UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year Commission File
ended June 30, 2000 Number 0-5200
BONTEX, INC.
Exact name of Registrant as specified in its charter
VIRGINIA 54-0571303
State of Incorporation IRS Employer No.
ONE BONTEX DRIVE, BUENA VISTA, VIRGINIA 24416-1500
Address of principal executive offices Zip code
Registrant's telephone number (540) 261-2181
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
$.10 par value common stock
Indicate by check mark whether the Registrant (1) has filed all annual,
quarterly and other reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months with the
Commission, and (2) has been subject to the filing requirements for at least the
past 90 days: ( x ) Yes ( ) No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K ( )
Aggregated market value of the voting stock held by non-affiliates of the
Registrant: $1,414,425 at August 30, 2000
On August 30, 2000, the Registrant had 1,572,824 shares of $.10 par value common
stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Portions of the Registrant's Annual Report to Stockholders are incorporated
by reference into Parts I and II hereof.
(2) Portions of the Registrant's Proxy Statement dated September 28, 2000
issued in connection with the annual meeting of shareholders to be held
November 2, 2000 are incorporated by reference into Part III hereof.
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TABLE OF CONTENTS
PART I
ITEM PAGE
1. Business...........................................................3
2. Properties.........................................................8
3. Legal Proceedings..................................................9
4. Submission of Matters to a Vote of Security Holders................9
PART II
5. Market for the Registrant's Common Equity and Related
Stockholder Matters...............................................11
6. Selected Financial Data...........................................11
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................11
7A. Quantitative and Qualitative Disclosures About Market Risk........11
8. Financial Statements and Supplementary Data.......................11
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..........................................11
PART III
10. Directors and Executive Officers of the Registrant................12
11. Executive Compensation............................................12
12. Security Ownership of Certain Beneficial Owners and Management....12
13. Certain Relationships and Related Transactions....................12
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...12
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PART I
ITEM 1. BUSINESS
On January 2, 1997, the Company completed a plan which changed, among
several items, its name to Bontex, Inc. from Georgia Bonded Fibers, Inc. For
further information see General Business below.
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
certain 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, excessive
worldwide footwear inventories, a shrinking domestic market for Bontex products,
decreased sales to key customers, increased competition from non-woven
materials, the reduction of prices by competitors, the increase in the relative
prices of Bontex's products due to foreign currency devaluations, increased pulp
and latex prices, capital illiquidity, unexpected foreign tax liabilities and
decreases in the Company's borrowing base.
GENERAL BUSINESS
Bontex, Inc. (all references hereinafter to the "Registrant," "Company"
or "Bontex" refer collectively to Bontex, Inc. and its wholly-owned and
majority-owned subsidiaries unless otherwise indicated by context) was
incorporated in June 1946 under the laws of the State of New Jersey. The Company
originally began as a leather processing operation, and today Bontex is a
leading worldwide manufacturer and distributor of uncoated and coated
elastomeric wet web impregnated fiberboard products. The Company's products are
generally described by the trademark BONTEX, and are marketed to various
industries, including footwear, headwear, luggage, leathergoods, allied
industries, belt backing, gasketing, furniture, electronic integrated component
packaging, and automotive industries. Bontex is a market leader in many of the
areas in which the Company competes.
Pressure on pricing has negatively affected the Company's sales as
noted in Management's Discussion and Analysis incorporated by reference in Part
II, Item 7 of this report. Sales have also been negatively affected by
inventories of footwear and competition that have led to a reduction of footwear
production. Even though economic conditions in Asia have reduced the Company's
near-term growth expectations, management believes that the market ultimately
will rebound. Nonwoven materials, however, continue to erode sales of cellulose
based products. Bontex is placing greater emphasis on the marketing of nonwoven
products, and working to develop new markets for impregnated cellulose products
in an effort to increase sales. Management also recognizes the need to further
diversify it's product line and has embarked on an aggressive plan to accomplish
this in the near term.
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
restructuring, the Company was reincorporated as a Virginia corporation, with
its principal place of business at One Bontex Drive, Buena Vista, Virginia
24416-1500, and the name of the Company was changed to "Bontex, Inc." The
Company's common stock is traded on the Nasdaq SmallCap Market under the symbol
"BOTX." The restructuring did not result in any material 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., dated January 2, 1997, and Proxy Statement for meeting of
Shareholders held on November 7, 1996.
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ORGANIZATION
The Company maintains corporate headquarters, manufacturing,
converting, sales office, and a warehouse facility in Buena Vista, Virginia; a
wholly-owned manufacturing subsidiary, Bontex S.A. in Stembert, Belgium; a
wholly-owned distribution and converting subsidiary, Bontex Italia S.r.l. in
Villafranca, Verona, Italy; a wholly-owned distribution subsidiary, Bontex de
Mexico, S.A. de C.V. in Leon, Mexico, Bontex Vietnam (near future) and a
majority owned distribution subsidiary, Bontex Hong Kong Limited in Hong Kong;
and a sales office and warehouse in Newark, New Jersey, which the Company plans
to sell during fiscal year 2001, but currently is still in use. See the
discussion under "Item 2. Properties," below. The Company utilizes a
wholly-owned foreign sales corporation organized and existing under the laws of
the Virgin Islands to facilitate export sales. Additionally, Bontex maintains a
network of liaison offices, Bontex Korea, Bontex Taiwan, Bontex China, Bontex
Indonesia, Bontex Philippines, and Bontex Australia to service Asian markets.
