-----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, Cb/AoDgACURGzU0vaGulhdQUZYIQb6uIIGNmbh2ozVRZpbrlfNVFxw9RW51rrRNs PIFOauz1BgzsFTn2Vd1weA== 0000950144-96-000231.txt : 19960129 0000950144-96-000231.hdr.sgml : 19960129 ACCESSION NUMBER: 0000950144-96-000231 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19951028 FILED AS OF DATE: 19960126 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JPS TEXTILE GROUP INC /DE/ CENTRAL INDEX KEY: 0000846615 STANDARD INDUSTRIAL CLASSIFICATION: BROADWOVEN FABRIC MILLS, COTTON [2211] IRS NUMBER: 570868166 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 033-27038 FILM NUMBER: 96507710 BUSINESS ADDRESS: STREET 1: 555 N PLEASANTBURG DR STE 202 CITY: GREENVILLE STATE: SC ZIP: 29607 BUSINESS PHONE: 803-239-3900 MAIL ADDRESS: STREET 1: 555 N PLEASANTBURG DR SUITE 202 CITY: GREENVILLE STATE: SC ZIP: 29607 10-K405 1 JPS TEXTILE GROUP 10-K405 10-28-95 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [x] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended October 28, 1995 [ ] 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 TEXTILE GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 57-0868166 (STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 555 North Pleasantburg Drive, Suite 202, Greenville, SC 29607 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code: (864) 239-3900 Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: None. 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: /X/ Indicate by check mark if disclosure of delinquent filers, pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: /X/ As of January 19, 1996, there were 490,000 shares of the registrant's Class A Common Stock, $.01 par value per share (the "Class A Common Stock"), held by non-affiliates of the registrant. There is no established public trading market for such shares. Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 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: /X/ As of the date hereof, 490,000 shares of Class A Common Stock and 510,000 shares of the registrant's Class B Common Stock, $.01 par value per share, were issued and outstanding. 2 JPS TEXTILE GROUP, INC. Table of Contents
PART I Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . . . 9 PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Item 6. SELECTED HISTORICAL FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . . 21 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . 45 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . . . 45 Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Item 12. SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT . . . . . . . . . . . . . . . . 50 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 52 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 52 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
3 PART I ITEM 1. BUSINESS. HISTORICAL BACKGROUND JPS Textile Group, Inc. ("JPS" or the "Company") is a Delaware corporation, incorporated in December 1986, with its principal executive offices located at 555 North Pleasantburg Drive, Suite 202, Greenville, South Carolina 29607; telephone number (864)239-3900. On March 14, 1988, the Company executed a merger agreement providing for the acquisition of J.P. Stevens & Co., Inc. ("J.P. Stevens"). On March 15, 1988, the Company commenced a tender offer pursuant to such merger agreement for all of the outstanding stock of J.P. Stevens. Subsequently, the Company terminated its tender offer and J.P. Stevens agreed to be acquired by another entity. Simultaneously therewith, J.P. Stevens agreed to sell to the Company the business and substantially all of the assets of five J.P. Stevens divisions: the Converter and Yarn division; the Automotive Products division; the Elastomerics division; the Carpet division; and the Industrial Fabrics division (the "Predecessor Stevens Divisions"), for approximately $527.0 million (the "Acquisition"). Subsequent to the Acquisition, due to certain financial concerns, the Company engaged certain financial advisors in March 1990 to advise the Company concerning a possible restructuring of its debts and equity capitalization. In furtherance thereof, the Company, together with its legal and financial advisors, met with representatives of the Company's senior lenders and with the respective legal and financial representatives of certain large institutional holders of the Company's (i) Senior Variable Rate notes due June 1, 1996, (ii) Senior Subordinated Discount Notes due June 1, 1999, (iii) 15.25% Senior Subordinated Notes due June 1, 1999, and (iv) 14.25% Subordinated Debentures due May 15, 2000 (collectively, the "Old Debt Securities"), to discuss the Company's general business and financial status, and to explore various financial restructuring alternatives. In November 1990, the Company and representatives of the holders of the Old Debt Securities determined that a transaction involving the exchange of the Old Debt Securities for a significant percentage of "new" common stock and "new" debt securities with a fixed lower per annum interest rate, together with the issuance to the holders of the Company's Series A Exchangeable Adjustable Rate Preferred Stock and Series B Junior Preferred Stock (together, the "Old Securities") of a significant percentage of the Company's "new" preferred equity securities, would improve the Company's financial condition and overall creditworthiness and simplify its capital structure, and that such transaction would best be accomplished pursuant to a pre-petition solicitation of votes to accept or reject a voluntary plan of reorganization (the "Plan of Reorganization") under chapter 11 of title 11 ("Chapter 11") of the United States Code (the "Bankruptcy Code"). The Company's solicitation was successfully completed and the Chapter 11 case was commenced in early February 1991 before the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). The Plan of Reorganization was confirmed by the Bankruptcy Court pursuant to a court order signed on March 21, 1991 and the Plan of Reorganization became effective on April 2, 1991. As part of the Plan of Reorganization, the Company, together with its senior bank lenders, agreed to restructure the then-existing bank debt of the Company. On June 28, 1994, pursuant to the terms of an Asset Purchase Agreement dated May 25, 1994, as amended, (the "Asset Purchase Agreement"), by and among the Company, JPS Auto Inc., a wholly-owned subsidiary of the Company ("Auto"), JPS Converter and Industrial Corp., a wholly-owned subsidiary of the Company ("C&I"), Foamex 2 4 International Inc. ("Foamex") and JPS Automotive Products Corp., an indirect, wholly-owned subsidiary of Foamex ("Purchaser"), the Company consummated the disposition of its Automotive Assets (as described below) to the Purchaser. The "Automotive Assets" consisted of the businesses and assets of Auto and the synthetic industrial fabrics division of C&I, and the Company's investment in common stock of the managing general partner of Cramerton Automotive Products, L.P. (an 80% owned joint venture). Pursuant to the Asset Purchase Agreement, the Purchaser agreed to assume substantially all of the liabilities and obligations associated with the Automotive Assets. In addition, the Company and its affiliates agreed, for a four year period, not to directly or indirectly compete in North, Central and South America with the businesses that were sold. The sale price for the Automotive Assets was approximately $283 million, consisting of $264 million of cash paid at closing, $15 million of assumed debt as of June 28, 1994, and certain post-closing adjustments which resulted in a net gain of $4.4 million recognized in 1995. The sale of the Automotive Assets resulted in an approximate gain of $137.4 million, net of income taxes of $2.9 million. The net cash proceeds from the disposition of the Automotive Assets (after deductions for fees, other expenses and amounts designated by management to satisfy possible contingent tax liabilities) were approximately $217 million, and such proceeds were used by the Company to reduce its outstanding indebtedness. On November 16, 1995, pursuant to the terms of an Asset Transfer Agreement dated as of November 16, 1995, by and among the Company, JPS Carpet Corp. ("Carpet"), a wholly-owned subsidiary of the Company, Gulistan Holdings Inc. and Gulistan Carpet Inc., a wholly-owned subsidiary of Gulistan Holdings Inc. (collectively, "Gulistan"), the Company and Carpet consummated the sale of substantially all the assets of Carpet used in the business of designing and manufacturing tufted carpets for sale to residential, commercial and hospitality markets (the "Carpet Business"). Pursuant to the Asset Transfer Agreement, Gulistan agreed to assume substantially all of the liabilities and obligations associated with the Carpet Business. Gulistan was formed and its common stock is owned by certain members of the former management team at Carpet. The Company and its subsidiaries have agreed, for a three-year period, not to compete in certain specified geographic areas directly or indirectly with the business that was sold. The consideration received for the Carpet Business consisted of approximately $22.5 million in cash, subject to certain post-closing adjustments based on the audited amount of working capital transferred which are expected to result in a reduction to net cash proceeds of approximately $3.5 million, and other debt and equity securities of Gulistan as follows: a $10 million Promissory Note due in November 2001, $5 million preferred stock redeemable in November 2005, and warrants to purchase 25% of the common stock of Gulistan. Based on an independent valuation, the Company has estimated the fair value of these debt and equity securities to be approximately $11.3 million. The Carpet Assets were reduced to their net realizable value as of October 28, 1995 and such reduction was reflected as a loss on sale of discontinued operations of $30.7 million in the 1995 consolidated financial statements. Estimated amounts of post-closing adjustments and other cash flows from October 28, 1995 to the closing date were included in the determination of net realizable value. The net cash proceeds from the disposition of the Carpet Assets were used to reduce outstanding borrowings under the Company's bank credit agreement. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." 3 5 GENERAL The Company is one of the largest diversified domestic manufacturers of textile and textile related products, principally for the apparel, industrial and home fashion markets. JPS conducts its operations from 12 manufacturing plants in five states and employs approximately 4,500 people. The Company competes in three industry segments; apparel fabrics and products, industrial fabrics and products and home fashion textiles. Certain financial information about the Company's industry segments for each of the last three fiscal years is included in Note 11 of the Notes to Consolidated Financial Statements included in Item 8 herein. APPAREL FABRICS AND PRODUCTS The Company is a leading manufacturer of greige goods (unfinished woven fabrics), yarn and elastic products. The Company's products are used in the manufacture of a broad range of consumer apparel products including blouses, dresses, sportswear, undergarments and disposable diapers. Greige Goods. The Company produces fabrics from spun and filament yarns that are used ultimately in the manufacture of apparel such as blouses, dresses and sportswear. Greige goods are produced from rayon, acetate, polyester and cotton yarns, and are primarily sold to other textile manufacturers for use in producing printed and dyed fabrics. Yarn. The Company produces a variety of rayon and polyester spun yarns for its own use and for sale to manufacturers of knitted apparel. Elastic Products. The Company manufactures a number of elastic products from natural and synthetic rubber compounds. Elastic thread is sold to manufacturers of undergarments for use in waistbands and similar applications, while other elastic products are used in the manufacture of disposable infant diapers. INDUSTRIAL FABRICS AND PRODUCTS Commercial Roofing Products. The Company is a well-established manufacturer of single-ply membrane roofs that are made from woven synthetic fabrics and rubber-based or polypropylene specialty polymer compounds which are sold principally to roofing distributors for use in both the new and replacement commercial markets. Other Building Construction Products. The Company is a producer of fabrics made from glass and synthetic fibers that are used in a number of applications in the building construction industry. Products include various scrims used for wallboard tapes and certain roofing applications, and reinforcement substrates used for the installation of internal and external tiles and synthetic wall surfaces. The Company produces and sells membrane products (similar to commercial roofing products) for use in environmental containment applications such as reservoir liners and covers. Other Industrial Products. The Company produces a wide variety of other industrial textile products that are used in many industries for many different end uses. Many of these products have characteristics that provide insulation or filtration properties. These specialty fabrics are used in the manufacture of such products as flame-retardant clothing, filtration products, tarpaulins, awnings, athletic tapes, printed circuit boards and advanced composites. In addition, the Company produces urethane products for use in the manufacture of various products such as "bulletproof" glass, disposable intravenous bags, seamless welded drive belts and tubing. 4 6 HOME FASHION TEXTILES The Company produces a variety of unfinished woven fabrics and yarns for use in the manufacture of draperies, curtains and lampshades and is a major producer of solution-dyed drapery fabrics. OPERATIONS Each operating unit of the Company has individual administrative, manufacturing and marketing capabilities and all material aspects of operations, including product design, customer service, purchasing and credit and collection are coordinated by each operating unit. Corporate support services include finance, strategic planning, legal, tax and regulatory affairs. Following the Acquisition and through the date hereof, management's business plans have included many cost-reduction activities aimed at improving return on assets. These activities included consolidating manufacturing operations, exiting unprofitable product lines, more aggressive capital spending programs to improve quality and productivity and reorganizing certain manufacturing operations. The Company plans to continue its manufacturing modernization program to improve efficiency and productivity and further reduce its cost structure. The Company's corporate headquarters is located in Greenville, South Carolina. The Company maintains a sales office in New York City for certain of its operations. Five additional regional sales offices are maintained by the Company, principally for its roofing and building construction products. See Item 2, "PROPERTIES". MANUFACTURING The Company's experienced work force and wide variety of yarn making, fabric forming and other manufacturing equipment allow the Company to rapidly and efficiently change its product mix to meet style and seasonal requirements. The Company's activities generally encompass all phases of manufacturing its products. In the manufacture of woven textile products, the Company purchases synthetic and natural fibers and spins them into yarn or purchases filament yarn for processing. In addition, the Company purchases certain spun yarns. Yarns are then coated, sized or directly woven into unfinished fabric. Upon completion of the weaving process, fabric is generally shipped to customers who dye, finish, coat and cut those fabrics for resale. The Company's elastic products are manufactured from natural and synthetic rubber compounds that are purchased from outside suppliers and are processed through a variety of production operations including slitting and calendering. Single-ply membrane roofing is made by processing a Company-manufactured woven substrate with specialty polymers. Other industrial fabric products are produced from either woven fiberglass or cotton and synthetic fibers, which fibers are processed into yarn, woven and finished into fabrics by the Company. Other specialty industrial products are produced by extrusion of urethane resins. The Company believes that its manufacturing facilities are sufficient for its present and reasonably foreseeable future production requirements. 5 7 RAW MATERIALS The Company generally has good relationships with its suppliers and has, where possible, diversified its supplier base so as to avoid a disruption of supply. In most cases, the Company's raw materials are staple goods that are readily available from numerous domestic fiber and chemical manufacturers. For several products, however, branded goods or other circumstances prevent such a diversification, and an interruption of the supply of these raw materials could have a significant negative impact on the Company's ability to produce certain products. The Company believes that its practice of purchasing such items from large, stable companies minimizes the risk of such an interruption in supply. MARKETING AND COMPETITION The textile industry is highly competitive and includes a number of participants with aggregate sales and financial resources greater than the Company's. The Company generally competes on the basis of price, quality, design and customer service. Many companies compete in limited segments of the textile market. The Company is well-positioned due to its ability to respond quickly to changing styling and fashion trends. This ability generally provides advantages for domestic textile manufacturers. Although no single company dominates the industry, most market segments are dominated by a small number of competitors. The Company believes it has a significant market share in the market for rayon and acetate apparel fabrics, rayon yarn, solution-dyed satin fabrics and quartz fabrics. The Company's marketing efforts include the development of new product designs and styles which meet customer needs. Each of the Company's operating units has been an established supplier to each of its markets for many years and is taking advantage of well-established customer relationships to increase product development with its customers. The "J.P. Stevens" trade name, which the Company has a non-exclusive, royalty-free license to use (see "--Patents, Licenses and Trademarks" below), is widely recognized throughout the textile industry. The Company believes that its relatively broad base of manufacturing operations provides it with a competitive advantage in developing new textile products. In addition to its direct marketing capabilities, the Company markets certain of its products through distributors. The following is a discussion of marketing and competitive factors as they relate to each of the Company's segments. Apparel Fabrics and Products Greige Goods. The Company markets its spun and filament fabrics to converters who finish and/or dye these products prior to shipping to finished apparel manufacturers. The Company has sought to maintain a relatively high proportion of such sales in product areas where its manufacturing flexibility can provide a competitive advantage. Yarn. The Company competes with a large number of companies which sell yarn to woven and knit goods manufacturers. Yarns are generally sold on a direct basis, and the Company believes that quality and price are the primary competitive factors. Elastic Products. The Company's elastic products are sold on a direct basis primarily to diaper and undergarment manufacturers as well as to outerwear manufacturers. The Company believes that price is the primary competitive factor in this market. 6 8 Industrial Fabrics and Products Construction Products. The Company markets its single-ply roofing products on a direct basis to roofing distributors. The Company competes with manufacturers of this and other types of roofing products. The Company believes that its product's ease of installation and warranty are important competitive factors. Other Products. Other industrial fabrics and products are marketed directly to other manufacturers and distributors. The Company believes that price and its ability to meet customer technical specifications are important competitive factors. Home Fashion Textiles The Company's home fashion operations compete with a large number of manufacturers of similar woven fabric products. In general, product markets are differentiated on the basis of price and quality. The Company believes that design and style features are important competitive factors. CUSTOMERS No customer accounts for more than 5% of the Company's sales. There are customers the loss of which could have a material adverse effect on sales. PRODUCT DEVELOPMENT In general, the textile industry expends its efforts on design innovation and capital expenditures for process enhancements rather than on basic research, relying on fiber suppliers or machinery manufacturers for basic research. The Company's research and development activities are directed toward the development of new fabrics and styles which meet specific styling requirements (in the case of apparel and home furnishing fabrics and products) or other specific properties such as insulation, weight, strength, filtration or laminate adherence (in the case of industrial fabrics and products). Significant time is spent by employees in activities such as meeting with stylists, designers, customers, suppliers and machinery manufacturers, as well as producing samples and running trials in order to develop new products and markets. These activities are performed at various levels and at various locations, and their specifically identifiable incremental costs are not material in relation to the Company's total operating costs. BACKLOG Unfilled open orders, which the Company believes are firm, were $50.5 million at October 28, 1995 and $84.6 million at October 29, 1994 (1995 and 1994 amounts are adjusted to exclude the discontinued operations of the Carpet Business sold in November 1995). The Company generally fills its open orders in the following fiscal year and the Company expects that all of the open orders as of October 28, 1995 will be filled in the 53-week period ending November 2, 1996 ("Fiscal 1996"). Unfilled open orders, which the Company believes are firm, were $68.0 million at December 30, 1995 compared to $85.9 million at December 31, 1994. The decrease in open orders in 1995 as compared to 1994 primarily is due to a decrease in customer demands for apparel fabrics and products and is representative of a change in the timing of the acceptance of certain orders by the Company. The Company believes that the amount of backlog provides some indication of the sales volume that can be expected in coming months, although changes in economic conditions may result in deferral or acceleration of orders which may affect sales volume for a period. 7 9 No significant portion of the Company's business is subject to renegotiation of profits, or termination of contracts or subcontracts at the election of the government. PATENTS, LICENSES AND TRADEMARKS Certain of the Company's products are sold under registered trademarks which have been licensed royalty-free to the Company from J.P. Stevens until May 2013, including trademarks for certain products using the "J.P. Stevens" name. Patented processes used in the manufacturing process are not a significant part of the Company's business. The Company does not license its name or products to others except for the licenses of certain trade names granted royalty free to operations that the Company has sold. EMPLOYEES The Company currently has approximately 4,500 employees of which approximately 3,900 are hourly and approximately 600 are salaried. The Company's employees are not represented by unions. The Company believes its relations with its employees to be good and has not had any work stoppages or strikes. ENVIRONMENTAL AND REGULATORY MATTERS The Company is subject to various federal, state and local government laws and regulations concerning, among other things, the discharge, storage, handling and disposal of a variety of hazardous and non-hazardous substances and wastes. The Company's plants generate small quantities of hazardous waste that are either recycled or disposed of off-site by or at licensed disposal or treatment facilities. The Company believes that it is in substantial compliance with all existing environmental laws and regulations to which it is subject. In addition, the Company is subject to liability under environmental laws relating to the past release or disposal of hazardous materials. To date, and in management's belief for the foreseeable future, liability under and compliance with existing environmental laws has not had and will not have a material adverse effect on the Company's financial or competitive positions. No representation or assurance can be made, however, that any change in federal, state or local requirements or the discovery of unknown problems or conditions will not require substantial expenditures by the Company. SEASONALITY Certain portions of the business of the Company are seasonal (principally construction products) and sales of these products tend to decline during winter months in correlation with construction activity. These declines have historically tended to result in lower sales and operating profits in the first and second quarters than in the third and fourth quarters of the Company's fiscal year. WORKING CAPITAL Information regarding the Company's working capital position and practices is set forth in Item 7 of this Form 10-K under the caption "Liquidity and Capital Resources." 8 10 ITEM 2. PROPERTIES. The following table sets forth certain information relating to the Company's principal facilities (segment information relates to principal use) excluding the facilities of the Carpet Business sold on November 16, 1995. All of the facilities owned or leased by the Company are used for manufacturing, except for the facility in New York, New York, which is used for sales offices. Except as noted, all of the Company's facilities are owned in fee and substantially all owned facilities are pledged as collateral for the Company's bank financing arrangement.
Square Square Location Footage Location Footage -------- ------- -------- ------- Apparel Fabrics and Products Industrial Fabrics and Products ---------------------------- ------------------------------- Greenville, SC 399,000 Kingsport, TN 625,000 Laurens, SC 475,000 Slater, SC 433,000 Greenville, SC 460,000 Westfield, NC 237,000 Stanley, NC 338,000 Easthampton, MA 50,000 S. Boston, VA 286,000 Stuart, VA 133,000 All Segments Rocky Mount, VA 81,000 ------------ New York, NY(1) 10,000 Home Fashion Textiles --------------------- Lincolnton, NC 387,000
(1) The New York, NY facility is leased by the Company under a lease agreement which was extended for two years effective June 1, 1995 and expires on May 30, 1997. The Company also leases certain other warehouse facilities, various regional sales offices, a subsidiary's corporate office and its corporate headquarters. The Company believes that all of its facilities are suitable and adequate for the current and anticipated conduct of its operations. ITEM 3. LEGAL PROCEEDINGS. The Company is involved in various legal proceedings which are routine litigations incidental to the conduct of its business. Management believes that none of this litigation, if determined adversely to the Company, would have a material adverse effect on the financial condition or results of operations of the Company. No proceeding was terminated in the fourth quarter of Fiscal 1995 that had a material adverse effect on the financial condition or results of operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS. No matters were submitted to a vote of securityholders during the fourth quarter of Fiscal 1995. 9 11 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. There is currently no established public trading market for the Company's Class A Common Stock, $.01 par value per share (the "Class A Common Stock"), or the Company's Class B Common Stock, $.01 par value per share (the "Class B Common Stock" and together with the Class A Common Stock, the "Common Stock"). As of January 15, 1996, there were 12 holders of record of Class A Common Stock and 2 holders of record of Class B Common Stock. As a holding company, the Company's ability to pay cash dividends is dependent on the earnings and cash flows of its subsidiaries and the ability of its subsidiaries to make funds available to the Company for such purpose. Under the terms of its outstanding indebtedness, the Company is currently prohibited from paying cash dividends on the Common Stock. The Company presently intends to retain earnings to fund working capital and for general corporate purposes, and, therefore, does not intend to pay cash dividends on shares of the Common Stock in the foreseeable future. The payment of future cash dividends, if any, would be made only from assets legally available therefor, and would also depend on the Company's financial condition, results of operations, current and anticipated capital requirements, restrictions under then-existing indebtedness and other factors deemed relevant by the Company's Board of Directors. 10 12 ITEM 6. SELECTED HISTORICAL FINANCIAL DATA (Dollars in Thousands Except Per Share Data) The following table presents selected consolidated historical financial data for the Company as of the dates and for the fiscal years indicated. The presentation of certain previously reported amounts have been reclassified to conform to the current presentation and to reflect discontinued operations of the Automotive Assets (sold in 1994) and the Carpet Business (sold on November 16, 1995) as discussed in Note 3 to the financial statements at Item 8 in this From 10-K.
