<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 April 1, 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 May 8, 1995
- -------------------------- ------------------------------------
Common Stock, no par value 3,573,122 shares
1
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
($000)
<TABLE>
<CAPTION>
April 1, December 31,
1995 1994
-------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,587 $ 4,883
Short-term investments 14,000 4,295
Accounts receivable, net 39,559 12,664
Inventories 75,421 19,304
Deferred income taxes 4,936 1,798
Prepaid expenses & other current assets 2,709 1,391
-------- --------
TOTAL CURRENT ASSETS 142,212 44,335
Property, plant and equipment, net 98,229 26,801
Investments in associated companies 1,662 10,228
Goodwill, net 13,439
Deferred income taxes 16,274
Other assets 9,336 1,440
-------- --------
$281,152 $ 82,804
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 24,450 $ 8,692
Accrued expenses 33,913 8,016
Income taxes payable 4,133 1,144
Current portion of long-term debt 2,106 2,094
-------- --------
TOTAL CURRENT LIABILITIES 64,602 19,946
Long-term debt 92,053 2,094
Pensions 14,766 2,582
Deferred income taxes 15,794 3,296
Accrued postretirement benefit obligation 10,755
Other liabilities 20,139 765
Majority interest 9,360
STOCKHOLDERS' EQUITY
Common stock 18,997 18,997
Retained earnings 49,063 49,644
Equity adjustment from translation (2,305) (2,437)
Less cost of shares in treasury (12,072) (12,083)
-------- --------
53,683 54,121
-------- --------
$ 281,152 $ 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
April 1, April 2,
1995 1994
-------- --------
<S> <C> <C>
Net sales $89,691 $24,722
Interest and other income 2,267 127
------- -------
91,958 24,849
Costs and expenses:
Cost of products sold 62,162 17,905
Selling, general and administrative
expenses 21,679 5,577
Interest 2,156 159
------- -------
85,997 23,641
------- -------
EARNINGS BEFORE INCOME TAXES AND
OTHER ITEMS 5,961 1,208
Provision for income taxes 2,531 465
Majority interest 1,411
Equity in income of joint venture 705
-------
NET EARNINGS $ 2,019 $ 1,448
======== ========
Primary and fully diluted
earnings per common share $ .53 $ .39
======== ========
Dividends declared per common share $ .0625 $ .01875
======== ========
</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>
Three Months Ended
April 1, April 2,
1995 1994
---------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,019 $ 1,448
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization 2,878 649
Equity in earnings of joint venture (705)
Accounts receivable (9,986) (541)
Inventory (8,900) (370)
Prepaid expenses and other current assets (236) (280)
Accounts payable and accrued expenses (8,854) (574)
Majority interest 1,411
Other 1,202 (329)
-------- -------
NET CASH USED BY OPERATING ACTIVITIES (20,466) (702)
-------- -------
INVESTING ACTIVITIES
Investment in property, plant and equipment (2,223) (863)
Sale of short-term investments, net 14,295
Preferred stock redemption 5,000
Preferred stock dividends 404
-------- -------
NET CASH PROVIDED BY INVESTING ACTIVITIES 12,072 4,541
-------- -------
FINANCING ACTIVITIES
Payment on long-term borrowings (29) (45)
Payment on short-term borrowings (1,000)
Payment of equity offering costs (732)
Net proceeds from Congoleum equity offering 56,219
Purchase of Congoleum Class B shares (60,450)
Purchase of treasury shares (2)
Proceeds from exercise of stock options 11
Dividends paid (223) (67)
-------- -------
NET CASH USED BY FINANCING ACTIVITIES (5,204) (1,114)
Effect of foreign exchange (516) (220)
-------- -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (14,114) 2,505
Cash and cash equivalents at beginning of
period (including Congoleum Corporation
in 1995) 19,701 8,528
-------- -------
CASH AND CASH EQUIVALENTS AT END OF
QUARTER $ 5,587 $11,033
======== =======
</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
April 1, 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, over which the
Company obtained voting control in 1995 (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 three month period
ended April 1, 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 April 1, 1995 and December 31, 1994 consisted of the following:
<TABLE>
<CAPTION>
April 1, December 31,
1995 1994
--------- ------------
($000)
<S> <C> <C>
Finished goods $49,197 $ 7,608
Work-in-process 12,756 5,791
Raw materials and supplies 13,468 5,905
------- -------
$75,421 $19,304
======= =======
</TABLE>
Congoleum Corporation total inventory at April 1, 1995 was $53,640.
