<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended September 30, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _____ to____
Commission File Number 33-75510-01; 1-12944
JPS AUTOMOTIVE, 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) No. 56-2001613
Delaware No. 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 November 10, 2000, the number of outstanding shares of JPS Automotive Inc.
and JPS Automotive Products Corp. common stock was 1,500 and 100, respectively.
<PAGE> 2
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 NINE MONTHS ENDED
------------------------------- ------------------------------
SEPTEMBER 30, SEPTEMBER 25, SEPTEMBER 30, SEPTEMBER 25,
2000 1999 2000 1999
(13 WEEKS) (13 WEEKS) (40 WEEKS) (39 WEEKS)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales ....................................... $ 53,082 $ 60,066 $ 174,033 $ 195,967
Cost of goods sold .............................. 48,591 55,153 156,334 176,426
--------- --------- --------- ---------
Gross profit .................................... 4,491 4,913 17,699 19,541
Selling, general and administrative expenses .... 2,276 2,744 7,448 8,855
Restructuring charge ............................ -- 6,637 -- 6,637
--------- --------- --------- ---------
Operating income (loss) ......................... 2,215 (4,468) 10,251 4,049
Interest expense, net ........................... 1,515 2,046 5,610 6,326
Other expense (income), net ..................... 2 (46) (403) (134)
--------- --------- --------- ---------
Income (loss) before income taxes ............... 698 (6,468) 5,044 (2,143)
Income tax expense (benefit) .................... 295 (2,323) 2,164 (485)
--------- --------- --------- ---------
Income (loss) before extraordinary charge and
cumulative effect of a change in accounting
principle .................................... 403 (4,145) 2,880 (1,658)
Extraordinary charge, net of income taxes of $457 (686) -- (686) --
Cumulative effect of a change in accounting
principle, net of income taxes of $528 ....... -- -- -- (791)
--------- --------- --------- ---------
Net income (loss) ............................... $ (283) $ (4,145) $ 2,194 $ (2,449)
========= ========= ========= =========
</TABLE>
See accompanying notes.
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<PAGE> 3
JPS AUTOMOTIVE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, DECEMBER 25,
ASSETS 2000 1999
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................... $ 831 $ 810
Accounts receivable, net of allowance of
$729 and $2,268 ................................... 31,758 37,387
Purchased receivables of affiliates ................. 701 4,805
Inventories ......................................... 5,819 6,912
Receivables from related parties .................... -- 13,506
Revolving loan due from C&A Products ................ 4,717 4,600
Deferred tax assets ................................. 1,218 1,685
Other current assets ................................ -- 1,085
--------- ---------
Total current assets .............................. 45,044 70,790
Property, plant and equipment, net ..................... 45,110 48,308
Goodwill, net .......................................... 95,717 97,757
Demand receivable due from C&A for income taxes ........ 11,032 10,601
Debt issuance costs, net ............................... 230 1,167
Other assets ........................................... 517 1,439
--------- ---------
$ 197,650 $ 230,062
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt ................ $ 48,387 $ --
Accounts payable .................................... 7,184 7,241
Payables to related parties ......................... 1,691 --
Accrued expenses .................................... 10,422 8,612
--------- ---------
Total current liabilities ......................... 67,684 15,853
Long-term debt ......................................... -- 87,370
Other liabilities ...................................... 9,857 8,924
Commitments and contingencies...........................
Stockholder's equity:
Common stock, no par (1,500 shares authorized, issued
and outstanding at September 30, 2000 and December .. 35,000 35,000
25, 1999)............................................
Additional paid-in capital .......................... 131,118 131,118
Accumulated deficit ................................. (46,009) (48,203)
--------- ---------
Total stockholder's equity ...................... 120,109 117,915
--------- ---------
$ 197,650 $ 230,062
========= =========
</TABLE>
See accompanying notes.
