-----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, L4Gzrl2htHwLpW2a3J2qUM9vSg5zIPk5J37KT3tLYhMEC/qfwbsEu3/xN2My/iO+ ZO9NCaDPxsfC7tgKOIc0dg== 0001067312-00-000211.txt : 20000517 0001067312-00-000211.hdr.sgml : 20000517 ACCESSION NUMBER: 0001067312-00-000211 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000401 FILED AS OF DATE: 20000516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JPS AUTOMOTIVE INC 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: 637882 BUSINESS ADDRESS: STREET 1: 701 MCCLULLOGH DR CITY: CHARLOTTE STATE: NC ZIP: 28262 BUSINESS PHONE: 6108593000 MAIL ADDRESS: STREET 1: 701 MCCULLOUGH DR STREET 2: POST OFFICE BOX 32665 CITY: CHARLOTTE STATE: NC ZIP: 28262 FORMER COMPANY: FORMER CONFORMED NAME: JPS AUTOMOTIVE L P DATE OF NAME CHANGE: 19960828 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: 637883 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 QUARTELY REPORT DATED APRIL 1, 2000 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q (Mark One) X Quarterly Report Pursuant to Section 13 or 15(d) --- of the Securities Exchange Act of 1934 For the quarter ended April 1, 2000 or ___ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____ to ____ Commission File Numbers: 33-75510-01; 1-12944 JPS AUTOMOTIVE, INC. JPS AUTOMOTIVE PRODUCTS CORP. (Exact name of registrants as specified in their charters) (State or other jurisdiction of (IRS Employer Identification incorporation or organization) 56-2001613 Delaware 57-0993690) Delaware 5755 New King Court Troy, MI 48098 (Address of principal executive offices, including zip code) (248) 824-2500 (Registrants telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- JPS Automotive Inc. and JPS Automotive Products Corp. meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format. As of May 16, 2000, the number of outstanding shares of JPS Automotive Inc. and JPS Automotive Products Corp. common stock was 1,500 and 100, respectively. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. JPS AUTOMOTIVE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands)
Quarter Ended ----------------------------------- April 1, March 27, 2000 1999 (14 weeks) (13 weeks) ------------- ------------- Net sales....................................... $ 65,063 $ 65,565 Cost of goods sold.............................. 57,496 58,704 ------------- ------------- Gross profit.................................... 7,567 6,861 Selling, general and administrative expenses.... 3,000 2,882 ------------- ------------- Income from operations.......................... 4,567 3,979 Interest expense, net........................... 2,146 2,254 Other income, net............................... (139) (43) ------------- ------------- Income before income taxes...................... 2,560 1,768 Income taxes.................................... 1,066 737 ------------- ------------- Income before cumulative effect of a change in accounting principle....................... 1,494 1,031 Cumulative effect of change in accounting principle, net of income taxes of $528........ - (791) ------------- ------------- Net income...................................... $ 1,494 $ 240 ============= =============
See accompanying notes. I-1 JPS AUTOMOTIVE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
(Unaudited) April 1, December 25, ASSETS 2000 1999 --------------- --------------- Current assets: Cash and cash equivalents...................................... $ 22,103 $ 810 Accounts receivable, net of allowance of $892 and $2,268.............................................. 33,466 37,387 Purchased receivables of affiliate............................. 2,061 4,805 Inventories.................................................... 6,168 6,912 Receivables from related parties............................... 10,171 13,506 Revolving loan due from C&A Products........................... 1,802 4,600 Deferred tax assets............................................ 1,525 1,685 Other current assets........................................... - 1,085 --------------- --------------- Total current assets......................................... 77,296 70,790 Property, plant and equipment, net................................ 47,032 48,308 Goodwill, net..................................................... 97,078 97,757 Demand receivable due from C&A for income taxes................... 10,601 10,601 Debt issuance costs, net.......................................... 967 1,167 Other assets...................................................... 1,347 1,439 --------------- --------------- $ 234,321 $ 230,062 =============== =============== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable............................................... $ 6,436 $ 7,241 Accrued expenses............................................... 