FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1995
Commission File No. 0-5200
GEORGIA BONDED FIBERS, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-1427551
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE BONTEX DRIVE, BUENA VISTA, VIRGINIA 24416-0751
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: 540-261-2181
Indicate by checkmark whether the registrant (1) has filed all
reports 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 the description and number of shares outstanding of each
of the issuer's classes of common stock as of the latest
practicable date.
Class Outstanding at September 30, 1995
Common Stock - $.10 par value 1,572,824
GEORGIA BONDED FIBERS, INC.
FORM 10-Q
FOR THE FIRST QUARTER ENDED SEPTEMBER 30, 1995
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1995 and 1994, June 30, 1995 . . . . . . . . . . . . 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
RETAINED EARNINGS
First Quarter Ended September 30, 1995 and 1994. . . . . . . . . . 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
First Quarter Ended September 30, 1995 and 1994. . . . . . . . . . 5
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .6, 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . .8, 9
PART II. OTHER INFORMATION
Item 5. Other Information. . . . . . . . . . . . . . . . . . 9
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 9
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GEORGIA BONDED FIBERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
September 30, June 30,
(unaudited)
1995 1994 1995
ASSETS
Current assets:
Cash and cash equivalents $ 1,313 $ 2,518 $ 4,379
Short-term investments, at cost which
approximates market - 123 -
Trade accounts receivable, less allowance
for doubtful accounts of $ 147 ($ 195 at
March '94, $183 at June '94) 11,813 12,236 15,300
Other receivables 379 507 490
Inventories 7,708 5,746 7,650
Deferred income taxes 449 - 449
Income taxes refundable 243 - 145
Other current assets 281 372 227
-------- -------- --------
TOTAL CURRENT ASSETS 22,186 21,502 28,640
-------- -------- --------
Property, plant and equipment:
Land 273 227 271
Buildings and building improvements 4,342 4,194 4,383
Machinery, furniture and equipment 14,145 12,748 14,256
Construction in progress 2,089 926 1,578
-------- -------- --------
20,849 18.095 20,488
Less accumulated depreciation and amortization 10,721 9,526 10,621
-------- -------- --------
Net property, plant and equipment 10,128 8,569 9,867
-------- -------- --------
Deferred income taxes 601 - 333
Other assets, at cost less applicable
amortization 643 740 687
-------- -------- --------
TOTAL ASSETS $ 33,558 $ 30,811 $ 39,527
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 9,008 $ 6,903 $ 11,674
Accounts payable 7,659 7,314 10,339
Accrued expenses 2,576 2,504 2,622
Long-term debt due currently 2,074 359 2,189
-------- -------- ---------
TOTAL CURRENT LIABILITIES 21,317 17,080 26,824
Long-term debt 1,223 1,526 1,364
Deferred income taxes - 214 -
Other long-term liabilities 110 25 153
-------- -------- --------
TOTAL LIABILITIES 22,650 18,845 28,341
-------- -------- --------
Stockholders' equity:
Common stock of $.10 par value. Authorized
3,000,000 shares; issued 1,572,824 shares 157 157 157
Additional capital 1,551 1,551 1,551
Retained earnings 8,022 9,419 8,213
Foreign currency translation adjustment 1,178 839 1,265
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY 10,908 11,966 11,186
-------- -------- --------
TOTAL LIABILITIES & STOCKHOLDER'S EQUITY $ 33,558 $ 30,811 $ 39,527
======== ======== ========
See accompanying notes to condensed consolidated financial statements.
GEORGIA BONDED FIBERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
AND RETAINED EARNINGS
(Dollars in Thousands Except for per Share Amounts)
(Unaudited)
First Quarter Ended
September 30,
1995 1994
Net Sales $ 9,905 $ 11,026
Cost of Sales 8,177 8,584
-------- --------
Gross Profit 1,728 2,442
Selling, General and Administrative Expenses 2,437 2,434
-------- --------
Operating Income (Loss) (709) 8
-------- --------
Other (Income) Expense:
Interest expense 295 163
Interest income (18) (6)
Foreign currency exchange (gain) loss (635) 165
Other, net 4 (2)
-------- --------
Total Other (354) 320
-------- --------
Income (Loss) Before Income Taxes (355) (312)
Provision for Income Taxes (164) (60)
-------- --------
Net income (loss) (191) (252)
Retained earnings, beginning of period 8,213 9,671
-------- --------
Retained earnings, end of period $ 8,022 $ 9,419
======== ========
Income (Loss) per share $ (.12) $ (.16)
======== =========
See accompanying notes to condensed consolidated financial statements.
