10-Q 1 k71292e10vq.txt QUARTERLY REPORT FOR PERIOD ENDED JUNE 30, 2002 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 June 30, 2002. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period from ________ to _____________. Commission file number 0-22580 JPE, Inc. (d/b/a ASCET and ASC Exterior Technologies) (Exact name of registrant as specified in its charter) Michigan (State or other jurisdiction of incorporation or organization) 38-2958730 (I.R.S. Employer Identification No.) 1030 Doris Road, Auburn Hills, Michigan 48326-2613 (Address of principal executive offices) (Zip Code) (248) 232-1161 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and formal fiscal year, if changed, since last report) 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 ----- ------ As of August 12, 2002, there were 14,043,600 shares of the registrant's common stock outstanding. This Quarterly Report on Form 10-Q contains 52 pages, of which this is page 1. 1 JPE, INC. (D/B/A ASCET, ASC EXTERIOR TECHNOLOGIES) INDEX Page PART I. Financial Information ITEM 1. Financial Statements 3 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 20 PART II. Other Information 21 ITEM 6. Exhibits 24-52 Signature 22 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS JPE, INC. (D/B/A ASCET AND ASC EXTERIOR TECHNOLOGIES) CONSOLIDATED CONDENSED BALANCE SHEETS ($ amounts in thousands)

~~Page~~AT AT JUNE 30, DECEMBER 31, 2002 2001 UNAUDITED ------------ ~~PART~~---------- I.ASSETS ~~Financial~~Current ~~Information~~assets: ~~ITEM~~Cash 1.and ~~Financial~~cash ~~Statements~~equivalents ~~Consolidated~~$ ~~Condensed~~2,794 ~~Balance~~$ ~~Sheets 3~~ -- AtAvailable ~~September~~for ~~30,~~sale ~~2001~~securities ~~(Unaudited)~~571 -- AtAccounts ~~December~~receivable 31trade, ~~2000~~net ~~Consolidated~~12,707 ~~Condensed~~14,610 ~~Statements~~Inventory of17,788 ~~Operations~~15,634 ~~(Unaudited)~~Other 4current assets 1,056 1,884 -------- ~~For~~-------- ~~the~~Total ~~Three~~current ~~Months~~assets ~~Ended~~34,916 ~~September~~32,128 30Property, ~~2001~~plant and ~~2000~~equipment, -net ~~For~~20,675 ~~the~~19,591 ~~Nine~~Goodwill, ~~Months~~net ~~Ended~~1,626 ~~September~~-- 30Other assets 1,155 ~~2001~~472 ~~and~~-------- ~~2000~~-------- ~~Consolidated~~Total ~~Condensed~~assets ~~Statements~~$ of58,372 ~~Shareholders~~$ 52,191 ======== ======== LIABILITIES AND SHAREHOLDERS' ~~Equity~~EQUITY ~~(Unaudited)~~Current 6liabilities: Current portion of long-term ~~For~~debt ~~the~~$ ~~Nine~~543 ~~Months~~$ ~~Ended~~494 ~~September~~Accounts 30payable 11,101 ~~2001~~12,045 ~~Consolidated~~Accrued ~~Condensed~~liabilities ~~Statements~~2,606 of3,501 ~~Cash~~Income ~~Flows~~Taxes ~~(Unaudited)~~47 7124 -------- ~~For~~-------- ~~the~~Total ~~Nine~~current ~~Months~~liabilities ~~ended~~14,297 ~~September~~16,164 30Long-term debt 42,507 ~~2001~~35,738 ~~and~~-------- ~~2000~~-------- ~~Notes~~Total toliabilities ~~Unaudited~~56,804 ~~Consolidated~~51,902 ~~Condensed~~-------- ~~Financial~~-------- ~~Statements~~Shareholders' 8equity: ~~ITEM~~First 2.Series ~~Management's~~Preferred ~~Discussion~~Shares, ~~and~~no ~~Analysis~~par ofvalue, ~~Financial~~50 ~~Condition~~votes per share, 3,000,000 authorized, 1,973,002 shares issued and ~~Results~~outstanding of16,590 ~~Operations~~206 Common stock, no par value, 15,000,000 ~~ITEM~~authorized, 3.14,043,600 ~~Quantitative~~shares issued and ~~Qualitative~~outstanding ~~Disclosures~~2,672 ~~about~~125 ~~Market~~Accumulated ~~Risk~~other 19comprehensive ~~PART~~income ~~II.~~76 ~~Other~~-- ~~Information~~Accumulated ~~ITEM~~deficit 6.(17,770) ~~Exhibits~~(42) -------- -------- Total shareholders' equity 1,568 289 -------- -------- Total liabilities and ~~Reports~~shareholders' 21equity ~~SIGNATURE~~$ 2258,372 $ 52,191 ======== ========

The accompanying notes are an integral part of the consolidated condensed financial statements 3 JPE, INC. (D/B/A ASCET AND ASC EXTERIOR TECHNOLOGIES) CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE OPERATIONS For the Three Months Ended June 30, 2002 and 2001 (Unaudited) ($ amounts in thousands, except per share data)

ATSUCCESSOR ~~SEPTEMBER~~--------- ~~30,~~PREDECESSOR ATCOMPANY ~~2001~~COMPANY ~~DECEMBER 31, (UNAUDITED) 2000~~ ---------------- --- --------- ~~ASSETS~~PERIOD ~~Current~~FROM ~~assets:~~PERIOD ~~Cash~~FROM ~~and~~THREE ~~cash~~MONTHS ~~equivalents~~APRIL $1, ~~264~~2002 $JUNE ~~196~~1, ~~Accounts~~2002 ~~receivables~~ENDED ~~trade,~~THROUGH ~~net~~THROUGH ~~14,620~~JUNE 1430,~~506~~ ~~Inventory~~MAY 1931,~~320~~ 22JUNE 30,~~269~~ ~~Other~~2001 ~~current~~2002 ~~assets~~2002 ~~1,538~~------------ ~~1,405~~ ------------- ------------ ~~Total~~Net ~~current~~sales ~~assets~~$ 3534,~~742~~491 ~~38,376~~$ ~~Property~~22,381 ~~plant~~$ ~~and equipment~~9,534 ~~net~~Cost ~~21,811~~of ~~23,582~~goods ~~Goodwill,~~sold ~~net 3~~29,~~428~~472 318,~~630~~492 ~~Deferred income taxes 2~~8,~~366~~158 ~~2,295 Other assets 1,130 2,007~~ --------- -------- -------- ~~Total~~Gross ~~assets~~profit $5,019 643,~~477~~889 $1,376 69Selling,~~890~~ ~~=========~~general ~~=========~~and ~~LIABILITIES~~administrative ~~AND~~expenses ~~SHAREHOLDERS'~~4,762 ~~EQUITY~~2,524 ~~(DEFICIT) Current liabilities: Current portion of long-term debt $ 27~~1,~~609~~298 $Other ~~611~~(income) ~~Accounts~~expense ~~payable~~9 25 11~~,290~~ ~~8,722~~Interest ~~Accrued liabilities 3~~expense,~~054~~ ~~4,319~~net ~~Income~~773 ~~taxes~~274 ~~424~~109 ~~224~~ --------- -------- -------- ~~Total~~Income ~~current~~(loss) ~~liabilities~~before ~~42,377 13,876 Deferred~~ income taxes ~~2,366~~(525) 21,~~295~~066 ~~Other~~(42) ~~liabilities~~Income --tax 20expense ~~Long-term~~58 ~~debt,~~25 ~~non~~-~~current 15,513 43,952~~ -~~--------~~ --------- ~~Total liabilities 60,256 60,143~~ --------- --------- ~~Shareholders'~~Net ~~equity~~income (~~deficit~~loss): ~~Warrants~~$ ~~293~~(583) ~~293~~$ ~~First~~1,041 ~~Series~~$ ~~Preferred~~(42) ~~Shares,~~======== no======== ~~par~~======== ~~value,~~Basic 50earnings ~~votes~~(loss) per share,: ~~3,000,000~~Common ~~authorized,~~Shares ~~1,973,002~~$ ~~and~~(0.01) ~~1,993,694~~$ ~~shares~~0.01 ~~issued~~$ ~~and~~0.00 ~~outstanding~~First atSeries ~~September~~Preferred ~~30,~~Shares ~~2001~~$ ~~and~~(0.26) ~~December~~$ ~~31,~~0.46 ~~2000,~~$ ~~respectively~~(0.02) ~~16,590~~Earnings ~~16,770~~(loss) ~~Common~~per ~~stock,~~share noassuming ~~par~~dilution: ~~value,~~Common ~~15,000,000~~Shares ~~authorized,~~$ ~~14,043,600~~(0.01) ~~shares~~$ ~~issued~~0.01 ~~and~~$ ~~outstanding~~0.00 atFirst ~~September~~Series ~~30,~~Preferred ~~2001~~Shares ~~and~~$ ~~December 31, 2000 2,379 2,379 Accumulated deficit~~ (~~15,041~~0.26) ~~(9,695) --------- --------- Total shareholders' equity 4,221 9,747 --------- --------- Total liabilities and shareholders' equity~~ $ ~~64,477~~0.46 $ ~~69,890 ========= =========~~(0.02)

