<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d)
--- of the Securities Exchange Act of 1934
For the quarter ended April 1, 2000
or
___ Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from ____ to ____
Commission File Numbers: 33-75510-01; 1-12944
JPS AUTOMOTIVE, INC.
JPS AUTOMOTIVE PRODUCTS CORP.
(Exact name of registrants as specified in their charters)
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) 56-2001613
Delaware 57-0993690)
Delaware
5755 New King Court
Troy, MI 48098
(Address of principal executive offices, including zip code)
(248) 824-2500
(Registrants telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
JPS Automotive Inc. and JPS Automotive Products Corp. meet the conditions set
forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore
filing this form with the reduced disclosure format.
As of May 16, 2000, the number of outstanding shares of JPS Automotive Inc. and
JPS Automotive Products Corp. common stock was 1,500 and 100, respectively.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
JPS AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------
April 1, March 27,
2000 1999
(14 weeks) (13 weeks)
------------- -------------
<S> <C> <C>
Net sales....................................... $ 65,063 $ 65,565
Cost of goods sold.............................. 57,496 58,704
------------- -------------
Gross profit.................................... 7,567 6,861
Selling, general and administrative expenses.... 3,000 2,882
------------- -------------
Income from operations.......................... 4,567 3,979
Interest expense, net........................... 2,146 2,254
Other income, net............................... (139) (43)
------------- -------------
Income before income taxes...................... 2,560 1,768
Income taxes.................................... 1,066 737
------------- -------------
Income before cumulative effect of a change
in accounting principle....................... 1,494 1,031
Cumulative effect of change in accounting
principle, net of income taxes of $528........ - (791)
------------- -------------
Net income...................................... $ 1,494 $ 240
============= =============
</TABLE>
See accompanying notes.
I-1
<PAGE>
JPS AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
April 1, December 25,
ASSETS 2000 1999
--------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................... $ 22,103 $ 810
Accounts receivable, net of allowance of
$892 and $2,268.............................................. 33,466 37,387
Purchased receivables of affiliate............................. 2,061 4,805
Inventories.................................................... 6,168 6,912
Receivables from related parties............................... 10,171 13,506
Revolving loan due from C&A Products........................... 1,802 4,600
Deferred tax assets............................................ 1,525 1,685
Other current assets........................................... - 1,085
--------------- ---------------
Total current assets......................................... 77,296 70,790
Property, plant and equipment, net................................ 47,032 48,308
Goodwill, net..................................................... 97,078 97,757
Demand receivable due from C&A for income taxes................... 10,601 10,601
Debt issuance costs, net.......................................... 967 1,167
Other assets...................................................... 1,347 1,439
--------------- ---------------
$ 234,321 $ 230,062
=============== ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable............................................... $ 6,436 $ 7,241
Accrued expenses............................................... 12,711 8,612
--------------- ---------------
Total current liabilities.................................... 19,147 15,853
Long-term debt.................................................... 87,131 87,370
Other liabilities................................................. 8,634 8,924
Commitments and contingencies.....................................
Stockholder's equity:
Common stock, no par (1,500 shares authorized, issued and
outstanding at April 1, 2000 and December 25, 1999)........... 35,000 35,000
Additional paid-in capital..................................... 131,118 131,118
Accumulated deficit............................................ (46,709) (48,203)
--------------- ---------------
Total stockholder's equity..................................... 119,409 117,915
--------------- ---------------
$ 234,321 $ 230,062
=============== ===============
</TABLE>
See accompanying notes.
I-2
<PAGE>
JPS AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------
April 1, March 27,
2000 1999
(14 weeks) (13 weeks)
------------------- --------------------
<S> <C> <C>
Operating activities:
Income from continuing operations................................. $ 1,494 $ 1,031
Adjustments to derive cash flow from continuing
operating activities:
Deferred income tax expense.................................. 607 707
Depreciation and amortization................................ 2,242 2,368
Interest accretion and debt issuance cost
amortization............................................... (39) (52)
Changes in operating assets and liabilities.................. 8,325 (5,042)
------------------- --------------------
Net cash provided by (used in) operating activities......... 12,629 (988)
------------------- --------------------
Investing activities:
Additions to property, plant, and equipment....................... (213) (936)
Sales of property, plant, and equipment........................... - 13
Payments received on purchased receivables........................ 2,744 -
------------------- --------------------
Net cash provided by (used in) investing activities......... 2,531 (923)
------------------- --------------------
Financing activities:
Change in amounts due C&A Products, net........................... 3,335 10,040
Net proceeds from revolving loans................................. 2,798 1,500
------------------- --------------------
Net cash provided by financing activities................... 6,133 11,540
------------------- --------------------
Net increase in cash and cash equivalents......................... 21,293 9,629
Cash and cash equivalents at beginning of period.................. 810 171
------------------- --------------------
Cash and cash equivalents at end of period........................ $ 22,103 $ 9,800
=================== ====================
</TABLE>
See accompanying notes.
