-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QJCjrqhskF76D5mwhzKaP3qQ3DhykOBM7D9xSREkSMUMWW+0dDXRD3fmPmdpQcpj wDycS78Rjra998xyEvaseQ== 0000950168-98-003447.txt : 19981111 0000950168-98-003447.hdr.sgml : 19981111 ACCESSION NUMBER: 0000950168-98-003447 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980926 FILED AS OF DATE: 19981110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JPS AUTOMOTIVE L P CENTRAL INDEX KEY: 0000924902 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 133770905 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-75510-01 FILM NUMBER: 98742122 BUSINESS ADDRESS: STREET 1: 701 MCCLULLOGH DR CITY: CHARLOTTE STATE: NC ZIP: 28262 BUSINESS PHONE: 6108593000 MAIL ADDRESS: STREET 1: 701 MCCULLOUGH DR CITY: CHARLOTTE STATE: NC ZIP: 28262 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JPS AUTOMOTIVE PRODUCTS CORP CENTRAL INDEX KEY: 0000919233 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 570993690 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12944 FILM NUMBER: 98742123 BUSINESS ADDRESS: STREET 1: 701 MCCULLOUGH DR CITY: CHARLOTTE, STATE: NC ZIP: 28262 BUSINESS PHONE: 6108593000 MAIL ADDRESS: STREET 1: 29 STEVENS ST CITY: GREENVILLE STATE: SC ZIP: 29602 10-Q 1 JPS AUTOMOTIVE L.P. -- 10-Q 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 26, 1998 Transition Report Pursuant to Section 13 or 15(d) --- of the Securities Exchange Act of 1934 For the transition period from to Commission File Number 33-75510-01; 1-12944 JPS AUTOMOTIVE L.P. JPS AUTOMOTIVE PRODUCTS CORP. (State or other Jurisdiction of (IRS Employer Identification incorporation or Organization) No. 57-1060375 Delaware No. 57-0993690) Delaware 701 McCullough Drive Charlotte, NC 28262 Telephone (704) 547-8500 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- JPS Automotive L.P. and JPS Automotive Products Corp. meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format. As of November 9, 1998, the number of outstanding shares of JPS Automotive Products Corp. common stock was 100. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. JPS AUTOMOTIVE L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands)
Quarter Ended Nine Months Ended ---------------------------- ---------------------------- September 26, September 27, September 26, September 27, 1998 1997 1998 1997 ------------- ------------- ------------- ------------- Net sales........................... $ 51,103 $ 59,430 $ 186,808 $ 179,573 Cost of goods sold.................. 48,134 51,567 168,332 153,601 ----------- ----------- ----------- ----------- Gross profit........................ 2,969 7,863 18,476 25,972 Selling, general and administrative expenses......................... (302) 3,959 8,045 12,687 ----------- ----------- ----------- ----------- Operating income.................... 3,271 3,904 10,431 13,285 Interest expense, net............... 2,182 1,904 6,393 7,513 Other expense (income), net......... 28 - (3) (5) ----------- ----------- ----------- ----------- Income from continuing operations before income taxes............... 1,061 2,000 4,041 5,777 Income tax expense.................. 488 881 1,814 2,654 ----------- ----------- ----------- ----------- Income from continuing operations... 573 1,119 2,227 3,123 Income from discontinued operations, net of income tax of $0 and $1,044........................... - 78 - 1,662 ----------- ----------- ----------- ----------- Income before extraordinary loss.... 573 1,197 2,227 4,785 Extraordinary loss, net of income tax of $58 and $442.............. - - (86) (721) ----------- ----------- ----------- ----------- Net income.......................... $ 573 $ 1,197 $ 2,141 $ 4,064 =========== =========== =========== ===========
See accompanying notes. I-1 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
(Unaudited) September 26, December 27, ASSETS 1998 1997 ------------- ------------ Current assets: Cash and cash equivalents.................. $ 1,801 $ 9,271 Accounts receivable, net................... 40,299 37,038 Inventories................................ 14,408 19,275 Receivables from related parties........... 5,579 1,974 Revolving loan due from C&A Products....... 4,500 4,500 Deferred tax assets........................ 4,073 5,369 Other current assets....................... 3,171 4,269 -------- ------ Total current assets...................... 73,831 81,696 -------- ------ Property, plant and equipment, net........... 52,510 55,470 Goodwill, net................................ 101,344 103,310 Demand receivable due from C&A for income taxes 6,996 6,548 Other assets................................. 3,458 3,583 -------- ------- $ 238,139 $ 250,607 ========== ========= LIABILITIES AND OWNERS' EQUITY Current liabilities: Accounts payable........................... $ 7,156 $ 12,083 Accrued expenses........................... 12,159 13,677 -------- ------ Total current liabilities................. 19,315 25,760 -------- ------ Long-term debt............................... 89,109 91,843 Other liabilities............................ 11,654 10,008 Commitments and contingencies................ Owners' equity: General partner............................ 48,073 48,073 Limited partner............................ 69,988 74,923 -------- ------ Total owners' equity.................... 118,061 122,996 -------- ------ $ 238,139 $ 250,607 ========== =========