The accompanying notes are an integral part of the consolidated condensed financial statements. 4 JPE, INC. (D/B/A ASCET AND ASC EXTERIOR TECHNOLOGIES) CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE OPERATIONS For the Six Months Ended June 30, 2002 and 2001 (Unaudited) ($ amounts in thousands, except per share data)

SUCCESSOR --------- PREDECESSOR COMPANY COMPANY ------------------- ------- PERIOD FROM PERIOD FROM SIX MONTHS JANUARY 1, 2002 JUNE 1, 2002 ENDED THROUGH THROUGH JUNE 30, MAY 31, JUNE 30, 2001 ~~2000~~2002 2002 ---------- --------------- ------------ Net sales $ 2864,~~753~~885 $ 3252,~~842~~126 $ 9,534 Cost of goods sold 2656,~~280~~754 2843,~~744~~636 8,158 -------- --- ----- -------- Gross profit 28,~~473~~131 48,~~098~~490 1,376 Selling, general and administrative expenses 49,~~266~~106 56,~~301~~794 1,298 Other ~~expenses~~(income) 60expense 7415 (152) 11 Interest expense, net ~~635~~ 1,~~121~~723 694 109 -------- --- ----- -------- ~~Loss~~Income ~~from~~(loss) ~~operations~~ before income taxes (2,~~488~~713) (21,~~398~~154 (42) Income tax expense ~~(benefit)~~114 3242 1-- -------- --- ----- -------- Net income (loss) $ (2,~~520~~827) $ (21,~~399~~112 $ (42) ======== === ===== ======== Basic earnings (loss) per share: Common Shares $ (0.0203) $ (0.~~02)~~01 $ 0.00 First Series Preferred Shares $ (1.1225) $ 0.49 $ (10.0602) ~~Loss~~Earnings (loss) per share assuming dilution: Common Shares $ (0.0203) $ (0.~~02)~~01 $ 0.00 First Series Preferred Shares $ (1.1225) $ 0.49 $ (10.0602)

The accompanying notes are an integral part of the consolidated condensed financial statements. 5 JPE, INC. (D/B/A ASCET AND ASC EXTERIOR TECHNOLOGIES) CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY For the Six Months Ended June 30, 2002 (Unaudited) ($ amounts in thousands)

~~2001~~PREDECESSOR ~~2000~~COMPANY ---- ----------------------------------------------------------------------- ~~Net~~NET ~~sales~~INCOME $FOR ~~93,638~~THE $PERIOD ~~108~~FROM SALE OF BALANCES AT JANUARY 1,~~867~~ ~~Cost~~2002 ofAVAILABLE ~~goods~~FOR ~~sold~~DECEMBER 83THROUGH MAY 31,~~038~~ 93SALE BALANCES AT 31,~~401~~ 2001 2002 SECURITIES MAY 31, 2002 ------------- ------------------ ~~Gross~~---------------- ~~profit~~--------------- 10First Series Preferred Shares: Shares Outstanding 1,~~600~~973,002 151,~~466~~973,002 ~~Selling~~Amount $ 16,590 ~~general~~$ ~~and~~16,590 ~~administrative~~Common ~~expenses~~Stock: 13Shares Outstanding 14,~~366~~043,600 1514,~~463~~043,600 Amount $ 2,672 $ 2,672 Accumulated Other ~~expenses~~Comprehensive Income $ 76 95$ ~~Interest~~(76) ~~expense~~-- Accumulated (Deficit) $ (17,770) ~~net~~$ 21,~~358~~112 3$ $ (16,~~512~~658) ------------ ------------ ~~Loss from operations before income taxes (5,200) (3,604) Income tax expense 146 117~~ ---------------- ------------ ~~Net~~Total ~~loss~~Shareholders' Equity $ (51,~~346)~~568 $ (31,~~721~~112 $ (76) $ 2,604 ============ ============ ~~Loss~~================ ~~per~~============ ~~share:~~SUCCESSOR ~~Common~~COMPANY ------------------------------------------------------------------------------------- NET LOSS FOR THE PERIOD PREDECESSOR FROM JUNE 1, BALANCES AT INVESTMENT SHAREHOLDER 2002 BALANCES AT MAY 31, NEW BASIS THROUGH JUNE 30, 2002 SHAREHOLDERS CHANGE JUNE 30, 2002 2002 -------------- ---------------- -------------- --------------- --------------- First Series Preferred Shares: Shares Outstanding 1,973,002 1,973,002 Amount $ ~~(0.05)~~16,590 $ 182 $ (~~0.03~~16,566) ~~First~~$ ~~Series~~206 ~~Preferred~~Common Stock: Shares Outstanding 14,043,600 14,043,600 Amount $ (2~~.37)~~,672 $ 18 $ (~~1.64~~2,565) ~~Loss~~$ ~~per~~125 ~~share~~Accumulated ~~assuming~~(Deficit) ~~dilution:~~$ ~~Common~~(16,658) ~~Shares~~$ 16,658 $ (~~0.05~~42) $ (~~0.03~~42) ~~First~~------------ ~~Series~~------------ ~~Preferred~~------------ ~~Shares~~------------ ------------ Total Shareholders' Equity $ 2,604 $ 200 $ (2~~.37~~,473) $ (~~1.64~~42) $ 289 ============ ============ ============ ============ ============

The accompanying notes are an integral part of the consolidated condensed financial statements. 6 JPE, INC. (D/B/A ASCET AND ASC EXTERIOR TECHNOLOGIES) CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS For the Six Months ended June 30, (Unaudited) ($ amounts in thousands)

