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 quarter ended June 27, 1998
[ ] 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 33-75510-01; 1-12944
JPS AUTOMOTIVE L.P.
JPS AUTOMOTIVE PRODUCTS CORP.
(State or other Jurisdiction of (IRS Employer Identification
incorporation or Organization) No. 57-1060375
Delaware No. 57-0993690)
Delaware
701 McCullough Drive
Charlotte, NC 28262
Telephone (704) 547-8500
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 [ ] .
JPS Automotive L.P. and JPS Automotive Products Corp. meet the conditions set
forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore
filing this form with the reduced disclosure format.
As of August 10, 1998, the number of outstanding shares of JPS Automotive
Products Corp. common stock was 100.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
------------------------- -------------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales .......................................................... $ 64,396 $ 62,119 $ 135,705 $ 120,143
Cost of goods sold ................................................. 58,644 51,688 120,198 102,052
--------- --------- --------- ---------
Gross profit ....................................................... 5,752 10,431 15,507 18,091
Selling, general and administrative expenses ....................... 4,247 4,258 8,347 8,710
--------- --------- --------- ---------
Operating income ................................................... 1,505 6,173 7,160 9,381
Interest expense, net .............................................. 2,097 2,436 4,211 5,609
Other income, net .................................................. (22) -- (31) (5)
--------- --------- --------- ---------
Income (loss) from continuing operations before income taxes ....... (570) 3,737 2,980 3,777
Income tax expense (benefit) ....................................... (109) 1,616 1,326 1,773
--------- --------- --------- ---------
Income (loss) from continuing operations ........................... (461) 2,121 1,654 2,004
Income from discontinued operations, net of
income tax of $587 and $1,044 .................................... -- 913 -- 1,584
--------- --------- --------- ---------
Income (loss) before extraordinary loss ............................ (461) 3,034 1,654 3,588
Extraordinary loss, net of income tax of $58 and $442 .............. (86) (721) (86) (721)
--------- --------- --------- ---------
Net income (loss) .................................................. $ (547) $ 2,313 $ 1,568 $ 2,867
========= ========= ========= =========
</TABLE>
See accompanying notes.
I-1
<PAGE>
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(Unaudited)
June 27, December 27,
ASSETS 1998 1997
-------- --------
Current assets:
Cash and cash equivalents ......................... $ 1,393 $ 9,271
Accounts receivable, net .......................... 33,013 37,038
Inventories ....................................... 17,581 19,275
Receivables from related parties .................. 6,749 1,974
Revolving loan due from C&A Products .............. 4,500 4,500
Deferred tax assets ............................... 4,257 5,369
Other current assets .............................. 3,564 4,269
-------- --------
Total current assets ............................ 71,057 81,696
-------- --------
Property, plant and equipment, net .................. 53,311 55,470
Goodwill, net ....................................... 101,999 103,310
Demand receivable due from C&A for income taxes ..... 6,548 6,548
Other assets ........................................ 3,853 3,583
-------- --------
$236,768 $250,607
======== ========
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable .................................. $ 8,108 $ 12,083
Accrued expenses .................................. 10,081 13,677
-------- --------
Total current liabilities ....................... 18,189 25,760
-------- --------
Long-term debt ...................................... 89,329 91,843
Other liabilities ................................... 11,984 10,008
Commitments and contingencies .......................
Owners' equity:
General partner ................................... 48,073 48,073
Limited partner ................................... 69,193 74,923
-------- --------
Total owners' equity .......................... 117,266 122,996
-------- --------
$236,768 $250,607
======== ========
See accompanying notes.
