UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year Commission File
ended June 30, 1995 Number 0-5200
GEORGIA BONDED FIBERS, INC.
Exact name of Registrant as specified in its charter
NEW JERSEY 22-1427551
State of Incorporation IRS Employer No.
ONE BONTEX DRIVE, BUENA VISTA, VIRGINIA 24416-0751
Address of principal executive offices Zip code
Registrant's telephone number (703)261-2181
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
$.10 par value common stock
Title of Class
Indicate by check mark whether the Registrant (1) has filed all
annual, quarterly and other reports required to be filed with the
Commission, and (2) has been subject to the filing requirements
for at least the past 90 days:
(x) Yes ( ) No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K ( )
Aggregated market value of the voting stock held by non-
affiliates of the Registrant: $2,426,775 at August 29, 1995
On August 29, 1995, the Registrant had 1,572,824 shares of $.10
par value common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Portions of the registrant's Annual Report to Stockholders
are incorporated by reference into Parts I and II hereof.
(2) Portions of the registrant's Proxy Statement dated
September 18, 1995 issued in connection with the annual
meeting of shareholders to be held October 19, 1995 are
incorporated by reference into Parts III hereof.
<PAGE>
TABLE OF CONTENTS
PART I
ITEM DESCRIPTION PAGE
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . 10
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 11
4. Submission of Matters to a Vote of Security Holders . . . 12
PART II
DESCRIPTION
5. Market for the Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . 13
6. Selected Financial Data . . . . . . . . . . . . . . . . 13
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . 14
8. Financial Statements and Supplementary Data . . . . . . 14
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures . . . . . . . . . . . . . 14
PART III
DESCRIPTION
10. Directors and Executives of the Registrant . . . . . . . 14
11. Executive Compensation . . . . . . . . . . . . . . . . . 15
12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . 15
13. Certain Relationships and Related Transactions . . . . . 15
PART IV
DESCRIPTION
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL BUSINESS
----------------
Georgia Bonded Fibers, Inc. (All references hereinafter to
the "Registrant," "Company" or "Bontex" refer collectively to
Georgia Bonded Fibers, Inc. and its wholly-owned subsidiaries
unless otherwise indicated by context) was incorporated in June
1946 under the laws of the State of New Jersey. The Company
originally began as a leather processing operation, and today
Bontex is a leading worldwide manufacturer and distributor of
uncoated and coated elastomeric wet web impregnated fiberboard
products, generally described by the trademark BONTEX, for
footwear, headwear, luggage, leathergoods, allied, belt backing,
gasketing, electronic integrated component packaging, and
automotive industries.
ORGANIZATION
------------
The Company maintains corporate headquarters, sales offices,
and a warehouse facility in Newark, New Jersey; a wholly-owned
manufacturing facility at Bontex USA, Buena Vista, Virginia; a
wholly-owned manufacturing subsidiary, Bontex S.A., Stembert,
Belgium; a wholly-owned distribution and converting subsidiary,
Bontex Italia s.r.l., Villafranca, Verona, Italy; and a wholly-
owned distribution subsidiary, Bontex de Mexico, S.A. de C.V.,
Leon, Mexico. The Company utilizes a wholly-owned foreign sales
corporation, Bontex Inc., organized and existing under the laws
of the Virgin Islands to facilitate export sales. Additionally,
Bontex maintains a network of liaison offices -- Bontex Canada,
Bontex Korea, Bontex Taiwan, Bontex China, Bontex Indonesia,
Bontex Philippines, and Bontex Australia -- to service Asian
markets.
The Company employs 108 full-time and 3 part-time people in
Buena Vista, Virginia; 2 full-time employees and 2 part-time
employees in Newark, New Jersey; 78 full-time and 2 part-time
employees in Belgium; 9 employees in Italy; and 1 full-time and 1
part-time employee in Mexico. Revenue per employee was
approximately $253,000 and $240,000 in fiscal years 1995 and
1994, respectively.
There is no labor union at the United States operations and
management knows of no union activity at the present time. In
the Company's European operations, unions are sponsored by the
national government and membership is required by law.
PRODUCTS
--------
BONTEX elastomeric wet web fiberboard materials are
primarily used as an insole material in footwear, visorboard in
headwear, dielectric sealing base in automotive door panels,
backing substrate, stiffener and laminating base in luggage,
leathergoods, and allied products. All BONTEX fiberboard
products are designed to be "environmentally-friendly," because
<PAGE>
Bontex uses recycled and primary cellulose fibers
originally derived from trees, a renewable resource. Bontex has
the American Podiatric Medical Association (APMA) Seal of
Acceptance for BONTEX elastomeric wet web products, BONFOAM,
SUREFOAM, and MAXXON, cushion insole materials. BONFOAM,
SUREFOAM, and MAXXON trademarks are the sole property of the
Registrant. The podiatric seal of acceptance is granted after
stringent clinical and laboratory tests have been carried out on
approved products which demonstrate conformity to APMA
guidelines, and assist in foot health, and comfort. The APMA
Seal of Acceptance for approved BONTEX products should enhance
product acceptance in the marketplace.
