-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JNN/nlzO6dOM6PCdxpdBlktu8s6N+SXnl6K61p9ESunwnIkUgxkM8x7qgUm865xv GzwdXroiRBcFMrzs3r8YiQ== /in/edgar/work/0000906504-00-000043/0000906504-00-000043.txt : 20001115 0000906504-00-000043.hdr.sgml : 20001115 ACCESSION NUMBER: 0000906504-00-000043 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BONTEX INC CENTRAL INDEX KEY: 0000041052 STANDARD INDUSTRIAL CLASSIFICATION: [2670 ] IRS NUMBER: 221427551 STATE OF INCORPORATION: VA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-05200 FILM NUMBER: 766783 BUSINESS ADDRESS: STREET 1: ONE BONTEX DR CITY: BUENA VISTA STATE: VA ZIP: 24416-0500 BUSINESS PHONE: 5402612181 MAIL ADDRESS: STREET 1: PO BOX 751 CITY: BUENA VISTA STATE: VA ZIP: 24416 FORMER COMPANY: FORMER CONFORMED NAME: GEORGIA BONDED FIBERS INC DATE OF NAME CHANGE: 19920703 10-Q 1 0001.txt FORM 10-Q FOR BONTEX, INC. 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 September 30, 2000 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 November 10, 2000 Common Stock - $.10 par value 1,572,824 BONTEX, INC. FORM 10-Q FOR THE FIRST QUARTER ENDED SEPTEMBER 30, 2000 INDEX PART I. FINANCIAL INFORMATION Page No. Item 1.Financial Statements CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2000 and June 30, 2000.................................3 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) AND CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY First Quarter Ended September 30, 2000 and 1999.......................4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS First Quarter Ended September 30, 2000 and 1999.......................5 CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.....6, 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................8-10 Item 3. Quantitative and Qualitative Disclosures About Market Risk.............................................10, 11 PART II. OTHER INFORMATION Item 6.Exhibits and Reports on Form 8-K..............................12 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BONTEX, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share and Per Share Data)
September 30, June 30, (unaudited) 2000 2000 ASSETS Current assets: Cash and cash equivalents $ 304 $ 457 Trade accounts receivable, less allowance for doubtful accounts of $177 ($170 at June '00) 10,534 12,187 Other receivables 395 378 Inventories 5,751 5,465 Deferred income taxes 136 135 Income taxes refundable 45 49 Other current assets 321 120 ------------- ------------- TOTAL CURRENT ASSETS 17,486 18,791 ------------- ------------- Property, plant and equipment: Land and land improvements 280 350 Buildings and building improvements 5,270 5,525 Machinery, furniture and equipment 17,389 17,797 Construction in progress 603 526 ------------- ------------- 23,542 24,198 Less accumulated depreciation and amortization 13,388 13,491 ------------- ------------- Net property, plant and equipment 10,154 10,707 Property held for sale 60 - Deferred income taxes 900 736 Other assets, net 599 651 ------------- ------------- TOTAL ASSETS $ 29,199 $ 30,885 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings $ 8,490 $ 8,251 Long-term debt due currently 596 626 Accounts payable 6,780 7,756 Accrued expenses 1,924 1,902 Income taxes payable 554 594 ------------- ------------- TOTAL CURRENT LIABILITIES 18,344 19,129 Long-term debt, less current portion 2,071 2,327 Deferred income taxes 38 42 Other long-term liabilities 438 439 ------------- ------------- TOTAL LIABILITIES 20,891 21,937 ------------- ------------- 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 Additional capital 1,551 1,551 Retained earnings 7,171 7,461 Accumulated other comprehensive income (loss) (571) (221) ------------- ------------- TOTAL STOCKHOLDERS' EQUITY 8,308 8,948 ------------- ------------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 29,199 $ 30,885 ============= ============= See accompanying condensed notes to unaudited condensed consolidated financial statements.
