<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 July 29, 2000
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 INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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)
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 September 12, 2000.
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JPS INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION Number
<S> <C>
Item 1. Condensed Consolidated Balance Sheets
July 29, 2000 (Unaudited) and October 30, 1999............................... 3
Condensed Consolidated Statements of Operations
Three Months and Nine Months Ended July 29, 2000 and
July 31, 1999 (Unaudited).................................................... 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended July 29, 2000 and
July 31, 1999 (Unaudited).................................................... 5
Notes to Condensed Consolidated Financial Statements (Unaudited)................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................... 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk....................... 12
PART II. OTHER INFORMATION ............................................................... 13
</TABLE>
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Item 1. Financial Statements
JPS INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In Thousands) July 29, October 30,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,259 $ 1,343
Accounts receivable 47,916 55,529
Inventories (Note 2) 33,356 36,250
Prepaid expenses and other (Note 5) 4,008 4,711
Net assets held for sale -- 504
--------- ---------
Total current assets 86,539 98,337
Property, plant and equipment, net 81,451 85,792
Reorganization value in excess of amounts allocable
to identifiable assets 29,776 31,066
Other assets 12,000 11,661
--------- ---------
Total assets $ 209,766 $ 226,856
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,667 $ 17,064
Accrued interest 418 865
Accrued salaries, benefits and withholdings 7,035 6,438
Other accrued expenses 7,837 8,984
Current portion of long-term debt (Note 3) 929 975
--------- ---------
Total current liabilities 32,886 34,326
Long-term debt (Note 3) 60,053 79,806
Deferred income taxes 937 --
Other long-term liabilities 17,410 18,071
--------- ---------
Total liabilities 111,286 132,203
--------- ---------
SHAREHOLDERS' EQUITY:
Common stock 100 100
Additional paid-in capital 124,191 123,942
Treasury stock at cost (133) --
Accumulated deficit (25,678) (29,389)
Total shareholders' equity 98,480 94,653
--------- ---------
Total liabilities and shareholders' equity $ 209,766 $ 226,856
========= =========
</TABLE>
Note: The condensed consolidated balance sheet at October 30, 1999 has been
extracted from the audited financial statements.
See notes to condensed consolidated financial statements.
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JPS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- -------------------------------
July 29, July 31, July 29, July 31,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 72,758 $ 69,468 $ 210,103 $ 212,137
Cost of sales 59,204 59,047 170,867 179,702
------------ ------------ ------------ ------------
Gross profit 13,554 10,421 39,236 32,435
Selling, general and administrative
expenses 9,466 8,002 27,085 26,729
Other expense (income), net (10) (104) (73) (10)
Charges for plant closing and
restructuring costs -- -- -- 3,718
------------ ------------ ------------ ------------
Operating income 4,098 2,523 12,224 1,998
Interest expense 1,614 1,878 5,156 5,654
------------ ------------ ------------ ------------
Income (loss) before income taxes
and discontinued operations 2,484 645 7,068 (3,656)
Provision (benefit) for income taxes 1,068 947 3,357 (303)
------------ ------------ ------------ ------------
Income (loss) from continuing operations 1,416 (302) 3,711 (3,353)
Discontinued operations (net of taxes):
Loss from discontinued operations -- -- -- (898)
Net income (loss) on disposal of
discontinued operations -- 3,834 -- (18,645)
------------ ------------ ------------ ------------
Net income (loss) $ 1,416 $ 3,532 $ 3,711 $ (22,896)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic 9,983,750 10,000,000 9,991,875 10,000,000
Diluted 10,107,398 10,000,000 10,055,153 10,000,000
Basic and diluted income (loss) per common share:
Income (loss) from continuing operations $ 0.14 $ (0.03) $ 0.37 $ (0.34)
Discontinued operations (net of taxes):