Bontex USA manufactures uncoated and coated BONTEX
fiberboard products; PVC breathable (moisture vapor transmission)
cushion foams, that are marketed under trademarks BON-FOAM,
MAXXON and SURE-FOAM, and are sold in a variety of grades for use
as shock absorbing insole material; BONTEX 200 RECYCLED and
BONTEX 300 RECYCLED, which are produced from 100 percent
recovered paper with a minimum 80 percent "post-consumer waste"
for use in footwear, visorboard in headwear, a backing substrate,
stiffener pieces and laminating base; BON-PEL, a wet web nonwoven
substrate, which is exceptionally strong and flexible; BONTEX 48
MA, an uncoated visorboard for use in military headwear, which
has been approved by NATICK military laboratory. Bontex USA also
combines certain products, such as foams, fabrics, and PVCs, to
BONTEX fiberboard. Additionally, Bontex USA is the exclusive
distributor globally to the footwear industry of an expanded
polyurethane material manufactured by E.A.R. Specialty
Composites, a division of Cabot Safety Corporation, under the
trademarks MAXXON LS and CONFOR. MAXXON LS and CONFOR have
moisture vapor transmission characteristics and are used for
socklinings and cushion insoles in various types of footwear.
CONFOR is a trademark of E.A.R. Specialty Composites.
Bontex S.A., Stembert, Belgium, manufactures uncoated BONTEX
products. Bontex Italia, s.r.l. is a distribution company and
operates converting equipment primarily servicing the Italian
market.
The Company's converting facilities continue to show
increased volume and open new market areas in coated and
composite items converted on BONTEX substrates. The Company's
marketing emphasis is to capitalize on the positive performance
of these products.
RESEARCH
--------
The Company's research efforts are directed primarily toward
developing new products, processing techniques, and improving
product performance, often in close association with customers.
The Company has also dedicated much of its efforts to
customizing many composite products with BONTEX fiberboard
products. These products have increased sales of combination
packages, primarily designed to take advantage of the current
increased emphasis on comfort in footwear products. A series of
dual-density (two-layer) foam packages have been designed, and
sales of these products have been increasing since their
introduction.
<PAGE>
Bontex has embarked on the implementation of the
International Organization for Standardization (IOS) quality
assurance system ISO 9000 at both the United States and Belgium
manufacturing facilities. Management is striving for
registration of ISO 9000 during fiscal year 1996. The immediate
impact of ISO 9000 on sales is anticipated to be minimal;
however, management regards ISO 9000 with significant importance
in maintaining a competitive edge in quality globally.
COMPETITION
-----------
The industry in which the Company operates is highly
competitive. Participants in the industry compete through
quality and price, including the ability to control costs, risk
management, innovation, and customer service. Presently, it is
management's opinion that the Company offers superior product
quality and customer service in major markets globally. In the
United States, there is one other manufacturer of BONTEX type
material. There are, however, other materials which may be
substituted for the same applications. The Company estimates
that during the last fiscal year, its products were in
approximately 45 to 50 percent of nonrubber footwear manufactured
in the United States. This estimate is based on Footwear
Industries of America (FIA) data as to total sales.
There are manufacturers who purchase BONTEX type materials
for coating, laminating, and converting into innersoles for
footwear, visors for headwear, and dielectric sealing base in
automotive door panels. There is more competition in these
segments, and no comparative market statistics are available.
In Europe, there are four major manufacturers of material
similar to BONTEX. These competitors are located in Germany,
Italy, Finland, and the former U.S.S.R. The Company estimates
that it sells approximately 45 percent of the BONTEX type
materials sold in the European Union. These estimates are based
on SATRA Common Market statistics as to total sales, and other
generally available industry information; however, as there are
many customers in Europe and globally who purchase BONTEX and
convert it into innersoles and other application components, the
actual total worldwide market penetration is difficult to
estimate.
RISK MANAGEMENT PROGRAM
-----------------------
The Company is exposed to the inherent risks associated with
conducting business globally. These risks include export duties,
quotas, restrictions on the transfer of funds, political
instability, and foreign currency exchange rate fluctuations.
The Company closely monitors its method of operating in each
country and adopts strategies responsive to changing economic and
political environments. The Company benefits from operating in a
number of different currencies, because weakness in any
particular currency often is offset by strengths in other
currencies.
During fiscal 1995, the Company experienced unprecedented
volatility in the foreign currency markets. The foreign currency
exchange losses for fiscal 1995 totaled approximately $1.5
million. The higher than normal exchange losses are the result
<PAGE>
of the large decreases in the value of the US dollar, Italian
lire, and Mexican peso. Over the past twelve months, the Italian
lire and US dollar decreased in value relative to the Belgian
franc by 13 and 12 percent, respectively, and the Mexican peso
reduced in value by more than 100 percent relative to the US
dollar. The largest portion of these exchange losses occurred at
Bontex S.A., the Belgium subsidiary. A significant portion of
the Belgium subsidiary's sales are denominated in US dollars and
Italian lire, and consequently, subject to the risk of foreign
exchange rate fluctuations.
Management has implemented a revised Risk Management Program
(RMP) to better manage the Company's exposure to foreign currency
exchange rate fluctuations. The revised RMP is a coordinated
approach in the management of foreign currency risk: The overall
policy of the RMP is to match currency denominations of assets
with liabilities, in a manner intended to reduce the Company's
foreign currency exposure. Bontex S.A. is generally able to
match the maturity and duration of its debt with that of its
assets based on routine cash flow projections. Additionally,
Bontex S.A. continues to utilize forward exchange contracts and
other approved hedging instruments to manage currency risks.