GEORGIA BONDED FIBERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
(Unaudited)
First Quarter Ended
September 30
1995 1994
Cash Flows from Operating Activities:
Cash received from customers $10,788 $13,072
Cash paid to suppliers and employees (10,522) (11,910)
Interest received 61 12
Interest paid (338) (169)
Income taxes paid, net of refunds 38 (2)
-------- --------
Net cash provided by operating activities 27 1,003
-------- --------
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment (608) (306)
-------- --------
Net cash used in investing activities (608) (306)
-------- --------
Cash Flows from Financing Activities:
Increase (decrease) in short-term borrowings, net (2,347) 388
Principal payments on long-term debt and capital
lease obligations (260) (97)
-------- --------
Net cash provided by (used in) financing activities (2,607) 291
-------- --------
Effect of Exchange Rate Changes on Cash 122 168
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents (3,066) 1,156
Cash and Cash Equivalents at Beginning of Year 4,379 1,362
-------- --------
Cash and Cash Equivalents at End of Year $ 1,313 $ 2,518
======== ========
Reconciliation of Net Loss to Net Cash provided by
Operating Activities:
Net loss $ (191) $ (252)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 255 248
Provision for bad debts (10) (8)
Deferred income taxes (259) 13
Change in assets and liabilities:
Decrease in trade accounts and other receivables 3,113 2,377
(Increase) decrease in inventories 2 (804)
(Increase) decrease in other assets (74) 465
Increase in accounts payable and accrued expenses (2,335) (569)
Increase (decrease) in income taxes (404) 64
Decrease in other liabilities (70) (531)
-------- --------
Net cash provided by operating activities $ 27 $ 1,003
======== ========
See accompanying notes to consolidated financial statements.
GEORGIA BONDED FIBERS, INC.
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994 AND JUNE 30, 1995
(Unaudited)
1. The accompanying unaudited condensed consolidated financial
statements have been prepared by Georgia Bonded Fibers, Inc.
and its subsidiaries ("Bontex" or the "Company") in accordance
with generally accepted accounting principles for interim
financial reporting information and the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and notes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all material adjustments, consisting
of normal recurring accruals, considered necessary for a fair
presentation of the results of operations, financial position
and cash flows for each period shown, have been included.
Operating results for interim periods are not necessarily
indicative of the results for the full year. The unaudited
condensed consolidated financial statements and condensed notes
are presented as permitted by Form 10-Q and do not contain
certain information included in the Company's annual consolidated
financial statements and notes. For further information, refer
to the consolidated financial statements and notes thereto
included in the Company's annual report on Form 10-K for the
year ended June 30, 1995.
2. The condensed consolidated balance sheets include the
following related to European subsidiaries:
September 30, June 30,
1995 1994 1995
(Dollars in Thousands)
Current assets $ 15,687 $ 14,384 $ 21,192
Total assets 21,721 19,785 27,426
Current liabilities 16,422 13,640 21,734
Total liabilities 17,645 15,493 23,310
Stockholders' equity 4,076 4,292 4,116
The condensed consolidated statements of income (loss)
include the following related to European subsidiaries:
First Quarter Ended
September 30,
1995 1994
(Dollars in Thousands)
Net Sales $ 6,084 $ 6,414
Net income (loss) 45 (247)
GEORGIA BONDED FIBERS, INC.
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994 AND JUNE 30, 1995
(Unaudited)
3. The last in, first out (LIFO) method of inventory pricing is
used by the United States company. Inventories of the
European subsidiaries are valued at the lower of cost
(principally first in, first out) or market. Inventories
are summarized as follows:
September 30, June 30,
1995 1994 1995
(Dollars in Thousands)
Finished goods $ 3,299 $ 2,818 $ 3,144
Raw Materials 3,819 2,375 3,871
Supplies 590 553 635
------- ------- -------
$ 7,708 $ 5,746 $ 7,650
======= ======= =======
4. Per share calculations are based on shares outstanding of
1,572,824 shares for all periods.
GEORGIA BONDED FIBERS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS AND QUARTER ENDED SEPTEMBER 30, 1995
RESULTS OF OPERATIONS
Consolidated net sales of $9.9 million for the quarter ended
September 30, 1995 represents a decline of $1.1 or 10.2
percent as compared to the corresponding prior year period.