Fiscal Year Ended ------------------------------------------------------------ 11/2/91 10/31/92 10/30/93 10/29/94 10/28/95 INCOME STATEMENT DATA: (52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) ---------- ---------- ---------- ---------- ---------- Net sales $ 459,158 $ 476,326 $ 457,552 $ 461,871 $ 472,565 Cost of sales 389,387 404,547 396,160 397,921 406,070 --------- --------- --------- --------- --------- Gross profit 69,771 71,779 61,392 63,950 66,495 Selling, general and administrative expenses 36,892 37,391 39,023 39,805 39,586 Other expense (income), net (122) 1,372 1,236 2,914 6,248 --------- --------- --------- --------- --------- Operating profit 33,001 33,016 21,133 21,231 20,661 Interest income 8 1 48 749 2,821 Interest expense (67,654) (58,513) (60,407) (55,570) (39,946) --------- --------- --------- --------- --------- Loss before reorganization items, income taxes, discontinued operations, extraordinary items and cumulative effects of accounting changes (1) (34,645) (25,496) (39,226) (33,590) (16,464) Reorganization items - professional fees and expenses 10,878 - - - - --------- --------- --------- --------- --------- Loss before income taxes, discontinued operations, extraordinary items and cumulative effects of accounting changes (45,523) (25,496) (39,226) (33,590) (16,464) Income taxes - 1,446 1,782 2,800 1,200 --------- --------- --------- --------- --------- Loss before discontinued operations, extraordinary items and cumulative effects of ccounting changes (45,523) (26,942) (41,008) (36,390) (17,664) Discontinued operations, net of taxes: Income (loss) from discontinued operations 1,620 16,089 24,165 23,628 (7,079) Net gain (loss) on sale of discontinued operations - - - 132,966 (26,241) Extraordinary gain (loss), net of taxes 35,265 - - (7,410) 20,120 Cumulative effects of accounting changes, net of taxes - - (4,988) (708) - --------- --------- --------- --------- --------- Net income (loss) $ (8,638) $ (10,853) $ (21,831) $ 112,086 $ (30,864) ========= ========= ========= ========= ========= Income (loss) applicable to common stock $ (12,407) $ (13,312) $ (24,694) $ 108,753 $ (34,695) ========= ========= ========= ========= ========= (Continued)
11 13 INCOME STATEMENT DATA (CONTINUED):
Fiscal Year Ended ------------------------------------------------------------- 11/2/91 10/31/92 10/30/93 10/29/94 10/28/95 (52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) ---------- ---------- ---------- ---------- ---------- Weighted average number of shares outstanding 590,700 1,000,000 1,000,000 1,000,000 1,000,000 ======== ========= ========= ========= ========= Earnings (loss) per common share: Loss before discontinued operations, extraordinary items and effects of accounting changes $ (83.44) $ (29.40) $ (43.87) $ (39.73) $ (21.50) Discontinued operations, net of taxes: Income (loss) from discontinued operations 2.74 16.09 24.17 23.63 (7.08) Net gain (loss) on sale of discontinued operations - - - 132.97 (26.24) Extraordinary gain (loss), net of taxes 59.70 - - (7.41) 20.12 Cumulative effects of accounting changes, net of taxes - - (4.99) (0.71) - -------- --------- --------- --------- --------- Net income (loss) $ (21.00) $ (13.31) $ (24.69) $ 108.75 $ (34.70) ======== ========= ========= ========= ========= BALANCE SHEET DATA: Working capital, excluding net assets held for sale $ 60,699 $ 61,431 $ 63,821 $ 65,855 $ 72,670 Total assets 533,772 511,535 532,608 452,811 412,822 Total long-term debt, less current portion 499,452 488,280 522,947 335,472 327,668 Senior redeemable preferred stock 15,685 18,144 21,007 24,340 28,171 Shareholders' deficit (73,097) (86,409) (111,103) (2,350) (37,045)
(1) The following non-cash charges have been included in the determination of loss before reorganization items, income taxes, discontinued operations, extraordinary items and cumulative effects of accounting changes for the periods shown above.
11/2/91 10/31/92 10/30/93 10/29/94 10/28/95 (52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) ---------- ---------- ---------- ---------- ---------- Certain non-cash charges to income: Depreciation $ 16,945 $ 19,736 $ 19,799 $ 22,242 $ 20,820 Amortization of goodwill and other 975 975 969 964 965 Product liability charge - - - - 5,000 Other non-cash charges to income 1,496 888 1,957 131 371 Non-cash interest 24,916 18,502 11,729 11,161 8,818 -------- -------- -------- -------- -------- $ 44,332 $ 40,101 $ 34,454 $ 34,498 $ 35,974 ======== ======== ======== ======== ========
12 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Consolidated Financial Statements of the Company and the Notes thereto included in Item 8 herein.
Fiscal Year Ended ------------------------------------------- 10/30/93 10/29/94 10/28/95 --------- --------- -------- (In Thousands) NET SALES Apparel fabrics and products $ 262,499 $ 254,810 $ 247,846 Industrial fabrics and products 156,763 169,736 191,985 Home fashion textiles 38,290 37,325 32,734 --------- --------- --------- $ 457,552 $ 461,871 $ 472,565 ========= ========= ========= OPERATING PROFIT Apparel fabrics and products $ 21,791 $ 18,487 $ 16,667 Industrial fabrics and products 3,582 7,618 7,590 Home fashion textiles 4,242 2,564 1,749 Indirect corporate expenses, net (8,482) (7,438) (5,345) --------- --------- --------- Operating profit 21,133 21,231 20,661 Interest income 48 749 2,821 Interest expense (60,407) (55,570) (39,946) --------- --------- --------- Loss before income taxes, discontinued operations, extraordinary items and cumulative effects of accounting changes(1) $ (39,226) $ (33,590) $ (16,464) ========= ========= ========= (1) The following non-cash charges have been included in the determination of loss for the periods presented: 1993 1994 1995 ---- ---- ---- (In Thousands) Depreciation $ 19,799 $ 22,242 $ 20,820 Amortization of goodwill and other 969 964 965 Product liability charge (industrial fabrics and products segment) - - 5,000 Other non-cash charges to income 1,957 131 371 Interest accretion and debt issuance cost amortization 11,729 11,161 8,818 --------- --------- --------- $ 34,454 $ 34,498 $ 35,974 ========= ========= =========
13 15 RESULTS OF OPERATIONS FISCAL 1995 COMPARED TO FISCAL 1994 (RESTATED FOR EFFECT OF CLASSIFYING CARPET BUSINESS AS DISCONTINUED OPERATIONS) Consolidated net sales from continuing operations increased $10.7 million (2.3%) from $461.9 million in Fiscal 1994 to $472.6 million in Fiscal 1995. Operating profit from continuing operations decreased $0.6 million (2.7%) from $21.2 million in Fiscal 1994 to $20.7 million in Fiscal 1995. Excluding a $5 million charge to income in Fiscal 1995 for product liability costs (discussed below), operating income would have increased $4.5 million in Fiscal 1995 over Fiscal 1994. Substantially all of these increases in consolidated net sales and operating profits occurred in the first two fiscal quarters of 1995. The last two fiscal quarters of 1995 saw declines in operating results from comparable prior year levels. This second half decline is primarily due to very weak market conditions for the Company's apparel fabrics which conditions are expected to continue to negatively impact consolidated results of operations in Fiscal 1996. Net sales in Fiscal 1995 in the apparel fabrics and products segment, which includes unfinished woven apparel fabrics (greige goods) primarily for women's wear, yarn sales and elastic products for various apparel uses, declined $7.0 million (2.7%) from $254.8 million in Fiscal 1994 to $247.8 million in Fiscal 1995. Fiscal 1995 results in the apparel fabrics and products segment were marked by two distinct halves. During the first two fiscal quarters of 1995, the Company reported results which were stronger than the comparable 1994 quarters primarily as a result of the Company's change in its product offering to emphasize specialty fabrics with more fashion and styling characteristics. Although overall apparel market conditions were not strong, these fabrics commanded higher average selling prices and margins than commodity type fabrics and allowed the Company to improve its margins in the face of the continued flood of imported commodity apparel fabrics, primarily from Chinese and Eastern European sources. The recent passage of the General Agreement on Tariffs and Trade (GATT) will likely foster such foreign competition in the commodity apparel fabrics market in the future. During the second half of Fiscal 1995, consumer demand for apparel products weakened significantly which in turn has led to a much weaker market for the Company's fabrics. As a result of this lower unit demand for all fabric styles, the impact of the aforementioned change in product offering was much less apparent in the second half. These weak market conditions have led to a number of recent business failures and will continue to impact all areas of the apparel markets. The Company, along with other textile manufacturers involved in the apparel industry, has curtailed production in the first quarter of 1996 in response to this poor demand. Market conditions have continued to weaken into Fiscal 1996 and no reversal of this trend is expected in the near term. As a result, sales and operating income in the apparel fabrics and products segment are expected to be substantially less in Fiscal 1996 than in Fiscal 1995. Operating profit in the apparel fabrics and products segment declined by $1.8 million (9.8%) from $18.5 million in Fiscal 1994 to $16.7 million in Fiscal 1995. This decrease is primarily the result of lower unit volume and poor average selling prices for the Company's apparel fabrics and products. In addition to the weak market conditions, the Company has experienced significant price increases for many of its most important raw materials, including rayon and polyester fiber. Net sales in Fiscal 1995 in the industrial fabrics and products segment, which includes single-ply roofing and environmental membrane, woven fabrics constructed of cotton, synthetics and fiberglass for insulation, filtration, and lamination applications, and extruded urethane products for industrial uses, increased $22.3 million (13.1%) to $192.0 million from $169.7 million in Fiscal 1994. Sales of fiberglass fabrics for electrical circuit boards and construction-related scrims increased $7.0 million. The market for fiberglass fabrics, particularly those used in the manufacture of electronic circuit boards has been growing in connection with the rapidly expanding worldwide consumer demand for electronic products. This growing global demand for electronic devices which has fueled the increased sales and profitability for the Company's fiberglass product line is not expected to slow for the 14 16 foreseeable future. As a result, the Company has and will continue to expand and enhance productive capacity in this area. Sales of cotton industrial fabrics increased $6.7 million as a result of higher unit volume in the first fiscal quarter and the pass-through of relatively higher cotton costs in Fiscal 1995. Sales of roofing membrane increased $4.9 million primarily as a result of the continued success of the Company's new line of roofing products introduced in late 1993. This new product's competitive price and improved performance characteristics have fueled its sales growth. The Company expects that sales of roofing membrane will continue to increase as this product gains further market acceptance. Operating profit in Fiscal 1995 for the industrial fabrics and products segment was level with Fiscal 1994 at $7.6 million. The operating profit in Fiscal 1995 was reduced as a result of a $5 million charge for product liability costs for which there was no comparable charge to income in Fiscal 1994. During the fourth quarter of Fiscal 1995, management determined that the estimate of the future costs associated with providing services and materials to repair or replace certain defective roofing products sold by the Company's predecessor prior to 1987 required revision. In 1988, the Company estimated the aggregate future costs to repair or replace those defective roofing products to be approximately $34.1 million. This estimate was based on a number of factors, including assumed claim rates and costs to repair or replace. Through October 28, 1995, approximately $29.8 million has been incurred and charged to this liability. The Company reevaluated the exposure based on recent experience and claims in process. The liability for future costs associated with these defective roofing products is subject to management's best estimate, including factors such as expected future claims experience by geographic region and roofing compound applied; expected costs to repair or replace such roofing products; estimated remaining length of time that such claims will be made by customers; and the estimated costs to litigate and settle certain claims now in litigation and those that may result in future litigation. Based on warranties that were issued on the roofs, the Company estimates that the defective roofing product claims will be substantially settled by 2000. Based on management's estimate of a range of future costs of approximately $9.3 million to $11.4 million, the Company recorded a $5.0 million addition to the liability for such defective products increasing such liability to $9.3 million at October 28, 1995. Operating profit in Fiscal 1995 in the industrial fabrics and products segment, excluding the aforementioned charge for product liability costs, increased $5.0 million (65.3%) to $12.6 million from $7.6 million in Fiscal 1994. The increase in operating profit is primarily a result of the higher sales volumes described above combined with the effects of improved manufacturing and operating efficiencies. The Company continuously evaluates its operating processes and capabilities in order to improve performance. Enhancements, which include modernizing plant and equipment and optimum utilization of human resources, are expected in all segments of the Company's operations and particularly in the industrial segment in which a very broad array of product lines and customers is served. As a result, margins in the industrial fabrics and products segment, which improved in Fiscal 1995, are expected to continue to reflect improvement in the future. Net sales in Fiscal 1995 in the home fashion textiles segment, which includes woven drapery fabrics and yarns for the home furnishings industry declined by $4.6 million (12.3%) to $32.7 million from $37.3 million in Fiscal 1994. The decline in volume results from weak demand for the Company's woven fabrics used in home decoration, a continuation of a trend in home fashion textile use for several years, combined with the weak soft goods market in 1995. 15 17 Operating profit in Fiscal 1995 in the home fashion textile segment declined by $0.8 million (31.8%) to $1.7 million primarily as a result of the lower sales volume described above and lower average selling prices for the Company's fabrics. Indirect corporate expenses in Fiscal 1995 declined $2.1 million from $7.4 million in Fiscal 1994 to $5.3 million in Fiscal 1995, primarily as a result of lower professional fees and lower depreciation and amortization. Interest expense for Fiscal 1995 is $15.6 million lower than it was for Fiscal 1994. Giving effect to the reduction of debt associated with the use of the net proceeds from the sale of the Automotive Assets in Fiscal 1994 on a pro forma basis would reduce interest expense by $14.1 million in Fiscal 1994. Such pro forma reduction includes $1.3 million representing interest accretion and debt issuance cost amortization. After giving pro forma effect to the debt reduction described above, interest expense decreased approximately $1.5 million in Fiscal 1995 from Fiscal 1994. In Fiscal 1995, a $3.4 million decrease in interest expense as a result of the lower debt balances caused by the Company's open market purchases of certain of its previously outstanding notes and debentures (as discussed below) was offset to the extent of $1.9 million due primarily to higher average interest rates and the compounding effect of accretion of debt discounts and non-cash interest. During the first quarter of Fiscal 1995, the Company expended $36.6 million to make open market purchases of certain of its outstanding notes and debentures with an aggregate face value of $66.6 million and a carrying value (including interest due at maturity) of $59.2 million. The Company recognized a gain from early extinguishment of debt of $20.1 million, net of expenses of $1.9 million and income taxes of $0.6 million. The Company has made no further open market purchases and is not currently seeking to make any such purchases. The terms of the Asset Purchase Agreement dated May 25, 1994, as amended, regarding the sale of the Automotive Assets on June 28, 1994, provided that the selling price be adjusted based on the net assets sold. During Fiscal 1995, such amount was finalized and resulted in additional cash proceeds to the Company of $4.5 million. Such amount, net of $0.1 million of tax, has been included as gain on sale of discontinued operations in Fiscal 1995. On November 16, 1995, pursuant to the terms of an Asset Transfer Agreement dated as of November 16, 1995, by and among the Company, JPS Carpet Corp. ("Carpet"), a wholly-owned subsidiary of the Company, Gulistan Holdings Inc., and Gulistan Carpet Inc., a wholly-owned subsidiary of Gulistan Holdings Inc. (collectively, "Gulistan"), the Company and Carpet consummated the sale of substantially all of the assets of Carpet used in the business of designing and manufacturing tufted carpets for sale to residential, commercial and hospitality markets (the "Carpet Business"). Pursuant to the Asset Transfer Agreement, Gulistan agreed to assume substantially all of the liabilities and obligations associated with the Carpet Business. The consideration for the Carpet Business consisted of approximately $22.5 million in cash, subject to certain post- closing adjustments based on the audited amount of working capital transferred on November 16, 1995, and other debt and equity securities of Gulistan as follows: a $10 million Promissory Note due in November 2001, $5 million of preferred stock redeemable in November 2005, and warrants to purchase 25% of the common stock of Gulistan. Based on an independent valuation, the Company has determined the fair value of these debt and equity securities to be approximately $11.3 million. Since the disposal of the Carpet Business occurred subsequent to the end of Fiscal 1995, the net assets of the Carpet Business (adjusted to net realizable value) have been classified as "net assets held for sale" on the October 28, 1995 Consolidated Balance Sheet. As of October 28, 1995, the Company adjusted the net assets of the Carpet Business to their net realizable value, which resulted in a charge to the 1995 Consolidated Statement of Operations of $30.7 million, classified as loss on sale of discontinued operations. The loss on the sale is not currently recognizable for tax purposes and the Company has recorded no net tax benefit as a result of this loss due to uncertainties regarding the ability to utilize these losses in future years. 16 18 FISCAL 1994 COMPARED TO FISCAL 1993 (BOTH YEARS RESTATED FOR EFFECT OF CLASSIFYING CARPET BUSINESS AS DISCONTINUED OPERATIONS) Consolidated net sales from continuing operations increased $4.3 million (0.9%) from $457.6 million in Fiscal 1993 to $461.9 million in Fiscal 1994. Operating profit from continuing operations increased $0.1 million to $21.2 million in Fiscal 1994. In general, lower margins on sales of apparel fabrics and products and home fashion textiles were offset by increases in sales and margins for industrial fabrics and products. Net sales in Fiscal 1994 in the apparel fabrics and products segment declined by $7.7 million (2.9%) from $262.5 million in Fiscal 1993 to $254.8 million. Increased foreign competition in the market for commodity apparel fabrics, primarily from Eastern European and Chinese sources, resulted in lower average selling prices and lower unit volumes in this market segment. During 1994, the Company responded to these changes in its business environment by changing its product offering dramatically, emphasizing specialty fabrics with more fashion and styling characteristics. These changes involved enhancing the Company's manufacturing capabilities and responsiveness to its customers. The markets for such specialty, styled fabrics, in which quality, product development, responsiveness and speed of delivery are more critical do not allow foreign competitors the type of cost advantage which they enjoy in commodity markets. Operating profit in Fiscal 1994 in the apparel fabrics and products segment declined by $3.3 million (15.2%) from Fiscal 1993 primarily as a result of the lower average selling prices for much of the Company's apparel fabrics product line, as discussed above. In addition, lower volume and a weaker product mix in sales of apparel elastic products accounted for $1.1 million of the decline in operating profit. Net sales in Fiscal 1994 in the industrial fabrics and products segment increased $12.9 million (8.3%) to $169.7 million from $156.8 million in Fiscal 1993. This increase was primarily the result of increased demand for fiberglass fabrics used in commercial construction and electronic circuit boards ($6.6 million) and due to the introduction in late 1993 of the Company's new product for the single-ply roofing market ($4.3 million). Operating profit in Fiscal 1994 in the industrial fabrics and products segment increased $4.0 million (112.7%) to $7.6 million from $3.6 million in Fiscal 1993 due to the higher sales volume discussed above and improved product mix in Fiscal 1994. Net sales in Fiscal 1994 in the home fashion textiles segment decreased $1.0 million to $37.3 million from $38.3 million in Fiscal 1993 primarily as a result of lower unit sales of drapery fabric, reflecting a continuation of a trend away from such fabrics in home decoration. Operating profit in Fiscal 1994 in the home fashion textiles segment declined $1.6 million (39.5%) to $2.6 million from $4.2 million in Fiscal 1993 as a result of the aforementioned decline in unit sales and a less profitable product mix in home fashion fabrics. Indirect corporate expenses in Fiscal 1994 declined $1.1 million to $7.4 million from $8.5 million in Fiscal 1993 due primarily to lower professional fees and lower depreciation and amortization expense. 17 19 Interest expense for Fiscal 1994 is $4.8 million lower than it was for Fiscal 1993. Giving effect to the reduction of debt associated with the use of the net proceeds from the sale of the Automotive Assets (as discussed above) on a pro forma basis would reduce interest expense by $21.6 million in Fiscal 1993 and $14.1 million in Fiscal 1994. Such pro forma reductions include $3.1 million and $1.3 million in Fiscal 1993 and 1994, respectively, representing interest accretion and debt issuance cost amortization. After giving pro forma effect to the debt reduction, interest expense increased approximately $2.6 million in Fiscal 1994 from Fiscal 1993 due primarily to additional revolver loan borrowings and the compounding effect of accretion of debt discounts and non-cash interest. 