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 28, 1996 Commission File Number 1-4773
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American Biltrite Inc.
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(Exact name of registrant as specified in its charter)
Delaware 04-1701350
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
57 River Street Wellesley Hills, Massachusetts 02181
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 617-237-6655
--------------------
None
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(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 1, 1996
- ----------------------- -----------------------------------
Common Stock 3,630,048 shares
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
($000)
<TABLE>
<CAPTION>
Sept. 28, December 31,
1996 1995
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,391 $ 39,297
Short-term investments 35,100
Accounts receivable, net 54,072 30,708
Inventories 82,733 82,853
Prepaid expenses & other current assets 9,951 11,268
--------- ----------
TOTAL CURRENT ASSETS 186,247 164,126
Goodwill, net 24,754 23,579
Deferred income taxes 2,873 2,873
Other assets 8,193 8,614
Property, plant and equipment, net 111,617 104,295
--------- ----------
$ 333,684 $ 303,487
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 21,250
Bank checks outstanding, net 5,401
Accounts payable 23,768 $ 29,094
Accrued expenses 49,617 44,819
Current portion of long-term debt 1,156 3,207
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TOTAL CURRENT LIABILITIES 101,192 77,120
Long-term debt 107,815 107,712
Other liabilities 48,177 48,180
Non-controlling interests 17,273 12,679
STOCKHOLDERS' EQUITY
Common stock 19,469 19,469
Retained earnings 54,175 52,096
Equity adjustment from translation (2,143) (2,334)
Minimum pension liability (445) (445)
Less cost of shares in treasury (11,829) (10,990)
---------- ----------
59,227 57,796
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$ 333,684 $ 303,487
========== ==========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
($000)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 28, Sept. 30, Sept. 28, Sept. 30,
1996 1995 1996 1995
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Net sales $ 111,263 $ 107,441 $ 311,343 $ 298,421
Interest and other income 999 604 3,122 4,046
---------- ---------- ---------- ----------
112,262 108,045 314,465 302,467
---------- ---------- ---------- ----------
Costs and expenses:
Cost of products sold 75,276 77,261 214,454 208,982
Selling, general and
administrative expenses 26,946 23,694 78,511 68,462
Interest 2,757 2,707 7,991 7,652
---------- ---------- ---------- ----------
104,979 103,662 300,956 285,096
---------- ---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES
AND NON-CONTROLLING
INTERESTS 7,283 4,383 13,509 17,371
Provision for income taxes 3,067 1,707 5,712 7,356
Non-controlling interests (2,472) (1,124) (4,623) (4,317)
---------- ---------- ---------- ----------
NET EARNINGS $ 1,744 $ 1,552 $ 3,174 $ 5,698
========== ========== ========== ==========
Earnings per common share $ .48 $ .41 $ .87 $ 1.50
Dividends declared per
common share $ .10 $ .10 $ .30 $ .25
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<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. 28, Sept. 30,
1996 1995
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<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 3,174 $ 5,698
Adjustments to reconcile net earnings to
net cash used by operating activities:
Depreciation and amortization 9,655 8,840
Accounts and notes receivable (23,493) (9,499)
Inventories (104) (9,127)
Prepaid expenses and other current assets 1,289 (593)
Accounts payable (5,306) (4,435)
Accrued expenses 4,815 (5,930)
Non-controlling interests 4,594 4,317
Other 19 1,465
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NET CASH USED BY OPERATING ACTIVITIES (5,357) (9,264)
INVESTING ACTIVITIES
Investment in property, plant & equipment (15,813) (8,316)
Purchase of short-term investments (35,100) (28,755)
Maturities of short-term investments 52,550
Business acquisitions (1,680) (5,274)
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NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES (52,593) 10,205
FINANCING ACTIVITIES
Net short-term borrowings 21,250 21,000
Long-term borrowings 15,000
Payment on long-term debt (17,207) (2,086)
Bank checks outstanding, net 5,401
Payment of Congoleum equity offering costs (911)
Net proceeds from Congoleum equity offering 56,219
Purchase of Congoleum Class B shares (60,450)
Repayments of loans from affiliates (5,792)
K&M capital transactions (3,821)
Purchase of treasury shares (878) (882)
Dividends paid (1,095) (909)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 22,471 2,368
Effect of foreign exchange 573 (391)
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INCREASE (DECREASE) IN CASH (34,906) 2,918
Cash at beginning of period 39,297 19,701
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,391 $ 22,619
========== ==========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 28, 1996
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") as well as entities
over which it has voting control 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 28, 1996 are not necessarily
indicative of the results that may be expected for the year
ending December 31, 1996. 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, 1995.