See accompanying notes. I-2 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended ----------------------- September 26, September 27, 1998 1997 ------------- ------------- OPERATING ACTIVITIES Income from continuing operations............ $ 2,227 $ 3,123 Adjustments to derive cash flow from continuing operating activities: Deferred income tax expense............... 3,950 - Depreciation and amortization............. 6,933 6,457 Interest accretion and debt issuance cost amortization............................ (164) (206) Other, net ............................... (740) 2,718 Changes in operating assets and liabilities (4,839) (7,718) ----------- ----------- Net cash provided by continuing operations 7,367 4,374 ----------- ----------- Net cash provided by discontinued operations - 1,735 ----------- ----------- INVESTING ACTIVITIES Additions to property, plant and equipment... (2,074) (5,018) Sales of property, plant and equipment....... 575 - Proceeds from disposition of discontinued operations................................... - 55,900 Other, net................................... (4) (5) ----------- ----------- Net cash provided by (used in) investing activities........................... (1,503) 50,877 ----------- ----------- FINANCING ACTIVITIES Distributions to C&A Products................ (10,000) - Capital contributions from partners.......... 2,930 23,233 Changes in amounts due C&A Products, net..... (4,053) - Repayments of long-term debt................. (2,066) (25,704) Other, net................................... (145) - ----------- ----------- Net cash used in financing activities (13,334) (2,471) ----------- ----------- Net increase (decrease) in cash and cash equivalents............................... (7,470) 54,515 Cash and cash equivalents at beginning of period 9,271 198 ----------- ----------- Cash and cash equivalents at end of period... $ 1,801 $ 54,713 =========== ===========
See accompanying notes. I-3 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Condensed Consolidated Financial Statements: The condensed consolidated financial statements include the accounts of JPS Automotive L.P. and its subsidiaries ("JPS Automotive"). In the opinion of management of JPS Automotive, the accompanying condensed consolidated financial statements reflect all adjustments considered necessary for a fair presentation of the consolidated financial position, results of operations and cash flows. Results of operations for interim periods are not necessarily indicative of results for the full year. Certain prior quarter items have been reclassified to conform with the third quarter presentation. For further information, refer to the consolidated financial statements and notes thereto included in JPS Automotive's Report on Form 10-K for the year ended December 27, 1997. On December 11, 1996, Collins & Aikman Corporation ("C&A"), through its subsidiaries, acquired JPS Automotive from Foamex International Inc. ("Foamex") pursuant to an Equity Purchase Agreement dated August 28, 1996, as amended December 11, 1996 (the "1996 Acquisition"). In the 1996 Acquisition, Collins & Aikman Products Co. ("C&A Products"), a wholly owned subsidiary of C&A, acquired a .9999% limited partnership interest in JPS Automotive from Foamex and a 99% limited partnership interest in JPS Automotive from Foamex - JPS Automotive L.P. ("FJPS"). PACJ, Inc., a wholly owned subsidiary of C&A Products, acquired a .0001% general partnership interest in JPS Automotive from JPSGP Inc. ("JPSGP"). Accordingly, 100% of the partnership interests in JPS Automotive are owned by PACJ, Inc. and C&A Products, which are, respectively, indirect and direct wholly owned subsidiaries of C&A. Additionally, on December 11, 1996, C&A Products acquired from Seiren Co. Ltd. and its affiliates the 20% minority interest in Cramerton Automotive Products, L.P. ("Cramerton"). JPS Automotive subsequently acquired the 20% minority interest previously held by the Seiren entities. 2. Goodwill: Goodwill, representing the excess of purchase price over the fair value of net assets acquired in the 1996 Acquisition, is being amortized on a straight-line basis over a period of forty years. Amortization of goodwill was $0.7 million and $2.0 million for the quarter and nine months ended September 26, 1998, respectively, and $0.6 million and $1.9 million for the quarter and nine months ended September 27, 1997, respectively. Accumulated amortization at September 26, 1998 was $4.6 million. The carrying value of goodwill is reviewed periodically based on the undiscounted cash flows and pretax income over the remaining amortization periods. Should this review indicate that the goodwill balance will not be recoverable, JPS Automotive's carrying value of the goodwill will be reduced. At September 26, 1998, JPS Automotive believes the recorded value of its goodwill of $101.3 million is fully recoverable. 3. Facility Closing Costs: In connection with the 1996 Acquisition, JPS Automotive eliminated certain redundant sales and administrative functions and closed one manufacturing facility in 1997, a second facility in January 1998, and a third facility in June 1998. JPS Automotive currently is in the process of relocating certain manufacturing processes from a JPS Automotive facility to an existing facility of another C&A Products subsidiary. These actions affect approximately 640 employees. Total costs accrued for the shutdown of facilities and severance and other personnel costs were $2.7 million and $7.7 million, respectively. The components of the reserves for the relocation and facility closures, which are expected to be completed in the second quarter of fiscal 1999, are as follows (in thousands):