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<PAGE> 4
JPS AUTOMOTIVE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------
SEPTEMBER 30, SEPTEMBER 25,
2000 1999
(40 WEEKS) (39 WEEKS)
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Income (loss) from continuing operations ................. $ 2,880 $ (1,658)
Adjustments to derive cash flow from continuing
operating activities:
Impairment of long-lived assets ..................... -- 4,862
Deferred income tax expense ......................... 2,137 635
Depreciation and amortization ....................... 6,871 7,214
Interest accretion and debt issuance cost
amortization ..................................... (110) (91)
Changes in operating assets and liabilities ......... 9,734 (6,320)
-------- --------
Net cash provided by operating activities ......... 21,512 4,642
-------- --------
INVESTING ACTIVITIES:
Additions to property, plant, and equipment .............. (1,451) (7,198)
Sales of property, plant, and equipment .................. 285 5,548
Payments received on purchased receivables ............... 4,104 --
Other, net ............................................... -- 387
-------- --------
Net cash provided by (used in) investing activities 2,938 (1,263)
-------- --------
FINANCING ACTIVITIES:
Repayment of long-term debt .............................. (39,078) --
Distributions to C&A Products ............................ -- (3,000)
Capital contributions from partners ...................... -- 3,528
Changes in amounts due C&A Products, net ................. 14,766 6,894
Net repayments and advances on revolving loans ........... (117) (3,000)
-------- --------
Net cash provided by (used in) financing activities (24,429) 4,422
-------- --------
Net increase in cash and cash equivalents ................ 21 7,801
Cash and cash equivalents at beginning of period ......... 810 171
-------- --------
Cash and cash equivalents at end of period ............... $ 831 $ 7,972
======== ========
</TABLE>
See accompanying notes.
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<PAGE> 5
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) 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 quarters
ended September 30, 2000, July 1, 2000, September 25, 1999, June 26, 1999 and
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
fiscal 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 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 was accounted for as a 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 and nine months ended September 25, 1999,
$46 thousand and $134 thousand, respectively, 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 (loss) is the only component of comprehensive income (loss).
During the quarters ended September 30, 2000 and September 25, 1999, JPS
Automotive recognized a comprehensive loss of $0.3 million and $4.2 million,
respectively. Comprehensive income was $2.2 million for the nine months ended
September 30, 2000, compared to a comprehensive loss of $2.5 million for the
nine months ended September 25, 1999.
JPS Automotive repurchased $38 million principal amount of JPS
Automotive Senior Notes on the open market at prices in excess of carrying value
resulting in an extraordinary charge of $0.7 million during the third quarter of
2000. The remaining Senior Notes mature June 15, 2001 and have been classified
as current in the accompanying September 30, 2000 condensed consolidated balance
sheet.
2. GOODWILL:
Goodwill, representing the excess of purchase price over the fair value
of net assets acquired in the 1996 Acquisition, is being amortized on a
straight-line basis over a period of forty years. Amortization of goodwill was
$0.7 million and $2.1 million for the quarter and nine months ended September
30, 2000, respectively, and $0.7 million and $2.0 million for the quarter and
nine months ended September 25, 1999, respectively. Accumulated amortization at
September 30, 2000 was $10.1 million. The carrying value of goodwill is reviewed
periodically based on the projected undiscounted cash flows and pre-tax income
over the remaining amortization periods. Should this
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<PAGE> 6
JPS AUTOMOTIVE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
review indicate that the goodwill balance will not be recoverable, JPS
Automotive's carrying value of the goodwill will be reduced. At September 30,
2000, JPS Automotive believes the recorded value of its goodwill of $95.7
million is fully recoverable.
3. INVENTORIES:
The components of inventories consist of (in thousands):
September 30, December 25,
2000 1999
------ ------
Raw materials and supplies $1,873 $2,492
Work in process .......... 3,885 2,752
Finished goods ........... 61 1,668
------ ------
$5,819 $6,912
====== ======
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 September 30, 2000,
approximately $0.3 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 used in production, 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 September 30, 2000, all employees affiliated with the Cramerton
facility had been terminated. As of September 30, 2000, approximately $1.3
million had been spent in severance and related costs. During the third quarter
of 2000, JPS Automotive and C&A Products completed the relocation of the
headliner business from the Cramerton, North Carolina facility to a C&A Products
facility where C&A Products is producing headliner for JPS Automotive on a
subcontract basis.
5. RELATED-PARTY TRANSACTIONS AND ALLOCATIONS:
At September 30, 2000, C&A Products has pledged the ownership interests
in its significant subsidiaries, including its interests in JPS Automotive, as
security for debt of C&A Products totaling $414.9 million.
