
<S> <C> <C>
Senior credit facility, revolving line of credit $ 92,475 $ 92,246
Contingent notes 34,540 34,540
Equipment financing 3,744 4,181
--------- ----------
Total 130,759 130,967
Less current portion 35,845 36,076
--------- ----------
Long-term portion $ 94,914 $ 94,891
========= ==========
</TABLE>
4. Contingencies
The Company has provided for all estimated future costs associated
with certain defective roofing products sold by the Predecessor
Stevens Division operations. The liability for future costs
associated with these defective roofing products is subject to
management's best estimate, including factors such as expected future
claims by geographic region and roofing compound applied; expected
costs to repair or replace such roofing products; estimated remaining
length of time that such claims will be made by customers; and the
estimated costs to litigate and settle certain claims now in
litigation. Based on warranties that were issued on the roofs, the
Company estimates that substantially all the defective roofing product
claims will be resolved by the year 2000. The liability for such
defective products was
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approximately $3.6 million at January 31, 1998 and $3.8 million at
November 1, 1997. The Company records the costs of meeting these
obligations as a reduction of the balance of the recorded liability
and, accordingly, such costs are not reflected in results of
operations. 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.
At January 31, 1998, the Company had net operating loss carryforwards
for regular federal income tax purposes of approximately $26.6 million
(subject to adjustment by the Internal Revenue Service). The net
operating loss carryforwards expire in years 2004 through 2011. The
Company also has federal alternative minimum tax net operating loss
carryforwards of approximately $20.9 million (subject to adjustment)
which expire in 2005 through 2012. Alternative minimum tax credits of
approximately $1.8 million can be carried forward indefinitely and
used as a credit against regular federal taxes, subject to limitation.
The Company utilized approximately $1.4 million of net operating loss
carryforwards for regular federal income tax purposes during the
quarter ended January 31, 1998. The Company's ability to utilize its
net operating loss carryforwards is limited under the income tax laws
as a result of the change in the ownership of the Company's stock
occurring as a part of the Plan of Reorganization. The effect of such
an ownership change is to limit the annual utilization of the net
operating loss carryforwards to an amount equal to the value of the
Company immediately after the time of the change (subject to certain
adjustments) multiplied by the Federal long-term tax exempt rate. Due
to the Company's operating history, it is uncertain that it will be
able to utilize all deferred tax assets. Therefore, a valuation
allowance of approximately $28 million has been provided.
On the Effective Date, under the terms of the Plan of Reorganization,
JPS Capital, JPS and First Trust National Association, as trustee,
entered into an indenture, dated as of the Effective Date, pursuant to
which JPS Capital issued contingent notes in an initial principal
amount of approximately $34 million, subject to adjustment as set
forth below. The contingent notes are unsecured obligations of JPS
Capital and are contingent as to timing and amount.
The timing and amount of payments due pursuant to the contingent notes
will depend upon the amount of cash on hand at JPS Capital at
maturity, which in turn will depend on the ultimate resolution of
certain possible contingent tax liabilities of the Company. JPS
Capital was established in 1994 at the time of the Company's sale of
its automotive assets. During fiscal year 1994, the Company utilized
approximately $141 million of tax net operating loss carryforwards to
offset the gain recognized on such sale. Although the Company
believes that the use of such carryforwards to offset such gain more
likely than not will be sustained under existing tax laws, uncertainty
existed at the time of such sale and continues to exist. Therefore,
the Company set aside in JPS Capital a portion of the net proceeds
from such sale to satisfy, if necessary, these possible contingent tax
liabilities. Such amounts were invested in United States Treasury
Securities and subsequently reinvested in United States Treasury
Securities and corporate obligations by JPS Capital. As of the
Effective Date, JPS Capital held funds of approximately $34 million.
Pursuant to the Plan of Reorganization, JPS Capital will continue to
hold those funds on behalf of the JPS tax affiliates, and following
the final resolution of such possible contingent tax liabilities,
provide to them from such funds the amounts with which they will
satisfy their finally determined liabilities.
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 principal amount of the contingent notes will be reduced to
equal the aggregate funds held by JPS Capital. The contingent notes
will mature and be payable on the forty-fifth day following the date
on which the possible
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<PAGE> 9
contingent tax liability in respect of fiscal year 1994 is finally
resolved, and to the extent of any such liability satisfied. No
interest is payable on the contingent notes prior to maturity.
