SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 27, 1997
Commission file numbers: 33-75510-01; 1-12944
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JPS AUTOMOTIVE L.P.
JPS AUTOMOTIVE PRODUCTS CORP.
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(Exact Name of Registrant as Specified in Its Charter)
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Delaware 57-1060375
Delaware 57-0993690
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(State or other Jurisdiction of (I.R.S. Employer
incorporation or Organization) Identification Number)
701 McCullough Drive, Charlotte, NC 28262
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (704) 547-8500
Securities registered pursuant to Section 12(b) of the Act: 11-1/8% Senior Notes due 2001, which are traded
on the New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the registrants (1) have 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 periods that the
registrant was required to file such reports), and (2) have been subject to such
filing requirements for the past 90 days.
YES X NO (See Note in the Index hereto)
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
None of the voting securities of JPS Automotive L.P. or JPS Automotive
Products Corp. is held by non-affiliates.
As of April 10, 1998, there were 100 shares of JPS Automotive Products
Corp. common stock outstanding.
JPS Automotive L.P. and JPS Automotive Products Corp. meet the
conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and
are therefore filing this form with the reduced disclosure format.
DOCUMENTS INCORPORATED BY REFERENCE
None
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JPS Automotive L.P.
JPS Automotive Products Corp.
Form 10-K
For the fiscal year ended December 27, 1997
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Index
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10-K
Page
Part I
Item 1. Business (A) 3
Item 2. Properties (A) 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders (A) 7
Part II
Item 5. Market for Registrants' Common Equity and Related Stockholder Matters 7
Item 6. Selected Financial Data (A) 7
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (A) 7
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 10
Item 8. Financial Statements and Supplementary Data 10
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure 10
Part III
Item 10. Directors and Executive Officers of the Registrants (A) 11
Item 11. Executive Compensation (A) 11
Item 12. Security Ownership of Certain Beneficial Owners and Management (A) 11
Item 13. Certain Relationships and Related Transactions (A) 11
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 11
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(A) Omitted or amended as all of the equity securities of the Registrants are
owned indirectly by Collins & Aikman Corporation and the Registrants
therefore meet the Conditions set forth in General Instructions I(1)(a)
and (b) of Form 10-K and are filing this Form with reduced disclosure
format.
The Registrants will furnish a copy of any exhibit to this Form 10-K upon the
request in writing of any holder of 11-1/8% Senior Notes due 2001 and upon the
payment of a fee equal to the Registrants' reasonable expenses in furnishing
such exhibit.
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Part I
Item 1. Business
Response to Item 1 of Form 10-K is in accordance with General Instruction
I(2)(d) to Form 10-K.
General
JPS Automotive L.P. ("JPS Automotive") operates in the automotive textile
segment and manufactures and supplies a complete line of automotive textile and
specialty textile products in North America. JPS Automotive's products include
molded floor carpet systems, seating upholstery fabric ("bodycloth"), headliner
fabric, and interior and trunk trim components. JPS Automotive supplies domestic
original equipment manufacturers ("OEMs"), including General Motors ("GM"),
Chrysler and Ford, as well as the domestic operations of certain foreign OEMs
("Transplant OEMs" and collectively with domestic OEMs, "OEMs"), including
Honda, Mazda, Mitsubishi, Nissan, NuMMI (a joint venture between GM and Toyota),
Subaru and Toyota. JPS Automotive Products Corp. ("Products Corp.") is a wholly
owned subsidiary of JPS Automotive.
Prior to December 11, 1996, JPS Automotive was owned by Foamex International
Inc. ("Foamex International") and its subsidiaries. On December 11, 1996,
Collins & Aikman Corporation ("C&A"), through its subsidiaries, acquired JPS
Automotive from Foamex International pursuant to an Equity Purchase Agreement
dated August 28, 1996, as amended December 11, 1996 (the "1996 Acquisition").
C&A is a global supplier of automotive interior systems, including textile and
plastic trim, acoustics and convertible top systems. The purchase price for the
1996 Acquisition was an aggregate of approximately $220 million, subject to
post-closing adjustment, consisting of approximately $195 million of
indebtedness of JPS Automotive and approximately $25 million in cash to Foamex
International. In 1997, the purchase price was finalized and C&A received
approximately $11 million from Foamex International as a reduction of the
purchase price.
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 International and a 99% limited partnership
interest in JPS Automotive from Foamex - JPS Automotive L.P., a Delaware limited
partnership controlled by Foamex International. PACJ, Inc., a wholly owned
subsidiary of C&A Products, acquired a .0001% general partnership interest in
JPS Automotive from JPSGP Inc., a subsidiary of Foamex International.
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.
On December 11, 1996, C&A also purchased from Seiren Co. Ltd. and its affiliates
for $10 million a minority interest in Cramerton Automotive Products, L.P. and
Cramerton Management Corporation, which are JPS Automotive subsidiaries that
were merged in December 1997 under the name "Cramerton Automotive Products,
Inc." 100% of Cramerton Automotive Products, Inc. ("Cramerton") is now owned
indirectly by C&A.
On July 24, 1997 JPS Automotive completed the sale of its Air Restraint and
Technical Products Division ("Airbag"), an airbag and industrial fabric
business, 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 fair value of Airbag determined during the 1996
Acquisition. Pursuant to the indenture governing JPS Automotive's 11-1/8% Senior
Notes due 2001 (the "Senior Notes"), in connection with the sale of Airbag, C&A
caused JPS Automotive to make an offer to purchase (up to the amount of the net
proceeds from the sale) the Senior Notes at 100% of their principal amount.
Pursuant to such offer (which expired September 16, 1997), JPS Automotive
repurchased and retired $23 thousand
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principal amount of the Senior Notes. During October 1997, C&A caused JPS
Automotive to use a portion of the proceeds remaining from the sale of Airbag to
make a distribution of $35 million to C&A Products, as permitted under the
restricted payments provisions of the Senior Notes indenture. The principal
executive offices of JPS Automotive are located at 701 McCullough Drive,
Charlotte, North Carolina, 28262 and its telephone number is (704) 547-8500.
References in this report to JPS Automotive means JPS Automotive L.P. and, where
relevant, its subsidiaries.
Automotive Textiles
JPS Automotive manufactures and distributes automotive textiles geared to
satisfy the specific needs of its customers. JPS Automotive distributes
automotive textile products to domestic OEMs, including GM, Chrysler and Ford,
as well as Transplant OEMs, including Honda, Toyota, Nissan, Mazda and
Mitsubishi. Many of these relationships allow JPS Automotive to participate in
the design phase of new products and new applications for existing products.
Products
JPS Automotive manufactures two principal product types: automotive carpet and
trim and interior fabric.
Automotive Carpet and Trim
JPS Automotive's carpet products are sold as (i) complete molded floor systems
and (ii) cut and/or molded interior trim and trunk parts. The floor systems and
cut parts are sold directly to OEMs pursuant to supply arrangements for
individual vehicle platforms. Such arrangements generally remain in place for
the life of a vehicle platform, and in many cases, through a platform's
redesign. Prior to 1998, JPS Automotive manufactured rolled carpet goods which
were incorporated by JPS Automotive into its own products as well as sold to
other automotive suppliers who then incorporated these goods into their
products. In accordance with plans to transfer certain manufacturing activities
to C&A Products, JPS Automotive intends to close its facility which manufactures
roll goods in the second quarter of 1998 and arrange for C&A Products to
manufacture all roll goods required by JPS Automotive. See Note 12 to JPS
Automotive Consolidated Financial Statements.
Molded floor carpet systems typically consist of tufted carpet made with either
spun or bulk continuous filament nylon, intercoated with either a polyethylene
backing or an engineered extruded thermo plastic referred to as mass back
system. This backing, when heated, allows the carpet to be molded to the shape
of the vehicle's interior. After molding, the carpet is trimmed, typically with
a high speed robotic device, to fit the exact dimensions of the vehicle's
interior. Additional features are then added, such as vinyl heel pads, plastic
protective covers and acoustical insulation. Due to its insulating and
acoustical properties, the mass back system has evolved into what JPS Automotive
believes to be the premier floor covering system for vehicles sold in the United
States.
JPS Automotive's trunk trim products consist of one piece, complete molded trunk
inserts and full trunk coverings comprised of three to six individual parts.
Because these products are placed in areas which experience less wear, they are
typically constructed of needlepunched carpet, a material which is normally
lighter in weight than tufted carpet. Trunk products typically use a different
backing than molded floor products.
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Interior trim parts typically include door trim, instrument panel trim, console
trim, seat trim, floormats, truck center floors and van rear floors. These can
be manufactured from either tufted or needlepunched carpet and have a variety of
backings, including latex, polyethylene, mass back or pressure sensitive
adhesive.
Interior Fabric
JPS Automotive sells bodycloth and headliner fabric to other automotive
suppliers, which cut, sew and fabricate it for vehicle installation. In the case
of bodycloth, JPS Automotive's fabric is specified by the OEM, but JPS
Automotive's contract (typically for two to three years) is usually with the
fabricator and parallels the contract between the OEM and the fabricator with
respect to certain aspects such as timing, product specifications and quantity.
JPS Automotive's principal upholstery fabric customers, the Transplant OEMs,
typically demand high-end automotive fabric products with respect to
construction, weight and styling. OEMs typically do not specify a certain
company's headliner fabric, but rather specify fabric type or construction when
awarding headliner system contracts to fabricators. In the second quarter of
1998, JPS Automotive plans to relocate its bodycloth manufacturing operations to
a C&A Products facility, which will produce bodycloth for JPS Automotive on a
contract basis. See Notes 7 and 12 to the JPS Automotive Consolidated Financial
Statements.
Marketing and Sales
During 1997, the marketing and sales forces of JPS Automotive were reduced from
30 employees to two employees in conjunction with the elimination of certain
redundant sales and administrative functions, which following the 1996
Acquisition are being performed by C&A Products. See Notes 7 and 12 to the JPS
Automotive Consolidated Financial Statements. The combination of marketing and
sales forces with C&A Products allows JPS Automotive to continue to provide its
customers, which include both OEMs and independent OEM suppliers, with
integrated product systems and design innovation programs which management
believes reduce costs and enhance value.
Manufacturing and Raw Materials
Manufacturing operations are currently conducted at two facilities with a total
of approximately 1.2 million square feet. In connection with the acquisition by
C&A, JPS Automotive has closed two manufacturing facilities and plans to close
one additional manufacturing facility in 1998. In addition, JPS Automotive is in
the process of relocating certain manufacturing processes from a JPS Automotive
facility to an existing facility of another C&A subsidiary. See Notes 7 and 12
to the JPS Automotive Consolidated Financial Statements. JPS Automotive believes
its facilities, taking into account its arrangements with C&A, are adequate to
meet its current production requirements.
The principal raw materials used by JPS Automotive are carpet fibers (nylon,
polyester and polypropylene), primary carpet backing and extrusion coating
materials and other nylon and polyester fibers for knitting. Many of JPS
Automotive's products contain branded raw materials specified by the customer
and any substitution of such raw materials would have to be made in consultation
with the customer. JPS Automotive purchases its raw materials from a few large
suppliers; however, JPS Automotive believes there are readily available
substitute sources of supply for its raw materials should the need for alternate
sources arise. The price of man-made fibers, such as nylon and polyester, is
influenced by demand, manufacturing capacity and polymer and petroleum prices.
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Employees
As of December 27, 1997, JPS Automotive employed 1,743 persons, with 1,711
involved primarily in engineering, research, development, manufacturing and
production, 30 involved in administration and 2 involved in marketing and sales.
JPS Automotive considers relations with its employees to be generally good.
Competition
The market for JPS Automotive's products is highly competitive. Competition is
based primarily on price, quality of products and service. Although some of JPS
Automotive's competitors are larger and have more financial resources,
management believes none of its competitors offers a more complete line of
automotive textiles.
Patents and Trademarks
JPS Automotive believes its business is not dependent upon any individual
patent, trademark or tradename.
Research and Development
JPS Automotive has always maintained an active design and development effort
geared toward new or enhanced products. Management believes these capabilities
were enhanced by C&A's ownership of JPS Automotive a result of the 1996
Acquisition. JPS Automotive believes its competitive position has been enhanced
as OEMs have transferred more responsibility for the design and development of
textiles to their suppliers.
Transactions and Arrangements with Affiliates
For a discussion of certain transactions and arrangements between C&A Products
and JPS Automotive, see Note 12 to JPS Automotive Consolidated Financial
Statements.