Following the 1996 Acquisition, C&A Products began to develop plans to
rationalize certain manufacturing locations as well as marketing and
administrative functions. This rationalization involved transactions and
arrangements between JPS Automotive and C&A Products, which were approved by the
Board of Directors of PACJ, Inc., the 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 evaluated 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
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JPS AUTOMOTIVE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
excluded from the fee calculations. As a result, JPS Automotive billed C&A
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 September 30, 2000 and September 25, 1999: (i) $1.8 million
and $1.9 million, respectively, for administrative and other services, and (ii)
$29.4 million and $26.8 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 September
30, 2000 and September 25, 1999, JPS Automotive recorded sales of $5.5 million
and $5.6 million, respectively, relating to contract manufacturing services
(including the sale of roll goods) provided to C&A Products and its
subsidiaries.
JPS Automotive paid or accrued the following amounts in connection with
the transactions and arrangements described above and related transactions for
the nine months ended September 30, 2000 and September 25, 1999: (i) $5.6
million and $5.5 million, respectively, for administrative and other services,
and (ii) $86.5 million and $74.7 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 nine
months ended September 30, 2000 and September 25, 1999, JPS Automotive recorded
sales of $20.0 million and $14.7 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 third quarter of 2000, C&A
Products was charged $49 thousand in net interest related to these revolving
credit arrangements. No interest was charged during the quarter ended September
25, 1999. During the nine months ended September 30, 2000 and September 25,
1999, C&A Products was charged $0.1 million and $12 thousand, respectively, in
net interest related to these revolving credit arrangements.
In accordance with C&A Products' normal practice, C&A Products designed
and produced 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, as permitted by the indenture governing the
Senior Notes, 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 September 30, 2000 there was an
outstanding balance of $0.7 million owed to JPS Automotive under this
arrangement. During the nine months ended September 30, 2000, approximately $0.2
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.
During the quarter and nine months ended September 30, 2000, JPS Automotive paid
intercompany payable balances with C&A Products of $21.2 million and $61.7
million, respectively, prior to September 30, 2000, and received a discount of
$0.4 million for the quarter and $0.8 million for the nine months ended
September 30, 2000.
During the nine months ended September 25, 1999, Cramerton incurred
costs of approximately $1.1 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
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<PAGE> 8
JPS AUTOMOTIVE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
completed the relocation of Cramerton's headliner business to a C&A Products
facility where C&A Products is producing headliner for JPS Automotive on a
subcontract basis. In connection with this move, during the nine months ended
September 30, 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 partners
(principally C&A Products) in amounts equal to the taxes JPS Automotive would be
required to pay if it were separately taxed. JPS Automotive and C&A Products
maintain the Tax Sharing Agreement in lieu of adding JPS Automotive as a party
to C&A's tax sharing arrangement. For the nine months ended September 30, 2000,
JPS Automotive recorded $0.4 million as an estimated amount due from C&A
Products under the terms of the Tax Sharing Agreement. For the nine months ended
September 25, 1999, JPS Automotive recorded $1.1 million as an estimated amount
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 for 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:
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 25,
2000 1999
------------- -------------
General Motors .... 40% 45%
Toyota ............ 13% 13%
DaimlerChrysler A.G 20% 15%
JPS Automotive's two reportable segments are Automotive Carpet and
Automotive Fabric. JPS Automotive's reportable segments are considered to be
strategic business units by management. Each business segment utilizes different
technology and focuses on specific vehicle interior systems. 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.)
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<PAGE> 9
JPS AUTOMOTIVE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Information about JPS Automotive's reportable segments is presented
below (in thousands).