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 (as defined below), which in connection with the sale of the Carpet Business on November 16, 1995, was reduced to a maximum of $118 million from $135 million. At October 28, 1995, the Company had $40.5 million available for borrowing under the Revolving Credit Facility. Borrowings under the Revolving Credit Facility are made or repaid on a daily basis in amounts equal to the net cash requirements or proceeds for that business day. The Company and its operating subsidiaries (being hereinafter collectively referred to as the "Borrowing Subsidiaries") are parties to the Fourth Amended and Restated Credit Agreement, dated as of June 24, 1994, as amended (the "Restated Credit Agreement"), by and among the financial institutions party thereto, Citibank, N.A. ("Citibank"), as administrative agent and co-agent, and General Electric Capital Corporation ("GECC"), as collateral agent and co-agent. The Restated Credit Agreement, as amended in connection with the sale of the Carpet Business which occurred on November 16, 1995, provides for a revolving credit loan facility and letters of credit (the "Revolving Credit Facility") in a maximum principal amount equal to a lesser of (a) $118 million and (b) a specified borrowing base, which is based upon eligible receivables and inventory of the Borrowing Subsidiaries (the "Borrowing Base"), except that (i) no Borrowing Subsidiary may borrow an amount greater than the Borrowing Base attributable to it, (ii) letters of credit may not exceed $15 million in the aggregate, and (iii) $20 million of the Revolving Credit Facility is available, not subject to the Borrowing Base, to purchase property, plant and equipment or to finance or refinance such purchases ("Capex Loans"), provided that the aggregate of all revolving credit loans, including Capex Loans, and letters of credit may not exceed the lesser of (A) $118 million and (B) the sum of the Borrowing Base plus $25 million (subject to certain reductions). Net cash provided by operations improved to $6.5 million in Fiscal 1995 compared to a use of $10.4 million in Fiscal 1994 primarily due to a $14.5 million decrease in interest payments. Cash used for increases in working capital (exclusive of the Carpet Business) and payments on long-term roofing liabilities totaled $10.9 million. Accrued interest declined by $2.6 million primarily as a result of lower outstanding amounts of notes and debentures at October 28, 1995. Net receipts from discontinued operations, which in Fiscal 1995 represents the net cash flow from the Carpet Business totaled $3.5 million. Such amount includes a reduction in the working capital employed in the Carpet Business of $5.2 million during Fiscal 1995. Net cash from operations, receipts from discontinued operations, and increased borrowings under the Revolving Credit Facility funded property and equipment additions of approximately $20.3 million. In response to the expectation of lower operating cash flows in the future, management expects to reduce such capital spending in Fiscal 1996 to approximately $11 million. 18 20 On November 16, 1995 at the closing of the sale of the Carpet Business as discussed above, the Company received approximately $22.5 million in cash, net of expenses, which it applied to reduce outstanding borrowings under its bank credit agreement. The cash proceeds are subject to certain post-closing adjustments based on net assets (as defined) as of the closing date. The Company has estimated the amount of such adjustment to be approximately $3.5 million payable to Gulistan. Therefore, the final amount of net cash proceeds to be applied by the Company to reduce outstanding borrowings under its bank credit agreement is expected to be approximately $19.0 million (net of fees, expenses and the estimated post-closing adjustment resulting from the level of working capital transferred at the closing date) based on management's best estimate of the certain post-closing adjustments for the working capital transferred. Management continually reviews various options for enhancing liquidity and its cash flow to cash requirements coverage, both operationally and financially. Such options include strategic dispositions and financing and refinancing activities aimed at increasing cash flow and reducing cash requirements, the principal items of which are interest and capital expenditures. Provisions of the Company's indentures governing its debt securities (the "Indentures") place significant restrictions on certain corporate acts such as mergers, consolidations, acquisitions, repurchases of stock, the making of certain restricted payments, including the payment of cash dividends on the Company's capital stock, transactions with affiliates and the sale of assets. The Company must maintain minimum levels of "net worth", defined to be total assets minus liabilities plus the subordinated notes and debentures and other adjustments. The Indentures place limitations on the Company's ability to incur additional debt, grant a security interest in its assets and require the Company to apply the proceeds from the sale of assets, outside the ordinary course of business, towards reducing outstanding debt. The payment of dividends is prohibited. Other customary covenants, conditions and default provisions are also present. The Company was in compliance with the restrictions and financial covenants of its debt agreements at October 28, 1995. Management believes that the Company's capital resources and expected cash flows will be adequate to meet its operating and working capital needs during Fiscal 1996. The Revolving Credit Facility (or a similar credit facility) is essential for the Company's continued operations. Prior to the expiration of the Company's Revolving Credit Facility on December 1, 1996, management will discuss extension of the facility with its banks. Mandatory principal payments of approximately $69 million on the Company's senior subordinated discount notes and senior subordinated notes are due June 1, 1997. Although such principal payments are not scheduled until June 1997, the Company's projected cash flows and capital resources are insufficient to satisfy such obligations. The Company cannot predict what effect, if any, that the mandatory payments on the debt securities in June 1997 will have on the negotiations with the banks to extend the Revolving Credit Facility beyond December 1, 1996. However, the Company does not expect that an extension of its Revolving Credit Facility beyond May 31, 1997 will be negotiated unless such debt securities are extended, replaced or refinanced. Accordingly, management expects to engage advisors and discuss extension, replacement or refinancing of the debt securities with its securityholders. The Company's ability to accomplish a restructuring of the terms of its debt securities or any refinancing will depend on a number of factors, including its operating performance, market conditions and the terms of any extension, replacement or refinancing. Management is unable to predict the Company's ability to accomplish the foregoing extension of its bank financing and extension, replacement or refinancing of its debt securities. The Company expects that its planned capital expenditures in Fiscal 1996 of approximately $11 million will be funded by cash from operations, bank and other equipment financing sources. Should such capital resources be inadequate or unavailable, however, management would defer certain of its planned capital expenditures or take other appropriate actions to preserve liquidity. At October 28, 1995, the Company has commitments for capital expenditures of approximately $1.6 million. 19 21 INFLATION AND TAX MATTERS The Company is subject to the effects of changing prices. It has generally been able to pass along inflationary increases in its costs by increasing the prices for its products; however, market conditions sometimes preclude this practice. The application of purchase accounting in connection with the Acquisition in 1988 mitigates the effects of changing costs on the Company's Consolidated Financial Statements because assets and liabilities were adjusted to fair values at the date of the Acquisition, and costs of sales and depreciation have been adjusted accordingly. The Company provided $1.2 million for income taxes on continuing operations in Fiscal 1995. No tax expense resulted from applying the statutory tax rate to the loss before income taxes. However, the Company was not able to fully offset subsidiary income in all tax jurisdictions with net operating losses of the Company or other subsidiaries or operating loss carryovers and, as a result, a provision for state income taxes was required. During Fiscal 1994, the Company utilized approximately $141 million of net operating loss carryforwards to offset the gain on sale of the Automotive Assets. Income tax expense incident to the sale was reduced by approximately $49 million as a result of such utilization. Federal alternative minimum and state taxes of approximately $2.8 million were recognized as a result of the sale. The Company's ability to utilize its net operating losses may be significantly limited under the income tax laws should there be changes in the ownership of the Company's stock which constitute an ownership change for tax purposes. The effect of such an ownership change would be to significantly limit the annual utilization of the remaining net operating loss to an amount equal to the value of the Company immediately prior to the time of the change (subject to certain adjustments) multiplied by the Federal long-term tax exempt rate. The Company does not believe that this potential limitation on net operating loss carryforwards is applicable. However, the Company has provided a 100% valuation allowance of $26 million for its remaining deferred tax asset, net of existing taxable "temporary differences," except those related to certain deferred state tax liabilities. The gross deferred tax asset relates primarily to the benefit of the net operating loss carryforward and losses from discontinued operations not currently recognizable for tax purposes. In the Company's opinion, the valuation allowance is required as realization of the tax benefit is not assured based on prior operating history. Although the Company believes use of its net operating losses to offset the gain on the Automotive Assets will more likely than not be sustained under existing tax laws, uncertainty exists primarily due to the fact that applicable regulations under Internal Revenue Code Section 382 have not been issued. Therefore, in accordance with provisions of the Indentures, the Company set aside, in a special-purpose subsidiary, a portion ($39.5 million) of the net proceeds from the sale of the Automotive Assets to satisfy, if necessary, these possible contingent tax liabilities. These funds have been invested in U.S. Government securities and are classified as other assets in the Company's Consolidated Balance Sheets. In the first quarter of Fiscal 1995, the Company estimated that the open market purchases of certain of its debt securities would result in additional tax liabilities of approximately $3.2 million. Such amount was recorded as a reduction of the extraordinary gain from early extinguishment of debt in the first fiscal quarter. This amount of tax was based on management's best estimate at that time of alternative minimum taxable income for Fiscal 1995. During the fourth fiscal quarter, management's estimate of Fiscal 1995 alternative minimum taxable income was revised downward. Accordingly, the Company reduced the $3.2 million tax estimate by $2.6 million to $0.6 million during the fourth quarter of Fiscal 1995. The loss recorded on the disposition of the Carpet Business is not currently recognizable for tax purposes. The Company has recorded no net tax benefit in its financial statements due to uncertainties surrounding the Company's ability to utilize such losses in future years. 20 22 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEPENDENT AUDITORS' REPORT JPS Textile Group, Inc.: We have audited the accompanying consolidated balance sheets of JPS Textile Group, Inc. and subsidiaries (the "Company") as of October 28, 1995 and October 29, 1994, and the related consolidated statements of operations, senior redeemable preferred stock and shareholders' equity (deficit), and cash flows for each of the three years in the period ended October 28, 1995. Our audits also included the financial statement schedule listed in the index at page S-1. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at October 28, 1995 and October 29, 1994, and the results of its operations and its cash flows for each of the three years in the period ended October 28, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. The accompanying consolidated financial statements for the year ended October 28, 1995 have been prepared assuming that the Company will continue as a going concern. As discussed in Note 12 to the consolidated financial statements, the Company has had recurring net losses from continuing operations since inception, has a net shareholders' deficiency and the Company's senior revolving credit facility expires on December 1, 1996. The Company's ability to extend the senior revolving credit facility or obtain alternative sources of financing is uncertain due to the significant mandatory principal payments described in Note 12. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 12. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. DELOITTE & TOUCHE LLP Greenville, South Carolina January 15, 1996 21 23 JPS TEXTILE GROUP, INC. CONSOLIDATED BALANCE SHEETS (In Thousands Except Share Data)
October 29, October 28, 1994 1995 ------------ ------------ ASSETS CURRENT ASSETS: Cash $ 1,844 $ 1,352 Accounts receivable, less allowance of $2,577 in 1994 and $2,131 in 1995 (Note 5) 87,100 88,186 Inventories (Notes 4 and 5) 48,044 48,729 Prepaid expenses and other 1,221 1,024 Net assets held for sale (Note 3) 69,684 28,932 --------- --------- Total current assets 207,893 168,223 PROPERTY, PLANT AND EQUIPMENT, net (Notes 4 and 5) 163,448 162,957 EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED, less accumulated amortization of $5,912 in 1994 and $6,877 in 1995 32,454 31,489 OTHER ASSETS (Notes 4, 8 and 9) 49,016 50,153 --------- --------- Total $ 452,811 $ 412,822 ========= =========
22 24
October 29, October 28, 1994 1995 -------------- -------------- LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable $ 30,665 $ 29,754 Accrued interest 12,448 9,895 Accrued salaries, benefits and withholdings (Note 8) 12,541 11,503 Other accrued expenses (Notes 4, 8 and 10) 14,353 12,699 Current portion of long-term debt (Note 5) 2,347 2,770 --------- --------- Total current liabilities 72,354 66,621 LONG-TERM DEBT (Note 5) 335,472 327,668 DEFERRED INCOME TAXES (Note 7) 3,565 4,165 OTHER LONG-TERM LIABILITIES (Notes 4, 8 and 9) 19,430 23,242 --------- --------- Total liabilities 430,821 421,696 --------- --------- COMMITMENTS AND CONTINGENCIES (Notes 3, 5, 7 and 8) SENIOR REDEEMABLE PREFERRED STOCK, redemption value of $48,374 in 1994 and $51,324 in 1995 (Note 6) 24,340 28,171 --------- --------- SHAREHOLDERS' EQUITY (DEFICIT) (Note 6): Junior preferred stock 250 250 Common stock: Class A, 490,000 shares issued and outstanding 5 5 Class B, 510,000 shares issued and outstanding 5 5 Additional paid-in capital 33,444 29,613 Deficit (36,054) (66,918) --------- --------- Total shareholders' deficit (2,350) (37,045) --------- --------- Total $ 452,811 $ 412,822 ========= =========
See notes to consolidated financial statements. 23 25 JPS TEXTILE GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands Except Per Share Data)
Year Ended -------------------------------------------- October 30, October 29, October 28, 1993 1994 1995 ------------ ------------ ------------ Net sales $ 457,552 $ 461,871 $ 472,565 Cost of sales 396,160 397,921 406,070 --------- --------- --------- Gross profit 61,392 63,950 66,495 Selling, general and administrative expenses (Note 10) 39,023 39,805 39,586 Other expense, net (Note 8) 1,236 2,914 6,248 --------- --------- --------- Operating Profit 21,133 21,231 20,661 Interest income 48 749 2,821 Interest expense (Note 5) (60,407) (55,570) (39,946) --------- --------- --------- Loss before income taxes, discontinued operations, extraordinary items and cumulative effects of accounting changes (39,226) (33,590) (16,464) Income taxes (Note 7) 1,782 2,800 1,200 --------- --------- --------- Loss before discontinued operations, extraordinary items and cumulative effects of accounting changes (41,008) (36,390) (17,664) Discontinued operations: Income (loss) from discontinued operations, net of taxes of $218 in 1993 and none in 1994 and 1995 24,165 23,628 (7,079) Net gain (loss) on sales of discontinued operations, net of taxes of $2,800 in 1994 and $100 in 1995 (Note 3) - 132,966 (26,241) --------- --------- --------- Income (loss) before extraordinary items and cumulative effects of accounting changes (16,843) 120,204 (50,984) Extraordinary gain (loss) on early extinguishment of debt, net of taxes of $600 in 1995 (Note 5) - (7,410) 20,120 Cumulative effects of accounting changes, net of taxes of $165 in 1993 and none in 1994 (Note 9) (4,988) (708) - --------- --------- --------- Net income (loss) (21,831) 112,086 (30,864) Senior redeemable preferred stock in-kind dividends and discount accretion (Note 6) (2,863) (3,333) (3,831) --------- --------- --------- Income (loss) applicable to common stock $ (24,694) $ 108,753 $ (34,695) ========= ========= ========= Weighted average number of common shares outstanding 1,000,000 1,000,000 1,000,000 ========= ========= ========= Earnings (loss) per common share: Loss before discontinued operations, extraordinary items and cumulative effects of accounting changes $ (43.87) $ (39.73) $ (21.50) Discontinued operations: Income (loss) from discontinued operations 24.17 23.63 (7.08) Net gain (loss) on sales of discontinued operations - 132.97 (26.24) --------- --------- --------- Income (loss) before extraordinary items and cumulative effects of accounting changes (19.70) 116.87 (54.82) Extraordinary gain (loss) on early extinguishment of debt - (7.41) 20.12 Cumulative effects of accounting changes (4.99) (0.71) - --------- --------- --------- Net income (loss) $ (24.69) $ 108.75 $ (34.70) ========= ========= =========
See notes to consolidated financial statements. 24 26 JPS TEXTILE GROUP, INC. CONSOLIDATED STATEMENTS OF SENIOR REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY (DEFICIT) (In Thousands)
Shareholders' Equity (Deficit) Senior -------------------------------------------------- Redeemable Junior Additional Preferred Common Preferred Paid-In Stock Stock Stock Capital Deficit ------------- --------- --------- ---------- ------------ Balance - October 31, 1992 $ 18,144 $ 10 $ 250 $ 39,640 $ (126,309) Net loss for 52 weeks (21,831) Preferred stock in-kind dividends and discount accretion 2,863 (2,863) -------- ---- ------ --------- ---------- Balance - October 30, 1993 21,007 10 250 36,777 (148,140) Net income for 52 weeks 112,086 Preferred stock in-kind dividends and discount accretion 3,333 (3,333) -------- ---- ------ --------- ---------- Balance - October 29, 1994 24,340 10 250 33,444 (36,054) Net loss for 52 weeks (30,864) Preferred stock in-kind dividends and discount accretion 3,831 (3,831) -------- ---- ------ --------- ---------- Balance - October 28, 1995 $ 28,171 $ 10 $ 250 $ 29,613 $ (66,918) ======== ==== ====== ========= ==========
See notes to consolidated financial statements. 25 27 JPS TEXTILE GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands)
Year Ended --------------------------------------------- October 30, October 29, October 28, 1993 1994 1995 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (21,831) $ 112,086 $ (30,864) --------- --------- --------- Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Loss (income) from discontinued operations (24,165) (23,628) 7,079 Loss (gain) on sales of discontinued operations - (132,966) 26,241 Extraordinary loss (gain) on early extinguishment of debt - 7,410 (20,120) Cumulative effects of accounting changes 4,988 708 - Depreciation and amortization, except amounts included in interest expense 20,768 23,206 21,785 Interest accretion and debt issuance cost amortization 11,729 11,161 8,818 Product liability charge - - 5,000 Deferred income taxes 1,082 1,227 - Financing costs incurred (6,016) (2,943) (25) Other, net 2,701 (2,970) (498) Changes in assets and liabilities: Accounts receivable (2,548) 426 (1,086) Inventories (6,729) (179) (685) Prepaid expenses and other assets (1,415) (1,248) (984) Accounts payable (1,496) 228 (911) Accrued expenses and other liabilities (5,602) (2,951) (7,202) --------- --------- --------- Total adjustments (6,703) (122,519) 37,412 --------- --------- --------- Net cash provided by (used in) operating activities (28,534) (10,433) 6,548 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Property and equipment additions (18,267) (18,423) (20,332) Receipts from discontinued operations, net 13,532 17,115 3,453 Proceeds from sale of discontinued operations, net - 259,044 4,415 Purchase of long-term investments - (39,500) - --------- --------- --------- Net cash provided by (used in) investing activities (4,735) 218,236 (12,464) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of long-term debt 5,898 285 5,000 Revolving credit facility borrowings (repayments), net 30,463 (41,666) 41,808 Purchases and repayment of other long-term debt (2,569) (166,044) (41,384) --------- --------- --------- Net cash provided by (used in) financing activities 33,792 (207,425) 5,424 --------- --------- --------- NET INCREASE (DECREASE) IN CASH 523 378 (492) Cash at beginning of year 943 1,466 1,844 --------- --------- --------- Cash at end of year $ 1,466 $ 1,844 $ 1,352 ========= ========= ========= (Continued)
26 28 JPS TEXTILE GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (In Thousands)
Year Ended --------------------------------------------- October 30, October 29, October 28, 1993 1994 1995 ------------ ------------ ------------ SUPPLEMENTAL INFORMATION ON CASH FLOWS FROM CONTINUING OPERATIONS: Interest paid $ 49,455 $ 48,219 $ 33,681 Income taxes paid 480 376 3,314 Reorganization items paid 162 - - Non-cash financing activities: Senior redeemable preferred stock dividends-in-kind 2,604 2,765 2,936
See notes to consolidated financial statements. 27 29 JPS TEXTILE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS AND BASIS OF PRESENTATION JPS Textile Group, Inc. (the "Company") purchased from J.P. Stevens & Co., Inc. ("J.P. Stevens") substantially all of the property, plant and equipment, inventories, certain other assets and the business of five former divisions of J.P. Stevens (the "Predecessor Stevens Divisions") on May 9, 1988 (the "Acquisition"). The purchase was financed through long-term borrowings and the sale of preferred and common stock. The Company operates principally as a manufacturer of apparel fabrics and products, industrial fabrics and products and home fashion textiles. A Plan of Reorganization (the "Plan") which was distributed to the Company's bondholders and preferred stockholders (the "Securityholders") on December 21, 1990, was approved by the securityholders in early February 1991 and in accordance with the Plan, the Company filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code. Subsequently, in March 1991, the bankruptcy court confirmed the Plan and it became effective April 2, 1991. The Plan provided for, among other things, the cancellation of certain existing debt and preferred stock securities in exchange for 490,000 shares of new Class A common stock along with new debt instruments and new preferred stock with lower interest and dividend rates. Since the Company's reorganization did not meet the criteria for "fresh-start" accounting, the primary adjustment to historical carrying values as a result of the reorganization was to state the new long-term debt and senior redeemable preferred stock at present values of amounts to be paid determined at appropriate current interest rates as of April 2, 1991, the effective date of the Plan. The resulting present value discount is amortized as interest expense or dividends over the life of the related debt or senior redeemable preferred stock instrument using the interest method. As described in Note 3, the Company completed the sale of the assets and business of its wholly-owned subsidiary, JPS Carpet Corp., on November 16, 1995 (subsequent to year end). Also described in Note 3, the Company sold the assets and businesses of its wholly-owned subsidiary, JPS Auto Inc., and its 80% owned joint venture and the synthetic industrial fabrics division of JPS Converter & Industrial Corp. (another of the Company's wholly-owned subsidiaries) in June 1994. 2. SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation - The consolidated financial statements include JPS Textile Group, Inc. and its subsidiaries, all of which are wholly owned. Significant intercompany transactions and accounts have been eliminated. Use of Estimates - 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 amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Inventories - Inventories are stated at the lower of cost or market. Cost, which includes labor, material and factory overhead, is determined on the first-in, first-out basis. 28 30 Property, Plant and Equipment - Property, plant and equipment is recorded at cost and depreciation is recorded using the straight-line method for financial reporting purposes. The estimated useful lives used in the computation of depreciation are as follows: Land improvements 10 to 45 years Buildings and improvements 25 to 45 years Machinery and equipment 3 to 15 years Furniture, fixtures and other 5 to 10 years