3 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)
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss): First Quarter Ended September 30, 2000 1999 Net Sales $ 9,128 $ 8,059 Cost of Sales 6,993 6,138 --------- --------- Gross Profit 2,135 1,921 Selling, General and Administrative Expenses 2,393 2,412 --------- --------- Operating Loss (258) (491) --------- --------- Other (Income) Expense: Interest expense 217 200 Foreign currency exchange gain (30) (15) Other, net 2 7 --------- --------- Total Other (Income)Expense 189 192 --------- --------- Loss Before Income Taxes (447) (683) Income Tax Benefit (157) (144) --------- --------- Net Loss (290) (539) --------- --------- Other Comprehensive Income (Loss) Foreign currency translation adjustment (350) 136 --------- --------- Comprehensive Loss $ (640) $ (403) ========= ========= Net loss per share $ (.18) $ (.34) ========= ========= Condensed Consolidated Statements of Changes in Stockholders' Equity: Stockholders' Equity, beginning balance $ 8,948 $ 9,893 Net loss (290) (539) Other comprehensive income (loss) Foreign currency translation adjustment (350) 136 --------- --------- Stockholders' Equity, ending balance $ 8,308 $ 9,490 ========= ========= See accompanying condensed notes to unaudited condensed consolidated financial statements.
4
BONTEX, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (unaudited) First Quarter Ended September 2000 1999 Cash Flows from Operating Activities: Cash received from customers $ 11,269 $ 9,765 Cash paid to suppliers and employees (11,605) (8,850) Interest received 1 1 Interest paid (250) (193) Income taxes paid, net of refunds (2) 2 --------- -------- Net cash provided by (used in) operating activities (587) 725 --------- -------- Cash Flows from Investing Activities: Acquisition of property, plant and equipment (267) (182) --------- -------- Net cash used in investing activities (267) (182) --------- -------- Cash Flows from Financing Activities: Increase (decrease) in short-term borrowings, net 883 (479) Long-term debt incurred 0 19 Principal payments on long-term debt (185) (186) --------- -------- Net cash provided by (used in) financing activities 698 (646) --------- -------- Effect of Exchange Rate Changes on Cash 3 (9) --------- -------- Net decrease in Cash and Cash Equivalents (153) (112) Cash and Cash Equivalents at Beginning of Period 457 336 --------- -------- Cash and Cash Equivalents at End of Period $ 304 $ 224 ========= ======== Reconciliation of Net Income (Loss) to Net Cash Provided by (Used In) Operating Activities: Net income (loss) $ (290) $ (539) Adjustments to reconcile net income (loss) to net cash provided by (Used In) Operating activities: Depreciation and amortization 361 328 Provision for bad debts 41 56 Deferred income taxes (168) (144) Change in assets and liabilities: Decrease in trade accounts and other receivables 819 1,974 Increase in inventories (631) (491) Increase in other assets (215) (233) Decrease in accounts payable and accrued expenses (593) (256) Increase in income taxes 2 2 Increase in other liabilities 87 28 --------- -------- Net cash provided by (used in) operating activities $ (587) $ 725 ========= ======== See accompanying condensed notes to unaudited condensed consolidated financial statements.
5 BONTEX, INC. AND SUBSIDIARIES CONDENSED NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 AND 1999 AND JUNE 30, 2000 (Unaudited) (Dollars in Thousands) 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 in the United States of America 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 in the United States of America 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, 2000. 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:
September 30, June 30, 2000 2000 Finished goods $ 3,875 $ 3,846 Raw Materials 1,565 1,222 Supplies 625 708 ------------------ ------------------- Inventories at FIFO and weighted average cost 6,065 5,779 ------------------ ------------------- LIFO reserves 314 314 ------------------ ------------------- $ 5,751 $ 5,465 ================== ===================
3. Business segment information related to the North American and European operations follows:
North American European Operations Operations Eliminations Consolidated First Quarter Ended September 30, 2000 Net Sales $ 4,081 $ 5,126 $ (79) $ 9,128 Net Loss (281) (9) - (290) First Quarter Ended September 30, 2000 Net Sales $ 3,703 $ 4,450 $ (94) $ 8,059 Net Loss (281) (261) 3 (539)
6 BONTEX, INC. AND SUBSIDIARIES CONDENSED NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 AND 1999 AND JUNE 30, 2000 (Unaudited) 4. Net loss per share has been computed on the basis of the weighted average number of common shares outstanding during each period(1,572,824 shares). Diluted earnings per share is not presented because the effect of stock options is anti-dilutive. 5. During fiscal year 2000, the Ministere Des Finances, the Belgian tax authority, completed an examination of Bontex S.A.'s, 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. Bontex S.A. 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 was accrued at June 30, 2000. 