Management cannot predict the likelihood of such developments
occurring again in the future. All transactions denominated in
foreign currencies are not hedged (i.e., Mexican peso, Canadian
dollar, etc.) since the volume of such transactions is limited
and therefore the cost to hedge is considered prohibitive. These
international markets are regarded as excellent opportunities for
future growth and profits, and management will continue to
monitor the situation and evaluate various alternatives to manage
exposure to such risks.
The Company also manages interest rate risk to protect the
Company's margins and financial position from future rate
increases by participating in interest rate swaps. The interest
rate swap arrangements provide for the payment of interest based
on fixed rates of interest rather than variable rates. The
Company does not speculate on interest rates, but rather seeks to
mitigate the possible impact of interest rate fluctuations on its
short-term variable rate debt.
At June 30, 1995 and 1994, the total notional amount of the
Company's foreign currency exchange contracts totaled $5.0
million and $4.0 million, respectively. The total notional
amount of the Company's interest rate swaps contracts totaled
$2.8 million and $2.3 million at June 30, 1995 and 1994,
respectively. The notional amount of these contracts does not
represent the direct credit exposure. Rather, credit exposure
may be defined as the market value of the contract and the
ability of the counterparty to perform its payment obligations
under the agreement. The Company's interest rate swap agreements
require the Company to pay a fixed rate. Therefore, this risk is
reduced in a declining interest rate environment as the Company
is generally in a payable position, and this risk is increased in
rising interest rate environment as the Company is generally in a
receivable position. The Company seeks to control the credit
risk of its interest rate swap agreements and other financial
instruments through credit exposure limits and monitoring
procedures. The Company may be exposed to a credit loss in the
event of nonperformance by the other party to an interest rate
<PAGE>
swap agreement. All interest rate swaps and foreign exchange
contracts are with established banks, and the Company does not
anticipate such nonperformance.
There are four major competitors operating in Taiwan and the
Peoples Republic of China which has a tendency to impact selling
prices. There is a 5 percent duty on BONTEX products going into
Taiwan. However, BONTEX sales continue to increase in Taiwan and
the Peoples Republic of China since the establishment of a Bontex
liaison office in Taipei, Taiwan. The Bontex liaison office in
Australia continues to perform well through the coordination of
all Asian operations covering, among others, Japan, Korea,
Taiwan, Hong Kong, Philippines, Indonesia, New Zealand,
Australia, Singapore, and Malaysia.
TRADEMARKS
----------
Georgia Bonded Fibers utilizes trademarks on nearly all of
its products, and believes having such distinctive trademarks
which are readily identifiable is an important factor in creating
and maintaining a market for its goods and services. This
further serves to identify the Company and distinguish its goods
from goods of others. The Company considers its BONTEX trademark
and other trademarks to be among its most valuable assets, and
has registered these trademarks in over 70 countries. Georgia
Bonded Fibers continues to vigorously protect its trademarks
against infringement.
PRODUCTION AND SALES
--------------------
Refer to Note 3 of Notes to the Consolidated Financial
Statements in the Company's Annual Report to Stockholders wherein
information is provided regarding foreign and domestic operations
and export sales for the last three fiscal years. Such
information is incorporated herein by reference, pursuant to
General Instruction G(2).
Credit terms offered by the Company to meet competition have
been longer than terms normally available to the Company from its
vendors. Some seasonality exists in that the second half of each
fiscal year is usually more productive and consequently more
profitable than the first half. This seasonality is largely
because of customers' scheduled vacations, shutdowns, and
holidays, which normally occur during the first half of each
fiscal year. Substantially all sales to Asia are negotiation of
letters of credit and sight drafts, and are covered by foreign
credit insurance. In the fiscal year ended June 30, 1995, a
leading athletic footwear company, specified BONTEX to sourcing
contractors globally, and accounts for approximately 14.6 percent
of the Company's consolidated sales (13.7% and 11.0% in 1994 and
1993, respectively).
The increase in consolidated sales during fiscal 1995 is
primarily due to the growth of converted and nonconverted
products resulting from positive market penetration, improvement
in overall global economic conditions, and continued efforts to
develop new value added products for the footwear, luggage, and
allied industries as well as foreign currency translation.
<PAGE>
Foreign operations, principally in Belgium and Italy,
constitute a significant portion of the Company's business.
Production of BONTEX fiberboard products is allocated between the
United States and Belgium manufacturing facilities based on such
factors as availability of capacity, production efficiencies,
logistical considerations, and foreign currency exchange rates.
The Company is currently operating near full capacity. During
the past three fiscal years, approximately 40 percent of total
production was in the United States. The backlog of firm orders
in the United States at the end of the fiscal year was about four
weeks production or approximately $1,800,000 in sales. The
current backlog at Bontex USA is approximately four weeks. In
Europe, the backlog at the end of the fiscal year was four weeks
production or approximately $2,000,000 sales. The present
backlog at Bontex S.A. is four weeks.
