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 January 26, 2002
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 Number 33-27038
JPS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 57-0868166
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
555 North Pleasantburg Drive, Suite 202, Greenville, South Carolina 29607
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number (864) 239-3900
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 [ ]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 9,271,756 shares of the
Company's Common Stock were outstanding as of March 7, 2002.
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JPS INDUSTRIES, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION Number
Item 1. Condensed Consolidated Balance Sheets
January 26, 2002 (Unaudited) and October 27, 2001..... 3
Condensed Consolidated Statements of Operations
Three Months Ended January 26, 2002 and
January 27, 2001 (Unaudited).......................... 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended January 26, 2002 and
January 27, 2001 (Unaudited).......................... 5
Notes to Condensed Consolidated Financial
Statements (Unaudited)................................ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk........................................... 10
PART II. OTHER INFORMATION ...................................... 11
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Item 1. Financial Statements
JPS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
January 26, October 27,
2002 2001
---------------- ----------------
(Unaudited)
ASSETS
Current assets:
Cash $ 0 $ 544
Accounts receivable 17,124 21,656
Inventories (Note 2) 17,665 18,439
Prepaid expenses and other (Note 4) 3,214 3,291
---------------- ----------------
Total current assets 38,003 43,930
Property, plant and equipment, net 42,251 43,707
Other assets 22,257 22,268
---------------- ----------------
Total assets $ 102,511 $ 109,905
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,413 $ 10,506
Accrued interest 38 57
Accrued salaries, benefits and withholdings 2,161 2,303
Other accrued expenses 3,013 3,643
Current portion of long-term debt (Note 3) 632 620
---------------- ----------------
Total current liabilities 12,257 17,129
Long-term debt (Note 3) 16,997 19,287
Deferred revenue and postemployment liabilities 18,455 18,242
---------------- ----------------
Total liabilities 47,709 54,658
---------------- ----------------
Shareholders' equity:
Common stock - $.01 par value; authorized - 22,000,000 shares; issued -
10,000,000 shares;
outstanding - 9,271,756 shares 100 100
Additional paid-in capital 124,175 124,175
Treasury stock (at cost) - 728,244 shares (2,835) (2,835)
Accumulated deficit (66,638) (66,193)
---------------- ----------------
Total shareholders' equity 54,802 55,247
---------------- ----------------
Total liabilities and shareholders' equity $ 102,511 $ 109,905
================ ================
Note: The condensed consolidated balance sheet at October 27, 2001 has been
extracted from the audited financial statements.
See notes to consolidated financial statements.
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JPS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Three Months Ended
------------------------------------
January 26, January 27,
2002 2001
---------------- ----------------
Net sales $ 27,131 $ 38,633
Cost of sales 22,833 29,852
---------------- ----------------
Gross profit 4,298 8,781
Selling, general and administrative expenses 4,811 5,804
Other expense (income), net 1 (2)
---------------- ----------------
Operating profit (loss) (514) 2,979
Interest expense 215 851
---------------- ----------------
Income (loss) before income taxes (729) 2,128
Income taxes (benefit) (284) 829
---------------- ----------------
Net income (loss) $ (445) $ 1,299
================ ================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
Basic 9,271,756 9,453,525
================ ================
Diluted 9,271,756 9,695,691
================ ================
Basic earnings (loss) per common share $ (0.05) $ 0.14
================ ================
Diluted earnings (loss) per common share $ (0.05) $ 0.13
================ ================
See notes to condensed consolidated financial statements.
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JPS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
------------------------------------
January 26, January 27,
2002 2001
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (445) $ 1,299
---------------- ----------------
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,460 1,488
Amortization of deferred financing costs 12 75
Deferred income tax benefit (284) --
Changes in assets and liabilities:
Accounts receivable 4,532 5,626
Inventories 774 (1,636)
Prepaid expenses and other assets 361 1,755
Accounts payable (4,093) (3,500)
Accrued expenses and other liabilities (791) (5,308)
Other, net 214 224
---------------- ----------------
Total adjustments 2,185 (1,276)
---------------- ----------------
Net cash provided by operating activities 1,740 23
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment additions (6) (3,070)
Proceeds from assets held for sale -- 27,454
---------------- ----------------
Net cash provided by (used in) investing activities (6) 24,384
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Financing costs incurred -- (61)
Purchase of treasury stock -- (2,033)
Net proceeds from exercise of stock options -- (13)
Revolving credit facility borrowings (repayments), net (2,128) (23,007)
Repayment of other long-term debt (150) (578)
---------------- ----------------
Net cash used in financing activities (2,278) (25,692)
---------------- ----------------
NET DECREASE IN CASH (544) (1,285)
CASH AT BEGINNING OF PERIOD 544 2,216
---------------- ----------------
CASH AT END OF PERIOD $ 0 $ 931
================ ================
SUPPLEMENTAL INFORMATION ON CASH FLOWS:
Interest paid $ 222 $ 1,307
Income taxes paid, net 138 391
See notes to consolidated financial statements.