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30, 2000 (13 WEEKS)
-------------------------------------------------------------------
AUTOMOTIVE AUTOMOTIVE
CARPET FABRIC OTHER (1) TOTAL
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
External revenues ........... $ 39,458 $ 175 $ 13,449 $ 53,082
Depreciation and amortization 1,566 855 -- 2,421
Operating income (loss) ..... 1,477 (289) 1,027 2,215
Total assets ................ 137,858 57,541 2,251 197,650
Capital expenditures ........ 584 -- -- 584
QUARTER ENDED SEPTEMBER 25, 1999 (13 WEEKS)
-------------------------------------------------------------------
AUTOMOTIVE AUTOMOTIVE
CARPET FABRIC OTHER (1) TOTAL
---------- ---------- ---------- ---------
External revenues ........... $ 42,263 $ 8,051 $ 9,752 $ 60,066
Depreciation and amortization 1,321 1,065 -- 2,386
Operating income (loss) ..... 515 (7,616) 2,633 (4,468)
Total assets ................ 153,541 75,126 2,877 231,544
Capital expenditures ........ 3,181 498 -- 3,679
NINE MONTHS ENDED SEPTEMBER 30, 2000 (40 WEEKS)
-------------------------------------------------------------------
AUTOMOTIVE AUTOMOTIVE
CARPET FABRIC OTHER (1) TOTAL
---------- ---------- ---------- ---------
External revenues ........... $ 130,989 $ 7,322 $ 35,722 $ 174,033
Depreciation and amortization 4,772 2,099 -- 6,871
Operating income (loss) ..... 7,768 (2,225) 4,708 10,251
Total assets ................ 137,858 57,541 2,251 197,650
Capital expenditures ........ 1,311 140 -- 1,451
NINE MONTHS ENDED SEPTEMBER 25, 1999 (39 WEEKS)
-------------------------------------------------------------------
AUTOMOTIVE AUTOMOTIVE
CARPET FABRIC OTHER (1) TOTAL
---------- ---------- ---------- ---------
External revenues ........... $ 134,495 $ 31,864 $ 29,608 $ 195,967
Depreciation and amortization 3,996 3,218 -- 7,214
Operating income (loss) ..... 2,613 (7,283) 8,719 4,049
Total assets ................ 153,541 75,126 2,877 231,544
Capital expenditures ........ 4,575 2,623 -- 7,198
</TABLE>
(1) Other includes adjustments made pursuant to the transactions and
arrangements between JPS Automotive and C&A Products. See Note 5.
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
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<PAGE> 10
JPS AUTOMOTIVE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 remains 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
condition or future 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 liabilities arising from its activities or properties,
its present and former subsidiaries and their corporate predecessors.
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 September 30, 2000, JPS
Automotive had no assets recognized pursuant to agreements that provide for
contractual reimbursement of pre-production design and development costs or
molds, dies and other tools that are customer-owned and approximately $0.3
million for molds, dies and other tools that JPS Automotive owns.
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<PAGE> 11
JPS AUTOMOTIVE PRODUCTS CORP.
(A WHOLLY-OWNED SUBSIDIARY OF JPS AUTOMOTIVE, INC.)
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, DECEMBER 25,
2000 1999
---------- ----------
<S> <C> <C>
(in thousands)
ASSETS
Current assets - Cash ....................... $ 1 $ 1
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities ................................. $ -- $ --
---------- ----------
Shareholder's equity:
Common stock, par value $0.01 per share;
10,000,000 shares authorized,
100 shares issued and outstanding .. -- --
Additional paid-in capital ............. 1 1
---------- ----------
Total shareholder's equity ......... 1 1
---------- ----------
$ 1 $ 1
========== ==========
</TABLE>
See accompanying note.
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<PAGE> 12
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 a joint 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 $48.4 million
(including a premium of $0.3 million) as of September 30, 2000.
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<PAGE> 13
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 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 a complete line of automotive
textiles and specialty textile products to North American automobile and light
truck manufacturers. 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.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 25,
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 nine months ended September 30, 2000 consisted of 40 weeks compared to 39
weeks for the nine months ended September 25, 1999. Therefore, sales in all
divisions and associated costs and expenses were impacted by the longer
reporting period for the nine months ended September 30, 2000.
NET SALES: Net sales for JPS Automotive for the nine months ended September 30,
2000 decreased 11.2% from $196.0 million to $174.0 million for the nine months
ended September 30, 2000. The primary reason for the sales decline is
attributable to program run-outs in Automotive Fabric.