I-3
<PAGE>
JPS AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Condensed Consolidated Financial Statements:
The condensed consolidated financial statements include the accounts of JPS
Automotive, Inc. and its subsidiaries ("JPS Automotive"). In the opinion of
management of JPS Automotive, the accompanying condensed consolidated financial
statements reflect all adjustments (consisting of only normal recurring
adjustments) considered necessary for a fair presentation of the consolidated
financial position, results of operations and cash flows. Results of operations
for interim periods are not necessarily indicative of results for the full year.
JPS Automotive's fiscal year ends on the last Saturday of December. The
2000 fiscal year will consist of 53 weeks. In a 53-week year, JPS Automotive's
policy is to include the additional week in the first quarter of the year. As a
result, the quarter ended April 1, 2000 consisted of 14 weeks. The quarter
ended March 27, 1999 consisted of 13 weeks.
For further information, refer to the consolidated financial statements and
notes thereto included in JPS Automotive's Report on Form 10-K for the year
ended December 25, 1999 (the "1999 10-K").
On December 11, 1996, Collins & Aikman Corporation ("C&A"), through its
subsidiaries, acquired JPS Automotive L.P. and subsidiaries ("JPS Automotive
L.P.") from Foamex International Inc. ("Foamex") pursuant to an Equity Purchase
Agreement dated August 28, 1996, as amended December 11, 1996 (the "1996
Acquisition"). In the 1996 Acquisition, Collins & Aikman Products Co. ("C&A
Products"), a wholly-owned subsidiary of C&A, acquired a .9999% limited
partnership interest in JPS Automotive L.P. from Foamex and a 99% limited
partnership interest in JPS Automotive L.P. from Foamex - JPS Automotive L.P.
("FJPS"). PACJ, Inc., a wholly-owned subsidiary of C&A Products with no
operations, acquired a .0001% general partnership interest in JPS Automotive
L.P. from JPSGP Inc. ("JPSGP"). Accordingly, 100% of the partnership interests
in JPS Automotive L.P. were owned by PACJ, Inc. and C&A Products, which were,
respectively, indirect and direct wholly-owned subsidiaries of C&A.
Additionally, on December 11, 1996, C&A Products also acquired from Seiren Co.
Ltd. and its affiliates a minority interest in Cramerton Automotive Products,
L.P. and Cramerton Management Corporation, which were JPS Automotive L.P.
subsidiaries that were merged in December 1997 under the name Cramerton
Automotive Products, Inc. ("Cramerton"). JPS Automotive L.P. subsequently
acquired the minority interest previously held by the C&A Products and now owns
100% of Cramerton.
On January 28, 2000, JPS Automotive L.P. merged with and into its general
partner PACJ, Inc. In the merger, all of the outstanding limited partnership
interests previously owned by C&A Products and the general partnership interests
held by PACJ, Inc. were canceled without any payment being made thereon. As a
result of the merger, PACJ, Inc. has changed its name to JPS Automotive, Inc.
and has assumed all of the obligations under the indenture governing the JPS
Automotive 11-1/8% Senior Notes due 2001 (the "Senior Notes"). The merger of
these related entities was accounted for in a manner similar to pooling of
interests and prior year financial information has been restated to reflect the
merger. Prior to the merger, the operations of PACJ, Inc. consisted of interest
income on its intercompany loan with C&A Products. During the quarter ended
March 27, 1999, $43 thousand of interest income has been reflected in the
accompanying statements of operations related to this loan. At December 25,
1999, $2.4 million was outstanding on this intercompany loan.
Net income is the only component of comprehensive income. Comprehensive
income was $1.5 million and $0.2 million, for the quarters ended April 1, 2000
and March 27, 1999, respectively.