The decrease in consolidated net sales mainly reflects lower
volume related to a general global slowdown; however, the
outlook for sales remains positive. The fluctuation in
foreign currency exchange rates resulted in a $700,000
translation increase in net sales.
The $191,000 or $.12 per share consolidated net loss for the
quarter ended September 30, 1995 represents an improvement of
$61,000 or $.04 per share over the same period in 1994, and is
primarily due to realized foreign exchange gains of
approximately $635,000. These exchange gains represent a
recovery of a large portion of the foreign currency exchange
losses which had been previously accrued during the prior
year.
Gross margins declined from 22.2 percent during the first
quarter of 1995 to 17.5 percent during the first quarter of
1996. This decrease is primarily due to the continued impact
of higher raw material costs. The cost of pulp and latex, two
primary raw materials for the Company's products, increased 85
percent and 38 percent, respectively, over the past eighteen
months. However, during the month of September, consolidated
gross margins showed improvement as compared to the same
period last year. Gross operating margins are projected to
continue to improve because of higher volumes, increased
selling prices, lower raw material costs, and the impact of
various cost control measures.
Seasonality exists in that the first half of each fiscal year is
typically lower in volume than the second half, which is
largely due to customers' scheduled vacations, shutdowns, and
holidays. Consequently, the results of operations during the
first quarter of each fiscal year historically have been
losses. Additionally, the first half of each fiscal year has
been traditionally at break-even. Excluding the effects of
non-recurring and non-operating type items (i.e., adoption of
FAS 109), over the past five years, the Company has not been
profitable during the first quarter, except one year.
Selling, General & Administrative (SG&A) expenses as a percent
of net sales increased 2.5 percent to 24.6 percent during the
first quarter of fiscal 1996, as compared to the corresponding
prior year period. The increase in SG&A percentage is mainly
due to the decrease in sales. Overall, SG&A costs remained
stable, as compared to the same period last year. SG&A costs
are expected to decline throughout the year reflecting the
impact of various cost control measures.
GEORGIA BONDED FIBERS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS AND QUARTER ENDED SEPTEMBER 30, 1995
FINANCIAL CONDITION
The consolidated financial condition of the Company remains
positive. Consolidated equity for the Company totaled $10.9
million at the end of September 1995. Financial ratios at
September 30, 1995 declined from a year ago because of
operating losses. Working capital decreased by almost $3.6
million to $869,000, because of cash requirements for
operations, reclassification of certain long-term debt and the
various planned plant and equipment additions. Excluding the
effects of the long-term debt reclassification, working
capital declined $2.1 million to $2.3 million. The
fluctuation in foreign currency exchange rates resulted in a
translation increase of $1.3 million in consolidated total
assets.
The decrease in cash balances is mainly due to funding of
operations and planned capital additions, as well as the
exchange of US dollar deposits at favorable exchange rates.
Trade accounts receivables decreased by $423,000 to $11.8
million, and is primarily because of reduced sales.
The $1.9 million increase in inventories to $7.7 million
mainly corresponds to higher raw material costs and the
procurement of certain inventories at favorable prices, prior
to the consumption of existing higher cost inventories.
The $1.6 million increase in Property, Plant and Equipment
(PP&E) is largely due to the capital additions relating to the
wastewater treatment projects at the Company's manufacturing
facilities.
Accounts payable and short-term borrowings increased $2.5
million, which primarily correlates to the higher inventory
balances, as well as foreign currency translation adjustments.
As a result of the decrease in various financial ratios
relating to certain long-term debt, the Company obtained a
waiver from such requirements at June 30, 1995. The Company
has not received a waiver for the period September 30, 1995,
but management expects to receive additional waivers from such
requirements. Since there is no assurance the Company will
obtain future waivers, the long-term debt has been classified
as current. Management believes that existing credit
facilities will be sufficient to meet future operating and
capital requirements.
PART II. OTHER INFORMATION
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibits
Exhibit 27 - Financial Data Schedule - page 11
(b.) No reports on Form 8-K have been filed during the first quarter
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GEORGIA BONDED FIBERS, INC.
(Registrant)
11-10-95 /s/James C. Kostelni
- -------- --------------------
(Date) James C. Kostelni
Chairman of the Board
and President
11-10-95 /s/David A. Dugan
- -------- --------------------
(Date) David A. Dugan
Controller and
Corporate Secretary