SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission File Number 1-13612
CONGOLEUM CORPORATION
(Exact name of Registrant as specified in Its Charter)
DELAWARE 02-0398678
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3705 Quakerbridge Road
P.O. Box 3127
Mercerville, NJ 08619-0127
(Address of Principal Executive Offices, including Zip Code)
Telephone number: (609) 584-3000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required 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 number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at November 1, 1996
- ---------------------- -------------------------------
Class A Common Stock 4,645,500
Class B Common Stock 5,350,000
Page 1 of 13
Index to Exhibits at Page 12
<PAGE>
CONGOLEUM CORPORATION
Index
Page
PART I. FINANCIAL INFORMATION ----
Item 1. Financial Statements:
Balance Sheets as of September 30, 1996
(unaudited) and December 31, 1995 3
Statements of Operations for the three and nine months
ended September 30, 1996 and 1995 (unaudited) 4
Statements of Cash Flows for the nine months
ended September 30, 1996 and 1995 (unaudited) 5
Notes to Unaudited Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
Exhibit Index 12
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
CONGOLEUM CORPORATION
BALANCE SHEETS
<CAPTION>
September 30, December 31,
1996 1995
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ -- $ 40,103
Short-term investments 35,100 --
Accounts and notes receivable, net 28,820 16,755
Inventories 47,511 48,018
Prepaid expenses and other current assets 1,222 918
Deferred income taxes 4,210 4,210
----------- -----------
Total current assets 116,863 110,004
Property, plant and equipment, net 77,863 74,208
Goodwill, net 12,791 13,115
Deferred income taxes 2,873 2,873
Other noncurrent assets 6,197 6,642
----------- -----------
Total assets $ 216,587 $ 206,842
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank checks outstanding, less cash in bank $ 2,846 $ --
Accounts payable 14,564 21,397
Accrued expenses 32,591 29,634
Accrued income taxes 2,944 346
Deferred income taxes 2,072 2,072
----------- -----------
Total current liabilities 55,017 53,449
Long-term debt 90,000 90,000
Other liabilities 17,629 17,601
Noncurrent pension liability 12,575 12,575
Accrued postretirement benefit obligation 10,615 10,615
----------- -----------
Total liabilities 185,836 184,240
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.01; 1,000,000 shares
authorized; none issued or outstanding -- --
Class A common stock,par value $0.01; 20,000,000
shares authorized, 4,650,000 shares issued;
4,645,500 and 4,650,000 outstanding as of
September 30, 1996 and December 31, 1995 47 47
Class B common stock, par value $0.01; 5,350,000
shares authorized, issued and outstanding as of
September 30, 1996 and December 31, 1995 53 53
Additional paid-in capital 55,172 55,172
Retained deficit (23,460) (31,658)
Minimum pension liability adjustment (1,012) (1,012)
Common stock held in treasury, at cost; 4,500 shares
at September 30, 1996 and none at December 31, 1995 (49) --
----------- ----------
Total stockholders' equity 30,751 22,602
----------- ----------
Total liabilities and stockholders' equity $ 216,587 $ 206,842
=========== ==========
The accompanying notes are an integral part
of the condensed financial statements.
</TABLE>
3
<PAGE>
<TABLE>
CONGOLEUM CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
(In thousands, except
per share amounts)
<S> <C> <C> <C> <C>
Net sales $ 71,900 $ 64,813 $ 200,398 $ 196,737
Cost of sales 46,931 46,596 135,552 137,061
Selling, general and administrative
expenses 16,492 13,711 47,279 41,969
-------- -------- --------- ---------
Income from operations 8,477 4,506 17,567 17,707
Other income (expense):
Interest income 497 337 1,186 999
Interest expense (2,044) (2,044) (6,126) (6,136)
Other income 393 180 1,057 1,286
Other expense (64) (28) (134) (177)
-------- -------- --------- ---------
Income before income taxes 7,259 2,951 13,550 13,679
Provision for income taxes 2,867 1,206 5,352 5,594
-------- -------- --------- ---------
Net income $ 4,392 $ 1,745 $ 8,198 $ 8,085
======== ======== ========= =========
Primary earnings per common share $ .44 $ .17 $ .82 $ .81
======== ======== ========= =========
Weighted average number of common
shares and equivalent shares
outstanding 9,997 10,000 9,999 10,030
======== ======== ========= =========
The accompanying notes are an integral part
of the condensed financial statements.