2. Goodwill:
Goodwill, representing the excess of purchase price over the fair value of
net assets acquired in the 1996 Acquisition, is being amortized on a straight-
line basis over a period of forty years. Amortization of goodwill was $0.7
million for the quarters ended April 1, 2000 and March 27, 1999. Accumulated
amortization at April 1, 2000 was $8.7 million. The carrying value of goodwill
is reviewed periodically based on the undiscounted cash flows and pre-tax income
over the remaining amortization periods. Should this review indicate that the
goodwill balance will not be recoverable, JPS Automotive's carrying value of the
goodwill will be reduced. At April 1, 2000, JPS Automotive believes the
recorded value of its goodwill of $97.1 million is fully recoverable.
I-4
<PAGE>
JPS AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
3. Inventories:
The components of inventories consist of (in thousands):
<TABLE>
<CAPTION>
April 1, December 25,
2000 1999
--------- ------------
<S> <C> <C>
Raw materials and supplies.......................................... $ 2,005 $ 2,492
Work in process..................................................... 3,056 2,752
Finished goods...................................................... 1,107 1,668
--------- ------------
$ 6,168 $ 6,912
========= ============
</TABLE>
4. Restructuring:
On February 10, 1999, C&A Products announced a comprehensive plan ("the
Reorganization") to reorganize its global automotive carpet, acoustics, plastics
and accessory floormats businesses. During 1999, JPS Automotive recognized a
restructuring charge related to the Reorganization of $0.3 million, representing
severance costs associated with the reduction of administrative personnel at JPS
Automotive's carpet facility. As of April 1, 2000, approximately $0.2 million
had been spent in severance and related costs.
On September 22, 1999, JPS Automotive completed the sale of its facility
located in Cramerton, North Carolina for a sales price of $6 million, resulting
in a loss on the sale of $4.9 million, and additional asset impairments, of
certain machinery and equipment, of $2.0 million. In addition, JPS Automotive
established a reserve of $1.4 million for severance costs to be paid to the
approximately 150 employees affected by the sale. At April 1, 2000 approximately
130 employees had been terminated. As of April 1, 2000, approximately $0.8
million had been spent in severance and related costs. JPS Automotive and C&A
Products are in the process of relocating the headliner business from the
Cramerton, North Carolina facility to a C&A Products facility where C&A Products
has begun producing headliner for JPS Automotive on a subcontract basis.
5. Related-party Transactions and Allocations:
At April 1, 2000, C&A Products has pledged the ownership interests in its
significant subsidiaries, including its partnership interests in JPS Automotive,
as security for debt of C&A Products totaling $395.9 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. This
rationalization involved transactions and arrangements between JPS Automotive
and C&A Products, which were approved by the Board of Directors of PACJ, Inc.,
the former general partner of JPS Automotive, and were reviewed by an investment
banking firm of national standing, which rendered an opinion that they were fair
to JPS Automotive from a financial point of view.
The transactions and arrangements and proposed transactions and
arrangements include the following: (i) the provision by C&A Products of
additional administrative, management, marketing and program management services
pursuant to a pre-existing services agreement assigned to C&A Products by Foamex
(the "Existing Services Agreement"), (ii) the purchase from and sale to C&A
Products and its subsidiaries of certain manufacturing assets, (iii) the
transfer of manufacturing responsibility for certain automotive programs, and
for the manufacturing of automotive carpet roll goods, to C&A Products and its
subsidiaries and from C&A Products to JPS Automotive, and (iv) the transfer of
certain automotive programs from JPS Automotive to C&A Products and its
subsidiaries and from C&A Products to JPS Automotive. For a description of the
compensation to be paid by JPS Automotive to C&A Products and by C&A Products to
JPS Automotive pursuant to the transactions and arrangements described above,
see Note 12 to JPS Automotive's consolidated financial statements included in
the 1999 10-K. During the first quarter of 2000, JPS Automotive completed its
evaluation of the terms of its arrangement with C&A Products to produce
automotive carpet on a subcontract basis for a particular program and determined
that certain costs had been excluded from the fee calculations. As a result, JPS
Automotive billed C&A
I-5
<PAGE>
JPS AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Products approximately $1.2 million, representing the cumulative amount owed to
JPS Automotive for 1997, 1998 and 1999 under the terms of the intercompany
arrangements.
