UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
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 24416-1500
(Address of principal executive offices) (Zip Code)
540-261-2181
(Registrant's telephone number, including area code)
Indicate by checkmark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months(or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES ( x ) NO ( )
Indicate the description and number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable date.
Class Outstanding at May 8, 1998
Common Stock - $.10 par value 1,572,824
<PAGE>
BONTEX, INC.
FORM 10-Q
NINE MONTHS ENDED MARCH 31, 1998
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1998 and 1997, June 30, 1997 . . . . . . . . . . . . . .3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND RETAINED
EARNINGS
Three Months and Nine Months Ended March 31, 1998 and 1997 . . . .4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, 1998 and 1997. . . . . . . . . . . . .5
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS .6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . 9-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . 12
Item 4. Submission of Matters to a Vote of Security Holders . 12
Item 5. Other Information . . . . . . . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
<TABLE><CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BONTEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Share and Per Share Data)
March 31, June 30,
(unaudited)
1998 1997 1997
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 807 $ 1,096 $ 1,373
Trade accounts receivable, less allowance
for doubtful accounts of $232 ($207 at
March '97, $119 at June '97) 10,332 11,610 13,622
Other receivables 775 741 551
Inventories 6,886 5,801 5,276
Deferred income taxes 396 320 321
Income taxes refundable 9 5 76
Other current assets 685 419 131
------- ------- -------
TOTAL CURRENT ASSETS 19,890 19,992 21,350
------- ------- -------
Property, plant and equipment:
Land 368 284 347
Buildings and building improvements 5,230 4,571 5,332
Machinery, furniture and equipment 16,468 15,540 16,176
Construction in progress 1,082 1,838 808
------- ------- -------
23,148 22,233 22,663
Less accumulated depreciation and
amortization 11,947 11,506 11,631
------- ------- -------
Net property, plant and equipment 11,201 10,727 11,032
Deferred income taxes - 232 -
Other assets, at cost less applicable
amortization 611 341 524
------- ------- -------
TOTAL ASSETS $ 31,702 $ 31,292 $ 32,906
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 8,851 $ 7,543 $ 8,019
Accounts payable 5,950 6.967 7,521
Accrued expenses 1,970 2,436 2,079
Income taxes payable 340 154 139
Long-term debt due currently 587 588 578
------- ------- -------
TOTAL CURRENT LIABILITIES 17,698 17,688 18,336
Long-term debt 2,466 2,813 2,761
Deferred income taxes 55 - 108
Other long-term liabilities 346 - 186
------- ------- -------
TOTAL LIABILITIES 20,565 20,501 21,391
------- ------- -------
<PAGE>
Stockholders' equity:
Preferred stock of no par value.
Authorized 10,000,000 shares; none issued - - -
Common stock of $.10 par value. Authorized
10,000,000 shares; issued and outstanding
1,572,824 shares 157 157 157
Additional capital 1,551 1,551 1,551
Retained earnings 9,228 8,474 9,344
Foreign currency translation adjustment 201 609 463
------- ------- -------
TOTAL STOCKHOLDERS' EQUITY 11,137 10,791 11,515
------- ------- -------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 31,702 $ 31,292 $ 32,906
======= ======= =======
See accompanying condensed notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BONTEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
AND RETAINED EARNINGS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
Nine Months Ended Three Months Ended
March 31, March 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Sales $ 32,055 $ 35,815 $ 10,434 $ 13,097
Cost of Sales 22,770 24,497 7,598 8,756
------- ------- ------- -------
Gross Profit 9,285 11,318 2,836 4,341
Selling, General and Administrative Expenses 8,606 8,957 2,868 3,360
------- ------- ------- -------
Operating Income (Loss) 679 2,361 (32) 981
------- ------- ------- -------
Other (Income) Expense:
Interest expense 766 922 233 281
Interest income (33) (2) (1) (1)
Foreign currency exchange (gain) loss 131 (5) 25 33
Other, net (33) 7 (4) (8)
------- ------- ------- -------
Total Other Expense, Net 831 922 253 305
------- ------- ------- -------
Income (Loss) Before Income Taxes (152) 1,439 (285) 676
Income Taxes (36) 576 (129) 274
------- ------- ------- -------
Net income (loss) (116) 863 (156) 402
Retained earnings, beginning of period 9,344 7,611 9,384 8,072
------- ------- ------- -------
Retained earnings, end of period $ 9,228 $ 8,474 $ 9,228 $ 8,474
======= ======= ======= =======
Net income (loss) per share $ (.07) $ .55 $ (.10) $ .26
======= ======= ======= =======
See accompanying condensed notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE><CAPTION>
BONTEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
(unaudited)
Nine Months Ended
March 31,
1998 1997
<S> <C> <C>