Note B - Inventories
- --------------------
Inventory at September 28, 1996 and December 31, 1995 consisted
of the following:
<TABLE>
<CAPTION>
September 28, December 31,
1996 1995
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($000)
<S> <C> <C>
Finished goods $ 55,234 $ 54,629
Work-in-process 12,611 11,984
Raw materials and supplies 14,888 16,240
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$ 82,733 $ 82,853
========= =========
</TABLE>
Note C - Commitments and Contingencies
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ABI has recorded what it believes are adequate provisions for
environmental remediation and product-related liabilities. While
the Company believes that its estimate of the future amount of
these liabilities is reasonable, the ultimate outcome of these
matters cannot be determined.
See Item 1. - Legal Proceedings
<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 28, 1996
Results of Operations
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Net sales for the 1996 third quarter were $111.3 million compared
to $107.4 million last year. Congoleum Corporation ("Congoleum")
sales in the third quarter account for the major portion of the
increase between years and 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. ABI's Tape and Canadian operations also reflect small
increases in sales over last year with K&M Associates L.P.
("K&M") reflecting a small sales loss from last year due to the
continuation of a weak retail environment.
Year-to-date net sales were $311.3 million compared to $298.4
million last year. ABI's Tape and Canadian operations continue
to reflect year-to-year increases in sales due to improved
domestic economies. Congoleum's strong second and third quarter
sales performance overcame the poor sales performance in the
current first quarter and is currently ahead of last year's nine
month sales pace. K&M's sales for the current nine months are
ahead of last year as K&M operations were not included in last
year's first quarter in that ABI did not acquire a majority
position in K&M until April 1, 1995.
Interest and other income increased by $0.4 million in the
current quarter due to receipt of royalty income at Congoleum.
In the current nine month period, interest and other income is
$0.9 million lower than last year due to lower royalty income at
Congoleum, lower incentive payments from Hillside Industries and
receipt in 1995 of one-time insurance claim and reserve
adjustments.
Cost of products sold as a percentage of sales decreased in the
current quarter to 67.7% from 71.9% last year and in the current
nine months decreased to 68.9% from 70.0% last year. This
improvement was generated entirely at Congoleum where gross
profit margins improved as a result of the sales increase
discussed earlier, improved manufacturing efficiency and more
moderate raw material costs.
Selling, general and administrative expenses as a percentage of
sales in the current quarter increased to 24.2% from 22.1% last
year and for the current nine months increased to 25.2% from
22.9% last year. The major reasons for the increase for both
periods
<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 28, 1996
continues to be increased expenses at both ABI and Congoleum for
new and existing product promotions, increased marketing,
expanded distribution and new product development.
Net income for the current third quarter was $1.7 million,
compared to $1.6 million for last year's third quarter and result
from a major improvement in earnings at Congoleum being partially
offset by lower earnings at ABI and a loss at K&M. For the
current nine months, net income was $3.2 million compared to $5.7
million last year. Lower nine month earnings at ABI and a nine
month loss at K&M account for this year-to-year difference.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents, including short-term investments at
September 28, 1996, were $39.5 million compared to $39.3 million
at December 31, 1995. Working capital was $85.1 million, down
slightly from $87.0 million at December 31, 1995. The ratio of
current assets to current liabilities at September 28, 1996 was
1.8 to 1 and was 2.1 to 1 at December 31, 1995. Cash used by
operations was $5.4 million for the first nine months of 1996 and
consists mainly of increases in accounts receivable due to third
quarter increased sales volume.
Capital expenditures in the current nine months were $15.8
million and depreciation and amortization expense was $9.7
million. It is anticipated that total year 1996 capital spending
will be in the range of $22 to $23 million.
