UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended May 1, 2004.
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number 33-27038
JPS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 57-0868166 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
| 55 Beattie Place, Suite 1510, Greenville, South Carolina | 29601 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number (864) 239-3900
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of The Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 9,534,259 shares of the Company’s Common Stock were outstanding as of June 14, 2004.
INDEX
| Page Number | ||||
| PART I. |
||||
| Item 1. |
Condensed Consolidated Balance Sheets |
3 | ||
| 4 | ||||
| 5 | ||||
| Notes to Condensed Consolidated Financial Statements (Unaudited) |
6 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
9 | ||
| Item 3. |
12 | |||
| Item 4. |
13 | |||
| PART II. |
14 | |||
-2-
JPS INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
| May 1, 2004 |
November 1, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash |
$ | 251 | $ | 661 | ||||
| Accounts receivable, net of allowances of $453 and $434 as of May 1, 2004 and November 1, 2003, respectively |
23,118 | 20,070 | ||||||
| Inventories (Note 2) |
14,878 | 13,613 | ||||||
| Prepaid expenses and other |
4,532 | 3,164 | ||||||
| Deferred income taxes |
304 | 304 | ||||||
| Total current assets |
43,083 | 37,812 | ||||||
| Property, plant and equipment, net |
31,400 | 33,788 | ||||||
| Deferred income taxes |
11,286 | 11,727 | ||||||
| Other assets |
21 | 44 | ||||||
| Total assets |
$ | 85,790 | $ | 83,371 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 10,506 | $ | 10,062 | ||||
| Accrued interest |
46 | 54 | ||||||
| Accrued salaries, benefits and withholdings |
2,166 | 1,017 | ||||||
| Accrued pension costs |
4,263 | 7,446 | ||||||
| Other accrued expenses |
6,457 | 3,943 | ||||||
| Current portion of long-term debt (Note 3) |
1,572 | 722 | ||||||
| Total current liabilities |
25,010 | 23,244 | ||||||
| Long-term debt (Note 3) |
13,918 | 14,046 | ||||||
| Deferred revenue and postemployment liabilities |
41,089 | 41,045 | ||||||
| Total liabilities |
80,017 | 78,335 | ||||||
| Shareholders’ equity: |
||||||||
| Common stock - $.01 par value; authorized – 22,000,000 shares; issued – 10,000,000 shares; outstanding – 9,534,259 shares at May 1, 2004 |
100 | 100 | ||||||
| Additional paid-in capital |
123,226 | 123,332 | ||||||
| Treasury stock (at cost) – 465,741 shares at May 1, 2004 |
(1,749 | ) | (1,895 | ) | ||||
| Additional minimum pension liability |
(49,835 | ) | (49,835 | ) | ||||
| Accumulated deficit |
(65,969 | ) | (66,666 | ) | ||||
| Total shareholders’ equity |
5,773 | 5,036 | ||||||
| Total liabilities and shareholders’ equity |
$ | 85,790 | $ | 83,371 | ||||
| Note: | The condensed consolidated balance sheet at November 1, 2003 has been extracted from the audited financial statements. |
See notes to condensed consolidated financial statements.
-3-
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
(Unaudited)
| Three Months Ended |
Six Months Ended |
|||||||||||||
| May 1, 2004 |
May 3, 2003 |
May 1, 2004 |
May 3, 2003 |
|||||||||||
| Net sales |
$ | 38,170 | $ | 29,493 | $ | 69,378 | $ | 58,272 | ||||||
| Cost of sales |
31,771 | 25,989 | 58,209 | 51,196 | ||||||||||
| Gross profit |
6,399 | 3,504 | 11,169 | 7,076 | ||||||||||
| Selling, general and administrative expenses |
4,861 | 4,868 | 9,609 | 9,263 | ||||||||||
| Operating profit (loss) |
1,538 | (1,364 | ) | 1,560 | (2,187 | ) | ||||||||
| Interest expense |
199 | 165 | 388 | 320 | ||||||||||
| Income (loss) before income taxes |
1,339 | (1,529 | ) | 1,172 | (2,507 | ) | ||||||||
| Income taxes (benefit) |
475 | 0 | 475 | (381 | ) | |||||||||
| Net income (loss) |
$ | 864 | $ | (1,529 | ) | $ | 697 | $ | (2,126 | ) | ||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |
||||||||||||||
| Basic |
9,349,259 | 9,294,259 | 9,330,926 | 9,293,426 | ||||||||||
| Diluted |
9,537,842 | 9,294,259 | 9,528,089 | 9,293,426 | ||||||||||
| Basic earnings (loss) per common share |
$ | 0.09 | $ | (0.17 | ) | $ | 0.07 | $ | (0.23 | ) | ||||
| Diluted earnings (loss) per common share |
$ | 0.09 | $ | (0.17 | ) | $ | 0.07 | $ | (0.23 | ) | ||||
See notes to condensed consolidated financial statements.