12,711 8,612 --------------- --------------- Total current liabilities.................................... 19,147 15,853 Long-term debt.................................................... 87,131 87,370 Other liabilities................................................. 8,634 8,924 Commitments and contingencies..................................... Stockholder's equity: Common stock, no par (1,500 shares authorized, issued and outstanding at April 1, 2000 and December 25, 1999)........... 35,000 35,000 Additional paid-in capital..................................... 131,118 131,118 Accumulated deficit............................................ (46,709) (48,203) --------------- --------------- Total stockholder's equity..................................... 119,409 117,915 --------------- --------------- $ 234,321 $ 230,062 =============== ===============
See accompanying notes. I-2 JPS AUTOMOTIVE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Quarter Ended ------------------------------------------- April 1, March 27, 2000 1999 (14 weeks) (13 weeks) ------------------- -------------------- Operating activities: Income from continuing operations................................. $ 1,494 $ 1,031 Adjustments to derive cash flow from continuing operating activities: Deferred income tax expense.................................. 607 707 Depreciation and amortization................................ 2,242 2,368 Interest accretion and debt issuance cost amortization............................................... (39) (52) Changes in operating assets and liabilities.................. 8,325 (5,042) ------------------- -------------------- Net cash provided by (used in) operating activities......... 12,629 (988) ------------------- -------------------- Investing activities: Additions to property, plant, and equipment....................... (213) (936) Sales of property, plant, and equipment........................... - 13 Payments received on purchased receivables........................ 2,744 - ------------------- -------------------- Net cash provided by (used in) investing activities......... 2,531 (923) ------------------- -------------------- Financing activities: Change in amounts due C&A Products, net........................... 3,335 10,040 Net proceeds from revolving loans................................. 2,798 1,500 ------------------- -------------------- Net cash provided by financing activities................... 6,133 11,540 ------------------- -------------------- Net increase in cash and cash equivalents......................... 21,293 9,629 Cash and cash equivalents at beginning of period.................. 810 171 ------------------- -------------------- Cash and cash equivalents at end of period........................ $ 22,103 $ 9,800 =================== ====================
See accompanying notes. I-3 JPS AUTOMOTIVE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Condensed Consolidated Financial Statements: The condensed consolidated financial statements include the accounts of JPS Automotive, Inc. and its subsidiaries ("JPS Automotive"). In the opinion of management of JPS Automotive, the accompanying condensed consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation of the consolidated financial position, results of operations and cash flows. Results of operations for interim periods are not necessarily indicative of results for the full year. JPS Automotive's fiscal year ends on the last Saturday of December. The 2000 fiscal year will consist of 53 weeks. In a 53-week year, JPS Automotive's policy is to include the additional week in the first quarter of the year. As a result, the quarter ended April 1, 2000 consisted of 14 weeks. The quarter ended March 27, 1999 consisted of 13 weeks. For further information, refer to the consolidated financial statements and notes thereto included in JPS Automotive's Report on Form 10-K for the year ended December 25, 1999 (the "1999 10-K"). On December 11, 1996, Collins & Aikman Corporation ("C&A"), through its subsidiaries, acquired JPS Automotive L.P. and subsidiaries ("JPS Automotive L.P.") from Foamex International Inc. ("Foamex") pursuant to an Equity Purchase Agreement dated August 28, 1996, as amended December 11, 1996 (the "1996 Acquisition"). In the 1996 Acquisition, Collins & Aikman Products Co. ("C&A Products"), a wholly-owned subsidiary of C&A, acquired a .9999% limited partnership interest in JPS Automotive L.P. from Foamex and a 99% limited partnership interest in JPS Automotive L.P. from Foamex - JPS Automotive L.P. ("FJPS"). PACJ, Inc., a wholly-owned subsidiary of C&A Products with no operations, acquired a .0001% general partnership interest in JPS Automotive L.P. from JPSGP Inc. ("JPSGP"). Accordingly, 100% of the partnership interests in JPS Automotive L.P. were owned by PACJ, Inc. and C&A Products, which