The Company currently employs 87 full-time and 2 part-time employees in
Buena Vista, Virginia; 1 full-time and 1 part-time employees in Newark, New
Jersey; 74 full-time and 2 part-time employees in Belgium; 10 full-time and 1
part-time employees in Italy; 2 full-time and 1 part-time employees in Mexico
and 2 full-time employees in Hong Kong. Revenue per employee was approximately
$220,000 and $221,000 in fiscal years 2000 and 1999, respectively.
There is no labor union at the United States operations, and management
knows of no union activity at the present time. There are labor unions at the
Company's European operations. Although the Company believes that relations with
its employees are positive, there can be no assurance that the Company will not
experience work stoppages in the future.
PRODUCTS
BONTEX elastomeric wet web fiberboard materials are primarily used as
an insole material in footwear, as well as visorboard in headwear, dielectric
sealing base in automotive door panels, backing substrate, stiffener and
laminating base in luggage, leathergoods, and allied products. All BONTEX
fiberboard products are designed to be "environmentally-friendly," because
Bontex uses recycled and primary cellulose fibers originally derived from trees,
a renewable resource. Bontex has the American Podiatric Medical Association
(APMA) Seal of Acceptance for BONTEX elastomeric wet web products, BONFOAM,
SUREFOAM, and MAXXON, cushion insole materials. BONFOAM, SUREFOAM, and MAXXON
trademarks are the sole property of the Registrant. The podiatric seal of
acceptance is granted after stringent clinical and laboratory tests have been
carried out on approved products which demonstrate conformity to APMA
guidelines, and assist in foot health and comfort. The APMA Seal of Acceptance
for approved BONTEX products should enhance product acceptance in the
marketplace. Bontex has the SATRA Quality mark and laboratory accreditation at
its Belgium facility.
Bontex USA manufactures uncoated and coated BONTEX fiberboard products;
breathable (moisture vapor transmission) cushion foams, that are marketed under
trademarks BON-FOAM, MAXXON and SURE-FOAM, and are sold in a variety of grades
for use as shock absorbing insole material; BONTEX 200 RECYCLED and BONTEX 300
RECYCLED, which are produced from 100 percent recovered paper with a minimum 80
percent "post-consumer waste" for use in footwear, visorboard in headwear, a
backing substrate, stiffener pieces and laminating base; BON-PEL, a hybrid
nonwoven substrate, which is exceptionally strong and flexible; BONTEX 48 MA, an
uncoated visorboard for use in military headwear, which has been approved by
NATICK military laboratory. Bontex USA also combines certain products, such as
foams, fabrics, and vinyls, with BONTEX fiberboard. Additionally, Bontex USA is
the exclusive distributor globally to the footwear industry of an expanded
polyurethane material manufactured by Aero E.A.R. Specialty Composites, under
the trademarks MAXXON LS and CONFOR. MAXXON LS and CONFOR have moisture vapor
transmission characteristics and are used for sock-linings and cushion insoles
in various types of footwear. CONFOR is a trademark of E.A.R. Specialty
Composites. Bontex also markets a range of nonwoven products under the name
Bon-stitch. During 1999 and 2000, Bontex introduced a broad range of footwear
materials, including Bontex 90 Insole Seatboard, economical
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insole products, Astral foam with the newest stay-dry technologies, Bon-Stitch
linings and Bon-Stitch next generation nonwoven insoles.
Bontex S.A., Stembert, Belgium, manufactures uncoated BONTEX products.
Bontex Italia, S.r.l. is a distribution company and operates converting
equipment primarily servicing the Italian market.
The Company's converting facilities continue to show increased volume
and open new market areas in coated and composite items converted on BONTEX
substrates. The Company's marketing emphasis is to capitalize on the positive
performance of these products. Management believes that Bontex is well
positioned for growth due to the high quality and market acceptance of its
products, as well as its significant market penetration in developed and
developing markets.
The Company's research efforts are directed primarily toward developing
new products and processing techniques, and improving product performance, often
in close association with customers. The Company customizes many composite
products with BONTEX fiberboard products. These products have increased sales of
combination packages, primarily designed to take advantage of the current
increased emphasis on comfort in footwear products. A series of dual-density
(two-layer) foam packages have been designed, and management believes that sales
of these products have been positive since their introduction.
Bontex has completed implementation of the International Organization
for Standardization quality assurance system ISO 9001 at both the United States
and Belgium manufacturing facilities. Bontex SA was certified ISO 9001 during
1996, and Bontex USA during 1997. The impact of ISO 9001 on sales is anticipated
to be minimal; however, management regards ISO 9001 qualification as important
to maintaining a competitive edge in quality globally.