~~BALANCES~~SUCCESSOR ATPREDECESSOR ~~REDEMPTION~~COMPANY OFCOMPANY ~~NET~~------------------- ~~LOSS~~--------- ~~FOR~~PERIOD ~~THE~~FROM ~~BALANCES~~PERIOD ATFROM ~~DECEMBER~~JANUARY 311, ~~SHAREHOLDER~~2002 ~~NINE~~JUNE ~~MONTHS~~1, ~~ENDED~~2002 ~~SEPTEMBER~~THROUGH ~~30,~~THROUGH ~~2000~~MAY ~~INTERESTS~~31, ~~SEPTEMBER~~JUNE 30, 2001 ~~2001~~2002 2002 ------- --------------- ------------ Cash flows from operating activities: Net income (loss) $(2,827) $ 1,112 $ (42) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization 1,979 1,595 320 Other 338 (76) -- Changes in operating assets and liabilities: Available for sale securities -- 571 -- Accounts receivable (2,145) (2,829) 926 Inventory 3,505 1,809 345 Other current assets (459) (535) (293) Accounts payable 1,788 727 217 Accrued liabilities and income taxes (521) 290 (20) ------- ------- ------- Net cash provided by (used for) operating activities 1,658 2,664 1,453 Cash flows from investing activities: Purchase of property and equipment (727) (76) (17) Proceeds from sale of assets 11 -- -- Other (16) -- -- ------- ------- ~~Common~~------- ~~Stock:~~Net ~~Shares~~cash ~~Outstanding~~used ~~14,043,600~~for ~~14,043,600~~investing ~~Amount~~activities $(732) ~~2,379~~(76) $(17) ~~2,379~~Cash ~~First~~flows ~~Series~~from ~~Preferred~~financing ~~Shares~~activities: ~~Shares~~Net ~~Outstanding~~payments under demand notes (1,~~993~~115) (5,~~694~~202) (1,~~973,002~~567) ~~Amount~~Net $repayments ~~16,770~~of $revolving ~~(180)~~credit $facility ~~16,590~~-- ~~Warrants:~~-- ~~Warrants~~-- ~~Outstanding~~Net ~~422,601~~borrowing ~~422,601~~under ~~Amount~~subordinated $debt ~~293~~-- $-- ~~293~~-- ~~Accumulated~~Repayments ~~deficit~~of $other debt (~~9,695~~7) ~~$ $~~ (~~5,346~~48) $ (~~15,041~~1) ------- ---- --- ------- Net cash provided by (used for) financing activities (1,122) (5,250) (1,568) Cash and cash equivalents: Net decrease in cash (196) (2,662) (132) Cash, beginning of period 196 2,794 132 ------- ---- --- -------- ~~Total~~Cash, ~~Shareholders'~~end ~~Equity~~of $period ~~9,747~~ $ ~~(180)~~-- $ ~~(5,346)~~132 $ ~~4,221~~-- =======~~====~~ =======~~===~~ =======~~==== ===========~~

The accompanying notes are an integral part of the consolidated condensed financial statements 7 JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES) NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) (amounts in thousands, except share data) A. BASIS OF PRESENTATION: The accompanying unaudited condensed consolidated financial statements of JPE, Inc. (d/b/a ASCET INC and ASC Exterior Technologies (together with its subsidiaries, the "Company")) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. These financial statements should be read in conjunction with the Company's consolidated financial statements and footnotes for the year ended December 31, 2001. The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's and Subsidiaries' annual report on Form 10-K for the year ended December 31, 2001. In accordance with the terms of a purchase agreement dated May 7, 2002, with ASC Holdings, LLC (the Predecessor company's 95% beneficial owner), QP Acquisition #2, Inc. ("QP") acquired 9,441,420 Common Shares and 1,952,352 Preferred Shares of the Company, effective May 31, 2002, for aggregate consideration of $200. The effect of this transaction transferred 95% of the voting securities of the Company from ASC Holdings, LLC to QP. In accounting for these transactions, the Company has applied purchase accounting as prescribed by Financial Accounting Standards Board Statement of Accounting Standards 141, Business Combinations and Accounting Principles Board Opinion 16 and Securities and Exchange Commission Staff Accounting Bulletin 54. Under this accounting method, the purchase price has been pushed down into the accompanying financial statements, with the difference between the purchase price and the sum of the fair value of tangible and identifiable assets acquired less liabilities assumed resulting in negative goodwill, which reduced the fair market value of property, plant and equipment recorded at June 1, 2002, by $1,792. The purchase price allocation has not been finalized at June 30, 2002, and the fair market value of property, plant and equipment and certain other employee benefit plan liabilities are based upon preliminary estimates. The company is in the process of obtaining third party valuations. Thus, the purchase price allocation is subject to refinement. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed (based on the 95% proportional change in ownership): ASSETS Current assets $ 33,238 PPE 19,863 Non-Compete 503 ------------ Total Assets Acquired $ 53,604 LIABILITIES Current Liabilities $ 15,473 Long-term debt 37,800 Predecessor Shareholder's basis 131 ------------ Total Liabilities Assumed $ 53,404 New Shareholders Basis $ 200 ============

8 JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES) NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) (amounts in thousands, except share data) B. ADOPTION OF ACCOUNTING PRINCIPLES: Effective January 1, 2002, the Predecessor Company adopted Financial Accounting Standards Board Statement of Accounting Standards (SFAS) 141, "Business Combinations", SFAS 142, "Goodwill and Intangible Assets" and SFAS 144, "Accounting for the Impairment or Disposal of Long-lived Assets." SFAS 141 requires that acquisitions entered into after June 30, 2001 be accounted for using the purchase method and establishes criteria to be used in determining whether acquired intangible assets are to be separated from goodwill. The adoption of SFAS 141 did not have a material effect on the Predecessor Company's financial statements. SFAS 142 sets forth the accounting for goodwill and intangible assets already recorded. Commencing January 1, 2002, goodwill is no longer being amortized and amounts in 2001 have not been restated in accordance with the statement. Further, goodwill should be tested at least annually, or more frequently if indicators arise, for impairment by comparing the asset's fair value to its carrying value. Finally, separable intangible assets that have finite lives will continue to be amortized over their useful lives. Reported income and earnings per share adjusted to exclude goodwill amortization for the Predecessor Company is as follows:

~~2001~~PERIOD ~~2000~~FROM ~~----~~PERIOD ~~----~~FROM ~~Cash~~JANUARY ~~flows from operating activities: Net loss $ (5~~1,~~346)~~ $JANUARY (31,~~721)~~ ~~Adjustments~~2001 to2002 ~~reconcile~~THROUGH ~~net~~THROUGH ~~loss~~JUNE to30, ~~net~~2001 ~~cash~~MAY ~~provided by operating activities: Depreciation and amortization 2~~31,~~952~~ ~~3,083~~2002 ~~Write Down of Impaired Asset 338 Other~~ -- 44 Changes in operating assets and liabilities: Accounts receivable (114) 726 Inventory 2,949 (39) Other current assets (98) 105 Accounts payable 2,568 3,175 Accrued liabilities and income taxes (1,085) 644 ----------- ------------ ~~Net~~Reported ~~cash~~income ~~provided~~(loss) by$ ~~operating activities~~ (2,~~164~~827) 4$ 1,~~017~~112 ~~Cash~~Add ~~flows from investing activities~~back: ~~Purchase~~Goodwill ofamortization ~~property~~134 ~~and~~-- ~~equipment~~Adjusted income (~~829~~loss) (12,~~458~~693) ~~Proceeds~~1,112 ~~from~~Basic ~~sale~~and ofdiluted ~~assets~~earnings ~~191~~per ~~600~~common ~~Other~~share: Income (17loss) $ (150.03) ~~Purchase~~$ of0.01 ~~Sales~~Goodwill ~~and~~amortization ~~Engineering Assets~~ -- ~~(1)~~ --~~-------~~ ~~----------~~Adjusted ~~Net~~income ~~cash used for investing activities~~ (~~655~~loss) (~~874~~0.03) ~~Cash~~0.01 ~~flows~~Basic ~~from~~and ~~financing~~diluted ~~activities:~~earnings ~~Net~~per ~~payments~~First ~~under~~Series ~~demand~~Preferred ~~notes~~Share: Income (~~1,400~~loss) $ (~~3,512~~1.25) ~~Repayments~~$ of0.49 ~~other~~Goodwill ~~debt~~amortization ~~(41)~~0.06 ~~(116)~~ --~~-------~~ ~~----------~~Adjusted ~~Net~~income ~~cash used for financing activities~~ (~~1,441~~loss) (~~3,628~~1.19) ~~Cash and cash equivalents: Net increase (decrease) in cash 68 (485) Cash, beginning of period 196 639 --------- ---------- Cash, end of period $ 264 $ 154 ========= ==========~~0.49

The Successor Company has non-compete agreements, which expire in 2004. Estimated annual amortization expense for these agreements are $338, $238, and $69 for 2002, 2003 and 2004, respectively. SFAS 144 addresses the accounting and reporting for the impairment or disposal of long-lived assets. The statement provides a consistent method to value long-lived assets to be disposed of and broadens the presentation of discontinued operations to include more disposal transactions. The adoption of SFAS 144 did not have a material effect on the Predecessor Company's financial statements. 9 JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES) NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) (amounts in thousands, except share data) C. INVENTORY: Inventories by component are as follows:

~~SEPTEMBER~~DECEMBER 3031, 2001 ~~DECEMBER~~JUNE 3130, ~~2000~~2002 ------------------ -------------~~----~~ ~~Finished~~Raw ~~goods~~materials $ 104,~~810~~957 $ 124,~~148~~188 Work in process 1,~~279~~356 1,~~698~~358 ~~Raw~~Finished ~~material~~goods 510,~~262~~119 59,~~413~~672 Tooling 1,~~969~~356 ~~3,010~~416 -------------- ------------- $ 1917,~~320~~788 $ 2215,~~269~~634 ============== =============

D. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment by component is as follows:

~~SEPTEMBER~~DECEMBER 3031, 2001 ~~DECEMBER~~JUNE 3130, ~~2000~~2002 ------------------ -------------~~----~~ Land $ 706 $ ~~706~~741 Buildings 5,513 54,~~496~~814 Machinery and equipment 21,~~453~~154 2013,~~871~~135 Furniture and fixtures 1,~~389~~397 1,~~372~~190 ------------- ------------- 2928,~~061~~770 2819,~~445~~880 Less accumulated depreciation (78,~~250~~095) (~~4,863~~289) ------------- ------------- $ 2120,~~811~~675 $ 2319,~~582~~591 ============= =============

E. ACCRUED LIABILITIES: Accrued liabilities consisted of the following:

~~SEPTEMBER~~DECEMBER 3031, 2001 ~~DECEMBER~~JUNE 3130, ~~2000~~2002 ------------------ -------------~~----~~ Accrued compensation $ ~~470~~285 $ ~~496~~414 Accrued interest ~~125~~94 ~~359~~94 Accrued employee benefits 1,~~102~~205 1,~~609~~694 Accrued taxes ~~813~~414 ~~1,041~~585 Other ~~544~~608 ~~814~~714 -------------- ------------- $ 32,~~054~~606 $ 43,~~319~~501 ============== =============

F. DEBT: Debt consisted of the following:

~~SEPTEMBER~~DECEMBER 3031, 2001 ~~DECEMBER~~JUNE 3130, ~~2000~~2002 ------------------ -------------~~----~~ Revolving Credit Facility-Comerica Bank $ 27,~~039~~000 $ 4220,~~874~~716 Notes Payable~~-MB~~ ~~purchase~~ 975 ~~1,464~~488 Capitalized lease obligations 8255 ~~193~~8 Subordinated demand note 15,000 --15,000 Other 2620 3220 --------------- -------------- $ 43,~~122~~050 $ 4436,~~563~~232 Less: Current portion ~~27,609~~543 ~~611~~494 --------------- -------------- $ 1542,~~513~~507 $ 4335,~~952~~738 =============== ==============

10 JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES) NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) (amounts in thousands, except share data) The Company has a $33,000 revolving credit facility with Comerica Bank (the "Comerica Facility") which matures February 1, 2003, and a $15,000 subordinated demand loan from ASC Incorporated, an affiliate of the Company. The Comerica Facility provides for borrowing options at a prime based rate or Eurodollar rate plus various interest rate margins dependent upon the Company's financial performance. Advances are subject to a borrowing base restriction equal to 85% of eligible OEM trade receivables, 80% of all other eligible trade receivables, 50% of eligible inventory (up to $9,000), plus an overformula amount of $10,000. The overformula amount decreases semiannually over a four-year period. All advances are fully secured by the Company's net assets. Required covenants under the Comerica Facility include submission of monthly and annual financial statements and annual financial projections during a prescribed period, as well as certain financial covenants, which exclude the effect of the $15,000 subordinated demand note from ASC Incorporated. In addition, the payment of dividends is prohibited by the terms of the Comerica Facility. As of September 30, 2001 and December 31, 2001, the Company was not in compliance with ratio covenants of the Comerica Facility. On April 16, 2002, the Comerica Facility was amended, and the September 30, 2001 and December 31, 2001 defaults were waived. The Senior Debt to EBITDA ratio covenant was removed and the interest coverage ratio covenant was reset for 2002 year to date performance with June 30, 2002 as the first measurement date. Interest rates were reset based upon the interest coverage ratio using the Company's financial performance beginning January 1, 2002. The revolving credit commitment amount was decreased from $33,000 to $30,000 as the Company believes $30,000 is adequate for its liquidity requirements through the remaining term of the loan. In consideration of the amendments and waivers, the Company paid Comerica Bank a nonrefundable amendment and waiver fee of $187.5. The Company's $15,000 subordinated demand note to ASC Incorporated dated February 7, 2001 is subordinated as to creditor rights and security to the Comerica Facility. Interest is payable monthly commencing March 1, 2001 at ASC Incorporated's cost of borrowing. ASC Incorporated has agreed not to call the note through at least January 1, 2003. Further, the Comerica Facility prohibits any payments to ASC Incorporated at non-arm's length amounts without prior consent. The Company also has a $3,000 Revolving Line of Credit Note with ASC Incorporated. This Note is subordinated to the Company's borrowings and advances under the Comerica Facility and bears interest at a rate equal to the cost of borrowing of ASC Incorporated. As of June 30, 2002, there were no advances made under this Note. G. INCOME TAXES: The Company's 2.4% effective tax rate for the three months ended June 30, 2002 is computed at regular tax rates, and reflects state and foreign income taxes related to the Company's profitable locations as well as an increase in the Company's valuation reserve. H. EARNINGS PER SHARE: The issuance of First Series Preferred Shares results in the Company having a participating security. In accordance with Statement of Financial Accounting Standards No. 128 - Earnings per Share, the "two class" method is used for computing earnings per share. Under this method, an earnings allocation formula is used to determine the amount of earnings allocated to each class of stock. Based on the participating rights of the First Series Preferred Shares approximately 87.5% of the earnings will be allocated to these shares and 12.5% of earnings to the common stock. Shares outstanding for the computation of basic earnings per share were 14,043,600 common shares as of June 30, 2001, and June 30, 2002. The First Series Preferred Shares outstanding were 1,973,002 as of June 30, 2001 and June 30, 2002. Earnings per share assuming dilution requires the Company to use the treasury method for stock options and warrants. The common stock options outstanding for the periods presented had exercise prices that were in excess of the market price and therefore had no effect on the computation assuming dilution. 11 JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES) NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) (amounts in thousands, except share data) I. SEGMENT INFORMATION: The Company manages and reports its operating activities under two segments, Trim Products and Truck and Automotive Replacement Parts. The Trim Products segment consists of decorative and functional exterior trim sold to original equipment manufacturers ("OEM's"). The Truck and Automotive Replacement Parts segment consists of heavy-duty vehicle undercarriage parts and brake systems for the automotive industry. The accounting policies for the segments are the same as those used for the consolidated financial statements. There are no inter-segment sales and management does not allocate interest or corporate expenses to the segments. The Company evaluates the performance of its segments and allocates resources to them based on operating income. Segment profit is defined as sales minus cost of goods sold and selling, general and administrative expenses. Other charges relate to non-recurring expense and income items. Information by operating segment for the three months ended June 30, 2002 and 2001 is summarized below:

~~Statutory~~For ~~U.S.~~The ~~federal~~Three ~~tax~~Months ~~rate~~Ended (June 30, ----------------------------------- Trim Replacement Products Parts Total -------- ----------- ----- Sales to unaffiliated customers April 1 to May 31, 2002 $ 12,487 $ 9,894 $ 22,381 June 1 to June 30, 2002 5,269 4,265 9,534 2001 19,564 14,927 34%,491 For The Three Months Ended June 30, ----------------------------------- Trim Replacement Products Parts Total -------- ----------- ----- Segment profit (loss) ~~State~~April ~~taxes~~1 to May 31, ~~net~~2002 of$ ~~federal~~1,164 ~~tax~~$ ~~benefit~~932 $ 2,096 ~~Foreign~~June ~~tax~~1 ~~rate~~to inJune ~~excess~~30, of2002 ~~U.S.~~194 ~~rate~~334 528 2001 984 892 1,876 ~~Increase~~Other incharges ~~valuation~~(income) ~~reserve~~April 341 to May 31, 2002 $ -- $ 25 $ 25 June 1 to June 30, 2002 -- 3%11 ~~===~~11 2001 -- 9 9 Depreciation and amortization April 1 to May 31, 2002 $ 427 $ 141 $ 568 June 1 to June 30, 2002 216 70 286 2001 599 200 799 Segment assets June 30, 2002 $ 27,471 $ 22,582 $ 50,053 December 31, 2001 31,127 23,448 54,575 Expenditures for segment assets April 1 to May 31, 2002 $ 55 $ -- $ 55 June 1 to June 30, 2002 17 -- 17 2001 437 28 465

12 JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES) NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) (amounts in thousands, except share data) Information by operating segment for the six months ended June 30, 2002 and 2001 is summarized below:

For The ~~Three~~Six Months Ended ~~September~~June 30, ---------------------------------~~---------~~ Trim ~~Replacements~~Replacement Products Parts Total -------- ----------- ----- Sales to unaffiliated customers January 1 to May 31, 2002 $ 29,638 $ 22,488 $ 52,126 June 1 to June 30, 2002 5,269 4,265 9,534 2001 36,540 28,345 64,885 Segment profit (loss) January 1 to May 31, 2002 $ 142,358 $ 1,360 $ 143,~~393~~718 June 1 to June 30, 2002 194 334 528 2001 317 1,658 1,975 Other charges (income) January 1 to May 31, 2002 $ 28(207) $ 55 $ (152) June 1 to June 30,~~753~~ ~~2000~~2002 19-- 11 11 2001 -- 15 15 Depreciation and amortization January 1 to May 31,~~792~~ 132002 $ 1,~~050~~078 32$ 352 $ 1,~~842~~430 June 1 to June 30, 2002 216 70 286 2001 1,198 398 1,596 For The Six Months Ended June 30, --------------------------------- Trim Replacement Products Parts Total -------- ----------- ----- Expenditures for segment assets January 1 to May 31, 2002 $ 59 $ 17 $ 76 June 1 to June 30, 2002 17 -- 17 2001 632 46 678

A reconciliation of segment profit (loss) for reportable segments to income (loss) before taxes is as follows:

~~For~~SUCCESSOR ~~The~~PREDECESSOR ~~Three~~COMPANY ~~Months~~COMPANY ~~Ended September 30,~~ ------------------------------------------- ~~Trim Replacements Products Parts Total~~ -------- ----- ------- ~~Segment~~Three ~~profit~~Months ~~(loss)~~Six ~~2001~~Months $April (1,~~369)~~ $January ~~849~~1, $June ~~(520)~~1, ~~2000~~Ended ~~153~~Ended ~~791~~June ~~944~~2002 ~~Other~~to ~~charges~~2002 ~~2001~~to $2002 --to $June 6030, $30, 60May ~~2000~~31, 56May 1831, 74June ~~Depreciation~~30, ~~and~~2001 ~~amortization~~ 2001 $2002 ~~652~~2002 $2002 ~~223~~----------- $--------- ~~875~~-------- ~~2000~~----------- ~~714~~-------- ~~214 928~~ Segment ~~assets~~profit ~~September~~$ 301,876 ~~2001~~ $ 341,~~220~~975 $ 262,~~098~~096 $ 603,~~318~~718 ~~December~~$ ~~31,~~528 ~~2000~~Other ~~39,392~~income (expense) (9) (15) (25) 152 (11) Corporate expense (1,~~870~~619) 65(2,~~262~~950) ~~Expenditures~~(731) ~~for~~(2,022) ~~segment~~(450) ~~assets~~Interest ~~2001~~expense (773) (1,723) (274) (694) (109) ----------- ----------- ----------- ----------- ------------ Income (loss) before taxes $ 78(525) $ 24(2,713) $ ~~102~~1,066 ~~2000~~$ ~~530~~1,154 89$ ~~619~~(42) =========== =========== =========== =========== ============

13 JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES) NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) (amounts in thousands, except share data) A reconciliation of segment assets to consolidated assets is as follows:

~~For~~December ~~the~~31, ~~Three~~2001 ~~Months~~June ~~Ended September~~ 30, 2002 ----------------- -------------~~----------~~ ~~2001 2000 ---- ----~~ Segment ~~profit~~assets ~~(loss)~~ $ ~~(520)~~54,575 $ ~~944~~50,053 ~~Other income (expense) (60) (74)~~ Corporate ~~expense~~assets (13,~~273)~~797 (2,~~147)~~138 ~~Interest expense (635) (1,121)~~ -------------- -------------- ~~Loss before taxes~~ $ (258,~~488)~~372 $ (252,~~398)~~191 ============== ==============

