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, 1996
Commission File No. 0-5200
BONTEX, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0571303
(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
Georgia Bonded Fibers, Inc., 15 Nuttman Street, Newark, New Jersey 07013-3508
- -----------------------------------------------------------------------------
(Former name or former address, if changed since last report)
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 12, 1997
Common Stock - $.10 par value 1,572,824
Preferred Stock - no par value None
<PAGE>
BONTEX, INC.
FORM 10-Q
FOR THE SECOND QUARTER ENDED DECEMBER 31, 1996
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995, June 30,1996. . . . . . . . . . . . . . . .3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND RETAINED EARNINGS
Second Quarter Ended December 31, 1996 and 1995 . . . . . . . . . . . .4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Second Quarter Ended December 31, 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 . . . . . . . . . . . . . . . 8-10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders . . . . 11
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 11
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
BONTEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
December 31, June 30,
(unaudited)
ASSETS 1996 1995 1996
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,621 $ 1,678 $ 715
Trade accounts receivable, less allowance
for doubtful accounts of $233 ($147 at
December '95, $134 at June '96) 11,367 11,648 14,078
Other receivables 713 425 527
Inventories 5,760 7,891 5,495
Deferred income taxes 480 450 676
Income taxes refundable 4 413 14
Other current assets 378 407 116
-------- -------- --------
TOTAL CURRENT ASSETS 20,323 22,912 21,621
======== ======== ========
Property, plant and equipment:
Land 297 287 298
Buildings and building improvements 4,761 4,349 4,785
Machinery, furniture and equipment 15,825 14,197 15,755
Construction in progress 1,348 2,391 782
-------- -------- --------
22,231 21,224 21,620
Less accumulated depreciation and amortization 11,622 10,941 11,165
-------- -------- --------
Net property, plant and equipment 10,609 10,283 10,455
-------- -------- --------
Deferred income taxes 442 877 442
Other assets, at cost less applicable
amortization 405 456 663
-------- -------- --------
TOTAL ASSETS $ 31,779 $ 34,528 $ 33,181
======== ======== ========
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 8,736 $ 10,513 $ 9,416
Accounts payable 7,046 8,012 8,047
Accrued expenses 2,048 2,550 2,345
Income taxes payable 174 - 169
Deferred income taxes 170 - -
Long-term debt due currently 517 2,058 566
-------- -------- --------
TOTAL CURRENT LIABILITIES 18,691 23,133 20,543
Long-term debt 2,387 1,196 2,330
Other long-term liabilities - 73 -
-------- -------- --------
TOTAL LIABILITIES 21,078 24,402 22,873
-------- -------- --------
Stockholders' equity:
Common stock of $.10 par value. Authorized
10,000,000 shares; issued 1,572,824 shares 157 157 157
Preferred stock of no par value. Authorized
10,000,000 shares; issued no shares - - -
Additional capital 1,551 1,551 1,551
Retained earnings 8,072 7,270 7,611
Foreign currency translation adjustment 921 1,148 989
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY 10,701 10,126 10,308
-------- -------- --------
TOTAL LIABILITIES & STOCKHOLDER'S EQUITY $ 31,779 $ 34,528 $ 33,181
======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BONTEX, 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,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales $ 22,718 $ 21,272 $ 11,833 $ 11,367
Cost of Sales 15,741 17,630 8,047 9,453
-------- -------- -------- --------
Gross Profit 6,977 3,642 3,786 1,914
Selling, General and Administrative Expenses 5,597 5,196 2,948 2,759
-------- -------- -------- --------
Operating Income (Loss) 1,380 (1,554) 838 (845)
-------- -------- -------- --------
Other (Income) Expense:
Interest expense 641 626 317 331
Interest income (1) (27) 2 (9)
Foreign currency exchange (gain) loss (38) (594) 20 41
Other, net 15 (61) (1) (65)
-------- -------- -------- --------
Total Other 617 (56) 338 298
-------- -------- -------- --------