COMPETITION
The industry in which the Company operates is highly competitive.
Participants in the industry compete through quality and price, including the
ability to control costs, risk management, innovation, and customer service.
Presently, it is management's opinion that the Company offers superior product
quality and customer service in major markets globally. In the United States,
there is one other manufacturer of BONTEX type material. There are, however,
other materials which may be substituted for the same applications. The Company
estimates that during fiscal year 2000, its products were in approximately 45 to
50 percent of non-rubber footwear manufactured in the United States. This
estimate is based on Footwear Industries of America (FIA) data as to total
sales.
There are manufacturers who purchase BONTEX type materials for coating,
laminating, and converting into innersoles for footwear, visors for headwear,
and dielectric sealing base in automotive door panels. There is more competition
in these segments, and no comparative market statistics are available.
In Europe, there are six major manufacturers of material to
BONTEX. These competitors are located in Germany, Italy, Finland, Slovenia,
Taiwan and the former USSR. The Company estimates that it sells approximately 45
percent of the BONTEX type materials sold in the European Union. These estimates
are based on SATRA Common Market statistics as to total sales, and other
generally available industry information.
There are a number of manufacturers of elastomeric fiberboard materials
in Asia; however, there are an estimated fourteen competitors operating in the
Peoples Republic of China, which impacts selling prices. There is a 5 percent
duty on BONTEX products going into Taiwan. The Company has petitioned the US
trade representatives to eliminate these duties. Bontex has received
notification that the Republic of China (R.O.C.) has agreed to reduce and
phase-out its duties, but no definitive time-frame has been announced.
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As there are many customers globally who purchase BONTEX and convert it
into innersoles and other application components, the actual total worldwide
market penetration is difficult to estimate.
TRADEMARKS
Bontex utilizes trademarks on most of its products, and believes
having such distinctive trademarks which are readily identifiable is an
important factor in creating and maintaining a market for its goods and
services. This further serves to identify the Company and distinguish its goods
from goods of others. The Company considers its BONTEX trademark and other
trademarks to be among its most valuable assets, and has registered its
trademarks in over 70 countries. Bontex continues to vigorously protect its
trademarks against infringement. The Company's operations are not dependent to
any significant extent upon any single or related group of patents, licenses or
concessions.
PRODUCTION AND SALES
Refer to Note 3 of Notes to the Consolidated Financial Statements in
the Company's Annual Report to Stockholders, wherein information is provided
regarding foreign and domestic operations and export sales for the last three
fiscal years. Such information is incorporated in Part II, Item 8 of this report
by reference.
Historically, Bontex has had a significant global presence, and one of
its major strategic objectives is to continue to expand this presence. The
Company's sales are diversified among a large customer base, as well as numerous
geographic regions. Asia, where an estimated 70 percent of global shoe
production occurs, is the largest market for Bontex products. The Company has
one of the largest customer bases in the industries it serves. The Company
offers a wide range of elastomeric products for use in a variety of
applications. However, the majority of the Company's sales are to the footwear
industry. The Company intends to continue its strategy of developing and
broadening non-footwear sales.
Credit terms offered by the Company to meet competition have been
longer than terms normally available to the Company from its vendors. Some
seasonality exists in that the second half of each fiscal year is usually more
productive and consequently more profitable than the first half. This
seasonality is largely because of customers' buying cycles with scheduled
vacations, shutdowns and holidays, which normally occur during the first half of
each fiscal year. Substantially all sales to Asia are denominated in US dollars,
negotiated letters of credit and sight drafts, and are covered by foreign credit
insurance. During the past three years, no single customer accounted for 10
percent or more of the Company's consolidated net sales.
Foreign operations, principally in Belgium and Italy, constitute a
significant portion of the Company's business. Production of BONTEX elastromeric
fiberboard products is allocated between the United States and Belgium
manufacturing facilities based on such factors as availability of capacity,
production efficiencies, logistical considerations, and foreign currency
exchange rates. The Company is currently operating at less than full
capacity. During the past three fiscal years, approximately 40 percent of total
production was manufactured in the United States. The backlog of firm orders in
the United States at the end fiscal 2000 was about three weeks production or
approximately $1 million in sales. The current backlog at Bontex USA is
approximately two weeks. In Europe, the backlog at the end of fiscal year 2000
was about three weeks production or approximately $750,000 in sales. The current
estimated backlog at Bontex S.A. is approximately two weeks. The Company expects
all the orders in the backlog will be manufactured and shipped during the next
fiscal year.