14 ITEM 2. 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 and notes thereto filed with the Company's Annual Report on Form 10-K to assist in understanding the Company's results of operations, its financial position, cash flows, capital structure and other relevant financial information. RECENT INFORMATION GENERAL AND RECENT INFORMATION In accordance with the terms of a purchase agreement dated May 7, 2002, with ASC Holdings, LLC (the Predecessor company's 95% beneficial owner), QP Acquisition #2, Inc. ("QP") acquired 9,441,420 Common Shares and 1,952,352 Preferred Shares of the Company, effective May 31, 2002, for aggregate consideration of $200. The effect of this transaction transferred 95% of the voting securities of the Company from ASC Holdings, LLC to QP. JPE, Inc. (together with its subsidiaries, the "Company"), through its three operating subsidiaries, Dayton Parts, Inc. (DPI), Starboard Industries, Inc. (SBI) and Plastic Trim, Inc. (PTI) manufactures and distributes automotive and truck components to original equipment manufacturers ("OEMs") and to the aftermarket. The Company had 2001 annual revenues of approximately $122,000 and total assets of approximately $59,000. JPE, Inc. is now operating under the assumed names of ASCET INC and ASC Exterior Technologies. PTI now operates under the assumed names of ASC Exterior Technologies - Dayton and ASC Exterior Technologies - Beavercreek. SBI now operates under the assumed name of ASC Exterior Technologies - East Tawas. RESULTS OF OPERATIONS Management's discussion and analysis of the results of operations has been structured to compare the same periods of 2001 with 2002 in order to provide meaningful comparisons. THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001 Net sales for the quarter ended June 30, 2002 and 2001 were as follows (in thousands):

~~For~~2001 ~~The~~2002 ~~Nine Months Ended September 30,~~ ---- ----~~-----------------------------------~~ Trim ~~Replacements~~ Products $ 19,564 $ 17,756 Replacement Parts ~~Total~~14,927 14,159 ----------- ----- ------ ~~Sales~~Total ~~to unaffiliated customers 2001~~ $ 5034,~~900~~491 $ 4231,~~738~~915 $=========== ~~93,638 2000 69,144 39,723 108,867 Segment profit (loss) 2001 $ (1,056) $ 2,513 $ 1,457 2000 1,257 2,540 3,797~~===========

The sales decrease in the Trim Products segment is $1,808, or 9.2%. The decrease is due to the completion of product programs for which the Company was not awarded replacement business, as well as a decrease in customer orders for those products supplied by the Trim Segment. The decrease in Replacement Parts sales of $768, or 5.1% is attributable to a decrease in heavy duty truck repair orders consistent with general market conditions in the overall heavy duty aftermarket industry. Gross profit was $5,265, or 16.5% of sales for the three months ended June 30, 2002 compared to $5,019, or 14.6% of sales, for the same quarter last year. The gross profit by segment is as follows (in thousands):

~~For~~2001 ~~The~~2002 ~~Nine Months Ended September 30,~~ ---- ----~~-----------------------------------~~ Trim ~~Replacements~~ Products $ 1,520 $ 1,826 Replacement Parts ~~Total~~3,499 3,439 ---------- ----- ----- ~~Other~~Total ~~charges 2001~~ $ ~~0 $ 76 $ 76 2000 63 32 95 Depreciation and amortization 2001 $ 1~~5,~~961~~019 $ ~~669 $ 2~~5,~~630~~265 ~~2000~~========== ~~1,954 555 2,509 Expenditures for segment assets 2001 $ 710 $ 70 $ 780 2000 869 334 1,203~~==========

15 The gross profit percentage for the Trim Products segment was 10.3% and 7.8% for the quarters ended June 30, 2002 and 2001, respectively. The increase in the gross profit percentage was primarily attributable to lower scrap rates, reduced freight costs, lower third party quality inspection costs, and higher labor efficiencies at the Dayton, Ohio operation. The gross profit percentage of sales for the Replacement Parts segment was 24.3%, compared to 23.4% for the three months ended June 30, 2002 and 2001, respectively. The increase in the gross profit percentage reflects sales of higher margin products and improved manufacturing efficiencies. Selling, general and administrative (SGA) expenses for the three months ended June 30, 2002 were $3,822 or 12.0% of sales compared to $4,762 or 13.8% of sales for the quarter ended June 30, 2001. Detail of SGA expenses for the three months ended June 30, 2002 and 2001 are as follows (in thousands):

~~For the Nine Months Ended September 30, ---------------------------------------~~ 2001 ~~2000~~2002 ---- ---- ~~Segment~~Trim ~~profit~~Products $ ~~1,457~~536 $ ~~3,797~~468 ~~Other~~Replacement ~~income~~Parts ~~(expense) (76) (95) Corporate expense (4~~2,~~223)~~607 (32,~~794)~~173 ~~Interest~~Corporate ~~expense (2~~1,~~358)~~619 (31,~~512)~~181 --------------- -------------- ~~Loss~~Total ~~before taxes~~ $(5 4,~~200)~~762 $ (3,~~604)~~822 =============== ==============

SGA expenses for the Trim Products segment was $468 or 2.7% of sales for the quarter ended June 30, 2002, compared to $536 or 2.7% of sales for the quarter ended June 30, 2001. The decrease in SGA expenses is attributable to reduced spending at the Dayton, Ohio operation. The Replacement Parts segment's SGA expenses were $2,173 or 15.4% of sales and $2,607 or 17.5% of sales for the three months ended June 30, 2002 and 2001, respectively. SGA for 2001 includes $214 of bad debt expense for the bankruptcy filing of a distribution customer. Without this item, SGA would have been $2,393, or 16% of sales. The lower expense in 2002 is due to reduced spending levels. Corporate administrative costs for the three months ended June 30, 2002 and 2001 were $1,181 and $1,619, respectively. SGA for 2001 includes $338 for the write off of a non-compete agreement for a former employee. Without this item, SGA would have been $1,281. The remaining decrease in 2002 is attributable to reduced spending levels. Interest expense for the three months ended June 30, 2002 was $383, compared to $773 for the quarter ended June 30, 2001. The reduction in interest expense is primarily attributable to lower borrowing costs due to lower general interest rates in the United States and Europe as well as a reduction in total bank borrowing compared to the second quarter of 2001. Also, the nonrefundable amendment and waiver fee paid to Comerica in April 2002 of $187.5, included in interest expense, was offset by forgiveness of $134 of accrued interest on the $15,000 note to ASC Incorporated. The Company's effective tax rate of 2.4% for the three months ended June 30, 2002, reflects regular tax rates and state and foreign income taxes related to the Company's profitable locations, as well as the effect from an increase in the valuation reserve. SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001 Net sales for the six months ended June 30, 2002 and 2001 were as follows (in thousands):

~~September 30,~~ 2001 ~~December~~2002 ~~31, 2000~~ ----~~--------------~~ ----~~-------------~~ ~~Segment~~Trim ~~assets~~Products $ 6036,~~318~~540 $ 6534,~~262~~907 ~~Corporate~~Replacement ~~assets~~Parts 428,~~159~~345 426,~~628~~753 --------------- -------------- Total $ 64,~~477~~885 $ 6961,~~890~~660 =============== ==============