Loss from discontinued operations -- -- --
(0.09)
Net income (loss) on disposal of
discontinued operations -- 0.38 -- (1.86)
------------ ------------ ------------ ------------
Net income (loss) $ 0.14 $ 0.35 $ 0.37 $ (2.29)
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
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JPS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------
July 29, July 31,
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 3,711 $(22,896)
-------- --------
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization, except amounts included
in interest expense 8,356 8,831
Amortization of deferred financing costs 391 283
Other, net (1,837) (10,219)
Charges for plant closing and restructuring costs -- 3,718
Loss from discontinued operations -- 898
Loss on disposal of discontinued operations -- 18,645
Changes in assets and liabilities:
Accounts receivable 7,612 15,528
Inventories 2,895 (1,798)
Prepaid expenses and other assets 2,808 2,460
Accounts payable (397) (6,227)
Accrued expenses and other liabilities (1,313) (7,986)
-------- --------
Total adjustments 18,515 24,133
-------- --------
Net cash provided by operating activities 22,226 1,237
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment additions (2,378) (4,151)
Proceeds from sale of assets -- 10,391
-------- --------
Net cash provided by (used in) investing activities (2,378) 6,240
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Financing costs incurred -- (731)
Purchase of treasury stock (133) --
Revolving credit facility repayments, net (19,111) (6,905)
Borrowings (repayments) of other long-term debt (689) (304)
-------- --------
Net cash used in financing activities (19,933) (7,940)
-------- --------
NET INCREASE (DECREASE) IN CASH (85) (463)
CASH AT BEGINNING OF PERIOD 1,343 1,549
-------- --------
CASH AT END OF PERIOD $ 1,258 $ 1,086
======== ========
SUPPLEMENTAL INFORMATION ON CASH FLOWS
FROM CONTINUING OPERATIONS:
Interest paid $ 5,213 $ 5,392
Income taxes paid, net 269 533
Non-cash financing activities:
Capital lease obligation -- 1,307
</TABLE>
See notes to condensed consolidated financial statements.
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JPS INDUSTRIES, 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 condensed consolidated financial statements
mean JPS Industries, Inc. and JPS Industries, 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 July 29, 2000 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
October 30, 1999. The results of operations for the interim period are
not necessarily indicative of the operating results for the full year.
Effective July 1, 2000, the Company adopted FASB Interpretation No. 44
regarding repriced options and recognized $2,000 of compensation
expense. The Company intends to adopt SFAS 133, Accounting for
Derivative Instruments and Hedging Activities, effective October 28,
2000. Based on its review, JPS has concluded that this will have no
impact on the Company's financial position or results of operations.
2. Inventories (in thousands):
<TABLE>
<CAPTION>
July 29, October 30,
2000 1999
------------ ------------
<S> <C> <C>
Raw materials and supplies $ 6,545 $ 6,640
Work-in-process 12,675 11,809
Finished goods 14,136 17,801
------------ ------------
Total $ 33,356 $ 36,250
============ ============
</TABLE>
3. Long-Term Debt (in thousands):
<TABLE>
<CAPTION>
July 29, October 30,
2000 1999
------------ ------------
<S> <C> <C>
Senior credit facility, revolving line of credit $ 56,283 $ 75,394
Equipment financing 833 1,125
Capital lease obligation 3,866 4,262
------------ ------------
Total 60,982 80,781
Less current portion (929) (975)
------------ ------------
Long-term portion $ 60,053 $ 79,806
============ ============
</TABLE>
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4. Discontinued Operations and Certain Other Changes
During Fiscal 1999, the Company took certain actions to reposition
itself from a textile-oriented enterprise to a diversified
manufacturing and marketing company that is focused on a broad array
of industrial applications. This was accomplished by successfully
streamlining the ongoing apparel fabrics business and exiting three
other textile businesses while intensifying its focus on the two
businesses with growth potential, JPS Elastomerics and JPS Glass. On
March 2, 1999, the Company exited its home fashions woven fabrics
business by completing the sale of its Boger City manufacturing plant.
