UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the Quarterly Period Ended March 31, 1995
Commission File No. 0-5200
GEORGIA BONDED FIBERS, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-14275551
(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: 703-261-2181
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 May 2, 1995
Common Stock - $.10 par value 1,572,824
<PAGE>
GEORGIA BONDED FIBERS, INC.
FORM 10-Q
FOR THE NINE MONTHS ENDED MARCH 31, 1995
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1995 and 1994, June 30, 1994 . . . . . . . . . 3,4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME(LOSS) AND
RETAINED EARNINGS
Nine Months and Quarter Ended March 31, 1995 and 1994 . .5,6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, 1995 and 1994 . . . . . . . . 7
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . 8,9
Item 2. Management s Discussion and Analysis of
Financial Condition and Results of Operations . . . . 10-13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 13
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GEORGIA BONDED FIBERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
March 31, June 30,
--------- --------
(unaudited)
1995 1994 1994
---- ---- ----
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,153 $ 955 $ 1,362
Short-term investments, at cost which
approximates market 122 123 123
Trade accounts receivable, less
allowance for doubtful
accounts of $147 ($195 at
March '94, $183 at June '94) 13,966 12,328 14,421
Other receivables 772 498 958
Inventories 5,850 5,603 4,892
Other current assets 1,082 313 161
----- --- ---
TOTAL CURRENT ASSETS 27,945 19,820 21,917
------ ------ ------
Property, plant and equipment:
Land 222 219 224
Buildings and building improvements 4,357 3,638 4,122
Machinery, furniture and equipment 13,877 11,492 12,309
Construction in progress 1,457 1,713 866
----- ----- ---
19,913 17,062 17,521
Less accumulated depreciation and
amortization 10,416 9,155 9,172
------ ----- -----
Net property, plant and
equipment 9,497 7,907 8,349
----- ----- -----
Other assets, at cost less
applicable amortization 733 972 766
--- --- ---
TOTAL ASSETS $ 38,175 $ 28,699 $ 31,032
======== ======== ========
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 10,876 $ 5,111 $ 6,339
Accounts payable 9,216 7,142 7,915
Accrued expenses 2,632 2,649 2,626
Capital lease obligations due
currently 60 59 69
Long-term debt due currently 639 304 331
--- --- ---
TOTAL CURRENT LIABILITIES 23,423 15,265 17,280
Capital lease obligations 6 58 40
Long-term debt 3,193 1,521 1,511
Deferred income taxes 154 456 121
--- --- ---
TOTAL LIABILITIES 26,776 17,300 18,952
------ ------ ------
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 8,408 9,200 9,671
Foreign currency translation
adjustment 1,283 491 701
----- --- ---
TOTAL STOCKHOLDERS' EQUITY 11,399 11,399 12,080
------ ------ ------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 38,175 $ 28,699 $ 31,032
======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
GEORGIA BONDED FIBERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME(LOSS)
AND RETAINED EARNINGS
(Dollars in Thousands Except for per Share Amounts)
(Unaudited)
Nine Months Ended Quarter Ended
March 31, March 31,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 36,973 $ 33,855 $ 14,102 $ 12,496
Cost of sales 27,834 24,918 10,507 8,981
------ ------ ------ -----
Gross profit 9,139 8,937 3,595 3,515
Selling, general and
administrative expenses 8,510 7,672 3,154 2,743
----- ----- ----- -----
Operating income 629 1,265 441 772
--- ----- --- ---
Other income and (expense):
Interest income 36 22 25 6
Interest expense (590) (486) (273) (141)
Foreign currency exchange
adjustments (1,519) (103) (1,171) 85
Other, net 67 58 8 19
-- -- - --
Total Other (2,006) (509) (1,411) (31)
------- ----- ------- ----
<PAGE>
Income (loss) before taxes
and cumulative
effect of change in
accounting principle (1,377) 756 (970) 741
Provision (benefit) for
income taxes (114) 292 (24) 259
----- --- ---- ---
Net income (loss) before
cumulative effect of
change in accounting
principle (1,263) 464 (946) 482
Cumulative effect of
change in accounting
principle - 400 - -
- --- - -
Net income (loss) (1,263) 864 (946) 482
Retained earnings,
beginning of period 9,671 8,336 9,354 8,718
----- ----- ----- -----
Retained earnings, end
of period $ 8,408 $ 9,200 $ 8,408 $ 9,200
======= ======== ======== ========
Net income (loss) per share:
Before cumulative
effect of change
in accounting
principle $ (.80) $ .30 $ (.60) $ .31
Cumulative effect of
change in accounting
principle - .25 - -
- --- - -
Net income (loss) $ (.80) $ .55 $ (.60) $ .31
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
GEORGIA BONDED FIBERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Nine Months Ended
March 31,
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,263) $ 864
Depreciation and amortization expense 685 561
Decrease in receivables 641 315
Increase in inventories (958) (170)
Increase in other assets (887) (287)
Increase in accounts payable 1,301 193
Increase (decrease) in accrued expenses 6 (166)
Increase (decrease) in income taxes 33 (106)
Increase in foreign currency translation 26 42
-- --
Net cash provided by (used in) operating
activities (416) 1,246
----- -----
Cash flows from investing activities:
Net increase of plant, property, and equipment (1,277) (1,432)
Proceeds from maturities of short-term investment - 296
- ---
Net cash used in investing activities (1,277) (1,136)
------- -------
Cash flows from financing activities:
Net increase (decrease) in notes payable and other
short-term borrowings 4,537 (1,305)
Changes in long-term debt and capital
lease obligations, net 1,947 489
----- ---
Net cash provided by (used in) financing
activities 6,484 (816)
----- -----
Net increase (decrease) in cash and cash equivalents 4,791 (706)
Cash and cash equivalents at beginning of period 1,362 1,661
----- -----
Cash and cash equivalents at end of period $ 6,153 $ 955
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
GEORGIA BONDED FIBERS, INC.