Original Changes In Remaining Reserve Reserve Reserve ------- ------- ------- Anticipated expenditures to close and dispose of idled facilities....................... $ 2,746 $ (2,459) $ 287 Anticipated severance benefits............ 7,655 (5,177) 2,478 ----------- --------- ----------- $ 10,401 $ (7,636) $ 2,765 =========== ========= ===========
I-4 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) 4. Related-party Transactions and Allocations: At September 26, 1998, C&A Products has pledged the ownership interests in its significant subsidiaries, including its partnership interests in JPS Automotive, as security for debt of C&A Products totaling $368.8 million. Following the 1996 Acquisition, C&A Products began to develop plans to rationalize certain manufacturing locations as well as marketing and administrative functions. This rationalization involved transactions and arrangements between JPS Automotive and C&A Products which were approved by the Board of Directors of PACJ, Inc., the general partner of JPS Automotive, and were reviewed by an investment banking firm of national standing, which rendered an opinion that they were fair to JPS Automotive from a financial point of view. The transactions and arrangements and proposed transactions and arrangements include the following: (i) the provision by C&A Products of additional administrative, management, marketing and program management services pursuant to a preexisting services agreement assigned to C&A Products by Foamex (the "Existing Services Agreement"), (ii) the purchase from and sale to C&A Products and its subsidiaries of certain manufacturing assets, (iii) the transfer of manufacturing responsibility for certain automotive programs, and for the manufacturing of automotive carpet roll goods, to C&A Products and its subsidiaries and from C&A Products to JPS Automotive, and (iv) the transfer of certain automotive programs from JPS Automotive to C&A Products and its subsidiaries and from C&A Products to JPS Automotive. For a description of the compensation to be paid by JPS Automotive to C&A Products and by C&A Products to JPS Automotive pursuant to the transactions and arrangements described above, see Note 12 to JPS Automotive's consolidated financial statements included in JPS Automotive's Annual Report on Form 10-K for the fiscal year ended December 27, 1997 (the "1997 10-K"). During the first quarter of 1998, pursuant to the rationalization process, JPS Automotive transferred to Collins & Aikman Canada Inc. ("C&A Canada") and C&A Products two programs for the production of automotive carpet products for aggregate consideration of $4.3 million. One of these programs was performed by C&A Canada for JPS Automotive during a portion of 1997 on a royalty basis. Due to the related party nature of the transfer, the $4.3 million received by JPS Automotive, net of the related tax provision of $1.6 milllion, has been treated as a capital contribution from C&A Products in the accompanying financial statements. During the remainder of 1998, C&A Products has agreed to transfer to JPS Automotive as an equity contribution all but one of the automotive soft trim programs formerly produced by C&A Products at its Salisbury, North Carolina, facility. Twenty-seven contracts relating to the closure of the Salisbury facility were transferred to JPS Automotive during the second quarter of 1998 in accordance with the arrangements between JPS Automotive and C&A Products. JPS Automotive did not pay any amounts to C&A Products for these contracts. No contracts relating to the closure of the Salisbury facility were transferred to JPS Automotive during the third quarter of 1998. 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. In addition, pursuant to the rationalization process, during the third quarter of 1998 JPS Automotive transferred equipment to C&A Products for aggregate consideration of $0.7 million. In accordance with the arrangements between JPS Automotive and C&A Products, JPS Automotive received fair market value and recorded the excess between book and fair market value as a capital contribution of $227 thousand, net of income taxes of $129 thousand. JPS Automotive paid or accrued the following amounts in connection with the transactions and arrangements described above and related transactions for the quarter and nine months ended September 26, 1998: (i) $1.9 million and $5.7 million, respectively, for administrative and other services, and (ii) $13.3 million and $41.9 million, respectively, for contract manufacturing services (including the purchase of roll goods) provided to JPS Automotive by C&A Products and its subsidiaries. In addition, for the quarter and nine months ended September 26, 1998, JPS Automotive recorded sales of $5.9 million and $26.7 million, respectively, relating to contract manufacturing services (including the sale of roll goods) provided to C&A Products and its subsidiaries. For the quarter and nine months ended September 27, 1997, JPS Automotive was charged $0.6 million and $2.1 million, respectively, by C&A Products for certain administrative and management services in accordance with the Existing Services Agreement. I-5 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) 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 quarter and nine months ended September 26, 1998, C&A Products was charged $83 thousand and $0.3 million, respectively, in net interest related to these revolving credit arrangements. At September 26, 1998, there was an outstanding balance of $4.5 million owed to JPS Automotive under this arrangement. In connection with certain manufacturing activities conducted by C&A Products for Cramerton during the third quarter and nine months ended September 26, 1998, Cramerton resold to C&A Products at cost approximately $0.3 million and $0.9 million, respectively, in yarn that had been purchased by Cramerton for use in the manufacturing activities conducted for Cramerton. In addition, in accordance with C&A Products' normal practice, C&A Products developed tooling for JPS Automotive, for which JPS Automotive reimbursed C&A Products its costs. The development of tooling was managed by JPS Automotive prior to the 1996 Acquisition. During the third quarter of 1998, JPS Automotive and C&A Canada exchanged responsibility for the production of certain automotive carpet products. Due to the related party nature of this exchange, this transaction did not have an effect on the financial statements. 