Cash Flows from Operating Activities:
Cash received from customers $ 35,182 $ 38,081
Cash paid to suppliers and employees (34,712) (34,924)
Interest received 68 62
Interest paid (846) (1,026)
Income taxes paid, net of refunds 190 (106)
------- -------
Net cash provided by operating activities (118) 2,087
------- -------
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment (1,382) (1,651)
------- -------
Net cash used in investing activities (1,382) (1,651)
------- -------
Cash Flows from Financing Activities:
Increase (decrease) in short-term borrowings, net 1,229 (594)
Long-term debt incurred 330 2,551
Principal payments on long-term debt and
capital lease obligations (446) (1,867)
------- -------
Net cash provided by financing activities 1,113 90
------- -------
Effect of Exchange Rate Changes on Cash (179) (145)
------- -------
Net Increase (Decrease) in Cash and Cash Equivalents (566) 381
Cash and Cash Equivalents at Beginning of Year 1,373 715
------- -------
Cash and Cash Equivalents at End of Year $ 807 $ 1,096
======= =======
Reconciliation of Net Income to Net Cash
Provided by
Operating Activities:
Net income (loss) $ (116) $ 863
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 974 911
Provision for bad debts 170 177
Deferred income taxes (184) 529
Change in assets and liabilities:
Decrease in trade accounts and other receivables 2,440 1,258
Increase in inventories (1,722) (908)
Increase in other assets (727) (310)
Decrease in accounts payable and
accrued expenses (1,385) (451)
Increase in income taxes 334 10
Increase in other liabilities 98 8
------- -------
Net cash provided by operating activities $ (118) $ 2,087
======= =======
See accompanying condensed notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
BONTEX, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997 AND JUNE 30, 1997
(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, 1997.
2. The condensed consolidated balance sheets include the following related
to European subsidiaries:
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997 1997
(Dollars in Thousands)
<S> <C> <C> <C>
Current assets $ 12,954 $ 13,311 $ 14,284
Total assets 18,230 18,755 19,801
Current liabilities 12,267 13,157 13,882
Total liabilities 13,991 14,850 15,656
Stockholders' equity 4,239 3,905 4,145
</TABLE>
The condensed consolidated statements of income include the following
related to European subsidiaries:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March 31, March 31,
1998 1997 1998 1997
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Net Sales $ 19,147 $ 21,026 $ 6,275 $ 7,585
Net income 357 565 3 368
</TABLE>
<PAGE>
BONTEX, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997 AND JUNE 30, 1997 (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>
March 31, June 30,
1998 1997 1997
(Dollars in Thousands)
<S> <C> <C> <C>
Finished goods $ 3,797 $ 3,341 $ 2,908
Raw Materials 2,650 2,204 2,067
Supplies 734 635 646
------ ------ ------
Inventories at FIFO and
weighted average cost 7,181 6,180 5,621
------ ------ ------
LIFO reserves (295) (379) (345)
------ ------ ------
$ 6,886 $ 5,801 $ 5,276
====== ====== ======
</TABLE>
4. Material changes in reported financial instruments and market risks
since the most recent fiscal year end report of June 30, 1997 are presented
as follows:
During the first quarter of fiscal year 1998, the Company began on a limited
basis to manage its exposure to pulp price changes with pulp futures. In
accordance with hedge accounting, gains or losses will be recorded as a
component of the underlying inventory purchase, since these contracts
effectively meet the risk reduction and correlation criteria. Gains or
losses on hedges that are terminated prior to the execution of the inventory
purchase are recorded in inventory until the inventory is sold. The
following table provides certain information regarding the Company's pulp
inventory and futures contracts that are sensitive to changes in pulp prices.
For inventory, the table presents the carrying amount and fair value at March
31, 1998. For futures contracts, all of which mature within the next year,
the table presents the notional amounts and fair value at March 31, 1998.
Balance Sheet Commodity Pulp Position and Related Derivatives Held for Other
Than Trading (dollars in thousands) at March 31, 1998:
<TABLE>
<CAPTION>
Carrying Amount Fair Value
<S> <C> <C>
Pulp Inventory $ 1,835 $ 1,835
Futures Contacts (Long) $ 1,403 $ 1,207
</TABLE>
Market risk is defined as the risk of loss arising from adverse changes in
market rates and prices. The disclosures provide certain forward looking
information concerning potential exposures to market risk. By its nature,
<PAGE>
such forward looking information is an estimate of what could occur in the
future and is dependent on model characteristics and assumptions. As a
result, actual gains or losses will differ from those reported. The above
value at risk (VAR) disclosure does not fully reflect the potential net
market risk exposure because other market risk exposures may exist in other
transactions and other financial instruments.
