-----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, Vo5OAWXPXlwbYjn6NsL2lpstL5RkDbVLN/i1jM2Ve/F9kQ9tU7z2/FrnyrsVgQgS GOfHMeH5RwtPuaZG2kFiDw== 0000950168-99-002794.txt : 19991110 0000950168-99-002794.hdr.sgml : 19991110 ACCESSION NUMBER: 0000950168-99-002794 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990925 FILED AS OF DATE: 19991109 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: 99743879 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: 99743880 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 QUARTERLY REPORT 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 quarterly period ended September 25, 1999 or __Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to____ Commission File Numbers 33-75510-01; 1-12944 JPS AUTOMOTIVE L.P. JPS AUTOMOTIVE PRODUCTS CORP. (Exact name of registrants as specified in their charters) Delaware No. 57-1060375 Delaware 57-0993690 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 701 McCullough Drive Charlotte, NC 28262 (Address of principal executive offices, including zip code) (704) 547-8500 (Registrant's 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 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 8, 1999, 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 25, SEPTEMBER 26, SEPTEMBER 25, SEPTEMBER 26, 1999 1998 1999 1998 -------------- ------------- ------------- ------------- Net sales................................................. $60,066 $51,103 $195,967 $186,808 Cost of goods sold........................................ 55,153 48,134 176,426 168,332 ------- ------- -------- -------- Gross profit............................................. 4,913 2,969 19,541 18,476 Selling, general and administrative expenses............. 2,744 (302) 8,855 8,045 Restructuring charge...................................... 6,637 - 6,637 - ------- ------- -------- -------- Operating income (loss).................................. (4,468) 3,271 4,049 10,431 Interest expense, net...................................... 2,046 2,182 6,326 6,393 Other expense (income), net............................ - 28 - (3) ------- ------- -------- -------- Income (loss) before income taxes.................... (6,514) 1,061 (2,277) 4,041 Income tax expense (benefit)........................... (2,316) 488 (514) 1,814 ------- ------- -------- -------- Income (loss) before extraordinary charge and cumulative effect of a change in accounting principle........... (4,198) 573 (1,763) 2,227 Extraordinary charge, net of income taxes of $58 - - - (86) Cumulative effect of a change in accounting principle, net of income taxes of $528.............. - - (791) - ------- ------- -------- -------- Net income (loss)......................................... $(4,198) $ 573 $ (2,554) $ 2,141 ======== ======= ========= ========
See accompanying notes. I-1 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
(UNAUDITED) SEPTEMBER 25, DECEMBER 26, ASSETS 1999 1998 ------------- ------------ Current assets: Cash and cash equivalents..................................... $ 7,972 $ 171 Accounts receivable, net of allowance of $2,401 and $2,254........................................... 39,912 36,139 Inventories................................................... 10,719 11,308 Receivables from related parties.............................. 1,251 10,403 Revolving loan due from C&A Products.......................... 4,500 1,500 Deferred tax assets........................................... 2,893 3,203 Other current assets.......................................... 1,338 1,344 ---------- ---------- Total current assets........................................ 68,585 64,068 Property, plant and equipment, net............................... 50,285 61,132 Goodwill, net.................................................... 98,706 100,688 Demand receivable due from C&A for income taxes.................. 8,034 6,887 Debt issuance costs, net......................................... 1,367 1,934 Other assets..................................................... 2,281 3,222 --------- --------- $ 229,258 $ 237,931 ========= ========= LIABILITIES AND OWNERS' EQUITY Current liabilities: Accounts payable.............................................. $ 6,171 $ 10,795 Accrued expenses.............................................. 10,513 6,383 --------- --------- Total current liabilities................................... 16,684 17,178 Long-term debt................................................... 87,589 88,247 Other liabilities................................................ 8,235 10,224 Commitments and contingencies.................................... Owners' equity: General partner............................................... 48,073 48,073 Limited partner............................................... 68,677 74,209 --------- --------- Total owners' equity...................................... 116,750 122,282 --------- --------- $ 229,258 $ 237,931 ========= =========
See accompanying notes. I-2 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