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. As of September 26, 1998 no amounts were payable under the Tax Sharing Agreement. In addition, because JPS Automotive is part of C&A's consolidated tax return, C&A effectively utilizes the tax benefits generated by JPS Automotive in its consolidated tax return, which resulted in benefits totaling $0.4 million for the nine months ended September 26, 1998, $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. In September 1998, JPS Automotive distributed its 50% ownership interest in Industrias Enjema S.A. de C.V. ("Enjema") to C&A Products Co. C&A Products acquired, from a third party, the other 50% interest in Enjema in August 1998 for approximately $1 million. No book value was assigned to JPS Automotive's 50% interest. In addition, in September 1998, JPS Automotive received payment from Enjema for receivables generated when Enjema was managed by third parties. JPS Automotive had previously fully reserved these receivables. As a result of the payment, JPS Automotive reversed this reserve, resulting in a reduction of selling, general and administrative expenses of $4.2 million. 5. Commitments and Contingencies: See "PART II - OTHER INFORMATION, Item 1. Legal Proceedings." The ultimate outcome of the legal proceedings to which JPS Automotive is a party will not, in the opinion of JPS Automotive's management based on the facts presently known to it, have a material adverse effect on the consolidated financial condition or results of operations of JPS Automotive. JPS Automotive is subject to various federal, state and local environmental laws and regulations that (i) affect ongoing operations and may increase capital costs and operating expenses and (ii) impose liability for the costs of investigation and remediation and certain other damages related to on-site and off-site contamination. JPS Automotive believes it has obtained or applied for the material permits necessary to conduct its business. To date, compliance with applicable environmental laws has not had and, in the opinion of management, based on the facts presently known to it, is not expected to have a material adverse effect on JPS Automotive's consolidated financial condition or results of operations. I-6 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (concluded) (Unaudited) In December 1997, another subsidiary of C&A Products assumed substantially all of the environmental liabilities of JPS Automotive and its subsidiaries in exchange for a payment from JPS Automotive of approximately $4.1 million. JPS Automotive will remain contingently liable for these environmental liabilities. In the opinion of management, based on the facts presently known to it, the environmental costs and contingencies will not have a material adverse effect on JPS Automotive's consolidated financial condition or results of operations. However, there can be no assurance that JPS Automotive has identified or properly assessed all potential environmental liabilities arising from the activities or properties of JPS Automotive, its present and former subsidiaries and their corporate predecessors. 6. Discontinued Operations: On July 24, 1997, JPS Automotive completed the sale of its Air Restraint and Technical Products Division ("Airbag") to Safety Components International, Inc. for a purchase price of approximately $56 million. No gain or loss was recorded on the sale since the sales price approximated the acquisition fair value of Airbag. Airbag reported income of $0.1 million and $1.7 million in the quarter and nine months ended September 27, 1997. 7. Newly Issued Accounting Standards: In April 1998, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position No. 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 provides guidance on the financial reporting of start-up costs and organization costs. It requires that all nongovernmental entities expense the costs of start-up activities as these costs are incurred instead of being capitalized and amortized. SOP 98-5 is effective for financial statements for fiscal years beginning after December 15, 1998 and the initial application of this pronouncement is to be reported as the cumulative effect of a change in accounting principle. JPS Automotive currently estimates that the impact of adoption of SOP 98-5 at the beginning of fiscal 1999 will be in the range of $0.5 million to $1.0 million. I-7 JPS AUTOMOTIVE PRODUCTS CORP. (A Wholly-Owned Subsidiary of JPS Automotive L.P.) BALANCE SHEETS