I-2
<PAGE>
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------
JUNE 27, JUNE 28,
1998 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations ........................................ $ 1,655 $ 2,004
Adjustments to derive cash flow from continuing operating activities:
Deferred income tax expense .......................................... 2,890 --
Depreciation and amortization ........................................ 4,338 4,344
Interest accretion and debt issuance cost amortization ............... (112) (170)
Other, net ........................................................... 354 279
Changes in operating assets and liabilities .......................... (1,852) (5,763)
-------- --------
Net cash provided by continuing operations ......................... 7,273 694
-------- --------
Net cash provided by discontinued operations, net ........................ -- 698
-------- --------
INVESTING ACTIVITIES
Additions to property, plant and equipment ............................... (1,082) (4,115)
Sales of property, plant and equipment ................................... 213 --
Other, net ............................................................... (144) (5)
-------- --------
Net cash used in investing activities .............................. (1,013) (4,120)
-------- --------
FINANCING ACTIVITIES
Distributions to C&A Products ............................................ (10,000) --
Capital contributions from partners ...................................... 2,703 23,233
Changes in amounts due C&A Products, net ................................. (4,775) 4,980
Repayments of long-term debt ............................................. (2,066) (23,645)
Other, net ............................................................... -- (2,038)
-------- --------
Net cash provided by (used in) financing activities ................ (14,138) 2,530
-------- --------
Net decrease in cash and cash equivalents ................................ (7,878) (198)
Cash and cash equivalents at beginning of period ......................... 9,271 198
-------- --------
Cash and cash equivalents at end of period ............................... $ 1,393 $ --
======== ========
</TABLE>
See accompanying notes.
I-3
<PAGE>
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
The condensed consolidated financial statements include the accounts of
JPS Automotive L.P. and its subsidiaries ("JPS Automotive"). In the opinion of
management of JPS Automotive, the accompanying condensed consolidated financial
statements reflect all adjustments considered necessary for a fair presentation
of the consolidated financial position, results of operations and cash flows.
Results of operations for interim periods are not necessarily indicative of
results for the full year. Certain prior quarter items have been restated to
conform with the second quarter presentation. For further information, refer to
the consolidated financial statements and notes thereto included in JPS
Automotive's Report on Form 10-K for the year ended December 27, 1997.
On December 11, 1996, Collins & Aikman Corporation ("C&A"), through its
subsidiaries, acquired JPS Automotive from Foamex International Inc. ("Foamex")
pursuant to an Equity Purchase Agreement dated August 28, 1996, as amended
December 11, 1996 (the "1996 Acquisition"). In the 1996 Acquisition, Collins &
Aikman Products Co. ("C&A Products"), a wholly owned subsidiary of C&A, acquired
a .9999% limited partnership interest in JPS Automotive from Foamex and a 99%
limited partnership interest in JPS Automotive from Foamex - JPS Automotive L.P.
("FJPS"). PACJ, Inc., a wholly owned subsidiary of C&A Products, acquired a
.0001% general partnership interest in JPS Automotive from JPSGP Inc. ("JPSGP").
Accordingly, 100% of the partnership interests in JPS Automotive are owned by
PACJ, Inc. and C&A Products, which are, respectively, indirect and direct wholly
owned subsidiaries of C&A. Additionally, on December 11, 1996, C&A Products
acquired from Seiren Co. Ltd. and its affiliates the 20% minority interest in
Cramerton Automotive Products, L.P. ("Cramerton"). JPS Automotive subsequently
acquired the 20% minority interest previously held by the Seiren entities.
2. GOODWILL:
Goodwill, representing the excess of purchase price over the fair value
of net assets acquired in the 1996 Acquisition, is being amortized on a
straight-line basis over a period of forty years. Amortization of goodwill was
$0.7 million and $1.3 million for the quarter and six months ended June 27,
1998, respectively, and $0.7 million and $1.5 million for the quarter and six
months ended June 28, 1997, respectively. Accumulated amortization at June 27,
1998 was $3.9 million. The carrying value of goodwill is reviewed periodically
based on the undiscounted cash flows and pretax income over the remaining
amortization periods. Should this review indicate that the goodwill balance will
not be recoverable, JPS Automotive's carrying value of the goodwill will be
reduced. At June 27, 1998, JPS Automotive believes the recorded value of its
goodwill of $102.0 million is fully recoverable.
3. FACILITY CLOSING COSTS:
In connection with the 1996 Acquisition, JPS Automotive eliminated
certain redundant sales and administrative functions and closed one
manufacturing facility in 1997, a second facility in January 1998, and a third
facility in June 1998. JPS Automotive currently is in the process of relocating
certain manufacturing processes from a JPS Automotive facility to an existing
facility of another C&A Products subsidiary.
These actions affect approximately 640 employees. Total costs accrued
for the shutdown of facilities and severance and other personnel costs were $2.7
million and $7.7 million, respectively.
