<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1995 Commission File Number 1-4773
------------------------ --------
American Biltrite Inc.
-----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-1701350
- --------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
57 River Street Wellesley Hills, Massachusetts 02181
- --------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 617-237-6655
------------------------
None
- --------------------------------------------------------------------------
(Former name, former address, and former fiscal year if changed since
last report)
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 covered by this report.
Class Outstanding at November 3, 1995
- --------------------------- ------------------------------------
Common Stock, no par value 3,683,636 shares
1
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
($000)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 22,619 $ 4,883
Short-term investments 4,500 4,295
Accounts receivable, net 46,611 12,664
Inventories 86,760 19,304
Deferred income taxes 4,776 1,798
Prepaid expenses & other current assets 4,069 1,391
-------- --------
TOTAL CURRENT ASSETS 169,335 44,335
Property, plant and equipment, net 101,217 26,801
Investments in associated companies 1,100 10,228
Goodwill, net 23,527
Deferred income taxes 15,339
Other assets 8,897 1,440
-------- --------
$319,415 $ 82,804
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks $ 21,000
Accounts payable 26,701 $ 8,692
Accrued expenses 36,641 8,016
Income taxes payable 2,191 1,144
Current portion of long-term debt 5,966 2,094
-------- --------
TOTAL CURRENT LIABILITIES 92,499 19,946
Long-term debt 94,303 2,094
Pensions 14,766 2,582
Deferred income taxes 15,627 3,296
Accrued postretirement benefit obligation 10,755
Other liabilities 20,123 765
Interests attributable to outside parties 12,916
STOCKHOLDERS' EQUITY
Common stock 18,997 18,997
Retained earnings 52,056 49,644
Equity adjustment from translation (1,899) (2,437)
Less cost of shares in treasury (10,728) (12,083)
-------- --------
58,426 54,121
-------- --------
$319,415 $ 82,804
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited)
($000)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
1995 1994 1995 1994
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Net sales $107,441 $ 26,361 $ 298,421 $ 78,906
Interest and other income 604 232 4,046 1,124
-------- -------- --------- ---------
108,045 26,593 302,467 80,030
-------- -------- --------- ---------
Costs and expenses:
Cost of products sold 77,261 18,545 208,982 56,380
Selling, general and
administrative expenses 23,694 5,675 68,462 17,121
Interest 2,707 147 7,652 479
-------- -------- --------- ---------
103,662 24,367 285,096 73,980
-------- -------- --------- ---------
EARNINGS BEFORE INCOME TAXES
AND OTHER ITEMS 4,383 2,226 17,371 6,050
Provision for income taxes 1,707 857 7,356 2,329
Interests attributable to
outside parties (1,124) (4,317)
Equity in income of joint
venture 1,811 4,538
-------- -------- --------- ---------
NET EARNINGS $ 1,552 $ 3,180 $ 5,698 $ 8,259
======== ======== ========= =========
Primary and fully diluted
earnings per share $ .41 $ .84 $ 1.50 $ 2.19
Dividends declared per
common share $ .10 $ .0375 $ .25 $ .09375
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
($000)
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 30, Oct. 1,
1995 1994
---------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 5,698 $ 8,259
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation and amortization 8,840 2,032
Equity in earnings of joint venture (4,538)
Accounts and notes receivable (9,499) (1,123)
Inventories (9,127) (2,159)
Prepaid expenses and other assets (593) (139)
Accounts payable (4,435) 2,048
Accrued expenses (5,930) 1,167
Interests attributable to outside parties 4,317
Other 1,465 (49)
-------- -------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES (9,264) 5,498
INVESTING ACTIVITIES
Business acquisitions, net of cash acquired (5,274)
Capital expenditures (8,316) (6,759)
Maturities of short-term investments 52,550
Purchase of short-term investments (28,755)
Preferred stock redemption 5,000
Preferred stock dividends 404
-------- -------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES 10,205 (1,355)
FINANCING ACTIVITIES
Payment of long-term debt (2,086) (2,072)
Payment of Congoleum equity offering costs (911)
Net proceeds from Congoleum equity offering 56,219
Purchase of Congoleum Class B shares (60,450)
Short-term borrowings 21,000 225
Repayments of loans to affiliates (5,792)
K&M capital transactions (3,821) 288
Purchase of treasury shares (882) (2)
Dividends paid (909) (334)
-------- -------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 2,368 (1,895)
Effect of foreign exchange (391) (383)
-------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,918 1,865
Cash at beginning of period (including
Congoleum Corporation in 1995) 19,701 8,528
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 22,619 $10,393
======== =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1995
Note A - Basis of Presentation
------------------------------
The accompanying unaudited consolidated condensed financial statements
which include the accounts of American Biltrite Inc. and its wholly-owned
subsidiaries ("ABI") and for 1995, Congoleum Corporation ("Congoleum"), over
which the Company obtained voting control in 1995, and K&M Associates L.P.
