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, 1999
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)
Registrant's telephone number, including area code 540-261-2181
Indicate by checkmark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES ( X ) NO ( )
Indicate the description and number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable date.
Class Outstanding at May 7, 1999
Common Stock - $.10 par value 1,572,824
<PAGE>
BONTEX, INC.
FORM 10-Q
NINE MONTHS ENDED MARCH 31, 1999
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1999 and 1998, June 30, 1998...............................3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE
INCOME (LOSS) AND CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
Nine Months and Three Months Ended March 31, 1999 and 1998...........4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, 1999 and 1998............................5
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.......6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................7-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...........................................11
Item 4. Submission of Matters to a Vote of Security Holders.........11
Item 5. Other Information...........................................12
Item 6. Exhibits and Reports on Form 8-K............................12
2
<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)
1999 1998 1998
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 349 $ 807 $ 517
Trade accounts receivable, less allowance for doubtful
accounts of $195 ($232 at March '98, $268 at June '98) 11,633 10,332 11,618
Other receivables 377 775 417
Inventories 7,023 6,886 6,436
Deferred income taxes 320 396 347
Income taxes refundable 120 9 56
Other current assets 289 685 338
---------- ---------- ----------
TOTAL CURRENT ASSETS 20,111 19,890 19,729
---------- ---------- ----------
Property, plant and equipment:
Land 366 368 369
Buildings and building improvements 5,566 5,230 5,575
Machinery, furniture and equipment 17,716 16,468 17,199
Construction in progress 986 1,082 781
---------- ---------- ----------
24,634 23,148 23,924
Less accumulated depreciation and amortization 12,777 11,947 11,882
---------- ---------- ----------
Net property, plant and equipment 11,857 11,201 12,042
Deferred income taxes 533 - 187
Other assets, at cost less applicable amortization 530 611 555
---------- ---------- ----------
TOTAL ASSETS $ 33,031 $ 31,702 $ 32,513
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Short-term borrowings $ 10,365 $ 8,851 $ 8,664
Accounts payable 6,715 5,950 7,133
Accrued expenses 1,509 1,970 1,520
Income taxes payable 31 340 41
Long-term debt due currently 1,279 587 1,364
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 19,899 17,698 18,722
Long-term debt, less current portion 2,383 2,466 2,256
Deferred income taxes 50 55 50
Other long-term liabilities 700 346 594
---------- ---------- ----------
TOTAL LIABILITIES 23,032 20,565 21,622
---------- ---------- ----------
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 8,046 9,228 8,898
Accumulated other comprehensive income 245 201 285
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY 9,999 11,137 10,891
---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 33,031 $ 31,702 $ 32,513
========== ========== ==========
</TABLE>
See accompanying condensed notes to unaudited condensed consolidated financial
statements.
3
<PAGE>
<TABLE>
<CAPTION>
BONTEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME(LOSS)
AND COMPREHENSIVE INCOME (LOSS)
AND CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands, Except Per Share Data)
(Unaudited)
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss):
Nine Months Ended Three Months Ended
March 31, March 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 28,983 $ 32,055 $ 10,599 $ 10,434
Cost of Sales 21,922 22,770 7,748 7,598
-------- -------- -------- --------
Gross Profit 7,061 9,285 2,851 2,836
Selling, General and Administrative Expenses 7,601 8,606 2,704 2,868
-------- -------- -------- --------
Operating Income (Loss) (540) 679 147 (32)
-------- -------- -------- --------
Other (Income) Expense:
Interest expense 696 766 220 233
Interest income (2) (33) - (1)
Foreign currency exchange loss 24 131 (13) 25
Other, net (18) (33) 25 (4)
-------- -------- -------- --------
Total Other Expense, Net 700 831 232 253
-------- -------- -------- --------
Income (Loss) Before Income Taxes (1,240) (152) (85) (285)
Income Taxes (Benefit) (388) (36) (108) (129)
-------- -------- -------- --------
Net income (loss) (852) (116) 23 (156)
Other Comprehensive Income (Loss)
Foreign currency translation adjustment (40) (262) (367) (148)
-------- -------- -------- --------
Comprehensive Loss $ (892) $ (378) $ (344) $ (304)
======== ======== ======== ========
Net income (loss) per share $ (.54) $ (.07) $ .01 $ (.10)
======== ======== ======== ========
Condensed Consolidated Statements of Changes in Stockholders' Equity:
Stockholders' Equity, beginning balance $ 10,891 $ 11,515 $ 10,343 $ 11,441
Net income (loss) (852) (116) 23 (156)
Other comprehensive income (loss)
Foreign currency translation adjustment (40) (262) ( 367) (148)
-------- -------- -------- --------
Stockholders' Equity, ending balance $ 9,999 $ 11,137 $ 9,999 $ 11,137
======== ======== ======== ========
</TABLE>
See accompanying condensed notes to unaudited condensed consolidated financial
statements.