</TABLE>
4
<PAGE>
<TABLE>
CONGOLEUM CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
-----------------
1996 1995
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,198 $ 8,085
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 6,569 6,430
Provision for doubtful accounts 450 242
Deferred income taxes -- 646
Loss on disposition of assets 7 14
Changes in certain assets and liabilities:
Accounts and notes receivable (12,515) (8,454)
Inventories 507 (2,322)
Prepaid expenses and other assets (303) (93)
Accounts payable (6,833) (4,505)
Accrued expenses 5,555 (5,295)
Other liabilities 27 323
--------- ---------
Net cash provided (used) by operating activities 1,662 (4,929)
--------- ---------
Cash flows provided (used) by investing activities:
Capital expenditures (9,462) (5,582)
Purchase of short-term investments (35,100) (12,500)
Maturities of short-term investments -- 32,000
--------- ---------
Net cash provided (used) by investing activities (44,562) 13,918
--------- ---------
Cash flows from financing activities:
Payment of equity offering costs -- (911)
Proceeds from equity offering -- 56,219
Purchase of class B shares -- (60,450)
Purchase of treasury stock (49) --
Bank checks outstanding, less cash in bank 2,846 --
--------- ---------
Net cash provided (used) by financing activities 2,797 (5,142)
--------- ---------
Net increase/(decrease) in cash and cash equivalents (40,103) 3,847
Cash and cash equivalents:
Beginning of period 40,103 14,818
--------- ---------
End of period $ -- $ 18,665
========= =========
The accompanying notes are an integral part
of the condensed financial statements.
</TABLE>
5
<PAGE>
CONGOLEUM CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
1. BASIS OF PRESENTATION
- --------------------------
The condensed financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with Rule 10-01 of Regulation S-X
and have not been audited by the Company's independent accountants.
Certain information and note disclosures normally included in
annual financial statements prepared in accordance with generally
accepted accounting principles for complete financial statements
have been condensed or omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. The
preparation of condensed financial statements requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities and the reported amounts of revenues and expenses
during the reporting period. In the opinion of management, all
adjustments (consisting of normal and recurring adjustments)
considered necessary for a fair presentation of the Company's
financial position have been included. The results of operations
for the nine months ended September 30, 1996 are not necessarily
indicative of the results to be expected for a full year. These
condensed financial statements should be read in conjunction with
the Company's audited financial statements which appear in the
Company's Annual Report to Stockholders for the period ended
December 31, 1995.
2. INVENTORIES
- ----------------
A summary of the major classifications of inventories is as
follows:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ -----------
<S> <C> <C>
Finished goods $ 34,300 $ 34,122
Work-in-process 4,853 4,298
Raw materials and supplies 8,358 9,598
---------- ----------
$ 47,511 $ 48,018
========== ==========
</TABLE>
If the FIFO (first-in, first-out) method of inventory
accounting had been used, inventories would have been approximately
$1,171 lower and $226 higher than reported at September 30, 1996
and December 31, 1995, respectively.
6
<PAGE>
3. EARNINGS PER SHARE
- -----------------------
Earnings per share is calculated by dividing net income by the
weighted average number of shares of common stock outstanding. For
the three and nine months ended September 30, 1996, common stock
equivalents have been included in the weighted average number of
shares of common stock outstanding and amount to approximately
2,000 and 1,000 shares respectively. For the three months ended
September 30, 1995, common stock equivalents have not been included
in the weighted average number of shares of common stock outstanding
since the effect would be antidilutive. For the nine months ended
September 30, 1995, common stock equivalents have been included in
the weighted average number of shares of common stock outstanding
and amounted to approximately 30,000 shares.