The Company sells most of its products directly to customers
through its own sales force throughout the United States. The
Company also sells products through distributors, and other
intermediaries who may convert and resell these products to
others. Bontex USA mainly services North and South America, as
well as certain Asian markets. For the past three years
approximately 43 percent of Bontex USA's sales are exported
outside of the United States. In the United States, Company
salesmen and commission sales representatives are used for
approximately 60 percent of sales. Bontex USA maintains leased
bonded warehouses in Nashville, Tennessee; St. Louis, Missouri;
Leon, Mexico; Cambridge, Ontario, Canada; and Montreal, Quebec,
Canada. The Company established Bontex de Mexico, S.A. de C.V.,
as a marketing distribution company in Leon, Mexico to directly
facilitate sales in Mexico. Currently, sales in Mexico are not
significant and have not grown as planned due to the recent
devaluation in the peso. Bontex continues to view the Mexican
market with guarded optimism for future growth.
Bontex S.A. markets its products through distributors and
sales representatives in most countries in Europe, Africa, and
the Middle East, as well as in Central and Eastern Europe. The
Company's wholly-owned subsidiary, Bontex Italia s.r.l., services
the Italian market directly, and through localized converters and
commissioned representatives.
The Company maintains six Bontex liaison offices in select
Asian markets, a network of sales representatives in various
countries where BONTEX is marketed, as well as leased bonded
warehouses in Korea, Taiwan, and the Peoples Republic of China.
For certain of its foreign markets the Company uses individual
distributors. One distributor represents approximately 13
percent of the Company's net consolidated sales, and the Company
believes that it is well positioned to replace any of these
distributors without materially impacting the Company's marketing
or financial operations.
STATUS OF PROPOSED PROJECT
--------------------------
On July 27, 1994, the Company's Board of Directors
authorized management to investigate the establishment of a
manufacturing facility in Malaysia. The Company's plans to
establish a manufacturing facility in Asia continues as
scheduled. Bontex Sdn Bhd was incorporated on July 12, 1995, and
<PAGE>
is being considered not only as a way of enabling the Company to
strengthen its presence in Asia, but also to expand its global
manufacturing network. Management anticipates completing site
selection during fiscal 1996. However, construction and
completion of the proposed project are subject to a number of
significant conditions, including the profitability of the
Company, final approval by the Company's Board of Directors,
procurement of capital, and Malaysian regulatory approvals.
Management projects that the proposed costs for Bontex Sdn Bhd is
estimated to be in the order of magnitude of $10 million. At the
time of this filing, management cannot provide more definitive
projected financial information for the proposed project with
confidence and accuracy, since such projections may vary
significantly based on ultimate circumstances.
MATERIALS AND SUPPLIES
----------------------
Both manufacturing locations in the United States and
Belgium primarily acquire raw materials from Western European,
Asian and American suppliers. More than one supplier is
available for all major raw materials. Bontex S.A. appears to
have available and receives adequate quantities of water for
processing and is assured of a continuous supply of high quality
water. The manufacturing facility in the United States has
adequate supply of processing water from wells and river sources.
The cost of raw materials increased at unprecedented high
rates last year. The cost of prime pulp and latex, two primary
raw materials for the Company's products, increased by
approximately 85 percent and 38 percent, respectively in fiscal
1995. Management has implemented various measures in an attempt
to manage the situation, including raising selling prices,
capital enhancements to improve production efficiencies and
several cost control measures through better utilization of
existing resources. It is difficult to implement price increases
for the Company's finished goods due to the global competitive
environment in which the Company operates, and even more
difficult to estimate future raw material prices. Based on
current information, management anticipates that raw material
prices will stabilize and possibly decline during fiscal 1996.
Management intends to continue to prudently apply technology to
manufacture high quality products while attempting to reduce
costs in all areas of operations in an effort to maintain
competitive selling prices. There can be no assurance however,
that increased raw material prices will not continue to have an
adverse effect on the Company's operations or competitive
position in the future.
Bontex USA maintains a private fleet of tractors and
trailers for long haul delivery of its products to customers
throughout the United States and Canada and to ports for export
shipments, in addition to backhauling of raw materials to reduce
operating costs. The Company also participates in numerous
equipment interchange agreements for containers with steamship
lines to facilitate exports.
REGULATORY
----------
As with all fiberboard manufacturers, the Company is subject
to regulations by various federal, state, foreign and local
<PAGE>
agencies concerning compliance with environmental control
statutes and regulations. These regulations impose limitations
on the discharge of contaminants into the environment, including
effluent and emission limitations, as well as require the Company
to obtain and operate in compliance with the conditions of
permits and other government authorizations. Failure to comply
with applicable environmental control standards could result in
interruption or suspension of operations at the affected
facilities or could require additional expenditures at these
facilities.
The Company has made and intends to continue to make capital
investments, operating expenditures, and production adjustments
in connection with compliance to environmental laws and
regulations. Since the Company is essentially comprised of two
fiberboard plants, water quality discharge remains the primary
environmental concern. A private water quality consulting firm
has completed an extensive analysis and plans for compliance at
both plants have been implemented.
On July 22, 1994, the Company entered into a Special Consent
Order with the Virginia Department of Environmental Quality
committing the Company to construct a waste water treatment
facility to address certain effluent limitations in its Virginia
Pollution Discharge Elimination Permit. The USA waste treatment
facility is estimated to cost a total of $1.4 million and is
scheduled to be completed by January 1, 1996, in accordance with
the construction schedule in the Consent Order.