Note C - Investment in Congoleum Corporation
--------------------------------------------
On February 8, 1995, Congoleum Corporation 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 Corporation, with Congoleum Corporation 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 stock issuance and
5
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
April 1, 1995
Note C - Investment in Congoleum Corporation (continued)
-------------------------------------------------------
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.
Below is a comparison of the unaudited results of operations for the quarter
ended April 1, 1995 with the unaudited pro forma results of operations for the
quarter ended April 2, 1994 which give effect to the change in voting control
as if it had occurred on January 1, 1994. The pro forma financial statements
are presented for informational purposes and are not necessarily indicative of
either the results of operations that would have occurred had the change in
voting control occurred at the beginning of the period presented or the future
results of operations.
<TABLE>
<CAPTION>
Three Months Ended
Pro Forma
April 1, April 2,
1995 1994
-------- ----------
($000)
<S> <C> <C>
Net sales $ 89,691 $83,557
Interest and other income 2,267 230
-------- -------
91,958 83,787
Costs and expenses:
Cost of products sold 62,162 57,283
Selling, general and administrative
expenses 21,679 20,524
Interest 2,156 2,000
-------- -------
85,997 79,807
-------- -------
EARNINGS BEFORE INCOME TAXES 5,961 3,980
Provision for income taxes 2,531 1,590
Majority interest 1,411 942
-------- -------
NET EARNINGS $ 2,019 $ 1,448
======== =======
</TABLE>
Key financial information of Congoleum as of April 1, 1995 follows:
Major components of property, plant and equipment ($000):
<TABLE>
<S> <C>
Land and improvements $ 2,960
Buildings 23,314
Machinery and equipment 100,011
Construction-in-progress 8,463
--------
134,748
Less accumulated depreciation 63,374
--------
$ 71,374
========
Other liabilities consist of:
Environmental remediation and
product-related liabilities $ 8,819
Accrued worker's compensation
claims 4,310
Restructuring and integration
liabilities 3,147
Other 1,950
--------
$ 18,226
========
</TABLE>
6
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
April 1, 1995
Note C - Investment in Congoleum Corporation (continued)
--------------------------------------------------------
On April 1, 1995, Congoleum had $90 million of Senior Notes due 2001 from a
public offering made on February 1, 1994. The Senior Notes, issued at par,
bear interest at 9.0%. The Senior Notes are redeemable at the option of
Congoleum, in whole or in part, at any time on and after February 1, 1998 at a
predetermined redemption price (ranging from 103% to 100%), plus accrued and
unpaid interest to the date of redemption. On or before the third anniversary
of the issuance of the Senior Notes, Congoleum may redeem up to 25% of the
aggregate principal amount of the Senior Notes originally issued at a
redemption price of 108%, plus accrued and unpaid interest to the date of
redemption.
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.
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
April 1, 1995
Results of Operations
---------------------
The comments that follow compare the first quarter 1995 results of operations
of ABI which include Congoleum Corporation with consolidated proforma results
of operations for both companies for the first quarter of 1994. Due to the
change in voting control that occurred in February 1995, ABI has majority
voting control and is consolidating 1995 results of operations as if voting
control occurred at the beginning of the year. ABI's investment in Congoleum
was previously accounted for on the equity method. Refer to Note C of the
Notes to Consolidated Condensed Financial Statements for the comparison of
results of operations for the first quarter of 1995 and 1994.
Net sales for the first quarter of 1995 were $89,691,000, reflecting an
increase of $6,134,000 or 7% over last year's first quarter sales of
$83,557,000. At ABI, sales volume increases together with nominal selling
price increases were experienced in both Tape operations and the Canadian
division. At Congoleum, sales also increased benefiting from improved sales of
products for manufactured housing and commercial tile, the introduction of two
new products (Futura/TM/ sheet vinyl and Forum/(R)/ wood plank), and an
average 3.5% list price increase effective January 1, 1995. These increases
helped to offset sales declines in mid to low-priced residential sheet and
tile product lines.
Interest and other income increased by $2,037,000 over last year.
Approximately $900,000 of income was recognized from an incentive payment made
by Hillside Industries to ABI in consideration of ABI's agreement to enter
into the transaction contemplated by Congoleum's initial public offering of
Common Stock in February 1995. At Congoleum, in the 1994 first quarter,
approximately $600,000 of expense was incurred for a prepayment fee associated
with the retirement of certain debt. Congoleum generated approximately
$350,000 more interest income in the current quarter than in the 1994 first
quarter.