For tax reporting purposes, the Company uses the Modified Accelerated Cost Recovery System to compute depreciation. Excess of Cost Over Fair Value of Net Assets Acquired - Excess of cost over fair value of net assets acquired is being amortized on a straight-line basis over a period of forty years. Periodically, the Company evaluates the realizability of the excess of cost over fair value of net assets acquired based upon expectations of undiscounted future cash flows and comparing such future cash flows to the carrying amount of the related asset. Debt Issuance Costs - Costs incurred in securing and issuing long-term debt are deferred and amortized over the terms of the related debt in amounts which approximate the interest method of amortization. Product Warranties - On certain of its products, the Company provides a warranty against defects in materials and workmanship under separately priced extended warranty contracts generally for a period of ten years. Revenue from such extended warranty contracts is deferred and recognized as income on a straight-line basis over the contract period. The cost of servicing such product warranties is charged to expense as incurred. Postretirement Benefits - Effective November 1, 1992, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". SFAS No. 106 requires that the projected future cost of providing postretirement benefits, such as health care and life insurance, be recognized as an expense as employees render service instead of when claims are incurred, as had been the Company's practice. See Note 9 for a further description of the accounting for postretirement benefits. Postemployment Benefits - Effective October 31, 1993, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits". SFAS No. 112 requires that the cost of benefits provided to former or inactive employees after employment but before retirement be recognized on the accrual basis of accounting instead of when paid, as had been the Company's practice. See Note 9 for a further description of the accounting for postemployment benefits. Revenue Recognition - The Company recognizes revenue from product sales when it has shipped the goods or ownership has been transferred to the customer for goods to be held for future shipment at the customer's request. Income Taxes - The Company accounts for income taxes using the principles of SFAS No. 109, "Accounting for Income Taxes". Under SFAS No. 109, deferred taxes represent the future income tax effect of temporary differences between the book and tax bases of the Company's assets and liabilities, assuming they will be realized and settled at the amount reported in the Company's financial statements. 29 31 Earnings Per Share - Earnings per share is computed by dividing earnings applicable to common stock (net income or loss adjusted by senior redeemable preferred stock dividends) by the weighted average number of shares of common stock outstanding during the period. Cash Flows - For purposes of reporting cash flows, cash includes cash on hand and in banks. The Company has no investments that are deemed to be cash equivalents. Fiscal Year - The Company's operations are based on a fifty-two or fifty-three week fiscal year ending on the Saturday closest to October 31. The 1993, 1994 and 1995 fiscal years each consisted of 52 weeks. Reclassifications - Certain 1993 and 1994 amounts have been reclassified to conform to the 1995 presentation. In addition, see Note 3 regarding reclassifications of 1993 and 1994 amounts for discontinued operations. 3. SALE OF DISCONTINUED OPERATIONS Carpet Business - On November 16, 1995, pursuant to the terms of an Asset Transfer Agreement dated as of November 16, 1995, by and among the Company, JPS Carpet Corp. ("Carpet"), a wholly-owned subsidiary of the Company, Gulistan Holdings Inc. and Gulistan Carpet Inc., a wholly-owned subsidiary of Gulistan Holdings Inc. (collectively, "Gulistan"), the Company and Carpet consummated the sale of substantially all of the assets of Carpet used in the business of designing and manufacturing tufted carpets for sale to residential, commercial and hospitality markets (the "Carpet Business"). Pursuant to the Asset Transfer Agreement, Gulistan agreed to assume substantially all of the liabilities and obligations associated with the Carpet Business. Gulistan was formed and its common stock is owned by certain members of the former management team at Carpet. The Company and its subsidiaries have agreed, for a three-year period, not to compete directly or indirectly with the business that was sold. The Consolidated Balance Sheets and Statements of Operations and Cash Flows for 1993 and 1994 have been reclassified to reflect the Carpet Business as discontinued operations. The consideration for the Carpet Business consisted of approximately $22.5 million in cash, subject to certain post-closing adjustments based on the audited amount of working capital transferred on November 16, 1995, and other debt and equity securities of Gulistan as follows: a $10 million Promissory Note due in November 2001, $5 million of preferred stock redeemable in November 2005, and warrants to purchase 25% of the common stock of Gulistan. Based on an independent valuation, the Company has determined the fair value of these debt and equity securities to be approximately $11.3 million. Since the disposal of the Carpet Business occurred subsequent to the end of Fiscal 1995, the net assets of the Carpet Business (adjusted to net realizable value) have been classified as "net assets held for sale" on the October 28, 1995 balance sheet. As of October 28, 1995, the Company adjusted the net assets of the Carpet Business to their net realizable value, which resulted in a charge to the 1995 Consolidated Statement of Operations of $30.7 million, classified as loss on sale of discontinued operations. The loss on the sale is not currently recognizable for tax purposes and the Company has recorded no net tax benefit as a result of this loss due to uncertainties regarding the ability to utilize these losses in future years. Net sales from the discontinued operations of the Carpet Business were $140.2 million, $141.6 million and $120.1 million in fiscal years 1993, 1994 and 1995, respectively. 30 32 The final amount of net cash proceeds applied by the Company to reduce outstanding borrowings under its bank credit agreement is expected to be approximately $19.0 million (net of fees, expenses and the estimated post- closing adjustment resulting from the level of working capital transferred at the closing date) based on management's best estimate of the certain post-closing adjustments for the working capital transferred (see Note 5 herein). Automotive Textiles Business - On June 28, 1994, pursuant to the terms of an Asset Purchase Agreement dated May 25, 1995 (the "Asset Purchase Agreement"), by and among the Company, JPS Auto Inc., a wholly-owned subsidiary of the Company ("Auto"), JPS Converter and Industrial Corp., a wholly-owned subsidiary of the Company ("C&I"), Foamex International Inc. ("Foamex") and JPS Automotive Products Corp., an indirect, wholly-owned subsidiary of Foamex ("Purchaser"), the Company consummated the disposition of its Automotive Assets (as described below) to the Purchaser. The Consolidated Balance Sheet and Statements of Operations and Cash Flows for 1993 have been reclassified to reflect the Automotive Assets as discontinued operations. The Automotive Assets consisted of the businesses and assets of Auto and the synthetic industrial fabrics division of C&I, and the Company's investment in common stock of the managing general partner of Cramerton Automotive Products, L.P. (an 80% owned joint venture). Net sales from the discontinued operations of the Automotive Assets were $287.9 million in fiscal year 1993 and $224.9 million for the eight months ended June 28, 1994. Pursuant to the terms of the Asset Purchase Agreement, the Purchaser agreed to assume substantially all of the liabilities and obligations associated with the Automotive Assets. In addition, the Company and its affiliates agreed, for a period of four years, not to directly or indirectly compete in North, Central and South America with the businesses that were sold. The sale price for the Automotive Assets was approximately $283 million, consisting of $264 million of cash paid at closing, $15 million of assumed debt as of June 28, 1994 and certain post-closing adjustments which resulted in a gain of $4.4 million, net of $0.1 million of taxes, recognized in 1995. The sale of the Automotive Assets resulted in an approximate total gain of $137.4 million, net of income taxes of $2.9 million. The net cash proceeds from the disposition of the Automotive Assets (after deductions for fees, other expenses and amounts designated by management to satisfy possible contingent tax liabilities) were approximately $217 million and such proceeds were used by the Company to reduce its outstanding indebtedness. The Company has allocated to the discontinued operations of the Automotive Assets and the Carpet Business a pro-rata portion of the interest expense of its senior credit facility, which pro-rata portions were approximately $4.3 million, $3.4 million and $1.6 million in 1993, 1994 and 1995, respectively. 31 33 4. BALANCE SHEET COMPONENTS The components of certain balance sheets accounts are (in thousands):
October 29, October 28, 1994 1995 ------------ ------------ Inventories: Raw materials and supplies $ 13,782 $ 13,909 Work-in-process 18,414 18,334 Finished goods 15,848 16,486 --------- --------- $ 48,044 $ 48,729 ========= ========= Property, plant and equipment, net: Land and improvements $ 7,291 $ 7,349 Buildings and improvements 51,837 53,649 Machinery and equipment 194,917 205,614 Furniture, fixtures and other 7,467 7,725 --------- --------- 261,512 274,337 Less accumulated depreciation (101,224) (118,866) --------- --------- 160,288 155,471 Construction in progress 3,160 7,486 --------- --------- $ 163,448 $ 162,957 ========= ========= Other noncurrent assets: Unamortized debt issuance costs $ 2,012 $ 1,092 Prepaid pension costs 5,100 5,973 Investments (see Note 8) 40,238 42,885 Other 1,666 203 --------- --------- $ 49,016 $ 50,153 ========= ========= Other accrued expenses: Roofing product liability costs $ 4,300 $ 4,000 Taxes payable other than income taxes 1,413 1,433 Income taxes 4,816 2,753 Other 3,824 4,513 --------- --------- $ 14,353 $ 12,699 ========= ========= Other long-term liabilities: Roofing product liability costs and deferred warranty income $ 13,987 $ 15,700 Accrued other postretirement and postemployment benefits 5,443 5,298 Other - 2,244 --------- --------- $ 19,430 $ 23,242 ========= =========
32 34 5. LONG-TERM DEBT Long-term debt consists of (in thousands):
October 29, October 28, 1994 1995 ------------ ------------ Senior credit facility, revolving line of credit $ 49,918 $ 91,726 Senior subordinated discount notes (including interest due at maturity of $3,395 and $4,370, respectively) 130,179 113,617 Senior subordinated notes (including interest due at maturity of $4,404 and $4,347, respectively) 109,283 81,120 Subordinated debentures 75,000 54,071 Equipment financing 7,658 9,780 --------- --------- Total 372,038 350,314 Less reorganization discount: Senior subordinated discount notes (8,109) (5,171) Senior subordinated notes (8,723) (4,435) Subordinated debentures (17,387) (10,270) --------- --------- Total long-term debt 337,819 330,438 Less current portion (2,347) (2,770) --------- --------- Long-term portion $ 335,472 $ 327,668 ========= =========
Senior Credit Facility - In connection with the sale of the Carpet Business (see Note 3), the Company amended its senior credit facility to provide for a $118 million revolving line of credit and modify existing restrictive covenants. The senior credit facility, as amended, is scheduled to terminate on December 1, 1996. The Company pays a fee of 1/2 of 1% per annum of the average unused line of credit. All senior borrowings bear interest at a Base Rate (as defined) plus 1.0% per annum (9.75% at October 28, 1995) or at the Eurodollar Rate (as defined) plus 2.50% per annum (approximately 8.4% at October 28, 1995). Borrowings under the revolving line of credit (other than for loans used to purchase property, plant and equipment or to finance or refinance such purchases ("Capex Loans")) are limited to specified percentages of eligible accounts receivable and inventories, as defined, and such borrowings plus letters of credit outstanding and Capex Loans may not exceed the lesser of $118 million and the borrowing base plus an additional amount of $25,000,000. As of October 28, 1995, unused letters of credit issued and outstanding totalled $2,430,000. The outstanding unused letters of credit reduce the funds available under the revolving line of credit. At October 28, 1995, the Company had $40,494,000 available for borrowing under the revolving credit agreement. The senior credit facility also provides that net cash proceeds from the sale of assets (as defined and excluding the sale or transfer of the Automotive Assets and the Carpet Business) will be used to permanently repay obligations thereunder to the extent such proceeds from March 1994 forward cumulatively exceed $35 million. No such asset sales occurred during fiscal years 1994 or 1995. During the first quarter of Fiscal 1995, the Company borrowed $36,607,000 under the revolving line of credit and made open market purchases of certain of its outstanding notes and debentures with an aggregate face value (including interest due at maturity) of $68,318,000 and a carrying value of $59,225,000. The Company recognized an extraordinary gain from early extinguishment of debt of $20,120,000, net of expenses of $1,898,000 and income taxes of $600,000. Senior Subordinated Discount Notes - The Company issued the discount notes in the 1991 reorganization. The discount notes began accruing interest on June 1, 1993 at 10.85% with 9.85% paid semi-annually and 1% payable at maturity. Interest payable at maturity compounds semi-annually at the annual rate of 10.85%. In connection with the 1991 reorganization, the carrying value of the discount 33 35 notes was reduced to its estimated net present value using an effective interest rate of 13%. Mandatory redemption payments equal to $37,777,000, plus accrued interest, are due on each of June 1, 1997 and June 1, 1998 prior to maturity on June 1, 1999 with optional early redemption available. Senior Subordinated Notes - The senior subordinated notes bear interest at 10.25% with 9.25% paid semi-annually and 1% payable at maturity and were issued in the 1991 reorganization. Interest payable at maturity compounds semi-annually at the annual rate of 10.25%. In connection with the 1991 reorganization, the notes were adjusted to their estimated net present value by recording a discount resulting in an effective interest rate of 13%. Mandatory redemption payments equal to $31,250,000, plus accrued interest, are due on each of June 1, 1997 and June 1, 1998 with optional early redemption available. Subordinated Debentures - The subordinated debentures bear interest at 7%, payable semi-annually, with a mandatory redemption payment of principal of $37,500,000 due May 15, 1999, prior to maturity on May 15, 2000, with optional early redemption available. The subordinated debentures were issued in the 1991 reorganization. In connection with the 1991 reorganization, the debentures were adjusted to an estimated net present value by recording a discount of $24,390,000 resulting in an effective interest rate of 13.5%. Equipment Financing - The Company has financed a portion of its equipment purchases with loans from a finance company and certain equipment vendors at fixed interest rates ranging from 7.6% to 9.7%. Monthly principal payments are due in various amounts as determined by the terms of the loans which have final maturity dates ranging from October 1997 through December 2001. Restrictive Covenants - Provisions of the senior credit agreement and the Company's other debt indentures place significant restrictions on certain corporate acts such as mergers, consolidations, acquisitions, repurchases of stock, the making of certain other restricted payments, transactions with affiliates and the sale of assets and prohibit the payment of cash dividends. The Company must maintain minimum levels of "net worth", defined to be total assets (excluding investments designated by management to satisfy possible contingent tax liabilities) minus total liabilities plus the subordinated notes and debentures and other adjustments, which vary quarterly from $205 million at October 28, 1995 to $156 million in the fourth quarter of 1996. In addition, the senior credit agreement contains requirements to meet certain financial ratios which vary quarterly or annually and place limitations on the Company's ability to incur additional debt or grant a security interest in its assets. Other customary covenants, conditions and default provisions are also present in the agreement and indentures. The Company was in compliance with the restrictions and financial covenants of its senior credit agreement and its long-term debt indentures at October 28, 1995. Fair Value - The fair value of the Company's long-term debt based on estimated quoted prices, compared to the carrying values (at discounted amounts), is as follows (in thousands):
October 29, 1994 October 28, 1995 --------------------- ---------------------- Carrying Fair Carrying Fair Value Value Value Value --------- --------- --------- ------- 10.85% Senior Subordinated Discount Notes $122,070 $93,186 $108,446 $96,138 10.25% Senior Subordinated Notes 100,560 77,086 76,685 66,025 7% Subordinated Debentures 57,613 33,750 43,081 32,443
34 36 As of January 15 1996, the fair value of the long-term debt had declined to approximately $84 million for the 10.85% notes, $58 million for the 10.25% notes and $26 million for the 7% debentures. Other - Substantially all of the Company's assets are pledged as collateral for the senior credit facilities or the equipment financing. Interest expense includes $11,729,000 in 1993, $11,161,000 in 1994, and $8,818,000 in 1995 representing amortization of debt issuance expenses and accretion of interest on the discounted notes and accrued product liability costs (see Note 8). In 1994, the Company recorded a $7,410,000 loss on early extinguishment of debt in connection with the retirement of certain debt with a portion of the proceeds of the Automotive Assets sale as discussed above. The loss represents deferred financing fees and reorganization discounts associated with the retired debt along with expenses of the transactions. Subsequent Events - On November 16, 1995, the Company closed on the sale of its Carpet Business and used the proceeds received at the closing to paydown on its revolving line of credit (see Note 3). Maturities - Aggregate principal maturities of all long-term debt are as follows (in thousands):
Fiscal Year Ending ------------------ 1996 $ 2,770 1997 166,865 1998 73,858 1999 88,307 2000 17,204 Thereafter 1,310 ---------- $ 350,314 ==========
6. SENIOR REDEEMABLE PREFERRED STOCK AND EQUITY SECURITIES Certain information on senior redeemable preferred stock and equity securities at October 28, 1995 is as follows:
Shares Par Value Issued and Per Share Authorized Outstanding --------- ---------- ----------- Series A Senior Redeemable Preferred Stock $.01 700,000(1) 507,031 Series B Junior Preferred Stock .01 700,000(1) 10,000 Class A Common Stock .01 700,000 490,000 Class B Common Stock .01 700,000 510,000
(1) The aggregate number of authorized shares of preferred stock is 700,000, including both the senior redeemable preferred stock and the junior preferred stock. 35 37 The senior redeemable preferred stock must be redeemed on May 15, 2003. Its holders vote with the junior preferred stockholders as a single class to elect two directors, otherwise, except in the event of default, the senior redeemable preferred stock is non-voting. The senior redeemable preferred stock is redeemable at the option of the Company prior to maturity at 103% of the liquidation preference of $100 per share. Dividends are cumulative and are calculated based on an annual rate of 6% of the liquidation preference and are paid quarterly. Under the terms of various credit agreements, dividends must be in the form of additional shares until 1998. In connection with the 1991 reorganization, the senior redeemable preferred stock was discounted to its estimated net present value with the net discount of $23,351,000 reflected as an adjustment of additional paid-in capital. The difference between the net carrying value of the senior redeemable preferred stock and its mandatory redemption value is being amortized using the interest method of amortization over the life of the shares by charges to additional paid-in capital or, if available, by charges to retained earnings. The effective dividend rate on the senior redeemable preferred stock is 15.0%. The unamortized discount was approximately $24,034,000 at October 29, 1994 and $23,153,000 at October 28, 1995. Because of the lack of recent trading activity and disparities in potential valuation methodologies, determination of the fair value of the Company's senior redeemable preferred stock is impractical. The junior preferred stock has a liquidation preference of $25 per share. Its holders vote with the senior redeemable preferred stockholders as a single class to elect two directors, otherwise, except in the event of default, the junior preferred stock is non-voting. The liquidation preference increases $15 per share for each year that the Company attains certain specified earnings levels for each of the first five fiscal years ended after April 2, 1991. No increase in the liquidation preference occurred because actual earnings were less than the specified earnings levels in each of the years. Dividends are non-cumulative and are payable at the same rate as is paid on the common stock, if any. As of October 28, 1995, no dividends had been paid. The Company's senior credit agreement prohibits the payment of cash dividends. The Class A and Class B common stocks have substantially the same voting rights except in the election of directors. The Class A common stockholders, voting separately as a class, have the right to elect three out of the seven Company directors. 7. INCOME TAXES The 1993, 1994 and 1995 provision for income taxes on continuing operations included in the consolidated statements of operations consists of the following (in thousands):