NINE MONTHS ENDED ---------------------------------- SEPTEMBER 25, SEPTEMBER 26, 1999 1998 --------------- ------------- OPERATING ACTIVITIES: Income (loss) from continuing operations..................................... $(1,763) $ 2,227 Adjustments to derive cash flow from continuing operating activities: Impairment of long-lived assets......................................... 4,862 - Deferred income tax expense............................................. 635 3,950 Depreciation and amortization........................................... 7,214 6,933 Interest accretion and debt issuance cost amortization......................................................... (91) (164) Changes in operating assets and liabilities............................. (6,320) (5,579) ------- ------- Net cash provided by operating activities............................. 4,537 7,367 ------- ------- INVESTING ACTIVITIES: Additions to property, plant, and equipment.................................. (7,198) (2,074) Sales of property, plant, and equipment...................................... 5,548 575 Other, net................................................................... 387 (4) ------- ------- Net cash used in investing activities................................. (1,263) (1,503) ------- ------- FINANCING ACTIVITIES: Distributions to C&A Products................................................ (3,000) (10,000) Capital contributions from partners.......................................... 22 2,930 Changes in amounts due C&A Products, net..................................... 10,505 (4,053) Repayments of long-term debt................................................. - (2,066) Net repayments and advances on revolving loans............................... (3,000) - Other, net................................................................... - (145) ------- ------- Net cash provided by (used in) financing activities................... 4,527 (13,334) ------- ------- Net increase (decrease) in cash and cash equivalents......................... 7,801 (7,470) Cash and cash equivalents at beginning of period............................. 171 9,271 ------- ------- Cash and cash equivalents at end of period................................... $ 7,972 $ 1,801 ======= =======
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 (consisting of only normal recurring adjustments) necessary for a fair presentation of the consolidated financial position, results of operations and cash flows. Certain prior year items have been reclassified to conform with the fiscal 1999 presentation. Results of operations for interim periods are not necessarily indicative of results for the full year. 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 26, 1998 (the "1998 10-K"). 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 also acquired from Seiren Co. Ltd. and its affiliates a minority interest in Cramerton Automotive Products, L.P. and Cramerton Management Corporation, which are JPS Automotive subsidiaries that were merged in December 1997 under the name Cramerton Automotive Products, Inc. ("Cramerton"). JPS Automotive subsequently acquired the minority interest previously held by C&A Products and now owns 100% of Cramerton. 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 in the quarters and nine months ended September 25, 1999, and September 26, 1998, respectively. Accumulated amortization at September 25, 1999 was $7.3 million. The carrying value of goodwill is reviewed periodically based on the predicted undiscounted cash flows and pre-tax income over the remaining amortization periods. Should this review indicate that the goodwill balance will not be recoverable, JPS Automotive's carrying value of the goodwill will be reduced. At September 25, 1999, JPS Automotive believes the recorded value of its goodwill of $98.7 million is fully recoverable. 3. INVENTORIES: The components of inventories consist of (in thousands): SEPTEMBER 25, DECEMBER 26, 1999 1998 ------------- ------------ Raw materials and supplies................ $ 4,116 $ 4,359 Work in process........................... 4,583 5,183 Finished goods............................ 2,020 1,766 --------- --------- $ 10,719 $ 11,308 ========= ========= I-4 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 4. RESTRUCTURING: On September 22, 1999, JPS Automotive sold its 400,000 square foot Automotive Fabric facility located in Cramerton, North Carolina for $6.0 million, resulting in a loss on the sale of $4.8 million. In addition, JPS Automotive established a reserve of $1.6 million for severance costs to be paid to the approximately 180 employees affected by the sale. As of September 25, 1999, approximately $0.1 million had been spent in severance and related costs. JPS Automotive and C&A Products are in the process of relocating the headliner business from the Cramerton, North Carolina facility to a C&A Products facility where C&A Products will produce headliner for JPS Automotive on a subcontract basis. 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 the third quarter of 1999, JPS Automotive recognized a restructuring charge related to the Reorganization of $0.2 million. The restructuring charge of $0.2 million represents severance costs associated with the reduction of administrative personnel at JPS Automotive's Automotive Carpet facility. As of September 25, 1999, approximately $0.1 million had been spent in severance and related 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. In June 1999, JPS Automotive completed the process of relocating bodycloth production from a JPS Automotive facility to an existing C&A Products facility. The remaining reserve of $0.5 million previously established for the costs of these consolidations will be used primarily for severance benefits. 