The Belgium government has imposed new regulations requiring
a formal water treatment plant to be installed at Bontex S.A.
The first phase for the construction of the waste treatment
facility in Belgium is anticipated to be completed in February
1996 at an estimated cost of $1.4 million.
Estimates of the costs of future environmental compliance
may differ from final costs due to, among other things, continued
emergence of new environmental laws and regulations and
environmental control or process technology developments. At the
present time, based on preliminary estimates, the Company
anticipates that consolidated capital expenditures for
environmental compliance in fiscal 1996 will aggregate
approximately $2.2 million; however, this estimate could change
due to ultimate circumstances. Compliance with existing
environmental regulations is not expected to have a materially
adverse effect on the Company's earnings, financial position or
competitive position.
ITEM 2. PROPERTIES
For information about interest and security interests held
by banks in the Company's properties, see Note 4 of Notes to
Consolidated Financial Statements contained in the Company's 1995
Annual Report to Stockholders. Such information is incorporated
herein by reference, pursuant to General Instruction G(2).
The properties of the Company consist primarily of wholly-
owned plant and equipment to manufacture and distribute the
Company's products. In Newark, New Jersey the Company owns an
office building and warehouse. Corporate headquarters and sales
<PAGE>
office are maintained at the Newark building, and the warehouse
is used for the distribution of the Company's products in the
northeastern region of the United States. The Newark facility is
located in an area where the potential of being acquired as part
of a revitalization development project has increased. At the
time of this filing, the Registrant is unable to determine the
ultimate impact, if any, of this situation on the Company's
operations.
The Company's manufacturing and converting facility in Buena
Vista, Virginia continues to be modernized, upgraded, and
expanded. In Stembert, Belgium, the subsidiary's plant is one of
the most modern in the world for producing BONTEX type products,
and the Company continues to invest in new equipment to maintain
its level of efficiency. Bontex Italia s.r.l. operates from a
modern distribution facility with new converting equipment. In
fiscal 1995, the Company spent approximately $1,407,000, $246,000
and $51,000 to refurbish, upgrade and install equipment at Bontex
USA, Bontex S.A., and Bontex Italia s.r.l., respectively.
The total cost of these capital expenditures, including the
capital expenditures planned for environmental regulations at
both Bontex USA and Bontex S.A. as discussed in the previous
section regarding regulations, is estimated not to exceed
$2,600,000 for fiscal year 1996. The Company believes that cash
generated from operations and current credit facilities will be
sufficient to meet these capital requirements. In conjunction
with credit facilities, the Company is required to maintain
certain minimum financial ratios on a quarterly basis under the
covenants of a secured line of credit. As a result of the
decrease in various financial ratios, the Company obtained a
waiver from such requirements at June 30, 1995. There is no
assurance the Company will obtain future waivers from such
requirements, and accordingly, $1,846,000 of long-term debt has
been classified as current.
The Company continues to manage the utilization of its
assets in order to meet global growth objectives, marketplace
forces, productivity and technology changes, while at the same
time, attempting to ensure that these assets are generating
economic value for the shareholder.
RECENT PRONOUNCEMENT
--------------------
In March 1995, the Financial Accounting Standards Board
issued SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets to be Disposed of." This statement establishes the
accounting standards for the impairment of long-lived assets and
certain identifiable intangibles to be disposed of. This
standard is effective for financial statements for fiscal years
beginning after December 15, 1995, which the Company would be in
fiscal 1997. Based on management's review of the adoption of
SFAS No. 121 is not expected to have a material impact, if any,
on the Company's financial position and results of operations.
ITEM 3. LEGAL PROCEEDINGS
On July 22, 1994, the Director of the Virginia Department of
Environmental Quality signed a Special Consent Order with the
Company. As part of the Order, the Company has paid a $5,000
<PAGE>
civil penalty. The Company, by agreeing to the order, has
committed to construction of a waste water treatment facility at
its US plant to address certain effluent limitations in its
Virginia Pollution Discharge Elimination Permit. The Company
intends to complete construction of the treatment facility by
January 1, 1996, in accordance with the construction schedule
included in the Order.
To the Company's knowledge, there are no legal proceedings,
lawsuits, and other claims pending against or involving the
Company which, in the opinion of management, will have a material
adverse impact upon the results of operations or financial
condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the fourth quarter of the fiscal year covered by this
report.
Executives of the Registrant
Pursuant to General Instruction G(3) of Form 10-K, the
following list is included as an unnumbered Item in Part I of
this report in lieu of being included in the Proxy Statement for
the Annual Meeting of Stockholders to be held on October 19,
1995.
The names, ages and positions of the executives of the
Company as of September 19, 1995 are listed below with their
business experience with the Company for the past five years.
Executive officers are appointed annually by the Board of
Directors at the annual meeting of stockholders. There is no
agreement or understanding between any executive and any other
pursuant to which the executive was selected. Mr. Jeffrey C.
Kostelni and Mr. Charles W. J. Kostelni are the sons of Mr. James
C. Kostelni.
Previous and present duties and responsibilities:
Position and Business
Name and Age Experience for Past Five Years
James C. Kostelni, 60 Chairman of the Board, Chief
Executive Officer(since 1994),
President and Chief Operating
Officer (since 1971). Mr. Kostelni
has a Bachelor of Science Degree in
Business Administration.