were, respectively, indirect and direct wholly-owned subsidiaries of C&A. Additionally, on December 11, 1996, C&A Products also acquired from Seiren Co. Ltd. and its affiliates a minority interest in Cramerton Automotive Products, L.P. and Cramerton Management Corporation, which were JPS Automotive L.P. subsidiaries that were merged in December 1997 under the name Cramerton Automotive Products, Inc. ("Cramerton"). JPS Automotive L.P. subsequently acquired the minority interest previously held by the C&A Products and now owns 100% of Cramerton. On January 28, 2000, JPS Automotive L.P. merged with and into its general partner PACJ, Inc. In the merger, all of the outstanding limited partnership interests previously owned by C&A Products and the general partnership interests held by PACJ, Inc. were canceled without any payment being made thereon. As a result of the merger, PACJ, Inc. has changed its name to JPS Automotive, Inc. and has assumed all of the obligations under the indenture governing the JPS Automotive 11-1/8% Senior Notes due 2001 (the "Senior Notes"). The merger of these related entities was accounted for in a manner similar to pooling of interests and prior year financial information has been restated to reflect the merger. Prior to the merger, the operations of PACJ, Inc. consisted of interest income on its intercompany loan with C&A Products. During the quarter ended March 27, 1999, $43 thousand of interest income has been reflected in the accompanying statements of operations related to this loan. At December 25, 1999, $2.4 million was outstanding on this intercompany loan. Net income is the only component of comprehensive income. Comprehensive income was $1.5 million and $0.2 million, for the quarters ended April 1, 2000 and March 27, 1999, respectively. 2. Goodwill: Goodwill, representing the excess of purchase price over the fair value of net assets acquired in the 1996 Acquisition, is being amortized on a straight- line basis over a period of forty years. Amortization of goodwill was $0.7 million for the quarters ended April 1, 2000 and March 27, 1999. Accumulated amortization at April 1, 2000 was $8.7 million. The carrying value of goodwill is reviewed periodically based on the undiscounted cash flows and pre-tax income over the remaining amortization periods. Should this review indicate that the goodwill balance will not be recoverable, JPS Automotive's carrying value of the goodwill will be reduced. At April 1, 2000, JPS Automotive believes the recorded value of its goodwill of $97.1 million is fully recoverable. I-4 JPS AUTOMOTIVE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) 3. Inventories: The components of inventories consist of (in thousands):
April 1, December 25, 2000 1999 --------- ------------ Raw materials and supplies.......................................... $ 2,005 $ 2,492 Work in process..................................................... 3,056 2,752 Finished goods...................................................... 1,107 1,668 --------- ------------ $ 6,168 $ 6,912 ========= ============
4. Restructuring: On February 10, 1999, C&A Products announced a comprehensive plan ("the Reorganization") to reorganize its global automotive carpet, acoustics, plastics and accessory floormats businesses. During 1999, JPS Automotive recognized a restructuring charge related to the Reorganization of $0.3 million, representing severance costs associated with the reduction of administrative personnel at JPS Automotive's carpet facility. As of April 1, 2000, approximately $0.2 million had been spent in severance and related costs. On September 22, 1999, JPS Automotive completed the sale of its facility located in Cramerton, North Carolina for a sales price of $6 million, resulting in a loss on the sale of $4.9 million, and additional asset impairments, of certain machinery and equipment, of $2.0 million. In addition, JPS Automotive established a reserve of $1.4 million for severance costs to be paid to the approximately 150 employees affected by the sale. At April 1, 2000 approximately 130 employees had been terminated. As of April 1, 2000, approximately $0.8 million had been spent in severance and related costs. JPS Automotive and C&A Products are in the process of relocating the headliner business from the Cramerton, North Carolina facility to a C&A Products facility where C&A Products has begun producing headliner for JPS Automotive on a subcontract basis. 