1993 1994 1995 --------- --------- --------- Current: Federal $ 34 State 666 $ 1,573 $ 1,200 Deferred state 1,082 1,227 - -------- ------- ------- Provision for income taxes $ 1,782 $ 2,800 $ 1,200 ======== ======= =======
The 1993 current Federal income tax provision relates to alternative minimum taxes. This amount can be carried forward indefinitely and be claimed as a credit against Federal income taxes in subsequent years. 36 38 A reconciliation between income taxes at the statutory Federal income tax rate (34.83% for 1993 and 35% for 1994 and 1995) and the provision for income taxes for the years ended 1993, 1994 and 1995 is as follows (in thousands):
1993 1994 1995 ----------- ------------ ---------- Income tax benefit at Federal statutory rate $ (13,662) $ (11,757) $ (5,762) Increase in income taxes arising from effect of: State and local income taxes 1,748 2,800 1,200 Amortization of goodwill 314 316 316 Other 308 250 212 Losses not resulting in tax benefits 13,074 11,191 5,234 ---------- --------- -------- Provision for income taxes $ 1,782 $ 2,800 $ 1,200 ========== ========= ========
Presented below are the elements which comprise deferred tax assets and liabilities (in thousands):
1994 1995 ------------ ----------- Gross deferred assets: Estimated allowance for doubtful accounts $ 594 $ 476 Excess of tax over financial statement basis of inventory 759 634 Accruals deductible for tax purposes when paid 2,384 2,263 Deferred compensation deductible for tax purposes when paid 178 39 Postretirement benefits deductible for tax purposes when paid 1,657 2,177 Miscellaneous 50 56 Alternative minimum tax credit carryforward available 2,100 2,300 Deferred financial statement income recognized for tax purposes when received 6,757 5,432 Allowance for loss on discontinued operations not currently recognized for tax purposes - 11,231 Excess of tax basis of intangibles over financial statement basis 7,283 8,004 Net operating loss carryover 22,928 23,519 Less valuation allowance (11,697) (26,020) ---------- --------- Gross deferred assets 32,993 30,111 ---------- --------- Gross deferred liabilities: Pension asset recognized for book purposes (1,641) (2,208) Excess of financial statement over tax basis of property, plant, and equipment (23,807) (21,550) Excess of tax over financial statement basis of debt instruments (net of deferred financing fees) (6,266) (6,353) Excess of financial statement over tax basis of discontinued operations (1,064) - Deferred state taxes resulting from filing separate subsidiary returns in some jurisdictions (3,565) (4,165) Miscellaneous (215) - ---------- --------- Gross deferred liabilities (36,558) (34,276) ---------- --------- Net deferred tax liability $ (3,565) $ (4,165) ========== =========
The net deferred tax liability is included in the accompanying consolidated balance sheet as a non-current liability. 37 39 At October 28, 1995, the Company had net operating loss carryforwards for tax purposes of approximately $63,600,000. The net operating losses expire in years 2005 through 2008. The Company also has alternative minimum tax net operating losses of approximately $6,000,000 which expire in 2007. During the year, the Company utilized approximately $4,500,000 of alternative minimum tax net operating loss carryovers to offset income from the extraordinary gain on early extinguishment of debt. As previously noted, alternative minimum taxes can be carried forward indefinitely and used as a credit against regular federal taxes. The Company's ability to utilize its net operating losses may be significantly limited under the income tax laws should there be changes in the ownership of the Company's stock which constitute an ownership change for tax purposes. The effect of such an ownership change would be to significantly limit the annual utilization of the net operating loss carryforwards to an amount equal to the value of the Company immediately prior to the time of the change (subject to certain adjustments) multiplied by the Federal long-term tax exempt rate. The Company does not believe this potential limitation on utilization of the net operating loss carryforwards applies. However, due to the Company's operating history, it is uncertain that it will be able to utilize all deferred tax assets. Therefore, a valuation allowance has been provided equal to the deferred tax assets remaining after deducting all deferred tax liabilities, exclusive of those related to certain deferred state tax liabilities. 8. COMMITMENTS AND CONTINGENCIES The Company leases office facilities, machinery and computer equipment under noncancellable operating leases. Rent expense was approximately $2,585,000 in 1993, $2,810,000 in 1994 and $3,411,000 in 1995. Future minimum payments, by year and in the aggregate, under the noncancellable operating leases with terms of one year or more consist of the following at October 28, 1995 (in thousands): 1996 $ 2,960 1997 2,109 1998 1,526 1999 1,343 2000 988 Thereafter 290 -------- $ 9,216 ========
The Company has planned expenditures of approximately $11 million for property, plant and equipment additions in Fiscal 1996. The Company has established long-term incentive compensation plans for certain of its key executives. One plan provides for payments to participants at retirement or termination based on the increase of the fair value, as defined, of the common stock of the Company over certain established levels, as determined by the Company's Board of Directors. No amounts have been earned under the provisions of this plan, except for termination and death benefits accrued and paid of $99,000 and $203,000 in Fiscal 1993 and 1994, respectively. Another plan, effective November 1, 1994, provides for payments to covered participants from amounts accumulated in individual award banks. Awards are determined based on the achievement of specified returns on net assets employed. Awards may be either positive or negative in any given year and are added or subtracted each year from each participant's respective award bank. A percentage of each participant's award bank balance is paid out annually beginning after Fiscal 1996. The payout percentage is 33% in Fiscal 1997, 50% in Fiscal 1998 and 33% for fiscal years thereafter. 38 40 No awards are expected to be paid out under this plan for operating results through October 28, 1995. The Company's policy is to accrue the cost of the plans as the fair value of the common stock increases over the established levels or as actual earnings occur if the cumulative earnings for the periods included under the plan are expected to reach the specified levels necessary for bonuses to be payable. The Company has provided for all estimated future costs associated with certain defective roofing products sold by the Predecessor Stevens Division operations. The liability for future costs associated with these defective roofing products is subject to management's best estimate, including factors such as expected future claims by geographic region and roofing compound applied; expected costs to repair or replace such roofing products; estimated remaining length of time that such claims will be made by customers; and the estimated costs to litigate and settle certain claims now in litigation and those that may result in future litigation. Based on warranties that were issued on the roofs, the Company estimates that the defective roofing product claims will be substantially settled by 2000. Based on management's estimate of a range of future costs of approximately $9.3 million to $11.4 million, the Company recorded a $5,000,000 addition to the liability for such defective products, charged to other expense in the accompanying statement of operations increasing such liability to $9,270,000 at October 28, 1995 (the liability was $8,207,000 at October 29, 1994). The Company records the costs of meeting these obligations as a reduction of the balance of the recorded liability and, accordingly, such costs are not reflected in results of operations. Payments on accrued product liability claims were $5,240,000, $3,870,000 and $4,040,000 in fiscal years 1993, 1994 and 1995, respectively. Management updates its assessment of the adequacy of the remaining reserve for defective roofing products quarterly and if it is deemed that an adjustment to the reserve is required, it will be charged to operations in the period in which such determination is made. In connection with the sale of the Automotive Assets in June 1994, the Company invested $39.5 million of the sale proceeds in long-term securities (principally United States Treasury Securities maturing in 1997) designated by management to be available to satisfy possible contingent tax liabilities. The investments are classified as "held-to-maturity" and recorded at amortized cost. As of October 28, 1995 and October 29, 1994, their aggregate fair value was approximately $43,400,000 and $39,600,000, respectively, with a gross unrealized holding gain of approximately $500,000 in 1995 and a gross unrealized holding loss of approximately $600,000 in 1994. The Company is exposed to a number of asserted and unasserted potential claims encountered in the normal course of business. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company's financial position or future results of operations. 9. RETIREMENT PLANS Defined Benefit Pension Plan - Substantially all of the Company's employees are covered by a company-sponsored defined benefit pension plan. The plan also provides benefits to individuals employed by the Automotive Assets which were sold by the Company on June 28, 1994 and the Carpet Business sold on November 16, 1995 subsequent to the end of Fiscal 1995. The benefits of these former employees were "frozen" at their respective dates of sale. Accordingly, these former employees will retain benefits earned through June 28, 1994 and November 16, 1995, respectively; however, they will not accrue additional benefits. The plan provides pension benefits that are based on the employees' compensation during the last ten years of employment. The Company's policy is to fund the annual contribution required by applicable regulations. 39 41 Assets of the pension plan are invested in common and preferred stocks, government and corporate bonds, real estate and various short-term investments. A reconciliation as of the most recent measurement date (November 1, 1994) of the funded status of the plan with amounts reported in the Company's consolidated balance sheets follows (in thousands):
October 29, October 28, 1994 1995 ------------ ------------ Actuarial present value of benefit obligations: Vested $ 79,185 $ 89,236 Non-vested 710 613 -------- -------- Accumulated benefit obligation 79,895 89,849 Provision for future pay increases 8,926 6,232 -------- -------- Total projected benefit obligation 88,821 96,081 Plan assets at fair value 80,072 91,996 -------- -------- Projected benefit obligation greater than plan assets (8,749) (4,085) Unrecognized net loss 7,611 4,460 Prior service cost not yet recognized in net periodic pension cost 6,238 5,598 -------- -------- Pension asset in accompanying financial statements $ 5,100 $ 5,973 ======== ========
Components of net periodic pension cost: 1993 1994 1995 -------- -------- --------- Service cost-benefits earned during the period $ 2,123 $ 2,925 $ 2,483 Interest cost on projected benefit obligation 7,135 6,987 7,131 Return on plan assets (9,998) 3,802 (15,628) Net amortization and deferral 3,317 (10,291) 8,478 -------- ------- -------- Net periodic pension cost 2,577 3,423 2,464 Cost allocated to discontinued operations 780 1,051 444 -------- ---------- -------- Net periodic pension cost for continuing operations $ 1,797 $ 2,372 $ 2,020 ======== ======= ========
The weighted-average discount rate used in determining the actuarial present value of the projected benefit obligation at October 29, 1994 was 8.4% and at October 28, 1995 was 7.8%. The expected long-term rate of return on assets was 9% at October 29, 1994 and October 28, 1995. The assumed rate of increase in compensation levels was based on age-related tables at October 29, 1994 and October 28, 1995. The assumed rates of compensation increases are a half percent lower in the 1995 table than in the 1994 table. Effective November 1, 1993, the Company amended the benefit formula for salaried employees to provide for an additional benefit on compensation in excess of the average social security wage base. 401(k) Savings Plan - The Company also has a savings, investment and profit-sharing plan available to employees meeting eligibility requirements. Effective January 1, 1994, the Company amended the plan to include coverage of hourly wage employees (previously the plan covered substantially only salaried employees). The plan is a tax qualified plan under Section 401(k) of the Internal Revenue Code. The Company makes a matching contribution of 25% of each participant's contribution with a maximum matching contribution of 1-1/2% of the participant's base compensation. Company contributions were approximately $245,000 in 1993, $536,000 in 1994 and $589,000 in 1995. 40 42 Postretirement Benefits - Effective November 1, 1992, the Company adopted SFAS No. 106, which requires that the projected future cost of providing postretirement benefits, such as health care and life insurance, be recognized as an expense as employees render service instead of when claims are incurred as had been the Company's practice. The cumulative effects as of November 1, 1992 of adopting SFAS No. 106 were to increase accrued postretirement benefit costs by approximately $5,208,000 and charge income in 1993 for approximately $4,988,000 after income taxes. The effect of adopting SFAS No. 106 on income from operations in 1993 was not significant. The Company has several unfunded defined benefit postretirement plans that provide certain health care and life insurance benefits to eligible retirees. The plans are contributory, with retiree contributions adjusted periodically, and contain cost-sharing features such as deductibles and coinsurance. The Company's life insurance plan provides benefits to both active employees and retirees. Active employee contributions in excess of the cost of providing active employee benefits are applied to reduce the cost of retirees' life insurance benefits. The following table sets forth the status of the Company's postretirement plans as recorded in the accompanying financial statements (in thousands): Accumulated postretirement benefit obligation (APBO):
October 29, October 28, 1994 1995 ------------ ------------ Retirees $ 2,656 $ 2,974 Fully eligible active plan participants 1,413 1,242 Other active plan participants 614 551 Unrecognized gain 680 482 ------- ------- Accrued postretirement benefit plan cost $ 5,363 $ 5,249 ======= =======
Net periodic postretirement benefit expense included the following components (in thousands):
1993 1994 1995 ----- ----- ----- Service cost for benefits earned $ 3 $ 7 $ 1 Interest cost on APBO 355 352 357 ------ ----- ----- Net periodic postretirement cost $ 358 $ 359 $ 358 ====== ===== =====
Since the Company has capped its annual liability per person and all future cost increases will be passed on to retirees, the annual rate of increase in health care costs does not affect the postretirement benefit obligation. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 8.0% and 7.8% as of October 29, 1994 and October 28, 1995, respectively. Postemployment Benefits - Effective October 31, 1993, the Company adopted SFAS No. 112, which requires that the cost of benefits provided to former or inactive employees after employment but before retirement be recognized on the accrual basis of accounting instead of when paid, as had been the Company's practice. The cumulative effects as of October 31, 1993 of adopting SFAS No. 112 were to increase accrued postemployment benefit costs by approximately $708,000 and charge income for approximately $708,000. Income taxes were not applicable. The effect of adopting SFAS No. 112 on income from operations in 1994 was not significant. 41 43 10. RELATED PARTIES The Company incurred fees of $1,250,000 each year in 1993 and 1994 and $1,000,000 in 1995 for management services provided by a certain shareholder pursuant to a management services agreement. The balance sheets as of October 29, 1994 and October 28, 1995 include accrued fees of $1,250,000 and $1,000,000, respectively, in other accrued expenses. The agreement provides for payments of fees to a shareholder of $1,000,000 in 1995 and annually thereafter through the year 2001. An investment banking company that owns common stock of the Company charged the Company approximately $361,000 in 1993 for various services. 11. BUSINESS SEGMENTS The Company competes in three industry segments: Apparel Fabrics and Products, Industrial Fabrics and Products and Home Fashion Textiles. The apparel fabrics and products segment manufactures a broad range of apparel fabrics and apparel related products, including unfinished woven apparel fabrics (greige goods) for men's, women's and children's wear, and spun yarns for use in apparel and elastic products for use in undergarments and diapers. The industrial fabrics and products segment manufactures commercial roofing products made from woven synthetic fabrics and rubber-based specialty polymer compounds, other building construction products made from glass and synthetic fibers, various industrial products which generally have insulation or filtration characteristics, and other rubber products and various extruded polyurethane products. The home fashion textiles segment manufactures a variety of unfinished woven fabrics and yarns for use in the manufacturing of draperies, curtains and lampshades and is a major producer of solution-dyed drapery fabrics. Export sales are approximately 3% of net sales and the Company has no significant foreign operations. Earnings by business segment represent operating profit, excluding net unallocated corporate operating expenses. Identifiable segment assets are those assets used in the operations of the segment. Corporate assets are cash and other assets. 42 44 Industry segment information (in thousands):
1993 1994 1995 ---------- ---------- ----------- Net sales: Apparel fabrics and products $ 262,499 $ 254,810 $ 247,846 Industrial fabrics and products 156,763 169,736 191,985 Home fashion textiles 38,290 37,325 32,734 ---------- ---------- --------- $ 457,552 $ 461,871 $ 472,565 ========== ========== ========= Operating profit: Apparel fabrics and products $ 21,791 $ 18,487 $ 16,667 Industrial fabrics and products 3,582 7,618 7,590 Home fashion textiles 4,242 2,564 1,749 ---------- ---------- --------- Total operating profit of segments 29,615 28,669 26,006 Interest income 48 749 2,821 Interest expense (60,407) (55,570) (39,946) Indirect corporate expenses and other (8,482) (7,438) (5,345) ---------- ---------- --------- Loss before income taxes, discontinued operations, extraordinary items, and cumulative effects of accounting changes $ (39,226) $ (33,590) $ (16,464) ========== ========== ========= Identifiable assets: Apparel fabrics and products $ 173,304 $ 171,164 $ 165,622 Industrial fabrics and products 103,323 106,124 115,710 Home fashion textiles 30,337 24,752 20,731 ---------- ---------- --------- Total segments 306,964 302,040 302,063 Corporate and other 40,108 81,087 81,827 ---------- ---------- --------- 347,072 383,127 383,890 Net assets held for sale 185,536 69,684 28,932 ---------- ---------- --------- $ 532,608 $ 452,811 $ 412,822 ========== ========== ========= Depreciation and amortization expense: Apparel fabrics and products $ 11,357 $ 13,329 $ 12,722 Industrial fabrics and products 4,939 6,103 5,690 Home fashion textiles 2,367 2,359 2,394 ---------- ---------- --------- Total segments 18,663 21,791 20,806 Corporate and other 2,105 1,415 979 ---------- ---------- --------- $ 20,768 $ 23,206 $ 21,785 ========== ========== ========= Capital expenditures: Apparel fabrics and products $ 9,966 $ 8,120 $ 10,373 Industrial fabrics and products 5,556 6,171 9,312 Home fashion textiles 2,726 4,122 643 ---------- ---------- --------- Total segments 18,248 18,413 20,328 Corporate and other 19 10 4 ---------- ---------- --------- $ 18,267 $ 18,423 $ 20,332 ========== ========== =========
43 45 12. LIQUIDITY AND GOING CONCERN The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has had recurring net losses from continuing operations since its inception, has a net shareholder's deficiency of approximately $37,045,000 at October 28, 1995 and the Company's senior revolving credit facility expires on December 1, 1996. Further, mandatory principal payments of approximately $69,027,000 on the Company's senior subordinated discount notes and senior subordinated notes are due on June 1, 1997. The Company's ability to extend the senior revolving credit facility or obtain alternative sources of financing is uncertain. Further, the Company's existing capital resources and projected cash flow are insufficient to make the mandatory principal payments which are due on June 1, 1997, other than through additional borrowings under a renegotiated revolving credit facility or some other source of financing. Accordingly, the Company's ability to secure financing beyond December 1, 1996 raises substantial doubt about the Company's ability to continue as a going concern. Management believes that the Company's capital resources and expected cash flows will be adequate to meet its operating and working capital needs during Fiscal 1996. The revolving credit facility (or a similar credit facility) is essential for the Company's continued operations. Prior to the expiration of the Company's revolving credit facility on December 1, 1996, management will discuss extension of the facility with its banks. The Company cannot predict what effect, if any, that the mandatory payments on the debt securities in June 1997 will have on the negotiations with the banks to extend the revolving credit facility beyond December 1, 1996. However, the Company does not expect that an extension of its revolving credit facility beyond May 31, 1997, the first mandatory redemption payment date on the Company's debt securities, will be negotiated unless the maturities of such debt securities are extended, replaced or refinanced. Management expects to engage advisors and discuss extension, replacement or refinancing of the debt securities with its securityholders. The Company's ability to accomplish a restructuring of the terms of its debt securities or any refinancing will depend on a number of factors, including its operating performance, market conditions and the terms of any extension, replacement or refinancing. Management is unable to predict the Company's ability to accomplish the foregoing extension of its bank financing and extension, replacement or refinancing of its debt securities. 44 46 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The following table sets forth certain information with respect to the persons who are members of the Board of Directors or executive officers of the Company. Each director serves until a successor is elected and qualified. Directors receive no compensation for their services.