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JPS INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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1. Basis of Presentation
Unless the context otherwise requires, the terms "JPS" and the
"Company", as used in these condensed consolidated financial
statements, mean JPS Industries, Inc. and JPS Industries, Inc. together
with its subsidiaries, respectively.
The Company has prepared, without audit, the interim condensed
consolidated financial statements and related notes. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and cash flows at January 26, 2002 and for all
periods presented have been made.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended
October 27, 2001 ("Fiscal 2001"). The results of operations for the
interim period are not necessarily indicative of the operating results
for the full year.
2. Inventories (in thousands):
January 26, October 27,
2002 2001
----------- -----------
Raw materials and supplies $ 3,310 $ 3,415
Work-in-process 4,177 4,662
Finished goods 10,178 10,362
----------- -----------
Total $ 17,665 $ 18,439
=========== ===========
3. Long-Term Debt (in thousands):
January 26, October 27,
2002 2001
----------- -----------
Senior credit facility,
revolving line of credit $ 14,624 $ 16,752
Capital lease obligation 3,005 3,155
----------- -----------
Total 17,629 19,907
Less current portion (632) (620)
----------- -----------
Long-term portion $ 16,997 $ 19,287
=========== ===========
On May 9, 2001, the Company replaced the existing syndicated senior
revolving credit facility with a new Revolving Credit and Security
Agreement with First Union National Bank. The new facility provides for
a revolving credit loan facility and letters of credit ("the Revolving
Credit Facility") in a maximum principal amount equal to the lesser of
(a) $35 million or (b) a specified borrowing base (the "Borrowing
Base"), which is based upon eligible receivables, eligible inventory,
and a specified dollar amount (currently $ 9.4 million subject to
reduction). The Revolving Credit Facility restricts investments,
acquisitions, and dividends. The
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Credit Agreement contains financial covenants relating to minimum
levels of net worth, as defined, and a minimum debt to EBITDA ratio, as
defined. The Company is currently in compliance with all of the
restrictions and covenants of its new Revolving Credit Facility. All
loans outstanding under the Revolving Credit Facility bear interest at
the 30-day LIBOR rate plus an applicable margin (the "Applicable
Margin") based upon the Company's debt to EBITDA ratio. As of January
26, 2002, the Company's interest rate under the Revolving Credit
Facility was 3.1%.
As of January 26, 2002, unused and outstanding letters of credit
totaled $0.6 million. The outstanding letters of credit reduce the
funds available under the Revolving Credit Facility. At January 26,
2002, the Company had approximately $15.4 million available for
borrowing under the Revolving Credit Facility.
4. Contingencies
At January 26, 2002, the Company had regular federal net operating loss
carryforwards for tax purposes of approximately $89.0 million. The net
operating loss carryforwards expire in years 2003 through 2020. The
Company also has federal alternative minimum tax net operating loss
carryforwards of approximately $105.0 million which expire in 2004
through 2020. Alternative minimum tax credits of $1.8 million that can
be carried forward indefinitely and used as a credit against regular
federal taxes, subject to limitation.
The Company's future ability to utilize a portion of its net operating
loss carryforwards is limited under the income tax laws as a result of
being treated as having a change in the ownership of the Company's
stock as of December 2000 under Federal income tax laws. The effect of
such an ownership change is to limit the annual utilization of the net
operating loss carryforwards to an amount equal to the value of the
Company immediately after the time of the change (subject to certain
adjustments) multiplied by the Federal long-term tax exempt rate. Based
on the expiration dates for the loss carryforwards and fair market
value at the time of ownership change, the Company does not believe
that the limitations imposed as a result of prior ownership changes
will result in any Federal loss carryforward expiring unutilized.
Uncertainties surrounding income tax law changes, shifts in operations
between state taxing jurisdictions and future operating income levels
may, however, affect the ultimate realization of all or some portion of
these deferred income tax assets. In addition, a future change in
ownership could result in additional limitations on the ability of the
Company to utilize its net operating loss carryforwards. Under
applicable accounting guidelines, these future uncertainties, combined
with factors giving rise to losses, requires a valuation allowance be
recognized.
The Company is exposed to a number of asserted and unasserted potential
claims encountered in the normal course of business including certain
asbestos-based claims. Except as discussed below, management believes
that none of this litigation, if determined unfavorable to the Company,
would have a material adverse effect on the financial condition or
results of operations of the Company.