5. Related-party Transactions and Allocations: At April 1, 2000, C&A Products has pledged the ownership interests in its significant subsidiaries, including its partnership interests in JPS Automotive, as security for debt of C&A Products totaling $395.9 million. Following the acquisition by C&A Products of JPS Automotive in December 1996, C&A, Products began to develop plans to rationalize certain manufacturing locations, as well as marketing and administrative functions. This rationalization involved transactions and arrangements between JPS Automotive and C&A Products, which were approved by the Board of Directors of PACJ, Inc., the former general partner of JPS Automotive, and were reviewed by an investment banking firm of national standing, which rendered an opinion that they were fair to JPS Automotive from a financial point of view. The transactions and arrangements and proposed transactions and arrangements include the following: (i) the provision by C&A Products of additional administrative, management, marketing and program management services pursuant to a pre-existing services agreement assigned to C&A Products by Foamex (the "Existing Services Agreement"), (ii) the purchase from and sale to C&A Products and its subsidiaries of certain manufacturing assets, (iii) the transfer of manufacturing responsibility for certain automotive programs, and for the manufacturing of automotive carpet roll goods, to C&A Products and its subsidiaries and from C&A Products to JPS Automotive, and (iv) the transfer of certain automotive programs from JPS Automotive to C&A Products and its subsidiaries and from C&A Products to JPS Automotive. For a description of the compensation to be paid by JPS Automotive to C&A Products and by C&A Products to JPS Automotive pursuant to the transactions and arrangements described above, see Note 12 to JPS Automotive's consolidated financial statements included in the 1999 10-K. During the first quarter of 2000, JPS Automotive completed its evaluation of the terms of its arrangement with C&A Products to produce automotive carpet on a subcontract basis for a particular program and determined that certain costs had been excluded from the fee calculations. As a result, JPS Automotive billed C&A I-5 JPS AUTOMOTIVE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) Products approximately $1.2 million, representing the cumulative amount owed to JPS Automotive for 1997, 1998 and 1999 under the terms of the intercompany arrangements. JPS Automotive paid or accrued the following amounts in connection with the transactions and arrangements described above and related transactions for the quarters ended April 1, 2000 and March 27, 1999, respectively: (i) $1.9 million and $1.8 million, respectively, for administrative and other services, and (ii) $30.6 million and $20.2 million, respectively, for contract manufacturing services (including the purchase of roll goods) provided to JPS Automotive by C&A Products and its subsidiaries. In addition, for the quarters ended April 1, 2000 and March 27, 1999, JPS Automotive recorded sales of $8.5 million and $4.7 million, respectively, relating to contract manufacturing services (including the sale of roll goods) provided to C&A Products and its subsidiaries. C&A Products and JPS Automotive entered into several additional arrangements including, among others, those described below. During the year ended December 27, 1997, C&A Products and JPS Automotive entered into reciprocal revolving credit arrangements whereby JPS Automotive may borrow up to $5 million from C&A Products and C&A Products may borrow up to $5 million from JPS Automotive. The borrower is charged interest on any outstanding balance at a rate equal to the rate charged to C&A Products under its revolving credit agreement. During the quarters ended April 1, 2000 and March 27, 1999, respectively, C&A Products was charged $65 thousand and $12 thousand, respectively, in net interest related to these revolving credit arrangements. At April 1, 2000 there was an outstanding balance of $1.8 million owed to JPS Automotive under this arrangement. In accordance with C&A Products' normal practice, C&A Products developed tooling for JPS Automotive, for which JPS Automotive reimbursed C&A Products its costs. The development of tooling was managed by JPS Automotive prior to the 1996 Acquisition. During December 1999, JPS Automotive purchased accounts receivable from a subsidiary of C&A Products located in Mexico for $4.8 million, representing a gross balance of $5.1 million, discounted at 5%. The purchased receivables have terms similar to JPS Automotive's trade accounts receivable. At April 1, 2000 there was an outstanding balance of $2.1 million owed to JPS Automotive under this arrangement. During the quarter ended April 1, 2000, approximately $0.1 million of income was recognized. JPS Automotive and C&A Products generally settle intercompany balances within ten days after a period end. In December 1999, C&A Products began offering a two percent discount for early payment of intercompany balances. In conjunction with the terms, JPS Automotive made payments of $10.9 million and received cash discounts of $0.2 