Income (Loss) Before Income Taxes 763 (1,498) 500 (1,143)
Provision for Income Taxes 302 (555) 198 (391)
-------- -------- -------- --------
Net income (loss) 461 (943) 302 (752)
Retained earnings, beginning of period 7,611 8,213 7,770 8,022
-------- -------- -------- --------
Retained earnings, end of period $ 8,072 $ 7,270 $ 8,072 $ 7,270
======== ======== ======== ========
Income (Loss) per share $ .29 $ (.60) $ .19 $ (.48)
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BONTEX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
(unaudited)
Six Months Ended
September 30,
1996 1995
<S> <C> <C>
Cash Flows from Operating Activities:
Cash received from customers $ 25,215 $ 26,899
Cash paid to suppliers and employees (22,254) (26,483)
Interest received 42 75
Interest paid (721) (676)
Income taxes paid, net of refunds 13 (136)
-------- --------
Net cash provided by (used in) operating activities 2,295 (321)
-------- --------
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment (818) (1,096)
Other assets, net - 107
-------- --------
Net cash used in investing activities (818) (989)
-------- --------
Cash Flows from Financing Activities:
Decrease in short-term borrowings, net (588) (880)
Long-term debt incurred 1,793 -
Principal payments on long-term debt and capital lease obligations (1,761) (302)
-------- --------
Net cash used in financing activities (556) (1,182)
-------- --------
Effect of Exchange Rate Changes on Cash (15) (209)
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents 906 (2,701)
Cash and Cash Equivalents at Beginning of Year 715 4,379
-------- --------
Cash and Cash Equivalents at End of Year $ 1,621 $ 1,678
======== ========
<PAGE>
Reconciliation of Net Income (Loss) to Net Cash Provided by
Operating Activities:
Net income (loss) $ 461 $ (943)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 607 518
Provision for bad debts 84 6
Deferred income taxes 37 (538)
Change in assets and liabilities:
Decrease in trade accounts and other receivables 2,631 3,529
Increase in inventories (232) (218)
Increase in other assets (12) (148)
Decrease in accounts payable and accrued expenses (1,265) (1,937)
Decrease in income taxes (16) (295)
Decrease in other liabilities - (295)
-------- --------
Net cash provided by (used in) operating activities $ 2,295 $ (321)
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BONTEX, INC.
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995 AND JUNE 30, 1996
(Unaudited)
1. The accompanying unaudited condensed consolidated financial statements
have been prepared by Bontex, Inc. and its subsidiaries(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:
<TABLE>
<CAPTION
December 31, June 30,
1996 1995 1996
(Dollars in Thousands)
<S> <C> <C> <C>
Current assets $ 13,999 $ 16,923 $ 14,905
Total assets 19,381 22,027 20,412
Current liabilities 14,742 18,229 15,991
Total liabilities 15,929 19,425 17,090
Stockholders' equity 3,452 3,602 3,249
</TABLE>
The condensed consolidated statements of income include the following
related to European subsidiaries:
<TABLE>
<CAPTION>
Six Months Ended Quarter Ended
December 31, December 31,
1996 1995 1996 1995
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Net Sales $13,441 $13,428 $ 7,089 $ 7,344
Net income (loss) 197 (403) 112 (448)
</TABLE>
<PAGE>
BONTEX, INC.
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 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:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1995 1996
(Dollars in Thousands)
<S> <C> <C> <C>
Finished goods $ 3,662 $ 3,363 $ 3,731
Raw Materials 1,906 4,654 1,791
Supplies 630 623 603
------- ------- -------
Inventories at FIFO 6,198 8,640 6,125
LIFO reserves 438 749 630
------- ------- -------
$ 5,760 $ 7,891 $ 5,495
======= ======= =======
</TABLE>
4. Per share calculations are based on shares outstanding of 1,572,824
common shares for all periods.
<PAGE>
BONTEX, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE SIX MONTHS AND QUARTER ENDED DECEMBER 31, 1996
(Unaudited)
On January 2, 1997, the Company completed a reorganization plan which
changed, among several items, the Company's name to Bontex, Inc.(formerly
Georgia Bonded Fibers, Inc.). For further information see REORGANIZATION
below.