This business accounted for sales of $0 and operating loss of $0 in
the three months ended July 31, 1999, and sales of $6.1 million and
operating income of $0 in the nine months ended July 31, 1999. The
Company closed its Angle manufacturing facility located in Rocky
Mount, Virginia, in its 1999 third fiscal quarter and sold the plant
on September 3, 1999, thereby streamlining the apparel fabrics
business. On July 23, 1999, the Company sold its Stanley, North
Carolina plant, thereby exiting its yarn sales textile business. This
business generated sales of $2.9 million and operating loss of $0.6
million in the three months ended July 31, 1999 and sales of $11.0
million and operating loss of $1.0 million in the nine months ended
July 31, 1999. On August 27, 1999, the Company sold its Borden
manufacturing plant located in Kingsport, Tennessee, thereby exiting
its cotton commercial products textile business. This business
generated sales of $5.3 million and operating loss of $0.5 million in
the three months ended July 31, 1999 and sales of $16.8 million and
operating loss of $0.9 million in the nine months ended July 31, 1999.
The results of operations for the yarn sales business and cotton
commercial products business for the three months and nine months
ended July 31, 1999 have been included in the accompanying condensed
consolidated financial statements as discontinued operations.
5. Contingencies
The Company has provided for all estimated future costs associated
with certain roofing products including those sold by the Predecessor
Stevens Division operations. The liability for future costs associated
with these 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.
At July 29, 2000, the Company had net operating loss carryforwards for
regular federal income tax purposes of approximately $47.7 million
(subject to adjustment by the Internal Revenue Service). The net
operating loss carryforwards expire in years 2003 through 2019. The
Company also has federal alternative minimum tax net operating loss
carryforwards of approximately $56.6 million (subject to adjustment)
which expire in 2004 through 2019. In addition, the Company has
alternative minimum tax credits of approximately $1.8 million that can
be carried forward indefinitely and used as a credit against regular
federal taxes, subject to limitation. The Company utilized
approximately $5.2 million of net operating losses during the
consecutive nine-month period ended July 29, 2000. A valuation
allowance has been provided due to the uncertainty that the Company
will be able to utilize all of its net operating loss carryforwards.
Any adjustment to the valuation allowance will reduce excess
reorganization value.
The Company's ability to utilize its net operating loss carryforwards
realized prior to completion of the Plan of Reorganization 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. 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 $30.5 million has
been provided.
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<PAGE> 8
The Company is exposed to a number of asserted and unasserted
potential claims encountered in the normal course of business. Except
as discussed below, management believes that none of this litigation,
if determined unfavorable to the Company, would have a material
adverse effect on the financial condition or results of operations of
the Company.
In June 1997, Sears Roebuck and Co. ("Sears") filed a multi-count
complaint against JPS Elastomerics Corp. ("Elastomerics"), a
wholly-owned subsidiary of JPS, and two other defendants alleging an
unspecified amount of damages in connection with the alleged premature
deterioration of the Company's roofing membrane installed on
approximately 150 Sears stores. No trial date has been established.
The Company believes it has meritorious defenses to the claims and
intends to defend the lawsuit vigorously. Management, however, cannot
determine the outcome of the lawsuit or estimate the range of loss, if
any, that may occur. Accordingly, no provision has been made for any
loss which may result. An unfavorable resolution of the actions could
have a material adverse effect on the business, results of operations
or financial condition of the Company.
6. Business Segments
The following details summarized information by reportable segments:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ -----------------------------
July 29, July 31, July 29, July 31,
2000 1999 2000 1999
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net sales:
Elastomerics $ 22,403 $ 20,355 $ 61,456 $ 59,241
Glass 22,866 20,331 62,732 60,944
Apparel 29,325 30,514 91,177 98,694
------------ ------------ ------------ -------------
74,594 71,200 215,365 218,879
Less intersegment sales (1,836) (1,732) (5,262) (6,742)
------------ ------------ ------------ -------------
Net sales $ 72,758 $ 69,468 $ 210,103 $ 212,137
============ ============ ============ =============
Operating profit (loss):
Elastomerics $ 2,089 $ 2,273 $ 6,017 $ 5,075
Glass 2,113 1,042 5,059 1,422
Apparel (104) (792) 1,148 (4,499)
------------ ------------ ------------ -------------
Operating income 4,098 2,523 12,224 1,998
Interest expense 1,614 1,878 5,156 5,654
------------ ------------ ------------ -------------
Income (loss) before income taxes
and discontinued operations $ 2,484 $ 645 $ 7,068 $ (3,656)
============ ============ ============ =============
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The statements contained in this quarterly report on Form 10-Q that are not
historical facts are forward-looking statements subject to the safe harbor
created by the Private Securities Litigation Reform Act of 1995. The Company
cautions readers of this quarterly report on Form 10-Q that a number of
important factors could cause the Company's actual results in Fiscal 2000 and
beyond to differ materially from those expressed in any such forward-looking
statements. These factors include, without limitation, the general economic and
business conditions affecting manufacturing businesses, the Company's ability
to meet its debt service obligations, competition from a variety of general
domestic and foreign manufacturers, the seasonality of the Company's sales, the
volatility of the Company's raw materials cost and the Company's dependence on
key personnel.