GROSS PROFIT: Gross profit as a percentage of sales for the nine months ended
September 30, 2000 remained relatively flat at 10.2% compared to 10.0% for the
nine months ended September 25, 1999.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES: Selling, general, and
administrative expenses decreased 15.9% to $7.4 million for the nine months
ended September 30, 2000, down $1.4 million from the comparable 1999 period. The
decrease is related to reduced expenses resulting from the relocation of the
Cramerton, North Carolina fabrics facility to another fabrics facility. This
decrease is partially offset by additional provisions for uncollectible accounts
receivable by Automotive Carpet.
RESTRUCTURING: During the nine months ended September 25, 1999, JPS Automotive
recognized a restructuring charge of $6.6 million. Approximately $4.9 million of
the charge represents the loss on the sale of the Cramerton, North Carolina
fabrics facility. The remaining $1.7 million relates to severance benefits for
the approximately 150 employees affected by the sale. In addition, JPS
Automotive recognized $0.3 million of severance expense related to employee
reductions occurring at JPS Automotive's Carpet facility in conjunction with a
reorganization at C&A Products.
INTEREST EXPENSE: Interest expense, net of interest income, was $5.6 million for
the nine months ended September 30, 2000, compared to $6.3 million for the nine
months ended September 25, 1999. The decrease is due to a lower outstanding
balance on the JPS Automotive Senior Notes. JPS Automotive repurchased $38
million principal amount of JPS Automotive Senior Notes during the third quarter
of 2000.
OTHER INCOME: JPS Automotive had other income of $0.4 million for the nine
months ended September 30, 2000 compared to $0.1 million in the comparable 1999
period The increase is primarily due to income recognized on the accounts
receivable purchased from a subsidiary of C&A Products in December, 1999.
INCOME TAXES: JPS Automotive recognized an income tax provision of $2.2 million
for the nine months ended September 30, 2000, compared to an income tax benefit
of $0.5 in the comparable 1999 period. JPS Automotive's effective tax rate for
the nine months ended September 30, 2000 was 42.9% compared to 22.6% for the
nine months ended September 25, 1999. The percentage increase is due to the
impact of certain state taxes and nondeductible goodwill, which do not fluctuate
with income.
EXTRAORDINARY CHARGE: During the third quarter of 2000, JPS Automotive
recognized an extraordinary charge of $0.7 million in connection with the
repurchase of $38 million principal amount of JPS Automotive Senior Notes on the
open market at prices in excess of carrying value.
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<PAGE> 14
JPS AUTOMOTIVE INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CUMULATIVE EFFECT OF 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 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. The initial impact of SOP 98-5 resulted in a charge of $0.8 million,
net of income taxes of $0.5 million.
NET INCOME: Net income was $2.2 million for the nine months ended September 30,
2000, compared to a net loss of $2.5 million for the nine months ended September
25, 1999 primarily due to the reasons cited above.
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<PAGE> 15
JPS AUTOMOTIVE INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 5 to JPS Automotive's Condensed Consolidated Financial Statements.
During the quarter, $38.0 million principal amount of the JPS
Automotive Senior Notes were repurchased by JPS Automotive on the open market
and retired. The JPS Automotive Senior Notes will mature in June, 2001. JPS
Automotive currently plans to satisfy the obligation with cash generated from
operations, with a portion being refinanced by C&A Products.
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, the Company's report on Form 10-Q for the fiscal quarters ended
April 1, 2000, July 1, 2000 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.
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<PAGE> 16
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 the fiscal year ended December
25, 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 By-laws of PACJ, Inc. are hereby incorporated by reference to
Exhibit 3.4 of the Form 10-K of JPS Automotive and Products
Corp. for the fiscal year ended December 25, 1999.
27 Financial Data Schedules
(b) Reports on Form 8-K
During the quarter for which this Report on Form 10-Q is filed, JPS
Automotive and Products Corp. did not file any reports on Form 8-K.
II-1
<PAGE> 17
SIGNATURES
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 13th day of November, 2000.
JPS AUTOMOTIVE INC.
By: /s/ Rajesh Shah
----------------
Rajesh K. Shah
Executive Vice President and
Chief Financial Officer
(Duly Authorized and Principal Financial Officer)
JPS AUTOMOTIVE PRODUCTS CORP.
By: /s/ Rajesh Shah
----------------
Rajesh K. Shah
Executive Vice President and
Chief Financial Officer
(Duly Authorized and Principal Financial Officer)