5. In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
SFAS No. 128 establishes new standards for computing and presenting earnings
per share ("EPS") and requires restatement of prior years' EPS data
previously presented. Adoption of SFAS No. 128 by the Company at December
31, 1997 did not have any effect on current or prior years' EPS data
presented due to
<PAGE>
BONTEX, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997 AND JUNE 30, 1997 (Unaudited)
the minimal impact of the potential dilution that could occur if outstanding
stock options were exercised. Basic net income per share calculations are
based on common shares outstanding of 1,572,824 shares for all periods.
Diluted net income per share calculations are based on weighted-average
common shares outstanding of 1,588,784 shares for all periods in fiscal year
1998. For purposes of diluted net income per share in fiscal year 1997,
there were no common stock options outstanding in the periods presented.
Stock options that could potentially dilute basic EPS in the future that were
not included in the computations of diluted EPS because to do so would have
been antidilutive for the periods presented totaled 40,000.
6. Stock option activity during the nine months ended March 31, 1998 is as
follows:
<TABLE>
<CAPTION>
Number of Weighted-Average
Shares Exercise Price
<S> <C> <C>
Balance at June 30, 1997 80,000 $ 4.50
Granted 40,000 5.63
------- ------
Balance at March 31, 1998 120,000 $ 4.88
======= ======
</TABLE>
At March 31, 1998, there were no additional shares available for grant under
the Company's Stock Option Plan.
<PAGE>
BONTEX, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS AND THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
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, fluctuations in the
price of primary raw materials and foreign currency exchange rates and
political and economic instability in the Company's markets.
RESULTS OF OPERATIONS
The results of operations for the first nine months of fiscal 1998 are
significantly lower than last year. During the first nine months of fiscal
1998, the Company generated a consolidated operating income of $679,000 and a
net loss of $(116,000) or $(.07) per share, as compared to the prior year first
nine months operating income of $2.4 million, and net income of $863,000 or
$.55 per share.
Consolidated net sales for the first nine months decreased $3.8 million or
10.5 percent to $32.1 million, as compared to the corresponding period last
year. If exchange rates had not changed, net sales would have decreased by
$480,000 or 1.3 percent. The overall decrease in net sales, excluding the
effects of translation adjustments, was mainly due to the decline in sales to
Asian and North and South American markets. There are several factors
adversely impacting the Company's sales. First, the financial situation in
Asia has resulted in a decline in demand for footwear products in that region
of the world, as described in further detail in the Financial Situation in
Asia section. Furthermore, it has been well publicized that the world's
largest athletic footwear company has excessive inventory levels globally,
which has had a significant negative impact on the overall market. The
athletic footwear category represents one of the largest footwear segments
globally. Additionally the year's winter was somewhat more mild than usual
in North America and Europe, which has had a negative impact on sales of
footwear at the retail level.
The third quarter of fiscal 1998 was not a positive quarter as compared to
the prior year. During the third quarter, consolidated net sales decreased
$2.7 million or 20.3 percent to $10.4 million; operating income decreased $1
million to a loss of $32,000; and net income declined to a loss of $(156,000)
or $(.10) per share from net income of $402,000 or $.26 per share last year.
Gross profit as a percentage of net sales (i.e., Gross Margin) for the first
nine months of fiscal 1998 decreased compared to the same period last year
from 31.6 to 29.0 percent. This drop in gross margin is mainly due to higher
pulp costs and lower sales. The company's profitability is volume sensitive.
Selling General & Administrative (SG&A) expenses as a percent of net sales
increased from 25.0 percent to 26.9 percent, as compared to the corresponding
prior year. The increase in SG&A percentage is mainly due to sales declining
at a higher rate than related expenses.
<PAGE>
FINANCIAL CONDITION
Management believes that the consolidated financial condition of the Company
remains positive. Due to the operating loss and currency translation
adjustments, consolidated equity decreased $378,000 from June 30, 1997 and
totaled $11.1 million at the end of March, 1998. From June 30, 1997 to March
31, 1998, working capital decreased to $2.2 million from $3.0 million,
because of a decrease in trade account receivables, negative operating
results, capital additions and foreign currency exchange fluctuations. The
fluctuations in foreign currency exchange rates resulted in a translation
decrease of $2.0 million in total assets as compared to June 30, 1997.
The cash balance mainly reflects the Company's financing and hedging position
at European Operations.
Trade accounts receivables decreased from June 30, 1997 to March 31, 1998 by
$3.3 million to $10.3 million, mainly because of the collection of higher
sales from the fourth quarter of fiscal 1997, lower sales in fiscal 1998 and
foreign currency translation adjustments.
Inventories at March 31, 1998 increased $1.6 million to $6.9 million, as
compared to June 30, 1997, mainly due to the forward purchasing of certain
raw materials to defer anticipated price increases.