<PAGE>
Jeffrey C. Kostelni, 29 Chief Financial Officer and
Treasurer (since 1994)and Assistant
Controller (1993-1994); prior
thereto, Senior Auditor, Deloitte &
Touche, Washington, D.C. Mr.
Kostelni has a Bachelor of Science
Degree in Accountancy, Cum Laude
and is a Certified Public
Accountant.
David A. Dugan, 48 Controller (since 1988) and
Secretary (since 1993) of the
Company; prior thereto, Assistant
Secretary of the Company (1991-93).
Mr. Dugan has a Masters in Business
Administration and is a Certified
Public Accountant.
Charles W. J. Kostelni, 31 Assistant Controller (since 1994);
prior thereto, Assistant Vice
President, Union Bank of
Switzerland, New York and Associate
Investment Banker, Chase Manhattan
Bank, New York. Mr. Kostelni has a
Bachelor of Science Degree in
Accountancy and is a Certified
Public Accountant.
Larry E. Morris, 49 Technical Director (since 1983) and
Sales Director (since 1993); prior
thereto, Manufacturing Director of
the Company (1983-93). Mr. Morris
has a Bachelor of Science Degree in
Chemical Engineering.
Michael J. Breton, 55 Director of International
Operations of the Company (since
1993); prior thereto, Director of
European Operations (1987-93). Mr.
Breton has a Bachelor of Science
Degree in Paper Technology.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information set forth under the caption "Common Stock
and Dividend Data" on page 7 of the Company's 1995 Annual Report
to Stockholders is incorporated herein by reference, pursuant to
General Instruction G(2).
ITEM 6. SELECTED FINANCIAL DATA
"Summary of Selected Five Year Data" on page 7 of the
Company's 1995 Annual Report to Stockholders is incorporated
herein by reference, pursuant to General Instruction G(2).
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Results of
Operations and Financial Condition" on pages 8 through 10 of the
Company's 1995 Annual Report to Stockholders are incorporated
herein by reference, pursuant to General Instruction G(2).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the
Registrant and the independent auditors' report included on pages
10 through 24 of the 1995 Annual Report to Stockholders, are
herein incorporated by reference, pursuant to General Instruction
G(2):
1. Consolidated Statements of Income (Loss) for the Years
Ended June 30, 1995, 1994 and 1993
2. Consolidated Balance Sheets as of June 30, 1995 and
1994
3. Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended June 30, 1995, 1994, and
1993
4. Consolidated Statements of Cash Flows for the Years
Ended June 30, 1995, 1994, and 1993
5. Notes to Consolidated Financial Statements
6. Independent Auditors' Report
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in independent auditors and no
disagreements with independent auditors on any matter of
accounting principles or practices, financial statement
disclosure, or auditor's scope or procedure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVES OF THE REGISTRANT
For information with respect to the executives of the
Registrant, see "Executives of the Registrant" at the end of Part
I of this Report. For information with respect to the Directors
of the Registrant, see "Election of Directors" at pages 4 through
6 of the Proxy Statement for the Annual Meeting of Stockholders
to be held October 19, 1995, which information is incorporated
herein by reference. The information with respect to compliance
with Section 16(a) of the Exchange Act, which is set forth under
the caption "Compliance with Section 16(a) of the Securities Act"
at page 14 of the Proxy Statement for the Annual Meeting of
Stockholders to be held October 19, 1995, is incorporated herein
by reference pursuant to General Instruction G(3).
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the captions "Executive
Compensation," "Compensation Committee Report on Executive
Compensation," "Compensation Committee Interlocks and Insider
Participation," and "Stock Performance" at pages 7 through 13 of
the Proxy Statement for the Annual Meeting of Stockholders to be
held October 19, 1995, is incorporated herein by reference
pursuant to General Instruction G(3).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information pertaining to stockholders beneficially
owning more than five percent of the Registrant's common stock
and the security ownership of management, which is set forth
under the captions "Stock Ownership of Certain Beneficial Owners"
and "Stock Ownership of Management" on pages 3 and 4 of the Proxy
Statement for the Annual Meeting of Stockholders to be held on
October 19, 1995, is incorporated herein by reference pursuant to
General Instruction G(3).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Related
Transactions" on page 13 of the Proxy Statement for the Annual
Meeting of Stockholders to be held on October 19, 1995 is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT, SCHEDULES AND REPORTS ON
FORM 8-K
(a) List of documents filed as part of this report:
1. Financial Statements: All financial statements of
the Registrant as set forth under Item 8 of this
Report on Form 10-K.
2. Financial statement schedules and the location in
this Form 10-K are as follows:
SCHEDULE
NUMBER DESCRIPTION PAGE
(a) Independent Auditors' Report on
Financial Statement Schedule as of June
30, 1995, 1994 and 1993 and for the
years then ended 20
(d) II Valuation and Qualifying Accounts 21
All other schedules are omitted, as the required
information is inapplicable, or the information is
presented in the consolidated financial statements or
related notes.