million during the quarter ended April 1, 2000. During the quarter ended March 27, 1999, Cramerton capitalized costs of approximately $0.3 million related to the construction of additional space at a C&A Products facility and the purchase of additional machinery and equipment for the production of bodycloth. C&A Products is manufacturing bodycloth for JPS Automotive on a subcontract basis at this location. On September 22, 1999, JPS Automotive completed the sale of its facility in Cramerton, North Carolina. JPS Automotive and C&A Products are relocating Cramerton's headliner business to a C&A Products facility where C&A Products has begun producing headliner for JPS Automotive on a subcontract basis. In connection with this move, during the quarter ended April 1, 2000, Cramerton capitalized costs of $0.1 million related to the purchase of additional machinery and equipment for the production of headliner. C&A Products and JPS Automotive are also parties to a tax sharing agreement (the "Tax Sharing Agreement") that was assigned to C&A Products by Foamex in connection with the 1996 Acquisition. The Tax Sharing Agreement provides that JPS Automotive will make certain payments to its shareholder (C&A Products) in amounts equal to the taxes JPS Automotive would be required to pay if it were separately taxed. JPS Automotive and C&A Products maintain the Tax Sharing Agreement in lieu of adding JPS Automotive as a party to C&A's tax sharing arrangement. For I-6 JPS AUTOMOTIVE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) the quarters ended April 1, 2000 and March 27, 1999 respectively, JPS Automotive recorded $0.5 million and $32 thousand as estimated amounts due to C&A Products under the terms of the Tax Sharing Agreement. 6. Information about the Company's Operations: JPS Automotive's customers primarily produce automobiles and light trucks in North America. JPS Automotive performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Receivables generally are due within 45 days, and credit losses have consistently been within management's expectations and are provided in the consolidated financial statements. Direct and indirect sales to significant customers in excess of ten percent of consolidated net sales from continuing operations are as follows: Quarter Ended ----------------------- April 1, March 27, 2000 1999 -------- --------- General Motors.................. 39% 46% DaimlerChrysler AG.............. 22% 10% Toyota Tsusho................... 13% 14% JPS Automotive has two reportable segments: Automotive Carpet and Automotive Fabric. JPS Automotive's reportable segments are strategic business units. The Automotive Carpet segment produces molded floor carpet and luggage compartment trim. The Automotive Fabric segment produces seating upholstery fabric ("bodycloth") and headliner fabric. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in the 1999 10-K. JPS Automotive evaluates performance based on profit or loss from operations before interest expense, other income and expense, income taxes and before adjustments made pursuant to the transactions and arrangements made between C&A Products and JPS Automotive. See Note 5. Information about JPS Automotive's reportable segments is presented below (in thousands).
Quarter Ended April 1, 2000 (14 weeks) ----------------------------------------------------------------- Automotive Automotive Carpet Fabric Other /(1)/ Total ------------ ------------ ------------- --------- External revenues....................... $ 46,314 $ 5,099 $ 13,650 $ 65,063 Depreciation and amortization........... 1,475 767 - 2,242 Operating income (loss)................. 2,902 (1,248) 2,913 4,567 Total assets............................ 155,302 72,998 6,021 234,321 Capital expenditures.................... 73 140 - 213
Quarter Ended March 27, 1999 (13 weeks) ----------------------------------------------------------------- Automotive Automotive Carpet Fabric Other /(1)/ Total ------------ ------------ ------------- --------- External revenues....................... $ 43,837 $ 12,087 $ 9,641 $ 65,565 Depreciation and amortization........... 1,318 1,050 - 2,368 Operating income (loss)................. 732 162 3,085 3,979 Total assets............................ 156,527 78,550 3,081 238,158 Capital expenditures.................... 522 414 - 936