16 The sales decrease in the Trim Products segment is $1,633, or 4.5%. The decrease is due to the completion of product programs for which the Company was not awarded replacement business, as well as a decrease in customer orders for these products supplied by the Trim segment. The decrease in Replacement Parts sales of $1,592, or 5.6% is attributable to a decrease in heavy duty truck repair orders consistent with general market conditions in the overall heavy duty aftermarket industry. Gross profit was $9,866 or 16.0% of sales for the six months ended June 30, 2002 compared to $8,131, or 12.5% of sales, for the same period last year. The gross profit by segment is as follows (in thousands):

2001 ~~2000~~2002 ---- ---- Trim Products $ 141,~~360~~391 $ 193,~~792~~426 Replacement Parts 146,~~393~~740 136,~~050~~440 --------------- -------------- Total $ 288,~~753~~131 $ 329,~~842~~866 =============== ==============

The gross profit percentage for the Trim Products segment was 9.8% and 3.8% for the six months ended June 30, 2002 and 2001, respectively. The increase in the gross profit percentage was primarily attributable to lower scrap rates, reduced freight costs, lower third party quality inspection costs, and higher labor efficiencies at the Dayton, Ohio operation. The gross profit percentage of sales for the Replacement Parts segment was 24.1%, compared to 23.8% for the six months ended June 30, 2002 and 2001, respectively. The increase in the gross profit percentage reflects sales of higher margin products and improved manufacturing efficiencies. Selling, general and administrative (SGA) expenses for the six months ended June 30, 2002 were $8,092 or 13.1% of sales compared to $9,106 or 14.0% of sales for the six months ended June 30, 2001. Detail of SGA expenses for the six months ended June 30, 2002 and 2001 are as follows (in thousands):

2001 ~~2000~~2002 ---- ---- Trim Products $ ~~(858)~~1,074 $ ~~902~~874 Replacement Parts 35,~~331~~082 34,~~196~~746 Corporate 2,950 2,472 --------------- -------------- Total $ 29,~~473~~106 $ 48,~~098~~092 =============== ==============