5. RELATED-PARTY TRANSACTIONS AND ALLOCATIONS: At September 25, 1999, 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 $450.9 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 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 1998 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 contracts was manufactured 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, and the related tax provision of $1.6 million, was treated as a capital contribution from C&A Products in the accompanying financial statements. During 1998, C&A Products transferred to JPS Automotive as an equity contribution all but one of the automotive soft trim programs formerly produced by C&A Products at its Salisbury, North Carolina facility. C&A Products also agreed to make additional cash equity contributions to JPS Automotive if JPS Automotive was unable to earn a specified level of operating profit on the contracts transferred from the Salisbury plant. JPS Automotive did not earn the specified level of operating profit and C&A Products made an additional equity contribution of $1.4 million to JPS Automotive in the fourth quarter of 1998. I-5 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 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 25, 1999 and September 26, 1998: (i) $1.9 million and $1.9 million, respectively, for administrative and other services, and (ii) $26.8 million and $13.3 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 25, 1999 and September 26, 1998, JPS Automotive recorded sales of $5.6 million and $5.9 million, respectively, relating to contract manufacturing services (including the sale of roll goods during 1998) 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 25, 1999 and September 26, 1998: (i) $5.5 million and $5.7 million, respectively, for administrative and other services, and (ii) $74.7 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 nine months ended September 25, 1999 and September 26, 1998, JPS Automotive recorded sales of $14.7 million and $26.7 million, respectively, relating to contract manufacturing services (including the sale of roll goods during 1998) 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 nine months ended September 25, 1999, C&A Products was charged $12 thousand in net interest related to these revolving credit arrangements. 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. On September 24, 1999, C&A Products borrowed $4.5 million under these revolving credit arrangements. In connection with certain manufacturing activities conducted by C&A Products for Cramerton during the quarter and nine months ended September 25, 1999, Cramerton resold to C&A Products at cost approximately $0.5 million and $2.9 million, respectively, of yarn. During the 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, of yarn. In addition, 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 the nine months ended September 25, 1999, and September 26, 1998, Cramerton incurred costs of approximately $1.1 million and $6.1 million respectively, 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 that location. On September 22, 1999, JPS Automotive completed the sale of its facility in Cramerton, North Carolina (See Note 4). JPS Automotive and C&A Products are relocating Cramerton's headliner business to a C&A Products facility where C&A Products will produce headliner for JPS Automotive on a subcontract basis. In connection with this move, during the nine months ended September 25, 1999, Cramerton incurred costs of $1.1 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 25, 1999, JPS Automotive recorded $1.1 million as an estimated amount due from C&A Products under the terms of the Tax Sharing Agreement. For the I-6 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) nine months ended September 26, 1998 JPS Automotive recorded $0.4 million as an estimated amount due from C&A Products under the terms of the Tax Sharing Agreement. In September 1998, JPS Automotive distributed its 50% ownership interest in Industrias Enjema S.A. de C.V. ("Enjema") to C&A Products. 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 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 25, SEPTEMBER 26, 1999 1998 ------------- ------------- General Motors................................ 45.1% 38.7% DaimlerChrysler A.G........................... 14.8% 11.7% Toyota........................................ 12.6% 14.9% Nissan........................................ 8.1% 11.0% 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 1998 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.) I-7 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) Information about JPS Automotive's reportable segments is presented below (in thousands). QUARTER ENDED SEPTEMBER 25, 1999 -------------------------------------------- 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 ................ 151,255 75,126 2,877 229,258 Capital expenditures ........ 3,181 498 -- 3,679 QUARTER ENDED SEPTEMBER 26, 1998 ------------------------------------------- AUTOMOTIVE AUTOMOTIVE CARPET FABRIC OTHER (1) FABRIC --------- --------- --------- --------- External revenues ........... $ 34,189 $ 13,165 $ 3,749 $ 51,103 Depreciation and amortization 1,300 1,018 -- 2,318 Operating income (loss) ..... 2,825 (985) 1,431 3,271 Total assets ................ 156,289 80,006 1,844 238,139 Capital expenditures ........ 928 64 -- 992 NINE MONTHS ENDED SEPTEMBER 25, 1999 ------------------------------------------- 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 ................ 151,255 75,126 2,877 229,258 Capital expenditures ........ 4,575 2,623 -- 7,198 NINE MONTHS ENDED SEPTEMBER 26, 1998 ------------------------------------------- AUTOMOTIVE AUTOMOTIVE CARPET FABRIC OTHER (1) TOTAL --------- --------- --------- --------- External revenues ........... $122,265 $ 53,812 $ 10,731 $186,808 Depreciation and amortization 3,885 3,048 -- 6,933 Operating income ............ 5,122 5 5,304 10,431 Total assets ................ 156,289 80,006 1,844 238,139 Capital expenditures ........ 