4
<PAGE>
<TABLE>
<CAPTION>
BONTEX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
(unaudited)
Nine Months Ended
March 31,
1999 1998
<S> <C> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Cash received from customers $ 31,500 $ 35,182
Cash paid to suppliers and employees (31,968) (34,712)
Interest received 10 68
Interest paid (751) (846)
Income taxes paid, net of refunds 15 190
------------ ------------
Net cash used in operating activities (1,194) (118)
------------ ------------
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment (845) (1,382)
------------ ------------
Net cash used in investing activities (845) (1,382)
------------ ------------
Cash Flows from Financing Activities:
Increase in short-term borrowings, net 1,851 1,229
Long-term debt incurred 564 330
Principal payments on long-term debt (479) (446)
------------ ------------
Net cash provided by financing activities 1,936 1,113
------------ ------------
Effect of Exchange Rate Changes on Cash (65) (179)
------------ ------------
Net Decrease in Cash and Cash Equivalents (168) (566)
Cash and Cash Equivalents at Beginning of Period 517 1,373
------------ ------------
Cash and Cash Equivalents at End of Period $ 349 $ 807
============ ============
Reconciliation of Net Income (Loss) to Net Cash Used in
Operating Activities:
Net income (loss) $ (852) $ (116)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization 1,026 974
Provision for bad debts 144 170
Deferred income taxes (346) (184)
Change in assets and liabilities:
(Increase) decrease in trade accounts and other receivables (135) 2,440
Increase in inventories (661) (1,722)
Decrease (increase) in other assets 55 (727)
Decrease in accounts payable and accrued expenses (430) (1,385)
(Decrease) increase in income taxes (79) 334
Increase in other liabilities 84 98
Net cash used in operating activities $ (1,194) $ (118)
============ ============
</TABLE>
See accompanying condensed notes to unaudited condensed consolidated financial
statements.
5
<PAGE>
BONTEX, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998 AND JUNE 30, 1998
(Unaudited)
1. The accompanying unaudited condensed consolidated financial statements have
been prepared by Bontex, Inc. and its subsidiaries ("Bontex" or the
"Company") in accordance with generally accepted accounting principles for
interim financial reporting information and the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all material reclassifications and 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, 1998.
2. The last in, first out (LIFO) method of inventory pricing is used by the
Company in the United States. 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,
1999 1998 1998
(Dollars in Thousands)
<S> <C> <C> <C>
Finished goods $ 3,716 $ 3,797 $ 3,782
Raw Materials 2,772 2,650 2,117
Supplies 774 734 786
-------- -------- --------
Inventories at FIFO and weighted average cost 7,262 7,181 6,685
LIFO reserves (239) (295) (249)
$ 7,023 $ 6,886 $ 6,436
======== ======== ========
</TABLE>
3. Business segment information related to the North American and European
operations follows:
<TABLE>
<CAPTION>
North American European Eliminations Consolidated
Operations Operations
<S> <C> <C>
Nine Months Ended March 31, 1999
Net Sales $ 11,471 $ 17,531 $ (19) $ 28,983
Net Loss (781) (71) - (852)
Nine Months Ended March 31, 1998
Net Sales $ 13,273 $ 19,147 $ (365) $ 32,055
Net Income (Loss) (473) 357 - (116)
</TABLE>
4. Net income per share calculations are based on the weighted average number
of shares outstanding of 1,572,824 shares for all periods.
6
<PAGE>
BONTEX, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS AND QUARTER ENDED MARCH 31, 1999
(Unaudited)
Except for historical data set forth herein, the following discussion
contains forward-looking statements within the meaning of the Private Securities
Litigation Act of 1995. Forward-looking statements include, for example,
statements about future results of operations or market conditions and involve
risks, uncertainties and assumptions. Actual results may differ materially from
these forward-looking statements. Factors that could cause or contribute to
those differences include, but are not limited to, the global economic crisis
emanating from Southeast Asia, excessive worldwide footwear inventories, a
shrinking domestic market for Bontex products, decreased sales to key customers,
increased competition from non-woven materials, the Year 2000 problem, the
increase in the relative prices of Bontex's products due to foreign currency
devaluations, increased pulp and latex prices, and capital illiquidity resulting
from the breach of loan ratios and/or an inability to identify additional
sources of financing.