(1) Other includes adjustments made pursuant to the transactions and arrangements between JPS Automotive and C&A Products. See Note 5. I-7 JPS AUTOMOTIVE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (concluded) (Unaudited) 7. Commitments and Contingencies See "PART II- OTHER INFORMATION, Item 1. Legal Proceedings." The ultimate outcome of the legal proceedings to which JPS Automotive is a party will not, in the opinion of JPS Automotive's management based on the facts presently known to it, have a material adverse effect on the consolidated financial condition or future results of operations of JPS Automotive. JPS Automotive is subject to various federal, state and local environmental laws and regulations that (i) affect ongoing operations and may increase capital costs and operating expenses and (ii) impose liability for the costs of investigation and remediation and certain other damages related to on-site and off-site contamination. JPS Automotive believes it has obtained or applied for the material permits necessary to conduct its business. To date, compliance with applicable environmental laws has not had and, in the opinion of management, based on the facts presently known to it, is not expected to have a material adverse effect on JPS Automotive's consolidated financial condition or future results of operations. In December 1997, another subsidiary of C&A Products assumed substantially all of the environmental liabilities of JPS Automotive and its subsidiaries in exchange for a payment from JPS Automotive of approximately $4.1 million. JPS Automotive will remain contingently liable for these environmental liabilities. Although it is possible that new information or future events could require JPS Automotive to reassess its potential exposure relating to its exposure for environmental matters, management believes that, based on the facts presently known to it, the resolution of such environmental matters will not have a material adverse effect on JPS Automotive's consolidated financial position or results of operations. The possibility exists, however, that new environmental legislation may be passed or environmental regulations may be adopted, or other environmental conditions may be found to exist, that may require expenditures not currently anticipated which may be material, and there can be no assurance that JPS Automotive has identified or properly assessed all potential environmental liability arising from its activities or properties. 8. Newly Issued Accounting Standards: In April 1998, the American Institute of Certified Public Accountants issued Statement of Position No. 98-5, "Reporting on the Costs of Start-up Activities" ("SOP 98-5"). SOP 98-5 provides guidance on the financial reporting of start-up costs and organization costs and requires that all nongovernmental entities expense the costs of start-up activities as these costs are incurred instead of being capitalized and amortized. SOP 98-5 is effective for financial statements for fiscal years beginning after December 15, 1998, and the initial application of this pronouncement was reported as a cumulative effect of a change in accounting principle. JPS Automotive adopted SOP 98-5 on December 27, 1998. The initial impact of the adoption of SOP 98-5 at the beginning of fiscal 1999 was $0.8 million, net of income taxes of $0.5 million. In September 1999, the FASB's Emerging Issues Task Force ("EITF") reached a consensus regarding EITF Issue No. 99-5, "Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements" ("EITF No. 99-5"). EITF No. 99-5 requires that design and development costs for products to be sold under long- term supply arrangements be expensed as incurred, and costs incurred for molds, dies and other tools that will be used in producing the products under long-term supply agreements be capitalized and amortized over the shorter of the expected useful life of the assets or the term of the supply arrangement. The consensus can be applied prospectively to costs incurred after December 31, 1999 or as a cumulative effect of a change in accounting principle as of the beginning of a company's fiscal year. JPS Automotive adopted the provisions of EITF No. 99-5 on a prospective basis on December 26, 1999. The adoption of EITF No. 99-5 did not have a material impact on JPS Automotive's financial position or the results of operations. At April 1, 2000, JPS Automotive had assets of $4.0 million of molds, dies and other tools that are owned by suppliers. I-8 JPS AUTOMOTIVE PRODUCTS CORP. (A Wholly-Owned Subsidiary of JPS Automotive, Inc.) BALANCE SHEETS (Unaudited)
