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, 1996
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 November 7, 1996
Common Stock - $.10 par value 1,572,824
GEORGIA BONDED FIBERS, INC.
FORM 10-Q
FOR THE FIRST QUARTER ENDED SEPTEMBER 30, 1996
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1996 and 1995, June 30, 1996. . . . . . . . . . . . . 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND RETAINED
EARNINGS
First Quarter Ended September 30, 1996 and 1995 . . . . . . . . . . 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
First Quarter Ended September 30, 1996 and 1995 . . . . . . . . . . 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)
September 30, June 30,
(unaudited)
1996 1995 1996
ASSETS
Current assets:
Cash and cash equivalents $ 1,079 $ 1,313 $ 715
Trade accounts receivable, less allowance
for doubtful accounts of $233 ($147 at
September '95, $134 at June 96) 11,482 11,813 14,078
Other receivables 845 379 527
Inventories 5,432 7,708 5,495
Deferred income taxes 539 449 676
Income taxes refundable - 243 14
Other current assets 315 281 116
------- ------- -------
TOTAL CURRENT ASSETS 19,692 22,186 21,621
------- ------- -------
Property, plant and equipment:
Land 298 273 298
Buildings and building improvements 4,797 4,342 4,785
Machinery, furniture and equipment 15,869 14,145 15,755
Construction in progress 937 2,089 782
------- ------- -------
21,901 20,849 21,620
Less accumulated depreciation and amortization 11,414 10,721 11,165
------- ------- -------
Net property, plant and equipment 10,487 10,128 10,455
------- ------- -------
Deferred income taxes 442 601 442
Other assets, at cost less applicable
amortization 424 643 663
------- ------- -------
TOTAL ASSETS $ 31,045 $ 33,558 $ 33,181
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 8,380 $ 9,008 $ 9,416
Accounts payable 6,649 7,659 8,047
Accrued expenses 2,270 2,576 2,345
Income taxes payable 243 - 169
Capital lease obligations due currently - 25 -
Long-term debt due currently 552 2,049 566
------- ------- -------
TOTAL CURRENT LIABILITIES 18,094 21,317 20,543
Long-term debt 2,488 1,223 2,330
Other long-term liabilities - 110 -
------- ------- -------
TOTAL LIABILITIES 20,582 22,650 22,873
------- ------- -------
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 7,770 8,022 7,611
Foreign currency translation adjustment 985 1,178 989
------- ------- -------
TOTAL STOCKHOLDERS' EQUITY 10,463 10,908 10,308
------- ------- -------
TOTAL LIABILITIES & STOCKHOLDER'S EQUITY $ 31,045 $ 33,558 $ 33,181
======= ======= =======
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,
1996 1995
Net Sales $10,885 $ 9,905
Cost of Sales 7,694 8,177
-------- --------
Gross Profit 3,191 1,728
Selling, General and Administrative Expenses 2,649 2,437
-------- --------
Operating Income (Loss) 542 (709)
-------- --------
Other (Income) Expense:
Interest expense 324 295
Interest income (3) (18)
Foreign currency exchange (gain) loss (58) (635)
Other, net 16 4
-------- --------
Total Other 279 (354)
-------- --------
Income (Loss) Before Income Taxes 263 (355)
Provision for Income Taxes 104 (164)
-------- --------
Net income (loss) 159 (191)
Retained earnings, beginning of period 7,611 8,213
-------- --------
Retained earnings, end of period $ 7,770 $ 8,022
======== ========
Income (Loss) per share $ .10 $ (.12)
======== ========
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,
1996 1995
Cash Flows from Operating Activities:
Cash received from customers $13,218 $10,788
Cash paid to suppliers and employees (11,383) (10,522)
Interest received 22 61
Interest paid (413) (338)
Income taxes paid, net of refunds 49 38
-------- --------
Net cash provided by operating activities 1,493 27
-------- --------
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment (314) (608)
-------- --------
Net cash used in investing activities (314) (608)
-------- --------
Cash Flows from Financing Activities:
Decrease in short-term borrowings, net (1,054) (2,347)
Long-term debt incurred 1,795 -
Principal payments on long-term debt and capital lease obligations (1,651) (260)