(Unaudited) September 26, December 27, 1998 1997 ------------- ------------ (in thousands) ASSETS Current assets - Cash..................... $ 1 $ 1 ============= ============= LIABILITIES AND SHAREHOLDER'S EQUITY Liabilities .............................. $ - $ - ============= ============= Shareholder's equity: Common stock, par value $0.01 per share; 10,000,000 shares authorized, 100 shares issued and outstanding... - - Additional paid-in capital............. 1 1 ------------- ------------- Total shareholder's equity.......... 1 1 ------------- ------------- $ 1 $ 1 ============= =============
See accompanying notes. I-8 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES (A Wholly-Owned Subsidiary of JPS Automotive L.P.) NOTE TO BALANCE SHEETS (Unaudited) 1. Commitments and Contingencies JPS Automotive Products Corp. ("Products Corp.") is a joint obligor (and co-registrant) with JPS Automotive L.P. of the 11-1/8% Senior Notes due 2001 (the "Senior Notes"), which had an outstanding balance of $89.1 million (including a premium of $2.4 million) as of September 26, 1998. I-9 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Pursuant to General Instruction H(2)(a) to Form 10-Q, the following discussion is a management's narrative analysis of the results of operations explaining the reasons for material changes in the amount of revenue and expense items between the most recent fiscal year-to-date period presented and the corresponding year-to-date period in the preceding fiscal year. JPS Automotive manufactures and supplies textiles and specialty textile products for passenger car and light truck production in North America. On December 11, 1996, C&A, through its subsidiaries, acquired JPS Automotive from Foamex in the 1996 Acquisition. The following discussion should be read in conjunction with the condensed consolidated financial statements and related notes thereto of JPS Automotive and Products Corp. included in this report. Nine Months Ended September 26, 1998 Compared to Nine Months Ended September 27, 1997. Consolidated Results of Operations Net Sales: Net sales for the nine months ended September 26, 1998 were $186.8 million as compared to $179.6 million for the nine months ended September 27, 1997. The $7.2 million increase in sales is partially due to new bodycloth business on the Nissan Altima and to increased sales to the Mercedes M-class and the GM APV. Also, automotive carpet products sales to C&A Products increased by approximately $8 million over the comparable period of 1997. This increased activity is due to the closure of C&A Products' Salisbury facility and to the transfer of programs between C&A Products and JPS Automotive. The increase in sales was somewhat offset by the adverse effect on sales of an increased demand for leather seating applications, which management expects to continue for the foreseeable future. In addition, the General Motors strike negatively impacted sales in the nine months ended September 26, 1998. The strike began on June 5, 1998 and ended on July 29, 1998. Gross Profit: Gross profit as a percentage of sales decreased to 9.9% for the nine months ended September 26, 1998 from 14.5% in the comparable period of 1997. The decrease in gross profit is due in part to lower volume and unfavorable product mix in automotive bodycloth and inefficiencies associated with the relocation and closing of certain manufacturing facilities. Selling, General and Administrative Expenses: Selling, general, and administrative expenses decreased 36.6% to $8.0 million for the nine months ended September 26, 1998 from $12.7 million in the comparable 1997 period. This decrease is a result of lower administrative costs resulting from the elimination of certain redundant sales and administrative functions in connection with the 1996 Acquisition. In addition, during the third quarter of 1998, JPS Automotive recognized $4.2 million in income related to the collection of a fully reserved receivable balance due from Enjema. See Note 4 to the Notes to JPS Automotive's Condensed Consolidated Financial Statements. Interest Expense: Interest expense decreased to $6.4 million for the nine months ended September 26, 1998 from $7.5 million in the comparable period in 1997 primarily due to lower overall debt levels following the 1996 Acquisition. From the first quarter of 1997 through the third quarter of 1998, $25.0 million principal amount of Senior Notes have been repurchased, on the open market or otherwise, by JPS Automotive and retired. During the second quarter of 1997, C&A Products and JPS Automotive entered into reciprocal revolving credit arrangements whereby JPS Automotive may borrow up to $5 million from C&A Products, and C&A Products may borrow up to $5 million from JPS Automotive, at interest rates equal to those charged to C&A Products under its revolving credit facility with The Chase Manhattan Bank. For the nine months ended September 26, 1998, $0.3 million in net interest was charged to C&A Products in connection with these revolving credit arrangements. Income Taxes: The income tax provision for the nine months ended September 26, 1998 decreased to $1.8 million from $2.7 million in the comparable 1997 period. Income from Discontinued Operations: Income from Airbag was $1.7 million for the nine months ended September 27, 1997. Airbag was sold in July 1997. Extraordinary Loss: For the nine months ended September 26, 1998, JPS Automotive recognized an extraordinary loss of $86 thousand, net of income taxes of $58 thousand, relating to the purchase by JPS Automotive of $2.0 million principal amount of Senior Notes at prices in excess of carrying values. The extraordinary loss of $0.7 million, net of income taxes of $0.4 million, in the comparable period of 1997 relates to the purchase of $19.4 million principal amount