RESULTS OF OPERATIONS
The results of operations for the first nine months of fiscal 1999 reflect
operating and net losses. During the first nine months, the Company generated a
consolidated operating loss of $540,000, and a net loss of $852,000 or $.54 per
share. Consolidated net sales decreased $3.1 million or 9.6% to $29 million for
the nine months ended March 31, 1999. The fluctuation in foreign currency
exchange rates resulted in a $813,000 translation increase in net sales.
Seasonality generally 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 purchasing cycles, scheduled vacations, shutdowns, and holidays.
Gross profit as a percentage of net sales (i.e., Gross Margin) for the first
nine months of fiscal 1999 decreased compared to the same period last year from
29.0 to 24.4 percent. This decrease in profit margins is primarily attributed to
the $3.1 million or 9.6 percent decline in sales, which is a result of, among
other things, (i) the financial situation in Asia and South America, (ii) the
continued contraction of the U.S. domestic market for Bontex related products,
(iii) the overall worldwide decline in sales of footwear, especially in the
athletic category, and consequent higher inventories of footwear, and (iv) the
increased usage of non-woven made materials. Furthermore, competitive pricing
pressures have resulted in lower selling prices, which also have had a negative
impact on net sales and profit margins.
Net sales and net income for the third quarter reflects improvement over the
same period last year, as net sales increased $165,000 or 1.6% and net income
improved from a net loss of $156,000 to net income of $23,000.
The cost of pulp is expected to remain stable during the remainder of fiscal
year 1999. It is difficult to predict future raw material costs, however, and
there can be no assurance that raw material prices will not have an adverse
impact on the Company's operations or competitive position in the future. Bontex
plans to continue a long standing practice of reducing costs by utilizing
technology in raw materials, equipment and processes improvements.
Selling, General & Administrative (SG&A) expenses as a percent of net sales
decreased slightly from 26.9 percent to 26.2 percent during the first nine
months of fiscal 1999, as compared to the corresponding period in fiscal 1998.
The decreased SG&A percentage is mainly due to the positive impact of the
restructuring implemented in February 1999, which resulted in cost reductions at
the U.S. operations. Overall, consolidated SG&A expenses declined $1 million or
11.7 percent, while sales decreased 9.6 percent. Bontex plans to implement
additional measures in an effort to reduce total SG&A costs.
7
<PAGE>
Interest charges in fiscal 1999 have decreased as a result of lower interest
rates, which have more than offset increased interest expenses relating to
higher borrowing levels. Foreign currency exchange losses have decreased as a
result, of among other things, the Company's Risk Management Program and more
stable currency exchange rates in the currencies in which the Company transacts
business.
Other comprehensive income, which consists of foreign currency translation
adjustment, totaled $40,000 for the nine months ended March 31, 1999, and
primarily reflects the fluctuation of the U.S. Dollar verses the Euro.
FINANCIAL CONDITION
Consolidated stockholders' equity decreased $892,000 from June 30, 1998, and
totaled $10 million at March 31, 1999. Financial ratios at March 31, 1999,
decreased from June 30, 1998, because of the negative operating results. The
$315,000 decrease in working capital primarily reflects the decrease in working
capital at Bontex USA, resulting from, among other things, increased short-term
liabilities to finance negative operating cash flows. The fluctuation in foreign
currency exchange rates resulted in a translation increase of $276,000 in
consolidated total assets as compared to March 31, 1998.
Cash balances mainly reflect financing and hedging positions at European
Operations.
Trade Accounts Receivable remain approximately the same from June 30, 1998 to
March 31, 1999. Even though sales have decreased, accounts receivable balances
remain approximately the same primarily due to the fact that a larger portion of
the Company's sales require extended credit terms.
The $587,000 increase in inventories from June 30, 1998, mainly corresponds to
the closure of pulp purchase contracts. Finished goods have decreased due to
decreased sales.
Other current assets decreased $49,000 to $289,000 from June 30, 1998, primarily
due to a decrease in deposits for pulp futures.