<PAGE>
3. Exhibits to this Form 10-K are as follows:
EXHIBIT NO. DESCRIPTION
3 (i) Certificate of Incorporation of the
Company, as amended (incorporated herein
by reference to Exhibit No. 3(i) of Form
10-K for the fiscal year ended June 30,
1994)
3 (ii) Bylaws of the Company, as
amended(incorporated herein by reference
to Exhibit No. 3(ii) of Form 10-K for
the fiscal year ended June 30, 1994)
10 (i) *Executive Compensation Agreement dated
June 29, 1989, between Georgia Bonded
Fibers, Inc. and James C. Kostelni
(incorporated herein by reference to
Exhibit 10.1 of Form 10-Q for quarter
ended September 30, 1993)
10 (ii) *Deferred Compensation Agreement for
Hugo N. Surmonte dated October 4, 1994,
between Georgia Bonded Fibers, Inc. and
Hugo N. Surmonte (incorporated herein by
reference to Exhibit 10.7 of Form 10-Q
for quarter ended September 30, 1994)
10 (iii) *Life Insurance Agreement between
Georgia Bonded Fibers, Inc. and James C.
Kostelni (incorporated herein by
reference to Exhibit 10.4 of Form 10-Q
for quarter ended December 31, 1993)
10 (iv) *Bontex S.A. Pension Plan (incorporated
herein by reference to Exhibit No.
10(iv) of Form 10-K for the fiscal year
ended June 30, 1994)
10 (v) *Georgia Bonded Fibers, Inc. Annual
Incentive Plan (incorporated herein by
reference to Exhibit No. 10(v) of Form
10-K for the fiscal year ended June 30,
1994)
10 (vi) *Supplemental Executive Compensation
Agreement dated May 26, 1994, between
Georgia Bonded Fibers, Inc. and James C.
Kostelni (incorporated herein by
reference to Exhibit No. 10(vi) of Form
10-K for the fiscal year ended June 30,
1994)
<PAGE>
10 (vii) Special Consent Order between the
Company and the State Water Control
Board dated July 22, 1994 (incorporated
herein by reference to Exhibit No.
10(vii) of Form 10-K for the fiscal year
ended June 30, 1994)
13 1995 Annual Report to Stockholders (such
report, except to the extent
incorporated herein by reference, is
being furnished for the information of
the Commission only and is not to be
deemed filed as part of this Report on
Form 10-K)
21 Subsidiaries of the Company
27 Financial Data Schedule
____________
* Management contract or compensatory plan or agreement
required to be filed as an Exhibit to this Form 10-K pursuant to
Item 14 (c).
(b) Reports on Form 8-K:
None
(c) Exhibits - The response to this section of Item 14 is
submitted as a separate section of this report.
(d) Financial statement schedules required by Regulation
S-X are submitted as separate section of this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by undersigned, hereunto duly
authorized on this 18th day of September, 1995.
GEORGIA BONDED FIBERS, INC.
by /s/ James C. Kostelni
---------------------------
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Company and in the capacities and on the
dates indicated.
Date
/s/James C. Kostelni September 18, 1995
-------------------------------- ------------------
James C. Kostelni
Chairman of the Board, President
Chief Executive Officer
Director
/s/Jeffrey C. Kostelni September 18, 1995
-------------------------------- ------------------
Jeffrey C. Kostelni
Treasurer
Chief Financial Officer
/s/David A. Dugan September 18, 1995
-------------------------------- ------------------
David A. Dugan
Controller and Corporate Secretary
Director
/s/Michael J. Breton September 18, 1995
-------------------------------- ------------------
Michael J. Breton
Corporate Director of International
Operations and General Manager, Bontex
S.A.
Director
/s/Larry E. Morris September 18, 1995
-------------------------------- ------------------
Larry E. Morris
Technical Director and Director of
Marketing/Sales
Director
<PAGE>
/s/Patricia S. Tischio September 18, 1995
-------------------------------- ------------------
Patricia S. Tischio
Assistant Corporate Secretary
Director
/s/William J. Binnie September 18, 1995
-------------------------------- ------------------
William J. Binnie
Director
/s/William B. D Surney September 18, 1995
-------------------------------- ------------------
William B. D Surney
Director
/s/Frank B. Mayorshi September 18, 1995
-------------------------------- ------------------
Frank B. Mayorshi
Director
/s/Joseph F.Raffetto September 18, 1995
-------------------------------- ------------------
Joseph F. Raffetto
Director
/s/Robert J. Weeks September 18, 1995
-------------------------------- ------------------
Robert J. Weeks
Director
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
and Stockholders
Georgia Bonded Fibers, Inc.:
Under date of August 11, 1995, except for note 4, as to which the
date is August 25, 1995, we reported on the consolidated balance
sheets of Georgia Bonded Fibers, Inc. and subsidiaries as of June
30, 1995 and 1994, and the related consolidated statements of
income (loss), changes in stockholders equity, and cash flows
for each of the years in the three-year period ended June 30,
1995, as contained in the 1995 annual report to stockholders.