of Senior Notes at prices in excess of carrying values. I-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Net Income: Net income decreased to $2.1 million for the nine months ended September 26, 1998 from $4.1 in the comparable period of 1997 primarily due to the reasons cited above. Liquidity and Capital Resources JPS Automotive's operating cash requirements consist principally of working capital requirements, scheduled payments of principal and interest on its outstanding indebtedness and capital expenditures. JPS Automotive believes the cash flow from operating activities, cash on hand and periodic borrowings, if necessary, will be adequate to meet operating cash requirements. For a discussion of certain transactions and arrangements and proposed transactions and arrangements between C&A Products and JPS Automotive, see Note 4 to the Notes to JPS Automotive's Condensed Consolidated Financial Statements. Impact of Year 2000 Compliance As previously discussed in Note 4 to the Notes to JPS Automotive's Condensed Consolidated Financial Statements, in accordance with arrangements between JPS Automotive and C&A Products, C&A Products provides administrative and management services to JPS Automotive. These services include business planning and management information systems services for JPS Automotive. Accordingly, JPS Automotive is part of C&A Products' comprehensive plan intended to address Year 2000 issues. C&A Products has selected a team of managers and outside consultants to identify, evaluate and implement a time-table aimed at bringing critical business systems and applications into Year 2000 compliance prior to December 31, 1999. The plan addresses JPS Automotive's information technology and non-information technology and categorizes them into the following areas which are vulnerable to Year 2000 risk: (i) business computer systems, including financial, human resources, purchasing, manufacturing and sales and marketing systems; (ii) manufacturing, warehousing and servicing equipment, including shop floor controls; (iii) technical infrastructure, including local area networks, mainframes and communication systems; (iv) end-user computing, including personal computers; (v) suppliers, agents and service providers, including systems which interface with customers; (vi) environmental operations, including fire, security, emission and waste controls and elevators; and (vii) dedicated research and development facilities, including CAD/CAE/CAM systems and product testing systems. JPS Automotive has evaluated the state of readiness of each area vulnerable to Year 2000 risk using the following definitions: Inventory - Systems are being surveyed and documented regarding compliance Remediation - Strategies are being implemented to modify or replace affected hardware and software Testing - Systems are being tested by C&A Products employees or third party consultants Complete - Systems are Year 2000 compliant Currently, JPS Automotive estimates that it is in the Remediation stage for each area of Year 2000 risk and currently expects its systems to become Year 2000 compliant during 1999. Based upon the current status of its Year 2000 efforts, JPS Automotive has not developed a formal contingency plan. However, JPS Automotive will develop an informal contingency plan in the event that it does not expect to be fully Year 2000 compliant within the current time estimates. JPS Automotive has coordinated its Year 2000 compliance efforts with a plan to make its computer systems consistent with other operations of C&A Products. As a result, the majority of the Year 2000 compliance work for JPS Automotive is being performed by employees of other C&A Products divisions or subsidiaries and is included in the amounts charged to JPS Automotive for administrative and other services in accordance with the arrangements between JPS Automotive and C&A Products. See Note 4 to the Notes to JPS Automotive's Condensed Consolidated Financial Statements. The additional cost to be borne by JPS Automotive for its efforts to address the Year 2000 issue is anticipated to be approximately $130 thousand. Included in this estimate is $70 thousand of salaries and other payroll costs of employees to the extent that they have devoted a portion of their time to the project. Approximately $14 thousand of these costs have been incurred through September 26, 1998, including $12 thousand of salaries and other payroll costs. JPS Automotive has been expensing and capitalizing the costs to complete the Year 2000 plan in accordance with appropriate accounting policies. JPS Automotive is funding the expenditures related to the Year 2000 plan with cash flows from operations. I-11 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (concluded) Due to the general uncertainty inherent in the Year 2000 process at this stage, it is difficult to determine a reasonably likely Year 2000 worst case scenario. One possible scenario would be the failure of JPS Automotive's key suppliers to become compliant. To mitigate the risk of this, JPS Automotive is in the process of issuing questionnaires to its suppliers and visiting certain of these suppliers to assess their Year 2000 readiness. This process is expected to continue over the next several months. Based upon the responses which JPS Automotive will receive through the questionnaires and meetings, JPS Automotive will develop contingency plans in the event that these suppliers will not be Year 2000 compliant in a timely manner. Due to the number of suppliers that JPS Automotive deals with, JPS Automotive