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 second quarter of fiscal 1997 reflect
continued improvement and profitability. During the second quarter, the
Company generated a consolidated operating profit of $838,000, and net income
of $302,000 or $.19 per share, as compared to the operating loss of $845,000
and net loss of $752,000 last year. For the six months ending December 31,
1996, the Company generated an operating profit of $1.38 million and net
income of $461,000 or $.29 per share, an improvement of $2.9 million and $1.4
million, respectively, as compared to the prior year. Consolidated net sales
increased almost $1.5 million or 6.8 percent to $22.7 million for the six
months ended December 31, 1996.
The higher consolidated sales reflect both increased volume and higher
average selling prices. The fluctuation in foreign currency exchange rates
resulted in a $296,000 translation decrease in net sales.
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.
Gross profit as a percentage of net sales (i.e., Gross Margin) for the first
six months of fiscal 1997 improved significantly over the same quarter last
year from 17.1 percent to 30.7 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 moderation of certain raw
material costs, helped restore the Company's operating margins, as noted
during the last six months of fiscal 1996, and the first half of fiscal 1997.
However, the Company's operating margins remain under pressure from continued
increasing environmental control costs and we have noted slight increases at
July 1, and October 1, 1996 in pulp prices.
<PAGE>
Selling General & Administrative (SG&A) expenses as a percent of net sales
increased slightly from 24.4 percent to 24.6 percent, as compared to the
corresponding prior year. The increase in SG&A percentage is mainly due to
management increasing certain marketing expenses.
The prior year first six months 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 currently 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 $10.7 million at
the end of December 1996. Financial ratios at December 31, 1996 generally
improved from June 30, 1996 because of the improved operating results.
Working capital increased to $1.6 million from $1.1 million, because of a
decrease in short-term borrowings, accounts payable, accrued expenses and
improved operating results. The fluctuation in foreign currency exchange
rates resulted in a translation decrease of $1.2 million 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 $2.7 million to $11.4 million, mainly
because of the collection of higher sales from the fourth quarter of fiscal
1996.
Inventories at December 31, 1996 increased $265,000 to $5.8 million, as
compared to June 30, 1996, mainly due to the forward purchasing of certain
raw materials to defer price increases.
The $611,000 increase in property, plant and equipment is largely due to
additions relating to the wastewater treatment project at the Company's
Belgian manufacturing facility and production process improvements at Bontex
USA.
The decrease in deferred income taxes mainly reflects the utilization of net
operating losses to offset taxable income. The decrease in income taxes
refundable is because the Company received the refund for losses carried-back
to offset income taxes previously paid. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income.
Management believes that it is more likely than not that the Company will
realize these deferred tax assets.
Accounts Payable, accrued expenses and short-term borrowings decreased $2.0
million, which primarily corresponds to a reduction in accounts receivable,
and positive operating results. Management believes that existing credit
facilities will be sufficient to meet future operating and capital
requirements.
<PAGE>
REORGANIZATION
On January 2, 1997, the Company received the final State regulatory approvals
of its proposal, which was adopted by the Company's stockholders at the
Annual Meeting of Stockholders held on November 7, 1996, to change the state
of incorporation of the Company to Virginia and effect Amended and Restated
Articles of Incorporation (the "Reorganization").
As a result of the Reorganization, the Company is now a Virginia corporation,
with its principal place of business at One Bontex Drive, Buena Vista,
Virginia 24416-0751, and the name of the Company has been changed to "Bontex,
Inc." The Company's common stock continues to be traded on the Nasdaq-NMS
under the symbol "BOTX." The Reorganization did not result in any change in
the business, management, assets, liabilities, or net worth of the Company.
For further information, refer to Report on Form 8-K, Reorganization of
Georgia Bonded Fibers, Inc., filed January 30, 1997, and Proxy Statement for
meeting of Shareholders held on November 7, 1996.
ENVIRONMENTAL
As with all manufacturers, the Company is subject to regulation by various
regulatory agencies concerning compliance with environmental control
statutes. The facility in USA is impacted by regulations concerning air
emissions and has entered into a consent order with the Virginia Department
of Environmental Quality, pursuant to which the Company has committed to take
appropriate action with respect to air quality emissions. This consent order
has been amended requiring the Company to achieve compliance by December 31,
1997 rather than by September 30, 1997. The cost of air control technologies
based on current information is expected to be approximately $250,000. The
waste water treatment facility in Belgium is under construction and is
anticipated to be completed in 1997 at an estimated cost of $1.5 million.