The $485,000 increase in total property, plant and equipment from June 30,
1997 to March 31, 1998 is largely due to additions relating to an
environmentally mandated project for air treatment, flood control and other
process equipment projects at the Company's manufacturing facilities.
The increase in other current assets relates to the deposits held by brokers
for pulp futures. These deposits did not exist last year because the Company
did not utilize pulp futures for hedging purposes.
As a result of the decrease in various financial ratios, the Company is not
in compliance with certain debt covenants relating to a credit facility.
Management is currently working with the lender to revise the ratios to
levels that will result in compliance at June 30, 1998, when the lender
verifies ratios per the loan agreement.
FINANCIAL INSTRUMENTS
The Company utilizes derivatives and other financial instruments in the
normal course of business. By their nature, all such instruments involve
risk, and the Company's maximum potential loss may exceed amounts recorded in
the balance sheet.
The Company is exposed to a variety of market risks, including the effects of
changes in foreign currency exchange rates, interest rates and commodity
prices. In the past, the Company has primarily used such derivative
financial instruments for the purpose of hedging only currency and interest
rates exposures. For further information concerning the aforementioned
financial instruments, 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, 1997.
<PAGE>
As part of the Company's Risk Management Program, the Company has explored
various alternatives to manage its exposure to highly volatile pulp prices,
the primary raw material for the Company's cellulose products. Historically,
the Company's primary method of hedging its exposure to pulp price changes
was through forward purchasing. During the previous several months, the
Company has investigated the new futures market for pulp. In connection with
purchasing pulp for future manufacturing requirements, the Company has
entered into a number of pulp futures contracts, as management deemed
appropriate, to reduce the effects of price fluctuations.
Additionally, the Company has used certain contracts to fix latex cost.
Bontex is in the process of closing out a number of these contracts without
physical delivery. There is a possibility that there could be some financial
considerations due to this situation, however, it is too early to quantify an
amount. Management expects to resolve this situation in the near future.
These financial exposures are monitored and managed by the Company as an
integral part of its overall risk management program, which recognizes the
unpredictability of financial markets and seeks to reduce the potentially
adverse effect on the Company's results.
FINANCIAL SITUATION IN ASIA
The financial situation in Asia relates to the recent Asian currency and
economic crisis. During the previous several months, the currencies of a
number of key Asian countries, including Korea, Indonesia and Thailand, have
devalued, resulting in an economic slowdown. Asia is the largest market for
Bontex type products, as over 68 percent of the world's footwear is
manufactured in Asia. Over the previous three years, approximately a third
of the Company's consolidated sales have been derived from customers in Asia.
Accordingly, the deteriorating situation in Asia will continue to negatively
impact the Company's operations.
In assessing the overall impact of the situation in Asia, management believes
sales and profits will decrease in the near term, because of, among other
things, falling demand for footwear products sold in Asia. Management cannot
at this time accurately quantify the adverse impact of the situation in Asia
on the Company's sales and profitability. Management's assessment is based
on a number of relevant sources, including information from key customers,
current sales trends, and other industry sources.
YEAR 2000 ISSUE
The Year 2000 issue relates to computer programs using two digits rather than
four to define the applicable year. Date-sensitive software using a date
"00" may recognize the year as 1900 rather than the year 2000, which may
result in system failures or miscalculations causing disruptions of
operations, including, among other things, temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
Based on a recent assessment, the Company believes that there are no material
adverse implications to the operations of the Company concerning the Year
2000 Issue. However, as part of the Company's planned capital projects, the
Company is in the process of upgrading its computer system and software. The
total cost of the project, which will be capitalized, is estimated to
approximate $160,000, and the Company plans to have the computer project
completed before December 31, 1999.
<PAGE>
The cost of the project and the date on which the Company plans to complete
the system upgrade is based on management's best estimates. However, there
can be no guarantee that these estimates will be achieved, and actual results
could differ significantly from those plans. Furthermore, the Company may be
vulnerable to third parties' failure to remediate their own Year 2000 Issue.
The Company has initiated communication with significant suppliers and large
customers to assess the Year 2000 Issue. There can be no guarantee that the
systems of other companies on which the Company's systems rely will be timely
converted or that a failure to convert by a supplier, customer or other third
party, or a conversion that is incompatible with the Company's systems, would
not have a material adverse effect on the Company and its operations.
ACCOUNTING PRONOUNCEMENTS
There have been no other accounting pronouncements issued during the period
that would have a material effect on the consolidated financial position,
results of operation or liquidity of the Company.
<PAGE>
PART II. OTHER INFORMATION
BONTEX, INC.