Item 2. Properties
Response to Item 2 of Form 10-K is in accordance with General Instruction
I(2)(d) to Form 10-K. JPS Automotive conducts its operations in two
manufacturing facilities, both of which are owned. Floor space at the two
facilities, which are located in North Carolina and South Carolina, totals
approximately 1.2 million square feet. JPS Automotive has another facility, with
approximately 0.8 million square feet, which will be closed in the second
quarter of 1998 in accordance with plans to transfer certain manufacturing
processes to an existing C&A Products facility. See Note 12 to JPS Automotive
Consolidated Financial Statements.
Item 3. Legal Proceedings
From time to time, JPS Automotive is involved in various legal proceedings.
Management believes that such proceedings are routine in nature and incidental
to the conduct of its business, and that none of such proceedings, if determined
adversely to JPS Automotive, would have a material adverse effect on the
consolidated financial condition or results of operations of JPS Automotive.
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Item 4. Submission of Matters to a Vote of Security Holders
Omitted pursuant to General Instruction I(2)(c) to Form 10-K.
Part II
Item 5. Market for Registrants' Common Equity and Related Stockholder Matters
JPS Automotive is a privately held company with no established public trading
market for its equity securities. The equity securities are held by two wholly
owned subsidiaries of C&A. Products Corp. is a wholly owned subsidiary of JPS
Automotive.
The indenture governing the Senior Notes generally prohibits JPS Automotive from
making certain restricted payments and investments (generally, dividends and
distributions on its equity interests; purchases or redemptions of its equity
interests; purchases of any indebtedness subordinated to Senior Notes and
investments other than as permitted) ("Restricted Payments") unless (i) there is
no default under the Senior Notes indenture, (ii) after giving pro forma effect
to the Restricted Payment, JPS Automotive would be permitted to incur at least
$1.00 of additional indebtedness under the indenture's general test for the
incurrence of indebtedness which is a specified ratio (currently 2.5 to 1.0) of
cash flow to interest expense and (iii) the aggregate of all Restricted Payments
from the issue date is less than a specified threshold (based, generally, on 50%
of cumulative consolidated net income since the issue date plus 100% of the
aggregate net cash proceeds of the issuance by JPS Automotive of certain equity
and convertible debt securities and cash contributions to JPS Automotive) (the
"Restricted Payments Tests"). These conditions were satisfied immediately
following the closing of the 1996 Acquisition and as of December 27, 1997. The
Restricted Payments Tests are subject to a number of significant exceptions.
During fiscal year 1997, JPS Automotive made distributions to C&A Products
totaling $44.6 million, which included the $35 million distribution of a portion
of the proceeds received from the sale of Airbag, as permitted under the
restricted payments provision of the Senior Notes. During fiscal year 1996, JPS
Automotive made no distributions to its partners.
Item 6. Selected Financial Data
Omitted pursuant to General Instruction I(2)(a) to Form 10-K.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Pursuant to General Instruction I(2)(a) to Form 10-K, the following discussion
is 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 presented and the fiscal year immediately preceding
it.
JPS Automotive manufactures and supplies textiles and specialty textile products
for passenger car and light truck production in North America. On June 28, 1994,
JPS Automotive acquired the assets of the automotive products and industrial
fabrics divisions of JPS Textile Group, Inc. (the "1994 Acquisition"). On
December 11, 1996, C&A, through its subsidiaries, acquired JPS Automotive from
Foamex International in the 1996 Acquisition. The following discussion should be
read in conjunction with the consolidated financial statements and related notes
thereto of JPS Automotive and Products Corp. included in this report.
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On July 24, 1997, JPS Automotive completed the sale of Airbag, its airbag and
industrial fabric business, 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 fair value of Airbag determined
during the 1996 Acquisition. Pursuant to the indenture governing the Senior
Notes, C&A Products caused JPS Automotive to make an offer to purchase (up to
the amount of the net proceeds from the sale) the Senior Notes. Pursuant to such
offer, which expired September 16, 1997, JPS Automotive repurchased and retired
$23 thousand principal amount of Senior Notes. During October 1997, C&A Products
caused JPS Automotive to use a portion of the proceeds remaining from the sale
of Airbag to make a distribution of $35 million to C&A Products, as permitted
under the restricted payment provisions of the Senior Notes indenture.
The consolidated balance sheets as of December 27, 1997 and December 28, 1996,
and consolidated statements of operations, cash flows and owners' equity for the
fiscal year ended December 27, 1997 and the period from December 12, 1996, to
December 28, 1996, pertain to JPS Automotive. The consolidated statements of
operations, cash flows and owners' equity for the period from January 1, 1996,
to December 11, 1996 pertain to JPS Automotive as it existed following the 1994
Acquisition and prior to the 1996 acquisition (the "Predecessor Company").
Foamex International and its affiliates provided JPS Automotive with certain
legal, accounting, auditing and other administrative services pursuant to the
terms of a services agreement between Foamex International and its affiliates
and JPS Automotive (the "JPS Automotive Services Agreement"). The JPS Automotive
Services Agreement was transferred to and assumed by C&A in connection with the
1996 Acquisition. C&A has expanded the services provided pursuant to the JPS
Automotive Services Agreement. Therefore, historical amounts for selling,
general and administrative expenses may not be directly comparable to amounts
reported by JPS Automotive after the 1996 Acquisition.
Fiscal Year 1997 Compared to the Combined Period from December 12, 1996 to
December 28, 1996 (JPS Automotive), and January 1, 1996 to December 11, 1996
(Predecessor Company) (the "1996 Combined Period")
JPS Automotive has presented management's discussion and analysis of fiscal year
1997 against the 1996 Combined Period as JPS Automotive believes that the data
is comparable and that a recasting of the data to provide a comparison of
comparable calendar periods would be unduly burdensome. Management believes that
there are no seasonal or other factors which are not discussed in this report
which materially affect the comparability of the 1997 fiscal year and the 1996
Combined Period.
Net Sales: Net sales for the twelve months ended December 27, 1997 were $247.3
million as compared to $225.4 million for the 1996 Combined Period. The
approximately $21.9 million increase in sales was primarily due to higher sales
levels of automotive carpet products as a result of increased production of the
automotive and light truck programs which JPS Automotive supplies. In addition,
bodycloth sales increased over the prior year due to new business on the Nissan
Altima and increased build and mix penetration on the Toyota Camry.
Gross Profit: Gross profit as a percentage of sales decreased to 15.0% for the
twelve months ended December 27, 1997 as compared to 16.2% in the 1996 Combined
Period. This is due to a shift towards lower margin automobile and light truck
programs that began in the second half of 1996 and continued through the first
half of 1997.
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Selling, General and Administrative Expenses: Selling, general and
administrative expenses decreased to $15.7 million for the twelve months ended
December 27, 1997 from $19.6 million in the 1996 Combined Period. This decrease
is a result of lower administrative costs resulting from the 1996 Acquisition.
Interest Expense: Interest and debt issuance expense decreased to $10.7 million
for the twelve months ended December 27, 1997 from $20.9 million in the 1996
Combined Period primarily due to the lower overall outstanding debt levels
following the 1996 Acquisition. In connection with the 1996 Acquisition, JPS
Automotive's revolving facilities were repaid and terminated and $68.0 million
in Senior Notes were retired. As a result of the 1996 Acquisition, holders of
the Senior Notes had a right to put their notes to JPS Automotive. Approximately
$3.9 million principal amount of Senior Notes were so put to JPS Automotive and
then purchased and retired by JPS Automotive in the first quarter of 1997.
During the second quarter of 1997, approximately $19.4 million principal amount
of Senior Notes was purchased by JPS Automotive on the open market and retired.
No open market purchases were made in the third or fourth quarters of 1997. JPS
Automotive repurchased and retired $23 thousand principal amount of Senior Notes
in conjunction with an offer to purchase as a result of the 1997 sale of Airbag.
During 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. During the twelve months ended December
27, 1997, JPS Automotive was charged $0.1 million in interest in connection with
these revolving credit arrangements, reflecting an average interest rate of
7.4%.
Other Income (Expense), Net: Other income for the twelve months ended December
27, 1997 and the 1996 Combined Period related to the sales of fixed assets.
Minority Interest: Minority interest expense of $0.5 million in the 1996
Combined Period related to the minority ownership interest in Cramerton. In
connection with the 1996 Acquisition, this minority interest was acquired by C&A
Products, and Cramerton is now 100% owned by JPS Automotive.
Income Taxes: The income tax provision for the twelve months ended December 27,
1997 increased to $5.2 million from a $36 thousand benefit in the 1996 Combined
Period. This increase resulted from the conversion immediately prior to the 1996
Acquisition whereby JPS Automotive was converted into an association that is
taxable as a corporation. The Predecessor Company, as a limited partnership, was
not subject to federal income taxes and, therefore, no current or deferred
income tax provision had been provided for such taxes.
Income from Discontinued Operations: Income from discontinued operations
decreased to $1.7 million in 1997 from $3.6 million in the 1996 Combined Period.
This decrease resulted from an increase in the effective tax rate as a result of
the 1996 Acquisition as well as the closing of the sale of Airbag on July 24,
1997.
Extraordinary Loss: Extraordinary loss of $0.7 million, net of income taxes of
$0.4 million, for the twelve months ended December 27, 1997, relates to the
purchase of $19.4 million principal amount of Senior Notes at prices in excess
of carrying values.
Net Income: Net income increased to $8.0 million for the twelve months ended
December 27, 1997 from a loss of $4.4 million in the 1996 Combined Period
primarily due to the reasons cited above.
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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 capital
contributions and borrowings 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 12 to JPS Automotive Consolidated Financial Statements.
Safe Harbor Statement
This Form 10-K 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-K 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-K
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 taste, dependence on significant automotive
customers, changes in the popularity of particular car models, the loss of
programs on particular car models and the level of competition in the automotive
supply industry 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 "Item 1.
Business" and the above discussion in this "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations," and Notes to
Consolidated Financial Statements and see also JPS Automotive's other filings
with the Securities and Exchange Commission.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Disclosures are not required at this time.
Item 8. Financial Statements and Supplementary Data
See the Consolidated Financial Statements of JPS Automotive and subsidiaries and
Products Corp. included herein and listed on the indices to the Consolidated
Financial Statements and Financial Statement Schedule as set forth in Item 14 of
this Form 10-K.
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
None
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Part III
Item 10. Directors and Executive Officers of the Registrants
Omitted pursuant to General Instruction I(2)(c) to Form 10-K.
Item 11. Executive Compensation
Omitted pursuant to General Instruction I(2)(c) to
Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Omitted pursuant to General Instruction I(2)(c) to Form 10-K.
Item 13. Certain Relationships and Related Transactions
Omitted pursuant to General Instruction I(2)(c) to Form 10-K.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements
The financial statements listed in the accompanying Index to Consolidated
Financial Statements are filed as part of this Report on Form 10-K.
(b) Reports on Form 8-K
During the last quarter of the period covered by this Report or Form 10-K,
the Company filed no reports or Form 8-K.
(c) Exhibits
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Exhibit
Number Description
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2.1 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.
2.2 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.
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.
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Exhibit
Number Description
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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.
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.
12
<PAGE>
<CAPTION>
Exhibit
Number Description
- -------- -----------
<S> <C>
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 Amended and Restated Agreement of Limited Partnership of Cramerton
Automotive Products, L.P., dated as of December 2, 1994, is
incorporated by reference to Exhibit 10.13 of Product Corp.'s
Registration Statement on Form S-1, Registration No. 33-75510.
10.5 First Amendment to Amended and Restated Agreement of Limited
Partnership of Cramerton Automotive Products, L.P., dated as of
June 28, 1994, is hereby incorporated by reference to Exhibit
10.85 of the Form 10-K of Foamex International Inc. for fiscal
1994.
10.6 Second Amendment to Amended and Restated Agreement of Limited
Partnership of Cramerton Automotive Products, L.P., dated as of
October 5, 1994, is hereby incorporated by reference to Exhibit
10.86 of the Form 10-K of Foamex International Inc. for fiscal
1994.
10.7 Third Amendment to the Amended and Restated Agreement of Limited
Partnership of Cramerton Automotive Products, L.P., dated as of
December 11, 1996, is hereby incorporated by reference to Exhibit
10.8 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 Certificate of Amendment of Certificate of Limited Partnership of
Cramerton dated December 12, 1996, is hereby incorporated by
reference to Exhibit 10.9 of the Form 10-K of JPS Automotive and
Products Corp. for the transition period from January 1, 1996 to
December 28, 1996.
10.9 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.
10.10 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.
10.11 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.
13
<PAGE>
<CAPTION>
Exhibit
Number Description
- ------- ------------
<S> <C>
10.12 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.
10.13 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.
10.14 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.
10.15 Post 1996 Acquisition Arrangements Under JPS Automotive
Services Agreement.