<PAGE>
PART II. OTHER INFORMATION
BONTEX, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1996
Item 4. Submission of Matters to Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on November 7, 1996.
The matters voted upon at the Meeting were as follows:
(i) The election of William J. Binnie, Michael J. Breton and Frank B.
Mayorshi as Class C directors, to serve until the 1999 Annual Meeting;
(ii) The appointment of KPMG Peat Marwick LLP as independent auditors of the
Company for fiscal year 1997; and
(iii) Reorganization to change the state of incorporation of Georgia Bonded
Fibers, Inc. to Virginia and to effect amended and restated Articles of
Incorporation of the Company by approving a Plan and Agreement of Merger
dated as of August 19, 1996, and the related Articles of Merger, providing
for the merger of the Company into a Virginia corporation, which is a wholly
owned subsidiary of the Company.
All nominees for director named above were elected, the appointment of KPMG
Peat Marwick and the reorganization were approved.
Election of Officers
<TABLE>
<CAPTION>
AUTHORITY
FOR WITHHELD
--------- --------
<S> <C> <C>
William J. Binnie 1,487,732 8,336
Michael J. Breton 1,487,732 8,336
Frank B. Mayorshi 1,487,732 8,336
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- ------- -------
<S> <C> <C> <C>
Appointment of KPMG Peat Marwick LLP 1,494,746 1,284 38
Reorganization of the Company 1,361,829 129,256 4,983
</TABLE>
Item 5. Other Information
None
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibits:
3(iii) Articles of Incorporation of the Company, as amended,
effective January 2, 1997.
10(iv) Amended Consent Order between the Company and the
Commonwealth of Virginia, Department of Environmental
Quality dated January 10, 1997.
27 - Financial Data Schedule.
(b.) Report on Form 8-K:
None.
<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.
BONTEX, INC.
(Registrant)
2-13-97 /s/James C. Kostelni
----------- --------------------
(Date) James C. Kostelni
Chairman of the Board
and President
2-13-97 /s/David A. Dugan
----------- --------------------
(Date) David A. Dugan
Controller and
Corporate Secretary
<PAGE>
Exhibit Index
3(iii) Articles of Incorporation of the Company, as amended, effective
January 2, 1997.
10(iv) Amended Consent Order between the Company and the Commonwealth of
Virginia, Department of Environmental Quality dated January 10,
1997.
27 Financial Data Schedule.
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
----------------------------------------------
OF
--
BONDED FIBERS CORP. (REDESIGNATED AS BONTEX, INC.)
--------------------------------------------------
Pursuant to Section 13.1-716C(1) of the Code of Virginia, as amended,
the Amended and Restated Articles of Incorporation of Bonded Fibers Corp.
(the "Corporation") are set forth below:
(a) The name of the Corporation is Bonded Fibers Corp.
(b) The text of the amended and restated Articles of Incorporation is
as follows:
1. The name of the Corporation is Bontex, Inc.
2. (a) The aggregate number of shares which the Corporation is
authorized to issue is as follows:
<TABLE>
<CAPTION>
Class Number of Shares Par Value
----- ---------------- ---------
<S> <C> <C>
Common 10,000,000 $.10
Preferred 10,000,000 No par value
</TABLE>
(b) The Board of Directors of the Corporation (the "Board of
Directors") may, by amending these Articles of Incorporation (the "Articles")
by filing Articles of Amendment with the Virginia State Corporation
Commission, fix in whole or in part the preferences, limitations and rights,
within the limits set by law, of (i) any class of shares, before the issuance
of any shares of that class, or (ii) one or more series within a class,
before the issuance of any shares within that series.