The components of the reserves for the relocation and facility closures,
which are expected to be completed during fiscal 1998, are as follows (in
thousands):
<TABLE>
<CAPTION>
Original Changes In Remaining
Reserve Reserve Reserve
-------- -------- --------
<S> <C> <C> <C>
Anticipated expenditures to close and dispose of idled facilities .... $ 2,746 $ (2,209) $ 537
Anticipated severance benefits ....................................... 7,655 (4,203) 3,452
-------- -------- --------
$ 10,401 $ (6,412) $ 3,989
======== ======== ========
</TABLE>
I-4
<PAGE>
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. RELATED-PARTY TRANSACTIONS AND ALLOCATIONS:
At June 27, 1998, C&A Products has pledged the ownership interests in
its significant subsidiaries, including its partnership interests in JPS
Automotive, as security for debt of C&A Products totaling $292.2 million.
Following the 1996 Acquisition, C&A Products began to develop plans to
rationalize certain manufacturing locations as well as marketing and
administrative functions. This rationalization involved transactions and
arrangements between JPS Automotive and C&A Products which were approved by the
Board of Directors of PACJ, Inc., the general partner of JPS Automotive, and
were reviewed by an investment banking firm of national standing, which rendered
an opinion that they were fair to JPS Automotive from a financial point of view.
The transactions and arrangements and proposed transactions and
arrangements include the following: (i) the provision by C&A Products of
additional administrative, management, marketing and program management services
pursuant to a preexisting services agreement assigned to C&A Products by Foamex
(the "Existing Services Agreement"), (ii) the purchase from and sale to C&A
Products and its subsidiaries of certain manufacturing assets, (iii) the
transfer of manufacturing responsibility for certain automotive programs, and
for the manufacturing of automotive carpet roll goods, to C&A Products and its
subsidiaries and from C&A Products to JPS Automotive, and (iv) the transfer of
certain automotive programs from JPS Automotive to C&A Products and its
subsidiaries and from C&A Products to JPS Automotive. For a description of the
compensation to be paid by JPS Automotive to C&A Products and by C&A Products to
JPS Automotive pursuant to the transactions and arrangements described above,
see Note 12 to JPS Automotive's consolidated financial statements included in
JPS Automotive's Annual Report on Form 10-K for the fiscal year ended December
27, 1997 (the "1997 10-K").
During the first quarter of 1998, pursuant to the rationalization
process, JPS Automotive transferred to Collins & Aikman Canada Inc. ("C&A
Canada") and C&A Products two contracts for the production of automotive carpet
products for aggregate consideration of $4.3 million. One of these contracts was
performed by C&A Canada for JPS Automotive during a portion of 1997 on a royalty
basis. Due to the related party nature of the transfer, the $4.3 million
received by JPS Automotive, net of the related tax provision of $1.6 milllion,
has been treated as a capital contribution from C&A Products in the accompanying
financial statements. During the remainder of 1998, C&A Products has agreed to
transfer to JPS Automotive as an equity contribution all but one of the
automotive soft trim programs formerly produced by C&A Products at its
Salisbury, North Carolina, facility. Twenty-seven contracts relating to the
closure of the Salisbury facility were transferred to JPS Automotive during the
second quarter of 1998 in accordance with the arrangements between JPS
Automotive and C&A Products. JPS Automotive did not pay any amounts for these
contracts. C&A Products has also agreed to make additional cash equity
contributions to JPS Automotive if JPS Automotive is unable to earn a
specified level of operating profit on the contracts transferred from the
Salisbury plant.
JPS Automotive paid or accrued the following amounts in connection with
the transactions and arrangements described above and related transactions for
the quarter and six months ended June 27, 1998: (i) $1.9 million and $3.8
million, respectively, for administrative and other services, and (ii) $15.3
million and $28.6 million, respectively, for contract manufacturing services
(including the purchase of roll goods) provided to JPS Automotive by C&A
Products and its subsidiaries. In addition, for the quarter and six months ended
June 27, 1998, JPS Automotive recorded sales of $10.2 million and $20.8 million,
respectively, relating to contract manufacturing services (including the sale of
roll goods) provided to C&A Products and its subsidiaries.
For the quarter and six months ended June 28, 1997, JPS Automotive was
charged $0.8 million and $1.5 million, respectively, by C&A Products for certain
administrative and management services in accordance with the Existing Services
Agreement.
C&A Products and JPS Automotive entered into several additional
arrangements during 1997 including, among others, those described below.