23 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedules
</TABLE>
(d) Schedules
The schedules listed in the accompanying Index to Financial Statement
Schedule are filed as part of this Annual Report on Form 10-K
14
<PAGE>
SIGNATURES
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 13th day of April,
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
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrants and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
- ----------- ----- -----
<S> <C> <C>
/s/ Thomas E. Hannah Director and Chief Executive April 13, 1998
- ----------------------------------- Officer of PACJ, Inc.
Thomas E. Hannah
/s/ David A. Stockman Director of PACJ, Inc. April 13, 1998
- ----------------------------------
David A. Stockman
/s/ J. Michael Stepp Executive Vice President and Chief April 13, 1998
- ------------------------------------
J. Michael Stepp Financial Officer (Chief Financial
Officer and Chief Accounting Officer)
of JPS Automotive Products Corp.
and PACJ, Inc. and Director of
JPS Automotive Products Corp.
/s/ Randall J. Weisenburger Director of PACJ, Inc. April 13, 1998
- ------------------------------------
Randall J. Weisenburger
</TABLE>
15
<PAGE>
JPS Automotive L.P.
JPS Automotive Products Corp.
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
Page
<S> <C>
Index to Consolidated Financial Statements F-1
JPS Automotive L.P. and Subsidiaries:
Report of Independent Public Accountants F-2
Report of Independent Accountants F-3
Consolidated Balance Sheets as of December 27, 1997, and December 28, 1996 F-4
Consolidated Statements of Operations for the year ended December 27, 1997, for the period from
December 12, 1996, to December 28, 1996, and from January 1, 1996, to December 11, 1996, and for
the year ended December 31, 1995 F-5
Consolidated Statements of Owners' Equity for the year ended December 27,
1997, for the period from December 12, 1996, to December 28, 1996, and
from January 1, 1996, to December 11, 1996, and for the year ended
December 31, 1995 F-6
Consolidated Statements of Cash Flows for the year ended December 27, 1997,
for the period from December 12, 1996, to December 28, 1996, and from
January 1, 1996, to December 11, 1996, and for the year ended December
31, 1995 F-7
Notes to Consolidated Financial Statements F-8
JPS Automotive Products Corp:
Report of Independent Public Accountants F-33
Balance Sheets as of December 27, 1997 and December 28, 1996 F-34
Notes to Financial Statements F-35
</TABLE>
F-1
<PAGE>
Report of Independent Public Accountants
To the Partners of JPS Automotive L.P.:
We have audited the accompanying consolidated balance sheets of JPS Automotive
L.P. (a Delaware limited partnership and an indirect subsidiary of Collins &
Aikman Corporation) and subsidiaries as of December 27, 1997, and December 28,
1996, and the related consolidated statements of operations, owners' equity, and
cash flows for the year ended December 27, 1997, the period from December 12,
1996, to December 28, 1996, and the period from January 1, 1996, to December 11,
1996. These consolidated financial statements and the schedule referred to below
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and schedule based
on our audits. The financial statements and schedule of JPS Automotive, L.P. for
the year ended December 31, 1995, were audited by other auditors whose report
dated February 9, 1996, expressed an unqualified opinion on those statements.
The opinion of such auditors does not cover the restatement of those statements
discussed in Note 11.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of JPS
Automotive L.P. and subsidiaries as of December 27, 1997, and December 28, 1996,
and the results of their operations and their cash flows for the year ended
December 27, 1997, the period from December 12, 1996, to December 28, 1996, and
the period from January 1, 1996, to December 11, 1996, in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Schedule II is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not a required part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in our audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
We have also audited the adjustments that were applied to restate the 1995
consolidated financial statements for the discontinued operations described in
Note 11. In our opinion, such adjustments are appropriate and have been properly
applied.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
March 26, 1998.
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of JPS AUTOMOTIVE L.P.:
We have audited the consolidated statements of operations, owners' equity and
cash flows of JPS Automotive L.P. and subsidiaries for the year ended December
31, 1995, prior to restatement (and, therefore, not presented herein) for the
discontinued operations described in Note 11 to the restated consolidated
financial statements. Our audit also included the consolidated financial
statement schedule as of December 31, 1995. These consolidated financial
statements are the responsibility of JPS Automotive's management. Our
responsibility is to express an opinion on these consolidated financial
statements (prior to restatement) based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements (prior to restatement)
referred to above present fairly, in all material respects, the consolidated
results of operations and cash flows for the year ended December 31, 1995, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the consolidated financial statement schedule (prior to restatement),
when considered in relation to the basic consolidated financial statements
(prior to restatement), taken as a whole presents fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Spartanburg, South Carolina
February 9, 1996
F-3
<PAGE>
<TABLE>
<CAPTION>
JPS Automotive L.P. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands)
December 27, December 28,
Assets 1997 1996
------ -------------- -------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 9,271 $ 198
Accounts receivable, net of allowance for doubtful accounts of
$6,018 and $5,896 37,038 26,840
Inventories 19,275 14,290
Revolving loan due from C&A Products 4,500 0
Deferred tax assets 5,369 4,647
Net assets of discontinued operations 0 50,418
Receivables from related parties 1,974 0
Other current assets 4,269 4,789
--------- ---------
Total current assets 81,696 101,182
--------- ---------
Property, plant and equipment:
Land and land improvements 4,581 4,893
Buildings and leasehold improvements 12,412 11,264
Machinery, equipment and furnishings 43,433 37,847
Construction in progress 415 5,793
-------- -------
Total 60,841 59,797
Less - Accumulated depreciation and amortization (5,371) (285)
------- --------
Property, plant and equipment, net 55,470 59,512
Goodwill, net of amortization 103,310 114,769
Demand receivable due from C&A for income taxes 6,548 328
Debt issuance costs, net of amortization 2,667 3,370
Other assets 916 7,187
--------- -------
$ 250,607 $ 286,348
========= =======
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Owners' Equity
-------------------------------
Current liabilities:
<S> <C> <C>
Accounts payable $ 12,083 $ 12,014
Accrued expenses 13,677 21,996
--------- ---------
Total current liabilities 25,760 34,010
--------- ---------
Long-term debt 91,843 117,175
--------- --------
Other liabilities 10,008 12,638
--------- --------
Commitments and contingencies
Owners' equity:
General partner 48,073 48,073
Limited partner 74,923 74,452
------- ---------
Total owners' equity 122,996 122,525
------- --------
$ 250,607 $ 286,348
======= =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
F-4
<PAGE>
<TABLE>
<CAPTION>
JPS Automotive L.P. and Subsidiaries
Consolidated Statements of Operations
(dollars in thousands)
Predecessor Company
-----------------------------
Period from Period from
December 12, January 1,
Year Ended 1996, to 1996, to Year Ended
December 27, December 28, December 11, December 31,
1997 1996 1996 1995
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 247,271 $ 6,370 $ 219,039 $ 239,016
Cost of goods sold 210,081 6,008 182,818 194,932
--------- --------- --------- ---------
Gross profit 37,190 362 36,221 44,084
Selling, general and administrative expenses 15,678 885 18,740 19,376
--------- --------- --------- ---------
Income (loss) from operations 21,512 (523) 17,481 24,708
Interest expense 10,681 550 20,363 22,231
Other income (expense), net 1,464 21 (4,668) 279
Minority interest in consolidated subsidiary 0 0 551 (403)
--------- --------- --------- ---------
Income (loss) before income taxes 12,295 (1,052) (6,999) 2,353
Income tax provision (benefit) 5,199 (388) 352 30
--------- --------- --------- ---------
Income (loss) from continuing operations 7,096 (664) (7,351) 2,323
Income from discontinued operations, net of
income tax of $1,044, $11, $0 and $0 1,662 18 3,615 6,206
--------- --------- --------- ---------
Income (loss) before extraordinary loss 8,758 (646) (3,736) 8,529
Extraordinary loss on extinguishment of
debt, net of income tax of $442 721 0 0 0
--------- --------- --------- ---------
Net income (loss) $ 8,037 $ (646) $ (3,736) $ 8,529
========= ========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
JPS Automotive L.P. and Subsidiaries
Consolidated Statements of Owners' Equity
(dollars in thousands)
Limited Partner General Partner Total
--------------- -------------- -----
Predecessor Company-
<S> <C> <C> <C>
Balance, December 31, 1995 $ 105,054 $ 1,061 $ 106,115
Net loss (3,699) (37) (3,736)
--------- --------- ---------
Balance, December 11, 1996 101,355 1,024 102,379
Acquisition of JPS Automotive by Collins & Aikman
Corporation (101,355) (1,024) (102,379)
--------- --------- ---------
$ 0 $ 0 $ 0
========= ========= ========
</TABLE>
<TABLE>
<CAPTION>
JPS Automotive-
Pushdown of acquisition basis and
<S> <C> <C> <C>
initial contributions by partners $ 70,980 $ 48,074 $ 119,054
Cash contributions by partners 4,117 0 4,117
Net loss (645) (1) (646)
--------- --------- --------
Balance, December 28, 1996 74,452 48,073 122,525
Contributions by partners-
Cash 32,369 0 32,369
Other 5,142 0 5,142
Distributions to partners (44,625) 0 (44,625)
True-up of pushdown acquisition basis (452) 0 (452)
Net income 8,037 0 8,037
--------- --------- ---------
Balance, December 27, 1997 $ 74,923 $ 48,073 $ 122,996
========= ========= =========
</TABLE>
The accompanying notes to consolidated and combined financial statements are an
integral part of these statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
JPS Automotive L.P. and Subsidiaries
Consolidated Statements of Cash Flows
(dollars in thousands)
Predecessor Company
---------------------------
Period from Period from
December 12, January 1,
Year Ended 1996, to 1996, to Year Ended
December 27, December 28, December 11, December 31,
1997 1996 1996 1995
------------ ----------- ------------ -----------
Operating activities:
<S> <C> <C> <C> <C>
Net income (loss) $ 8,037 $ (646) $ (3,736) $ 8,529
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities-
Income from discontinued operations (1,662) (18) (3,615) (6,206)
Extraordinary loss, net 721 0 0 0
Deferred income tax expense 11,190 (60) 0 0
Depreciation and amortization 7,868 373 10,492 9,856
Interest accretion and debt issuance cost
amortization (322) 0 1,115 1,081
Other, net 215 (21) 3,898 (88)
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable (10,414) (102) 776 (642)
Inventories (4,986) 596 40 1,085
Accounts payable 69 (2,846) (3,483) (4,930)
Other assets and liabilities (6,401) (10,784) 7,781 (2,504)
--------- ------- ----- -------
Net cash provided by (used in) continuing
operations 4,315 (13,508) 13,268 6,181
Net cash provided by (used in) discontinued
operations, net 478 (1,777) 11,105 8,396
-------- ------ ------ -----
Net cash provided by (used in) operating
activities 4,793 (15,285) 24,373 14,577
------- -------- ------ ------
Investing activities:
Capital expenditures, net (3,692) (435) (4,438) (17,110)
Proceeds from disposition of discontinued
operations 55,900 0 0 0
Payment to related party for assumption of
environmental liabilities (4,136) 0 0 0
Acquisition, net of cash acquired 0 0 0 (4,653)
Other 1,391 0 85 80
------ ------- ----- ------
Net cash provided by (used in) investing
activities 49,463 (435) (4,353) (21,683)
------ ------- ------- -------
Financing activities:
Net proceeds from (repayments and advances on)
revolving loans (4,500) 0 (9,563) 2,521
Repayment of long-term debt (25,627) (26,878) (1,415) (785)
Capital contributions from partners 32,369 30,995 0 0
Distributions to C&A Products (44,625) 0 0 0
Increase in amounts due C&A Products, net (2,800) 0 0 0
Distributions to minority interest 0 0 (78) (62)
------ ------ -------- -------
Net cash provided by (used in) financing
activities (45,183) 4,117 (11,056) 1,674
------- ------ -------- -------
Net increase (decrease) in cash and cash equivalents 9,073 (11,603) 8,964 (5,432)
Cash and cash equivalents at beginning of period 198 11,801 2,837 8,269
------ ------ -------- -------
Cash and cash equivalents at end of period $ 9,271 $ 198 $ 11,801 $ 2,837
====== ====== ======== =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-7
<PAGE>
JPS Automotive L.P. and Subsidiaries
Notes to Consolidated Financial Statements
1. Organization and Basis of Presentation:
JPS Automotive L.P. and subsidiaries ("JPS Automotive" or the "Company") operate
in the automotive products segment in North America, including the design,
manufacture and sale of carpet components and interior fabrics for passenger
cars and light trucks. On December 11, 1996, all of the outstanding equity of
the Company was acquired from Foamex International, Inc. ("Foamex") by Collins &
Aikman Corporation ("C&A"), through its subsidiaries (the "1996 Acquisition").
(See Note 2.)
