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 December 31, 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 February 6, 1996
Common Stock - $.10 par value 1,572,824
GEORGIA BONDED FIBERS, INC.
FORM 10-Q
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994, June 30, 1995. . . . . . . . . . . . . . 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND RETAINED
EARNINGS
Six Months Ended December 31, 1995 and 1994. . . . . . . . . . . . . 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended December 31, 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 4. Submission of Matters to Vote of Security Holders . . . . .10
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . .10
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . .10
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GEORGIA BONDED FIBERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
December 31, June 30,
(unaudited)
1995 1994 1995
ASSETS
Current assets:
Cash and cash equivalents $ 1,678 $ 2,769 $ 4,379
Short-term investments, at cost which
approximates market - 122 -
Trade accounts receivable, less allowance
for doubtful accounts of $ 133 ($108
at December '94, $156 at June '95) 11,648 12,207 15,300
Other receivables 425 447 490
Inventories 7,891 6,039 7,650
Deferred income taxes 450 20 449
Income taxes refundable 413 - 145
Other current assets 407 335 227
------ ------ ------
TOTAL CURRENT ASSETS 22,912 21,939 28,640
------ ------ ------
Property, plant and equipment:
Land 287 222 271
Buildings and building improvements 4,349 4,162 4,383
Machinery, furniture and equipment 14,197 12,983 14,256
Construction in progress 2,391 1,045 1,578
------ ------ ------
21,224 18.412 20,488
Less accumulated depreciation and amortization 10,941 9,721 10,621
------ ------ ------
Net property, plant and equipment 10,283 8,691 9,867
------ ------ ------
Deferred income taxes 877 - 333
Other assets, at cost less applicable
amortization 456 650 687
------ ------ ------
TOTAL ASSETS $ 34,528 $ 31,280 $ 39,527
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $10,513 $ 5,735 $ 11,674
Accounts payable 8,012 7,216 10,339
Accrued expenses 2,550 2,448 2,622
Long-term debt due currently 2,058 735 2,189
------ ------ ------
TOTAL CURRENT LIABILITIES 23,133 16,134 26,824
Long-term debt 1,196 3,119 1,364
Deferred income taxes - 147 -
Other long-term liabilities 73 - 153
------ ------ ------
TOTAL LIABILITIES 24,402 19,400 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 7,270 9,354 8,213
Foreign currency translation adjustment 1,148 818 1,265
------ ------ ------
TOTAL STOCKHOLDERS' EQUITY 10,126 11,880 11,186
------ ------ ------
TOTAL LIABILITIES & STOCKHOLDER'S EQUITY $ 34,528 $ 31,280 $ 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)
Six Months Ended Quarter Ended
December 31, December 31,
1995 1994 1995 1994
Net Sales $21,272 $22,871 $11,367 $11,845
Cost of Sales 17,630 17,327 9,453 8,743
------ ------ ------ ------
Gross Profit 3,642 5,544 1,914 3,102
Selling, General and
Administrative Expenses 5,196 5,356 2,759 2,922
------ ------ ------ ------
Operating Income (Loss) (1,554) 188 (845) 180
------ ------ ------ ------
Other (Income) Expense:
Interest expense 626 317 331 154
Interest income (27) (11) (9) (5)
Foreign currency exchange
(gain) loss (594) 348 41 183
Other, net (61) (59) (65) (57)
------ ------ ------ ------
Total Other (56) 595 298 275
------ ------ ------ ------
Income (Loss) Before Income Taxes (1,498) (407) (1,143) (95)
Provision for Income Taxes (555) (90) (391) (30)
------ ------ ------ ------
Net income (loss) (943) (317) (752) (65)
Retained earnings, beginning
of period 8,213 9,671 8,022 9,419
------ ------ ------ ------
Retained earnings, end of period $ 7,270 $ 9,354 $ 7,270 $ 9,354
====== ====== ====== ======
Income (Loss) per share $ (.60) $ (.20) $ (.48) $ (.04)
====== ====== ====== ======
See accompanying notes to condensed consolidated financial statements.
GEORGIA BONDED FIBERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
(unaudited)
Six Months Ended
December 31
1995 1994
Cash Flows from Operating Activities:
Cash received from customers $26,899 $24,858
Cash paid to suppliers and employees (26,483) (23,800)
Interest received 75 17
Interest paid (676) (324)
Income taxes paid, net of refunds (136) 77
------ ------
Net cash provided by (used in) operating activities (321) 828
------ ------
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment (1,096) (678)
Other assets, net 107 25
------ ------
Net cash used in investing activities (989) (653)
------ ------
Cash Flows from Financing Activities:
Decrease in short-term borrowings, net (880) (730)
Long-term debt incurred - 2,000
Principal payments on long-term debt and capital
lease obligations (302) (143)
------ ------
Net cash provided by (used in) financing activities (1,182) 1,127
------ ------
Effect of Exchange Rate Changes on Cash (209) 105
------ ------
Net Increase (Decrease) in Cash and Cash Equivalents (2,701) 1,407
Cash and Cash Equivalents at Beginning of Year 4,379 1,362
------ ------
Cash and Cash Equivalents at End of Year $ 1,678 $ 2,769
====== ======
Reconciliation of Net Loss to Net Cash Provided by
Operating Activities:
Net loss $ (943) $ (317)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 518 462
Provision for bad debts 6 5
Deferred income taxes (538) 139
Change in assets and liabilities:
Decrease in trade accounts and other
receivables 3,529 2,922
Increase in inventories (218) (1,218)
(Increase) decrease in other assets (148) 19
Decrease in accounts payable and
accrued expenses (1,937) (600)
Decrease in income taxes (295) (23)
Decrease in other liabilities (295) (561)
------ ------
Net cash provided by operating activities $ (321) $ 828
====== ======
See accompanying notes to consolidated financial statements.