During the year ended December 27, 1997, C&A Products and JPS Automotive
entered into reciprocal revolving credit arrangements whereby JPS Automotive may
borrow up to $5 million from C&A Products and C&A Products may borrow up to $5
million from JPS Automotive. The borrower is charged interest on any outstanding
balance at a rate
I-5
<PAGE>
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
equal to the rate charged to C&A Products under its revolving
credit agreement. During the quarter and six months
ended June 27, 1998, C&A Products was charged $85 thousand and $180 thousand,
respectively, in net interest related to these revolving credit arrangements. At
June 27, 1998, there was an outstanding balance of $4.5 million owed to JPS
Automotive under this arrangement.
In connection with certain manufacturing activities conducted by C&A
Products for Cramerton during the second quarter and six months ended June 27,
1998, Cramerton resold to C&A Products at cost approximately $0.3 million and
$0.6 million, respectively, in yarn that had been purchased by Cramerton for use
in the manufacturing activities conducted for Cramerton. In addition, in
accordance with C&A Products' normal practice, C&A Products developed tooling
for JPS Automotive, for which JPS Automotive reimbursed C&A Products its costs.
The development of tooling was managed by JPS Automotive prior to the 1996
Acquisition.
C&A Products and JPS Automotive are also parties to a tax sharing
agreement (the "Tax Sharing Agreement") that was assigned to C&A Products by
Foamex in connection with the 1996 Acquisition. The Tax Sharing Agreement
provides that JPS Automotive will make certain payments to its partners
(principally C&A Products) in amounts equal to the taxes JPS Automotive would be
required to pay if it were separately taxed. JPS Automotive and C&A Products
maintain the Tax Sharing Agreement in lieu of adding JPS Automotive as a party
to C&A's tax sharing arrangement. For the six months ended June 27, 1998, no
amounts were due to C&A Products under the terms of the Tax Sharing Agreement.
In addition, because JPS Automotive is part of C&A's consolidated tax return,
C&A effectively utilized the tax benefits generated by JPS Automotive in its
consolidated tax return, which resulted in benefits totaling $6.2 million for
1997 and $0.3 million for the period from December 12, 1996 to December 28,
1996. C&A Products has agreed to reimburse JPS Automotive for these benefits on
demand by JPS Automotive.
5. COMMITMENTS AND CONTINGENCIES:
See "PART II - OTHER INFORMATION, Item 1. Legal Proceedings."
The ultimate outcome of the legal proceedings to which JPS Automotive is
a party will not, in the opinion of JPS Automotive's management based on the
facts presently known to it, have a material adverse effect on the consolidated
financial condition or results of operations of JPS Automotive.
JPS Automotive is subject to various federal, state and local
environmental laws and regulations that (i) affect ongoing operations and may
increase capital costs and operating expenses and (ii) impose liability for the
costs of investigation and remediation and certain other damages related to
on-site and off-site contamination. JPS Automotive believes it has obtained or
applied for the material permits necessary to conduct its business. To date,
compliance with applicable environmental laws has not had and, in the opinion of
management, based on the facts presently known to it, is not expected to have a
material adverse effect on JPS Automotive's consolidated financial condition or
results of operations.
In December 1997, another subsidiary of C&A Products assumed
substantially all of the environmental liabilities of JPS Automotive and its
subsidiaries in exchange for a payment from JPS Automotive of approximately $4.1
million. JPS Automotive will remain contingently liable for these environmental
liabilities.
In the opinion of management, based on the facts presently known to it,
the environmental costs and contingencies will not have a material adverse
effect on JPS Automotive's consolidated financial condition or results of
operations. However, there can be no assurance that JPS Automotive has
identified or properly assessed all potential environmental liabilities arising
from the activities or properties of JPS Automotive, its present and former
subsidiaries and their corporate predecessors.
6. DISCONTINUED OPERATIONS:
On July 24, 1997, JPS Automotive completed the sale of its Air Restraint
and Technical Products Division ("Airbag") to Safety Components International,
Inc. for a purchase price of approximately $56 million. No gain or loss was
recorded on the sale since the sales price approximated the acquisition fair
value of Airbag. Airbag reported income of $0.9 million and $1.6 million in the
quarter and six months ended June 28, 1997.