JPS Automotive L.P. was formed on May 17, 1994 (the "Predecessor Company"), for
the purpose of acquiring a 100% ownership interest in JPS Automotive Products
Corp. ("Products Corp."), which was purchased for nominal consideration on May
25, 1994. On June 28, 1994, Foamex-JPS Automotive L.P. ("FJPS") and JPSGP Inc.
("JPSGP"), the owners of a 99% limited partnership interest and a 1% general
partnership interest in the Predecessor Company, respectively, made capital
contributions of approximately $90.0 million. The Predecessor Company, in turn,
made a capital contribution of approximately $90.0 million to Products Corp.
FJPS and JPSGP were indirect wholly owned subsidiaries of Foamex.
On June 28, 1994, Products Corp. acquired the assets of the automotive products
and industrial fabrics divisions of JPS Textile Group, Inc. Effective October 3,
1994, Products Corp. transferred and assigned substantially all of its assets,
subject to substantially all of its liabilities, to the Predecessor Company,
which agreed to assume such liabilities.
JPS Automotive is the beneficial owner of Cramerton (as defined in Note 2). As a
result of the 1996 Acquisition, the Company owns a 98% limited partnership
interest and a 1% general partnership interest in Cramerton and, through its
subsidiary, Cramerton Management Corporation ("CMC"), beneficially owns a 1%
general partnership interest. Prior to the 1996 Acquisition, the Predecessor
Company was the beneficial owner of an 80% interest in Cramerton. In connection
with the 1996 Acquisition, Collins & Aikman Products Co., a wholly-owned
subsidiary of C&A ("C&A Products"), purchased the 20% minority interest in
Cramerton from Seiren Co. Ltd. and its affiliates. JPS Automotive subsequently
acquired the 20% minority interest previously owned by the Seiren entities.
On July 24, 1997, JPS Automotive completed the sale of its Air Restraint and
Technical Products Division, an airbag and industrial fabric business,
("Airbag") to Safety Components International, Inc. JPS Automotive has accounted
for the financial results and net assets of Airbag as a discontinued operation.
Accordingly, previously reported financial results for all periods have been
restated to reflect Airbag as a discontinued operation. (See Note 11)
F-8
<PAGE>
The consolidated balance sheets as of December 27, 1997, and December 28, 1996,
and the consolidated statements of operations, cash flows and owners' equity for
the year ended December 27, 1997, and the period from December 12, 1996, to
December 28, 1996, pertain to JPS Automotive. The consolidated statements of
operations, cash flows and owners' equity for the period from January 1, 1996,
to December 11, 1996, and for the year ended December 31, 1995, pertain to the
Predecessor Company.
2. JPS Automotive Acquisition:
As discussed in Note 1, on December 11, 1996, C&A, through its subsidiaries,
acquired JPS Automotive from Foamex pursuant to an Equity Purchase Agreement
dated August 28, 1996, as amended December 11, 1996. The purchase price for the
1996 Acquisition was an aggregate of approximately $220 million, consisting of
approximately $195 million of indebtedness of JPS Automotive and $25 million in
cash paid to Foamex.
In the 1996 Acquisition, C&A Products acquired a .9999% limited partnership
interest in JPS Automotive from Foamex and a 99% limited partnership interest in
JPS Automotive from FJPS. PACJ, Inc., a wholly owned subsidiary of C&A Products,
acquired a .0001% general partnership interest in JPS Automotive from 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.
In addition, as discussed in Note 1, on December 11, 1996, C&A Products also
purchased from Seiren Co. Ltd. and its affiliates for $10 million 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. In December 1997, Cramerton was converted into a
corporation through the merger of Cramerton into its general partner.
In connection with the 1996 Acquisition, C&A, through its subsidiaries, acquired
approximately $68 million of the Company's outstanding 11-1/8% Senior Notes due
2001 (the "Senior Notes"), which were subsequently retired by the Company. In
addition, at the time of closing, approximately $15 million of the Company's
outstanding debt was repaid. (See Note 6.) The Senior Notes formerly held by C&A
and the funds used to repay the Company's outstanding bank indebtedness were
recorded as capital contributions to the Company from C&A and its subsidiaries.
The aggregate investment of approximately $119 million in connection with the
acquisition of JPS Automotive by C&A and its subsidiaries was funded by
borrowings under C&A's credit facilities.
F-9
<PAGE>
The 1996 Acquisition has been accounted for as a purchase and, pursuant to the
provisions of Staff Accounting Bulletin No. 54 ("SAB No. 54") and the rules of
pushdown accounting, the 1996 Acquisition gave rise to a new basis of
accounting. The purchase price and related acquisition expenses exceeded the
fair value of the net assets acquired by approximately $126.4 million. The
purchase price in excess of the net assets acquired has been pushed down and
recorded in the accompanying consolidated balance sheet as goodwill. The excess
of the purchase price over the estimated fair value of the net assets acquired
(goodwill) is being amortized over 40 years.
In addition to the pushdown of goodwill, adjustments to certain assets and
liabilities of the Predecessor Company were recorded by the Company as a result
of the 1996 Acquisition and the application of pushdown accounting. A comparison
of the Company's assets and liabilities to those of the Predecessor Company is
as follows:
Predecessor JPS
Company Automotive
------------- ---------------
December 11, December 12,
1996 1996
------------- -----------------
Current assets $133,690 $111,409
Property, plant and equipment, net 85,080 59,366
Debt issuance costs, net 6,113 3,370
Goodwill 117,664 114,884
Other assets 1,146 7,180
Current liabilities 40,665 47,260
Long-term debt 190,608 117,170
Other liabilities 3,425 12,695
Minority interest 6,616 0
The above December 12, 1996 balances, which were subject to postclosing
adjustment, reflect the revaluation of the JPS Automotive assets and liabilities
to their estimated fair values at the date of the 1996 Acquisition. The purchase
price allocation related to the JPS Automotive acquisition established certain
reserves related to management's plans to rationalize certain acquired
manufacturing facilities (see Note 7). During 1997, the Company finalized the
purchase price and received approximately $11.2 million from the seller as a
reduction of the purchase price. The impact of management's final plans, the
settlement of the purchase price adjustment and certain other revisions to
preliminary estimates resulted in a reduction of goodwill during fiscal 1997 of
approximately $5.0 million.
Unaudited pro forma consolidated income from continuing operations of the
Company for the period from January 1, 1996, to December 28, 1996, and for the
year ended December 31, 1995, assuming that the 1996 Acquisition occurred at the
beginning of each period, would have been approximately $0.4 million and $7.4
million, respectively. Unaudited pro forma consolidated net income for the same
periods using the same assumptions would have been approximately $4.0 million
and $13.5 million, respectively. The pro forma adjustments, which would not
affect net sales, reflect primarily reduced depreciation, goodwill amortization
and interest expense offset by the pro forma impact of income taxes.
F-10
<PAGE>
Following the acquisition by C&A Products of JPS Automotive in December 1996,
C&A Products began to develop plans to rationalize certain manufacturing
locations as well as marketing and administrative functions. These transactions
and arrangements and proposed transactions and arrangements 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 issued
an opinion confirming they are fair to JPS Automotive from a financial point of
view. See Note 12 for further discussion.
3. Summary of Significant Accounting Policies:
Consolidation
The consolidated financial statements include the accounts of JPS Automotive and
all subsidiaries that JPS Automotive directly or indirectly controls, either
through majority ownership or otherwise. Minority interest represents the
minority partners' proportionate shares of the equity in Cramerton prior to the
1996 Acquisition. Intercompany accounts and transactions have been eliminated in
consolidation. Investments in 20% to 50% controlled companies are accounted for
on the equity method.
Fiscal Year
As a result of the 1996 Acquisition, JPS Automotive's fiscal year ends on the
last Saturday of December. Prior to that time, the Predecessor Company's fiscal
year ended on the Sunday closest to the thirty-first day of December.
Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reported period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. The cost of the
inventories is determined on a first-in, first-out basis.
F-11
<PAGE>
Property, Plant and Equipment
Property, plant and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets. The range of
useful lives estimated for buildings is generally 25 to 40 years and the range
for machinery, equipment and furnishings is 3 to 15 years. Leasehold
improvements are amortized over the shorter of the terms for the respective
leases or the estimated lives of the leasehold improvements. For income tax
purposes, the Company uses accelerated depreciation methods.
Cost of maintenance and repairs is charged to expense as incurred. Renewals and
improvements are capitalized. Upon retirement or other disposition of items of
plant and equipment, cost of items and related accumulated depreciation are
removed from the accounts and any gain or loss is included in operations.
In connection with the 1996 Acquisition, the Company's property, plant and
equipment was recorded at the appraised values reflecting the intended future
use of the facilities and equipment. Reserves for facility shutdowns and other
associated costs were provided for in the purchase accounting adjustments. (See
Note 7.)
Long-lived Assets
In 1996, the Predecessor Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." SFAS No. 121 establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles and goodwill related to those assets to be held and
used and for long-lived assets and certain identifiable intangibles to be
disposed of. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable and that certain long-lived
assets and identifiable intangibles to be disposed of be reported at the lower
of carrying amount or fair value less cost to sell. The adoption of SFAS No. 121
did not have a material impact on the consolidated results of operations.
As a result of its ongoing assessment of long-lived assets, during the period
from January 1, 1996, to December 11, 1996, the continuing operations of the
Predecessor Company recorded a charge of approximately $4.4 million for the
write-down of certain machinery and equipment to their estimated realizable
values as the assets were assessed by management to have no continuing use due
primarily to the loss of certain programs and a loss of a headliner customer.
The write-down of machinery and equipment is included in other income (expense),
net in the accompanying consolidated statement of operations.
Debt Issuance Costs
Debt issuance costs consist of amounts incurred in obtaining long-term
financing. These costs are amortized over the term of the related debt using the
interest method. Accumulated amortization as of December 27, 1997, was
approximately $0.7 million.
In connection with the 1996 Acquisition and the subsequent retirement of debt,
$2.7 million of debt issuance costs were eliminated as a result of the
application of pushdown accounting. (See Note 2.)
F-12
<PAGE>
Goodwill
As discussed in Note 2, the acquisition of JPS Automotive by C&A has been
accounted for as a purchase and, pursuant to SAB No. 54 and the rules of
pushdown accounting, gave rise to a new basis of accounting. As a result, the
amount by which the purchase price and related acquisition expenses exceeded the
fair value of the net assets acquired has been recorded by JPS Automotive as
goodwill in the accompanying December 27, 1997, and December 28, 1996,
consolidated balance sheet and is being amortized over a 40-year period.
Accumulated amortization as of December 27, 1997 and December 28, 1996, was
approximately $2.6 million and $0.1 million, respectively. The carrying value of
goodwill will be reviewed periodically based on the undiscounted cash flows and
pretax income over the remaining amortization period. Should this review
indicate that the goodwill balance will not be recoverable, the Company's
carrying value of goodwill will be reduced. At December 27, 1997, the Company
believes the goodwill is fully recoverable.
Environmental Matters
The Company records its best estimate when it believes it is probable that an
environmental liability has been incurred and the amount of loss can be
reasonably estimated. The Company also considers estimates of certain reasonably
possible environmental liabilities in determining the aggregate amount of
environmental reserves. Accruals for environmental liabilities at December 28,
1996, are primarily included in the consolidated balance sheet as other
noncurrent liabilities at undiscounted amounts and exclude claims for recoveries
from insurance or other third parties.
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 of approximately $4.1 million. As a result,
environmental liabilities totaling $4.6 million have been excluded from the
accompanying December 27, 1997 balance sheet and a gain of $0.5 million has
been recorded as a capital contribution from C&A Products due to the related
party nature of this transaction. JPS Automotive will remain contingently
liable for these environmental liabilities.
Postemployment Benefits
Under the provisions of SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," benefits attributable to employee services rendered are accrued when
it becomes probable that such benefits will be paid and when sufficient
information exists to make reasonable estimates of the amounts to be paid.
Revenue Recognition
The Company recognizes revenue from product sales when it has shipped the goods
or ownership has been transferred to the customer for goods to be held for
future shipment at the customer's request. The Company generally allows its
customers the right of return only in the case of defective products. The
Company provides a reserve for estimated defective product costs at the time of
the sale of the products.
F-13
<PAGE>
Interest Rate Swap Agreement
The differential to be paid or received under an interest rate swap agreement is
recognized in the current period as interest rates change as an adjustment to
interest expense. At December 27, 1997, and December 28, 1996, there were no
outstanding interest rate swap agreements.
Income Taxes
Income taxes for all periods are determined in accordance with SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires the use of the liability
method in which deferred income taxes are provided for temporary differences
between the financial reporting and income tax basis of assets and liabilities
using the income tax rates, under existing legislation, expected to be in effect
at the date such temporary differences are expected to reverse.