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<PAGE> 9
The following should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing in Item 7
of the Company's Annual Report on Form 10-K for the fiscal year ended October
30, 1999.
RESULTS OF OPERATIONS
Introduction
The Company has repositioned itself from one that was largely textile-oriented
to a diversified manufacturing and marketing company that is focused on a broad
array of industrial applications. This has been accomplished by successfully
streamlining the ongoing apparel fabrics business and exiting three other
textile businesses, while intensifying its focus on the two businesses with
growth potential, JPS Glass and JPS Elastomerics. On March 2, 1999, the Company
sold its Boger City manufacturing plant, thereby exiting the home fashions
woven fabrics business. The Company closed its Angle manufacturing facility in
the third quarter of 1999 and sold the remaining plant on September 3, 1999,
thereby streamlining the apparel business. On July 23, 1999, the Company sold
its Stanley manufacturing plant, thereby exiting its yarn sales segment. On
August 27, 1999, the Company sold its Borden manufacturing plant, thereby
exiting its cotton commercial products segment. The yarn sales and cotton
commercial products segments are reported in the accompanying condensed
consolidated financial statements as discontinued operations. The Company
changed its name from JPS Textile Group, Inc. to JPS Industries, Inc. and is
now focusing solely on improving the performance and profitability of its
remaining core businesses: JPS Elastomerics, JPS Glass and JPS Apparel.
Three Months Ended July 29, 2000 (the "2000 Third Quarter") Compared to the
Three Months Ended July 31, 1999 (the "1999 Third Quarter")
Consolidated net sales increased $3.3 million, or 4.7%, from $69.5 million in
the 1999 third quarter to $72.8 million in the 2000 third quarter. Operating
profit increased $1.6 million from an operating profit of $2.5 million in the
1999 third quarter to an operating profit of $4.1 million in the 2000 third
quarter.
Net sales in the 2000 third quarter in the Elastomerics segment, which includes
single-ply roofing, environmental membrane and extruded urethane products,
increased $2.0 million, or 9.8%, to $22.4 million in the 2000 third quarter
from $20.4 million in the 1999 third quarter. This increase is primarily
attributable to new product introductions. The domestic roofing market
continues to be characterized by intense competition and slow market growth.
The Company has addressed these factors with aggressive pricing strategies,
introduction of two new roofing systems, and has strengthened its sales
management in key territories. Sales of extruded urethane products were higher
in the 2000 third quarter as a result of higher demand for certain of the
Company's blown film products, as well as ongoing product introductions.
Operating profit for the Elastomerics segment decreased $0.2 million from $2.3
million in the 1999 third quarter to $2.1 million in the 2000 third quarter.
The decrease is due to reversals of reserves in the prior year period.
Net sales in the Glass segment, which includes mechanically-formed substrates
constructed of synthetics and fiberglass for electronic components,
construction products, reinforced composites, industrial insulation, and
filtration applications increased $2.6 million, or 12.8%, from $20.3 million in
the 1999 third quarter to $22.9 million in the 2000 third quarter.
Operating profit for the Glass segment increased $1.1 million from an operating
profit of $1.0 million in the 1999 third quarter to $2.1 million in the 2000
third quarter. This increase reflects ongoing cost reduction and product
quality improvement initiatives and improved operating efficiencies.
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<PAGE> 10
Net sales of apparel fabrics, which are principally cellulosic woven fabrics
used primarily for women's wear, decreased $1.2 million, or 3.9%, from $30.5
million in the 1999 third quarter to $29.3 million in the 2000 third quarter,
primarily as a result of market conditions.