I-6
<PAGE>
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
(UNAUDITED)
7. NEWLY ISSUED ACCOUNTING STANDARDS:
In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position No. 98-5, "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5"). SOP 98-5 provides guidance on the financial
reporting of start-up costs and organization costs. It requires that all
nongovernmental entities expense the costs of start-up activities as these costs
are incurred instead of being capitalized and amortized. SOP 98-5 is effective
for financial statements for fiscal years beginning after December 15, 1998
and the initial application of this pronouncement is to be reported as the
cumulative effect of a change in accounting principle. JPS Automotive currently
estimates that the impact of adoption of SOP 98-5 at the beginning of fiscal
1999 will be in the range of $0.5 million to $0.6 million.
I-7
<PAGE>
JPS AUTOMOTIVE PRODUCTS CORP.
(A WHOLLY-OWNED SUBSIDIARY OF JPS AUTOMOTIVE L.P.)
BALANCE SHEETS
(Unaudited)
June 27, December 27,
1998 1997
------- --------
(in thousands)
ASSETS
Current assets - Cash .............................. $ 1 $ 1
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities ........................................ $ -- $ --
------- --------
Shareholder's equity:
Common stock, par value $0.01 per share;
10,000,000 shares authorized,
100 shares issued and outstanding .......... -- --
Additional paid-in capital ..................... 1 1
------- --------
Total shareholder's equity ................. 1 1
------- --------
$ 1 $ 1
======= ========
See accompanying notes.
I-8
<PAGE>
JPS AUTOMOTIVE PRODUCTS CORP.
(A WHOLLY-OWNED SUBSIDIARY OF JPS AUTOMOTIVE L.P.)
NOTE TO BALANCE SHEETS (UNAUDITED)
1. Commitments and Contingencies
JPS Automotive Products Corp. ("Products Corp.") is a joint obligor (and
co-registrant) with JPS Automotive L.P. of the 11-1/8% Senior Notes due 2001
(the "Senior Notes"), which had an outstanding balance of $89.3 million
(including a premium of $2.7 million) as of June 27, 1998.
I-9
<PAGE>
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Pursuant to General Instruction H(2)(a) to Form 10-Q, the following
discussion is a management's narrative analysis of the results of operations
explaining the reasons for material changes in the amount of revenue and expense
items between the most recent fiscal year-to-date period presented and the
corresponding year-to-date period in the preceding fiscal year.
JPS Automotive manufactures and supplies textiles and specialty textile
products for passenger car and light truck production in North America. On
December 11, 1996, C&A, through its subsidiaries, acquired JPS Automotive from
Foamex in the 1996 Acquisition. The following discussion should be read in
conjunction with the condensed consolidated financial statements and related
notes thereto of JPS Automotive and Products Corp. included in this report.
SIX MONTHS ENDED JUNE 27, 1998 COMPARED TO SIX MONTHS ENDED JUNE 28, 1997.
CONSOLIDATED RESULTS OF OPERATIONS
NET SALES: Net sales for the six months ended June 27, 1998 were $135.7 million
as compared to $120.1 million for the six months ended June 28, 1997. The $15.6
million increase in sales is due to new bodycloth business on the Nissan Altima
and higher sales levels of automotive carpet products. Molded floor carpet sales
were positively impacted by increased sales to the Mercedes M-class and the GM
APV. The increase is somewhat offset by reduced bodycloth sales on the Toyota
Camry and lower carpet sales due to a strike at General Motors which began in
June. The strike ended on July 29, 1998.
GROSS PROFIT: Gross profit as a percentage of net sales decreased to 11.4% for
the six months ended June 27, 1998 from 15.1% in the comparable period of 1997.
The decrease in gross profit is due in part to lower volume and unfavorable
product mix in automotive bodycloth and inefficiencies associated with
relocation and closing of certain manufacturing facilities.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses decreased 4.2% to $8.3 million for the six months ended
June 27, 1998 from $8.7 million in the comparable 1997 period. This decrease is
a result of lower administrative costs resulting from the elimination of certain
redundant sales and administrative functions in connection with the 1996
Acquisition.