Immediately prior to the 1996 Acquisition, JPS Automotive was converted from a
Delaware limited partnership into an association which is taxable as a
corporation for federal, state and local income tax purposes. The Company is
included in the consolidated federal income tax return of C&A. Income taxes for
periods subsequent to the 1996 Acquisition reflect the pushdown of JPS
Automotive's impact on the consolidated tax position of C&A.
The Predecessor Company, as a limited partnership, was not subject to federal
income taxes and, therefore, no current or deferred income tax provision has
been provided for such taxes prior to the 1996 Acquisition. However, the limited
partnership had provided for the income taxes of certain states for which it is
subject and federal and state income taxes associated with the operations of
Products Corp. The partners included their respective shares of income or loss
of JPS Automotive on their federal and applicable state income tax returns. JPS
Automotive had a tax-sharing agreement that provided for payment to the partners
of amounts that would be required to be paid if JPS Automotive were a
corporation filing separate income tax returns. At the time of the 1996
Acquisition, Foamex assigned to C&A Products the tax-sharing agreement.
Newly Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. SFAS No. 130 requires that an enterprise classify items of other
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. This statement is effective for fiscal years beginning after
December 15, 1997.
F-14
<PAGE>
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". SFAS No. 131 requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. Generally, financial information is required to
be reported on the basis that is used internally for evaluating segment
performance. This statement also requires that a public business enterprise
report descriptive information about the way that the operating segments were
determined and the products and services provided by the operating segments.
SFAS No. 131 is effective for financial statements for periods beginning after
December 15, 1997. JPS Automotive has not finalized its assessment of the impact
of this statement on its disclosure requirements.
4. Inventories:
The components of inventories consist of (in thousands):
December 27, 1997 December 28, 1996
----------------- -----------------
Raw materials and supplies $ 7,254 $ 4,210
Work-in-process 8,407 7,323
Finished goods 3,614 2,757
------- -------
Total $19,275 $14,290
======== ========
5. Accrued Expenses:
Accrued expenses are summarized below (in thousands):
December 27, December 28,
1997 1996
------------ -----------
Payroll, severance and employee benefits $ 6,777 $ 9,228
Warranty reserve 0 4,090
Acquisition costs 0 3,875
Other 6,900 4,803
------- --------
Total $13,677 $21,996
======= ========
6. Long-term Debt:
Long-term debt consists of (in thousands):
December 27, December 28,
1997 1996
------------- ------------
11-1/8% senior notes due 2001 $ 88,668 $111,968
Add - Premium on senior notes 3,175 5,207
-------- ---------
Long-term debt $ 91,843 $117,175
======== ========
F-15
<PAGE>
11-1/8% Senior Notes Due 2001 ("Senior Notes")
The Senior Notes were issued on June 28, 1994. Interest on the Senior Notes is
payable semiannually on June 15 and December 15 of each year. The Senior Notes
mature on June 15, 2001.
As discussed in Note 2, on the 1996 Acquisition date, $180 million principal
amount of the Senior Notes were outstanding. Of this amount, approximately $68
million had been purchased by C&A, prior to the 1996 Acquisition, on the open
market and were subsequently retired by JPS Automotive. The total capital
contribution resulting in the retirement of these Senior Notes is approximately
$70.2 million. In addition, in connection with the purchase accounting for the
1996 Acquisition, the remaining approximately $112 million in face value of
Senior Notes were recorded at a market value of $117.2 million on the date of
the 1996 Acquisition. The bond premium amount of $5.2 million will be amortized
as a reduction of interest expense over the remaining term of the Senior Notes
and will result in an effective interest rate of approximately 10% for periods
after the 1996 Acquisition.
The Company is not required to make mandatory redemption or sinking fund
payments except in the case of certain asset sales or a change of control (as
defined in the indenture for the Senior Notes). In addition, the Senior Notes
are not subject to optional redemption, except in connection with certain public
offerings of common stock or following a change of control (as so defined). The
1996 Acquisition resulted in a change of control which, under the terms of the
indenture for the Senior Notes, gave holders of the Senior Notes the right to
put their notes to JPS Automotive at a price of 101% of their principal amount
plus accrued interest. Approximately $3.9 million principal amount of Senior
Notes were so put to the Company and then repurchased on March 10, 1997. In
addition, JPS Automotive repurchased $23 thousand principal amount of Senior
Notes in conjunction with an offer to purchase as a result of the 1997 sale of
Airbag (see Note 11). In addition, during 1997, JPS Automotive purchased $19.4
million of Senior Notes in the open market. These notes were subsequently
retired. To fund these purchases (including premium and interest paid), C&A
Products made capital contributions as well as loaned funds in accordance with
the revolving credit arrangement discussed below.
F-16
<PAGE>
The indenture governing the Senior Notes generally prohibits JPS Automotive from
making certain payments and investments (generally, dividends and distributions
on its equity interests, purchases or redemptions of its equity interests,
purchases of any indebtedness subordinated to the Senior Notes and investments
other than as permitted) (the "Restricted Payments") unless (i) there is no
default under the Senior Notes indenture; (ii) after giving pro forma effect to
the Restricted Payment, JPS Automotive would be permitted to incur at least
$1.00 of additional indebtedness under the indenture's general test for the
incurrence of indebtedness which is a specified ratio (currently 2.5 to 1.0) of
cashflow to interest expense, and (iii) the aggregate of all Restricted Payments
from the issue date is less than a specified threshold (based, generally, on 50%
of JPS Automotive's cumulative consolidated net income, since the issue date
plus 100% of the aggregate net cash proceeds of the issuance by JPS Automotive
of certain equity and convertible debt securities and cash contributions to JPS
Automotive) (the "Restricted Payments Tests"). These conditions were satisfied
immediately following the 1996 Acquisition and as of December 27, 1997. The
Restricted Payments Test are subject to a number of significant exceptions. The
indenture governing the Senior Notes also contains other restrictive covenants
(including, among others, limitations on the incurrence of indebtedness and
preferred stock, asset dispositions and transactions with affiliates including
C&A and C&A Products) which are customary for such securities. These covenants
are also subject to a number of significant exceptions.
The Senior Notes rank senior in right of payment to all existing or future
subordinated indebtedness of JPS Automotive and on an equal basis in right of
payment with all existing or future senior indebtedness of JPS Automotive.
Term and Revolving Loans
The Predecessor Company maintained a credit agreement which provided for loans
of up to $35 million of which $10 million was available as a term loan and up to
$25 million was available under a revolving line of credit. In connection with
the 1996 Acquisition, the outstanding borrowings at December 11, 1996, of $9.2
million under the term loan were repaid. At December 11, 1996, there were no
outstanding borrowings under the revolving line of credit. The funds to
extinguish the term debt on behalf of the Company were recorded as a capital
contribution from C&A. The credit agreement was subsequently terminated.
Cramerton had a $15 million revolving line of credit (the "Cramerton Credit
Facility"), with recourse only to Cramerton. In connection with the 1996
Acquisition, the outstanding borrowings at December 11, 1996, of approximately
$4.8 million under the Cramerton Credit Facility were repaid.
During 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 equal to the
rate charged to C&A Products under its revolving credit agreement. During the
year ended December 27, 1997, JPS Automotive was charged $0.1 million in net
interest related to these revolving credit arrangements, reflecting an average
interest rate during the year of 7.4%. At December 27, 1997, there was an
outstanding balance of $4.5 million owed to JPS Automotive under this
arrangement.
F-17
<PAGE>
Interest Rate Swap Agreements
The Predecessor Company entered into interest rate swaps to lower funding costs
and/or to manage interest costs and exposure to changing interest rates. The
Predecessor Company did not hold or issue financial instruments for trading
purposes. During the period from January 1, 1996, to December 11, 1996, and the
year ended December 31, 1995, the effect of the interest rate swaps described
above was a favorable adjustment to interest expense of $0.8 million and $1.0
million, respectively. The interest rate swap agreements were terminated during
1996.
7. Facility Closing Costs:
In connection with the 1996 Acquisition, JPS Automotive eliminated certain
redundant sales and administrative functions, closed one manufacturing facility
in 1997 and formulated plans to exit two additional manufacturing facilities in
1998. In addition, JPS Automotive is in the process of relocating certain
manufacturing processes from a JPS Automotive facility to an existing facility
of another Collins & Aikman subsidiary. These actions affect approximately 640
employees. Original estimates of the total costs accrued for the shutdown of
facilities and severance and other personnel costs were $2.2 million and $7.0
million, respectively. During 1997, JPS Automotive revised these estimates upon
finalization of the plans and increased the accruals for the shutdown of
facilities and severance and other personnel costs to $2.7 million and $7.7
million, respectively.
The components of the reserves for these facility closings, which are expected
to be completed during fiscal 1998, are as follows (in thousands):
<TABLE>
<CAPTION>
Changes in Remaining Reserve
Original Reserve Reserve December 27, 1997
---------------- --------- ------------------
<S> <C> <C> <C>
Anticipated expenditures to close and
dispose of idled facilities $ 2,746 $ (323) $ 2,423
Anticipated severance benefits 7,655 (2,896) 4,759
-------- -------- --------
$ 10,401 $ (3,219) $ 7,182
======== ========= ========
</TABLE>
8. Employee Benefit Plans:
The 1996 Acquisition did not significantly affect the employee benefit plans
offered to the employees of JPS Automotive. However, C&A has transitioned the
benefits of JPS Automotive to plans that are consistent with benefits offered to
the existing employees of C&A and its subsidiaries. Effective January 1, 1998,
the defined benefit, defined contribution and post-retirement medical plans of
JPS Automotive were merged into the plans of C&A. Under the provisions of these
plan mergers, the accounts established in the C&A plans for the active plan
participants were credited for benefits earned in the JPS Automotive plans
through December 31, 1997. These plan mergers did not significantly affect the
benefits provided to retired, fully vested or active plan participants. The
disclosures below reflect the plans of JPS Automotive prior to the merger with
the related plans of C&A.
F-18
<PAGE>
Defined Benefit Pension Plan
Effective January 1, 1995, the Predecessor Company adopted the Retirement
Pension Plan for Employees of JPS Automotive L.P. (the "Plan") for salaried and
certain hourly employees. Benefits are based on the employees' final average
compensation, years of benefit service, the covered compensation in effect at
retirement and the employees' ages when payment begins.
As part of the 1996 Acquisition, the Company recognized all prior service cost,
net losses and minimum liabilities. Accordingly, the period from December 12,
1996, to December 28, 1996, does not reflect any net amortization or deferrals.
Net periodic pension cost of continuing operations included the following (in
thousands):
<TABLE>
<CAPTION>
Predecessor Company
-------------------------------------
Period from Period from
December 12, January 1, 1996,
Year Ended 1996, to to December 11, Year Ended
December 27, 1997 December 28, 1996 1996 December 31, 1995
----------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Service cost $ 901 $ 37 $ 740 $ 613
Interest cost 267 5 101 44
Actual return on plan assets (141) (2) (36) (2)
Net amortization and
deferral 28 0 47 31
------- ------- ------- -------
Total $ 1,055 $ 40 $ 852 $ 686
======= ======= ======== =======
</TABLE>
The Company's funding policy is to contribute annually an amount that both
satisfies the minimum funding requirements of the Employee Retirement Income
Security Act of 1974 and does not exceed the full funding limitations of the
Internal Revenue Code of 1986, as amended. Plan investments consist primarily of
equity and fixed income securities.
F-19
<PAGE>
The following table sets forth the funded status of the Plan and the amounts
recognized in the accompanying consolidated balance sheets as of December 27,
1997, and December 28, 1996, (in thousands):
<TABLE>
<CAPTION>
December 27, December 28,
1997 1996
------------ ---------------
Actuarial present value of accumulated benefit obligations-
<S> <C> <C>
Vested benefits $(2,147) $(1,559)
Nonvested benefits (356) (260)
-------- --------
Accumulated benefit obligations $(2,503) $(1,819)
======== ========
Total projected benefit obligations $(3,697) $(2,666)
Fair value of plan assets 2,377 1,323
-------- -------
Plan assets less than projected benefit obligations (1,320) (1,343)
Unrecognized net loss 29 0
-------- -------
Accrued pension cost $(1,291) $(1,343)
======== ========
</TABLE>
Significant assumptions used in determining the plan's unfunded status are as
follows:
<TABLE>
<CAPTION>
December 27, December 28,
1997 1996
------------ ------------
<S> <C> <C>
Expected long-term rate of return on plan assets 9.00% 8.00%
Discount rate on projected benefit obligations 7.00 7.25
Rates of increase in compensation levels (where applicable) 4.50 4.25
===== =====
</TABLE>
Defined Contribution Plan
JPS Automotive maintains a defined contribution plan qualified under Section
401(k) of the Internal Revenue Code that covers eligible nonunion employees.