JPS Automotive paid or accrued the following amounts in connection with the
transactions and arrangements described above and related transactions for the
quarters ended April 1, 2000 and March 27, 1999, respectively: (i) $1.9 million
and $1.8 million, respectively, for administrative and other services, and (ii)
$30.6 million and $20.2 million, respectively, for contract manufacturing
services (including the purchase of roll goods) provided to JPS Automotive by
C&A Products and its subsidiaries. In addition, for the quarters ended April 1,
2000 and March 27, 1999, JPS Automotive recorded sales of $8.5 million and $4.7
million, respectively, relating to contract manufacturing services (including
the sale of roll goods) provided to C&A Products and its subsidiaries.
C&A Products and JPS Automotive entered into several additional
arrangements 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 quarters ended April 1, 2000 and
March 27, 1999, respectively, C&A Products was charged $65 thousand and $12
thousand, respectively, in net interest related to these revolving credit
arrangements. At April 1, 2000 there was an outstanding balance of $1.8 million
owed to JPS Automotive under this arrangement.
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.
During December 1999, JPS Automotive purchased accounts receivable from a
subsidiary of C&A Products located in Mexico for $4.8 million, representing a
gross balance of $5.1 million, discounted at 5%. The purchased receivables have
terms similar to JPS Automotive's trade accounts receivable. At April 1, 2000
there was an outstanding balance of $2.1 million owed to JPS Automotive under
this arrangement. During the quarter ended April 1, 2000, approximately $0.1
million of income was recognized.
JPS Automotive and C&A Products generally settle intercompany balances
within ten days after a period end. In December 1999, C&A Products began
offering a two percent discount for early payment of intercompany balances.
In conjunction with the terms, JPS Automotive made payments of $10.9 million and
received cash discounts of $0.2 million during the quarter ended April 1, 2000.
During the quarter ended March 27, 1999, Cramerton capitalized costs of
approximately $0.3 million related to the construction of additional space at a
C&A Products facility and the purchase of additional machinery and equipment for
the production of bodycloth. C&A Products is manufacturing bodycloth for JPS
Automotive on a subcontract basis at this location.
On September 22, 1999, JPS Automotive completed the sale of its facility in
Cramerton, North Carolina. JPS Automotive and C&A Products are relocating
Cramerton's headliner business to a C&A Products facility where C&A Products has
begun producing headliner for JPS Automotive on a subcontract basis. In
connection with this move, during the quarter ended April 1, 2000, Cramerton
capitalized costs of $0.1 million related to the purchase of additional
machinery and equipment for the production of headliner.
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 shareholder (C&A Products) in
amounts equal to the taxes JPS Automotive would be required to pay if it were
separately taxed. JPS Automotive and C&A Products maintain the Tax Sharing
Agreement in lieu of adding JPS Automotive as a party to C&A's tax sharing
arrangement. For
I-6
<PAGE>
JPS AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
the quarters ended April 1, 2000 and March 27, 1999 respectively, JPS
Automotive recorded $0.5 million and $32 thousand as estimated amounts due to
C&A Products under the terms of the Tax Sharing Agreement.
6. Information about the Company's Operations:
JPS Automotive's customers primarily produce automobiles and light trucks
in North America. JPS Automotive performs periodic credit evaluations of its
customers' financial condition and generally does not require collateral.
Receivables generally are due within 45 days, and credit losses have
consistently been within management's expectations and are provided in the
consolidated financial statements.
Direct and indirect sales to significant customers in excess of ten percent
of consolidated net sales from continuing operations are as follows:
Quarter Ended
-----------------------
April 1, March 27,
2000 1999
-------- ---------
General Motors.................. 39% 46%
DaimlerChrysler AG.............. 22% 10%
Toyota Tsusho................... 13% 14%
JPS Automotive has two reportable segments: Automotive Carpet and
Automotive Fabric. JPS Automotive's reportable segments are strategic business
units. The Automotive Carpet segment produces molded floor carpet and luggage
compartment trim. The Automotive Fabric segment produces seating upholstery
fabric ("bodycloth") and headliner fabric.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies in the 1999 10-K. JPS Automotive
evaluates performance based on profit or loss from operations before interest
expense, other income and expense, income taxes and before adjustments made
pursuant to the transactions and arrangements made between C&A Products and JPS
Automotive. See Note 5.
Information about JPS Automotive's reportable segments is presented below
(in thousands).