The Company sells most of its products directly to customers through
its own sales force and commissioned sales representatives throughout the United
States. The Company also sells products through distributors and other
intermediaries who may convert and resell these products to others. Bontex USA
mainly services North and South America, as well as certain Asian markets. Over
the past three years, Bontex USA's export sales to markets outside of the United
States have increased from 50 to 70 percent. This primarily reflects the decline
of the domestic market and continued emphasis on overseas markets. Bontex USA
maintains leased
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bonded warehouses in St. Louis, Missouri; Leon, Mexico; Cambridge, Ontario,
Canada; and Montreal, Quebec, Canada. The Company established Bontex de Mexico,
S.A. de C.V., as a marketing distribution company in Leon, Mexico to directly
facilitate sales in Mexico.
Bontex S.A. markets its products through its own sales force,
distributors and sales representatives in most countries in Europe, Central and
Eastern Europe, Africa, the Middle East, as well as certain Asian markets. The
Company's wholly-owned subsidiary, Bontex Italia S.r.l., services the Italian
market directly and through localized converters and commissioned
representatives. Over the past few years a greater portion of footwear,
especially athletic shoes, is strobel stitched using nonwoven materials in place
of Bontex cellulose type products. In fiscal 1999, the Company began
successfully marketing Bon-stitch, a broad range of nonwoven materials. The
Company plans to expand its strategic alliances to further leverage its Bontex
trademark and marketing capabilities.
The Company maintains six Bontex liaison offices in select Asian
markets, a network of sales representatives in various countries where BONTEX is
marketed, as well as leased bonded warehouses in Korea, Taiwan, and the Peoples
Republic of China. For certain of its foreign markets, the Company uses
individual distributors. One distributor represented approximately 19.2 percent
of the Company's net consolidated sales. The Company believes that it is well
positioned to replace any of these distributors without materially affecting the
Company's marketing or financial operations. The Bontex liaison office in
Australia coordinates Asian operations covering, among other countries, Japan,
Korea, Taiwan, Hong Kong, Philippines, Indonesia, New Zealand, Australia,
Singapore and Malaysia. The Company has established a sales subsidiary, Bontex
Hong Kong Limited, in Hong Kong, to replace a distributor for Hong Kong and the
PRC New Territories. In Vietnam, the Company is in the process of establishing a
new sales subsidiary to service the Vietnam market.
MATERIALS AND SUPPLIES
The Company purchases a broad range of raw materials sourced throughout
the world in connection with its manufacturing activities. More than one
supplier is available for all major raw materials. Bontex S.A. appears to have
available and receives adequate quantities of water and steam for processing in
Belgium. The manufacturing facility in the United States has an adequate supply
of processing water from wells and river sources.
The Company attempts to minimize the effects of cyclical changes in raw
material costs through purchase contracts, forward purchasing, and the
application of technologies to improve process efficiencies. Principal cost
factors include the cost of raw materials, specifically pulp and latex, two
primary raw materials for the Company's products. Currently market pulp prices
are around $735 per ton for NBSK pulp, and have been increasing. Management
intends to continue to prudently apply technology to manufacture high quality
products while attempting to reduce costs in all areas of operations in an
effort to maintain competitive selling prices. There can be no assurance,
however, that increased raw material prices will not continue to have an adverse
effect on the Company's operations or competitive position in the future.
Bontex USA maintains a limited private fleet of tractors and trailers
for long haul delivery of its products to customers throughout the United States
and Canada and to east coast ports for export shipments, in addition to
back-hauling of certain raw materials to reduce operating costs. The Company
also participates in numerous equipment interchange agreements for containers
with steamship lines to facilitate exports.
REGULATORY AND ENVIRONMENTAL MATTERS
As with other related manufacturers, the Company is subject to
regulations by various federal, state, foreign and local agencies concerning
compliance with environmental control statutes. These regulations impose
limitations on the use of chemicals in manufacturing processes and discharge of
effluent and emissions into the environment, and establish standards for solid
and hazardous waste disposal, treatment, and storage, as well as require the
Company to obtain and operate in compliance with the conditions of environmental
permits. The
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Company believes that it is in substantial compliance with such existing
domestic and foreign environmental statutes and regulations. Failure to comply
with applicable environmental control standards could result in interruption of
operations or could require additional expenditures at these facilities.
In recent years, various agencies have increased their screening and
testing of the effects of chemicals or mixtures, including those that occur
naturally. The Company's product formulations, in some instances, may include
compounds that are or will be subject to these tests. The Company devotes
significant resources to improve product formulation for, among other things,
comfort, health, cost, quality and other performance features.
The Company has made and intends to continue to make capital
investments, operating expenditures, and production adjustments in connection
with compliance with environmental laws and regulations. Since the Company is
essentially comprised of two fiberboard plants, Bontex USA and Bontex S.A.,
water quality discharge remains a primary environmental concern. Both plants are
operating new waste water treatment facilities, which the Company believes to be
operating within compliance of applicable environmental requirements.
Bontex USA is also affected by regulations concerning air emissions
relating to the operation of certain coating and converting equipment. The
Company entered into a Consent Order with the Virginia Department of
Environmental Quality pursuant to which the Company committed to take
appropriate corrective action with respect to air quality emissions and to
achieve compliance by December 31, 1997. The air emission control equipment was
installed and appears to be operating within compliance of applicable
environmental requirements.