Employee contributions are voluntary and subject to certain limitations as
imposed by the Internal Revenue Code. JPS Automotive makes a matching
contribution of 25% of each employee's contribution with a maximum matching
contribution of 1-1/2% of each employee's base compensation. The Predecessor
Company also provided an additional 25% match of each employee's contribution to
a fund which invests in Foamex common stock with a maximum contribution of 3% of
each employee's base compensation. JPS Automotive's contributions were
approximately $0.3 million for the year ended December 27, 1997, and $25
thousand for the period from December 12, 1996, to December 28, 1996; the
Predecessor Company's contributions were approximately $0.4 million for the
period from January 1, 1996, to December 11, 1996, and $0.2 million for the year
ended December 31, 1995.
Postretirement Benefits
JPS Automotive provides postretirement health care and life insurance benefits
for eligible employees and retirees of the Company and retirees of the
Predecessor Company. These plans are unfunded and JPS Automotive retains the
right to modify or eliminate these benefits.
F-20
<PAGE>
In December 1997, another subsidiary of C&A Products assumed the postretirement
benefit liabilities of certain plan participants who, as of January 1, 1997,
were either active and fully eligible or retired. As a result, postretirement
benefit liabilities totaling $1.3 million and related deferred tax assets of
$0.5 million have been excluded from the accompanying December 27, 1997 balance
sheet and recorded as a net capital contribution of $0.8 million from C&A
Products due to the related party nature of this transaction. JPS Automotive
will remain contingently liable for these postretirement liabilities.
The components of the expense of continuing operations for postretirement
benefits are (in thousands):
<TABLE>
<CAPTION>
Predecessor Company
-------------------------
Period from Period from
December 12, January 1,
Year Ended 1996, to 1996, to Year Ended
December December 28, December 11, December 31,
27, 1997 1996 1996 1995
--------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Service cost for benefits earned $194 $ (1) $(20) $(20)
Interest cost on liability 236 4 75 58
Amortization of unrecognized loss 0 0 29 0
---- ---- ---- -----
Net periodic postretirement benefit cost $430 $ 3 $ 84 $ 38
===== ==== ==== ====
</TABLE>
The following table sets forth the amount of net postretirement benefit
obligation included in the accompanying consolidated balance sheets (in
thousands):
December 27, December 28,
1997 1996
--------------- -------------
Retirees $ 0 $ 754
Fully eligible active plan participants 147 387
Other active plan participants 1,833 568
------ ------
Accumulated postretirement benefit obligation 1,980 1,709
Unrecognized net loss 135 0
------ ------
Net postretirement benefit obligation $2,115 $1,709
====== ======
As part of the 1996 Acquisition, the Company recognized all previously
unrecognized net losses.
Since JPS Automotive has capped its annual liability per person and all future
cost increases will be passed on to retirees, the annual rate of increase in
health care costs does not affect the postretirement benefit obligation. The
weighted-average discount rate used in determining the accumulated
postretirement benefit obligation as of December 27, 1997, and December 28,
1996, was 7.0% and 7.25%, respectively.
Postemployment Benefits
JPS Automotive provides certain postemployment benefits to former or inactive
employees and their dependents during the time period following employment but
before retirement. As of December 27, 1997, and December 28, 1996, JPS
Automotive's liability for postemployment benefits was $0.4 million for each
period and is included in other noncurrent liabilities in the accompanying
consolidated balance sheets.
F-21
<PAGE>
9. Income Taxes:
Immediately prior to the 1996 Acquisition, JPS Automotive was converted from a
Delaware limited partnership into an association which is taxable as a
corporation for federal, state and local income tax purposes. The purchase of
the entire equity interest in JPS Automotive has been treated as a stock
acquisition for federal, state and local income tax purposes. JPS Automotive
remains a Delaware limited partnership for all purposes other than federal and
state income taxes.
The acquisition of Cramerton resulted in a termination of the partnership's tax
status, resulting in a step-up to fair market value for the underlying assets of
Cramerton. Cramerton, a Delaware limited partnership, was recognized as a
partnership for tax purposes subsequent to the acquisition. In December 1997,
Cramerton was merged into its managing general partner and became taxable as a
corporation.
The Company is included in the consolidated federal income tax return of C&A.
Income taxes for periods subsequent to the 1996 Acquisition reflect the pushdown
of JPS Automotive's impact on the consolidated tax position of C&A.
The provision (benefit) for income taxes of continuing operations includes the
following (in thousands):
<TABLE>
<CAPTION>
Predecessor Company
---------------------------------------
Period from Period from
December 12, January 1,
Year Ended 1996, to 1996, to Year Ended
December 27, December 28, December 11, December 31,
1997 1996 1996 1995
------------ ------------ ------------ ----------
Federal-
<S> <C> <C> <C> <C>
Current $ (5,840) $ (328) $ 0 $ 0
Deferred 10,194 (49) 0 0
-------- --------- --------- --------
4,354 (377) 0 0
-------- --------- --------- ---------
State-
Current (151) 0 352 30
Deferred 996 (11) 0 0
-------- -------- -------- --------
845 (11) 352 30
-------- -------- -------- --------
$ 5,199 $ (388) $ 352 $ 30
======= ========= ======= ========
</TABLE>
F-22
<PAGE>
For the periods prior to the 1996 Acquisition, no amounts were payable by JPS
Automotive under the provisions of its tax-sharing agreement. For the periods
subsequent to the 1996 Acquisition, no amounts were payable by or due to JPS
Automotive under the terms of the tax-sharing agreement assumed by C&A Products
in the 1996 Acquisition. However, as discussed in Note 12, C&A has agreed to
reimburse JPS Automotive for tax benefits utilized in its consolidated tax
return totaling $6.2 million for fiscal 1997 and $0.3 million for the period
from December 12, 1996, to December 28, 1996.
A reconciliation of the statutory federal income taxes of continuing operations
to the effective income tax is as follows (in thousands):
<TABLE>
<CAPTION>
Predecessor Company
---------------------------
Period from Period from
December 12, January 1,
Year Ended 1996, to 1996, to Year Ended
December 27, December 28, December 11, December 31,
1997 1996 1996 1995
------------ ------------ ------------- -----------
<S> <C> <C> <C> <C>
Statutory income tax $ 4,303 $ (368) $(2,445) $ 897
State income taxes, net of federal 549 (7) 352 30
Permanent difference on goodwill
and partnership income 268 0 2,445 (897)
Other 79 (13) 0 0
------- ------- ------- ------
$ 5,199 $ (388) $ 352 $ 30
======= ======= ======= =======
</TABLE>
As a result of the change in the Company's tax status that resulted from the
1996 Acquisition, deferred tax assets and liabilities of JPS Automotive and
Cramerton are provided on the temporary differences between the financial
reporting and tax bases of the Company's assets and liabilities. While the
equity purchase of JPS Automotive results in carryover tax basis in the assets,
such carryover basis reflects the fair market value as a result of the deemed
taxable sale and revaluation to fair market value in the hands of the seller
just prior to the purchase by C&A and its subsidiaries. The components of the
net deferred tax assets as of December 27, 1997, and December 28, 1996, were as
follows (in thousands):
<TABLE>
<CAPTION>
December 27, December 28,
1997 1996
------------ ------------
Deferred tax assets-
<S> <C> <C>
Pension and postretirement benefits $ 942 $ 1,054
Other employee benefits 1,893 1,406
Premium on Senior Notes 2,534 1,921
Other liabilities and reserves 4,651 6,971
-------- -------
10,020 11,352
-------- --------
Deferred tax liabilities-
Goodwill amortization (1,396) (66)
Fixed assets (5,173) 0
--------- --------
(6,569) (66)
-------- --------
Net deferred tax assets $ 3,451 $11,286
======== ========
</TABLE>
F-23
<PAGE>
The above amounts have been classified in the consolidated December 27, 1997,
and December 28, 1996, balance sheets as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
December 27 December 28,
1997 1996
------------ -----------
Deferred tax assets (liabilities):
Current $ 5,369 $ 4,647
Noncurrent, included in other noncurrent assets 0 6,639
Noncurrent, included in other noncurrent liabilities (1,918) 0
--------- --------
$ 3,451 $ 11,286
========= =========
10. Commitments and Contingencies:
Operating Leases
JPS Automotive is obligated under various noncancellable lease agreements for
rental of facilities, machinery and computer equipment which remained
outstanding following the 1996 Acquisition. Many of the leases contain renewal
options with varying terms and escalation clauses that provide for increased
rentals based upon increases in the Consumer Price Index, real estate taxes and
lessors' operating expenses. Total minimum rental commitments required under
operating leases at December 27, 1997, are (in thousands):
1998 $319
1999 145
2000 56
2001 6
2002 and thereafter 0
-----
$526
=====
Rental expense charged to continuing operations under operating leases by the
Company approximated $1.2 million for the year ended December 27, 1997, and $0.1
million for the period from December 12, 1996, to December 28, 1996, by the
Predecessor Company approximated $1.6 million for the period from January 1,
1996, to December 11, 1996, and $1.5 million for the year ended December 31,
1995. Substantially all such rental expense represented the minimum rental
payments under operating leases.
Guarantees
The Predecessor Company had pledged all of the outstanding common stock of
Products Corp. and FJPS had pledged its 99% limited partnership interest in the
Predecessor Company to collateralize the repayment by FJPS of a note payable to
Foamex L.P. These pledges were released in connection with the 1996 Acquisition.
F-24
<PAGE>
11. Discontinued Operations:
On July 24, 1997, JPS Automotive completed the sale of 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, which included approximately
$14.9 million of allocated goodwill. Pursuant to the indenture governing the
Senior Notes, in connection with the sale of Airbag, the Company caused JPS
Automotive to make an offer to purchase (up to the amount of the net proceeds
from the sale) the Senior Notes at 100% of their principal amount. Pursuant to
such offer (which expired September 16, 1997), JPS Automotive repurchased and
retired $23 thousand principal amount of Senior Notes. During October 1997, the
Company caused JPS Automotive to use a portion of the proceeds remaining from
the sale of Airbag to make a distribution of $35.0 million to C&A Products, as
permitted under the restricted payments provision of the Senior Notes indenture
(see Note 6).
JPS Automotive has accounted for the financial results and net assets of Airbag
as a discontinued operation. Accordingly, previous reported financial results
for all periods have been restated to reflect Airbag as a discontinued
operation.
Net sales of Airbag prior to its sale were approximately $41.0 million for the
year ended December 27, 1997, and $2.1 million for the period from December 12,
1996, to December 28, 1996, $62.8 million for the period from January 1, 1996,
to December 11, 1996, and $73.1 million for the year ended December 31, 1995.
12. Related-party Transactions and Allocations:
JPS Automotive
At December 27, 1997, C&A Products has pledged the ownership interests in its
significant subsidiaries, including its partnership interests in the Company, as
security for debt of C&A Products totaling $218.8 million.
Following the acquisition by C&A Products of JPS Automotive in December 1996,
C&A Products began to develop plans to rationalize certain manufacturing
locations as well as marketing and administrative functions. These transactions
and arrangements and proposed transactions and arrangements 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 issued
an opinion confirming that they are fair to JPS Automotive from a financial
point of view.
F-25
<PAGE>
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.
The compensation to be paid by JPS Automotive to C&A Products for the services
to be provided by C&A Products under the Existing Services Agreement, including
the additional services described above, will include all reasonable expenses of
C&A Products employees assigned to perform the services, all reasonable
out-of-pocket expenses incurred by C&A Products and an amount to cover C&A's
Products' overhead, but will not exceed the lesser of (x) C&A Products' budgeted
estimate for such costs for 1998, as adjusted annually for changes in general
producer price levels for the carpet industry and (y) the actual annual cost
savings achieved from the elimination of managerial, marketing and program
management functions at JPS Automotive. Assets sold by JPS Automotive to C&A
Products in connection with the rationalization process generally will be sold
for a purchase price equal to the greater of the book value of the assets sold
or their appraised fair market value. Assets sold by C&A Products to JPS
Automotive generally will be sold for a purchase price equal to the lesser of
their book value or fair market value, as determined by an independent appraisal
in the case of assets having book values in excess of $100,000 at the time of
the sale. Where manufacturing responsibility for a program is transferred, the
manufacturer will receive a fee equal to its costs of production plus a 10%
margin, provided that, where C&A Products manufactures products for JPS
Automotive, JPS Automotive will not be required to pay to C&A Products amounts
greater than JPS Automotive's current costs that are to be eliminated by the
transfer of manufacturing responsibility for the transferred program. In
addition, a party for whom carpet roll goods are manufactured will pay for the
goods at the manufacturer's standard cost, subject to certain exceptions,
including that in no event will JPS Automotive pay to C&A Products an amount
greater than JPS Automotive's 1997 standard cost to produce carpet roll goods.