("K&M") (see Note C) have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the nine month period ended September 30, 1995 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1995. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1994.
Note B - Inventories
--------------------
Inventory at September 30, 1995 and December 31, 1994 consisted of the
following:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
($000)
<S> <C> <C>
Finished goods $59,412 $ 7,608
Work-in-process 13,775 5,791
Raw materials and supplies 13,573 5,905
------- -------
$86,760 $19,304
======= =======
</TABLE>
Note C - Investments in Affiliated Companies
--------------------------------------------
On February 8, 1995, Congoleum completed a public offering of 4,650,000 shares
of Class A Common Stock at $13 per share and implemented a Plan of Repurchase,
pursuant to which its two-tiered holding company ownership structure was
eliminated through the merger of Congoleum Holdings with and into Congoleum,
with Congoleum as the surviving corporation. The net proceeds of the
offering, together with certain other funds of Congoleum, were used to acquire
a portion of Congoleum's outstanding Class B Common Stock held by Hillside
Industries Incorporated. In conjunction with the transaction, ABI exchanged
its shares of Class B Common Stock for 4,395,605 shares of a new series of
Class B Common Stock. The exchange of stock did not change the Company's 44%
ownership, however, the new shares represent 57% of the voting shares of
Congoleum, giving ABI majority voting control. Accordingly, Congoleum's
assets, liabilities, results of operations and cash flows have been
consolidated in the financial statements of ABI, using Congoleum's historical
cost, as if voting control was obtained on January 1, 1995. In connection
with Congoleum's
5
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1995
Note C - Investment in Affiliated Companies (continued)
------------------------------------------------------
stock issuance and repurchase, ABI charged $2,377,000 to retained earnings to
reflect the reduction in the equity of Congoleum. In 1994, the investment in
Congoleum was accounted for using the equity method.
During 1995, ABI indirectly acquired an aggregate 62.5% interest in K&M, a
Rhode Island limited partnership, in which ABI indirectly has held a limited
partnership interest since 1983. K&M is a business engaged in the sale,
distribution and servicing of costume jewelry and other related accessories.
Prior to May 4, 1995, ABI indirectly held an 8% limited partnership interest
in K&M.
Following are the pro forma unaudited results of operations for the nine
months ended September 30, 1995 and October 1, 1994 which give effect to the
change in voting control over Congoleum and the acquisition of K&M interests
as if the transactions had occurred on January 1, 1994. The pro forma
financial information is presented for informational purposes and is not
necessarily indicative of either the results of operations that would have
occurred had the change in voting control and acquisition occurred at the
beginning of the period presented or the future results of operations.
<TABLE>
<CAPTION>
Nine Months Ended
Pro Forma
Sept. 30, Oct. 1,
1995 1994
--------- ---------
($000)
<S> <C> <C>
Net sales $306,146 $301,520
Net income 5,529 8,420
Primary and fully diluted earnings
per common share 1.46 2.23
</TABLE>
Note D - Commitments and Contingencies
--------------------------------------
ABI and Congoleum have recorded what they believe are adequate provisions for
their respective environmental remediation and product-related liabilities,
including for Congoleum, provisions for testing for potential remediation of
conditions at its own facilities. While each company believes that its
estimate of the future amount of these liabilities is reasonable, and that the
costs of these liabilities will be paid over a period of several years, the
timing and amount of such payments may differ significantly from the
companies' assumptions.