Operating profit for the Apparel segment increased $0.7 million from an
operating loss of $0.8 million in the 1999 third quarter to an operating loss
of $0.1 million in the 2000 third quarter. This increase is primarily
attributable to ongoing cost reduction initiatives, product mix and operating
efficiencies.
Intersegment sales consist primarily of the transfer of certain scrim products
manufactured by the Glass segment to the Elastomerics segment. All intersegment
sales and profits are eliminated in the accompanying condensed consolidated
financial statements.
Interest expense in the 2000 third quarter was $0.3 million less than the 1999
third quarter as a result of lower debt levels.
Nine Months Ended July 29, 2000 (the "2000 Nine-Month Period") Compared to the
Nine Months Ended July 31, 1999 (the "1999 Nine-Month Period")
Consolidated net sales decreased $2.0 million, or 0.9%, from $212.1 million in
the 1999 nine-month period to $210.1 million in the 2000 nine-month period.
Operating profit increased $10.2 million from an operating profit of $2.0
million in the 1999 nine-month period to an operating profit of $12.2 million
in the 2000 nine-month period. The 1999 nine-month period includes charges for
plant closing and restructuring costs of approximately $3.7 million. Excluding
such charges for comparative purposes, operating profit in the 1999 nine-month
period was $5.7 million compared to $12.2 million in the 2000 nine-month
period.
Net sales in the 2000 nine-month period in the Elastomerics segment increased
$2.3 million, or 3.9%, to $61.5 million from $59.2 million in the 1999
nine-month period. This increase is primarily attributable to increases in
sales of extruded products partially offset by a reduction in the sales of
environmental membranes.
Operating profit for the Elastomerics segment increased $0.9 million from $5.1
million in the 1999 nine-month period to $6.0 million in the 2000 nine-month
period. This increase is due to ongoing cost reduction initiatives, improved
operating efficiencies in urethane production, and a reduction of warranty
reserves for roofing systems.
Net sales in the Glass segment increased $1.8 million, or 3.0%, from $60.9
million in the 1999 nine-month period to $62.7 million in the 2000 nine-month
period. The increase is primarily attributable to market conditions and the
product mix of the Company's products.
Operating profit for the Glass segment increased $3.7 million from $1.4 million
in the 1999 nine-month period to $5.1 million in the 2000 nine-month period as
a result of cost reduction efforts, quality enhancements and improved operating
efficiencies.
Net sales of apparel fabrics decreased $7.5 million, or 7.6%, from $98.7
million in the 1999 nine-month period to $91.2 million in the 2000 nine-month
period due to the elimination of certain product offerings.
Operating profit for the Apparel segment increased $5.6 million from an
operating loss of $4.5 million in the 1999 nine-month period to an operating
profit of $1.1 million in the 2000 nine-month period. The 1999 nine-month
period includes charges for plant closing and restructuring costs which totaled
approximately $2.4 million. Excluding such charges for comparative purposes,
operating loss in the 1999 nine-month period was $2.1 million compared to
operating profit of $1.1 million in the 2000 nine-month period. Performance
improved as a result of cost reduction initiatives and operating efficiencies.
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<PAGE> 11
Intersegment sales consist of the transfer of certain scrim products
manufactured by the Glass segment to the Elastomerics segment. All intersegment
sales and profits are eliminated in the accompanying condensed consolidated
financial statements.
Interest expense in the 2000 nine-month period was $5.2 million compared to
$5.7 million in the 1999 nine-month period, reflecting lower debt levels.
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). On October 9, 1997, JPS Elastomerics and JPS C&I (the
"Borrowing Subsidiaries") and JPS entered into the Credit Facility Agreement.
As amended, 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) $100 million and (b) a specified borrowing
base (the "Borrowing Base"), which is based upon eligible receivables, eligible
inventory and a specified dollar amount (currently $29,500,000 (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 Credit Agreement contains restrictions on investments,
acquisitions and dividends. The Credit Agreement also restricts, among other
things, indebtedness, liens, affiliate transactions, operating leases,
fundamental changes and asset sales. 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 maturity date of the Revolving Credit Facility is October 9, 2002.