Name Age Position(s) Held - ---- --- ---------------- Steven M. Friedman 41 Director and Chairman of the Board Jerry E. Hunter 58 Director, President and Chief Executive Officer David H. Taylor 40 Director, Executive Vice President--Finance and Secretary Muzzafar Mirza 37 Director Alain M. Oberrotman 44 Director Marc C. Particelli 50 Director
The business experience of each of the directors and executive officers during the past five years is as follows: Steven M. Friedman was elected as the Chairman of the Board of the Company in April 1991. He has been a director of the Company since May 1988. He served as Chief Executive Officer of the Company from April 1991 to November 1994. Mr. Friedman became a general partner of EOS Partners, L.P. ("EOS Partners") (a private investment firm) on January 1, 1994. Prior thereto, he was a general partner of Odyssey Partners, a private investment partnership with substantial capital invested in marketable securities and closely-held businesses, since July 1988. He is also a director of Forstmann & Company, Inc., a manufacturer of textiles and textile-related products, MICOM Communications Corp., a supplier of data communications and networking products, Eagle Food Centers, Inc., a chain of grocery stores, The Leslie Fay Companies, Inc., a women's wear designer and manufacturer, Rickel Home Centers, Inc., a chain of home center retail stores, and The Caldor Corporation, a chain of discount retail stores. Jerry E. Hunter was appointed as a director of the Company on April 6, 1993 and was appointed Chief Executive Officer on November 29, 1994. Mr. Hunter has served as President of the Company since September 1988. Prior to that time, from May 1988 to September 1988, he was Executive Vice-President - Operations. He also serves as a Vice-President of each of the Company's subsidiaries. From April 1986 to May 1988 he was Vice-President - Technical Services at J.P. Stevens. From March 1983 to March 1986, he was Senior Vice President at Cannon Mills, Inc., a textile manufacturer. Prior to March 1983, he was employed by Springs Industries, a textile manufacturer, for twenty-one years. 45 47 David H. Taylor was appointed as a director of the Company on April 15, 1993. Mr. Taylor has served as Executive Vice-President - Finance and Secretary of the Company since June 1991, and prior thereto he was Controller and Assistant Secretary of the Company since May 1988. Prior to that time, he was a Senior Manager at Deloitte Haskins & Sells, a public accounting firm by which he was employed from June 1977 through May 1988. In addition, Mr. Taylor serves as a Vice-President and Assistant Secretary of each of the Company's subsidiaries. Alain M. Oberrotman was appointed as a director of the Company on January 25, 1994. He has been a principal of Odyssey Partners since October 1992. From September 1990 to October 1992, he was a principal of Hambro International Equity Partners, a venture capital firm. Prior thereto, Mr. Oberrotman was the President of TVI Group, Inc., an interim management and consulting firm. Muzzafar Mirza was appointed as a director of the Company on October 25, 1993. He has been a principal of Odyssey Partners since July 1993. From May 1988 to June 1993, he was employed by General Electric Capital Corporation, as head of Merchant Banking for the GE Capital Corporate Finance Group. From 1983 to 1988, he was a Vice President of Marine Midland Bank, N.A. Mr. Mirza is also a director of The Scotsman Group, Inc. and its parent, Scotsman Holdings, Inc., a lessor of mobile office units. Marc C. Particelli was appointed as a director of the Company on November 29, 1994. He has been a principal of Odyssey Partners since October 1, 1994. Prior thereto, he was worldwide Practice Leader for the Consumer Products group at Booz, Allen & Hamilton, an international management consulting firm by which he was employed from 1974 to 1994. The Company's directors are elected annually to serve until the next annual meeting of stockholders and until their successors have been elected and qualified. None of the directors or executive officers listed herein is related to any other such director or executive officer. 46 48 ITEM 11. EXECUTIVE COMPENSATION. The following summary compensation table sets forth information concerning compensation for the last three years for services in all capacities awarded to, earned by or paid to the Company's Chief Executive Officer and the four other most highly compensated executive officers of the Company during Fiscal 1995. SUMMARY COMPENSATION TABLE
Name and Annual Compensation --------------------------- All Other Principal Position Year Salary Bonus Compensation(3) - ------------------ ---- --------- ---------- ------------ Jerry E. Hunter 1995 $ 306,075 $ 195,902 $ 3,228 President and Chief Executive 1994 291,500 292,793 5,219 Officer 1993 265,000 108,942 8,823 Carl Rosen 1995 243,750 83,000 3,046 President, JPS Converter & 1994 217,708 60,000 4,354 Industrial Corp.(1) 1993 175,500 50,000 7,076 David H. Taylor 1995 196,350 118,139 2,238 Executive Vice President - 1994 187,000 162,631 3,271 Finance and Secretary 1993 170,000 48,921 6,704 Monnie L. Broome 1995 155,925 91,822 2,250 Vice President-Human Resources 1994 148,500 122,590 3,029 1993 135,000 33,299 6,058 Paul B. Comiskey 1995 175,000 - 2,023 President, JPS Carpet Corp. (1)(2) 1994 175,000 1,000 3,062 1993 175,000 21,500 6,763
_________________ (1) Such executive officers of the Company's subsidiaries perform certain policy-making functions for the Company and are therefore included herein pursuant to Item 402(a)(3) of Regulation S-K and Rule 36-7 under the Exchange Act. (2) The Company has terminated Paul B. Comiskey's position as a result of the sale of the Carpet Business which occurred on November 16, 1995. (3) Employer matching 401(k) plan contribution and employer-provided life insurance premiums. 47 49 LONG-TERM INCENTIVE PLAN The Company and certain of its subsidiaries (the "Subsidiary Participants") have adopted a Long-Term Incentive Plan for certain officers and key employees effective November 1, 1994. The plan provides for annual awards which are accumulated in individual award banks. Awards may be either positive or negative in any given year and are added or subtracted each year from each participant's respective award bank. A percentage of each participant's award bank balance is paid out annually beginning after Fiscal 1996. Awards are based on the achievement of certain financial performance targets by the Company and the Subsidiary Participants. Such financial performance targets are established on a rolling 3-year basis and are subject to change at the discretion of the Boards of Directors of the Company and the Subsidiary Participants. The following employees named in the Summary Compensation Table are currently employee participants in the Long-Term Incentive Plan: Jerry E. Hunter, Carl Rosen, David H. Taylor and Monnie L. Broome. As of January 26, 1996, there have been no awards granted under this plan. RETIREMENT PENSION PLAN The Company maintains a Retirement Pension Plan for all employees (the "Pension Plan"), including its salaried employees. The Pension Plan is a defined benefit pension plan providing a formula benefit with contributions determined on an actuarial basis. The Pension Plan generally covers all employees 21 years of age or older who have completed one year of service with the Company. The Pension Plan generally takes into account annual compensation earned under certain predecessor plans of J.P. Stevens. The following table indicates the approximate amounts of annual retirement income that would be payable to a salaried employee under the Pension Plan based on the compensation levels and years of credited service shown. There would be no social security or other offset deducted from the amounts shown. PENSION PLAN TABLE*
Years of Service ------------------------------------------------------------- Remuneration 15 Years 20 Years 25 Years 30 Years 35 Years ------------ -------- -------- -------- -------- -------- $125,000 $20,167 $26,890 $33,612 $40,334 $47,057 150,000 and above 24,667 32,890 41,112 49,334 57,557
* Assumes individual retires at age 65 in 1995 with the indicated years of service and compensation. The social security integration level of such individuals would be $25,920. The social security integration level is adjusted annually. Credited years of service for benefit accrual under the Pension Plan as of October 28, 1995 for the following executive officers are: Jerry E. Hunter . . . . . . . . . . . . . 9 years Carl Rosen . . . . . . . . . . . . . . . . 4 years David H. Taylor . . . . . . . . . . . . . 7 years Monnie L. Broome . . . . . . . . . . . . . 7 years Paul B. Comiskey . . . . . . . . . . . . . 13 years
48 50 Annual retirement benefits for salaried employees are generally computed as the sum of 0.6% of a participant's average compensation (the annual average of five consecutive, complete plan years of highest compensation during the last 10 plan years of service) multiplied by the years of benefit service plus 0.6% of a participant's compensation which exceeds the Participant's Social Security Integration Level (equal to $25,920 in 1995) multiplied by the participant's years of benefit service. The Pension Plan provides that each participant's benefits fully vest after five years of service or the attainment of age 65. This table may understate the benefits available to certain participants because salaried employees who were covered by the Pension Plan before July 1, 1989 are entitled to the greater of the benefit formula noted above or the prior benefit formula, plus additional accrued benefits under the new formula since July 1, 1989. Under the prior formula, a participant's annual pension payable as of normal retirement age was equal to 1% of the portion of "final average compensation" which was equal to the "social security integration level" in effect for the year of retirement, plus 1.5% of the portion of the participant's final average compensation in excess of the social security integration level, the sum of which was multiplied by the number of years of credited service not exceeding 35. In addition, as noted below, the table assumes that covered compensation was limited to the current allowable amount for all years while benefits may have been accrued in years when limitations were higher. Compensation covered by the Pension Plan consists of all payments made to a participant for personal services rendered as an employee of the Company which are subject to federal income tax withholding, excluding imputed income attributable to certain fringe benefit programs. In accordance with the Revenue Reconciliation Act of 1993 with respect to salaried employees, plan compensation covers up to a maximum of $150,000 as adjusted per individual for the plan year beginning November 1, 1994. Plan compensation was subject to substantially higher limits in previous years ($235,840 for 1994). The amounts shown are also subject to possible maximum limitations under Section 415 of the Internal Revenue Code of 1986, as amended (the "Code") and are subject to possible reduction for amounts payable under other JPS qualified plans. COMPENSATION OF DIRECTORS Members of the Board of Directors receive no compensation for their services. MANAGEMENT AGREEMENT Pursuant to a management agreement (the "Management Agreement"), dated as of April 2, 1991, between the Company and Odyssey Investors, Inc., a Delaware corporation and an affiliate of Odyssey Partners ("Odyssey Investors"), the Company agreed to pay Odyssey Investors a $1.0 million fee for Fiscal 1995 and for each fiscal year thereafter through April 2, 2001, in exchange for certain management services provided by Odyssey Investors. Such services include continual financial advisory and business management services in order to maximize the efficiency of operations and enhance profitability. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Company does not have a compensation committee or other board committee performing equivalent functions thereto. However, Odyssey Investors, as part of its duties under the Management Agreement, from time to time during the past fiscal year has participated in certain discussions with Jerry E. Hunter, the President, Chief Executive Officer and a Director of the Company, David H. Taylor, Executive Vice President-Finance and Director of the Company and Monnie L. Broome, Vice President-Human Resources of the Company in determining certain business and financial objectives and other criteria to enable the Company to set compensation awards and Long Term Incentive Plan targets for the Company's executive officers. 49 51 ITEM 12. SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT. The following table sets forth information as of December 29, 1995 with respect to the beneficial ownership of shares of (i) Senior Preferred Stock; (ii) Junior Preferred Stock; (iii) Class A Common Stock; and (iv) Class B Common Stock by (a) each person or group that is known to the Company to be the beneficial owner of more than 5% of the outstanding shares, (b) each director of the Company, and (c) all directors and executive officers of the Company as a group.
Senior Preferred Stock Junior Preferred Stock Class A Common Stock Class B Common Stock ---------------------- ---------------------- -------------------- -------------------- Number Percent Number Percent Number Percent Number Percent Name of 5% of of of of of of of of Beneficial Owner Shares Class Shares Class Shares Class(1) Shares Class(1) ---------------- ------ ----- ------ ----- ------ -------- ------ -------- Bear Stearns Securities Corp. (4) 76,608 15.11% % ADP Proxy Services 51 Mercedes Way Edgewood, NY 11717 Presidential Life 51,461 10.15% Insurance Company c/o The Bank of New York Post Office Box 16203 New York, NY 10249 Franklin Funds 50,742 10.00% c/o ADP Proxy Services 51 Mercedes Way Edgewood, NY 11717 State Street Research 51,109 9.93% and Management (6) One Financial Center Boston, MA 02111-2690 Executive Life Ins. Co. 47,821 9.43% Base Assets Trust 11444 Olympic Blvd. Los Angeles, CA 90064 Citibank, N.A. (4) 26,794 5.21% P. O. Box 1530, Grand Central 111 Wall Street 20th FL., Zone 9 New York, NY 10043 Lehman Brothers 25,755 5.00% c/o ADP Proxy Services 51 Mercedes Way Edgewood, NY 11717 Odyssey Partners, L.P. (2) 5,000 50.00% 340,000 34.00% 31 West 52nd Street New York, NY 10019 DLJ Capital Corp. (3) 170,000 17.00% 140 Broadway New York, NY 10005-1285 Messrs. Grant M. Wilson, 5,000 50.00% William J. DeBrule and Yehochai Schneider 111 Pond Street Cohasset, MA 02025
50 52
Senior Preferred Stock Junior Preferred Stock Class A Common Stock Class B Common Stock ---------------------- ---------------------- -------------------- -------------------- Number Percent Number Percent Number Percent Number Percent Name of 5% of of of of of of of of Beneficial Owner Shares Class Shares Class Shares Class(1) Shares Class(1) ---------------- ------ ----- ------ ----- ------ -------- ------ -------- Hare & Co. 79,940 7.99% Bank of New York P. O. Box 11203 New York, NY 10249 Lutheran Brotherhood 70,180 7.02% Research Corp. 625 Fourth Avenue South Minneapolis, MN 55415 Everest Capital Fund, L.P. 51,223 5.12% c/o Morgan Stanley & Co., Inc. One Pierpont Plaza Brooklyn, NY 11201 Directors and executive 510,000 51.0% officers as a group (5) (6 persons)
(1) Percentages represented hereunder are based on the combined Class A Common Stock and Class B Common Stock issued and outstanding. (2) Represents shares of Class B Common Stock and Junior Preferred Stock owned by Odyssey Partners. In addition, Odyssey Partners has voting control with respect to the 5,000 shares of Junior Preferred Stock held by Grant M. Wilson, William J. DeBrule and Yehochai Schneider. The Class B Common Stock shares are subject to a Stockholders' Agreement, which provides, among other things, for certain restrictions on the voting and transfer of such shares. Leon Levy, Jack Nash, Stephen Berger, Joshua Nash, the Nash Family Partnership and Brian Wruble, by virtue of being general partners of Odyssey Partners, share voting and dispositive power with respect to the Class B Common Stock and Junior Preferred Stock owned by Odyssey Partners and, accordingly, may each be deemed to own beneficially such stock owned by Odyssey Partners. Each of such persons has expressly disclaimed any such beneficial ownership (within the meaning of Rule 13d-3(a) under the Securities and Exchange Act of 1934, as amended (the "Exchange Act")) which exceeds the proportionate interest in the Class B Common Stock and Junior Preferred Stock which he or it may be deemed to own as a general partner of Odyssey Partners. Mr. Friedman has an indirect fractional financial interest in the shares of Class B Common Stock owned by Odyssey Partners; however, he has no voting or dispositive power over any shares owned by Odyssey Partners. (3) Such shares are subject to the Stockholders' Agreement, which provides, among other things, for certain restrictions on the voting and transfer of such shares. In addition, pursuant to the Voting Trust Agreement, dated as of April 2, 1991, between DLJ and Lincoln National, DLJ conferred the right to vote 120,000 of such shares of Class B Common Stock to Lincoln National, as voting trustee. Such shares include shares held by DLJ First ESC L.L.C. which is an "employee securities corporation" formed to hold securities on behalf of participants in certain DLJ incentive compensation plans. (4) Shown is the nominee recordholder of such shares. It is not known if all shares are held for one beneficial owner. (5) None of Jerry E. Hunter, Carl Rosen, David H. Taylor, Monnie L. Broome or Paul B. Comiskey, the executive officers listed above in Item 11, "-- Executive Compensation -- Summary Compensation Table," beneficially own, or may be deemed to own, any shares of capital stock of the Company, and therefore are not listed in this table. (6) Disclaims beneficial ownership. 51 53 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K. (a) (1) The following financial statements are included in Item 8: (i) Independent Auditors' Report. (ii) Consolidated Balance Sheets as of October 28, 1995 and October 29, 1994. (iii) Consolidated Statements of Operations for the fiscal years ended October 28, 1995, October 29, 1994 and October 30, 1993. (iv) Consolidated Statements of Senior Redeemable Preferred Stock and Shareholders' Equity (Deficit) for the fiscal years ended October 28, 1995, October 29, 1994 and October 30, 1993. (v) Consolidated Statements of Cash Flows for the fiscal years ended October 28, 1995, October 29, 1994 and October 30, 1993. (vi) Notes to Consolidated Financial Statements. The registrant is primarily a holding company and all subsidiaries are wholly owned. (2) The financial statement schedule required by Item 8 is listed on Index to Financial Statement Schedule, starting at page S-1 of this report. (3) The exhibits required by Item 601 of Regulation S-K are listed in the accompanying Index to Exhibits. Registrant will furnish to any securityholder, upon written request, any exhibit listed in the accompanying Index to Exhibits upon payment by such securityholder of registrant's reasonable expenses in furnishing any such exhibit. (b) Report on Form 8-K dated December 1, 1995, containing disclosure of the Company's disposition of the Carpet Business on November 16, 1995, including an unaudited pro forma balance sheet as of July 29, 1995 and proforma income statements for the periods ended July 29, 1995 and October 29, 1994 giving effect to the disposition, and a press release dated November 16, 1995 regarding the disposition. (c) Reference is made to Item 14(a)(3) above. (d) Reference is made to Item 14(a)(2) above. 52 54 INDEX TO EXHIBITS The following is a complete list of Exhibits filed as part of this report, which are incorporated herein:
Exhibit Number Description - ------ ----------- 2.1(i) Plan of Reorganization of JPS Textile Group, Inc., a Delaware corporation (the "Company"), filed pursuant to Chapter 11 of the United States Bankruptcy Code, dated February 7, 1991 (the "Plan).* 2.1(ii) Revised Technical and Conforming Amendment to the Company's Plan, dated March 20, 1991.* 3.1 Restated Certificate of Incorporation of the Company, filed with the Secretary of State of the State of Delaware on April 1, 1991.* 3.2 By-laws of the Company.* 3.3 Certificate of Designations of the Company's Series A Senior Preferred Stock (the "Senior Preferred Stock").* 3.4 Certificate of Designations of the Company's Series B Junior Preferred Stock.* 4.1 Indenture, dated as of April 2, 1991 (the "Discount Note Indenture"), between the Company and First Trust National Association ("First Trust"), as Trustee, relating to the Company's Senior Subordinated Discount Notes due June 1, 1999 (the "Discount Notes").* 4.2 Form of Discount Note, incorporated by reference to Exhibit A to the Discount Note Indenture.* 4.3 Indenture, dated as of April 2, 1991 (the "Subordinated Note Indenture"), between the Company and First Trust, as Trustee, relating to the Company's 10.25% Senior Subordinated Notes due June 1, 1999 (the "Subordinated Notes").* 4.4 Form of Subordinated Note, incorporated by reference to Exhibit A to the Subordinated Note Indenture.* 4.5 Indenture, dated as of April 2, 1991 (the "Debenture Indenture"), between the Company and First Bank National Association, as Trustee, relating to the Company's 7% Subordinated Debentures due May 15, 2000 (the "Debentures").* 4.6 Form of Debenture, incorporated by reference to Exhibit A to the Debenture Indenture.* 4.7 Stockholders' Agreement, dated as of April 2, 1991, among Odyssey Partners, L.P. ("Odyssey Partners"), DLJ Capital Corp. ("DLJ Capital") and Lincoln National Bank and Trust Company of Fort Wayne ("Lincoln National").*
53 55
Exhibit Number Description - ------ ----------- 4.8 Letter Agreement, dated April 2, 1991 regarding certain rights of "co-sale" granted by Odyssey partners, DLJ Capital and Lincoln National to the holders of the Company's Class A Common Stock.* 4.9 Letter Agreement, dated April 2, 1991, among Odyssey Partners, Grant M. Wilson, William J. DeBrule and Yehochai Schneider.* 9.1 Voting Trust Agreement, dated as of April 2, 1991, between DLJ Capital and Lincoln National.* 10.1 Management Agreement, dated as of April 2, 1991, between the Company and Odyssey Investors, Inc.* 10.2 Registration Rights Agreement, dated as of April 2, 1991, by and among the Company and the holders of the Company's Senior Notes, Discount Notes, Subordinated Notes, Senior Preferred Stock and Class A Common Stock (collectively, the "Securities").* 10.3 Loan and Security Agreement, dated as of October 30, 1991, (the "CIT Loan Agreement"), between JPS Converter and Industrial Corp., a Delaware corporation ("JCIC") and The CIT Group/Equipment Financing, Inc. ("CIT").* 10.4 First Amendment to the CIT Loan Agreement, dated as of June 26, 1992, by and between JCIC and CIT.* 10.5 Second Amendment to the CIT Loan Agreement, dated as of December 22, 1992, by and between JCIC and CIT.* 10.6 Agreement of Lease, dated as of June 1, 1988, by and between 1185 Avenue of the Americas Associates ("1185 Associates") and JCIC.* 10.7 Lease Modification and Extension Agreement, dated as of April 2, 1991, by and between 1185 Associates and JCIC.* 10.8 Third Amendment to the CIT Loan Agreement, dated as of August 6, 1993, by and between JCIC and CIT.** 10.9 Trademark License Agreement, dated as of May 9, 1988, by and between J.P. Stevens and JPS Acquisition Corp. (predecessor to the Company.)** 10.10 Omnibus Real Estate Closing Agreement, dated as of May 9, 1988, by and among J.P. Stevens, JPS Acquisition Corp., JPS Acquisition Automotive Products Corp., JPS Acquisition Carpet Corp., JPS Acquisition Industrial Fabrics Corp., JPS Acquisition Converter and Yarn Corp. and JPS Acquisition Elastomerics Corp.**
54 56
Exhibit Number Description - ------ ----------- 10.11 Purchase Agreement, dated as of April 24, 1988, by and among JPS Holding corp., the Company, Odyssey Partners, West Point-Pepperell, Inc., STN Holdings Inc., Magnolia Partners, L.P. and J.P. Stevens.** 10.12 Asset Purchase Agreement, dated as of May 25, 1994, by and among the Company, JAPC, JCIC, JPS Auto Inc., a Delaware corporation, and Foamex International Inc., a Delaware corporation.*** 10.13 Fourth Amended and Restated Credit Agreement (the "Existing Credit Agreement"), dated as of June 24, 1994, by and among the Company, JCIC, JPS Elastomerics Corp., a Delaware corporation ("JEC"), JPS Carpet Corp., a Delaware corporation ("JCC"), the financial institutions listed on the signature pages thereof, Citibank, N.A. ("Citibank") as Agent and Administrative Agent, and General Electric Capital Corporation ("GECC") as Co-Agent and Collateral Agent.**** 10.14 First Amendment to the Existing Credit Agreement, dated as of November 4, 1994, by and among the Company, JCIC, JEC, JCC, the financial institutions listed on the signature pages thereof, Citibank, as Agent and Administrative Agent, and GECC, as Co-Agent and Collateral Agent.***** 10.15 Second Amendment to the Existing Credit Agreement, dated as of December 21, 1994, by and among the Company, JCIC, JEC, JCC, the financial institutions listed on the signature pages thereof, Citibank, as Agent and Administrative Agent, and GECC as Co-Agent and Collateral Agent.***** 10.16 Fourth Amendment to CIT Loan Agreement, dated as of December 29, 1994, by and between JCIC and CIT.***** 10.17 Lease Modification and Extension Agreement, dated as of April 30, 1993, by and between 1185 Associates and JCIC.***** 10.18 Long-Term Incentive Plan of the Company effective November 1, 1994.****** 10.19 Third Amendment to Existing Credit Agreement, dated as of May 31, 1995 by and among the Company, JCIC, JEC, JCC, the financial institutions listed on the signature pages thereof, Citibank, as Agent and Administrative Agent, and GECC, as Co-Agent and Collateral Agent.******** 10.20 Fourth Amendment to Existing Credit Agreement, dated as of October 28, 1995 by and among the Company, JCIC, JEC, JCC, the financial institutions listed on the signature pages thereof, Citibank, as Agent and Administrative Agent, and GECC, as Co-Agent and Collateral Agent.********* 10.21 Lease Modification and Extension Agreement, dated as of November 17, 1994, by and between 1185 Associates and JCIC.*********