Cost of products sold as a percentage of sales increased to 69.3% in 1995 from
68.6% last year. At Congoleum, the percentages were the same for both the
current quarter and last year due to raw material cost increases being offset
by selling price increases. At ABI, cost increases reduced margins in that
selling price increases did not cover the substantial increase in the cost of
raw materials, particularly paper, latex, aluminum, natural rubber and
polymers to name a few.
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
April 1, 1995
Selling, general and administrative expenses as a percentage of sales
decreased slightly to 24.2% in the current quarter from 24.6% last year.
At Congoleum, increased costs for data processing systems and quality
improvements were more than offset by savings in employee benefit costs
resulting from a change in insurance carriers and lower selling expenses.
At ABI, expense levels were higher than last year's first quarter due to
increased Corporate administrative expenses.
The effective tax rate in the current quarter is 42.5% compared to 40.0% last
year. The difference is due to a higher estimated tax rate used by Congoleum
in 1995. Congoleum's current quarter effective tax rate is comparable to the
effective tax rate for the full year 1994, which was higher than the effective
tax rate for the first quarter 1994.
Liquidity and Capital Resources
-------------------------------
The ratio of current assets to current liabilities was 2.2 at the end of the
1995 first quarter. At December 31, 1994, ABI's current ratio was also 2.2 to
1 and Congoleum's was 2.0 to 1. Long-term debt at the end of the current
quarter was $94,159,000, of which $90,000,000 pertains to Congoleum and has no
recourse to ABI. Net cash used by operating activities in 1995's first
quarter amounted to $20,466,000, the major portion of which was used by
Congoleum. Increases in receivables reflected seasonal sales growth, while
inventory grew as a result of seasonal factors, cost increases and new product
introductions. Accounts payable and accrued expenses reflect reductions from
their year end 1994 levels. During the first three months of 1995, the Company
invested $2,223,000 in new plant and equipment and depreciation expense was
$2,621,000. Cash requirements for capital expenditures, working capital, debt
service and for the current authorization of $7,200,000 to purchase ABI Common
Stock, are expected to be financed from funds presently available and from
existing lines of credit which at ABI are presently $25,000,000 and at
Congoleum are $30,000,000.
On May 4, 1995, the Directors of ABI raised the quarterly cash dividend from
$.0625 to $.0875 per share. The Company also announced it has reached an
agreement with K&M Associates L.P., a national jewelry supplier in which ABI
has had a partnership investment since 1983, to purchase the remainder of K&M
over a period of several years. A Form 8-K will be filed with the Commission
within the required time period.
9
<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
April 1, 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
April 1, 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: May 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
April 1, 1995
Item 6. Exhibits
- ------------------
(11) STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
April 1, April 2,
1995 1994
-------- --------
(000's omitted, except per share data)
<S> <C> <C>
Primary:
Average shares outstanding 3,572 3,558
Net effect of dilutive
stock options-based on
the treasury stock method
using average market price 247 190
------ ------
Totals 3,819 3,748
====== ======
Net income $2,019 $1,448
====== ======
Per share amount $ .53 $ .39
====== ======
Fully diluted:
Average shares outstanding 3,572 3,558
Net effect of dilutive
stock options-based on
the treasury stock method
using quarter-end market
price 247 192
------ ------
Totals 3,819 3,750
====== ======
Net income $2,019 $1,448
====== ======
Per share amount $ .53 $ .39
====== ======
</TABLE>
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
First Qtr 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> APR-01-1995
<CASH> 5,587
<SECURITIES> 14,000
<RECEIVABLES> 39,559
<ALLOWANCES> 0
<INVENTORY> 75,421
<CURRENT-ASSETS> 142,212
<PP&E> 98,229
<DEPRECIATION> 0
<TOTAL-ASSETS> 281,152
<CURRENT-LIABILITIES> 64,602
<BONDS> 0
<COMMON> 18,997
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 281,152
<SALES> 89,691
<TOTAL-REVENUES> 91,958
<CGS> 62,162
<TOTAL-COSTS> 62,162
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,156
<INCOME-PRETAX> 5,961
<INCOME-TAX> 2,531
<INCOME-CONTINUING> 2,019
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,019
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
</TABLE>