Subsequent to October 9, 1997, the Credit Agreement has been amended to, among
other things (i) modify the financial covenants relating to minimum levels of
EBITDA, minimum interest coverage ratio, minimum fixed charge coverage ratio,
and maximum capital expenditures, (ii) modify the interest rate margin and
unused commitment fees, (iii) provide additional reduction of fixed asset
portion of the Borrowing Base, and (iv) allow the Company to repurchase shares
of its common stock subject to certain limitations. As of July 29, 2000, the
Company was in compliance with these restrictions and all financial covenants,
as amended. All loans outstanding under the Revolving Credit Facility, as
amended, bear interest at either the Eurodollar Rate (as defined in the Credit
Agreement) or the Base Rate (as defined in the Credit Agreement) plus an
applicable margin (the "Applicable Margin") based upon the Company's fixed
charge coverage ratio (which margin will not exceed 2.50% for Eurodollar Rate
borrowings and 1.00% for Base Rate borrowings). The weighted average interest
rate at July 29, 2000 is approximately 9.1%. At July 29, 2000, the Company had
approximately $21.1 million available for borrowing under the Revolving Credit
Facility.
For the nine months ended July 29, 2000, cash provided by operating activities
was $22.2 million. Working capital decreased from $64.0 million at October 30,
1999 to $53.6 million at July 29, 2000. Accounts receivable decreased by $7.6
million from October 30, 1999 to July 29, 2000. Inventories decreased by $2.9
million, primarily in finished goods, during the 2000 third quarter, prepaid
and other assets decreased $2.8 million, accounts payable decreased by $0.4
million, and accrued expenses and other liabilities decreased $1.3 million.
The principal use of cash in the 2000 third quarter was for capital
expenditures of $0.9 million. As of July 29, 2000, the Company had commitments
of $0.8 million for capital expenditures. The Company anticipates making
capital expenditures in Fiscal 2000 of approximately $5.0 million and expects
such amounts to be funded by cash from operations, bank and other equipment
financing services. Also, on February 29, 2000, the Company announced a stock
repurchase program for up to $8 million of its outstanding common stock.
Repurchases under this program will be made from time to time in open market or
privately negotiated transactions consistent with
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the Credit Agreement. The actual number of shares purchased, the timing of
purchases and the prices paid will depend on future market conditions and
compliance with applicable legal requirements. The Company has repurchased
32,500 shares to date.
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest rate risk. The Company has exposure to interest rate changes primarily
relating to interest rate changes under its Revolving Credit Facility. The
Company's Revolving Credit Facility bears interest at rates which vary with
changes in (i) the London Interbank Offered Rate (LIBOR) or (ii) a rate of
interest announced publicly by Citibank in New York, New York. The Company does
not speculate on the future direction of interest rates. As of July 29, 2000,
approximately $56.3 million of the Company's debt bore interest at variable
rates.
Raw material price risk. A portion of the Company's raw materials are staple
goods that are affected by raw material pricing and are, therefore, subject to
price volatility caused by weather, production problems, delivery difficulties,
and other factors which are outside the control of the Company. In most cases,
essential raw materials are available from several sources. For several raw
materials, however, branded goods or other circumstances may prevent such
diversification and an interruption of the supply of these raw materials could
have a significant impact on the Company's ability to produce certain products.
The Company has established long-term relationships with key suppliers and may
enter into purchase contracts or commitments of one year or less for certain
raw materials. Such agreements generally include a pricing schedule for the
period covered by the contract or commitment. The Company believes that any
changes in raw material pricing which cannot be adjusted for by changes in its
product pricing or other strategies, would not be significant.
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JPS INDUSTRIES, INC.
PART II - OTHER INFORMATION
Item
<TABLE>
<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 Stockholders 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
(b) Current Reports on Form 8-K:
(i) No reports on Form 8-K were filed for the Third Quarter ended July
29, 2000.
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 INDUSTRIES, INC.
Date: September 12, 2000 /s/ Charles R. Tutterow
-----------------------------------------
Charles R. Tutterow
Executive Vice President, Chief Financial
Officer and Secretary
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