7 BONTEX, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS QUARTER ENDED SEPTEMBER 30, 2000 (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, excessive worldwide footwear inventories, a shrinking U. S. domestic market for Bontex products, decreased sales to key customers, increased foreign competition, the substitution by key customers of lower-margin products for higher-margin products, 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. RESULTS OF OPERATIONS The results of operations for the first quarter of fiscal year 2001 reflect an improvement in operating results over the prior year's first quarter. During the first quarter, the Company generated a consolidated operating loss of $258,000, and a net loss of $290,000 or $0.18 per share as compared to the prior year's first quarter operating loss of $491,000, and net loss of $539,000 or $0.34 per share. Consolidated net sales increased $1.1 million or 13.3 percent to $9.1 million for the first quarter ended September 30, 2000. The Company's improved sales are a result of the Company's efforts to promote additional elastomeric cellulose insole footwear products and an overall improvement in market conditions particularly in Asia. Additionally, the Company has also improved its sales of existing composite insole products. If foreign currency exchange rates had remained unchanged, however, net sales would have been $808,000 higher. 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 scheduled vacations, shutdowns, holidays and purchasing cycles. Over the past sixteen years, the Company has generated net income during the first quarter only six times, the most recent being in fiscal year 1997. Gross profit as a percentage of net sales (i.e., Gross Margin) for the first quarter of fiscal year 2001 decreased slightly compared to the same period last year from 23.8 to 23.4 percent. This decrease in profit margins is primarily attributable to competitive pricing pressures, and higher raw material costs, which resulted in a negative impact on net sales and profit margins that was partially offset by the overall increase in sales volume. The market price of pulp has increased over the past twelve months and it is expected to continue to increase during fiscal year 2001. The Company has delayed the impact of certain of the pulp cost increases through agreements with suppliers for purchasing pulp at fixed prices for fiscal year 2001. Additionally, management has announced a price increases for our finished products that is expected to be fully implemented during calendar year 2001. It is difficult to predict future raw material costs and future selling prices, and there can be no assurance that raw material prices will not have an adverse impact on the Company's operations or competitive position. Compared to the same period last year, Selling General & Administrative (SG&A) expenses remained approximately the same and decreased as a percent of net sales from 29.9 percent to 26.2 percent. The decrease in SG&A percentage is mainly due to sales increasing at a higher rate than costs, reflecting the benefit from our marketing efforts and cost control measures. Interest expense increased $17,000 for the quarter ended September 30, 2000, as compared to the same period last year due to increased short-term borrowings. The increase in short-term borrowings reflects the financing of higher inventories and the decrease in payables. 8 Other comprehensive loss, which consists of foreign currency translation adjustment, totaled $350,000 for the quarter ended September 30, 2000, and is primarily the result of the strengthening of the US Dollar versus the Euro since June 30, 2000. FINANCIAL CONDITION Consolidated stockholders' equity decreased $640,000 from June 30, 2000, and totaled $8.3 million at the end of September 2000. Financial ratios at September 30, 2000 generally decreased from June 30, 2000 because of the negative operating results. The fluctuation in foreign currency exchange rates resulted in a translation decrease of $3.0 million in consolidated total assets as compared to June 30, 2000. Trade accounts receivable decreased by $1.6 million to $10.5 million, primarily because of the seasonal decrease in consolidated net sales from the fourth quarter of the prior fiscal year 2000 compared to the first quarter of fiscal year 2001. This compares favorably to the prior year decrease in trade receivables from June 30, 1999 to Sept. 30, 1999 of $2.0 million. The $286,000 increase in inventories to $5.8 million mainly corresponds to raw material increases from year-end lows made in order to support higher sales volumes. Other current assets increased $201,000 to $321,000 from June 30, 2000, primarily due to prepaid insurance for fiscal year 2001. The level of other current assets is comparable with last year's September 30, 1999 balance of $388,000. The $553,000 decrease in net property, plant and equipment is due to the re-classification of property held for sale, depreciation for the three-month period and the translation decrease adjustment at the Company's European operations due to currency exchange rate changes. On September 29, 2000, the Company entered into a contract for the sale of its warehouse facility in Newark, New Jersey, with the New Jersey Institute of Technology. The contract for sale is to close on or before December 15, 2000, after the parties meet certain conditions. The contractual purchase price for the warehouse facility is $863,000 and the net book value of the property is $60,000. Accordingly, when the sale closes the Company expects to recognize a net gain after taxes of approximately $500,000. The proceeds from the sale may be used to reduce long-term debt. The Newark warehouse facility is classified as property held for sale on the balance sheet at September 30, 2000. During fiscal year 2000, the Belgian tax authority completed an examination of the tax returns for Bontex S.A., the Company's Belgian subsidiary, for 1997, 1998 and 1999 and extended the tax examination to 1995 and 1996 based on certain items. At September 30, 2000, the examination file had not yet been closed, and 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 had been accrued at June 30, 2000. 