6
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1995
Results of Operations
---------------------
The comments that follow compare the third quarter and nine months of 1995
results of operations with the same periods of 1994. In both 1995 periods,
the financial results of Congoleum and K&M are included. In both periods in
1994, the financial results of Congoleum and K&M are not included. See Note C
of the Notes to Consolidated Condensed Financial Statements which outlines our
investments in these affiliated companies.
Net sales for the 1995 third quarter were $107.4 million compared to $26.4
million last year, an increase of $81.0 million. For the current nine months,
net sales are $298.4 million compared to $78.9 million last year, an increase
of $219.5 million.
The following table illustrates the various components of net sales for each
period:
<TABLE>
<CAPTION>
(Dollars in Millions)
Third Quarter Nine Months
1995 1994 1995 1994
------ ------ ---------- ------
<S> <C> <C> <C> <C>
ABI and K&M $ 41.9 $ 26.4 $105.5(1) $78.9
Congoleum 64.8 196.7
Intercompany
eliminations
and other .7 (3.8)
------ ------ ------ -----
Total $107.4 $ 26.4 $298.4 $78.9
====== ====== ====== =====
</TABLE>
(1) Includes K&M for six months
Net sales for ABI and K&M for the 1995 third quarter and nine months were
slightly ahead of last year due to volume increases together with nominal
selling price increases. At Congoleum, 1995 third quarter sales reflect a 7%
decrease from what they reported in last year's third quarter. This sales
decrease resulted from extremely weak retail demand, particularly for higher
priced residential products, and reduced purchases by a major customer.
Partially offsetting these declines were sales of new products and increased
sales to the manufactured housing segment. Congoleum 1995 nine months sales
reflect a 2% decrease from last year's nine months sales and are the result of
1995 third quarter performance.
7
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1995
Interest and other income increased by $0.4 million in the current quarter and
by $2.9 million in the current nine months over last year. Including interest
and other income at Congoleum for 1995 in consolidated ABI results is the
major reason for the increase in both current periods. Congoleum generated
$1.0 million in interest income and $1.1 million in royalty income in the
first nine months of 1995. At ABI, $0.9 million was recognized in the 1995
first quarter from an incentive payment received from Hillside Industries as
described in prior 10-Q's.
Cost of products sold as a percentage of sales in the current quarter
increased to 71.9% from 70.4% last year. In the current nine months, these
percentages decreased to 70.0% from 71.5% last year. Historically, gross
margins at both Congoleum and K&M are higher than those reported for ABI. In
the current third quarter, margins at both ABI and Congoleum were depressed as
a result of substantially higher raw material costs exacerbated by the
inability to offset these cost increases with higher selling prices, and at
Congoleum lower sales volume and extreme summer heat aggravated the production
process, resulting in plant inefficiencies and lower absorption of factory
overhead. These factors caused margins to be lower in the current quarter
compared to last year, but not sufficient to pull year-to-date margins to a
level lower than last year.
Selling, general and administrative expenses as a percentage of sales in the
current quarter increased to 22.1% from 21.5% last year and for the current
nine months increased to 22.9% from 21.7% last year. The main reason for the
increase in both current periods is the impact of expenses at K&M where these
expenses historically have been over 35% of sales. Excluding K&M from the
calculation, these expense percentages would be equal to last year for both
periods.
Interest expense increased to $2.7 million in the current quarter from $0.1
million last year and increased to $7.7 million in the current nine months
from $0.5 million last year. Interest expense in the current quarter for
Congoleum was $2.0 million and at K&M was $0.4 million and for the first nine
months of 1995, $6.1 million and $0.7 million respectively. At ABI, interest
expense
8
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1995
was $0.3 million in the current quarter compared to $0.1 million last year and
$0.9 million in the current nine months compared to $0.5 million last year.
This increase at ABI is mainly due to increased borrowings to finance the
acquisition of the additional partnership interest in K&M.
Movements of foreign currency exchange rates have not significantly impacted
the Company's financial condition, cash flows or results of operations.
Liquidity and Capital Resources
-------------------------------
Cash used by operations was $9.3 million for the first nine months of 1995.