INTEREST EXPENSE: Interest expense decreased to $4.2 million for the six months
ended June 27, 1998 from $5.6 million in the comparable period in 1997 primarily
due to lower overall debt levels following the 1996 Acquisition. From the first
quarter of 1997 through the second quarter of 1998, $25.0 million principal
amount of Senior Notes have been repurchased, on the open market or otherwise,
by JPS Automotive and retired. During the second quarter of 1997, C&A Products
and JPS Automotive entered into reciprocal revolving credit arrangements whereby
JPS Automotive may borrow up to $5 million from C&A Products, and C&A Products
may borrow up to $5 million from JPS Automotive, at interest rates equal to
those charged to C&A Products under its revolving credit facility with The Chase
Manhattan Bank. For the six months ended June 27, 1998, $0.2 million in net
interest was charged to C&A Products in connection with these revolving credit
arrangements.
INCOME TAXES: The income tax provision for the six months ended June 27, 1998
decreased to $1.3 million from $1.8 million in the comparable period of 1997.
INCOME FROM DISCONTINUED OPERATIONS: Income from Airbag was $1.6 million for the
six months ended June 28, 1997. Airbag was sold in July 1997.
EXTRAORDINARY LOSS: For the six months ended June 27, 1998, JPS Automotive
recognized an extraordinary loss of $86 thousand, net of income taxes of $58
thousand, relating to the purchase by JPS Automotive of $2.0 million principal
amount of Senior Notes at prices in excess of carrying values. The extraordinary
loss of $0.7 million, net of income taxes of $0.4 million, in the comparable
period of 1997 relates to the purchase of $19.4 million principal amount of
Senior Notes in excess of carrying values.
NET INCOME: Net income decreased to $1.6 million for the six months ended June
27, 1998 from $2.9 million in the comparable period in 1997 primarily due to the
reasons cited above.
I-10
<PAGE>
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONCLUDED)
LIQUIDITY AND CAPITAL RESOURCES
JPS Automotive's operating cash requirements consist principally of
working capital requirements, scheduled payments of principal and interest on
its outstanding indebtedness and capital expenditures. JPS Automotive believes
the cash flow from operating activities, cash on hand and periodic borrowings,
if necessary, will be adequate to meet operating cash requirements. For a
discussion of certain transactions and arrangements and proposed transactions
and arrangements between C&A Products and JPS Automotive, see Note 4 to the
Notes to JPS Automotive's Condensed Consolidated Financial Statements.
SAFE HARBOR STATEMENT
This Form 10-Q contains statements which, to the extent they are not
historical fact, constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of Securities Exchange
Act of 1934 (the "Safe Harbor Acts"). All forward-looking statements involve
risks and uncertainties. The forward-looking statements in this Form 10-Q are
intended to be subject to the safe harbor protection provided by the Safe Harbor
Acts.
Risks and uncertainties that could cause actual results to vary
materially from those anticipated in the forward-looking statements included in
this Form 10-Q include industry-based factors such as possible declines in the
North American automobile and light truck build, labor strikes at JPS
Automotive's major customers, changes in consumer preferences, dependence on
significant automotive customers, changes in the popularity of particular car
models, the loss of programs on particular car models, the level of competition
in the automotive supply industry and Year 2000 compliance issues, as well as
factors more specific to JPS Automotive, such as the substantial leverage of JPS
Automotive and limitations imposed by the Senior Notes. For a discussion of
certain of these and other important factors which may affect the operations,
products and markets of JPS Automotive, see "Business" in the 1997 10-K and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the 1997 10-K, JPS Automotive's Report on Form 10-Q for the
fiscal quarter ended March 28, 1998 and above in this Form 10-Q and also see JPS
Automotive's other filings with the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Omitted pursuant to General Instruction H(2)(c) to Form 10-Q.
I-11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There have been no material developments in legal proceedings
involving JPS Automotive or its subsidiaries since those reported, if any, in
JPS Automotive's Annual Report on Form 10-K for the fiscal year ended December
27, 1997.
ITEM 5. OTHER INFORMATION.
Effective January 1, 1998, the Savings, Investment and Profit
Sharing Plan of JPS Automotive L.P. (the "JPS Automotive Plan") was merged into
the Collins & Aikman Products Co. (formerly Collins & Aikman Corporation)
Employees' Profit Sharing and Personal Savings Plan. The JPS Automotive Plan has
no further duty to file reports under Sections 13 and 15(d) of the Securities
Exchange Act of 1934.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit
Number Description
- ------ -----------
3.1 Certificate of Incorporation of Products Corp. is hereby incorporated by
reference to Exhibit 3.1 of Products Corp.'s Registration Statement on
Form S-1, Registration No. 33-75510.