GEORGIA BONDED FIBERS, INC.
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 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:
December 31, June 30,
1995 1994 1995
(Dollars in Thousands)
Current assets $ 16,923 $ 13,578 $ 21,192
Total assets 22,027 18,938 27,426
Current liabilities 18,229 13,067 21,734
Total liabilities 19,425 14,724 23,310
Stockholders' equity 3,602 4,214 4,116
The condensed consolidated statements of income (loss) include the
following related to European subsidiaries:
Six Months Ended Quarter Ended
December 31, December 31,
1995 1994 1995 1994
(Dollars in Thousands)
Net Sales $13,428 $13,619 $ 7,344 $ 7,205
Net loss $ (403) $ (304) $ (448) $ (57)
GEORGIA BONDED FIBERS, INC.
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 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 or market principally using the
first-in, first-out (FIFO) method of inventory costing.
Inventories are summarized as follows:
December 31, June 30,
1995 1994 1995
(Dollars in Thousands)
Finished goods $ 3,363 $ 3,691 $ 3,644
Raw Materials 4,654 2,234 4,148
Supplies 623 549 635
------- ------- -------
Inventories at FIFO $ 8,640 $ 6,474 $ 8,427
LIFO reserves 749 435 777
------- ------- -------
$ 7,891 $ 6,039 $ 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 SIX MONTHS AND QUARTER ENDED DECEMBER 31, 1995
(Unaudited)
RESULTS OF OPERATIONS
Consolidated net sales of $11.4 million for the second quarter ended
December 31, 1995 represents a decline of $500,000 or 4 percent as compared
to the corresponding prior year period. Consolidated net sales of $21.3
million for the six months ended December 31, 1995 represents a decline of
$1.6 million or 7 percent as compared to the first six months last year.
This represents a slight improvement relative to the first quarter results,
when the decline in sales was 10.2 percent. The decrease in consolidated
net sales mainly reflects lower volume related to a general global slowdown
in the industries the Company serves. The fluctuation in foreign currency
exchange rates resulted in a $800,000 translation increase in net sales.
The $943,000 or $.60 per share consolidated net loss for the six months
ended December 31, 1995 represents a decline of $626,000 or $.40 per share
over the same period in 1994, and is primarily due to lower sales volume
and higher raw material costs. Realized foreign currency exchange gains of
approximately $594,000 reduced operating losses. 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 24.2 percent during the first six months of
fiscal 1995 to 17.1 percent during the first six months of fiscal 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, subsequent to December 31, 1995,
the Company has seen some stabilization of certain raw material costs, the
effects of which may not be evident until the fourth quarter, when
existing inventories are consumed and lower priced inventories are
procured. 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 remains 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, holidays and industry buying cycles.
Consequently, the first half of each fiscal year has been traditionally at
break-even.
Selling, General & Administrative (SG&A) expenses as a percent of net sales
increased 1.0 percent to 24.4 percent during the first half 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
declined by $160,000, 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.
FINANCIAL CONDITION
Consolidated equity for the Company totaled $10.1 million at the end of
December 1995. Financial ratios at December 31, 1995 declined from a year
ago because of operating losses. Working capital decreased by $6 million
to ($221,000), 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 $4.6 million to $1.2 million.
The fluctuation in foreign currency exchange rates resulted in a
translation increase of $1.9 million in consolidated total assets.
The decrease in cash balances is mainly due to funding of operations and
planned capital additions.
Trade accounts receivables decreased by $559,000 to $11.6 million, and is
primarily because of reduced sales and improved collections.
The $1.9 million increase in inventories to $7.9 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. Finished goods inventories declined from a year ago.
The $1.6 million increase in Net 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 $5.6 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, the Company is not in compliance with certain debt
covenants relating to a credit facility. The Company obtained a waiver
from such requirements at June 30, 1995. The Company's lender has not
declared the Company in default, but the Company has not received
additional waivers for the six month period ended December 31, 1995.
The Company is negotiating with the lender for a modified loan agreement,
but an agreement has not yet been reached and there is no assurance that an
agreement will be reached. Since there is no assurance the Company will
obtain future waivers, $1,461,000 of the long-term debt has been classified
as current, and the Company's payment obligations could be accelerated.
Management currently believes that existing credit facilities will be
sufficient to meet future operating and capital requirements.
PART II. OTHER INFORMATION
GEORGIA BONDED FIBERS, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1995
Item 4. Submission of Matters to Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on October 19, 1995.
The matters voted upon at the Meeting were as follows:
(i) The election of William B. D'Surney as a Class A director, to
serve until the 1997 Annual Meeting; and the election of Patricia S.
Tischio, Jeffrey C. Kostelni and Joseph F. Raffetto as Class B directors,
to serve until the 1998 Annual Meeting; and
(ii) The appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for fiscal year 1996.
All nominees for director named above were elected, and the appointment of
KPMG Peat Marwick was approved.
Election of Officers
AUTHORITY
FOR WITHHELD
--- --------
William B. D'Surney 1,164,668 14,933
Patricia S. Tischio 1,165,045 14,556
Jeffrey C. Kostelni 1,164,715 14,886
Joseph F. Raffetto 1,165,045 14,556
FOR AGAINST ABSTAIN
--- ------- -------
Appointment of KPMG Peat Marwick LLP 1,169,710 4,458 5,433
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 second
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)
2-12-96 /s/James C. Kostelni
- -------------- ---------------------------
(Date) James C. Kostelni
Chairman of the Board
and President
2-12-96 /s/David A. Dugan
- -------------- ---------------------------
(Date) David A. Dugan
Controller and
Corporate Secretary