FORM 10-Q
Item 1. Legal Proceedings
On March 17, 1998, a Complaint was filed in the Superior Court of New Jersey,
Law Division, Essex County, by Patricia Surmonte Tischio, a director of
Bontex, Inc. (the "Company"), against the Company, James C. Kostelni, the
President and Chief Executive Officer of the Company, and Mr. Kostelni's
spouse. Both Mrs. Tischio and Mrs. Kostelni are daughters of the Company's
founder and serve as co-executors and co-trustees of, and are designated
beneficiaries under, an estate and certain trusts which, in the aggregate,
beneficially own approximately 43 percent of the Company's outstanding common
stock.
Mrs. Tischio's Complaint sets out various counts relating to the defendants'
alleged breach of and/or interference with an alleged contract relating to
Mr. Tischio's employment with the Company and seeks unspecified damages and
declaratory and other relief. Management believes that Mrs. Tischio's claims
are without merit and intends to vigorously defend the lawsuit.
Mrs. Tischio also has notified the Company's Board of Directors that she
expects to take part in separate litigation in the near future to enforce her
separate rights as a Company shareholder. Mrs. Tischio has complained to the
Board of Directors of mismanagement and misconduct on the part of Mr.
Kostelni and certain other Company officers and directors. In response to
these allegations, the Company has formed a special committee of independent
directors, which engaged independent counsel, to investigate Mrs. Tischio's
allegations. This special committee has not yet issued its written report to
the Board, but is expected to do so before year-end.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3(i) Bylaws of the Company, as amended.
27 Financial Data Schedule.
(b) Report on Form 8-K:
Form 8-K dated March 6, 1998 relating to listing status of
Bontex, Inc's common stock on the Nasdaq National Market.
<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)
5-13-98 s/James C. Kostelni
- -------------- ---------------------------
(Date) James C. Kostelni
Chairman of the Board
and President
5-13-98 s/Charles W.J. Kostelni
- -------------- ---------------------------
(Date) Charles W.J. Kostelni
Corporate Controller and
Corporate Secretary
<PAGE>
EXHIBIT INDEX
3(i) Bylaws of the Company, as amended
27 Financial Data Schedule
<PAGE>
Exhibit 3(i)
Restatement Effective
February 16, 1994
By s/James C. Kostelni
-------------------
James C. Kostelni
President and Vice-
Chairman of the Board
BYLAWS
of
GEORGIA BONDED FIBERS, INC.
(as amended through January 21, 1998)
----------
Article I.
OFFICES
The principal office of the corporation shall be in such
place in the City of Newark, State of New Jersey, as the Board
of Directors may from time to time direct. The corporation may
also establish and have such other offices needed for the
conduct of its business at such other place or places as may
from time to time be designated by the Board of Directors.
Article II.
SEAL
The corporation shall have a seal of duly approved form and
design, an impression of which is affixed hereto.
Article III.
STOCKHOLDERS' MEETINGS
Section A. Annual Meeting. The annual meeting of the
stockholders for the election of directors and for the
transaction of such other business as may properly come before
it shall be at the registered office or at any other place
within or without the State of New Jersey determined by the
Board of Directors on the last Thursday in October in each year,
or such other date as may be determined by the Board of
Directors.
Section B. Quorum. The presence, in person or by proxy,
of holders of a majority of the shares entitled to vote shall
constitute a quorum.
<PAGE>
Section C. Special Meetings. Special meetings of the
stockholders shall be held at the principal office of the
corporation, or at such other place as the Board of Directors
may select. Such meetings, other than those regulated by
statute, may be called at any time by the Board of Directors,or
a majority thereof, or by the Chairman of the Board or by the
President. It shall be the duty of the President or the Board
of Directors to call such meetings whenever so requested in
writing by the stockholders of record who own at least 45% of
the shares of the capital stock of the corporation, entitled to
vote as such meetings. Notice of such meetings shall specify
the object or objects thereof, and no other business than that
specified in such notice shall be considered at any such
meeting, except upon unanimous consent of all stockholders
entitled to notice thereof.
Section D. Notice of Meetings. A written or printed
notice of each annual or special meeting of the stockholders of
the corporation, signed by the Chairman of the Board, the
President or the Vice-President or Secretary, which shall state
the time, place and objects of such meeting, shall be delivered
personally or by mail, not less than ten nor more than sixty
days before a meeting unless otherwise provided by law, to each
stockholder of record entitled to vote at such meeting, and to
each stockholder who, by reason of any action proposed at such
meeting, would be entitled to have his stock appraised, if such
action were taken. If mailed, the notice shall be directed to
the stockholder at his address as it appears on the stock book,
unless he shall have filed with the Secretary of the corporation
a written request that notices intended for him be mailed to
some other address, in which case it shall be mailed to the
address designated in such request. Any stockholder may at any
time by a duly signed statement in writing to that effect waive
any statutory or other notice of any meeting, whether such
statement be signed before or after such meeting.