The $845,000 of additions from June 30, 1998, in PP&E is largely due to capital
additions at European Operations relating to increased capacity and efficiency
projects.
Accounts payable, accrued expenses and short-term borrowings increased $1.3
million from June 30, 1998, which primarily corresponds to funding negative
operating cash flows and higher inventory.
Management believes that existing credit facilities will be sufficient to
meet future operating and capital requirements based on present circumstances.
The Company may further alter its business strategy based on future revenues and
margin trends. As of March 31, 1999, Bontex USA was not in compliance with
certain financial ratios of its secured debt agreement, under which certain
current and noncurrent assets are pledged as collateral. Management is
negotiating with the bank for modified covenants and terms of the credit
agreement. There can be no assurance that Bontex will be able to obtain
satisfactory modifications. Accordingly, Bontex has classified $480,000 of
long-term debt as current. If Bontex cannot obtain a modified agreement and it
were unable to obtain refinancing, Bontex might have difficulty in obtaining
funds to meet operating and capital requirements, which could cause a material
adverse impact on its financial condition and results of operations.
FINANCIAL INSTRUMENTS
From time to time, 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.
8
<PAGE>
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 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, 1998.
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 products. Historically, the Company's
primary and only available method of hedging its exposure to pulp price changes
was through forward purchasing and other purchase contracts. In connection with
purchasing pulp for future manufacturing requirements, the Company has entered
into a number of pulp futures, as deemed appropriate, to reduce the effects of
price fluctuations.
In accordance with hedge accounting, gains or losses are recorded as a component
of the underlying inventory purchase, because 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. At March 31, 1999, the Company did not
hold any related derivatives for pulp futures.
FINANCIAL SITUATION IN ASIA
Asia is currently in a financial and economic crisis. During the past year, the
currencies of a number of key Asian countries 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. The economic slowdown in Asia has decreased the
sale of Bontex type products there. The overall strength of the U.S. dollar and
the currency devaluations in Asia have resulted in additional pressure on
earnings, in part by increasing the relative prices of Bontex products versus
Asian competitors. Accordingly, the situation in Asia will continue to
negatively affect the Company's operations, and the economic crisis may further
spread to other markets, including South America.
In assessing the overall impact of the situation in Asia, management believes
sales and profits will improve in the near term as the situation improves.
Management cannot at this time accurately quantify the anticipated progress 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.
REFOCUSING
Management has implemented a dual focused approach composed of a definitive
Sales Action Plan and a Cost Reduction Program. In an effort to increase sales,
the Company plans to augment its product line for footwear and nonfootwear
related products and refine its marketing approaches in a number of key markets.
The Company hopes to develop several products that complement existing
manufacturing capabilities without significant capital investment or process
modifications.
The Company's Cost Reduction Program consists of a number of critical steps to
reduce its cost structure, especially concerning overhead and capacity issues.
To that end, the Company has taken steps effective February 1, 1999, in an
attempt to reduce costs by approximately $1.2 million on an annualized basis
through the rationalization of 14 percent of its U.S. staff, the listing for
sale of the Newark warehouse facility, and other measures to reduce overhead.
Costs to be incurred as a result of these actions are not considered material to
the financial statements, and accordingly, no related accruals were made as of
March 31, 1999. The positive impact of the Cost Reduction Program was partially
evident during the third quarter of fiscal 1999. Management believes that the
effects of both sales and cost initiatives will become more evident when fully
implemented over the next several months.
9
<PAGE>
YEAR 2000 READINESS
Over the past two years, Bontex has invested approximately $175,000 in
information and non-information technology (IT) systems to improve data
efficiency and address the Company's Year 2000 systems exposure. The Year 2000
issue relates to computer programs using two digits rather than four to define
the applicable year. Inability to process data properly due to this phenomenon
may result in systems failures. The project to address the Company's Year 2000
systems exposure is substantially complete with approximately $25,000 remaining
to be invested. The IT systems, originally expected to be completed in November
1998, are now estimated to be completed during 1999, while an external vendor
completes customized software programs. The IT systems software has been tested,
and, with the exception of the customized software discussed above, all software
appears to operate as intended. Testing of non-IT systems is underway, with all
testing and necessary modifications, estimated to be completed by July 1999.