(Unaudited) April 1, December 25, 2000 1999 ------------- ------------- (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-9 JPS AUTOMOTIVE PRODUCTS CORP. (A Wholly-Owned Subsidiary of JPS Automotive, Inc.) NOTE TO BALANCE SHEETS (Unaudited) 1. Commitments and Contingencies JPS Automotive Products Corp. ("Products Corp.") is the co-obligor (and co- registrant) with JPS Automotive, Inc. of the 11-1/8% Senior Notes due 2001 (the "Senior Notes"), which had an outstanding balance of $87.1 million (including a premium of $1.1 million) as of April 1, 2000. I-10 JPS AUTOMOTIVE, INC. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Pursuant to General Instruction H(2)(a) to Form 10-Q, the following discussion is a management's narrative analysis of the results of operations explaining the reasons for material changes in the amount of revenue and expense items between the most recent fiscal year-to-date period presented and the corresponding year- to-date period in the preceding fiscal year. JPS Automotive produces and supplies automotive textiles and specialty textile products to North American automobile and truck manufacturers. On December 11, 1996, C&A, through its subsidiaries, acquired JPS Automotive L.P. from Foamex in the 1996 Acquisition. The following discussion should be read in conjunction with the condensed consolidated financial statements and related notes thereto of JPS Automotive and Products Corp. included in this report. Three Months Ended April 1, 2000 Compared to Three Months Ended March 27, 1999. JPS Automotive's fiscal year ends on the last Saturday of December. The 2000 fiscal year will consist of 53 weeks. In a 53-week year, JPS Automotive's policy is to include the additional week in the first quarter of the year. As a result, the quarter ended April 1, 2000 consisted of 14 weeks. The quarter ended March 27, 1999 consisted of 13 weeks. Therefore, sales in all divisions and associated costs and expenses were impacted by the longer reporting period in the first quarter of 2000. Net Sales: Net sales for JPS Automotive for the first quarter of 2000 were $65.1 million, compared to $65.6 million for the comparable 1999 period. The sales decline is attributable to lower sales volume of Automotive Fabrics due to program run-outs. Offsetting this decline is an increase in Automotive Carpet sales due to the inclusion of an additional week in the first quarter of 2000. In addition, sales in the first quarter of 2000 reflect a one-time billing by JPS Automotive to C&A Products of $1.2 million, under the intercompany arrangements. See Note 5 to the Condensed Consolidated Financial Statements. Gross Profit: Gross profit as a percentage of sales for the first quarter of 2000 was 11.6%, up from 10.5% for the three months ended March 27, 1999. This increase is primarily due to additional sales resulting from the $1.2 million adjustment discussed above. This increase is partially offset by costs associated with the relocation of the headliner fabrics business from Cramerton, North Carolina to another fabrics facility. Selling, General and Administrative Expenses: Selling, general and administrative expenses increased 4.1% to $3.0 million, up $0.1 million from the comparable 1999 period. The increase is primarily due to additional provisions for uncollectible accounts receivable by Automotive Carpet. This increase is partially offset by reduced expenses resulting from the relocation of the Cramerton, North Carolina fabrics facility to another fabrics facility. Interest Expense: Interest expense, net of interest income, decreased $0.1 million to $2.1 million in the first quarter of 2000. The decrease is attributed to higher interest income of $0.3 million. This decrease is partially offset by increased interest expense of $0.2 million on the Senior Notes which is primarily attributed to the impact of the additional week in the first quarter of fiscal 2000. Income Taxes: The income tax provision in the first quarter of 2000 increased to $1.0 million from $0.7 million in the first quarter of 1999. JPS Automotive's effective tax rate for the first quarter of 2000 was 41.6% compared to 41.7 % in the first quarter of 1999. Cumulative Effect of a Change in Accounting Principle: JPS Automotive adopted the provisions of Statement of Position No. 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5") at the beginning of 1999. SOP 98-5 provides guidance on the financial reporting of start-up activities as these costs are incurred instead of being capitalized and amortized. The initial impact of SOP 98-5 resulted in a charge of $0.8 million, net of income taxes of $0.5 million. I-11 JPS AUTOMOTIVE, INC. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Net Income: The combined effect of the foregoing resulted in net income of $1.5 million during the three months ended April 1, 2000, compared to net income of $0.2 million during the comparable 1999 period. Liquidity and Capital Resources JPS Automotive's operating cash requirements consist principally of working capital requirements, scheduled payments of principal and interest on its outstanding indebtedness and capital expenditures. JPS Automotive believes the cash flow from operating activities, cash on hand and periodic capital contributions and borrowings, if necessary, will be adequate to meet operating cash requirements. For a discussion of certain transactions and arrangements and proposed transactions and arrangements between C&A Products and JPS Automotive, see Note 5 to JPS Automotive's Condensed