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. For further information concerning this tax examination, refer to Management's Discussion and Analysis included in the Company's Annual Report on Form 10-K for the year ended June 30, 2000. Accounts payable, accrued expenses and short-term borrowings decreased $715,000, which primarily corresponds to decreased trade account receivables. Subject to the discussion in the foregoing paragraph, and assuming receipt of the waiver by the lender referenced below, management believes that existing credit facilities will be sufficient to meet future operating and capital requirements. During the first quarter of fiscal 2001, Bontex USA was not in compliance with a loan covenant of its secured debt agreement, under which certain current and noncurrent assets are pledged as collateral. The Company has agreed with its lender to an Amendment to Loan and Security Agreement dated November 13, 2000, in which the lender agrees to waive the Company's past non-compliance with the covenant and to adjust temporarily through December 30, 2000 the covenant to a level placing Bontex USA within compliance. As previously discussed, if the Company completes the sale of the Newark warehouse during the second quarter, Bontex will recognize a gain that should enable the Company to comply with the original level of the covenant on December 31, 2000. If Bontex does not 9 complete its sale or otherwise cannot maintain compliance with the debt covenants, Bontex may have difficulty in obtaining funds to meet operating and capital requirements, which would cause a material adverse impact on its financial condition and results of operations. FINANCIAL INSTRUMENTS The Company uses various 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. As is customary for these types of instruments, the Company does not require collateral or other security from other parties to these instruments. However, because the Company manages exposure to credit risk through credit approvals, credit limits and monitoring procedures, the Company believes that reserves for losses are adequate. The Company has periodically used derivative instruments for the purpose of hedging commodity and interest rate exposures. As a policy, the Company does not engage in speculative transactions, nor does the Company hold or issue financial instruments for trading purposes. REFOCUSING Bontex has recently developed several new innovative products for footwear. As part of this program, the Company also concluded a marketing agreement with a stitch-bonded non-woven manufacturer. The Company has a strategy to locate new technologies and bring them to the marketplace, but it is not possible to predict with a high level of assurance their level of sales potential or profitability at this time. No material sales have been generated yet for these new technologies and products. RECENT ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," was effective for periods beginning after June 15, 2000. This statement requires that the Company recognize all derivatives as either assets or liabilities in the balance sheet, and measure those instruments at fair value. At September 30, 2000, the Company did not have any derivative instruments or hedging. Because the Company has used in the past and continues to consider in the future the use of derivative instruments and hedging activities this statement could have an impact on the Company's future financial statements.. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to certain risks related to interest rates, currency and commodity positions. Market risk is defined as the risk of loss arising from adverse changes in market rates and prices. The following disclosures provide certain forward-looking data concerning potential exposures to market risk. When deemed appropriate, the Company's general policy is to fix rates and prices at levels considered favorable. There is no expected material foreign exchange risk for the Company's debt, as these amounts are denominated in the local operating currencies of the respective operations. The table below provides information about the Company's financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. Financial Instruments held for other than trading purposes at September 30, 2000 (dollars in thousands): 10
Expected Maturity Date There- Fair 2001 2002 2003 2004 2005 after Total Value Liabilities Long-term debt Fixed Rate $ 320 $ 425 $ 425 $ 424 $ 206 - $ 1,800 $ 1,686 Average interest rate 4.97% 4.97% 4.97% 4.97% 5.27% - 5.02% Variable Rate $ 150 $ 200 $ 200 $ 200 $ 117 - $ 867 $ 867 Average Interest Rate 10.5% 10.5% 10.5% 10.5% 10.5% - 10.5%