-4-
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
| Six Months Ended |
||||||||
| May 1, 2004 |
May 3, 2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
| Net income (loss) |
$ | 697 | $ | (2,126 | ) | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
2,676 | 2,762 | ||||||
| Amortization of deferred financing costs |
23 | 23 | ||||||
| Deferred income taxes (benefit) |
475 | (381 | ) | |||||
| Pension plan contributions |
(3,183 | ) | (1,483 | ) | ||||
| Other, net |
9 | (233 | ) | |||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
(3,048 | ) | 2,831 | |||||
| Inventories |
(1,265 | ) | (367 | ) | ||||
| Prepaid expenses and other assets |
(1,402 | ) | 563 | |||||
| Accounts payable |
444 | (66 | ) | |||||
| Accrued expenses and other liabilities |
3,655 | (1,987 | ) | |||||
| Net cash used in operating activities |
(919 | ) | (464 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
| Net cash used in investing activities, property and equipment additions |
(213 | ) | (165 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
| Financing costs |
0 | (1 | ) | |||||
| Net proceeds from exercise of stock options |
0 | 7 | ||||||
| Revolving credit facility borrowings, net |
1,016 | 1,102 | ||||||
| Repayment of other long-term debt |
(294 | ) | (328 | ) | ||||
| Net cash provided by financing activities |
722 | 780 | ||||||
| NET INCREASE (DECREASE) IN CASH |
(410 | ) | 151 | |||||
| CASH AT BEGINNING OF PERIOD |
661 | 267 | ||||||
| CASH AT END OF PERIOD |
$ | 251 | $ | 418 | ||||
| SUPPLEMENTAL INFORMATION ON CASH FLOWS: |
||||||||
| Interest paid |
$ | 373 | $ | 334 | ||||
| Income taxes paid |
0 | 36 | ||||||
See notes to condensed consolidated financial statements.
-5-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| 1. | Basis of Presentation |
The terms “JPS” and the “Company”, as used in these condensed consolidated financial statements, mean JPS Industries, Inc. and JPS Industries, Inc. together with its subsidiaries, respectively, unless the context requires otherwise.
The Company has prepared, without audit, the interim condensed consolidated financial statements and related notes. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at May 1, 2004 and for all periods presented have been made.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended November 1, 2003 (“Fiscal 2003”). The results of operations for the interim period are not necessarily indicative of the operating results for the full year.
| 2. | Inventories (in thousands): |
| May 1, 2004 |
November 1, 2003 | |||||
| Raw materials and supplies |
$ | 3,054 | $ | 2,351 | ||
| Work-in-process |
3,986 | 2,851 | ||||
| Finished goods |
7,838 | 8,411 | ||||
| Total |
$ | 14,878 | $ | 13,613 | ||
| 3. | Long-Term Debt (in thousands): |
| May 1, 2004 |
November 1, 2003 |
|||||||
| Senior credit facility, revolving line of credit |
$ | 13,918 | $ | 12,902 | ||||
| Capital lease obligation |
1,572 | 1,866 | ||||||
| Total |
15,490 | 14,768 | ||||||
| Less current portion |
(1,572 | ) | (722 | ) | ||||
| Long-term portion |
$ | 13,918 | $ | 14,046 | ||||
The Company’s Revolving Credit and Security Agreement, as amended, (the “revolving credit facility”), is with Wachovia Bank. All borrowings under the revolving credit facility mature on April 30, 2007. The revolving credit facility provides for a revolving loan and letters of credit in a maximum principal amount equal to the lesser of (a) $25 million or (b) a specified borrowing base, which is based upon eligible receivables and inventory (as defined), and a specified dollar amount (currently $7.8 million, subject to amortization).
-6-
As of May 1, 2004, unused and outstanding letters of credit totaled $0.3 million. The outstanding letters of credit reduce the funds available under the revolving credit facility. At May 1, 2004, the Company had $11.2 million available for borrowing under the revolving credit facility.
The revolving credit facility restricts investments, capital expenditures, acquisitions and dividends. The revolving credit facility contains financial covenants relating to minimum levels of EBITDA, as defined, and a minimum fixed charge coverage ratio, as defined. All loans outstanding under the revolving credit facility bear interest at the 30-day LIBOR rate plus an applicable margin based upon the Company’s fixed charge coverage ratio. As of May 1, 2004, the Company’s interest rate under the revolving credit facility was 3.4%.
| 4. | Equity Securities |
The Company has one class of stock issued and outstanding.
1997 Incentive and Capital Accumulation Plan
The Company applies the principles of APB Opinion 25 in accounting for employee stock option plans. Under APB Opinion 25, the Company generally recognizes no compensation expense with respect to such awards because the quoted market price and the amount to be paid by the employee are the same on the date of grant. There was no compensation expense in the six months ended May 3, 2003 and May 1, 2004 related to these options.
Since the Company made no option grants during the six months ended May 3, 2003 and May 1, 2004 and had no expense under APB Opinion 25, the Company’s net loss and net loss per share would have been the same had the Company determined compensation expense based on the fair value at the grant date method of SFAS No. 123. Therefore, the pro forma income is the same as reported.
| 5. | Income Taxes |
The provision (benefit) for income taxes on continuing operations included in the condensed statements of operations for the three months ended below consists of the following (in thousands):