1,756 318 -- 2,074 (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 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 or costs 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 I-8 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED) (UNAUDITED) presently known to it, is not expected to have a material adverse effect on JPS Automotive's consolidated financial condition or results of operations. In December 1997, another subsidiary of C&A Products assumed substantially all of the environmental liabilities of JPS Automotive and its subsidiaries in exchange for a payment from JPS Automotive of approximately $4.1 million. JPS Automotive remains contingently liable for these environmental liabilities. In connection with the sale of the Cramerton, North Carolina facility, approximately $3.0 million of environmental liabilities were removed from C&A Products. As a result, JPS Automotive is no longer 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. 8. RECENTLY ISSUED ACCOUNTING STANDARDS: In April 1998, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position No. ("SOP") No. 98-5, "Reporting on the Costs of Start-Up Activities." 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 is to be reported as the cumulative effect of a change in accounting principle. JPS Automotive adopted SOP 98-5 on December 27, 1998. The impact of the adoption of SOP 98-5 at the beginning of fiscal 1999 was approximately $0.8 million, net of income taxes. In September 1999, the FASB's Emerging Issue 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. The accounting treatment proposed by EITF No. 99-5 is consistent with the JPS Automotive's current accounting policy regarding design and tooling costs and JPS Automotive does not anticipate the adoption of EITF No. 99-5 to have a material impact on its consolidated financial position or results of operations. I-9 JPS AUTOMOTIVE PRODUCTS CORP. (A WHOLLY-OWNED SUBSIDIARY OF JPS AUTOMOTIVE L.P.) BALANCE SHEETS
(UNAUDITED) SEPTEMBER 25, DECEMBER 26, 1999 1998 ------------------ ----------------- (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 note. I-10 JPS AUTOMOTIVE PRODUCTS CORP. (A WHOLLY-OWNED SUBSIDIARY OF JPS AUTOMOTIVE L.P.) NOTE TO BALANCE SHEETS (UNAUDITED) 1. COMMITMENTS AND CONTINGENCIES JPS Automotive Products Corp. ("Products Corp.") is a joint obligor (and co-registrant) with JPS Automotive L.P. of the 11-1/8% Senior Notes due 2001 (the "Senior Notes"), which had an outstanding balance of $87.6 million (including a premium of $1.5 million) as of September 25, 1999. I-11 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 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. 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 25, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 26, 1998. NET SALES: Net sales for the nine months ended September 25, 1999 were $196.0 million, compared to $186.8 million for the comparable 1998 period. A strike at General Motors during June and July 1998 negatively impacted sales during 1998 by approximately $12 million. The sales increase is partially offset by a decrease in bodycloth sales resulting from a increased demand for leather seating applications. GROSS PROFIT: Gross profit as a percentage of sales for the nine months ended September 25, 1999 remained relatively unchanged at 10.0%, compared to 9.9% for the nine months ended September 26, 1998. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and administrative expenses increased 10% to $8.9 million, up $0.8 million from the comparable 1998 period. Selling, general and administrative expenses for the nine months ended September 26, 1998 were reduced by $4.2 million of income recognized by JPS Automotive related to the collection of a fully reserved receivable balance due from Enjema. Excluding the impact of the Enjema receivable collection, selling, general and administrative expenses have decreased 27.7% from the comparable 1998 period. This decrease is related to the elimination of certain redundant sales and administrative functions in connection with the 1996 Acquisition as well as cost-cutting efforts at its fabrics operations. This decrease is partially offset by an allocation from C&A Products for administrative services. See Note 5 to JPS Automotive's Condensed Consolidated Financial Statements. RESTRUCTURING CHARGE: During the nine months ended September 25, 1999, JPS Automotive recognized a restructuring charge of $6.6 million. Approximately $4.8 million of the charge represents the loss on the sale of the Cramerton, North Carolina fabrics facility. The remaining $1.6 million relates to severance benefits for the approximately 180 employees affected by the sale. In addition, JPS Automotive recognized $0.2 million of severance expense related to employee reductions occurring at JPS Automotive's Automotive Carpet facility in conjunction with a reorganization at C&A Products. INTEREST EXPENSE: Interest expense, net of interest income, was $6.3 million during the nine months ended September 25, 1999, compared to $6.4 million during the comparable 1998 period. During the nine months ended September 25, 1999, $0.2 million of interest, related to the construction of additional space for the production of bodycloth at a C&A Products facility, was capitalized. No amounts were capitalized in the comparable period of 1998. See Note 5 to JPS Automotive's Condensed Consolidated Financial Statements. INCOME TAXES: JPS Automotive recognized an income tax benefit of $0.5 million during the nine months ended September 25, 1999, compared to an income tax provision of $1.8 million in the comparable 1998 period. JPS Automotive's effective tax rates for the nine months ended September 25, 1999 and September 26, 1998 were 22.6% and 44.9%, respectively. The percentage decrease is due to the impact of certain state taxes and nondeductible goodwill, which do not fluctuate with income. 