However, on the maturity date thereof, as provided above, interest
will be payable on the contingent notes to the extent the aggregate
funds held by JPS Capital on such date exceeds $34 million. If, on
such date, the aggregate principal amount, reduced as provided above,
is zero or less, the contingent notes will be deemed automatically
canceled and no longer an obligation of JPS Capital.
5. Earnings Per Share
In the quarter ended January 31, 1998, the Company adopted Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share" which requires the presentation of basic and diluted earnings
per share, as defined. Basic earnings per share for the quarter ended
January 31, 1998, was computed by dividing net income by the weighted
average number of shares of common stock outstanding during the
period. The presentation of diluted earnings per share was not
required for the quarter ended January 31, 1998 since the inclusion of
additional shares assuming the exercise of stock options and warrants
was antidilutive. Earnings per share for the quarter ended February
1, 1997 have not been presented because share and per share data for
periods ending prior to the Effective Date are not meaningful due to
the significant change in the capital structure of the Company in
connection with the Plan of Reorganization.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The financial statements for the period subsequent to the Effective Date
(quarter ended January 31, 1998) were prepared under the principles of
fresh-start reporting for companies emerging from chapter 11 reorganization and
are not comparable to prior periods. The Company believes that the most
meaningful comparison is made using the pro forma financial information, and
therefore, this discussion addresses such pro forma information. The unaudited
pro forma financial information for the quarter ended February 1, 1997 gives
effect to the Plan of Reorganization as if the transactions had occurred on
November 3, 1996 and was derived by adjusting the historical consolidated
financial statements of the Company for the effects of fresh-start accounting.
Such adjustments primarily relate to decreased depreciation expense resulting
from revaluation of the Company's fixed assets, decreased interest expense
resulting from extinguishment of certain old debt securities in the
reorganization, increased amortization resulting from reorganization value in
excess of amounts allocable to identifiable assets and the elimination of
reorganization items, and their related tax effects. This pro forma
information is provided for informational purposes only and should not be
construed to be indicative of the results of operations of the Company had the
transactions been consummated on November 3, 1996 and are not intended to be
predictive of the results of operations of the Company for any future period.
The following should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing in Item 7
of the Company's Annual Report on Form 10-K for the fiscal year ended November
1, 1997.
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended
---------------------------------
Reorganized Predecessor
Company Company
------------- -------------
January 31, February 1,
1998 1997
------------- -------------
(Pro Forma)
<S> <C> <C>
Net sales:
Apparel fabrics and products $ 52,591 $ 47,318
Industrial fabrics and products 41,997 40,776
Home fashion textiles 6,212 9,072
----------- -----------
Net sales $ 100,800 $ 97,166
=========== ===========
Operating profit:
Apparel fabrics and products $ 3,365 $ 2,090
Industrial fabrics and products 3,040 3,320
Home fashion textiles (93) 999
Indirect corporate expenses, net (1,411) (1,500)
----------- -----------
Operating profit 4,901 4,909
Interest income 325 294
Interest expense (2,284) (2,298)
----------- -----------
Income before income taxes $ 2,942 $ 2,905
=========== ===========
</TABLE>
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RESULTS OF OPERATIONS
Three Months Ended January 31, 1998 (the "1998 First Quarter") Compared to the
(Pro Forma) Three Months Ended February 1, 1997 (the "1997 First Quarter")
Consolidated net sales increased $3.6 million or 3.7% from $97.2 million in the
1997 first quarter to $100.8 million in the 1998 first quarter. Operating
profit remained constant at $4.9 million in the 1998 first quarter compared to
a pro forma operating profit of $4.9 million in the 1997 first quarter.
Net sales in the apparel fabrics and products segment, which includes
unfinished woven apparel fabrics (greige goods) and yarn primarily for women's
wear increased $5.3 million or 11.2% from $47.3 million in the 1997 first
quarter to $52.6 million in the 1998 first quarter. This increase is
attributable to an improvement in the market conditions for certain of the
Company's apparel fabrics as a result of the exit of certain domestic
competitors and an increase in average selling prices resulting from an
improvement in the mix of products sold during the 1998 first quarter. In
addition, the Company utilized certain productive capacity for apparel fabrics
in the 1998 first quarter that was utilized for home fashions fabrics in the
1997 first quarter. The Company continues to broaden its sales distribution in
its apparel segment to include more export sales and continually works to
develop new fabric construction and styles to improve the profitability of its
product mix.