Section E. Proxies. Any stockholder of record entitled to
vote may be represented at any regular or special meeting of the
stockholders by a duly appointed proxy. All proxies shall be
written and properly signed, but shall require no other
attestation, and shall be filed with the Secretary of the
meeting before being voted.
Section F. Order of Business. The order of business at
all meetings of the stockholders, unless changed by majority
vote, shall be as follows:
1. Roll call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Report of Officers.
5. Reports of Committees. (If any)
6. Election of Inspectors of Election. (If any)
7. Election of Directors.
<PAGE>
8. Unfinished Business.
9. New Business.
Article IV.
DIRECTORS
Section A. Number, Term of Office, etc. The directors of
the corporation shall be ten (10) in number. The directors
shall be elected in the manner provided by these Bylaws, at the
annual meeting of the stockholders of the corporation. Election
to the Board of Directors shall be for staggered terms with
one-third (1/3) the directors elected for a term of one (1)
year, one-third (1/3) the directors elected for a term of two
(2) years,and one-third (1/3) the directors elected for a term
of three (3) years; and thereafter one-third (1/3) of the
membership of the Board shall be elected annually. Each
director shall serve thereafter until his successors shall be
elected and qualified. Any one or more of the directors may be
removed, either with or without cause, at any time by a vote of
a majority of the stockholders at a special meeting called for
this purpose. Any vacancy occurring in the Board of Directors
shall be filled for the unexpired term by a majority vote of the
remaining directors. [As amended by Board of Directors'
resolution of October 24, 1991.]
Section B. Duties and Powers. The Board of Directors
shall have the control and management of the affairs of the
corporation and shall exercise all such powers of the
corporation, and do all such lawful acts and things necessary or
expedient in the control and management thereof, as are not by
statute or by these Bylaws directed or required to be exercised
or done by the stockholders. The directors may adopt such rules
and regulations for the conduct of their meetings and the
management of the corporation as they may deem proper, not
inconsistent with the law.
Section C. Meetings. Meetings of the Board of Directors
shall be held at the office of the corporation, or any other
place which the Chairman or a majority of the Board of Directors
may from time to time designate. There shall be an annual
meeting of the Board of Directors held upon the day of their
election, or as soon thereafter as convenient. Other regular
meetings of the Board shall be held at such time and places as
the Board of Directors shall from time to time by resolutions
prescribe. Special meetings of the Board of Directors shall be
held whenever called by the Chairman and may be held in any
manner provided by law. Notice of each meeting as required by
law shall be given to each director by the Secretary. A
majority of the directors shall constitute a quorum for the
transaction of business, but the director or directors present,
if less than a quorum, may adjourn any meeting from time to time
until such quorum shall be present. All questions coming before
the Board shall be determined and decided by a majority vote of
those present. Each director shall be entitled to one vote at
all meetings of directors.
<PAGE>
Article V.
EXECUTIVE COMMITTEE
Section A. Designation, Number and Powers. The Board of
Directors, by resolution adopted by a majority of the number of
directors fixed by these Bylaws, may designate three or more
Directors, including the Chairman of the Board and the
President, to constitute an Executive Committee, which shall
have and may exercise any of the powers of the Board of
Directors granted by the resolution, and permitted by law. The
Executive Committee shall report its action to the Board of
Directors.
Section B. Meetings and Notice. The Executive Committee
may make rules for the holding and conduct of its meetings and
the keeping of the records thereof. Meetings of the Executive
Committee may be called by any member. Reasonable notice of all
meetings of the Executive Committee shall be given the members
thereof unless such notice shall be waived in writing, either
before or after the meeting. Members of the Executive Committee
shall receive such compensation for attendance at meetings as
may be fixed by the Board of Directors.
Article VI.
OFFICERS
Section A. Election. The Board of Directors may elect
from its own number a Chairman of the Board and a Vice-Chairman
of the Board, and shall elect a President from its own number
and a Secretary and a Treasurer. In addition, it may elect a
Comptroller and such other officers as the Board of Directors
from time to time may see fit. The Chairman of the Board
likewise may appoint any officer not already elected by the
Board of Directors. [As amended by Board of Directors'
resolution of February 16, 1994.]
Section B. Removal. In its discretion the Board of
Directors by a vote of a majority of the Board may leave
unfilled for any such period as it may fix by resolution any
office except those of President, Secretary and Treasurer. Any
officer or agent shall be subject to removal at any time by the
affirmative vote of a majority of the whole Board of Directors.
Any officers, agent or employee, other than officers appointed
by the Board of Directors, shall hold office at the discretion
of the officer appointing them.