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 the first quarter 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 I-12 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS capitalized and amortized. The initial impact of adopting SOP 98-5 resulted in a charge of $0.8 million, net of income taxes of $0.5 million. NET INCOME (LOSS): The combined effect of the foregoing resulted in a net loss of $2.6 million during the nine months ended September 25, 1999, compared to net income of $2.1 million during the comparable 1998 period. LIQUIDITY AND CAPITAL RESOURCES JPS Automotive's operating cash requirements consist principally of working capital requirements, scheduled payments of principal and interest on its outstanding indebtedness and capital expenditures. JPS Automotive believes the cash flow from operating activities, cash on hand and periodic capital contributions and borrowings 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. IMPACT OF YEAR 2000 READINESS As previously discussed in Note 5 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 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 readiness 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 and safety 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 ready Currently, JPS Automotive estimates that it is presently in or has completed the Testing phase for most areas of Year 2000 risk and expects its systems to become Year 2000 ready during 1999. JPS Automotive has formalized contingency plans for its operations and for critical support services. These contingency plans include, among other things, the following: (i) establishing back-up production capacities with other C&A Products facilities to shift the manufacturing of similar products between plants if a JPS Automotive plant should be unable to complete its scheduled production requirements; (ii) formulating enhanced information technology disaster recovery plans; (iii) maintaining offline documentation of production schedules, releases and inventory levels; (iv) carrying additional inventory where appropriate and (v) establishing alternative communications links. JPS Automotive has not yet quantified the entire costs associated with these contingency plans. JPS Automotive has coordinated its Year 2000 readiness 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 readiness work for JPS I-13 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 5 to JPS Automotive's Condensed Consolidated Financial Statements. Total costs for its efforts to address the Year 2000 issue, including certain costs incurred by other C&A Products divisions on behalf of JPS Automotive, are anticipated to be approximately $0.8 million. Included in this estimate are $0.5 million of salaries and other payroll costs of employees to the extent that they have devoted a majority of their time to the project. Approximately $0.7 million of these costs have been incurred through September 25, 1999, including $0.5 million of salaries and other payroll costs. JPS Automotive is funding the expenditures related to the Year 2000 plan with cash flows from operations. 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 Year 2000 ready. To mitigate this risk, JPS Automotive has issued questionnaires to its suppliers and has visited or had discussions with certain of these suppliers to assess their Year 2000 readiness. The majority of JPS Automotive's suppliers have represented that they will be Year 2000 ready by the end of 1999. 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 ready 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 Report on Form 10-Q contains statements which 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 Report on 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 Report on 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 car models or particular interior trim packages, the loss of programs on particular car models, the level of competition in the automotive supply industry, pricing pressure from automotive customers and Year 2000 readiness 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 1998 10-K and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 1998 10-K, the Company's Reports on Form 10-Q for the fiscal quarters ended March 27, 1999 and June 26, 1999, 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-14 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES 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 26, 1998. 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. 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 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 8th day of November, 1999. JPS AUTOMOTIVE L.P. By: PACJ, Inc. General Partner By: /s/ Rajesh K. Shah ------------------------- Rajesh K. Shah Executive Vice President and Chief Financial Officer (On behalf of the Registrant and as Principal Financial and Accounting Officer) JPS AUTOMOTIVE PRODUCTS CORP. By: /s/ Rajesh K. Shah ------------------------- Rajesh K. Shah Executive Vice President and Chief Financial Officer (On behalf of the Registrant and as Principal Financial and Accounting Officer) EX-27 2 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONDENSED CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 25, 1999 AND SUCH IS QUALIFIED IN ITS ENTIRETY BY REFERENCETO SUCH FINANCIAL STATEMENTS. 0000924902 JPS AUTOMOTIVE L.P. AND SUBSIDIARIES 1,000 9-MOS DEC-31-1999 SEP-25-1999 7,972 0 42,313 2,401 10,719 68,585 62,407 (12,122) 229,258 16,684 87,589 0 0 0 116,750 229,258 195,967 195,967 176,426 8,855 0 0 6,326 (2,277) (514) (1,763) 0 0 791 (2,554) 0 0
EX-27 3 EXHIBIT 27.2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JPS AUTOMOTIVE PRODUCTS CORP. BALANCE SHEET AT SEPTEMBER 25, 1999, AND SUCH IS QUALIFIED IN ITS ENTIRETY BY REFERENCETO SUCH FINANCIAL STATEMENTS. 0000919233 JPS AUTOMOTIVE PRODUCTS CORP. 1,000 9-MOS DEC-31-1999 SEP-25-1999 1 0 0 0 0 1 0 0 1 0 0 0 0 0 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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