In June 1997, Sears Roebuck and Co. ("Sears") filed a multi-count
complaint against Elastomerics and two other defendants alleging an
unspecified amount of damages in connection with the alleged premature
deterioration of the Company's Hypalon roofing membrane installed
during the 1980's on approximately 140 Sears stores. No trial date has
been established. The Company believes it has meritorious defenses to
the claims and intends to defend the lawsuit vigorously. Management,
however, cannot determine the outcome of the lawsuit or estimate the
range of loss, if any, that may occur. Accordingly, no provision has
been made for any loss which may result. An unfavorable resolution of
the actions could have a material adverse effect on the business,
results of operations or financial condition of the Company if not
covered by insurance.
5. Business Segments
The Company's reportable segments are JPS Elastomerics and JPS Glass.
The reportable segments were determined using the Company's method of
internal reporting, which divides and analyzes the business by the
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nature of the products manufactured and sold, the customer base,
manufacturing process, and method of distribution. The Elastomerics
segment principally manufactures and markets extruded products
including high performance roofing products, environmental
geomembranes, and various polyurethane products. The Glass segment
produces and markets specialty substrates mechanically formed from
fiberglass and other specialty materials for a variety of applications
such as printed circuit boards, filtration, advanced composites,
building products, defense, and aerospace.
The Company evaluates the performance of its reportable segments and
allocates resources principally based on the segment's operating
profit, defined as earnings before interest and taxes. Indirect
corporate expenses allocated to each business segment are based on
management's analysis of the costs attributable to each segment. The
following table presents certain information regarding the business
segments (in thousands):
Three Months Ended
--------------------------
January 26, January 27,
2002 2001
----------- -----------
Net sales:
Elastomerics $ 15,839 $ 18,976
Glass 11,292 19,657
----------- -----------
Net sales $ 27,131 $ 38,633
=========== ===========
Operating profit (loss) (1):
Elastomerics $ (289) $ 947
Glass (225) 2,032
----------- -----------
Operating profit (loss) (514) 2,979
Interest expense 215 851
----------- -----------
Income (loss) before income taxes $ (729) $ 2,128
=========== ===========
January 26, October 27,
2002 2001
----------- -----------
Identifiable assets:
Elastomerics $ 50,091 $ 54,684
Glass 52,420 55,221
----------- -----------
Total assets
$ 102,511 $ 109,905
=========== ===========
(1) The operating profit of each business segment includes a proportionate
share of indirect corporate expenses. The Company's corporate group is
responsible for finance, strategic planning, legal, tax, and regulatory
affairs for the business segments. Such expense consists primarily of
salaries and employee benefits, professional fees, and amortization of
Reorganization Value in Fiscal 2001.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The statements contained in this quarterly report on Form 10-Q that are not
historical facts are forward-looking statements subject to the safe harbor
created by the Private Securities Litigation Reform Act of 1995. The Company
cautions readers of this quarterly report on Form 10-Q that a number of
important factors could cause the Company's actual results in Fiscal 2002 and
beyond to differ materially from those expressed in any such forward-looking
statements. These factors include, without limitation, the general economic and
business conditions affecting manufacturing businesses, actions of a variety of
domestic and foreign competitors, changes in demand in the primary markets of
JPS, the seasonality of the Company's sales, changes in the Company's costs of
claims, raw materials and energy, and the Company's dependence on key personnel.
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The following should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing in the
Company's Annual Report on Form 10-K for the fiscal year ended October 27, 2001.
(In Thousands)
Three Months Ended
--------------------------
January 26, January 27,
2002 2001
----------- -----------
Net sales:
Elastomerics $ 15,839 $ 18,976
Glass 11,292 19,657
----------- -----------
Net sales $ 27,131 $ 38,633
=========== ===========
Operating profit (loss):
Elastomerics $ (289) $ 947
Glass (225) 2,032
----------- -----------
Operating profit (loss) (514) 2,979
Interest expense 215 851
----------- -----------
Income (loss) before income taxes $ (729) $ 2,128
=========== ===========
RESULTS OF OPERATIONS
Introduction
The Company has repositioned itself from one that was largely textile-oriented
to a diversified manufacturing and marketing company that is focused on a broad
array of industrial applications.
Three Months Ended January 26, 2002 (the "2002 First Quarter") Compared to the
Three Months Ended January 27, 2001 (the "2001 First Quarter")
Consolidated net sales decreased $11.5 million, or 29.8%, from $38.6 million in
the 2001 first quarter to $27.1 million in the 2002 first quarter. Operating
profit decreased $3.5 million from $3.0 million in the 2001 first quarter to a
loss of $0.5 million in the 2002 first quarter.