During 1998, pursuant to the rationalization process, JPS Automotive will
transfer 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 manufactured by C&A
Canada for JPS Automotive during a portion of 1997 on a royalty basis. Finally,
during 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. 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.
F-26
<PAGE>
JPS Automotive paid or accrued the following amounts in connection with the
transactions described above and related transactions for the year ended
December 27, 1997: (i) $5.5 million for administrative and other services, (ii)
$7.3 million for contract manufacturing services (including the purchase of roll
goods) provided to JPS Automotive by C&A Products and its subsidiaries, and
(iii) $0.2 million for the purchase of machinery and equipment from C&A
Products. In addition, during 1997, JPS Automotive recorded sales of $7.9
million relating to contract manufacturing services (including the sale of roll
goods) provided to C&A Products and its subsidiaries and $81 thousand in royalty
payments from C&A Canada. Finally, during 1997, machinery and equipment was sold
to C&A Products for an aggregate sales price of $6.0 million with the resulting
gain of $3.8 million recorded as a capital contribution from C&A Products due to
the related party nature of the transactions.
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 equal to the rate charged to C&A Products under its revolving credit
agreement. During the year ended December 27, 1997, JPS Automotive was charged
$0.1 million in net interest related to these revolving credit arrangements,
reflecting an average interest rate during the year of 7.4%. At December 27,
1997, 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 1997, Cramerton resold to C&A Products at cost
approximately $1.4 million 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. No amounts were payable by JPS Automotive under the terms
of the Tax-Sharing Agreement. Nevertheless, 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 resulting 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.
F-27
<PAGE>
Predecessor Company
The Predecessor Company regularly entered into transactions with its affiliates
in the ordinary course of business.
In connection with the 1994 acquisition by Foamex, the Predecessor Company
entered into a supply agreement (the "Supply Agreement") and the Existing
Services Agreement with Foamex, the limited partner of FJPS and the sole
shareholder of JPSGP. Pursuant to the terms of the Supply Agreement, at the
option of the Predecessor Company, Foamex would purchase certain raw materials
which were necessary for the manufacture of the Predecessor Company's products,
and resell such materials to the Predecessor Company at a price equal to net
cost plus reasonable out-of-pocket expenses. During the period from January 1,
1996, to December 11, 1996, and the year ended December 31, 1995, the
Predecessor Company purchased $69.0 million and $92.9 million, respectively, of
raw materials under the Supply Agreement with Foamex. Pursuant to the terms of
the Existing Services Agreement, Foamex would supply the Predecessor Company
with certain managerial services on an as-needed basis. The Predecessor Company
would pay Foamex and its affiliates' costs plus allocated overhead for the
services provided pursuant to the Existing Services Agreement. During the period
from January 1, 1996, to December 11, 1996, and the year ended December 31,
1995, the Predecessor Company did not incur significant costs under the Existing
Services Agreement. As discussed in Note 2, at the time of the 1996 Acquisition,
Foamex assigned to C&A Products the Existing Services Agreement.
The Predecessor Company had a tax-sharing agreement with its partners pursuant
to which the Predecessor Company would make quarterly distributions to its
partners, which in the aggregate, would equal the tax liability that the
Predecessor Company would have paid if it had been a Delaware corporation filing
a separate tax return rather than a partnership. During the period from January
1, 1996, to December 11, 1996, and the year ended December 31, 1995, JPS
Automotive made no tax-sharing distributions to its partners.
Cramerton
Seiren U.S.A. Corporation ("Seiren U.S.A.") was paid marketing assistance fees
annually under the terms of an agreement with Cramerton. These fees were equal
to 1% of the first $30.0 million of Cramerton's sales of bodycloth material to
Japanese automakers with U.S. assembly operations and 1-1/2% of such sales
exceeding $30.0 million. These fees amounted to $.7 million for the period from
January 1, 1996, to December 11, 1996, and $0.5 million for the year ended
December 31, 1995.
In connection with the 1996 Acquisition, C&A Products purchased from Seiren Co.
Ltd. and its affiliates its interest in Cramerton. As of December 28, 1996, the
Company owns, directly or beneficially through its subsidiaries, 100% of the
partnership interests in Cramerton.
In connection with the 1996 Acquisition, the marketing agreement between Seiren
U.S.A. and Cramerton was terminated and replaced by a new marketing agreement
with Seiren Co. Ltd. The consulting agreement with Seiren Co. Ltd. was extended
on a short-term basis in connection with the 1996 Acquisition.
F-28
<PAGE>
13. Environmental:
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.
Although not named as a potentially responsible party for any environmentally
contaminated sites, JPS Automotive and the Predecessor Company have accrued
environmental costs at December 28, 1996, of $4.7 million, $0.7 million of which
is included in current liabilities. In addition, as of December 31, 1995, the
Predecessor Company had a receivable of $0.5 million for indemnification of
environmental liabilities from JPS Textile, former owner of the Predecessor
Company, which was included in noncurrent assets. The environmental receivable
was written off during the period from January 1, 1996, to December 11, 1996, as
JPS Automotive management believed that the realization of the receivable
established for indemnification was remote.
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 of approximately $4.1 million. As a result, environmental
liabilities totaling $4.6 million have been excluded from the accompanying
December 27, 1997, balance sheet and a gain of $0.5 million has been recorded as
a capital contribution from C&A Products due to the related party nature of this
transaction. JPS Automotive will remain contingently liable for these
environmental liabilities.
Although it is possible that new information or future events could require JPS
Automotive to reassess its potential exposure relating to its contingent
exposure for environmental matters, management believes that, based on the facts
presently known to it, the resolution of such environmental matters will not
have a material adverse effect on JPS Automotive's consolidated financial
position or results of operations. The possibility exists, however, that new
environmental legislation may be passed or environmental regulations may be
adopted, or other environmental conditions may be found to exist, that may
require expenditures not currently anticipated which may be material, and there
can be no assurance that JPS Automotive has identified or properly assessed all
potential environmental liability arising from its activities or properties.
14. Litigation:
From time to time, JPS Automotive and the Predecessor Company have been involved
in various legal proceedings. Management believes that such litigation is
routine in nature and incidental to the conduct of its business, and that none
of such litigation, if determined adversely to JPS Automotive, would have a
material adverse effect on the consolidated financial position or results of
operations of JPS Automotive.
F-29
<PAGE>
15. Financial Instruments and Concentration of Credit Risk:
Concentration of Credit Risk
Financial instruments which potentially subject JPS Automotive to significant
concentrations of credit risk consist primarily of cash and cash equivalents and
trade accounts receivable.
JPS Automotive's customers operate primarily in the automotive industry. JPS
Automotive performs ongoing credit evaluations of its customers and generally
does not require collateral. JPS Automotive maintains allowance accounts for
potential losses and such losses have been within management's expectations. The
percentage of consolidated sales of continuing operations to the three principal
customers were as follows:
Predecessor Company
-------------------------
Period from Period from
December 12, January 1,
Year Ended 1996, to 1996, to Year Ended
December 27, December 28, December 11, December 31,
1997 1996 1996 1995
----------- ------------ ------------- -----------
General Motors 46% 37% 34% 30%
Chrysler 9 11 17 20
Toyota Tsusho 16 29 14 14
=== === === ====
Trade receivables are the principal financial instrument which subjects JPS
Automotive to concentrations of credit risk. Accounts receivable due from the
three principal customers as a percentage of total accounts receivable are as
follows:
December 27, December 28,
1997 1996
----------- ------------
General Motors 41% 35%
Chrysler 3 14
Toyota Tsusho 12 12
=== ===
JPS Automotive's exposure to credit risk associated with nonpayment by these
automotive manufacturers is affected by conditions or occurrences within the
automotive industry. Substantially all trade receivables from these three
customers were current at December 27, 1997.
Disclosure About Fair Value of Financial Instruments
The following disclosures of the estimated fair value amounts have been
determined based on JPS Automotive's assessment of available market information
and appropriate valuation methodologies.
F-30
<PAGE>
The estimated fair values of JPS Automotive's financial instruments are as
follows (in thousands):
</TABLE>
<TABLE>
<CAPTION>
December 27, 1997 December 28, 1996
----------------------- ------------------------
Carrying Fair Carrying Fair
Amount of Value of Amount of Value of
Liabilities Liabilities Liabilities Liabilities
----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Liabilities - Long-term debt $91,843 $100,976 $117,175 $120,198
========== ============ ========== ============
</TABLE>
Carrying amounts reported in the consolidated balance sheets for cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities
approximate fair value due to the short-term nature of these instruments.
The fair value of long-term debt is estimated using quoted market prices.
Fair value estimates are made at a specific point in time, based on relevant
market information about the financial instruments. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
16. Supplemental Disclosure of Cash Flow Information (in thousands):
<TABLE>
<CAPTION>
Predecessor Company
--------------------------
Period from Period from
December 12, January 1,
Year Ended 1996, to 1996, to Year Ended
December 27, December 28, December 11, December 31,
1997 1996 1996 1995
----------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Cash paid for interest $10,996 $10,013 $11,626 $21,397
Income taxes paid/deemed to be paid 0 0 0 0
Asset sale proceeds not yet
collected (Note 12) 5,518 0 0 0
Capital expenditures included in
accounts payable 353 1,206 876 1,623
====== ======== ======= =========
</TABLE>
In connection with the 1996 Acquisition, C&A contributed during 1996 noncash
assets to JPS Automotive totaling approximately $92.2 million. (See Note 2.)
F-31
<PAGE>
17. Quarterly Financial Data (Unaudited):
The quarterly financial data of JPS Automotive is as follows (in thousands):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------- -------- --------- ----------
1997-
<S> <C> <C> <C> <C>
Net sales $ 58,024 $ 62,119 $ 59,430 $ 67,698
Gross profit 7,660 10,431 7,619 11,480
Income (loss) from continuing operations (117) 2,121 1,119 3,973
Income before extraordinary item (2) 554 3,034 1,197 3,973
Net income 554 2,313 1,197 3,973
========= ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Predecessor Company
----------------------------------------------------
First Second Third Fourth Fourth
Quarter Quarter Quarter Quarter Quarter
--------- --------- -------- -------- ----------
1996(1)-
<S> <C> <C> <C> <C> <C>
Net sales $ 55,867 $ 65,174 $ 47,785 $ 50,213 $ 6,370
Gross profit 10,386 11,737 6,023 8,075 362
Income (loss) from continuing operations 261 1,267 (4,021) (4,858) (664)
Net income (loss) 1,311 2,262 (3,433) (3,876) (646)
======== ======== ======== ========= ==========
</TABLE>
(1) The fourth quarter results of the Predecessor Company are through
December 11, 1996, and include the $4.4 million write-down of
certain machinery and equipment. (See Note 2.). The Company's
fourth quarter results are only for the period from December 12,
1996, to December 28, 1996, the period following the acquisition
by C&A.
(2) The repurchase of $19.4 million principal amount of Senior Notes
at prices in excess of carrying value during 1997 resulted in an
extraordinary loss of $0.7 million, net of income taxes of $0.4
million for the year ended December 27, 1997.
F-32
<PAGE>
Report of Independent Public Accountants
To the Stockholder of
JPS Automotive Products Corp.:
We have audited the accompanying balance sheets of JPS Automotive Products Corp.
(a Delaware corporation and subsidiary of JPS Automotive L.P.) as of December
27, 1997, and December 28, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these balance sheets based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the balance sheets referred to above present fairly, in all
material respects, the financial position of JPS Automotive Products Corp. as of
December 27, 1997, and December 28, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
March 26, 1998.
F-33
<PAGE>
JPS Automotive Products Corp.
Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
December 27, December 28,
1997 1996
----------- ------------
Assets
------
<S> <C> <C>
Current assets - Cash $1 $1
=== ===
Liabilities and Shareholder's Equity
------------------------------------
Liabilities $0 $0
Shareholder's equity:
Common stock, par value $0.01 per share; 10,000,000 shares authorized,
100 shares issued and outstanding 0 0
Additional paid-in capital 1 1
-- --
Total shareholder's equity 1 1
-- --
$1 $1
== ==
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-34
<PAGE>
JPS Automotive Products Corp.
Notes to Financial Statements
1. Organization and Basis of Presentation:
JPS Automotive Products Corp. ("Products Corp.") operated in the industrial
fabrics and products segment, including the design, manufacture and sale of
carpet components and interior fabrics for passenger cars and light trucks and
other specialty industrial fabrics.