is unable to make a meaningful estimate of the revenue that would be lost in the event such a scenario was realized. C&A Products' and JPS Automotive's Year 2000 efforts are ongoing and their overall plan, as well as the consideration of contingency plans, will continue to evolve as new information becomes available. JPS Automotive currently anticipates that, with the modifications discussed above, the Year 2000 issue should not pose significant operational problems for JPS Automotive. However, if such modifications are not made, or are not completed timely, or contingency plans fail, the Year 2000 issue could have a material adverse impact on the operations of JPS Automotive. Success of the Year 2000 plan may to some extent depend on the availability of outside consultants. Further, there is no guarantee that the systems of other companies on which JPS Automotive's systems rely will be timely converted and would not have an adverse effect on JPS Automotive's systems. The cost to JPS Automotive of its Year 2000 efforts and the dates by which JPS Automotive believes it will be Year 2000 compliant are based on management's current best estimates, which were derived based on numerous assumptions of future events, some of which are beyond the control of JPS Automotive, including the continued availability of certain resources, third party modification plans and other factors. There can be no guarantee, however, that these estimates will be achieved, and actual results could differ materially from those anticipated. Safe Harbor Statement This Form 10-Q contains statements which, to the extent they are not historical fact, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of Securities Exchange Act of 1934 (the "Safe Harbor Acts"). All forward-looking statements involve risks and uncertainties. The forward-looking statements in this Form 10-Q are intended to be subject to the safe harbor protection provided by the Safe Harbor Acts. Risks and uncertainties that could cause actual results to vary materially from those anticipated in the forward-looking statements included in this Form 10-Q include industry-based factors such as possible declines in the North American automobile and light truck build, labor strikes at JPS Automotive's major customers, changes in consumer preferences, dependence on significant automotive customers, changes in the popularity of particular car models or particular interior trim packages, the loss of programs on particular car models, the level of competition in the automotive supply industry and Year 2000 compliance issues, as well as factors more specific to JPS Automotive, such as the substantial leverage of JPS Automotive and limitations imposed by the Senior Notes. For a discussion of certain of these and other important factors which may affect the operations, products and markets of JPS Automotive, see "Business" in the 1997 10-K and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 1997 10-K, JPS Automotive's Reports on Form 10-Q for the fiscal quarters ended March 28, 1998 and June 27, 1998 and above in this Form 10-Q and also see JPS Automotive's other filings with the Securities and Exchange Commission. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Omitted pursuant to General Instruction H(2)(c) to Form 10-Q. I-12 PART II - OTHER INFORMATION Item 1. Legal Proceedings. There have been no material developments in legal proceedings involving JPS Automotive or its subsidiaries since those reported, if any, in JPS Automotive's Annual Report on Form 10-K for the fiscal year ended December 27, 1997. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit Number Description 3.1 Certificate of Incorporation of Products Corp. is hereby incorporated by reference to Exhibit 3.1 of Products Corp.'s Registration Statement on Form S-1, Registration No. 33-75510. 3.2 By-laws of Products Corp. are hereby incorporated by reference to Exhibit 3.2 of Products Corp.'s Registration Statement on Form S-1, Registration No. 33-75510. 3.3 Certificate of Limited Partnership of JPS Automotive is hereby incorporated by reference to Exhibit 3.3 of Products Corp.'s Registration Statement on Form S-1, Registration No. 33-75510. 3.4 First Amended and Restated Agreement of Limited Partnership of JPS Automotive, dated as of June 27, 1994, is hereby incorporated by reference to Exhibit 3.4 of the Form 10-K of JPS Automotive and Products Corp. for fiscal 1994. 3.5 Certificate of Amendment of Certificate of Limited Partnership of JPS Automotive dated December 11, 1996 is hereby incorporated by reference to Exhibit 3.5 of the Form 10-K of JPS Automotive and Products Corp. for the transition period from January 1, 1996 to December 28, 1996. 3.6 First Amendment to First Amended and Restated Agreement of Limited Partnership of JPS Automotive dated as of December 11, 1996 is hereby incorporated by reference to Exhibit 3.6 of the Form 10-K of JPS Automotive and Products Corp. for the transition period from January 1, 1996 to December 28, 1996. 3.7 Second Amendment to First Amended and Restated Agreement of Limited Partnership of JPS Automotive dated as of December 11, 1996, is hereby incorporated by reference to Exhibit 3.7 of the Form 10-K of JPS Automotive and Products Corp. for the transition period from January 1, 1996 to December 28, 1996. 