55 57
Exhibit Number Description - ------ ----------- 10.22 Asset Transfer Agreement, dated as of November 16, 1995, by and among the Company, JPS Carpet Corp., a Delaware corporation, Gulistan Holdings Inc. ("GHI"), a Delaware corporation and Gulistan Carpet Inc., a Delaware Corporation and wholly-owned subsidiary of GHI.********** 11.1 Statement re: Computation of Per Share Earnings - not required since such computation can be clearly determined from the material contained herein. 12.1 Computation of Ratio of Earnings to Fixed Charges - not required for Form 10-K per Item 503(d) of Regulation S-K. 12.2 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends--not required for Form 10-K per Item 503(d) of Regulation S-K. 21.1 List of Subsidiaries of the Company.***** 27.1 Financial data schedule (for SEC use only).*********
________ * Previously filed as an exhibit to Registration Statement No. 33-58272 on Form S-1, declared effective by the SEC on July 26, 1993, and incorporated herein by reference. ** Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended October 30, 1993. *** Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1994. **** Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended July 30, 1994. ***** Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended October 29, 1994. ****** Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended January 28, 1995. ******* Previously filed as an exhibit to Post-Effective Amendment No. 3 to Registration Statement No. 33- 58272 on Form S-1, declared effective by the SEC on June 7, 1995 and incorporated herein by reference. ******** Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended April 29, 1995. ********* Filed herewith. ********** Previously filed as an exhibit to the Company's Current Report on Form 8-K dated December 1, 1995. 56 58 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 TEXTILE GROUP, INC. Date: January 26, 1996 By: /s/ Jerry E. Hunter ------------------------- Jerry E. Hunter President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------- ----- ---- /s/ Steven M. Friedman Director and Chairman January 26, 1996 - ------------------------- of the Board STEVEN M. FRIEDMAN /s/ Jerry E. Hunter Director, President and January 26, 1996 - ------------------------------ Chief Executive Officer JERRY E. HUNTER /s/David H. Taylor Director, Executive January 26, 1996 - ----------------------------- Vice President-Finance, DAVID H. TAYLOR Principal Financial Officer and Secretary /s/ Muzzafar Mirza Director January 26, 1996 - --------------------------- MUZZAFAR MIRZA /s/ Alain M. Oberrotman Director January 26, 1996 - ----------------------- ALAIN M. OBERROTMAN /s/ Marc C. Particelli Director January 26, 1996 - ----------------------------- MARC. C. PARTICELLI /s/ Allen A. Hodges Controller January 26, 1996 - ----------------------------- ALLEN A. HODGES
57 59 JPS TEXTILE GROUP, INC. INDEX TO SCHEDULE INDEX TO FINANCIAL STATEMENT SCHEDULE For the Years Ended October 30, 1993, October 29, 1994 and October 28, 1995 FINANCIAL STATEMENT SCHEDULE II. Valuation and Qualifying Accounts and Reserves S-2
Note: All other schedules are omitted because they are not applicable or not required, or because the required information is shown either in the consolidated financial statements or in the notes thereto. S-1 60 JPS TEXTILE GROUP, INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (IN THOUSANDS)
Column A Column B Column C Column D Column E - -------------------------- ----------- ---------------------- ---------- ------------ Charged to Balance at Charged to Other Balance at Beginning Costs and Accounts Deductions End of Classification of Period Expenses Describe Describe Period - -------------------------- ----------- --------- ---------- ---------- ------------ (a) (b) Allowances Deducted from Asset to Which They Apply: Year Ended October 30, 1993 (52 Weeks) Allowance for doubtful accounts $ 1,912 $ 441 $ (92) $ 323 $ 1,938 Claims, returns and other allowances 701 528 452 777 ------- ----- ------- -------- ------- $ 2,613 $ 441 $ 436 $ 775 $ 2,715 ======= ====== ======= ======== ======= Year Ended October 29, 1994 (52 Weeks) Allowance for doubtful accounts $ 1,938 $ 748 $ 847 $ 1,606 $ 1,927 Claims, returns and other allowances 777 (73) 369 423 650 ------- ------ ------- -------- ------- $ 2,715 $ 675 $ 1,216 $ 2,029 $ 2,577 ======= ====== ======= ======== ======= Year Ended October 28, 1995 (52 Weeks) Allowance for doubtful accounts $ 1,927 $ (114) $ 206 $ 69 $ 1,950 Claims, returns and other allowances 650 175 644 181 ------- ------ ------- -------- ------- $ 2,577 $ (114) $ 381 $ 713 $ 2,131 ======= ====== ======== ======== =======
(a) Change in various reserves charged to net sales. (b) Uncollected receivables written off, net of recoveries. S-2 EX-10.20 2 4TH A TO 4TH AMENDED & RESTATED CREDIT AGREEMENT 1 Exhibit 10.20 EXECUTION COPY FOURTH AMENDMENT TO FOURTH AMENDED AND RESTATED CREDIT AGREEMENT This Fourth Amendment to Fourth Amended and Restated Credit Agreement dated as of October 28, 1995 (this "Amendment"), is entered into among JPS TEXTILE GROUP, INC., a Delaware corporation (the "Company"), JPS CARPET CORP., a Delaware corporation ("JCC"), JPS ELASTOMERICS CORP., a Delaware corporation ("JEC"), and JPS CONVERTER AND INDUSTRIAL CORP., a Delaware corporation ("JCIC", and together with JCC and JEC, the "Borrowing Subsidiaries"), the FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (collectively referred to herein, together with their respective successors and assigns, as the "Senior Lenders" and individually as a "Senior Lender"), CITIBANK, N.A., in its separate capacities as agent and administrative agent for the Senior Lenders (in such capacities, the "Agent") and General Electric Capital Corporation, in its separate capacities as co-agent and collateral agent for the Senior Lenders (in such capacities, the "Collateral Agent"), and amends the Fourth Amended and Restated Credit Agreement dated as of June 24, 1994, as amended by the First Amendment to Fourth Amended and Restated Credit Agreement dated as of November 4, 1994, the Second Amendment to Fourth Amended and Restated Credit Agreement dated as of December 21, 1994 and the Third Amendment to Fourth Amended and Restated Credit Agreement dated as of May 31, 1995 (as so amended and as further amended hereby, the "Credit Agreement"), entered into among the Company, the Borrowing Subsidiaries, the Senior Lenders, the Agent and the Collateral Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement. Each of the parties hereto agrees that from and after the Fourth Amendment Effective Date (as defined below) JCC shall cease to be a party to the Credit Agreement. W I T N E S S E T H: WHEREAS, the Company and JCC have agreed to sell and transfer the Carpet Assets (as defined below) to Gulistan Holdings Inc., a newly-formed Delaware corporation which is owned by certain members of the existing management of JCC ("Holdco"), and Holdco will subsequently contribute the Carpet Assets to Gulistan Carpet Inc., a newly-formed Delaware corporation and a wholly-owned subsidiary of Holdco ("Subco"); WHEREAS, certain proceeds of the sale of the Carpet Assets shall constitute "Net Cash Proceeds" and shall be applied as a mandatory prepayment to the outstanding Revolving Loans (without a corresponding reduction of the Commitments); 2 WHEREAS, the Company and JCC have requested that the Senior Lenders permit the Agent and the Collateral Agent to release their respective Liens on the Carpet Assets (including, without limitation, any capital stock which is part of such Carpet Assets); WHEREAS, the Company and the Borrowing Subsidiaries have requested the Senior Lenders to amend the Credit Agreement to provide, among other things, for (i) a decrease in the Revolving Credit Facility from $135,000,000 to $118,000,000, (ii) an amendment of certain financial covenants and (iii) other amendments, all as more fully described herein; NOW, THEREFORE, in consideration of the above premises, the Company, the Borrowing Subsidiaries, the Senior Lenders, the Agent and the Collateral Agent agree as follows: SECTION 1. Amendment to the Credit Agreement. The Credit Agreement is, effective as determined pursuant to Section 4 hereof, hereby amended as follows: 1.01 Section 1.01 of the Credit Agreement is amended to add the following definitions thereto: "Carpet Asset Transfer Agreement" shall mean the Asset Transfer Agreement to be entered into among JCC, the Company, Holdco and Subco in connection with the Carpet Sale, as the same may be amended, supplemented or otherwise modified from time to time. "Carpet Assets" shall mean the Transferred Assets (as defined in the Carpet Asset Transfer Agreement). "Carpet Guaranty" shall mean the Amended and Restated Guaranty dated as of March 18, 1993 executed by JCC, pursuant to which JCC has guaranteed all of the Obligations of each Borrowing Subsidiary, as the same may be amended, supplemented or otherwise modified from time to time. "Carpet Pledge Agreement" shall mean the Pledge Agreement dated as of the Fourth Amendment Effective Date between JCC and the Agent, as the same may be amended, supplemented or otherwise modified from time to time. "Carpet Sale" shall mean the purchase by Holdco and Subco and sale by JCC, and the assumption by Holdco and Subco of substantially all of the liabilities associated with, the Carpet Assets, all pursuant to and in accordance with the terms of the Carpet Asset Transfer Agreement. "Carpet Sale Amendatory Agreement" shall mean the Amendatory Agreement and Release dated as of the Fourth Amendment Effective Date among the Company, JCC, the Borrowing Subsidiaries, the Agent and the Collateral Agent, as such agreement may be amended, supplemented or otherwise modified from time to time. 3 "Carpet Security Agreement" shall mean the Security Agreement dated as of the Fourth Amendment Effective Date among JCC, the Collateral Agent and the Agent, as the same may be amended, supplemented or otherwise modified from time to time. "Carpet Stockholders Agreement" shall mean the Stockholders Agreement to be entered into among Holdco, JCC, as a stockholder of Holdco and the other stockholders of Holdco party thereto in connection with the Carpet Sale, as such agreement may be amended, supplemented or otherwise modified from time to time. "Carpet Transaction Documents" shall mean, collectively, (i) the Carpet Asset Transfer Agreement, (ii) the Holdco Note, (iii) the Holdco Preferred Stock, (iv) the Holdco Warrants and (v) the Carpet Stockholders Agreement. "Fourth Amendment Effective Date" shall mean the date on which the Fourth Amendment to the Credit Agreement becomes effective pursuant to the terms thereof. "Holdco" shall mean Gulistan Holdings Inc., a Delaware corporation. "Holdco Note" shall mean the promissory note in the principal amount of $10,000,000 (plus the amount of any deferred interest thereon) made by Holdco in favor of JCC in connection with the Carpet Sale, as such note may be amended, supplemented or otherwise modified from time to time. "Holdco Preferred Stock" shall mean the Series A preferred stock of Holdco, $.01 par value per share. "Holdco Warrants" shall mean the warrants to acquire certain shares of the common stock of Holdco issued to JCC pursuant to the Carpet Asset Transfer Agreement. "Subco" shall mean Gulistan Carpet Inc., a Delaware corporation. 1.02 Section 1.01 of the Credit Agreement is further amended as follows: (a) The definition of "Borrowing Subsidiaries" is deleted in its entirety and the following definition is substituted therefor: "Borrowing Subsidiaries" shall mean JCIC and JEC. (b) The definition of "Collateral Documents" in Section 1.01 of the Credit Agreement is hereby amended to add the phrase "the Carpet Security Agreement, the Carpet Pledge Agreement, the Carpet Guaranty, the Carpet Sale Amendatory Agreement" following the phrase "the JPS Auto Security Agreement,". -3- 4 (c) The definition of "Deed of Charge" is deleted in its entirety. (d) The definition of "EBITDA" is deleted in its entirety and the following definition is substituted therefor: "EBITDA" shall mean, for any period, (i) the sum of the amounts for such period of (A) Consolidated Net Income, (B) depreciation, amortization expense and other non-cash charges, (C) consolidated interest expense (including fees for Letters of Credit) and (D) Federal, state, local and foreign income taxes; minus (ii) gains (or plus losses) from asset sales calculated pursuant to GAAP for such period plus solely with respect to the last fiscal quarter of Fiscal Year 1995 and the first three fiscal quarters of Fiscal Year 1996, the extraordinary gain not in excess of $2,800,000 related to the Auto Sale. (e) The definition of "Fixed Asset Portion" in Section 1.01 of the Credit Agreement is hereby deleted in its entirety and the following definition is substituted therefor: "Fixed Asset Portion" shall mean $25,000,000; provided, however, the amount of the Fixed Asset Portion shall be reduced by the aggregate amount of each of the following: (i) the amount of any cash proceeds from sales of assets (other than Inventory) sold in the ordinary course of business that exceed Two Million Dollars ($2,000,000) in the aggregate in any Fiscal Year, net of (A) the costs of sale, lease, assignment or other disposition, (B) any income, franchise, transfer or other tax liability arising from such transaction and (C) amounts applied to the repayment of Indebtedness (other than the Obligations) secured by a Lien on the asset disposed of; (ii) in the event of the sale of all or substantially all of the capital stock or assets of any Borrowing Subsidiary (to the extent otherwise permitted hereunder) (other than in connection with the Auto Sale or the Carpet Sale), the amount of the Fixed Asset Value of such Borrowing Subsidiary plus fifty percent (50%) of the amount, if any, by which the Net Cash Proceeds from such sale exceed such Fixed Asset Value; (iii) in the event of a Permitted Disposition, an amount equal to fifty percent (50%) of the Net Cash Proceeds from such disposition; and (iv) the amount of Net Cash Proceeds from sales of assets (other than in connection with a Permitted Disposition, the Auto Sale or the Carpet Sale). (f) The definition of "Fixed Asset Value" is deleted in its entirety and the following definition is substituted therefor: "Fixed Asset Value" shall mean with respect to JCIC, $23,644,068 and with respect to JEC, $1,355,932. -4- 5 (g) The definition of "JPS-U.K." is deleted in its entirety. (h) The definition of "Net Worth" is hereby amended (i) to insert the phrase "and the Carpet Sale" at the end of the parenthetical in clause (iv) thereof and (ii) to insert the phrase "other than those gains associated with the Company's repurchase of Subordinated Indebtedness" at the end of the parenthetical in clause (v) thereof. (i) The definition of "Permitted Disposition" is deleted in its entirety and the following definition is substituted therefor: "Permitted Dispositions" shall mean (i) Permitted Financings and (ii) sales of fixed assets other than in the ordinary course of business permitted pursuant to the first sentence of Section 7.02(a), including sales that occur in connection with sale and leaseback transactions; provided, however, the Net Cash Proceeds of the transactions in both clauses (i) and (ii) above collectively shall not exceed Thirty Five Million Dollars ($35,000,000) in the aggregate since March 18, 1993 without the prior written consent of the Requisite Senior Lenders; provided, further, a Permitted Disposition shall not include the Auto Sale, the Carpet Sale or any transaction prohibited by Section 7.07(a) and shall only include those dispositions with respect to which each of the following conditions shall have been met: (A) the Agent and the Collateral Agent shall have received such landlord or mortgagee waivers, documents and agreements as the Agent and the Collateral Agent have reasonably deemed necessary to permit the Agent and the Collateral Agent to protect and enforce their respective Liens on Collateral; (B) all representation and warranties set forth in subsection (a) through (dd) of Section 4.01 ((I) except to the extent such statements expressly are made only as of the Effective Date or (II) other than for changes permitted or contemplated by this Agreement), shall have been true, correct and complete in all material respects as of the date of such disposition; (C) on the date of such disposition, no Event of Default or Potential Event of Default shall have occurred and be continuing or would result from the consummation of such disposition; and (D) the Net Cash Proceeds of such disposition shall have been applied to the repayment of the Obligations pursuant to Section 2.06(b); provided, further, (a) in the event any Loan Party would receive Net Cash Proceeds in excess of an aggregate amount of Ten Million Dollars ($10,000,000) from the sale of any fixed assets pursuant to the first sentence of Section 7.02(a) (other than in connection with a sale and leaseback transaction) in a single transaction or series of related transactions, such Loan Party shall have submitted the documentation for such disposition to the Senior Lenders and shall have obtained the prior written consent of the -5- 6 Requisite Senior Lenders to such disposition and (b) in the event of a Permitted Financing or a sale of fixed assets in connection with a sale and leaseback transaction by a Borrowing Subsidiary, such Borrowing Subsidiary shall have submitted the documentation for such disposition to the Senior Lenders and shall have obtained the prior written consent of the Requisite Senior Lenders to such disposition, but only if the Net Cash Proceeds of such disposition and all prior dispositions of such type (other than the Auto Sale and the Carpet Sale) received by such Borrowing Subsidiary since March 18, 1993 exceed in the aggregate (I) for JEC, Ten Million Dollars ($10,000,000) and (II) for JCIC, Twenty-Five Million Dollars ($25,000,000). (j) The definition of "Revolving Credit Facility" in Section 1.01 of the Credit Agreement is hereby amended to delete the dollar amount "$135,000,000" and substitute the dollar amount "$118,000,000" therefor. (k) The definition of "Transaction Documents" in Section 1.01 of the Credit Agreement is hereby amended to add the phrase "the Carpet Transaction Documents," following the phrase "the New Auto Transaction Documents,". 1.03 Section 2.06(b)(iii) of the Credit Agreement is hereby amended to add the phrase "or the Carpet Sale" after the phrase "from the Auto Sale" in the third line of the proviso in the first sentence thereof. 1.04 Section 7.02(a) of the Credit Agreement is hereby amended to delete clause (B) thereof and substitute new clauses (B) and (C) prior to the period at the end of clause (B) thereof as follows: ,(B) JCC shall be permitted to assign any of its interests in the Holdco Note, the Holdco Preferred Stock and the Holdco Warrants, or any of them, to any of the Borrowing Subsidiaries; provided that the Borrowing Subsidiary to which such interests are transferred shall enter into documentation pledging such interests in favor of the Agent in form and substance satisfactory to the Agent and the Collateral Agent and deliver to the Agent, the Collateral Agent and the Senior Lenders all legal opinions and supporting documentation requested by the Agent and the Collateral Agent in connection therewith and (C) JCC (or any Borrowing Subsidiary to which JCC shall have transferred any of its interests pursuant to clause (B) above) shall be permitted to sell any of its interests in the Holdco Note, the Holdco Preferred Stock and the Holdco Warrants, or any of them, to a Person other than a Loan Party; provided that the Net Cash Proceeds of such sale are applied as a mandatory prepayment in accordance with Section 2.06(b) and such sale is made on terms satisfactory to the Requisite Senior Lenders. -6- 7 1.05 Section 7.03 of the Credit Agreement is hereby amended to (i) delete the word "and" following the semicolon at end of clause (vii) thereof and (ii) delete in its entirety clause (viii) thereof and substitute the following new clauses (viii) and (ix) therefor:. (viii) Investments held by JCC or any of the Borrowing Subsidiaries in the Holdco Note, the Holdco Preferred Stock and the Holdco Warrants; and (viii) Investments held by the Company in JPS Auto and JCC. 1.06 Section 7.04(vi) of the Credit Agreement is hereby deleted in its entirety and the following clause is substituted therefor: (vi) Accommodation Obligations arising in connection with the Transaction Documents, including, without limitation, (A) the Assumed Liabilities, (B) obligations owing by the Company in connection with its indemnification obligations under the Purchase Agreement, any of the New Auto Transaction Documents or any of the Carpet Transaction Documents and obligations owing by JCC or any of its transferees in connection with its indemnification obligations under any of the Carpet Transaction Documents, (C) any purchase price or tax adjustments payable by the Company pursuant to the terms of the Purchase Agreement, any of the New Auto Transaction Documents or any of the Carpet Transaction Documents 1.07 Section 7.07(a) of the Credit Agreement is hereby amended to insert the following phrase prior to the period at the end thereof: ; provided that the Company shall be permitted to dissolve JCC at any time after (i) the payment or receipt of all purchase price adjustments pursuant to Section 2.3 of the Carpet Asset Transfer Agreement and (ii) the transfer of all remaining assets of JCC, including, without limitation, the Holdco Note, the Holdco Preferred Stock and the Holdco Warrants, pursuant to Section 7.02(a) on terms satisfactory to the Agent and the Collateral Agent 1.08 The last sentence of Section 7.07(c) of the Credit Agreement is hereby deleted in its entirety and the following sentence is substituted therefor: The Company agrees that JPS Auto and JCC shall not engage in any business or own or acquire any assets (other than, in the case of JCC, the Holdco Note, the Holdco Preferred Stock and the Holdco Warrants). -7- 8 1.09 Section 7.16 of the Credit Agreement is hereby deleted in its entirety and the following paragraph is substituted therefor: 7.16. Amendment of Transaction Documents. Neither the Company nor any of its Subsidiaries shall amend, modify, terminate or supplement any of the Transaction Documents to which they are a party without the prior written consent of the Requisite Senior Lenders or, as otherwise provided in this Agreement, without the prior written consent of the Agent and the Collateral Agent (which consent, with respect to the Purchase Agreement, the New Auto Transaction Documents and the Carpet Transaction Documents, shall not be unreasonably withheld); provided that no such consent shall be required for any such amendment, modification or supplement which affects solely a non-material provision or non-material provisions of one or more New Auto Transaction Documents or Carpet Transaction Documents in a manner which is not adverse to the Agent, the Collateral Agent or any of the Senior Lenders. 1.10 Section 8.01 of the Credit Agreement is hereby deleted in its entirety and the following paragraph is substituted therefor: 8.01. Minimum Net Worth. The Net Worth of the Company and its Subsidiaries on a consolidated basis on the last day of each month of each fiscal quarter set forth below shall not be less than the minimum amount set forth opposite such fiscal quarter:
Fiscal Quarter Minimum Amount -------------- -------------- Effective Date through the third fiscal quarter of Fiscal Year 1994 $310,000,000 The fourth fiscal quarter of Fiscal Year 1994 268,000,000 The first fiscal quarter of Fiscal Year 1995 210,000,000 The second fiscal quarter of Fiscal Year 1995 209,000,000 The third fiscal quarter of Fiscal Year 1995 208,000,000 The fourth fiscal quarter of Fiscal Year 1995 205,000,000 The first fiscal quarter of Fiscal Year 1996 157,435,000
-8- 9 The second fiscal quarter of Fiscal Year 1996 158,129,000 The third fiscal quarter of Fiscal Year 1996 157,563,000 The fourth fiscal quarter of Fiscal Year 1996 156,172,000
1.11 Section 8.02 of the Credit Agreement is hereby deleted in its entirety and the following paragraphs are substituted therefor: 8.02. Minimum Total Interest Coverage Ratio. (A) Total Interest Coverage Ratio of the Company and its Subsidiaries on a consolidated basis, as determined as of the last day of each fiscal quarter set forth below for the twelve month period ending on such day shall not be less than the minimum ratio set forth opposite such fiscal quarter:
Fiscal Quarter Minimum Ratio -------------- ------------- Effective Date through the third fiscal quarter of Fiscal Year 1994 1.55:1 The fourth fiscal quarter of Fiscal Year 1994 1.60:1 The first fiscal quarter of Fiscal Year 1995 1.65:1 The second fiscal quarter of Fiscal Year 1995 1.55:1 The third fiscal quarter of Fiscal Year 1995 1.60:1 The fourth fiscal quarter of Fiscal Year 1995 1.70:1 The first fiscal quarter of Fiscal Year 1996 1.56:1 The second fiscal quarter of Fiscal Year 1996 1.44:1 The third fiscal quarter of Fiscal Year 1996 1.54:1 The fourth fiscal quarter of Fiscal Year 1996 1.48:1
-9- 10 (B) Total Operating Company Interest Coverage Ratio of the Borrowing Subsidiaries on a consolidated basis, as determined as of the last day of each fiscal quarter set forth below for the twelve month period ending on such day, shall not be less than the minimum ratio set forth opposite such fiscal quarter:
Fiscal Quarter Minimum Ratio -------------- ------------- Effective Date through the third fiscal quarter of Fiscal Year 1994 8.80:1 The fourth fiscal quarter of Fiscal Year 1994 10.00:1 The first fiscal quarter of Fiscal Year 1995 8.50:1 The second fiscal quarter of Fiscal Year 1995 6.70:1 The third fiscal quarter of Fiscal Year 1995 5.50:1 The fourth fiscal quarter of Fiscal Year 1995 5.00:1 The first fiscal quarter of Fiscal Year 1996 7.08:1 The second fiscal quarter of Fiscal Year 1996 6.30:1 The third fiscal quarter of Fiscal Year 1996 6.37:1 The fourth fiscal quarter of Fiscal Year 1996 6.04:1
-10- 11 1.12 Section 8.03 of the Credit Agreement is hereby deleted in its entirety and the following paragraph is substituted therefor: 8.03. Minimum Fixed Charge Coverage Ratio. (A) The Minimum Fixed Charge Coverage Ratio of the Company and its Subsidiaries on a consolidated basis, as determined as of the last day of each fiscal quarter set forth below for the twelve month period ending on such day shall not be less than the minimum ratio set forth opposite such fiscal quarter:
Fiscal Quarter Minimum Ratio -------------- ------------- Effective Date through the third fiscal quarter of Fiscal Year 1994 0.80:1 The fourth fiscal quarter of Fiscal Year 1994 0.85:1 The first fiscal quarter of Fiscal Year 1995 0.85:1 The second fiscal quarter of Fiscal Year 1995 0.77:1 The third fiscal quarter of Fiscal Year 1995 0.90:1 The fourth fiscal quarter of Fiscal Year 1995 0.93:1 The first fiscal quarter of Fiscal Year 1996 0.85:1 The second fiscal quarter of Fiscal Year 1996 0.85:1 The third fiscal quarter of Fiscal Year 1996 0.85:1 The fourth fiscal quarter of Fiscal Year 1996 0.95:1
-11- 12 (B) The Operating Company Fixed Charge Coverage Ratio of the Borrowing Subsidiaries on a consolidated basis, as determined as of the last day of each fiscal quarter set forth below for the twelve month period ending on such day shall not be less than the minimum ratio set forth opposite such fiscal quarter:
Fiscal Quarter Minimum Ratio -------------- ------------- Effective Date through the third fiscal quarter of Fiscal Year 1994 1.50:1 The fourth fiscal quarter of Fiscal Year 1994 1.70:1 The first fiscal quarter of Fiscal Year 1995 1.71:1 The second fiscal quarter of Fiscal Year 1995 1.46:1 The third fiscal quarter of Fiscal Year 1995 1.46:1 The fourth fiscal quarter of Fiscal Year 1995 1.40:1 The first fiscal quarter of Fiscal Year 1996 1.48:1 The second fiscal quarter of Fiscal Year 1996 1.56:1 The third fiscal quarter of Fiscal Year 1996 1.46:1 The fourth fiscal quarter of Fiscal Year 1996 1.84:1
-12- 13 1.13 Section 8.05 of the Credit Agreement is hereby deleted in its entirety and the following paragraph is substituted therefor: 8.05. Minimum Current Ratio. The Current Ratio of the Company and its Subsidiaries on a consolidated basis shall not be less than the minimum ratio set forth opposite such fiscal quarter:
Fiscal Quarter Minimum Ratio -------------- ------------- Effective Date through the third fiscal quarter of Fiscal Year 1994 1.00:1 The fourth fiscal quarter of Fiscal Year 1994 1.00:1 The first fiscal quarter of Fiscal Year 1995 0.85:1 The second fiscal quarter of Fiscal Year 1995 0.86:1 The third fiscal quarter of Fiscal Year 1995 0.87:1 The fourth fiscal quarter of Fiscal Year 1995 0.85:1 The first fiscal quarter of Fiscal Year 1996 0.77:1 The second fiscal quarter of Fiscal Year 1996 0.78:1 The third fiscal quarter of Fiscal Year 1996 0.79:1 The fourth fiscal quarter of Fiscal Year 1996 0.81:1
1.14 Section 8.06 of the Credit Agreement is hereby amended to delete the dollar amount "$24,500,000" set forth below opposite Fiscal Year 1996 and substitute the dollar amount "13,000,000" therefor. -13- 14 1.15 Section 10.08(b) of the Credit Agreement is hereby amended to insert the following phrase prior to the period at the end of the first sentence thereof: ; or (vii) constituting fixed assets that are financed or refinanced by Indebtedness permitted by Sections 7.01(v) and (x) SECTION 2. Amendments to Schedules to Credit Agreement. 2.01 Schedule 1.01-A to the Credit Agreement is deleted in its entirety and Exhibit A hereto shall be substituted therefor. SECTION 3. Consent of the Senior Lenders. (a) The Senior Lenders hereby consent to the transactions contemplated by the Carpet Transaction Documents, including, without limitation, the sale of substantially all of the assets of JCC, subject to certain liabilities, to Holdco pursuant to the Carpet Asset Transfer Agreement, and the subsequent transfer of such assets by Holdco to Subco; provided, however, that the Net Cash Proceeds received by JCC or any Loan Party in connection with such transactions (including, without limitation, any adjustments to the purchase price received by JCC pursuant to Section 2.3 of the Carpet Asset Transfer Agreement) shall be applied to the repayment of the Obligations pursuant to Section 2.06(b) of the Credit Agreement (without a corresponding reduction in the Commitments). (b) The Senior Lenders hereby instruct and direct the Agent and the Collateral Agent, upon the consummation of the transactions contemplated by the Carpet Asset Transfer Agreement and the satisfaction of the conditions precedent in Section 4 hereof, to release all Liens made in favor of the Agent and/or the Collateral Agent on the Carpet Assets, to terminate the Subsidiary Security Agreement to which JCC is party and to enter into a replacement security agreement substantially in the form of such Subsidiary Security Agreement, to release the Agent and the Collateral Agent as loss payee or co-insured, as the case may be, on any insurance policies covering the Carpet Assets, to enter into the Carpet Sale Amendatory Agreement substantially in the form of Exhibit B hereto and to take all actions as may be appropriate (including, without limitation, the filing of releases with respect to Uniform Commercial Code financing statements and the termination of all blocked account agreements) in connection therewith. SECTION 4. Conditions Precedent to the Effectiveness of this Amendment. Section 1.02(c) hereof shall become effective as of the date hereof solely with respect to calculations of -14- 15 EBITDA for the last fiscal quarter of Fiscal Year 1995 on the date that the Agent shall have received a copy of this Amendment duly executed by each Loan Party and by the Requisite Senior Lenders. The remaining sections of this Amendment (including, without limitation, Section 1.02(c) with respect to calculations of EBITDA for Fiscal Year 1996) shall become effective as of the date hereof on the date (the "Fourth Amendment Effective Date") when the following conditions precedent have been satisfied (unless waived by the Requisite Senior Lenders or unless the deadline for delivery has been extended by the Agent): 4.01 (a) Certain Documents. The Agent shall have received on or before the Fourth Amendment Effective Date all of the following, all of which, except as otherwise specifically described below, shall be in form and substance satisfactory to the Requisite Senior Lenders and in sufficient copies for each of the Senior Lenders: (i) This Amendment, executed by the Company, JCC and each Borrowing Subsidiary, each Senior Lender, the Agent and the Collateral Agent, together with all exhibits and schedules thereto; (ii) A substitute Note payable to each Senior Lender in a principal amount equal to such Senior Lender's Pro Rata Share of $118,000,000; (iii) The Carpet Sale Amendatory Agreement; (iv) The Carpet Pledge Agreement; (v) The Carpet Security Agreement; (vi) The Amended and Restated Contribution Agreement; (vii) Release of Liens on the trademarks of JCC created pursuant to the Trademark Security Agreement executed by JCC; (viii) Release of Liens on the stock of JPS-U.K. created pursuant to the Deed of Charge executed by JCC; (ix) Releases of the Real Property Collateral Documents, as may be required as a result of the transactions contemplated by this Amendment, for each parcel of real property owned by JCC and set forth on Schedule 1 hereto; (x) Executed copies of each UCC-3 termination statement signed by the Agent and the Collateral Agent, as appropriate to be filed in each jurisdiction set forth on Schedule 2 hereto; -15- 16 (xi) Executed copies of each UCC-1 Financing Statement signed by JCC, the Agent and the Collateral Agent, as appropriate to be filed in each jurisdiction set forth on Schedule 3 hereto; (xii) The Holdco Note to be pledged under the Carpet Pledge Agreement (duly endorsed in favor of the Agent); (xiii) Stock certificates representing the Holdco Preferred Stock and the Holdco Warrants to be pledged under the Carpet Pledge Agreement (with stock powers and warrant transfer documents duly executed in blank); (xiv) A favorable opinion of Weil, Gotshal & Manges, counsel to the Loan Parties, International Fabrics, JPS Auto and JCC, in form and substance satisfactory to the Requisite Senior Lenders, and a letter entitling the Agent, the Collateral Agent and the Senior Lenders to rely on any opinion or opinions delivered by Weil, Gotshal & Manges in connection with the Carpet Transaction Documents; (xv) A copy of each of the Carpet Transaction Documents, certified as of the Fourth Amendment Effective Date by the Secretary or an Assistant Secretary of the Company (A) to be a true, correct and complete copy of each such document and (B) not to have been amended or rescinded; (xvi) A certificate of the Secretary or Assistant Secretary of the Company dated the Fourth Amendment Effective Date certifying (A) the names and true signatures of the incumbent officers of the Company authorized to sign this Amendment and all other Transaction Documents executed by the Company in connection with this Amendment, (B) the By-Laws of the Company as in effect on the date of such certification, (C) the resolutions of the Company's Board of Directors approving and authorizing the execution, delivery and performance of this Amendment and the other Transaction Documents executed in connection with this Amendment to which it is a party and (D) that there have been no changes in the Certificate of Incorporation of the Company since the date of the most recent certification thereof by the Secretary of State of Delaware delivered to the Agent; (xvii) A certificate of the Secretary or Assistant Secretary of JCC dated the Fourth Amendment Effective Date certifying (A) the names and true signatures of the incumbent officers of JCC authorized to sign this Amendment and the other Transaction Documents executed in connection with this Amendment to which it is a party, (B) the By-laws of JCC as in effect on the date of such certification, (C) the resolutions of JCC's Board of Directors approving and authorizing the execution, delivery and performance of this Amendment and the other Transaction Documents executed in -16- 17 connection with this Amendment to which it is a party and (D) that there have been no changes in the Certificate of Incorporation of JCC since the date of the most recent certification thereof by the Secretary of State of Delaware delivered to the Agent; (xviii) A certificate of the Secretary or Assistant Secretary of each Borrowing Subsidiary, JPS Auto and International Fabrics dated the Fourth Amendment Effective Date certifying (A) the names and true signatures of the incumbent officers of such Borrowing Subsidiary, JPS Auto and International Fabrics authorized to sign this Amendment and the other Transaction Documents executed in connection with this Amendment to which it is a party, (B) the By-laws of such Borrowing Subsidiary, JPS Auto and International Fabrics as in effect on the date of such certification, (C) the resolutions of such Borrowing Subsidiary's, JPS Auto's and International Fabrics' Board of Directors approving and authorizing the execution, delivery and performance of this Amendment and the other Transaction Documents executed in connection with this Amendment to which it is a party and (D) that there have been no changes in the Certificate of Incorporation of such Borrowing Subsidiary, JPS Auto and International Fabrics since the date of the most recent certification thereof by the Secretary of State of Delaware delivered to the Agent; (xix) Good Standing Certificates certified by the Secretary of State of Delaware relating to the Company, JCC, International Fabrics, JPS Auto and each Borrowing Subsidiary; and (xx) Such additional documentation as the Agent, the Collateral Agent or the Requisite Senior Lenders may reasonably require. (b) Obligations Paid. The Loan Parties and JCC shall have used the Net Cash Proceeds of the Carpet Sale to make a mandatory prepayment of Revolving Loans (without a corresponding reduction in the Commitments). (c) The Carpet Sale. The Agent, the Collateral Agent and the Requisite Senior Lenders shall be satisfied that: (i) the Carpet Asset Transfer Agreement and all other Carpet Transaction Documents shall have been duly approved and executed and delivered by the parties thereto in form and substance satisfactory to the Agent, the Collateral Agent and the Senior Lenders, (ii) all conditions precedent to closing under the Carpet Asset Transfer Agreement and the other Carpet Transaction Documents have been met (and no modification or waiver of any such condition shall have been made without the consent of the Agent and the Collateral Agent) and such documents are, or simultaneously with the execution hereof, will be in full force and effect, (iii) the sum received by the Company and/or JCC of -17- 18 Net Cash Proceeds from the Carpet Sale shall equal at least $22,000,000, (iv) the Carpet Sale and the transactions contemplated thereby and by this Amendment (including, without limitation, the application of the gross proceeds and Net Cash Proceeds of the Carpet Sale, and the application of the proceeds of the Revolving Loans) do not and will not contravene or constitute a default under or in respect of the Senior Notes, any Subordinated Indebtedness or any other Indebtedness of JCC or any of the Loan Parties, (v) the Loan Parties and the other parties to the Loan Documents and the Carpet Transaction Documents are (and, after giving effect to the Carpet Sale and the transactions contemplated thereby and by this Amendment, will be) in compliance with all Requirements of Law and all material Contractual Obligations and (vi) the Company and its Subsidiaries have made adequate provision for the payment of all fees, expenses, indemnities and other liabilities to be incurred by the Company and its Subsidiaries in connection with the Carpet Sale and the transactions contemplated thereby and by this Amendment. 4.02 Each of the representations and warranties made by the Company or the Borrowing Subsidiaries in or pursuant to the Credit Agreement, as amended by this Amendment, the Collateral Documents and the other Loan Documents to which the Company or any of the Borrowing Subsidiaries is a party or by which the Company or any of the Borrowing Subsidiaries is bound, shall be true and correct in all material respects on and as of the Fourth Amendment Effective Date (except any such representations and warranties stated to be given as of a specific date other than the Fourth Amendment Effective Date). 4.03 All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Amendment shall be satisfactory in all respects in form and substance to the Agent, the Collateral Agent and each of the Senior Lenders. 4.04 No Event of Default or Potential Event of Default shall have occurred and be continuing on the Fourth Amendment Effective Date. SECTION 5. Representations and Warranties. 5.01 The Carpet Asset Transfer Agreement is in full force and effect and no material breach or default of any term or provision of any Carpet Transaction Document by any of the Company and its Subsidiaries or (to the best knowledge of the Loan Parties) by any other party thereto has occurred (except for such breaches or defaults thereunder that have been waived by the parties thereto not in default with the prior consent in writing by the Agent and the Collateral Agent (which consent shall not have been unreasonably withheld)). Except as permitted by Section 7.16, no provision of any Carpet Transaction Document has been waived and no Carpet Transaction Document has been amended, supplemented or otherwise modified. -18- 19 5.02 Each Loan Party hereby represents and warrants to the Senior Lenders that (a) as of the date hereof no Event of Default or Potential Event of Default under the Credit Agreement shall have occurred and be continuing and (b) all of the representations and warranties of the Loan Parties contained in subsections 4.01(a) through (dd) of the Credit Agreement and in any other Loan Document (as defined under the Credit Agreement) continue to be true and correct as of the date of execution hereof in all material respects, as though made on and as of such date (unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct as of such earlier date). SECTION 6. Reference to and Effect on the Loan Documents. 6.01 Upon the effectiveness of this Amendment, on and after the date hereof, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import, and each reference in the other Loan Documents to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended hereby. 6.02 Except as specifically amended above, all of the terms of the Credit Agreement and all other Loan Documents shall remain unchanged and in full force and effect. 6.03 The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Senior Lender, the Agent or the Collateral Agent under the Credit Agreement or any of the Loan Documents, nor constitute a waiver of any provision of the Credit Agreement or any of the Loan Documents. SECTION 7. Costs and Expenses. Each Loan Party agrees to pay on demand in accordance with the terms of Section 11.03 of the Credit Agreement all costs and expenses of the Agent in connection with the preparation, reproduction, execution and delivery of this Amendment and all other Loan Documents entered into in connection herewith, including the reasonable fees and out-of-pocket expenses of Sidley & Austin, counsel for the Agent with respect thereof. SECTION 8. Execution in Counterparts. This Amendment may be executed and delivered in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original and all of which taken together shall constitute one and the same original agreement. SECTION 9. Governing Law. This Amendment shall be governed by and construed in accordance with, the laws of the State of New York. -19- 20 IN WITNESS WHEREOF, this Amendment has been duly executed on the date set forth above. JPS TEXTILE GROUP, INC. By: /s/ David H. Taylor ------------------------------------- Title: EVP-Finance & Secretary JPS CARPET CORP. By: /s/ David H. Taylor ------------------------------------- Title: Vice President JPS ELASTOMERICS CORP. By: /s/ David H. Taylor ------------------------------------- Title: Vice President JPS CONVERTER AND INDUSTRIAL CORP. By: /s/ David H. Taylor ------------------------------------- Title: Vice President Senior Lenders: CITIBANK, N.A., as Agent and as a Senior Lender By: /s/ Brenda M. Cotsen ------------------------------------- Title: Attorney in Fact GENERAL ELECTRIC CAPITAL CORPORATION, as Collateral Agent and as a Senior Lender By: /s/ Rick Luck ------------------------------------- Title: Vice President GE Capital Commercial Finance, Inc. HELLER FINANCIAL, INC. By: /s/Frank Ross ------------------------------------- Title: -20- 21 THE BANK OF NEW YORK COMMERCIAL CORPORATION By: /s/ Michael Lustbader ------------------------------------- Title: VP NATIONSBANK OF GEORGIA, N.A. By: /s/ Brian O'Fallon ------------------------------------- Title: SVP -21- EX-10.21 3 LEASE MODIFICATION AND EXTENSION 1 Exhibit 10.21 LEASE MODIFICATION AND EXTENSION AGREEMENT AGREEMENT made as of this 17th day of November, 1994, by and between 1185 AVENUE OF THE AMERICAS ASSOCIATES, a New York limited partnership, having an office at 60 East 42nd Street, New York, New York 10165 (hereinafter referred to as "Sublessor"), and JPS CONVERTER AND INDUSTRIAL CORP., a Delaware corporation, having an office at 555 North Pleasantburg Drive, Greenville, South Carolina 29607 (hereinafter referred to as "Sublessee"). W I T N E S S E T H: WHEREAS, the parties hereto are Sublessor and Sublessee, respectively, under that certain Agreement of Lease, dated as of June 1, 1988, as modified and extended pursuant to Lease Modification and Extension Agreement, dated as of April 8, 1991, and Lease Modification and Extension Agreement, dated as of April 30, 1993 (which sublease, as modified and extended, is hereinafter called the "Sublease") covering approximately 12,454 rentable square feet on the 14th floor (the "Subleased Premises") in the building located at 1185 Avenue of the Americas, New York, New York, (the "Building"); and WHEREAS, the parties hereto wish to extend further the term of the Sublease and to modify the terms thereof in the manner hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, it is agreed as follows: 1. The term of the Sublease is hereby extended for a period of two (2) years (less one (1) day), commencing June 1, 1995 and expiring on May 30, 1997 (unless sooner terminated pursuant to the terms hereof), upon all of the terms, covenants and conditions as are now provided in the Sublease (except as provided in Paragraph 2 hereof), unless any such terms, covenants or conditions shall hereafter be modified by agreement of the parties prior to May 30, 1997, it being expressly understood and agreed that: (I) the fixed annual rent for the subleased premises shall be in the sum of $373,620 per year; and (ii) the base tax year set forth in Article 42 for Tax Escalation rent and the base year set forth in Article 43 for Operating Expense Escalation rent shall remain unchanged during the extended term. 2. A. Provided that Sublessee is not in default under any of the terms, covenants and conditions of the Sublease, Sublessee shall be granted a rent credit against the fixed annual rent payable under the Sublease (excluding the ERIF portion thereof referred to in Articled 44) in the total amount of $62,270.00 to be applied in equal monthly amounts of $2,594.58 against each of the twenty-four (24) monthly installments of fixed annual rent due under the Sublease. If the term of this Sublease is terminated by virtue of default of Sublessee hereunder, then in such event, in additional to all other damages and remedies herein provided and provided by law for Sublessor, Sublessor shall also be entitled to the return of the total dollar amount of the aforedescribed rent credit heretofore enjoyed by Sublessee hereunder, which sum shall be deemed additional rent due and owing prior to such termination of this Sublease. The obligation of Sublessee to pay such additional rent (or damages) to Sublessor shall survive the expiration or sooner termination of the term of this Sublease. 2 B. The provisions of Articles 51 and 53 shall not apply to this Agreement or to the extended term of the Sublease. 3. Sublessee understands and agrees that it will accept possession of the Subleased Premises for the extended term of the Sublease in its then "as is" condition, and Sublessor shall have no obligation to do any work in and to the Subleased Premises in connection with this Agreement or the extended term of the Sublease. 4. Sublessor and Sublessee each represents and warrants to the other that it has neither consulted or negotiated with any broker or finder with regard to the Subleased Premises, and Sublessor and Sublessee each agrees to indemnify, defend and save harmless the other from and against any claims for fees or commissions from anyone with whom it has dealt in connection with the Subleased Premises or the Sublease. 5. Except as herein modified, all of the other terms, covenants and conditions of the Sublease are and shall remain in full force and effect and are hereby ratified and confirmed. 6. This Agreement shall be binding upon and inure to the benefit of the parties hereto have caused this Agreement to be executed as of the day and year first above written. 1185 AVENUE OF THE AMERICAS ASSOCIATES (Sublessor) By: W&M Properties, Inc., as Agent By: /s/ Donald B. Kaplan -------------------- Executive Vice President JPS CONVERTER AND INDUSTRIAL CORP. (Sublessee) By: /s/ Carl Rosen -------------- President EX-27 4 FINANCAIL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF JPS TEXTILE GROUP, INC. CONTAINED IN THE BODY OF THE ACCOMPANYING FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR OCT-28-1995 OCT-28-1995 1,352 0 90,317 2,131 48,729 168,223 281,823 118,866 412,822 66,621 327,668 28,171 250 10 (37,305) 412,822 472,565 472,565 406,070 406,070 0 0 39,946 (16,464) 1,200 (17,664) (33,320) 20,120 0 (30,864) (34.70) (34.70)
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