The Company has established a reserve for product related
liabilities and an environmental reserve against which the costs
of administration and remediation 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 to repurchase $4.7 million
of ABI's Common Stock, $5.0 million of Congoleum's Common Stock
and $10.0 million of Congoleum's 9% senior notes are expected to
be financed from operating activities and borrowings under
existing bank lines of credit which at ABI are presently $30.0
million and at Congoleum are $30.0 million. During 1996, ABI
entered into a $30.0 million note purchase and private shelf
agreement with an insurance company and drew down $15.0 million.
There is $15.0 million remaining in the shelf facility for future
financing requirements.
<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
September 28, 1996
Item 1. Legal Proceedings
- ---------------------------
As the Company reported in its Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, the Company has been named a
Potentially Responsible Party ("PRP") within the meaning of the
federal Comprehensive Environmental Response Compensation and
Liability Act, as amended, as to three sites in three separate
states. The Company, together with 19 other PRPs, recently
signed a consent decree and site remediation agreement with
respect to remediation at one of these sites, the ILCO Superfund
site located in Leeds, Alabama (the "ILCO Site"). An action is
expected to be commenced for approval of the consent decree by
the United States against the settling PRPs in the United States
District Court for the Northern District of Alabama. The
currently estimated aggregate future cost of remediation at the
ILCO Site is $37 million. Although the Company has agreed to an
interim cost allocation under the site remediation agreement of
$1.5 million, based on current estimates and analyses, the
Company's final share of the aggregate remediation costs (which
will depend upon a number of factors, including without
limitation the significant number of "orphan shares" at the ILCO
Site) could be as high as $3 million, payable over a period of
four to seven years. Under an agreement between the Company and
The Biltrite Corporation ("TBC"), TBC is liable for 37.5% of the
remediation costs incurred by the Company with respect to the
ILCO Site. Moreover, the Company believes that it may have a
claim for an indeterminable amount against a third party who may
have arranged for the shipment of alleged hazardous substances
generated by the Company to the ILCO Site. In addition, the
Company and the other settling PRPs have claims against PRPs who
used the ILCO Site and have not settled. Provisions previously
recorded by the company for environmental matters are sufficient
to absorb the company's expected loss in this matter.
<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
September 28, 1996
Item 6. Exhibits and Reports on Form 8-K
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(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 nine months
ended September 28, 1996.
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 6, 1996 BY: /S/ Gilbert K. Gailius
-----------------------
Gilbert K. Gailius
Vice President-Finance
<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
September 28, 1996
Item 6. Exhibits
- -------------------
(11) STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
1995 1995
--------- ---------
(000's omitted, except per share data)
<S> <C> <C>
Primary:
Average shares outstanding 3,631 3,599
Net effect of dilutive
stock options-based on
the treasury stock method
using average market price 125 198
--------- ---------
Totals 3,756 3,797
========= =========
Net income $ 1,552 $ 5,698
========= =========
Per share amount $ .41 $ 1.50
========= =========
Fully diluted:
Average shares outstanding 3,631 3,599
Net effect of dilutive
stock options-based on
the treasury stock method
using quarter-end market
price 133 201
--------- ---------
Totals 3,764 3,800
========= =========
Net income $ 1,552 $ 5,698
========= =========
Per share amount $ .41 $ 1.50
========= =========
Note: There was no dilutive effect from stock options in 1996.
Weighted average shares outstanding for the three months
and nine months ended September 28, 1996 were 3,632,460
and 3,650,278, respectively.
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-28-1996
<CASH> 4,391
<SECURITIES> 35,100
<RECEIVABLES> 54,072
<ALLOWANCES> 0
<INVENTORY> 82,733
<CURRENT-ASSETS> 186,247
<PP&E> 111,617
<DEPRECIATION> 0
<TOTAL-ASSETS> 333,684
<CURRENT-LIABILITIES> 101,192
<BONDS> 107,815
0
0
<COMMON> 19,469
<OTHER-SE> 39,758
<TOTAL-LIABILITY-AND-EQUITY> 333,684
<SALES> 311,343
<TOTAL-REVENUES> 314,465
<CGS> 214,454
<TOTAL-COSTS> 214,454
<OTHER-EXPENSES> 78,511
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,991
<INCOME-PRETAX> 13,509
<INCOME-TAX> 5,712
<INCOME-CONTINUING> 3,174
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,174
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
</TABLE>