(c) The preferred stock (including any shares of preferred
stock restored to the status of authorized but unissued preferred stock
undesignated as to series pursuant to this Article 2(c)) may be divided into
one or more series and issued from time to time with such preferences,
privileges, limitations, and relative rights as shall be fixed and determined
by the Board of Directors. Without limiting the generality of the foregoing,
the Board of Directors is expressly authorized to the fullest extent
permitted from time to time by law to fix:
(i) the distinctive serial designations and the division
of shares of preferred stock into one or more series and the number of shares
of a particular series, which may be increased or decreased (but not below
the number of shares thereof then outstanding);
<PAGE>
(ii) the rate or amount (or the method of determining the
rate or amount) and times at which, the form in which, and the preferences
and conditions under which, dividends shall be payable on shares of a
particular series, the status of such dividends as cumulative, partially
cumulative, or noncumulative, the date or dates from which dividends, if
cumulative, shall accumulate, and the status of such series as participating
or nonparticipating with shares of other classes or series;
(iii) the price or prices at which, the consideration for
which, the period or periods within which and the terms and conditions, if
any, upon which the shares of a particular series may be redeemed, in whole
or in part, at the option of the Corporation or otherwise;
(iv) the amount or amounts and rights and preferences, if
any, to which the Holders (as defined in Article 3 below) of shares of a
particular series are entitled or shall have upon any involuntary or
voluntary liquidation, dissolution or winding up of the Corporation;
(v) the rights and preferences over or otherwise in
relation to any other class or series (including other series of preferred
stock), as to the right to receive dividends and/or the right to receive
payments out of the net assets of the Corporation upon any involuntary or
voluntary liquidation, dissolution or winding up of the Corporation;
(vi) the right, if any, of the Holders of a particular
series, the Corporation or another person to convert or cause conversion of
shares of such series into shares of other classes or series or into other
securities, cash, indebtedness or other property, or to exchange or cause
exchange of such shares for shares of other classes or series or other
securities, cash, indebtedness or other property, and the terms and
conditions, if any, including the price or prices or the rate or rates of
conversion and exchange, and the terms and conditions or adjustments, if any,
at which such conversion or exchange may be made or caused;
(vii) the obligation, if any, of the Corporation to
redeem, purchase or otherwise acquire, in whole or in part, shares of a
particular series for a sinking fund or otherwise, the terms and conditions
thereof, if any, including the price or prices and the nature of the
consideration payable for such shares so redeemed, purchased or otherwise
acquired;
(viii) the voting rights, if any, including special,
conditional or limited voting rights, of the shares of a particular series in
addition to those required by law, including the number of votes per share
and any requirement for the approval by the Holders of shares of all series
of preferred stock, or of the shares of one or more series thereof, or of
both, in an amount greater than a majority, up to such amount as is in
accordance with applicable law or these Articles, as a condition to specified
corporate action or amendments to the Articles; and
(ix) any other preferences, limitations and relative
rights which may be so determined by resolution or resolutions of the Board
of Directors.
<PAGE>
Shares of preferred stock shall rank prior or superior to the
common stock in respect of the right to receive dividends and/or the right to
receive payments out of the net assets of the Corporation upon any
involuntary or voluntary liquidation, dissolution or winding up of the
Corporation. All shares of preferred stock redeemed, purchased or otherwise
acquired by the Corporation (including shares surrendered for conversion or
exchange) shall be cancelled and thereupon restored to the status of
authorized but unissued shares of preferred stock undesignated as to series.
(d) The Holders of common stock, to the exclusion of any other
class of stock of the Corporation, have sole and full power to vote for the
election of directors and for all other purposes without limitation except
only (i) as otherwise expressly provided in the serial designation of any
series of preferred stock, (ii) as otherwise expressly provided in these
Articles and (iii) as otherwise expressly provided by the then existing laws
of the Commonwealth of Virginia. The Holders of common stock will have one
vote for each share of common stock held by them. The outstanding shares of
common stock, upon dissolution, liquidation or winding up of the Corporation,
entitle their Holders to share, pro rata, based on the number of shares
owned, in the Corporation's assets remaining after payment or provisions for
payment of all debts and liabilities of the Corporation, and after provisions
for the outstanding shares of any class of stock or other security having
senior liquidation rights to the common stock.
(e) No Holder of shares of stock of any class of the
Corporation will have any preemptive or preferential right of subscription to
any shares of any class of stock of the Corporation, whether now or hereafter
authorized, or to any obligations of the Corporation convertible into stock
of the Corporation, issued or sold, nor any right of subscription to any
thereof.