Approximately $9.4 million of variable rate debt is not covered by interest rate swaps and is subject to the risk of interest rate changes. The market risk sensitivity analysis above does not fully reflect the potential net market risk exposure, because other market risk exposures may exist in other transactions. 11 PART II. OTHER INFORMATION BONTEX, INC. FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2000 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 10 - Amendment to Loan and Security Agreement between Congress Financial Corporation and Bontex, Inc. dated November 13, 2000. 27 - Financial Data Schedule (b) Reports on Form 8-K: None 12 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) November 14, 2000 /s/James C. Kostelni - ------------------- ---------------------------- (Date) James C. Kostelni Chairman of the Board and President November 14, 2000 /s/Charles W. J. Kostelni - ------------------- ---------------------------- (Date) Charles W. J. Kostelni Corporate Controller and Secretary 13 EXHIBIT INDEX 10 Amendment to Loan and Security Agreement between Congress Financial Corporation and Bontex, Inc. dated November 13, 2000. 27 Financial Data Schedule 14 EX-10 2 0002.txt EXHIBIT 10 Exhibit 10 AMENDMENT TO LOAN AND SECURITY AGREEMENT This Amendment to Loan and Security Agreement is made this 13th day of November, 2000 by and between CONGRESS FINANCIAL CORPORATION, a Delaware corporation ("Lender") and BONTEX, INC. ("Borrower"). Recitals Borrower and Lender entered into a certain Loan and Security Agreement dated January 26, 2000 (together with all amendments, modifications, addenda and supplements, the "Loan Agreement") and related documents, evidencing certain financing arrangements between Lender and Borrower as more particularly described therein. Borrower has requested certain modifications to the terms and conditions of the Loan Agreement. Lender is willing to make the said modifications, subject to the terms and conditions of this Agreement ("Agreement"). In addition, Borrower is not in compliance with certain financial covenants in the Loan Agreement and has requested Lender to waiver such noncompliance, and Lender has agreed to such waiver in accordance with the terms of this Agreement. NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree, as of the date hereof, as follows: 1. Subsection 2.1(a)(iii)(B) of the Loan Agreement is hereby amended by deleting the term "Two Million Dollars ($2,000,000)" and substituting in lieu thereof the term: "One Million Five Hundred Thousand Dollars ($1,500,000)." 2. Section 2.3 of the Loan Agreement is hereby amended by the addition of the following sentence: "Without in any manner limiting the provisions of this Section 2.3, Borrower hereby consents to the imposition of an Availability Reserve in the amount of $425,000, to take effect upon receipt by Lender of Net Proceeds under Section 6.7, which Availability Reserve shall be continuously maintained in the exclusive discretion of Lender. In the event the Net Proceeds are less than $850,000, Lender reserves the right to increase the level of said Availability Reserve." 3. Section 6.7 of the Loan Agreement is amended by deleting the term "Term Loan" and substituting therefor the term "Revolving Loans." 4. Section 9.14 of the Loan Agreement is hereby amended to read as follows: "9.14. Adjusted Tangible Net Worth. Borrower shall continuously maintain Adjusted Tangible Net Worth of not less than Seven Million Eight Hundred Thousand Dollars ($7,800,000) through December 30, 2000, and not less than Eight Million Three Hundred Thousand Dollars ($8,300,000) from December 31, 2000 and at all times thereafter." 5. This Agreement is conditioned on the payment by Borrower to Lender of a loan modification supplemental closing fee of $5,000, under Section 3.2 of the Loan Agreement, which shall be fully earned as of the date hereof. 6. Borrower acknowledges that as of the date of this Amendment, Borrower is not in compliance with the requirements of Section 9.14 of the Loan Agreement. Effective upon payment in full of the amount set forth in Section 5 hereof, and in consideration thereof, Lender waives such noncompliance from July 1, 2000 through the date hereof. Lender's agreement to waive such noncompliance shall not constitute a waiver of any other event which may constitute an Event of Default or obligate Lender to any future waiver of any Event of Default. 7. Except as expressly amended herein, the terms and conditions of the Loan Agreement are hereby reaffirmed and ratified in all respects, and Borrower reaffirms each of the representations and warranties under the Loan Agreement made by it, as if said representations and warranties were made and given on and as of the date hereof. 8. The Amendment may be executed in any number of counterparts and by different parties on separate counterparts (including by facsimile transmission of executed signature pages hereto), each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Amendment. This Amendment shall become effective upon the execution and delivery of a counterpart hereof by each of the parties hereof. [SIGNATURES ON FOLLOWING PAGE] IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be duly executed on and as of the date and year first above written. LENDER BORROWER CONGRESS FINANCIAL BONTEX, INC. CORPORATION By: s/Cindy Denbaum By: s/James C. Kostelni Title: Vice President Title: CEO Address: Address: 1133 Avenue of the Americas One Bontex Drive New York, NY 10036 Buena Vista, Virginia 24116 EX-27 3 0003.txt FDS --
5 This schedule contains summary financial information extracted from Bontex, Inc.'s unaudited condensed consolidated financial statements for the quarter ended September 30, 2000, 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. 3-MOS JUN-30-2001 SEP-30-2000 304 0 11,106 177 5,751 17,486 23,542 13,388 29,199 19,036 2,667 0 0 157 8,151 29,199 9,128 9,158 6,993 9,605 0 41 217 (447) (157) (290) 0 0 0 (290) (.18) (.18)
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