The actual costs of future environmental compliance may differ from
projected costs due to, among other things, new environmental laws and
regulations and efficiencies in environmental control or process technology
developments.
ITEM 2. PROPERTIES
For information about liens and security interests held by banks on the
Company's properties, see Note 4 of Notes to Consolidated Financial Statements
contained in the Company's 2000 Annual Report to Stockholders, incorporated in
Part II, Item 8 of this Report by reference.
The properties of the Company consist primarily of plant and equipment
to manufacture and distribute the Company's products. The Company's corporate
headquarters, manufacturing and converting facility in Buena Vista, Virginia
continues to be modernized, upgraded, and expanded. In Stembert, Belgium, the
subsidiary's plant is one of the most modern and highest capacity in the world
for producing BONTEX type products, and the Company continues to invest in new
equipment to maintain its high capacity and high level of efficiency. Bontex
Italia S.r.l. operates from a modern distribution facility with new converting
equipment. During fiscal 2000, the Company spent approximately $368,000,
$381,000 and $105,000 to refurbish, upgrade and install equipment at Bontex USA,
Bontex S.A., and other subsidiaries, respectively.
In Newark, New Jersey, the Company owns an office building and
warehouse. A sales office is maintained at the Newark building, and the
warehouse has been used for the distribution of the Company's products in the
northeastern region of the United States. In June 1997, the Company's Board of
Directors, in response to decreasing demand in the domestic markets, approved a
plan to reduce the costs of the Company's operations in the Northeast. The plan
focuses on the Company's Newark, New Jersey operation and involves closing the
Company's Newark warehouse facility. The Company expects this disposal should
contribute to the long-term profitability of the Company. The Company plans to
dispose of the warehouse facility within the next year. The net realizable value
of the Newark warehouse facility significantly exceeds the net carrying amount
of approximately $60,000.
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The total cost of capital expenditures, including the capital
expenditures planned for environmental regulations at both Bontex USA and Bontex
S.A. as discussed in the previous section regarding regulations, is estimated
not to exceed $250,000 for fiscal year 2001. The Company believes that cash
generated from operations and credit facilities will be sufficient to meet these
capital requirements.
The Company continues to manage the utilization of its assets in an
effort to meet global growth objectives, marketplace forces, productivity and
technology changes. The Company considers all its properties well maintained and
adequate for present and future requirements.
ITEM 3. LEGAL PROCEEDINGS
During fiscal year 2000, the Ministere Des Finances, the Belgian tax
authority, completed an examination of Bontex S.A.'s ("BXSA"), the Company's
Belgian subsidiary, tax returns for 1997, 1998 and 1999 and extended the tax
examination to 1995 and 1996 based on certain items. BXSA has received notices
of proposed tax adjustments to these tax returns. The proposed tax adjustments
arise from items which are considered disallowed expenses by tax authorities,
including commissions paid to certain distributors and clients, certain travel
expenses and various smaller items including allowances for doubtful receivables
and certain insurance premiums. The proposed tax adjustments by the Belgian
authorities approximate $820,000. The Company believes, based in part on written
opinion of external counsel, it has meritorious legal defenses to many of the
claims and the Company intends to defend such claims. The Company's best
estimate of the most likely amount payable for the foregoing tax matters is
$239,000, and accordingly, a provision for this amount has been accrued at June
30, 2000. Similar deductions relating to the year ended June 30, 2000 that in
light of the current information may be disallowed have been treated as
disallowed expenses in the calculation of the current year's tax provision. The
Company's actual liability pursuant to the foregoing examination may exceed
$239,000, and such excess liability could adversely affect the Company's
financial condition.
In the normal course of business, the Company is subject to
proceedings, lawsuits and other claims whose outcomes are uncertain and
unpredictable. There are no other legal proceedings, lawsuits or other claims
pending against or involving the Company that, in the opinion of management,
will have a material adverse impact upon the financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
Executives of the Registrant:
The following list is included as an unnumbered Item in Part I of this
report in lieu of being included in the Proxy Statement for the Annual Meeting
of Stockholders to be held on November 2, 2000.
The names, ages and positions of the executives of the Company as of
September 22, 2000 are listed below with their business experience with the
Company for the past five years. Executive officers are appointed annually by
the Board of Directors at the annual meeting of stockholders. There is no
agreement or understanding between any executive and any other pursuant to which
the executive was selected. Mr. Jeffrey C. Kostelni and Mr. Charles W. J.
Kostelni are the sons of Mr. James C. Kostelni.
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<TABLE>
<CAPTION>
Position and Business
Name and Age Experience for Past Five Years
------------ ------------------------------
<S> <C>
James C. Kostelni, 65 Chairman of the Board, President, and Chief
Executive Officer (since 1994), President and Chief
Operating Officer (since 1971) of the Company. Mr.
Kostelni has a Bachelor of Science Degree in
Business Administration. Director.