4. COMMITMENTS AND CONTINGENCIES
- ----------------------------------
Certain legal and administrative claims are pending or have
been asserted against the Company, which are considered incidental
to its business. Among these claims, the Company is a named party
in several actions associated with waste disposal sites and
asbestos-related claims. These actions include possible
obligations to remove or mitigate the effects on the environment of
wastes deposited at various sites, including Superfund sites. The
amount of such future cost is indeterminable due to such unknown
factors as the magnitude of clean-up costs, the timing and extent
of the remedial actions that may be required, the determination of
the Company's liability in proportion to other potentially
responsible parties, and the extent to which costs may be
recoverable from insurance. The contingencies also include claims
for personal injury and/or property damage.
The Company records a liability for environmental remediation
and asbestos-related claim costs when a clean-up program or claim
payment becomes probable and the costs can be reasonably estimated.
As assessments and clean-ups progress, these liabilities are
adjusted based upon progress in determining the timing and extent
of remedial actions and the related costs and damages. The extent
and amounts of the liabilities can change substantially due to
factors such as the nature or extent of contamination, changes in
remedial requirements and technological improvements. Estimated
insurance recoveries related to these liabilities are reflected in
other non-current assets.
Although the outcome of these matters could result in
significant expenses or judgments, management does not believe that
their disposition will have a material adverse effect on the
financial position or results of operations of the Company.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Three and nine months ended September 30, 1996 as compared to
three and nine months ended September 30, 1995.
Net sales for the third quarter of 1996 were $71.9 million as
compared to $64.8 million for the third quarter of 1995, an
increase of $7.1 million or 10.9%. Year-to-date net sales were
$200.4 million, an increase of $3.7 million or 1.9% from the first
nine months of 1995. The increase in third quarter sales over year
earlier levels was primarily due to sales to new customers.
Shipments to the manufactured housing segment and sales of
residential sheet goods also contributed to the increase.
Gross profit for the third quarter of 1996 was $25.0 million,
up $6.8 million from $18.2 million in the third quarter of 1995,
reflecting improved gross profit margins and the increase in sales.
Gross profit as a percent of sales in the third quarter of 1996 was
34.7%, compared to 28.1% in the third quarter of 1995. Increased
volume, improved efficiency, and more moderate raw material costs
all contributed to the improvement in gross margin. Year-to-date
gross profit was $64.8 million (32.4% of sales), up from $59.7
million (30.3% of sales) in the first nine months of 1995.
Selling, general, and administrative costs increased by $2.8
million or 20.3% to $16.5 million in the third quarter of 1996 from
$13.7 million in the third quarter of 1995. As a percent of sales,
selling, general, and administrative costs were 22.9% for the third
quarter of 1996 and 21.1% for the third quarter of 1995. Increased
expenses for marketing, expanded distribution and new product
development were the major reasons for the increase. Year-to-date
selling, general and administrative expenses were $47.3 million
(23.6% of sales) up from $42.0 million (21.3% of sales) in the same
period one year earlier.
Income from operations for the third quarter of 1996 was $8.5
million (11.8% of net sales), compared to $4.5 million (7.0% of net
sales) for the third quarter of 1995, an increase of $4.0 million,
or 88.2%. The increase resulted from the higher sales and improved
gross profit margins, partly offset by increased selling, general,
and administrative costs. Income from operations for the nine
months ended September 30, 1996 totaled $17.6 million, $0.1 million
lower than the same period in 1995.
Net income for the third quarter of 1996 was $4.4 million,
compared to $1.7 million for the third quarter of 1995, an increase
of $2.6 million, reflecting the higher income from operations. For
the nine months ended September 30, 1996, net income was $8.2
million, $0.1 million higher than net income in the first nine
months of 1995.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents, including short-term investments at
September 30, 1996 were $35.1 million, a decrease of $5.0 million
from December 31, 1995. Working capital at September 30, 1996 was
$61.8 million, up from $57.8 million one year earlier. The ratio
8
<PAGE>
of current assets to current liabilities at September 30, 1996 was
2.1, and the ratio of debt to total capital was .42. Net cash
provided by operations during the nine months ended September 30,
1996 was $1.7 million and capital expenditures totaled $9.5
million.
Capital expenditures are anticipated to be approximately $14
to $15 million in 1996 and approximately $20 million in 1997.