3. (a) Subject to the rights of Holders of any series of preferred
stock to elect directors under specified circumstances:
(i) The number of directors of the Corporation, not less
than ten nor more than fifteen, shall be set by the Bylaws; provided that, in
the absence of a provision in the Bylaws fixing the number of directors, the
number of directors shall be fifteen. The directors shall be divided into
three classes as nearly equal in number as possible, with the term of office
of directors of the first class to expire at the first annual meeting of the
shareholders after their election, that of the second class to expire at the
second annual meeting after their election, and that of the third class to
expire at the third annual meeting after their election. At each annual
meeting after such classification, the number of directors equal to the
number of the class whose term expires at the time of such meeting shall be
elected to hold office until the third succeeding annual meeting of
shareholders and until their respective successors are elected and shall
qualify. In the event of any increase or decrease in the number of directors
fixed by the Bylaws, all classes of directors shall be increased or decreased
as equally as may be possible.
<PAGE>
(ii) Newly-created directorships resulting from an
increase in the authorized number of directors or any vacancies in the Board
of Directors resulting from death, resignation, retirement, disqualification,
removal from office, or other cause shall be filled by the affirmative vote
of a majority of the directors then in office, whether or not a quorum. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director. A director may be removed from
office only for cause and only by the affirmative vote of the Holders of a
majority of each class of the voting stock of the Corporation then
outstanding at a meeting called for that purpose.
(b) The power to adopt, alter, amend or repeal Bylaws is vested
in the Board of Directors, which may take such action by the vote of a
majority of the directors present and voting at a meeting at which a quorum
is present, provided that if, as of the date such action shall occur, there
is an Interested Shareholder (other than an Interested Shareholder qualifying
as such on December 1, 1996), such majority must include a majority of the
Continuing Directors. The Bylaws may contain any provision respecting the
affairs, business, governance or other matters relating to the Corporation
not inconsistent with the express provisions of these Articles.
Shareholders, by the affirmative vote of the Holders of not less than 80
percent of each class of the voting stock of the Corporation then
outstanding, may (i) adopt new Bylaws, or (ii) alter, amend or repeal Bylaws
adopted by either the shareholders or the Board, and (iii) prescribe that any
Bylaw made by them shall not be altered, amended or repealed by the Board
(provided that if the shareholders do not so prescribe, any Bylaw made by
them may be altered, amended or repealed by the Board).
(c) The affirmative vote of the Holders of not less than
80 percent of each class of the voting stock of the Corporation then
outstanding shall be required to amend or repeal this Article 3 or adopt any
provision of the Articles or Bylaws inconsistent with this Article 3.
(d) For purposes of this Article 3:
(i) "Person" means any individual, firm, corporation or
other entity.
(ii) "Interested Shareholder" means (A) any Person (other
than the Corporation, a Subsidiary, or any profit-sharing, employee stock
ownership or employee benefit plan of the Corporation or a Subsidiary, or any
trustee of or fiduciary with respect to any such plan acting in such
capacity) that is the direct or indirect beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934 (the "'34
Act") as in effect on June 30, 1996) of five percent or more of the
outstanding capital stock of the Corporation entitled to vote for the
election of directors, and (B) any Affiliate or Associate of any such Person.
(iii) "Affiliate" and "Associate" shall have the
respective meanings given those terms in Rule 12b-2 of the General Rules and
Regulations under the '34 Act as in effect on June 30, 1996.
(iv) "Subsidiary" means any business entity, fifty
percent or more of which is directly or indirectly owned by the Corporation.
(v) "Continuing Director" means any member of the Board
of Directors who is neither an Interested Shareholder nor affiliated with an
Interested Shareholder and who was a member of the Board of Directors
immediately prior to the time that the Interested Shareholder became an
Interested Shareholder.
<PAGE>
(vi) "Holders" means the holders of all classes and
series of the capital stock of the Corporation, except as otherwise
specifically provided herein.
4. To the full extent that the laws of the Commonwealth of Virginia,
as they now or may hereafter exist, permit the limitation or elimination of
the liability of directors or officers, no director or officer of the
Corporation shall be liable to the Corporation or its shareholders for any
monetary damages.