Section C. Duties of the Chairman and Vice-Chairman. The
Chairman of the Board of Directors if elected, or failing his
election, the President, shall be the Chief Executive Officer of
the Company, and shall preside at all meetings of the
stockholders and board of directors. He may appoint officers,
agents or employees other than those appointed by the Board of
Directors. He may sign, execute and deliver in the name of the
Company all documents not required by law to be signed by the
President. He shall have such other powers as may be conferred
<PAGE>
upon him by the Board of Directors. The Vice-Chairman, if
elected, may serve as, and perform all duties of, the Chairman
in the Chairman's absence or inability to act. [As amended by
Board of Directors' resolution of February 16, 1994.]
Section D. Duties of the President. The President shall
be the Chief Operating Officer of the Company, and shall, in
general, supervise and control all of the business and affairs
of the Company. In the absence of the Chairman of the Board, he
shall preside at all meetings of the stockholders and of the
Board of Directors. In the absence of the Chairman of the
Board, he shall exercise all of the powers of the Chairman. He
shall see that reports, statements and other documents required
by law are properly filed. He shall, in general, perform all
duties incident to the office of President and shall have all of
the powers and duties granted or imposed by law upon the
President, and shall perform such other duties as shall be
prescribed from time to time by the Board of Directors. [As
amended by Board of Directors' resolution of October 21, 1993.]
Section E. Duties of the Secretary. The Secretary shall:
(a) see that all notices are duly giving in accordance with the
provisions of these Bylaws or as required by law; (b) be
custodian of the corporate records; and (c) in general, perform
all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to the Secretary by
the Board of Directors. In the absence of the Secretary, or in
the event of his death, inability, or refusal to act, an
Assistant Secretary, if any, shall perform the duties of the
Secretary. [As amended by Board of Directors' resolution of
October 21, 1993.]
Section F. Duties of the Treasurer. The Treasurer shall
be the chief financial and accounting officer of the
Corporation. He shall have charge and custody of and be
responsible for all funds and securities of the Corporation and
shall cause all such funds and securities to be deposited in
such banks and depositaries as the Board of Directors from time
to time may direct. He shall maintain adequate records of all
assets, liabilities and transactions of the Corporation in
accordance with generally accepted accounting practices; shall
exhibit his accounts and records to the Board and the Officers
as often and in such manner as they shall require. He shall in
general perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be
assigned to him by the Board of Directors or the President.
Section G. (Reserved) [As amended by Board of Directors'
resolution of October 21, 1993.]
Section H. Duties of Other Officers. All other officers,
including Assistant Secretaries and Assistant Treasurers, as may
be from time to time appointed by the Chairman of the Board of
Directors shall have such duties and shall hold such office for
such terms as may then be designated by the Chairman. [As
amended by Board of Directors' resolution of February 16, 1994.]
<PAGE>
Section I. Combination of Offices. Any one or more
offices may be held by the same person, except that the offices
of President and Secretary may not be held by the same person.
[As amended by Board of Directors' resolution of February 16,
1994.]
Section J. Compensation of Officers. The Board of
Directors shall fix the compensation of the Chairman of the
Board of the Corporation and the Chairman of the Board shall fix
the compensation of all other officers and employees of the
corporation.
Article VII.
INDEMNITY OF OFFICERS AND DIRECTORS
Any present or future director or officer, or the executor,
administrator or other legal representative of any such director
or officer, shall be indemnified by the company against
reasonable costs, expenses (exclusive of any amount paid to the
corporation in settlement) and counsel fees paid or incurred in
connection with any action, suit or proceeding to which any such
director or officer or his executor, administrator or other
legal representative may hereafter be made a party by reason of
his being or having been such director or officer, provided, (1)
said action, suit or proceeding shall be prosecuted against such
director or officer or against his executor, administrator or
other legal representative to final determination, and it shall
not be finally adjudged in said action, suit or proceeding that
he had been derelict in the performance of his duties as such
director or officer, or (2) said action, suit or proceeding
shall be settled or otherwise terminated as against such
director or officer or his executor, administrator or other
legal representative without a final determination on the
merits, and it shall be determined that such director or officer
had not in any substantial way been derelict in the performance
of his duties as charged in such action, suit or proceeding,
such determination to be made by a majority of the members of
the board of directors who were not parties to such action, suit
or proceeding, though less than a quorum, or by any one or more
disinterested persons to whom the question may be referred by
the board of directors. The foregoing right of indemnification
shall not be exclusive of any other rights to which any director
or officer may be entitled as a matter of law or which may be
lawfully granted to him; and the indemnification hereby granted
by the company shall be in addition to and not in restriction or
limitation of any other privilege or power which the company may
lawfully exercise with respect to the indemnification or
reimbursement of directors, trustees, officers or employees.