-------- --------
Net cash used in financing activities (910) (2,607)
-------- --------
Effect of Exchange Rate Changes on Cash 95 122
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents 364 (3,066)
Cash and Cash Equivalents at Beginning of Year 715 4,379
-------- --------
Cash and Cash Equivalents at End of Year $ 1,079 $ 1,313
======== ========
Reconciliation of Net Income (Loss) to Net Cash Provided by
Operating Activities:
Net income (loss) $ 159 $ (191)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 292 255
Provision for bad debts 103 (10)
Deferred income taxes 69 (259)
Change in assets and liabilities:
Decrease in trade accounts and other receivables 2,393 3,113
(Increase) decrease in inventories 51 2
Increase in other assets (164) (74)
Decrease in accounts payable and accrued expenses (1,493) (2,335)
Increase (decrease) in income taxes 83 (404)
Increase (decrease) in other liabilities - (70)
-------- --------
Net cash provided by operating activities $ 1,493 $ 27
======== ========
See accompanying notes to consolidated financial statements.
GEORGIA BONDED FIBERS, INC.
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995 AND JUNE 30, 1996
(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, 1996.
2. The condensed consolidated balance sheets include the following related
to European subsidiaries:
September 30, June 30,
1996 1995 1996
(Dollars in Thousands)
Current assets $ 13,809 $ 15,687 $ 14,905
Total assets 19,052 21,721 20,412
Current liabilities 14,437 16,422 15,991
Total liabilities 15,645 17,645 17,090
Stockholders' equity 3,407 4,076 3,249
The condensed consolidated statements of income include the following
related to European subsidiaries:
First Quarter Ended
September 30,
1996 1995
(Dollars in Thousands)
Net Sales $ 6,352 $ 6,084
Net income 85 45
GEORGIA BONDED FIBERS, INC.
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995 AND JUNE 30, 1996
(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 using the first-in, first-out
(FIFO) and weighted average bases. Inventories are summarized as
follows:
September 30, June 30,
1996 1995 1996
(Dollars in Thousands)
Finished goods $ 3,696 $ 3,750 $ 3,731
Raw Materials 1,695 4,148 1,791
Supplies 630 590 603
------- ------- -------
Inventories at FIFO 6,021 8,488 6,125
LIFO reserves 589 780 630
------- ------- -------
$ 5,432 $ 7,708 $ 5,495
======= ======= =======
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, 1996
(Unaudited)
RESULTS OF OPERATIONS
Except for historical data set forth herein, the following discussion
contains certain forward-looking information. The Company's actual results
may differ significantly from the projected results. Factors that could
cause or contribute to such differences include, but are not limited to,
level of sales to key customers, actions by competitors, and fluctuations in
the price of primary raw materials and foreign currency exchange rates.
The results of operations for the first quarter of fiscal 1997 reflect
continued improvement and profitability. During the first quarter, the
Company generated a consolidated operating profit of $542,000, and net income
of $159,000 or $.10 per share. Consolidated net sales increased almost
$1.0 million or 9.9 percent to $10.9 million for the first quarter ended
September 30, 1996.
The higher consolidated sales reflect both increased volume and higher
average selling prices. The fluctuation in foreign currency exchange rates
resulted in a $200,000 translation decrease in net sales.
Bontex has generated approximately $2.0 million in operating profits and net
income of $427,000 or $.27 per share over the past nine months. 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 customer's scheduled
vacations, shutdowns, holidays and purchasing cycles. Over the past fifteen
years, the Company has generated net income during the first quarter only
four other times, the most recent being in 1992. These improved operating
results are mainly due to lower raw material costs, the impact of various
cost control measures and higher sales volume and prices.