3.2 By-laws of Products Corp. are hereby incorporated by reference to Exhibit
3.2 of Products Corp.'s Registration Statement on Form S-1, Registration
No. 33-75510.
3.3 Certificate of Limited Partnership of JPS Automotive is hereby
incorporated by reference to Exhibit 3.3 of Products Corp.'s Registration
Statement on Form S-1, Registration No. 33-75510.
3.4 First Amended and Restated Agreement of Limited Partnership of JPS
Automotive, dated as of June 27, 1994, is hereby incorporated by
reference to Exhibit 3.4 of the Form 10-K of JPS Automotive and Products
Corp. for fiscal 1994.
3.5 Certificate of Amendment of Certificate of Limited Partnership of JPS
Automotive dated December 11, 1996 is hereby incorporated by reference to
Exhibit 3.5 of the Form 10-K of JPS Automotive and Products Corp. for the
transition period from January 1, 1996 to December 28, 1996.
3.6 First Amendment to First Amended and Restated Agreement of Limited
Partnership of JPS Automotive dated as of December 11, 1996 is hereby
incorporated by reference to Exhibit 3.6 of the Form 10-K of JPS
Automotive and Products Corp. for the transition period from January 1,
1996 to December 28, 1996.
3.7 Second Amendment to First Amended and Restated Agreement of Limited
Partnership of JPS Automotive dated as of December 11, 1996, is hereby
incorporated by reference to Exhibit 3.7 of the Form 10-K of JPS
Automotive and Products Corp. for the transition period from January 1,
1996 to December 28, 1996.
4.1 Indenture dated as of June 28, 1994, between Products Corp., as Issuer,
JPS Automotive, as Guarantor, and Shawmut Bank Connecticut, N.A., as
Trustee, relating to $180,000,000 principal amount of 11-1/8% Senior
Notes due 2001 including form of the JPS Automotive Senior Note is hereby
incorporated by reference to Exhibit 4.2 of Products Corp.'s Registration
Statement on Form S-1, Registration No. 33-75510.
II-1
<PAGE>
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
Exhibit
Number Description
- ------ -----------
4.2 First Supplemental Indenture, dated as of October 5, 1994, between
Products Corp. and JPS Automotive, as Co-Obligors, and Shawmut Bank
Connecticut, N.A., as Trustee, relating to the JPS Automotive Senior
Notes is hereby incorporated by reference to Exhibit 4.48A of Form 10-Q
of JPS Automotive and Products Corp. for the fiscal quarter ended October
2, 1994.
Certain instruments defining the rights of security holders have been
excluded herefrom in accordance with Item 601(b)(4)(iii) of Regulation
S-K. The Registrants hereby agree to furnish a copy of any such
instrument to the Commission upon request.
10.1 Services Agreement, by and between JPS Automotive and Foamex
International is hereby incorporated by reference to Exhibit 10.2 of
Products Corp.'s Registration Statement on Form S-1, Registration No.
33-75510.
10.2 Supply Agreement, by and among Foamex International and certain of its
affiliates and JPS Automotive is incorporated by reference to Exhibit
10.8 of Products Corp.'s Registration Statement on Form S-1, Registration
No. 33-75510.
10.3 Tax-sharing Agreement, by and among JPS Automotive and its partners is
incorporated by reference to Exhibit 10.9 of Products Corp.'s
Registration Statement on Form S-1, Registration No. 33-75510.
10.4 Assignment dated as of December 11, 1996, from Foamex International to
C&A Products relating to Services Agreement, is hereby incorporated by
reference to Exhibit 10.10 of the Form 10-K of JPS Automotive and
Products Corp. for the transition period from January 1, 1996 to December
28, 1996.
10.5 Assignment dated as of December 11, 1996, from Foamex-JPS Automotive L.P.
to C&A Products relating to Tax-Sharing Agreement, is hereby incorporated
by reference to Exhibit 10.11 of the Form 10-K of JPS Automotive and
Products Corp. for the transition period from January 1, 1996 to December
28, 1996.
10.6 Assignment dated as of December 11, 1996, from JPSGP, Inc. to C&A
Products relating to Tax-Sharing Agreement, is hereby incorporated by
reference to Exhibit 10.12 of the Form 10-K of JPS Automotive and
Products Corp. for the transition period from January 1, 1996 to December
28, 1996.