<TABLE>
<CAPTION>
Quarter Ended April 1, 2000 (14 weeks)
-----------------------------------------------------------------
Automotive Automotive
Carpet Fabric Other /(1)/ Total
------------ ------------ ------------- ---------
<S> <C> <C> <C> <C>
External revenues....................... $ 46,314 $ 5,099 $ 13,650 $ 65,063
Depreciation and amortization........... 1,475 767 - 2,242
Operating income (loss)................. 2,902 (1,248) 2,913 4,567
Total assets............................ 155,302 72,998 6,021 234,321
Capital expenditures.................... 73 140 - 213
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended March 27, 1999 (13 weeks)
-----------------------------------------------------------------
Automotive Automotive
Carpet Fabric Other /(1)/ Total
------------ ------------ ------------- ---------
<S> <C> <C> <C> <C>
External revenues....................... $ 43,837 $ 12,087 $ 9,641 $ 65,565
Depreciation and amortization........... 1,318 1,050 - 2,368
Operating income (loss)................. 732 162 3,085 3,979
Total assets............................ 156,527 78,550 3,081 238,158
Capital expenditures.................... 522 414 - 936
</TABLE>
(1) Other includes adjustments made pursuant to the transactions and
arrangements between JPS Automotive and C&A Products. See Note 5.
I-7
<PAGE>
JPS AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (concluded)
(Unaudited)
7. Commitments and Contingencies
See "PART II- OTHER INFORMATION, Item 1. Legal Proceedings." The ultimate
outcome of the legal proceedings to which JPS Automotive is a party will not, in
the opinion of JPS Automotive's management based on the facts presently known to
it, have a material adverse effect on the consolidated financial condition or
future results of operations of JPS Automotive.
JPS Automotive is subject to various federal, state and local environmental
laws and regulations that (i) affect ongoing operations and may increase capital
costs and operating expenses and (ii) impose liability for the costs of
investigation and remediation and certain other damages related to on-site and
off-site contamination. JPS Automotive believes it has obtained or applied for
the material permits necessary to conduct its business. To date, compliance
with applicable environmental laws has not had and, in the opinion of
management, based on the facts presently known to it, is not expected to have a
material adverse effect on JPS Automotive's consolidated financial condition or
future results of operations.
In December 1997, another subsidiary of C&A Products assumed substantially
all of the environmental liabilities of JPS Automotive and its subsidiaries in
exchange for a payment from JPS Automotive of approximately $4.1 million. JPS
Automotive will remain contingently liable for these environmental liabilities.
Although it is possible that new information or future events could require
JPS Automotive to reassess its potential exposure relating to its 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.
8. Newly Issued Accounting Standards:
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-5, "Reporting on the Costs of Start-up
Activities" ("SOP 98-5"). SOP 98-5 provides guidance on the financial reporting
of start-up costs and organization costs and requires that all nongovernmental
entities expense the costs of start-up activities as these costs are incurred
instead of being capitalized and amortized. SOP 98-5 is effective for financial
statements for fiscal years beginning after December 15, 1998, and the initial
application of this pronouncement was reported as a cumulative effect of a
change in accounting principle. JPS Automotive adopted SOP 98-5 on December 27,
1998. The initial impact of the adoption of SOP 98-5 at the beginning of fiscal
1999 was $0.8 million, net of income taxes of $0.5 million.
In September 1999, the FASB's Emerging Issues Task Force ("EITF") reached a
consensus regarding EITF Issue No. 99-5, "Accounting for Pre-Production Costs
Related to Long-Term Supply Arrangements" ("EITF No. 99-5"). EITF No. 99-5
requires that design and development costs for products to be sold under long-
term supply arrangements be expensed as incurred, and costs incurred for molds,
dies and other tools that will be used in producing the products under long-term
supply agreements be capitalized and amortized over the shorter of the expected
useful life of the assets or the term of the supply arrangement. The consensus
can be applied prospectively to costs incurred after December 31, 1999 or as a
cumulative effect of a change in accounting principle as of the beginning of a
company's fiscal year. JPS Automotive adopted the provisions of EITF No. 99-5 on
a prospective basis on December 26, 1999. The adoption of EITF No. 99-5 did not
have a material impact on JPS Automotive's financial position or the results of
operations. At April 1, 2000, JPS Automotive had assets of $4.0 million of
molds, dies and other tools that are owned by suppliers.
I-8
<PAGE>
JPS AUTOMOTIVE PRODUCTS CORP.