Consolidated Financial Statements. Safe Harbor Statement This Form 10-Q contains statements which, to the extent they are not historical fact, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Safe Harbor Acts"). All forward-looking statements involve risks and uncertainties. The forward-looking statements in this Form 10-Q are intended to be subject to the safe harbor protection provided by the Safe Harbor Acts. Risks and uncertainties that could cause actual results to vary materially from those anticipated in the forward-looking statements included in this Form 10-Q include general economic conditions in the markets in which JPS Automotive operates and industry-based factors such as possible declines in the North American automobile and light truck build, labor strikes at JPS Automotive's major customers, changes in consumer preferences, dependence on significant automotive customers, changes in the popularity of particular vehicle models or particular interior trim packages, the loss of programs on particular vehicle models, the level of competition in the automotive supply industry and pricing pressure from automotive customers, as well as factors more specific to JPS Automotive, such as the substantial leverage of JPS Automotive and limitations imposed by the Senior Notes. For a discussion of certain of these and other important factors which may affect the operations, products and markets of JPS Automotive, see "Business" in the 1999 10-K and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 1999 10-K, the Notes to JPS Automotive's Consolidated Financial Statements in the 1999 10-K, and above in this Form 10-Q and also see JPS Automotive's other filings with the Securities and Exchange Commission. Item 3. Quantitative and Qualitative Disclosures About Market Risk. JPS Automotive does not have any exposure to market risk for changes in interest rates and foreign exchange rates. I-12 PART II - OTHER INFORMATION Item 1. Legal Proceedings. There have been no material developments in legal proceedings involving JPS Automotive or its subsidiaries since those reported, if any, in JPS Automotive's Annual Report on Form 10-K for the fiscal year ended December 25, 1999. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit Number Description - ------ ----------- 2.1 Agreement and Plan of Merger dated as of January 1, 2000 by and between PACJ, Inc. and JPS Automotive L.P. is hereby incorporated by reference to Exhibit 2.1 of the Form 8-K of JPS Automotive and Products Corp. dated January 28, 2000. 3(i).1 Certificate of Incorporation of Products Corp. is hereby incorporated by reference to Exhibit 3.1 of Products Corp.'s Registration Statement on Form S-1, Registration No. 33-75510. 3(i).2 Certificate of Incorporation of PACJ, Inc. is hereby incorporated by reference to Exhibit 3.3 of the Form 10-K of JPS Automotive and Products Corp for fiscal 1999. 3(ii).1 By-laws of Products Corp. are hereby incorporated by reference to Exhibit 3.2 of Products Corp.'s Registration Statement on Form S-1, Registration No. 33-75510. 3(ii).2 Bylaws of PACJ, Inc. are hereby incorporated by reference to Exhibit 3.4 of the Form 10-K of JPS Automotive and Products Corp. for fiscal 1999. 27 Financial Data Schedules (b) Reports on Form 8-K During the quarter for which this Report on Form 10-Q is being filed, JPS Automotive and Products Corp. filed a Current Report on Form 8-K dated January 28, 2000 reporting under Item 1 thereof the merger of JPS Automotive with and into its general partner, PACJ, Inc. No financial statements were filed. II-1 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized, on the 15th day of May, 2000. JPS AUTOMOTIVE INC. By: /s/ Rajesh Shah --------------- Rajesh K. Shah Executive Vice President and Chief Financial Officer (On behalf of the Registrant and as Principal Financial and Chief Accounting Officer) JPS AUTOMOTIVE PRODUCTS CORP. By: /s/ Rajesh Shah ---------------- Rajesh K. Shah Executive Vice President and Chief Financial Officer EX-27.1 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE QUARTER ENDED APRIL 1, 2000, AND SUCH IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000924902 JPS AUTOMOTIVE, INC. & SUBSIDIARIES 1,000 3-MOS DEC-30-2000 DEC-26-1999 APR-01-2000 22,103 0 34,358 892 6,168 77,296 61,529 14,497 234,321 19,147 87,131 0 0 35,000 84,409 234,321 65,063 65,063 57,496 3,000 (139) 1,619 2,146 2,560 1,066 1,494 0 0 0 1,494 0 0
EX-27.2 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JPS AUTOMOTIVE PRODUCTS CORP. BALANCE SHEET AT APRIL 1, 2000, AND SUCH IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000919233 JPS AUTOMOTIVE PRODUCTS CORP. 1,000 3-MOS DEC-30-2000 DEC-26-1999 APR-01-2000 1 0 0 0 0 1 0 0 1 0 0 0 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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