5. (a) The Corporation shall indemnify a director or officer of
the Corporation who is or was a party to any proceeding, including a
proceeding by or in the right of the Corporation, by reason of the fact that
he is or was such a director or officer or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or
other profit or non-profit enterprise against all liabilities and expenses
incurred in the proceeding, except such liabilities and expenses as are
incurred because of his willful misconduct or knowing violation of the
criminal law. Unless a determination has been made that indemnification is
not permissible, the Corporation shall make advances and reimbursement for
expenses incurred by a director or officer in a proceeding upon receipt of an
undertaking from him to repay the same if it is ultimately determined that he
is not entitled to indemnification. Such undertaking shall be an unlimited
unsecured general obligation of the director or officer and shall be accepted
without reference to his ability to make repayment. The Board of Directors
is hereby empowered to contract in advance to indemnify and advance the
expenses of any director or officer. The termination of any proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or
---- ----------
its equivalent shall not, by itself, create a presumption that the director
or officer did not meet the standard of conduct entitling him to indemnity
hereunder.
(b) The Board of Directors is hereby empowered to cause the
Corporation to indemnify and make advances and reimbursement for expenses (or
contract in advance for the same) incurred by any person not specified in
paragraph (a) of this Article 5 who was or is a party to any proceeding, by
reason of the fact that he is or was an employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other profit or non-profit
enterprise, to the same extent as if such person were specified as one to
whom indemnification is granted in paragraph (a) of this Article.
(c) The Corporation may purchase and maintain insurance to
indemnify it against the whole or any portion of the liability assumed by it
in accordance with this Article and may also procure insurance, in such
amounts as the Board of Directors may determine, on behalf of any person who
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against any liability asserted
against or incurred by such person in any such capacity or arising from his
status as such, whether or not the Corporation would have power to indemnify
him against such liability under the provisions of this Article.
<PAGE>
(d) Except as hereinafter provided, all determinations as to
the permissibility of indemnification and advances and reimbursement for
expenses (including contracts with respect thereto) shall be made by a
majority vote of a quorum consisting of directors not at the time parties to
the proceeding. In the event such a quorum cannot be obtained to make any
determination as to the permissibility of indemnification and advances and
reimbursement for expenses with respect to any claim for indemnification
(including contracts with respect thereto), or in the event there has been a
change in the composition of a majority of the Board of Directors after the
date of the alleged act with respect to which indemnification is claimed,
such determination shall be made by special legal counsel agreed upon by the
Board of Directors and the proposed indemnitee. If the Board of Directors
and the proposed indemnitee are unable to agree upon such special legal
counsel, the Board of Directors and the proposed indemnitee each shall select
a nominee, and the nominees shall select such special legal counsel.
(e) The provisions of this Article shall be applicable to all
actions, claims, suits or proceedings commenced after the adoption hereof,
whether arising from any action taken or failure to act before or after such
adoption. No amendment, modification or repeal of this Article shall
diminish the rights provided hereby or diminish the right to indemnification
with respect to any claim, issue or matter in any then pending or subsequent
proceeding that is based in any material respect on any alleged action or
failure to act prior to such amendment, modification or repeal.
(f) Except to the extent inconsistent with this Article, terms
used herein shall have the same meanings assigned them in the Indemnification
Article of the Virginia Stock Corporation Act, as now in effect or hereafter
amended or replaced. Without limitation, it is expressly understood that
reference herein to directors, officers, employees or agents shall include
former directors, officers, employees and agents and their respective heirs,
executors and administrators.
<PAGE>
(Seal of Commonwealth of Virginia)
COMMONWEALTH of VIRGINIA
DEPARTMENT OF ENVIRONMENTAL QUALITY
AMENDED CONSENT ORDER
---------------------
WITH
----
GEORGIA BONDED FIBERS, INC.,
d/b/a BONTEX
One Bontex Drive
BUENA VISTA, VIRGINIA 24416
Registration No. 20342
This is an amendment to the Consent Order ("the Order") entered into on
May 20, 1996, between the Department of Environmental Quality ("DEQ") and
Georgia Bonded Fibers, Inc., d/b/a Bontex ("Bontex") under the authority of
the State Air Pollution Control Law and Regulations. That Order establishes
a plan of corrective action for Bontex to achieve compliance with the visible
emissions limitation of the Permit.