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1994 AND JUNE 30, 1994
(Unaudited)
1. The accompanying unaudited condensed consolidated financial
statements have been prepared 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 have
been included. Operating results for the first nine months
ended March 31, 1995, are not necessarily indicative of the
results that may be expected for the year ended June 30,
1995. 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, 1994.
2. The condensed consolidated balance sheets include the
following related to European subsidiaries:
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994 1994
(Dollars in Thousands)
<S> <C> <C> <C>
Current assets $ 20,112 $ 12,937 $ 14,524
Total assets 25,958 17,904 19,808
Current liabilities 20,324 12,510 13,685
Total liabilities 22,049 14,247 15,413
Stockholders' equity 3,909 3,657 4,425
</TABLE>
The condensed consolidated statements of income(loss) include the
following related to European subsidiaries:
<TABLE>
<CAPTION>
Nine Months Ended Quarter Ended
March 31, March 31,
1995 1994 1995 1994
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Net Sales $ 22,569 $ 18,978 $ 8,950 $ 7,174
Cumulative effect of
change in accounting
principle - - - -
Net income(loss) (1,136) 407 (832) 300
</TABLE>
<PAGE>
GEORGIA BONDED FIBERS, INC.
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1994 AND JUNE 30, 1994
(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:
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994 1994
(Dollars in Thousands)
<S> <C> <C> <C>
Finished goods $ 2,826 $ 3,315 $ 2,891
Raw Materials 2,415 1,781 1,389
Supplies 609 507 612
--- --- ---
$ 5,850 $ 5,603 $ 4,892
======= ======= =======
</TABLE>
4. Per share calculations are based on shares outstanding of
1,572,824 shares for all periods.
<PAGE>
GEORGIA BONDED FIBERS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS AND QUARTER ENDED MARCH 31, 1995
RESULTS OF OPERATIONS
The Company recorded consolidated net sales of $37.0 million for
the nine months ended March 31, 1995. This represents an
increase of $3.1 million or 9.2 percent as compared to the
corresponding prior year period. This year's third quarter
consolidated net sales increased $1.6 million or 12.9 percent
over the corresponding period in 1994. Management anticipates
the trend of increasing consolidated sales to continue through
the fourth quarter. The increase in net sales is primarily the
result of continued positive market penetration, price increases,
improved global economic conditions, and foreign currency
translation adjustments.
The increase in cost of sales is largely due to the growth in
sales, and the continued increases in raw material prices,
particularly with pulp and latex. Management continues to
improve product formulation and processes to offset a portion of
these raw material price increases. The forecast for raw
material costs remain negative, as pulp and latex prices continue
to escalate. We anticipate higher raw material costs during the
remainder of the fiscal year to adversely impact margins. The
Company has utilized long-term contracts and forward purchases of
raw materials in an effort to manage these cost increases.
Additionally, management is pursuing price increases to help
offset a portion of the rising raw material costs.
Unfortunately, the competitive situation in the marketplace has
made the implementation of price increases difficult.
Consolidated net loss for the first nine months of fiscal year
1995 was $1,263,000 or $.80 per share, as compared to net income
of $864,000 or $.55 per share for the prior year. Last year's
net income was higher than normal primarily because of the one-
time $400,000 gain resulting from the adoption of FASB 109,
"Accounting for Income Taxes." Excluding the effects of FASB
109, this year's net loss represents a decline of approximately
$1,727,000, mainly resulting from increased foreign currency
exchange losses and higher raw material costs.
Selling, general and administrative (SG&A) expenses as a percent
of net sales increased slightly to 23.0 percent from 22.7 percent
last year. The increase in SG&A percentage was mainly due to
employee compensation and marketing costs increasing at a higher
rate than sales.