Products Corp., a newly formed entity, was acquired by JPS Automotive L.P. ("JPS
Automotive"), a partnership in which Foamex-JPS Automotive L.P. ("FJPS") owned a
99% limited partnership interest and JPSGP Inc. owned a 1% general partnership,
for nominal consideration on May 25, 1994. FJPS and JPSGP Inc. were wholly owned
subsidiaries of Foamex International Inc. ("Foamex"). On June 28, 1994, FJPS and
JPSGP Inc. invested $90.0 million in JPS Automotive which, in turn, invested a
like amount in Products Corp.
On June 28, 1994, Products Corp. acquired the assets of the automotive products
and industrial fabrics divisions of JPS Textile Group, Inc. Effective October 3,
1994, Products Corp. transferred and assigned substantially all of its assets,
subject to substantially all of its liabilities, to JPS Automotive, which agreed
to assume such liabilities. Subsequently, Products Corp. did not have any
operations and, accordingly, no statement of operations or cash flows has been
presented for 1997, 1996 or 1995.
Prior to October 3, 1994, Products Corp. was the beneficial owner of an 80%
interest in Cramerton Automotive Products, L.P. Products Corp. owned a 79.5%
limited partnership interest and, through Cramerton Management Corporation,
beneficially owned a 0.5% general partnership interest. These interests were
transferred to JPS Automotive on October 3, 1994.
On December 11, 1996, Collins & Aikman Corporation ("C&A"), through its
subsidiaries, acquired JPS Automotive, including its ownership interest in
Products Corp., from Foamex pursuant to an Equity Purchase Agreement dated
August 28, 1996, as amended December 11, 1996 (the "1996 Acquisition"). The
purchase price for the 1996 Acquisition was an aggregate of approximately $220
million, consisting of approximately $195 million of indebtedness of JPS
Automotive and approximately $25 million in cash paid to Foamex. During 1997,
C&A finalized the purchase price and received approximately $11.2 million from
the seller as a reduction of the purchase price. The 1996 Acquisition has been
accounted for as a purchase; however, adjustment was not required because the
historical value of the assets and liabilities of Products Corp. reflected fair
value at the time of the 1996 Acquisition.
As a result of the 1996 Acquisition, Products Corp.'s fiscal year ends on the
last Saturday of December. Prior to that time, Products Corp.'s fiscal year
ended on the Sunday closest to the thirty-first day of December.
F-35
<PAGE>
2. Commitments and Contingencies:
Co-obligor
Products Corp. is the co-obligor (and co-registrant) for the Senior Notes and
borrowings under the JPS Automotive credit agreement. As a result of the 1996
Acquisition, the JPS Automotive credit agreement was repaid and terminated.
11-1/8% Senior Notes Due 2001 (Senior Notes)
The Senior Notes were issued on June 28, 1994. Interest on the Senior Notes is
payable semiannually on June 15 and December 15 of each year, commencing on
December 15, 1994. The Senior Notes mature on June 15, 2001.
At the time of the 1996 Acquisition, $180 million principal amount of the Senior
Notes were outstanding. Of this amount, $68 million had been purchased by C&A
prior to the 1996 Acquisition on the open market and were subsequently retired.
JPS Automotive is not required to make mandatory redemption or sinking fund
payments except in the case of certain asset sales or a change of control (as
defined in the indenture for the Senior Notes). In addition, the Senior Notes
are not subject to optional redemption, except in connection with certain public
offerings of common stock or following a change of control (as so defined). The
1996 Acquisition resulted in a change of control which, under the terms of the
indenture for the Senior Notes, gave holders of the Senior Notes the right to
put their notes to JPS Automotive at a price of 101% of their principal amount
plus accrued interest. Approximately $3.9 million principal amount of Senior
Notes were so put to JPS Automotive and then repurchased on March 10, 1997.
During the second quarter of 1997, an additional $19.4 million principal amount
of Senior Notes was purchased by JPS Automotive on the open market and retired.
No open market purchases were made during the third and fourth quarters of 1997,
although $23 thousand principal amount of Senior Notes was repurchased and
retired pursuant to an offer to purchase due to the sale of JPS Automotive's Air
Restraint and Technical Products Division. At December 27, 1997, approximately
$91.8 million of Senior Notes (including a premium of $3.2 million) were
outstanding.
F-36
<PAGE>
The indenture governing the Senior Notes generally prohibits JPS Automotive from
making certain payments and investments (generally, dividends and distributions
on its equity interests, purchases or redemptions of its equity interests,
purchases of any indebtedness subordinated to the Senior Notes and investments
other than as permitted) (the "Restricted Payments") unless (i) there is no
default under the Senior Notes indenture; (ii) after giving pro forma effect to
the Restricted Payment, JPS Automotive would be permitted to incur at least
$1.00 of additional indebtedness under the indenture's general test for the
incurrence of indebtedness which is a specified ratio (currently 2.5 to 1.0) of
cashflow to interest expense, and (iii) the aggregate of all Restricted Payments
from the issue date is less than a specified threshold (based, generally, on 50%
of JPS Automotive's cumulative consolidated net income, since the issue date
plus 100% of the aggregate net cash proceeds of the issuance by JPS Automotive
of certain equity and convertible debt securities and cash contributions to JPS
Automotive) (the "Restricted Payments Tests"). These conditions were satisfied
immediately following the 1996 Acquisition and as of December 27, 1997. The
Restricted Payments Tests are subject to a number of significant exceptions. The
indenture governing the Senior Notes also contains other restrictive covenants
(including, among others, limitations on the incurrence of indebtedness and
preferred stock, asset dispositions and transactions with affiliates including
C&A and C&A Products Co.) which are customary for such securities. These
covenants are also subject to a number of significant exceptions.
The Senior Notes rank senior in right of payment to all existing or future
subordinated indebtedness of JPS Automotive and on an equal basis in right of
payment with all existing or future senior indebtedness of JPS Automotive.
F-37
<PAGE>
JPS Automotive L.P.
JPS Automotive Products Corp.
Index to Financial Statement Schedule
<TABLE>
<CAPTION>
Page
<S> <C>
Index to Financial Statement Schedule S-1
Schedule II - Valuation and Qualifying Accounts and Reserves - JPS Automotive L.P. S-2
</TABLE>
All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements and notes thereto.
S-1
<PAGE>
<TABLE>
<CAPTION>
JPS Automotive L.P. and Subsidiaries
Valuation and Qualifying Accounts and Reserves (1)
(dollars in thousands)
Balance at Charged to Charged to Balance
Beginning Costs and Other at End of
of Period Expenses Accounts (2) Deductions (3) Period
--------- ----------- ------------ -------------- ---------
Year ended December 27, 1997:
<S> <C> <C> <C> <C> <C>
Allowances for doubtful accounts $ 5,896 $ 156 $ 0 $ (34) $ 6,018
======= ========== ======== ========= =========
Period from December 12, 1996, to December 28, 1996:
Allowances for doubtful accounts $ 5,749 $ 147 $ 0 $ 0 $ 5,896
======= ========== ======== ========= =========
Period from January 1, 1996, to December 11, 1996:
Allowances for doubtful accounts $ 5,971 $ (205) $ 0 $ (17) $ 5,749
======= ========== ======== ========= =========
Year ended December 31, 1995:
Allowances for doubtful accounts $ 3,442 $ 1,997(4) $ 532(5) $ 0 $ 5,971
======= ========== =========== ========= =========
</TABLE>
(1) Amounts for all periods have been restated to excluded amounts related to
the discontinued operation.
(2) Change in various reserves charged to net sales.
(3) Uncollected receivables written off, net of recoveries.
(4) For the year ended December 31, 1995, substantially all of the amount
relates to a Mexican joint venture and is included in cost of goods sold.
(5) For the year ended December 31, 1995, approximately $1.1 million of the
amount was reclassified from related allowance accounts on the opening
balance sheet of JPS Automotive.
S-2
Additions to Services Agreement:
Title: Services Agreement, dated as of June
28, 1994 (the "Existing Services
Agreement")
Parties: C&A (as successor to Foamex
International, Inc.) and JPS
Automotive
Principal
Terms: C&A shall provide JPS Automotive with
general managerial services of a
financial, technical, legal,
commercial, administrative and/or
advisory nature, with respect to the
manufacture, distribution and sale of
various automotive supply components
and industrial fabrics.
Compensation: (a) All reasonable expenses associated
with the employment of C&A's employees
assigned to perform services for JPS
Automotive, including, but not limited
to: wages; bonuses; ordinary fringe
benefits; payroll; social security and
other taxes; payments required to be
made pursuant to employee benefit
plans; and workers' compensation
insurance (collectively, "Employment
Expenses") with such Employment
Expenses to be allocated on a pro rata
basis according to the number of hours
devoted by such employees to the
performance of services for JPS
Automotive.
(b) All reasonable out-of-pocket
expenses incurred by C&A in
connection with the provision of
the services described under
"Principal Terms".
(c) An amount to cover C&A's overhead
(without profit) for the employees
referred to in (a) above, which
amount shall be determined in
accordance with C&A's internal
overhead allocation procedures.
Billing: Monthly
Duration: Unlimited, subject to termination by
JPS Automotive upon a Change of
Control (as defined in the JPS Notes
Indenture) or by either party upon
breach of the Existing Services
Agreement.
<PAGE>
Post-Acquisition:
Additional The general managerial services
Services: provided will include management
services previously provided through
JPS Automotive headquarters staff in
Greenville, SC and by Cramerton
administrative staff in Cramerton, NC.
These services include: management,
accounting, quoting, safety,
production planning, business
planning, product engineering,
facility engineering, purchasing,
styling and management information
systems. In addition, the general
managerial services previously
provided by Foamex under the Existing
Services Agreement will include the
management and corporate services
(e.g. tax, accounting and legal)
available through C&A's Science and
Services Division and quality control,
lab certification and industrial
engineering. The general managerial
services will also include certain
consolidated marketing and program
management functions provided by C&A
employees. Certain JPS Automotive
staff will be transferred to C&A, and
the functions will be managed by C&A
employees. Such functions include
acting as exclusive sales agent for
JPS Automotive with respect to sales
of automotive products to automotive
Original Equipment Manufacturers
("OEM's").
Notwithstanding the compensation
provisions set forth above, in no event
will the annual compensation for the
services provided under the Existing
Services Agreement, as modified herein,
exceed the lesser of (i) $7.8 million,
the actual cost projected to be
incurred by C&A in providing services
to JPS Automotive in 1998, which number
shall be adjusted annually to reflect
changes in the Producer Price Index
Carpet & Rugs beginning January 1999,
and (ii) the actual annual cost savings
achieved from the elimination of
managerial, marketing and program
management functions at Greenville and
Cramerton, such reduction to be
measured against the costs incurred by
JPS Automotive and Cramerton in 1996.
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Annual Report on Form 10-K of our report
dated February 9, 1996, on our audit of the consolidated statements of
operations, owners' equity and cash flows, of JPS Automotive L.P. and
subsidiaries for the year ended December 31, 1995, prior to restatement for the
discontinued operations described in Note 11 to the restated consolidated
financial statements.
COOPERS & LYBRAND L.L.P.
Spartanburg, South Carolina
April 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
JPS Automotive L.P. and Subsidiaries
Financial Data Schedule
This schedule contains summary financial information extracted from the
Company's consolidated balance sheet and consolidated statements of operations
for the year ended December 27, 1997, and such is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK>0000924902
<NAME>JPS AUTOMOTIVE LP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> DEC-27-1997
<CASH> $9,271
<SECURITIES> 0
<RECEIVABLES> 43,056
<ALLOWANCES> 6,018
<INVENTORY> 19,275
<CURRENT-ASSETS> 81,696
<PP&E> 60,841
<DEPRECIATION> 5,371
<TOTAL-ASSETS> 250,607
<CURRENT-LIABILITIES> 25,760
<BONDS> 91,843
0
0
<COMMON> 0
<OTHER-SE> 122,996
<TOTAL-LIABILITY-AND-EQUITY> 250,607
<SALES> $247,271
<TOTAL-REVENUES> 247,271
<CGS> 210,081
<TOTAL-COSTS> 15,522
<OTHER-EXPENSES> 1,464
<LOSS-PROVISION> 156
<INTEREST-EXPENSE> 10,681
<INCOME-PRETAX> 12,295
<INCOME-TAX> 5,199
<INCOME-CONTINUING> 7,096
<DISCONTINUED> 1,662
<EXTRAORDINARY> (721)
<CHANGES> 0
<NET-INCOME> 8,037
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0
<FN>
<F1>BASIC
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
JPS Automotive Products Corp.
Financial Data Schedule
This schedule contains summary financial information extracted from JPS
Automotive Products Corp. balance sheet at December 27, 1997, and such is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK>0000919233
<NAME>JPS AUTOMOTIVE PRODUCTS CORP.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> DEC-27-1997
<CASH> $1
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1
<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<F1>
<EPS-DILUTED> 0
<FN>
<F1>BASIC
</FN>
</TABLE>