(A Wholly-Owned Subsidiary of JPS Automotive, Inc.)
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(Unaudited)
April 1, December 25,
2000 1999
------------- -------------
(in thousands)
ASSETS
<S> <C> <C>
Current assets - Cash............................... $ 1 $ 1
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities $ - $ -
=========== ===========
Shareholder's equity:
Common stock, par value $0.01 per share;
10,000,000 shares authorized,
100 shares issued and outstanding.............. - -
Additional paid-in capital....................... 1 1
----------- -----------
Total shareholder's equity..................... 1 1
----------- -----------
$ 1 $ 1
=========== ===========
</TABLE>
See accompanying note.
I-9
<PAGE>
JPS AUTOMOTIVE PRODUCTS CORP.
(A Wholly-Owned Subsidiary of JPS Automotive, Inc.)
NOTE TO BALANCE SHEETS
(Unaudited)
1. Commitments and Contingencies
JPS Automotive Products Corp. ("Products Corp.") is the co-obligor (and co-
registrant) with JPS Automotive, Inc. of the 11-1/8% Senior Notes due 2001 (the
"Senior Notes"), which had an outstanding balance of $87.1 million (including a
premium of $1.1 million) as of April 1, 2000.
I-10
<PAGE>
JPS AUTOMOTIVE, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Pursuant to General Instruction H(2)(a) to Form 10-Q, the following discussion
is a management's narrative analysis of the results of operations explaining the
reasons for material changes in the amount of revenue and expense items between
the most recent fiscal year-to-date period presented and the corresponding year-
to-date period in the preceding fiscal year.
JPS Automotive produces and supplies automotive textiles and specialty
textile products to North American automobile and truck manufacturers. On
December 11, 1996, C&A, through its subsidiaries, acquired JPS Automotive L.P.
from Foamex in the 1996 Acquisition. The following discussion should be read in
conjunction with the condensed consolidated financial statements and related
notes thereto of JPS Automotive and Products Corp. included in this report.
Three Months Ended April 1, 2000 Compared to Three Months Ended March 27, 1999.
JPS Automotive's fiscal year ends on the last Saturday of December. The 2000
fiscal year will consist of 53 weeks. In a 53-week year, JPS Automotive's
policy is to include the additional week in the first quarter of the year. As a
result, the quarter ended April 1, 2000 consisted of 14 weeks. The quarter
ended March 27, 1999 consisted of 13 weeks. Therefore, sales in all divisions
and associated costs and expenses were impacted by the longer reporting period
in the first quarter of 2000.
Net Sales: Net sales for JPS Automotive for the first quarter of 2000 were $65.1
million, compared to $65.6 million for the comparable 1999 period. The sales
decline is attributable to lower sales volume of Automotive Fabrics due to
program run-outs. Offsetting this decline is an increase in Automotive Carpet
sales due to the inclusion of an additional week in the first quarter of 2000.
In addition, sales in the first quarter of 2000 reflect a one-time billing by
JPS Automotive to C&A Products of $1.2 million, under the intercompany
arrangements. See Note 5 to the Condensed Consolidated Financial Statements.
Gross Profit: Gross profit as a percentage of sales for the first quarter of
2000 was 11.6%, up from 10.5% for the three months ended March 27, 1999. This
increase is primarily due to additional sales resulting from the $1.2 million
adjustment discussed above. This increase is partially offset by costs
associated with the relocation of the headliner fabrics business from Cramerton,
North Carolina to another fabrics facility.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased 4.1% to $3.0 million, up $0.1 million from the
comparable 1999 period. The increase is primarily due to additional provisions
for uncollectible accounts receivable by Automotive Carpet. This increase is
partially offset by reduced expenses resulting from the relocation of the
Cramerton, North Carolina fabrics facility to another fabrics facility.
Interest Expense: Interest expense, net of interest income, decreased $0.1
million to $2.1 million in the first quarter of 2000. The decrease is attributed
to higher interest income of $0.3 million. This decrease is partially offset by
increased interest expense of $0.2 million on the Senior Notes which is
primarily attributed to the impact of the additional week in the first quarter
of fiscal 2000.
Income Taxes: The income tax provision in the first quarter of 2000 increased
to $1.0 million from $0.7 million in the first quarter of 1999. JPS
Automotive's effective tax rate for the first quarter of 2000 was 41.6%
compared to 41.7 % in the first quarter of 1999.