Jeffrey C. Kostelni, 34 Senior Vice President (since 1999); Chief Financial
Officer and Treasurer (since 1994) of the Company;
General Sales Manager of Bontex S.A., a subsidiary
of the Company in Belgium (1995-1999). Mr.
Kostelni has a Bachelor of Science Degree in
Accountancy and is a Certified Public Accountant.
Director.
Charles W. J. Kostelni, 36 Senior Vice President (since 1999), General
Manager (U.S. operations only) (since 1998),
Corporate Secretary (since 1997), Corporate
Controller (since 1996) of the Company and General
Sales Manager of Bontex S.A., a subsidiary of the
Company in Belgium (since 1999). Prior thereto,
Assistant Controller (1994-1996) of the Company
and Assistant Vice President, Union Bank of
Switzerland, New York (1991-1995). Mr. Kostelni
has a Bachelor of Science Degree in Accountancy
and is a Certified Public Accountant. Director.
David A. Dugan, 53 Controller (since 1988) and Assistant Corporate
Secretary (since 1997); prior thereto, Corporate
Secretary (1993-1997) of the Company. Mr. Dugan
has a Masters in Business Administration and is a
Certified Public Accountant.
Larry E. Morris, 54 Technical Sales Director (since 1998) of the
Company; prior thereto, Technical (1983-1998),
Sales Director (1993-1998). Director.
Michael J. Breton, 60 Corporate Director of International Operations of the
Company (since 1993), and General Manager of
Bontex S.A., a subsidiary of the Company (since
1987). Mr. Breton has a Bachelor of Science
Degree in Paper Technology. Director.
</TABLE>
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information set forth under the caption "Common Stock and Dividend
Data" on page 4 of the Company's 2000 Annual Report to Stockholders is
incorporated herein by reference, pursuant to General Instruction G(2).
ITEM 6. SELECTED FINANCIAL DATA
The five year data for the fiscal years 2000, 1999, 1998, 1997, and
1996 are included in the "Summary of Selected Ten Year Data" on page 4 of the
Company's 2000 Annual Report to Stockholders and is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
"Management's Discussion and Analysis " on pages 5 through 10 of the
Company's 2000 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Quantitative and qualitative disclosures about market risk in
"Management's Discussion and Analysis" on pages 9 and 10 of the Company's 2000
Annual Report to Stockholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Registrant and
the independent auditors' report included on pages 11 through 26 of the 2000
Annual Report to Stockholders, are herein incorporated by reference.
1. Consolidated Statements of Income (Loss) and Comprehensive Income
(Loss) for the Years Ended June 30, 2000, 1999 and 1998.
2. Consolidated Statements of Changes in Stockholders' Equity for
the Years Ended June 30, 2000, 1999, and 1998.
3. Consolidated Balance Sheets as of June 30, 2000 and 1999.
4. Consolidated Statements of Cash Flows for the Years Ended June
30, 2000, 1999, and 1998.
5. Notes to Consolidated Financial Statements.
6. Independent Auditors' Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in independent auditors and no disagreements
with independent auditors on any matter of accounting principles or practices,
financial statement disclosure, or auditors' scope or procedure.
11
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information with respect to the executives of the Registrant, see
"Executives of the Registrant" at the end of Part I of this Report. For
information with respect to the Directors of the Registrant, see "Election of
Directors" at pages 4 through 6 of the Proxy Statement for the Annual Meeting of
Stockholders to be held November 2, 2000, which information is incorporated
herein by reference. The information with respect to compliance with Section
16(a) of the Exchange Act, which is set forth under the caption "Section 16(a)
Beneficial Ownership Reporting Compliance" at page 16 of the Proxy Statement for
the Annual Meeting of Stockholders to be held November 2, 2000, is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the captions "Executive Compensation,"
"Compensation Committee Report on Executive Compensation" and "Stock
Performance" at pages 8 through 15 of the Proxy Statement for the Annual Meeting
of Stockholders to be held November 2, 2000, is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information pertaining to stockholders beneficially owning more
than five percent of the Registrant's common stock and the security ownership of
management, which is set forth under the caption "Stockholdings of Certain
Owners and Management" on pages 2 through 4 of the Proxy Statement for the
Annual Meeting of Stockholders to be held on November 2, 2000, is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Related Party
Transactions" on page 13 of the Proxy Statement for the Annual Meeting of
Stockholders to be held on November 2, 2000, is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report:
1. Financial Statements: All financial statements of the
Registrant as set forth under Item 8 of this Report on Form
10-K.
2. Financial statement schedules and the location in this Form
10-K are as follows:
<TABLE>
<CAPTION>
SCHEDULE
NUMBER DESCRIPTION PAGE
<S> <C> <C> <C> <C> <C> <C>
(a) Independent Auditors' Report
on Financial Statement Schedule 17
(d) II Valuation and Qualifying Accounts for the
years ended June 30, 2000, 1999 and 1998 18
</TABLE>
12
<PAGE>
All other schedules are omitted, as the required information
is inapplicable, or the information is presented in the
consolidated financial statements or related notes.