4.1 Indenture dated as of June 28, 1994, between Products Corp., as Issuer, JPS Automotive, as Guarantor, and Shawmut Bank Connecticut, N.A., as Trustee, relating to $180,000,000 principal amount of 11-1/8% Senior Notes due 2001 including form of the JPS Automotive Senior Note is hereby incorporated by reference to Exhibit 4.2 of Products Corp.'s Registration Statement on Form S-1, Registration No. 33-75510. II-1 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES Exhibit Number Description - ------ ----------- 4.2 First Supplemental Indenture, dated as of October 5, 1994, between Products Corp. and JPS Automotive, as Co-Obligors, and Shawmut Bank Connecticut, N.A., as Trustee, relating to the JPS Automotive Senior Notes is hereby incorporated by reference to Exhibit 4.48A of Form 10-Q of JPS Automotive and Products Corp. for the fiscal quarter ended October 2, 1994. Certain instruments defining the rights of security holders have been excluded herefrom in accordance with Item 601(b)(4)(iii) of Regulation S-K. The Registrants hereby agree to furnish a copy of any such instrument to the Commission upon request. 10.1 Services Agreement, by and between JPS Automotive and Foamex International is hereby incorporated by reference to Exhibit 10.2 of Products Corp.'s Registration Statement on Form S-1, Registration No. 33-75510. 10.2 Supply Agreement, by and among Foamex International and certain of its affiliates and JPS Automotive is incorporated by reference to Exhibit 10.8 of Products Corp.'s Registration Statement on Form S-1, Registration No. 33-75510. 10.3 Tax-sharing Agreement, by and among JPS Automotive and its partners is incorporated by reference to Exhibit 10.9 of Products Corp.'s Registration Statement on Form S-1, Registration No. 33-75510. 10.4 Assignment dated as of December 11, 1996, from Foamex International to C&A Products relating to Services Agreement, is hereby incorporated by reference to Exhibit 10.10 of the Form 10-K of JPS Automotive and Products Corp. for the transition period from January 1, 1996 to December 28, 1996. 10.5 Assignment dated as of December 11, 1996, from Foamex-JPS Automotive L.P. to C&A Products relating to Tax-Sharing Agreement, is hereby incorporated by reference to Exhibit 10.11 of the Form 10-K of JPS Automotive and Products Corp. for the transition period from January 1, 1996 to December 28, 1996. 10.6 Assignment dated as of December 11, 1996, from JPSGP, Inc. to C&A Products relating to Tax-Sharing Agreement, is hereby incorporated by reference to Exhibit 10.12 of the Form 10-K of JPS Automotive and Products Corp. for the transition period from January 1, 1996 to December 28, 1996. 10.7 Assignment dated as of December 11, 1996, from Foamex to C&A Products relating to Supply Agreement, is hereby incorporated by reference to Exhibit 10.13 of the Form 10-K of JPS Automotive and Products Corp. for the transition period from January 1, 1996 to December 28, 1996. 10.8 Equity Purchase Agreement by and among JPSGP, Inc., Foamex - JPS Automotive L.P. and Collins & Aikman Products Co. dated August 28, 1996, is hereby incorporated by reference to Exhibit 2.1 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended July 27, 1996. 10.9 Amendment No. 1 to Equity Purchase Agreement by and among JPSGP, Inc., Foamex - JPS Automotive L.P., Foamex International Inc. and Collins & Aikman Products Co. dated as of December 11, 1996, is hereby incorporated by reference to Exhibit 2.2 of Collins & Aikman Corporation's Current Report on Form 8-K dated December 10, 1996. 10.10 Post 1996 Acquisition Arrangements Under JPS Automotive Services Agreement is hereby incorporated by reference to Exhibit 10.15 of the Form 10-K of JPS Automotive and Products Corp. for the fiscal year ended December 27, 1997. 10.11 Asset Purchase Agreement dated as of June 30, 1997 by and among JPS Automotive L.P. and Safety Components International, Inc. is hereby incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K of JPS Automotive and Products Corp. dated July 24, 1997. II-2 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES Exhibit Number Description - ------ ----------- 10.12 Closing Agreement dated as of July 24, 1997 by and among JPS Automotive L.P., Safety Components International, Inc. and Safety Components Fabric Technologies, Inc. is hereby incorporated by reference to Exhibit 2.2 of the Current Report on Form 8-K of JPS Automotive and Products Corp. dated July 24, 1997. 27 Financial Data Schedules (b) Reports on Form 8-K During the quarter for which this Report on Form 10-Q is filed, JPS Automotive and Products Corp. did not file any reports on Form 8-K. II-3 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized, on the 9th day of November, 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 EX-27 2 EXHIBIT 27
5 This schedule contains summary financial information extracted from JPS Automotive Products Corp. balance sheet at September 26, 1998, and such is qualified in its entirety by reference to such financial statements. 0000919233 JPS AUTOMOTIVE PRODUCTS CORP. 9-MOS DEC-26-1998 DEC-28-1997 SEP-26-1998 1,000 0 0 0 0 1,000 0 0 1,000 0 0 0 0 0 1,000 1,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27 3 EXHIBIT 27.2
5 This schedule contains summary financial information extracted from the Company's consolidated balance sheet and consolidated statements of operations for the nine months ended September 26, 1998, and such is qualified in its entirety by reference to such financial statements. 0000924902 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES 9-MOS DEC-26-1998 DEC-28-1997 SEP-26-1998 1,801 0 42,503 2,204 14,408 73,831 62,274 9,764 238,139 19,315 89,109 0 0 0 118,061 238,139 186,808 186,808 168,332 176,047 (3) 330 6,393 4,041 1,814 2,227 0 86 0 2,141 0 0
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