Operating profit in the 1998 first quarter for the apparel fabrics and products
segment increased by $1.3 million to $3.4 million from pro forma operating
profit of $2.1 million in the 1997 first quarter. This increase is
attributable to the increase in sales volume, a more profitable product mix and
certain improvements in manufacturing efficiencies and productivity resulting
from the Company's capital spending plan. The Company expects to realize
further improvements in its cost structure as a result of the capital spending
plan.
Net sales in the industrial fabrics and products segment, which includes
single-ply roofing and environmental membrane, woven fabrics constructed of
cotton, synthetics and fiberglass for lamination, insulation and filtration
applications and extruded urethane products, increased $1.2 million or 2.9%
from $40.8 million in the 1997 first quarter to $42.0 million in the 1998 first
quarter. Sales of fiberglass fabrics increased $0.9 million or 5.5% from $16.4
million in the 1997 first quarter to $17.3 million in the 1998 first quarter
primarily as a result of the continued growth in demand for fabrics used in the
manufacture of electrical circuit boards. The Company expects that the global
demand for electronic products which has fueled the growth in demand for
fiberglass fabrics will continue in the foreseeable future. The Company has
expanded and enhanced its productive capacity and expects to continue to invest
in additional machinery and equipment in order to satisfy customer demand and
improve product quality. Sales of roofing membrane decreased $0.8 million from
$12.2 million in the 1997 first quarter to $11.4 million in the 1998 first
quarter. This decrease is primarily attributable to the unusually adverse
winter weather conditions throughout much of the United States. The Company's
"Hi-Tuff/EP" line of roofing products has enjoyed success in recent years as a
result of the membrane's competitive price and outstanding performance
characteristics. The Company expects its roofing sales to continue to grow as
the Company capitalizes on the market enthusiasm for its line of roofing
products. Sales of urethane products in the 1998 first quarter decreased $0.2
million or 3% from the 1997 first quarter because of a slight decline in demand
for certain of the Company's products used in the manufacture of athletic
footwear. Sales of cotton industrial fabrics in the 1998 first quarter
increased $1.9 million or 27.5% from the 1997 first quarter due to improved
unit volumes and selling prices. Sales of other industrial fabrics in the 1998
first quarter declined $0.6 million from the 1997 first quarter primarily as a
result of the exit of certain low margin products.
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<PAGE> 12
Operating profit in the 1998 first quarter for the industrial fabrics and
products segment decreased $0.3 million to $3.0 million from pro forma
operating profit of $3.3 million in the 1997 first quarter primarily as a
result of a change in the product mix, certain costs associated with the
installation of additional machinery and equipment referred to above, and
increased selling, general and administrative expenses.
Net sales in the home fashion textiles segment, which includes woven drapery
fabrics and yarns for the home furnishings industry, decreased $2.9 million or
31.9% from $9.1 million in the 1997 first quarter to $6.2 million in the 1998
first quarter due to a soft home furnishings market in the 1998 first quarter
compared to an extremely strong market in the 1997 first quarter.
Operating results in the 1998 first quarter for the home fashion textiles
segment decreased to a loss of $0.1 million from a pro forma operating profit
of $1.0 million in the 1997 first quarter principally due to the decrease in
sales volume and a generally weaker product mix.
Indirect corporate expenses decreased $0.1 million from $1.5 million (pro
forma) in the 1997 first quarter to $1.4 million in the 1998 first quarter
principally due to slightly lower insurance costs.
Reorganization-related fees and expenses incurred in the 1997 first quarter
totaled $1.2 million and represented fees and expenses of the Company's
financial advisor, legal counsel and other professionals associated with the
Company's financial restructuring and the financial advisor and legal counsel
for the holders of a substantial majority of the Company's old outstanding
bonds. Such fees and expenses have been excluded from the pro forma financial
statements.
In the 1997 first quarter, the Company held debt and equity securities of
Gulistan Holdings, Inc. As a result of net losses incurred by Gulistan, the
Company recorded a valuation allowance against its investment in the securities
with a corresponding charge to income of $1.3 million. These securities were
sold in August 1997 for $2 million. Accordingly, the charge of $1.3 million
has been excluded from the 1997 first quarter pro forma financial information.