Cumulative Effect of a Change in Accounting Principle: JPS Automotive adopted
the provisions of Statement of Position No. 98-5, "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5") at the beginning of 1999. SOP 98-5 provides
guidance on the financial reporting of start-up activities as these costs are
incurred instead of being capitalized and amortized. The initial impact of SOP
98-5 resulted in a charge of $0.8 million, net of income taxes of $0.5 million.
I-11
<PAGE>
JPS AUTOMOTIVE, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Net Income: The combined effect of the foregoing resulted in net income of $1.5
million during the three months ended April 1, 2000, compared to net income of
$0.2 million during the comparable 1999 period.
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, if necessary, will be adequate to meet operating
cash requirements. For a discussion of certain transactions and arrangements and
proposed transactions and arrangements between C&A Products and JPS Automotive,
see Note 5 to JPS Automotive's Condensed Consolidated Financial Statements.
Safe Harbor Statement
This Form 10-Q contains statements which, to the extent they are not
historical fact, constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 (the "Safe Harbor Acts"). All forward-looking statements
involve risks and uncertainties. The forward-looking statements in this Form
10-Q are intended to be subject to the safe harbor protection provided by the
Safe Harbor Acts.
Risks and uncertainties that could cause actual results to vary materially
from those anticipated in the forward-looking statements included in this Form
10-Q include general economic conditions in the markets in which JPS Automotive
operates and industry-based factors such as possible declines in the North
American automobile and light truck build, labor strikes at JPS Automotive's
major customers, changes in consumer preferences, dependence on significant
automotive customers, changes in the popularity of particular vehicle models or
particular interior trim packages, the loss of programs on particular vehicle
models, the level of competition in the automotive supply industry and pricing
pressure from automotive customers, as well as factors more specific to JPS
Automotive, such as the substantial leverage of JPS Automotive and limitations
imposed by the Senior Notes. For a discussion of certain of these and other
important factors which may affect the operations, products and markets of JPS
Automotive, see "Business" in the 1999 10-K and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the 1999 10-K, the
Notes to JPS Automotive's Consolidated Financial Statements in the 1999 10-K,
and above in this Form 10-Q and also see JPS Automotive's other filings with the
Securities and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
JPS Automotive does not have any exposure to market risk for changes in
interest rates and foreign exchange rates.
I-12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There have been no material developments in legal proceedings
involving JPS Automotive or its subsidiaries since those reported, if any, in
JPS Automotive's Annual Report on Form 10-K for the fiscal year ended December
25, 1999.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit
Number Description
- ------ -----------
2.1 Agreement and Plan of Merger dated as of January 1, 2000 by and
between PACJ, Inc. and JPS Automotive L.P. is hereby incorporated by
reference to Exhibit 2.1 of the Form 8-K of JPS Automotive and
Products Corp. dated January 28, 2000.
3(i).1 Certificate of Incorporation of Products Corp. is hereby incorporated
by reference to Exhibit 3.1 of Products Corp.'s Registration Statement
on Form S-1, Registration No. 33-75510.
3(i).2 Certificate of Incorporation of PACJ, Inc. is hereby incorporated by
reference to Exhibit 3.3 of the Form 10-K of JPS Automotive and
Products Corp for fiscal 1999.
3(ii).1 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(ii).2 Bylaws of PACJ, Inc. are hereby incorporated by reference to Exhibit
3.4 of the Form 10-K of JPS Automotive and Products Corp. for fiscal
1999.
27 Financial Data Schedules
(b) Reports on Form 8-K
During the quarter for which this Report on Form 10-Q is being filed, JPS
Automotive and Products Corp. filed a Current Report on Form 8-K dated
January 28, 2000 reporting under Item 1 thereof the merger of JPS
Automotive with and into its general partner, PACJ, Inc. No financial
statements were filed.
II-1
<PAGE>
SIGNATURE
Pursuant to the requirements 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 15th day of May, 2000.
JPS AUTOMOTIVE INC.
By: /s/ Rajesh Shah
---------------
Rajesh K. Shah
Executive Vice President and
Chief Financial Officer
(On behalf of the Registrant and as Principal
Financial and Chief Accounting Officer)
JPS AUTOMOTIVE PRODUCTS CORP.
By: /s/ Rajesh Shah
----------------
Rajesh K. Shah
Executive Vice President and
Chief Financial Officer
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