Bontex is in the process of assessing the Year 2000 readiness of its major
customers and vendors. The review is substantially complete with no material
risks identified. Major customers and vendors who have not responded, however,
could suffer disruptions from the Year 2000 problem. Furthermore, even if the
systems of Bontex's major customers and vendors are Year 2000 compliant, their
operations may suffer disruptions as a result of the Year 2000 problems of the
outside parties on which they rely. Therefore, there can be no assurances that
the Year 2000 will not significantly affect the Company's third parties.
The Company is currently in the process of formulating a contingency plan to
maintain operations in the event of its most likely worse-case Year 2000
scenario. Bontex intends to complete the plan before the end of 1999. Bontex
expects that the contingency plan will provide, if necessary, for manual
processing of accounting and financial information. The contingency plan,
however, would be unable to mitigate extreme Year 2000 effects, such as power or
communications failures, interrupted deliveries from major suppliers, or
decreased sales resulting from regional or worldwide recessions or disruptions
in the operations of major customers. Therefore, there can be no assurance that
the date change from 1999 to 2000 will not materially affect the Company's
operations and financial results.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," was issued in June 1998. This
Statement addresses the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and hedging activities. The
Statement will be effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999. Future adoption of this Statement could have a
material impact on the Company's consolidated financial position, or results of
operations. The Company is currently in process of reviewing the impacts of this
Statement.
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," is effective for periods after December 15, 1997. Interim
information for SFAS No. 131 is presented in Note 3 of Condensed Notes to
Condensed Consolidated Financial Statements.
10
<PAGE>
PART II. OTHER INFORMATION
BONTEX, INC.
FORM 10-Q
FOR THE NINE MONTHS ENDED MARCH 31, 1999
Item 1. Legal Proceedings
Please refer to Item 1, Legal Proceedings in Bontex, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998, for a
description of the civil lawsuit filed by Patricia Surmonte Tischio,
a director and employee of Bontex (the "Company") in New Jersey state
court on March 11, 1998. The case was transferred to the United
States District Court for the Western District of Virginia in July
1998.
On February 23, 1999, the United States District Court for the
Western District of Virginia granted the Motion for Judgment on the
Pleadings filed by the defendants with regard to the tortious
interference with contractual relations and conspiracy claims,
dismissing those claims with prejudice. No appeal was taken from the
Court's ruling by Mrs. Tischio. The Court declined to enter
declaratory judgment regarding plaintiff's alleged lifetime contract
with the Company. The Court also found that the case presented a
nonjusticiable issue for the breach of contract, promissory estoppel
and wrongful discharge in violation of public policy claims and
dismissed those claims without prejudice.
Please refer to Item 1, Legal Proceedings, in the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998, for a
description of the civil lawsuit filed in September 1998 in the
United States District Court for the District of Massachusetts by
Texon USA, Inc. The lawsuit was resolved without admission of
liability by the Company and in a manner that management believes
will not have a material impact on the Company. The lawsuit was
dismissed on May 11, 1999.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on January 28,
1999. The matters voted upon at the Meeting were as follows:
(i) The election of Jeffrey C. Kostelni, Joseph F. Raffetto and
Patricia S. Tischio as Class B directors, to serve until the 2001
Annual Meeting; and
(ii) Approve a plan to grant stock options to certain executive
officers.
11
<PAGE>
All nominees for director names above were elected, and the stock
option plan was approved.
Election of Officers
AUTHORITY
FOR WITHHELD
--------- --------
Jeffrey C. Kostelni 1,439,975 11,893
Joseph F. Raffetto 1,439,730 12,138
Patricia S. Tischio 1,439,975 11,893
FOR AGAINST ABSTAIN
--- ------- -------
Approve plan to grant stock options 1,146,770 56,530 248,568
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 - Financial Data Schedule
(b) Report on Form 8-K:
None
12
<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)
May 17, 1999 /s/James C. Kostelni
- ----------------------- ---------------------------------
(Date) James C. Kostelni
Chairman of the Board
and President
May 17, 1999 /s/Jeffrey C. Kostelni
- ----------------------- --------------------------------
(Date) Jeffrey C. Kostelni
Treasurer and
Chief Financial Officer
May 17, 1999 /s/Charles W. J. Kostelni
- ----------------------- --------------------------------
(Date) Charles W. J. Kostelni
Corporate Controller
and Secretary
13
<PAGE>
EXHIBIT INDEX
27 Financial Data Schedule
14
<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, 1999, 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>
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0
0
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</TABLE>