The increase in accounts receivable is primarily at Congoleum and is due to
fluctuations in their monthly sales patterns and the predominantly short
(fifteen day) payment terms, with sales in the last two weeks of September,
1995 $7.8 million higher than the last two weeks of December, 1994, which
included a one-week shutdown. The increase in inventories is mainly at K&M
due to the need to build inventories to meet customers' seasonal shipping
requirements. Decreases in accounts payable are caused by unusually high
payables at year end.
During the first nine months of 1995, the Company invested $8.3 million in new
plant and equipment and depreciation and amortization expense was $8.8
million. Total year capital expenditures are anticipated to be between $16.0
to $17.0 million. Short-term investments of $23.8 million, consisting mainly
of investments made by Congoleum, were sold to fund operations. Short-term
borrowings of $21.0 million were incurred by ABI to purchase additional
partnership interest in K&M and to fund its operations.
The Company has established an environmental reserve against which the costs
of administration and remediation, as well as legal costs, are and will be
charged. Since legal proceedings tend to be unpredictable and costly,
resolution of an environmental proceeding could possibly be material to the
results of operations or cash flow for a particular quarterly or annual
reporting period.
Cash requirements for capital expenditures, working capital, debt service and
the current authorization of $5.8 million to purchase ABI Common Stock, are
expected to be financed from operating activities and borrowings under
existing lines of credit which at ABI are presently $28.0 million and at
Congoleum are $30.0 million.
9
<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
September 30, 1995
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
--------
The following exhibit is included herein:
(11) Statement re: computation of earnings per share
(b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K filed for the three months ended
September 30, 1995.
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.
AMERICAN BILTRITE INC.
----------------------
(Registrant)
Date: November 10, 1995 BY: /s/ Gilbert K. Gailius
----------------------
Gilbert K. Gailius
Vice President-Finance
10
<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
September 30, 1995
Item 6. Exhibits
- ------------------
(11) STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
1995 1994 1995 1994
--------- ------- -------- ---------
(000's omitted, except per share data)
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 3,631 3,561 3,599 3,560
Net effect of dilutive
stock options-based on
the treasury stock method
using average market price 125 240 198 209
------ ------ ------ ------
Totals 3,756 3,801 3,797 3,769
====== ====== ====== ======
Net income $1,552 $3,180 $5,698 $8,259
====== ====== ====== ======
Per share amount $ .41 $ .84 $ 1.50 $ 2.19
====== ====== ====== ======
Fully diluted:
Average shares outstanding 3,631 3,561 3,599 3,560
Net effect of dilutive
stock options-based on
the treasury stock method
using quarter-end market
price 133 240 201 216
------ ------ ------ ------
Totals 3,764 3,801 3,800 3,776
====== ====== ====== ======
Net income $1,552 $3,180 $5,698 $8,259
====== ====== ====== ======
Per share amount $ .41 $ .84 $ 1.50 $ 2.19
====== ====== ====== ======
</TABLE>
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> XXXXXX
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> JUL-02-1995 JAN-01-1995
<PERIOD-END> SEP-30-1995 SEP-30-1995
<CASH> 22,619 22,619
<SECURITIES> 4,500 4,500
<RECEIVABLES> 46,611 46,611
<ALLOWANCES> 0 0
<INVENTORY> 86,760 86,760
<CURRENT-ASSETS> 169,335 169,335
<PP&E> 101,217 101,217
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 319,415 319,415
<CURRENT-LIABILITIES> 92,499 92,499
<BONDS> 0 0
<COMMON> 18,997 18,997
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 319,415 319,415
<SALES> 107,441 298,421
<TOTAL-REVENUES> 108,045 302,467
<CGS> 77,261 208,982
<TOTAL-COSTS> 77,261 208,982
<OTHER-EXPENSES> 23,694 68,462
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,707 7,652
<INCOME-PRETAX> 4,383 17,371
<INCOME-TAX> 1,707 7,356
<INCOME-CONTINUING> 1,552 5,698
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,552 5,698
<EPS-PRIMARY> 0.41 1.50
<EPS-DILUTED> 0.41 1.50
</TABLE>