3. Exhibits to this Form 10-K are as follows:
EXHIBIT
NUMBER DESCRIPTION
3 (i) Amended and Restated Articles of Incorporation of the
Company, as amended (incorporated herein by reference
to Exhibit No. (iii) of Form 10-Q for the fiscal
quarter ended December 31, 1996)
3 (ii) Amended and Restated Bylaws of Bontex, Inc.
(incorporated herein by reference to Exhibit No. 3(i)
of Form 10-Q for quarter ended March 31, 1998)
10 (i) *Executive Compensation Agreement dated January 22,
1997, between Bontex, Inc. and James C. Kostelni
(incorporated herein by reference to Exhibit 10(i) of
Form 10-Q for quarter ended March 31, 1997)
10 (ii) *Life Insurance Agreement between Georgia Bonded
Fibers Inc. and James C. Kostelni incorporated herein
by reference to Exhibit 10.4 of Form 10-Q for quarter
ended December 31, 1993)
10 (iii) *Bontex S.A. Pension Plan (incorporated herein
by reference to Exhibit No. 10(iv) of Form 10-K for
the fiscal year ended June 30, 1994)
10 (iv) *Georgia Bonded Fibers, Inc. Annual Incentive Plan
(incorporated herein by reference to Exhibit No.
10(v) of Form 10-K for the fiscal year ended June 30,
1994)
10 (v) *Supplemental Executive Compensation Agreement dated
May 26, 1994, between Georgia Bonded Fibers, Inc. and
James C. Kostelni (incorporated herein by reference
to Exhibit No. of Form 10-K for the fiscal year ended
June 30, 1994)
10 (vi) Special Consent Order between the Company and the
State Water Control Board dated July 22, 1994
(incorporated herein by reference to Exhibit No.
10(vii) of Form 10-K for the fiscal year ended June
30, 1994)
10 (vii) Amended Consent Order between the Company and
the Commonwealth of Virginia, Department of
Environmental Quality dated January 10, 1997
(incorporated herein by reference to Exhibit No.
10(iv) of Form 10-Q for the quarter ended December
31, 1996)
10 (viii) Related party Marketing Agreement between Bontex,
Inc. and Maxcomm, Inc. dated February 16, 1999
10 (ix) *Bontex, Inc. Key Employee Stock Option Plan dated
October 29, 1999 (incorporated herein by reference
to Exhibit 4(c) of the Form S-8 filed on February
28, 2000).
10 (x) *Amendment to Executive Compensation Agreement
between Jeffrey C. Kostelni and Bontex, Inc. dated
January 27, 2000.
10 (xi) *Amendment to Executive Compensation Agreement
between Charles W. J. Kostelni and Bontex, Inc. dated
January 27, 2000.
13
<PAGE>
10 (xii) *Part-Time Employment Agreement, Settlement
Agreement, General Release and Non-Disclosure
Agreement between Patricia S. Tischio and Bontex,
Inc. dated April 30, 2000.
13 2000 Annual Report to Stockholders (such report,
except to the extent incorporated herein by
reference, is being furnished for the information of
the Commission only and is not to be deemed filed as
part of this Report on Form 10-K)
21 Subsidiaries of the Company
27 Financial Data Schedule
*Management contract or compensatory plan or agreement required to be
filed as an Exhibit to this Form 10-K pursuant to Item 14 (c).
(b) Reports on Form 8-K: None
(c) Exhibits - The response to this section of Item 14 is submitted
as a separate section of this report.
(d) Financial statement schedules required by Regulation S-X are
submitted as a separate section of this report.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, hereunto duly authorized on this 28th day of
September, 2000.
BONTEX, INC.