Interest income and expense in the 1998 first quarter are consistent with the
1997 first quarter pro forma amounts.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity for operations and expansion are
funds generated internally and borrowings under its Revolving Credit Facility
(as defined below). JPS Elastomerics Corp. and JPS Converter and Industrial
Corp., each a wholly-owned subsidiary of JPS (collectively, the "Borrowing
Subsidiaries"), and JPS have entered into the Credit Facility Agreement, dated
as of October 9, 1997 (the "Credit Agreement"), with the financial institutions
party thereto, Citibank, as 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) neither 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. Until the delivery of the
Company's certificate with respect to its compliance with the terms of the
Credit Agreement during its second fiscal quarter of 1998 (the date of such
delivery being the "Delivery Date"), all loans outstanding under the Revolving
Credit Facility bear interest at either the Eurodollar Rate (as defined in the
Credit Agreement) plus 1.5% per annum or the Base Rate (as defined in the
Credit Agreement) and, thereafter, will bear interest at the
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<PAGE> 13
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 currently pays (i) a fee of .375% per annum on the
average unused commitments under the Revolving Credit Facility until the
Delivery Date and thereafter such fees will be reduced to .25% per annum if a
specified leverage ratio is satisfied and (ii) a letter of credit fee equal to
the Applicable Margin for Eurodollar Rate borrowings. Borrowings under the
Revolving Credit Facility are made or repaid on a daily basis in amounts equal
to the net cash requirements or proceeds for that business day. At January 31,
1998, the Company had approximately $40.8 million available for borrowing under
the Revolving Credit Facility.
During the 1998 first quarter, cash provided by operating activities was $3.5
million. Working capital increased slightly from $82.1 million at November 1,
1997 to $82.3 million at January 31, 1998. Accounts receivable decreased by
$4.7 million from November 1, 1997 to January 31, 1998 due to seasonally lower
sales in January 1998 compared to October 1997. Inventories increased by $1.9
million, primarily in finished goods, during the 1998 first quarter as a result
of the lower sales volume in that period. Accounts payable decreased by $1.3
million from November 1, 1997 to January 31, 1998 primarily as a result of the
slowdown in sales volume in January 1998 compared to October 1997 and the
corresponding decrease in production requirements. Accrued interest increased
$1.0 million from November 1, 1997 to January 31, 1998 due to the timing of
interest payments on the Company's revolving credit facility and the accrual of
interest on the contingent notes. Accrued salaries, benefits and withholding
decreased $1.1 million from November 1, 1997 to January 31, 1998 due to payment
of fiscal year-end accrued incentive compensation. Other accrued expenses
decreased $1.7 million during the 1998 first quarter due to the payment of
certain accrued restructuring fees and expenses.
Based upon the Company's ability to generate working capital through its
operations and its Revolving Credit Facility, the Company believes that it has
the financial resources necessary to pay its capital obligations and implement
its business plan.
-13-
<PAGE> 14
JPS TEXTILE GROUP, INC.
PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
Item
- ----
<S> <C> <C>
1. Legal Proceedings None
2. Changes in Securities None
3. Defaults Upon Senior Securities None
4. Submission of Matters to a Vote of Security Holders None
5. Other Information None
6. Exhibits and Reports on Form 8-K:
</TABLE>
(a) Exhibits:
(11) Statement re: Computation of Per Share Earnings - not required
since such computation can be clearly determined from the
material contained herein.
(27) Financial Data Schedule (for SEC use only)
(b) Current Reports on Form 8-K:
Report on Form 8-K dated December 18, 1997, containing the JPS
Textile Group, Inc. Press Release announcing its pro forma results
for the fourth quarter and fiscal year ended November 1, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JPS TEXTILE GROUP, INC.
Date: March 17, 1998 /s/ David H. Taylor
--------------------
David H. Taylor
Executive Vice President - Finance,
Secretary and Chief Financial Officer
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE BODY OF THE ACCOMPANYING FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 2,575
<SECURITIES> 0
<RECEIVABLES> 76,250
<ALLOWANCES> 1,425
<INVENTORY> 46,706
<CURRENT-ASSETS> 162,249
<PP&E> 109,886
<DEPRECIATION> 3,087
<TOTAL-ASSETS> 320,954
<CURRENT-LIABILITIES> 79,982
<BONDS> 94,914
0
0
<COMMON> 100
<OTHER-SE> 127,639
<TOTAL-LIABILITY-AND-EQUITY> 320,954
<SALES> 100,800
<TOTAL-REVENUES> 100,800
<CGS> 85,414
<TOTAL-COSTS> 85,414
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,284
<INCOME-PRETAX> 2,942
<INCOME-TAX> 1,250
<INCOME-CONTINUING> 1,692
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,692
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