Gross profit as a percentage of net sales (i.e., Gross Margin) for the first
quarter of fiscal 1997 improved significantly over the same quarter last year
from 17.5 percent to 29.3 percent. These positive operating conditions are
expected to continue during fiscal 1997.
The overall decline in operating margins during the last quarter of fiscal
1995 and first half of fiscal 1996 is mainly attributed to the increase in
raw material costs. Selling price increases implemented in fiscal 1996,
coupled with various cost control measures and the decline in certain raw
material costs, restored the Company's operating margins, as noted during the
last six months of fiscal 1996, and the first quarter of fiscal 1997.
The cost of certain raw materials, especially pulp, have moderated since
December 1996. These decreases have translated positively to the bottom line.
However, we have noted slight increases at July 1, and October 1, 1996 in
pulp prices. Additionally, the Company's operating margins remain under
pressure from continued increasing environmental control costs.
Selling General & Administrative (SG&A) expenses as a percent of net sales
decreased slightly from 24.6 percent to 24.3 percent, as compared to the
corresponding prior year. The decreased SG&A percentage is mainly due to
sales increasing at a higher rate than costs, as well as the impact of
various cost control measures.
The prior year first quarter includes a higher than normal exchange gain,
because during the first quarter last year, the Company recovered a large
portion of the foreign exchange losses incurred during fiscal 1995. Future
exchange gains or losses are not expected to be material due to the
implementation of the revised risk management program.
FINANCIAL CONDITION
The consolidated financial condition of the Company remains positive.
Consolidated equity increased from June 30, 1996 and totaled $10.5 million at
the end of September 1996. Financial ratios at September 30, 1996 generally
improved from June 30, 1996 because of the improved operating results.
Working capital increased by $520,000 to $1.6 million, because of increased
long-term debt and improved operating results. The fluctuation in foreign
currency exchange rates did not result in a material translation increase or
decrease in total assets as compared to the prior year.
The increase in cash mainly reflects the Company's financing and hedging
position at European Operations.
Trade Accounts Receivables decreased by $2.6 million to $11.5 million, and is
mainly because of the collection of higher sales from the fourth quarter of
fiscal 1996.
Inventories at June 30, and September 30, 1996 remain stable at $5.5 million.
The $281,000 increase in property, plant and equipment is largely due to
additions relating to the wastewater treatment project at the Company's
Belgian manufacturing facility.
Accounts Payable, accrued expenses and short-term borrowings decreased $2.3
million, which primarily corresponds to a reduction in accounts receivable,
and positive operating results. The increase in long-term debt is mainly due
to the refinancing of the term loan at Bontex USA during the first quarter.
Management 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 SEPTEMBER 30, 1996
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
At the Annual Shareholders Meeting on November 7, 1996, the
shareholders of Bontex approved a proposal to change the state of
incorporation of the Company to Virginia and to effect amended
and restated Articles of Incorporation. The reorganization will
be effective upon receipt of approval from the Virginia State
Corporation Commission and will not result in any change in the
business, management, net worth, assets or liabilities of the
Company. The shareholders also reelected Messrs. William J.
Binnie, Michael J. Breton and Frank Mayorshi to serve three-year
terms on the Board of Directors, as well as the appointment of
external auditors, KPMG Peat Marwick.
At the Annual Meeting held immediately following the
Shareholder's Meeting, the Company's Board of Directors reelected
officers, reappointed Board committees and approved a resolution
to consider adoption of a shareholder's rights plan at a later
date. Bontex has also adopted a new logo reflecting the recent
changes and the Company's emphasis on our strategic plan to be
the global leader in our industry.
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibits:
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)
11-13-96 /s/James C. Kostelni
- ---------------- ------------------------------
(Date) James C. Kostelni
Chairman of the Board
and President
11-13-96 /s/David A. Dugan
- ---------------- ------------------------------
(Date) David A. Dugan
Controller and
Corporate Secretary