These consolidated financial statements and our report thereon
are incorporated by reference in the annual report on Form 10-K
for the year 1995. In connection with our audits of the
aforementioned consolidated financial statements, we also audited
the related consolidated financial statement schedule as set
fourth under Item 14(a)2 on pages 11 and 12 of the accompanying
annual report on Form 10-K for the year 1995. This financial
statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on the
financial statement based on our audits.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Roanoke, Virginia
August 11, 1995, except for note 4,
as to which the date
is August 25, 1995.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
GEORGIA BONDED FIBERS, INC., AND SUBSIDIARIES
Balance at Charges to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts* Deductions** Period
----------- --------- -------- --------- ------------ ------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1995
Reserves and allowances
deducted from asset accounts:
Allowances for doubtful accounts $183,000 $42,000 $12,000 $81,000 $156,000
YEAR ENDED JUNE 30, 1994
Reserves and allowances
deducted from asset accounts:
Allowance for doubtful accounts $175,000 $34,000 $4,000 $30,000 $183,000
YEAR ENDED JUNE 30, 1993
Reserves and allowances
deducted from asset accounts:
Allowances for doubtful accounts $213,000 $25,000 ($7,000) $56,000 $175,000
*Foreign currency translation gain(loss)
**Uncollectable accounts written off, net of recoveries
</TABLE>
<PAGE>
Exhibit Index
-------------
Page
----
3 (i) Certificate of Incorporation of the Company,
as amended (incorporated herein by reference
to Exhibit No. 3(i) of Form 10-K for the
fiscal year ended June 30, 1994)
3 (ii) Bylaws of the Company, as amended
(incorporated herein by reference to Exhibit
No. 3(ii) of Form 10-K for the fiscal year
ended June 30, 1994)
10 (i) *Executive Compensation Agreement dated June
29, 1989, between Georgia Bonded Fibers, Inc.
and James C. Kostelni(incorporated herein by
reference to Exhibit 10.1 of Form 10-Q for
quarter ended September 30, 1993)
10 (ii) *Deferred Compensation Agreement for Hugo N.
Surmonte dated October 4, 1994, between
Georgia Bonded Fibers, Inc. and Hugo N.
Surmonte (incorporated herein by reference to
Exhibit 10.7 of Form 10-Q for quarter ended
September 30, 1994)
10 (iii) *Life Insurance Agreement between Georgia
Bonded Fibers, Inc.and James C. Kostelni
(incorporated herein by reference to Exhibit
10.4 of Form 10-Q for quarter ended December
31, 1993)
10 (iv) *Bontex S.A. Pension Plan (incorporated herein
by reference to Exhibit No. 10(iv) of Form 10-
K for the fiscal year ended June 30, 1994)
10 (v) *Georgia Bonded Fibers, Inc. Annual Incentive
Plan (incorporated herein by reference to
Exhibit No. 10(v) for Form 10-K for the fiscal
year ended June 30, 1994)
10 (vi) *Supplemental Executive Compensation Agreement
dated May 26, 1994, between Georgia Bonded
Fibers, Inc. and James C. Kostelni
(incorporated herein by reference to Exhibit
No. 10(vi) of form 10-K for the fiscal year
ended June 30, 1994)
10 (vii) Special Consent Order between the Company and
the State Water Control Board dated July 22,
1994 (incorporated herein by reference to
Exhibit No. 10(vii) of Form 10-K for the
fiscal year ended June 30, 1994)
<PAGE>
13 1995 Annual Report to Stockholders (such
report, except to the extent incorporated
herein by reference, is being furnished for
the information of the Commission only and is
not to be deemed filed as part of this Report
on Form 10-K)
21 Subsidiaries of the Company
27 Financial Data Schedule
________________
*Management contract or compensatory plan or agreement
required to be filed as an Exhibit to this Form 10-K pursuant to
Item 14(c).
<PAGE>
<SEGEMENTS> annual_report
</SEGEMENTS>
<TABLE>
<CAPTION>
Exhibit 21
----------
LISTING OF SUBSIDIARIES
There are five active subsidiaries of the Company:
Name Under which
Name of Subsidiary Jurisdiction of Incorporation Subsidiary Does Business
------------------ ----------------------------- ------------------------
<S> <C> <C>
Bontex S.A. Belgium Same
Bontex Italia s.r.l. Italy Same
Bontex, Inc. Virgin Islands Same
Bontex de Mexico Mexico Same
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GEORGIA
BONDED FIBERS, INC.'S AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED JUNE 30, 1995, AS SET FORTH IN THE COMPANY'S ANNUAL REPORT TO
SHAREHOLDERS AND ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 4,379
<SECURITIES> 0
<RECEIVABLES> 15,300
<ALLOWANCES> 156
<INVENTORY> 7,650
<CURRENT-ASSETS> 28,640
<PP&E> 20,488
<DEPRECIATION> 10,621
<TOTAL-ASSETS> 39,527
<CURRENT-LIABILITIES> 26,824
<BONDS> 1,364
<COMMON> 157
0
0
<OTHER-SE> 1,551
<TOTAL-LIABILITY-AND-EQUITY> 39,527
<SALES> 50,998
<TOTAL-REVENUES> 50,998
<CGS> 39,398
<TOTAL-COSTS> 51,311
<OTHER-EXPENSES> 2,033
<LOSS-PROVISION> 42
<INTEREST-EXPENSE> 984
<INCOME-PRETAX> (2,346)
<INCOME-TAX> (888)
<INCOME-CONTINUING> (1,458)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,458)
<EPS-PRIMARY> (.93)
<EPS-DILUTED> (.93)
</TABLE>