10.7 Assignment dated as of December 11, 1996, from Foamex to C&A Products
relating to Supply Agreement, is hereby incorporated by reference to
Exhibit 10.13 of the Form 10-K of JPS Automotive and Products Corp. for
the transition period from January 1, 1996 to December 28, 1996.
10.8 Equity Purchase Agreement by and among JPSGP, Inc., Foamex - JPS
Automotive L.P. and Collins & Aikman Products Co. dated August 28, 1996,
is hereby incorporated by reference to Exhibit 2.1 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended July 27,
1996.
10.9 Amendment No. 1 to Equity Purchase Agreement by and among JPSGP, Inc.,
Foamex - JPS Automotive L.P., Foamex International Inc. and Collins &
Aikman Products Co. dated as of December 11, 1996, is hereby incorporated
by reference to Exhibit 2.2 of Collins & Aikman Corporation's Current
Report on Form 8-K dated December 10, 1996.
10.10 Post 1996 Acquisition Arrangements Under JPS Automotive Services
Agreement is hereby incorporated by reference to Exhibit 10.15 of the
Form 10-K of JPS Automotive and Products Corp. for the fiscal year ended
December 27, 1997.
10.11 Asset Purchase Agreement dated as of June 30, 1997 by and among JPS
Automotive L.P. and Safety Components International, Inc. is hereby
incorporated by reference to Exhibit 2.1 of the Current Report on Form
8-K of JPS Automotive and Products Corp. dated July 24, 1997.
II-2
<PAGE>
JPS AUTOMOTIVE L.P. AND SUBSIDIARIES
Exhibit
Number Description
- ------ -----------
10.12 Closing Agreement dated as of July 24, 1997 by and among JPS Automotive
L.P., Safety Components International, Inc. and Safety Components Fabric
Technologies, Inc. is hereby incorporated by reference to Exhibit 2.2 of
the Current Report on Form 8-K of JPS Automotive and Products Corp. dated
July 24, 1997.
27 Financial Data Schedules
(b) Reports on Form 8-K
During the quarter for which this Report on Form 10-Q is filed, JPS
Automotive and Products Corp. did not file any reports on Form 8-K.
II-3
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrants have duly caused this report to be signed
on their behalf by the undersigned, thereunto duly authorized on the 11th day of
August, 1998.
JPS AUTOMOTIVE L.P.
By: PACJ, Inc.
General Partner
By: /s/ J. Michael Stepp
---------------------
J. Michael Stepp
Executive Vice President and
Chief Financial Officer
JPS AUTOMOTIVE PRODUCTS CORP.
By: /s/ J. Michael Stepp
---------------------
J. Michael Stepp
Executive Vice President and
Chief Financial Officer
II-4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated balance sheet and consolidated statements of operations
for the six months ended June 27, 1998, and such is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000924902
<NAME> JPS Automotive L.P. and Subsidiaries
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> JUN-27-1998
<CASH> 1,393
<SECURITIES> 0
<RECEIVABLES> 39,776
<ALLOWANCES> 6,763
<INVENTORY> 17,581
<CURRENT-ASSETS> 71,057
<PP&E> 61,710
<DEPRECIATION> 8,399
<TOTAL-ASSETS> 236,768
<CURRENT-LIABILITIES> 18,189
<BONDS> 89,329
0
0
<COMMON> 0
<OTHER-SE> 117,266
<TOTAL-LIABILITY-AND-EQUITY> 236,768
<SALES> 135,705
<TOTAL-REVENUES> 135,705
<CGS> 123,082
<TOTAL-COSTS> 128,461
<OTHER-EXPENSES> (31)
<LOSS-PROVISION> 84
<INTEREST-EXPENSE> 4,211
<INCOME-PRETAX> 2,980
<INCOME-TAX> 1,326
<INCOME-CONTINUING> 1,654
<DISCONTINUED> 0
<EXTRAORDINARY> 86
<CHANGES> 0
<NET-INCOME> 1,568
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from JPS
Automotive Products Corp. balance sheet at June 27, 1998, and such is qualified
in its entirely by reference to such financial statements.
</LEGEND>
<CIK> 0000919233
<NAME> JPS Automotive Products Corp.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> JUN-27-1998
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1
<TOTAL-LIABILITY-AND-EQUITY> 1
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