<PAGE>
Article VIII.
CAPITAL STOCK
Section A. Stock Certificates. Certificates for stock of
the Company shall be in such form as the Board of Directors may
from time to time prescribe and shall be signed by the President
or a Vice-President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary. If
certificates are signed by Transfer Agent, acting in behalf of
the Company, and a Registrar, the signatures of the officers of
the Company may be facsimile.
Section B. Transfer Agent. The Board of Directors shall
have the power to appoint one or more Transfer Agents and
Registrars for the transfer and registration of certificates of
stock of any class, and may require that stock certificates
shall be countersigned and registered by one or more of such
Transfer Agents and Registrars.
Section C. Transfer of Stock. Shares of capital stock of
the Company shall be transferable on the books of the Company
only by the holder of record thereof in person or by a duly
authorized attorney, upon surrender and cancellation of
certificates for a like number of shares.
Section D. Lost Certificates. In case any certificate for
the capital stock of the Company shall be lost, stolen or
destroyed, the Company may require such proof of the fact and
such indemnity to be given to it and to its Transfer Agent and
Registrar, if any, as shall be deemed necessary or advisable by
it.
Section E. Holder of Record. The Company shall be
entitled to treat the holder of record of any share or shares of
stock as the holder thereof in fact and shall not be bound to
recognize any equitable or other claim to or interest in such
shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise
expressly provided by law.
Section F. Closing of Books. The Board of Directors shall
have power to close the stock transfer books of the Company for
a period ont exceeding 50 days preceding the date of any meeting
of stockholders or the date for payment of any dividend or the
date for the allotment of rights or the date when any change or
conversion or exchange of capital stock shall go into effect;
provided that, in lieu of closing the stock transfer books, the
Board of Directors may fix in advance a date, not exceeding 50
days preceding t he date of any meeting of stockholders, or the
date for the payment of any dividend or the date for allotment
of rights, or the date when any change or conversion or exchange
of capital stock shall go into effect, as a record date for the
determination of the stockholders entitled to notice of and to
vote at any such meeting, or entitled to receive payment of any
such dividends, or any such allotment of rights, or to exercise
the rights in respect to any such change, conversion, or
exchange of capital stock, and in such case only stockholders of
record on the date so fixed shall be entitled to such notice of
<PAGE>
and to vote at such meeting, or to receive payment of such
dividend, or allotment of rights, or exercise such rights, as
the case may be, and notwithstanding any transfer of any stock
on the books of the Company after any such record date fixed as
herein provided.
Article IX.
CORPORATE FUNDS
The funds of the corporation shall be deposited in such
bank or banks as the Board of Directors may direct and shall be
withdrawn only on checks signed by such officer or officers or
other agents of the corporation as said Board may authorize.
Article X.
DIVIDENDS
Dividends may be declared and paid out of surplus only at
such times and in such amounts as the Board of Directors may in
their absolute discretion determine and designate, subject to
the restrictions and limitations imposed by law, the Certificate
of Incorporation, and these Bylaws.
Article XI.
AMENDMENT OF BYLAWS
These Bylaws may be amended, altered or repealed at any
meeting of the Board of Directors by affirmative vote of a
majority of all members of the Board of Directors. The
stockholders shall have the power to rescind, alter, amend or
repeal any Bylaws and to enact Bylaws which, if expressly so
provided, may not be amended, altered or repealed by the Board
of Directors.
Article XII.
CONTROL SHARE ACQUISITIONS
Article 14.1 of Chapter 9 of Title 13.1 of the Code of
Virginia, entitled Control Share Acquisitions, shall not apply
to acquisitions of shares of the corporation. [Added by Board of
Directors resolution of January 21, 1998.]
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BONTEX,
INC.'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS
ENDED MARCH 31, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORTS ON FORM
10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 807
<SECURITIES> 0
<RECEIVABLES> 10,564
<ALLOWANCES> 232
<INVENTORY> 6,886
<CURRENT-ASSETS> 19,890
<PP&E> 23,148
<DEPRECIATION> 11,947
<TOTAL-ASSETS> 31,702
<CURRENT-LIABILITIES> 17,698
<BONDS> 2,466
0
0
<COMMON> 157
<OTHER-SE> 10,980
<TOTAL-LIABILITY-AND-EQUITY> 31,702
<SALES> 32,055
<TOTAL-REVENUES> 32,121
<CGS> 22,770
<TOTAL-COSTS> 31,376
<OTHER-EXPENSES> 131
<LOSS-PROVISION> 170
<INTEREST-EXPENSE> 766
<INCOME-PRETAX> (152)
<INCOME-TAX> (36)
<INCOME-CONTINUING> (116)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (116)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