by /s/James C. Kostelni
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date
/s/James C. Kostelni September 28, 2000
------------------------------------ -------------------
James C. Kostelni
Chairman of the Board, President and
Chief Executive Officer
Director
/s/Jeffrey C. Kostelni September 28, 2000
------------------------------------ -------------------
Jeffrey C. Kostelni
Treasurer and
Chief Financial Officer
Director
/s/Charles W. J. Kostelni September 28, 2000
------------------------------------ -------------------
Charles W. J. Kostelni
Corporate Controller and
Corporate Secretary
Director
/s/Larry E. Morris September 28, 2000
------------------------------------ -------------------
Larry E. Morris
Technical Sales Director
Director
/s/Patricia S. Tischio September 28, 2000
------------------------------------ -------------------
Patricia S. Tischio
Director
/s/William J. Binnie September 28, 2000
------------------------------------ -------------------
William J. Binnie
Director
/s/William B. D'Surney September 28, 2000
------------------------------------ -------------------
William B. D'Surney
Director
15
<PAGE>
/s/Frank Mayorshi September 28, 2000
------------------------------------ -------------------
Frank Mayorshi
Director
/s/Joseph F. Raffetto September 28, 2000
------------------------------------ -------------------
Joseph F. Raffetto
Director
/s/Robert J. Weeks September 28, 2000
------------------------------------ -------------------
Robert J. Weeks
Director
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of Bontex, Inc.:
Under date of August 25, 2000, we reported on the consolidated balance sheets of
Bontex, Inc. and subsidiaries as of June 30, 2000 and 1999, and the related
consolidated statements of income (loss) and comprehensive income (loss),
changes in stockholders' equity, and cash flows for each of the years in the
three-year period ended June 30, 2000, as contained in the 2000 annual report to
stockholders. These consolidated financial statements and our report thereon are
incorporated by reference in the accompanying annual report on Form 10-K for the
year 2000. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedule as set forth under Item 14(a)2 of the accompanying annual
report on Form 10-K for the year 2000. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
s/KPMG LLP
KPMG LLP
Roanoke, Virginia
August 25, 2000
<PAGE>
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
BONTEX, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Balance at Charges to Charged to Balance
Beginning Costs and Other at End
Description of Period Expenses Accounts* Deductions** of Period
----------- --------- -------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 2000
Reserves and allowances
Deducted from asset accounts:
Allowances for doubtful accounts $ 128,000 $ 92,000 $ (15,000) $ 35,000 $ 170,000
YEAR ENDED JUNE 30, 1999
Reserves and allowances
Deducted from asset accounts:
Allowances for doubtful accounts $ 268,000 $ (39,000) $ (7,000) $ 94,000 $ 128,000
YEAR ENDED JUNE 30, 1998
Reserves and allowances
Deducted from asset accounts:
Allowances for doubtful accounts $ 119,000 $ 252,000 $ - $ 103,000 $ 268,000
</TABLE>
*Foreign currency translation (loss)
**Uncollectible accounts written off, net of recoveries.
<PAGE>
Exhibit Index
3 (i) Amended and Restated Articles of Incorporation of the
Company, as amended (incorporated herein by reference
to Exhibit No. (iii) of Form 10-Q for the fiscal
quarter ended December 31, 1996)
3 (ii) Amended and Restated Bylaws of Bontex, Inc.
(incorporated herein by reference to Exhibit No. 3(i)
of Form 10-Q for quarter ended March 31, 1998)
10 (i) *Executive Compensation Agreement dated January 22,
1997, between Bontex, Inc. and James C. Kostelni
(incorporated herein by reference to Exhibit 10(i) of
Form 10-Q for quarter ended March 31, 1997)
10 (ii) *Life Insurance Agreement between Georgia Bonded
Fibers Inc. and James C. Kostelni incorporated herein
by reference to Exhibit 10.4 of Form 10-Q for quarter
ended December 31, 1993)
10 (iii) *Bontex S.A. Pension Plan (incorporated herein
by reference to Exhibit No. 10(iv) of Form 10-K for
the fiscal year ended June 30, 1994)
10 (iv) *Georgia Bonded Fibers, Inc. Annual Incentive Plan
(incorporated herein by reference to Exhibit No.
10(v) of Form 10-K for the fiscal year ended June 30,
1994)
10 (v) *Supplemental Executive Compensation Agreement dated
May 26, 1994, between Georgia Bonded Fibers, Inc. and
James C. Kostelni (incorporated herein by reference
to Exhibit No. of Form 10-K for the fiscal year ended
June 30, 1994)
10 (vi) Special Consent Order between the Company and the
State Water Control Board dated July 22, 1994
(incorporated herein by reference to Exhibit No.
10(vii) of Form 10-K for the fiscal year ended June
30, 1994)
10 (vii) Amended Consent Order between the Company and
the Commonwealth of Virginia, Department of
Environmental Quality dated January 10, 1997
(incorporated herein by reference to Exhibit No.
10(iv) of Form 10-Q for the quarter ended December
31, 1996)
10 (viii) Related party Marketing Agreement between Bontex,
Inc. and Maxcomm, Inc. dated February 16, 1999
10 (ix) *Bontex, Inc. Key Employee Stock Option Plan dated
October 29, 1999 (incorporated herein by reference
to Exhibit 4(c) of the Form S-8 filed on February
28, 2000).
10 (x) *Amendment to Executive Compensation Agreement
between Jeffrey C. Kostelni and Bontex, Inc. dated
January 27, 2000.
10 (xi) *Amendment to Executive Compensation Agreement
between Charles W. J. Kostelni and Bontex, Inc. dated
January 27, 2000.
10 (xii) *Part-Time Employment Agreement, Settlement
Agreement, General Release and Non-Disclosure
Agreement between Patricia S. Tischio and Bontex,
Inc. dated April 30, 2000.
13 2000 Annual Report to Stockholders (such report,
except to the extent incorporated herein by
reference, is being furnished for the information of
the Commission only and is not to be deemed filed as
part of this Report on Form 10-K)
21 Subsidiaries of the Company
<PAGE>
27 Financial Data Schedule
*Management contract or compensatory plan or agreement required to be
filed as an Exhibit to this Form 10-K pursuant to Item 14 (c).