During 1996, the Company's Board of Directors authorized the
repurchase of $5 million of the Company's Class A common stock and
$10 million of its 9% senior notes. At September 30, 1996, $49
thousand had been expended on stock repurchases and nothing had
been expended on note repurchases pursuant to these authorizations.
The Company has recorded what it believes are adequate
provisions for environmental remediation and product-related li
abilities, including provisions for testing for potential
remediation of conditions at its own facilities. While the Company
believes its estimate of the future amount of these liabilities is
reasonable, that such amounts will not have a material adverse
impact on the Company's financial position or results of
operations, and that they will be paid over a period of five to ten
years, the timing and amount of such payments may differ
significantly from the Company's assumptions. Although the effect
of future government regulation could have a significant effect on
the Company's costs, the Company is not aware of any pending
legislation which could have a material adverse effect on its
results of operations or financial position. There can be no
assurances that such costs could be passed along to its customers.
The Company's principal sources of liquidity are net cash
provided by operating activities and borrowings under its Amended
and Restated Financing Agreement. The Company believes that these
sources will be adequate to fund working capital requirements, debt
service payments, stock and note repurchases, and planned capital
expenditures through the foreseeable future.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 2. Changes in Securities: None
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders: None
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits: 11 Computation of Per Share Earnings
(b) Reports on Form 8-K: None
10
<PAGE>
CONGOLEUM CORPORATION
SIGNATURE
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.
CONGOLEUM CORPORATION
(Registrant)
Date: November 4, 1996 By: /s/ Howard N. Feist
-------------------------
(signature)
Howard N. Feist III
Sr. Vice President - Finance
(Principal Financial & Accounting
Officer)
11
<PAGE>
EXHIBIT INDEX
Page
Exhibit Number Number
- ------------------- ------ ------
Computation of Income Per Common Share 11 13
12
<PAGE>
EXHIBIT 11
<TABLE>
Congoleum Corporation
Computation of Income Per Common Share
(Amounts in thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary Earnings Per Common Share
- ---------------------------------
Income per common and common
equivalent share $ 4,392 $ 1,745 $ 8,198 $ 8,085
======== ======== ======== ========
Weighted average common shares
outstanding 9,995 10,000 9,998 10,000
Effect of assumed exercise of
dilutive stock options <F1> 2 -- 1 30
-------- -------- -------- --------
Weighted average common and common
equivalent shares 9,997 10,000 9,999 10,030
======== ======== ======== ========
Income per common and common
equivalent share $ 0.44 $ 0.17 $ 0.82 $ 0.81
======== ======== ======== ========
Fully Diluted Earnings Per Common Share:
- ---------------------------------------
Income per common and common
equivalent share $ 4,392 $ 1,745 $ 8,198 $ 8,085
======== ======== ======== ========
Weighted average common shares
outstanding 9,995 10,000 9,998 10,000
Effect of assumed exercise of
dilutive stock options <F1> 4 -- 1 37
-------- -------- -------- --------
Weighted average common and common
equivalent shares 9,999 10,000 9,999 10,037
======== ======== ======== ========
Income per common and common
equivalent share $ 0.44 $ 0.17 $ 0.82 $ 0.81
======== ======== ======== ========
<FN>
<F1> Computed based on the treasury stock method
</FN>
</TABLE>
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and statements of operations as reported in the form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 35,100
<RECEIVABLES> 28,820
<ALLOWANCES> 0
<INVENTORY> 47,511
<CURRENT-ASSETS> 116,863
<PP&E> 77,863
<DEPRECIATION> 0
<TOTAL-ASSETS> 216,587
<CURRENT-LIABILITIES> 55,017
<BONDS> 90,000
0
0
<COMMON> 100
<OTHER-SE> 30,651
<TOTAL-LIABILITY-AND-EQUITY> 216,587
<SALES> 200,398
<TOTAL-REVENUES> 202,641
<CGS> 135,552
<TOTAL-COSTS> 135,552
<OTHER-EXPENSES> 47,279
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,126
<INCOME-PRETAX> 13,550
<INCOME-TAX> 5,352
<INCOME-CONTINUING> 8,198
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,198
<EPS-PRIMARY> .82
<EPS-DILUTED> .82
</TABLE>