SGA expenses for the Trim Products segment was $874 or 2.5% of sales for the six months ended June 30, 2002, compared to $1,074 or 2.9% of sales for the six months ended June 30, 2001. The decrease in SGA expenses is attributable to reduced spending at the Dayton, Ohio operation. The Replacement Parts segment's SGA expenses were $4,746 or 17.7% of sales and $5,082 or 17.9% of sales for the six months ended June 30, 2002 and 2001, respectively. SGA for 2001 includes $214 of bad debt expense for the bankruptcy filing of a distribution customer. Without this item, SGA would have been $4,868 or 17.2% of sales. The lower expense in 2002 is due to reduced spending levels. Corporate administrative costs for the six months ended June 30, 2002 and 2001 were $2,472 and $2,950, respectively. SGA for 2001 includes $338 for the write off of a non-compete agreement for a former employee. Without this item, SGA would have been $2,612. The remaining decrease in 2002 is attributable to reduced spending levels. Interest expense for the six months ended June 30, 2002 was $803, compared to $1,723 for the same period last year. The reduction in interest expense is attributable to lower borrowing costs due to lower general interest rates in the United States and Europe as well as a reduction in total bank borrowing compared to the first half of 2001. Also, no interest expense was incurred in 2002 on the $15,000 note to ASC Incorporated as the April 16, 2002 amendment 17 to the Comerica Facility prohibits payment of interest. These items offset the nonrefundable amendment and waiver fee paid to Comerica in April, 2002 of $187.5. The Company's effective tax rate of 3.8% for the six months ended June 30, 2002, reflects regular tax rates and state and foreign income taxes related to the Company's profitable locations, as well as the effect from an increase in the valuation reserve. LIQUIDITY AND CAPITAL RESOURCES Operating activities provided $4,117 in cash for the six months ended June 30, 2002, primarily due to cash generated from net income plus the addback of depreciation and amortization. Investing activities used $93 in cash for capital expenditures. Financing activities used $6,818 in cash, representing debt repayments. Prior to February 7, 2001, the Company's principal source of liquidity was a $56,300 demand loan from Comerica Bank which was available to fund daily working capital needs in excess of internally generated funds. On February 7, 2001, the Company entered into a new $33,000 revolving credit facility with Comerica Bank (the "Comerica Facility") which matures February 1, 2003. The $56,300 demand loan from Comerica Bank was terminated on February 7, 2001. Concurrent with the execution of the Comerica Facility, the Company received a $15,000 subordinated demand loan from ASC Incorporated, an affiliate of the Company, which repaid $15,000 of the Company's $56,300 demand loan from Comerica Bank. In connection with the Comerica Facility, the Company signed a promissory note in the amount of $33,000, providing for borrowing options at a prime based rate or Eurodollar rate plus various interest rate margins dependent upon the Company's financial performance beginning January 1, 2002. For 2001 and through March 31, 2002, the Company's margin on prime based loans and Eurodollar loans was 1/4% and 2 1/4%, respectively. Eurodollar borrowings for 1 month to 6 months are permitted at the option of the Company. Advances under the Comerica Facility are subject to a borrowing base restriction equal to 85% of eligible OEM trade receivables, 80% of all other eligible trade receivables, 50% of eligible inventory (up to $9,000), plus an overformula amount of $10,000. The overformula amount decreases semiannually over a four-year period. The initial reduction of $1,000 occurred on September 1, 2001. The second reduction of $1,250 occurred on March 1, 2002. All advances are fully secured by the Company's net assets. Required covenants under the Comerica Facility include submission of monthly and annual financial statements and annual financial projections during a prescribed period. Quarterly financial covenants include an interest coverage ratio for 2001 to date performance commencing September 30, 2001, and a Senior Debt to EBITDA ratio no greater than 5 to 1 as of December 31, 2001. Both covenants exclude the effect of the $15,000 subordinated demand note from ASC Incorporated. In addition, the payment of dividends is prohibited by the terms of the Comerica Facility. As of September 30, 2001 and December 31, 2001, the Company was not in compliance with ratio covenants of the Comerica Facility. On April 16, 2002, the Company's Comerica Facility was amended, and the September 30, 2001 and December 31, 2001 defaults were waived. The Senior Debt to EBITDA ratio covenant was removed and the interest coverage ratio covenant was reset for 2002 year to date performance with June 30, 2002 as the first measurement date. Interest rates were reset based upon the interest coverage ratio using the Company's financial performance beginning January 1, 2002. For the period from April through June, 2002, the Company's margin on prime based loans and Eurodollar loans was 1 3/4% and 3 3/4%, respectively. The revolving credit commitment amount was decreased from $33,000 to $30,000 as the Company believes $30,000 is adequate for its liquidity requirements through the remaining term of the loan. In consideration of the amendments and waivers, the Company paid Comerica Bank a nonrefundable amendment and waiver fee of $187.5. The Company's $15,000 subordinated demand note to ASC Incorporated dated February 7, 2001 is subordinated as to creditor rights and security to the Comerica Facility. Interest is payable monthly commencing March 1, 2001 at ASC Incorporated's cost of borrowing. ASC Incorporated has agreed not to call the Note through at least January 1, 2003. Further, the Comerica Facilities prohibit any payments to ASC Incorporated at non arm's length amounts, without prior consent. The April 16, 2002 amendment to the Comerica Facility prohibits the Company from paying interest to ASC Incorporated on the $15,000 note. 18 Borrowings at June 30, 2002 under the Company's $30,000 revolving credit facility were $20,716, with unused borrowing capacity of $6,981 (based on the borrowing base advance restrictions). On February 7, 2001, concurrent with the execution of the Comerica Facility, the Company entered into a new $3,000 Revolving Line of Credit Note with ASC Incorporated. This Note is subordinated to the Company's borrowings and advances under the Comerica Facility and bears interest at a rate equal to the cost of borrowing of ASC Incorporated. As of June 30, 2002, there were no advances made under this Note. Together with internally generated cash flow, the Company believes the Comerica Facility and notes with ASC Incorporated are adequate to provide working capital funding during the course of the year, except in the event of a sustained cyclical downturn in the automotive industry. 19 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK MARKET RISK The Company's sales volumes have remained steady during the last quarter of 2001 and throughout the first six months of 2002. Although most underlying fundamentals remain strong, the impact of the OEM vehicle manufacturers to rebalance inventories, the continuance of rebates and reduced customer financing rates and the trend of retail sales and other uncertainties may adversely impact the Company's 2002 financial performance. Furthermore, in the normal course of business the Company is subject to market exposures from changes in interest rates. The Company's variable interest expense is sensitive to changes in the general level of United States and European interest rates. The Company's Comerica Facility provides for borrowing options at a prime-based rate or Eurodollar rate plus various interest rate margins dependent on the Company's financial performance. As such, future borrowings under the Comerica Facility are sensitive to changes in interest rates. At June 30, 2002, the weighted average interest rate of the $36.2 million debt was 3.2% and the fair value of the debt approximates its carrying value. The Company had interest expense of $803 for the six months ended June 30, 2002. The potential increase in interest expense from a hypothetical 2% adverse change, assuming the June 30, 2002 debt was outstanding for the entire year, would be $414. FORWARD LOOKING INFORMATION This Quarterly Report on Form 10-Q contains, and from time to time the Company expects to make, certain forward-looking statements regarding its business, financial condition and results of operations. In connection with the "Safe Harbor" provisions of the Private Securities Reform Act of 1995 (the "Reform Act"), the Company intends to caution readers that there are several important factors that could cause the Company's actual results to differ materially from those projected in its forward-looking statements, whether written or oral, made herein or that may be made from time to time by or on behalf of the Company. Investors are cautioned that such forward-looking statements are only predictions and that actual events or results may differ materially. The Company undertakes no obligation to publicly release the results of any revisions to the forward-looking statements to reflect events or circumstances or to reflect the occurrence of unanticipated events. The Company wishes to ensure that any forward-looking statements are accompanied by meaningful cautionary statements in order to comply with the terms of the safe harbor provided by the Reform Act. Accordingly, the Company has set forth a list of important factors that could cause the Company's actual results to differ materially from those expressed in forward-looking statements or predictions made herein and from time to time by the Company. Specifically, the Company's business, financial condition and results of operations could be materially different from such forward-looking statements and predictions as a result, among other things, of (i) customer pressures that could impact sales levels and product mix, including customer sourcing decisions, customer evaluation of market pricing on products produced by the Company and customer cost-cutting programs; (ii) operational difficulties encountered during the launch of major new original equipment manufacturer's ("OEM") programs; (iii) cyclical consumer demand for new vehicles; (iv) competition in pricing and new product development from larger companies with substantially greater resources; (v) the concentration of a substantial percentage of the Company's sales with a few major OEM customers; and (vi) labor relations at the Company and its customers and suppliers. 20 PART II. OTHER INFORMATION JPE, INC. (D/B/A ASCET AND ASC EXTERIOR TECHNOLOGIES) ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. EXHIBITS: 2.1 JPE Equity Purchase Agreement, dated May 7, 2002, by and between QP Acquisition #2, Inc. and ASC Holdings, LLC (incorporated by reference to Exhibit 1 to the joint Schedule 13D filed by Questor Partners Fund II, L.P. Questor Side-by-Side Partners II 3(c)(1), L.P. and QP Acquisition #2, Inc. on May 17, 2002). 10.1 Bonus Award Letter dated June 21, 2002 by and between JPE, Inc. and Scott Koepke. 10.2 Bonus Award Letter dated June 21, 2002 by and between JPE, Inc. and Robert Naglick. 10.3 Completion Bonus Letter dated July 15, 2002 by and between JPE, Inc. and Robert Naglick. 10.4 Executive Severance Agreement dated as of June 21, 2002 by and between JPE, Inc. and Robert A. Naglick. 10.5 Executive Severance Agreement dated as of August 1, 2002 by and between Dayton Parts, Inc. and Gary A. Smalley. 10.6 Letter Agreement dated April 18, 2002 among ASC Incorporated, JPE, Inc. and Scott Koepke. 10.7 2002 Incentive Compensation Plan for Key Employees, effective as of January 1, 2002. b. REPORT ON FORM 8-K: JPE, Inc. ("JPE") filed a Current Report on Form 8-K, dated May 6, 2002, in connection with a press release announcing that an affiliate of Questor Partners Fund II, L.P. ("Questor") agreed to acquire all of the stock of JPE owned by ASC Holdings, LLC. JPE filed a Current Report on Form 8-K, dated May 31, 2002, reporting that an affiliate of Questor had consummated the acquisition of 67.2% of JPE's outstanding Common Shares and 98.9% of JPE's outstanding First Series Preferred Shares from ASC Holdings, LLC, which shares constitute 94.9% of JPE's outstanding voting shares. 21 JPE, INC. (D/B/A ASCET AND ASC EXTERIOR TECHNOLOGIES) SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JPE, Inc. d/b/a ASCET and ASC Exterior Technologies By: /s/ Robert A. Naglick ------------------------ Robert A. Naglick Vice President and Chief Financial Officer (Principal Accounting Officer) Date: August 14, 2002 22 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION ----------- ----------- 10.1 Bonus Award Letter dated June 21, 2002 by and between JPE, Inc. and Scott Koepke. 10.2 Bonus Award Letter dated June 21, 2002 by and between JPE, Inc. and Robert Naglick. 10.3 Completion Bonus Letter dated July 15, 2002 by and between JPE, Inc. and Robert Naglick. 10.4 Executive Severance Agreement dated as of June 21, 2002 by and between JPE, Inc. and Robert A. Naglick. 10.5 Executive Severance Agreement dated as of August 1, 2002 by and between Dayton Parts, Inc. and Gary A. Smalley. 10.6 Letter Agreement dated April 18, 2002 among ASC Incorporated, JPE, Inc. and Scott Koepke. 10.7 2002 Incentive Compensation Plan for Key Employees, effective as of January 1, 2002.

2001 2000 ---- ---- Trim Products $ 511 $ 749 Replacement Parts 2,482 2,405 Corporate 1,273 2,147 -------- -------- Total $ 4,266 $ 5,301 ======== ========

2001 2000 ---- ---- Trim Products $ 50,900 $ 69,144 Replacements Parts 42,738 39,723 -------- -------- Total $ 93,638 $108,867 ======== ========

2001 2000 ---- ---- Trim Products $ 529 $ 5,671 Replacements Parts 10,071 9,795 -------- -------- Total $ 10,600 $ 15,466 ======== ========

2001 2000 ---- ---- Trim Products $ 1,585 $ 4,414 Replacements Parts 7,558 7,255 Corporate 4,223 3,794 -------- -------- Total $ 13,366 $ 15,463 ======== =========

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