Net sales in the 2002 first quarter in the Elastomerics segment, which includes
single-ply roofing and extruded urethane products, decreased $3.2 million, or
16.5%, from $19.0 million in the 2001 first quarter to $15.8 million in the 2002
first quarter. This decrease is primarily attributable to lower volumes,
principally in urethane films as a result of the general economic slowdown, and
competitive price pressures primarily in roofing related products.
Operating profit in the 2002 first quarter for the Elastomerics segment
decreased $1.2 million from $0.9 million in the 2001 first quarter to a loss of
$0.3 million in the 2002 first quarter. This decrease is due to reduced
revenues, lower selling prices, unabsorbed costs associated with underutilized
manufacturing capacity, and higher insurance costs.
Net sales in the Glass segment, which includes substrates constructed of
synthetics and fiberglass for lamination, insulation, and filtration
applications, decreased $8.4 million, or 42.6%, from $19.7 million in the 2001
first quarter to $11.3 million in the 2002 first quarter. The decrease is
primarily attributable to the severe decline in demand for electronic
application products, partially offset by higher sales of aviation and
filtration products resulting from new product introductions and enhancements.
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Operating profit in the 2002 first quarter for the Glass segment decreased $2.2
million from $2.0 million in the 2001 first quarter to a loss of $0.2 million in
the 2002 first quarter. This decrease reflects lower contribution from sales and
higher manufacturing and insurance costs.
Interest expense in the 2002 first quarter was $0.6 million less than the 2001
first quarter as a result of lower debt levels and interest rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity for operations and expansion are
funds generated internally and borrowings under its Revolving Credit Facility.
See Note 3 for additional discussion of the revolving credit facility.
Year to date for 2002, cash provided by operating activities was $1.7 million.
Working capital at October 27, 2001 was $26.8 million compared with $25.7
million at January 26, 2002. Accounts receivable decreased by $4.5 million from
October 27, 2001 to January 26, 2002 due to timing and sales levels. Inventories
decreased $0.8 million from October 27, 2001 to January 26, 2002. Accounts
payable and accrued expenses decreased by $4.9 million from October 27, 2001 to
January 26, 2002 as a result of lower general payables.
The principal uses of cash in 2002 were for the repayment of long-term debt of
approximately $2.3 million. The Company anticipates that its total capital
expenditures in Fiscal 2002 will be approximately $1.0 million and expects such
amounts to be funded by cash from operations and bank financing sources.
Based upon the ability to generate working capital through its operations and
its new Revolving Credit Facility, the Company believes that it has the
financial resources necessary to pay its capital obligations and implement its
business plan.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest rate risk. The Company has exposure to interest rate changes primarily
relating to interest rate changes under its Revolving Credit Facility. The
Company's Revolving Credit Facility bears interest at rates which vary with
changes in the London Interbank Offered Rate (LIBOR). The Company does not
speculate on the future direction of interest rates. Currently, all of the
Company's debt bears interest at the 30-day LIBOR rate plus an applicable margin
based upon the Company's debt to EBITDA ratio. The Company believes that the
effect, if any, of reasonably possible near-term changes in interest rates on
the Company's consolidated financial position, results of operations, or cash
flows would not be material.
Raw material price risk. A portion of the Company's raw materials are
commodities and are, therefore, subject to price volatility caused by weather,
production problems, delivery difficulties, and other factors which are outside
the control of the Company. In most cases, essential raw materials are available
from several sources. For several raw materials, however, branded goods or other
circumstances may prevent such diversification and an interruption of the supply
of these raw materials could have a significant impact on the Company's ability
to produce certain products. The Company has established long-term relationships
with key suppliers and may enter into purchase contracts or commitments of one
year or less for certain raw materials. Such agreements generally include a
pricing schedule for the period covered by the contract or commitment. The
Company believes that any changes in raw material pricing, which cannot be
adjusted for by changes in its product pricing or other strategies, would not be
significant.
General Economic Conditions. Demand for the Company's products is affected by a
variety of economic factors including, but not limited to, the cyclical nature
of the construction industry, demand for electronic and aerospace products which
ultimately utilize components manufactured by the Company, and general consumer
demand. Adverse economic developments could affect the financial performance of
the Company.
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JPS INDUSTRIES, INC.
PART II - OTHER INFORMATION
Item
1. Legal Proceedings None
2. Changes in Securities None
3. Defaults Upon Senior Securities None
4. Submission of Matters to a Vote of Security Holders None
5. Other Information None
6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
(11) Statement re: Computation of Per Share Earnings - not required
since such computation can be clearly determined from the
material contained herein.
(b) Current Reports on Form 8-K:
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JPS INDUSTRIES, INC.
Date: March 7, 2002 /s/ Charles R. Tutterow
-------------------------------------
Charles R. Tutterow
Executive Vice President,
Chief Financial Officer & Secretary
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