The foreign currency exchange losses totaled approximately $1.5
million at March 31, 1995, of which $922,000 represented
unrealized exchange losses. These larger than normal exchange
<PAGE>
losses are primarily due to the recent weakening of the US dollar
and Italian lire in relation to the Belgian franc. A significant
portion of the sales for the Company's Belgium subsidiary are
denominated in US dollars and Italian lire, and as such, are
subject to the risk of exchange rate fluctuations. Over the past
twelve months, the US dollar and Italian lire have decreased in
value by approximately 25 percent and 20 percent, respectively.
Management has adopted a revised hedging program to better manage
current and future currency exposures.
Historically, some seasonality exists in that the first half of
each year is usually less productive and consequently less
profitable than the second half. This seasonality is largely due
to customers' scheduled vacations, shutdown, and holidays, which
normally occur during the first half of each fiscal year.
<PAGE>
GEORGIA BONDED FIBERS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE NINE
MONTHS AND QUARTER ENDED MARCH 31, 1995 (continued)
FINANCIAL CONDITION
The $5.2 million increase in cash and cash equivalents from
March 31, 1994, to March 31, 1995, is largely due to the higher
than normal cash balances at both Bontex USA and Bontex SA. At
Bontex USA, there was approximately $1.1 million in cash and
short-term investments to be disbursed for the waste water
treatment project and certain other capital projects. Bontex SA
maintained larger than normal cash balances in Italian lire and
US dollars in anticipation of improvements in foreign currency
exchange rates. The $4.6 million in cash balances at Bontex SA
is offset by a corresponding amount of short-term debt. The
interest income earned on these deposits at Bontex SA more than
offset the related borrowings in Belgian francs.
From March 31, 1994, to March 31, 1995, trade accounts receivable
increased $1.6 million to $14 million primarily because of higher
sales volume and foreign currency translation adjustments.
Inventories increased $247,000 to $5.85 million primarily because
of increases in both raw material and finished goods inventory at
Bontex SA mainly resulting from increases in sales volume and
forward purchasing of raw material to defer cost increases. The
$1.3 million increase in plant and equipment is largely due to
the additions relating to the waste water treatment projects at
the Company's manufacturing facilities and the paper machine
rebuild in the USA. Accounts payable increased $2.1 million
primarily because of increased sales volume, raw material costs
and foreign currency translation adjustments.
The Company has certain responsibilities under federal, state and
foreign regulations to maintain the quality of its water
discharge within promulgated regulations in the United States and
Europe. At the present time, the Company estimates that to bring
the water discharge into compliance with current and new
regulations for environmental protection, it will require
additional capital investment over the next fiscal year of
approximately $1,800,000. This investment will be financed from
a combination of funds provided from operations and expanded
credit facilities.
The fluctuation in foreign currency exchange rates from March 31,
1994, to March 31, 1995, resulted in a 2.6 percent translation
increase of $759,000 in consolidated total assets.
RESTRUCTURING AND PRODUCTIVITY IMPROVEMENT PLAN
The Company had previously announced certain restructuring plans
relating to the disposal of certain assets; however, management
<PAGE>
does not currently anticipate the necessity for such action. The
recent equipment modifications to increase productivity and
expand capacity are expected to be sufficient to meet the
increased demand for the Company's products and enhance
profitability.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a.) Exhibits.
Exhibit 27 - Financial Data Schedule - page 15
(b.) No reports on Form 8-K have been filed during the
third quarter.
<PAGE>
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)
5-10-95 /s/James C. Kostelni
_____________ ____________________
(Date) James C. Kostelni
Chairman of the Board
and President
5-10-95 /s/David A. Dugan
_____________ _________________
(Date) David A. Dugan
Controller and
Corporate Secretary
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GEORGIA
BONDED FIBERS, INC.'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR
THE QUARTER ENDED MARCH 31, 1995, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT
ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 6,153
<SECURITIES> 122
<RECEIVABLES> 13,966
<ALLOWANCES> 147
<INVENTORY> 5,850
<CURRENT-ASSETS> 27,945
<PP&E> 19,913
<DEPRECIATION> 10,416
<TOTAL-ASSETS> 38,175
<CURRENT-LIABILITIES> 23,423
<BONDS> 3,193
<COMMON> 157
0
0
<OTHER-SE> 1,551
<TOTAL-LIABILITY-AND-EQUITY> 38,175
<SALES> 36,973
<TOTAL-REVENUES> 36,973
<CGS> 27,834
<TOTAL-COSTS> 36,344
<OTHER-EXPENSES> 2,006
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 590
<INCOME-PRETAX> (1,377)
<INCOME-TAX> (114)
<INCOME-CONTINUING> (1,263)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,263)
<EPS-PRIMARY> (.80)
<EPS-DILUTED> (.80)
</TABLE>