Bontex has requested additional time to evaluate and implement a
reliable and cost effective technology to resolve opacity problems at its
facility. DEQ is willing to amend the Order to allow such additional time.
Therefore, DEQ and Bontex voluntarily agree to the attached amendment to
Appendix A of the Order. Both DEQ and Bontex understand and agree that this
amendment does not alter, modify, or amend any other terms or conditions of
the Order or the Permit.
The foregoing Amended Consent Order has been executed on behalf of the
Department of Environmental Quality and on behalf of Bontex, each by its duly
authorized representatives, on the dates indicated below.
DEPARTMENT OF ENVIRONMENTAL QUALITY
OF THE COMMONWEALTH OF VIRGINIA
January 10, 1997 BY: s/R. Bradley Chewning
- -------------------- ------------------------------
(date) for Thomas L. Hopkins
Director
<PAGE>
Agreement with Bontex
Registration No. 20342
Page 2
GEORGIA BONDED FIBERS, INC.,
d/b/a BONTEX
12/30/96 BY: s/H. H. Floyd, Jr.
- -------------------- ------------------------------
(date)
TITLE: Director of MFG./Chief Engr.
----------------------------
STATE OF VIRGINIA
COUNTY OF ROCKBRIDGE
----------
The foregoing instrument was acknowledged before me this 30th day of
----
December, 1996, by H. H. Floyd, Jr., who is Director of MFG/Chief Engineer on
- -------- ---------------- ------------------------------
(name) (title)
behalf of Georgia Bonded Fibers, Inc., d/b/a/ Bontex.
s/Charles C. Armstrong
----------------------------------
Notary Public
My commission expires March 31, 1999
----------------------------------
<PAGE>
Agreement with Bontex
Registration No. 20342
Page 3
AMENDED APPENDIX A
In order to comply with the provisions of the State Air Pollution Control
Law, SAPCB regulations, and the Permit, Bontex agrees to the following
schedule of compliance:
1. Verify the PVC Line emission profile by evaluating potential
emissions and by quantifying and speciating VOC and particulate
emissions by June 30, 1996.
2. Evaluate the available technologies to reduce visible emissions
from the boiler stack and select the appropriate control
technology by January 1, 1997.
3. Build and/or have delivered the selected appropriate control
equipment and related materials by July 1, 1997.
4. Install the control equipment by September 1, 1997.
5. Achieve final compliance with the visible emissions limitation of
the Permit by December 31, 1997. A Visible Emission Evaluation
(VEE) shall be conducted prior to this date in accordance with 40
CFR Part 60, Appendix A, Method 9, to demonstrate compliance.
Bontex agrees to notify DEQ's Valley Regional Office, in writing,
at least seven (7) days prior to the VEE to allow DEQ staff to be
present during the test.
6. No later than 14 days following a date identified in the above
schedule of compliance, Bontex shall submit to DEQ's Valley
Regional Office a written notice of compliance or non-compliance
with the scheduled item. In the case of noncompliance, the
notice shall include the cause of noncompliance, any remedial
actions taken, and the probability of meeting the next scheduled
item.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BONTEX,
INC.'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE QUARTER
ENDED DECEMBER 31, 1996, 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 1,621
<SECURITIES> 0
<RECEIVABLES> 11,367
<ALLOWANCES> 214
<INVENTORY> 5,760
<CURRENT-ASSETS> 20,323
<PP&E> 22,231
<DEPRECIATION> 11,622
<TOTAL-ASSETS> 31,779
<CURRENT-LIABILITIES> 18,691
<BONDS> 2,387
157
0
<COMMON> 0
<OTHER-SE> 10,701
<TOTAL-LIABILITY-AND-EQUITY> 31,779
<SALES> 22,718
<TOTAL-REVENUES> 22,718
<CGS> 15,741
<TOTAL-COSTS> 21,338
<OTHER-EXPENSES> 617
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 641
<INCOME-PRETAX> 763
<INCOME-TAX> 302
<INCOME-CONTINUING> 461
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 461
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
