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 June 28, 1997 Commission File Number 1-4773
------------------------ -------
American Biltrite Inc.
- ----------------------------------------------------------------------
(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
- ----------------------------------------------------------------------
(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 August 1, 1997
- ----------------------------- ----------------------------------
Common Stock 3,635,048 shares
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(In thousands of dollars)
<TABLE>
<CAPTION>
June 28, December 31,
1997 1996
--------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,807 $ 33,658
Short-term investments 24,600 17,500
Accounts receivable, net 40,889 34,849
Inventories 100,299 81,058
Prepaid expenses & other current assets 6,739 8,660
--------- ---------
TOTAL CURRENT ASSETS 180,334 175,725
Goodwill, net 23,944 24,510
Deferred income taxes 3,068 3,068
Other assets 10,480 9,779
Property, plant and equipment, net 116,456 111,884
--------- ---------
$ 334,282 $ 324,966
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 17,000 $ 10,250
Accounts payable 23,779 27,342
Accrued expenses 56,789 50,259
Current portion of long-term debt 1,156 1,156
--------- ---------
TOTAL CURRENT LIABILITIES 98,724 89,007
Long-term debt 103,584 105,565
Other liabilities 51,341 49,735
Non-controlling interests 19,423 18,898
STOCKHOLDERS' EQUITY
Common stock, par value $0.01-authorized
15,000,000 shares, issued 4,607,902 shares 46 46
Additional paid-in capital 19,423 19,423
Retained earnings 56,569 56,920
Equity adjustment from translation (2,183) (1,921)
Minimum pension liability (877) (877)
Less cost of shares in treasury (11,768) (11,830)
--------- ---------
61,210 61,761
--------- ---------
$ 334,282 $ 324,966
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<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 Six Months Ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 101,592 $ 110,175 $ 197,105 $ 200,080
Interest and other income 936 810 1,507 2,123
---------- ---------- ---------- ----------
102,528 110,985 198,612 202,203
---------- ---------- ---------- ----------
Costs and expenses:
Cost of products sold 70,214 74,895 137,157 140,064
Selling, general and
administrative expenses 26,671 25,979 52,230 50,679
Interest 2,255 2,585 4,774 5,234
---------- ---------- ---------- ----------
99,140 103,459 194,161 195,977
---------- ---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES
AND NON-CONTROLLING
INTERESTS 3,388 7,526 4,451 6,226
Provision for income taxes 1,337 3,150 1,773 2,645
Non-controlling interests (1,167) (2,736) (1,747) (2,151)
---------- ---------- ---------- ----------
NET EARNINGS $ 884 $ 1,640 $ 931 $ 1,430
========== ========== ========== ==========
Earnings per common share $ .24 $ .45 $ .25 $ .39
Dividends declared per
common share $ .10 $ .10 $ .20 $ .20
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands of dollars)
<TABLE>
<CAPTION>
Six Months Ended
June 28, June 29,
1997 1996
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 931 $ 1,430
Adjustments to reconcile net earnings to
net cash used by operating activities:
Depreciation and amortization 7,412 6,076
Accounts and notes receivable (6,321) (13,176)
Inventories (19,782) (7,847)
Prepaid expenses and other current assets 1,875 2,476
Accounts payable and accrued expenses 3,068 2,023
Non-controlling interests 1,747 2,151
Other 741 1,071
--------- ---------
NET CASH USED BY OPERATING ACTIVITIES (10,329) (5,796)
INVESTING ACTIVITIES
Investment in property, plant & equipment (11,386) (8,411)
Purchase of short-term investments (28,800) (27,500)
Maturities of short-term investments 21,700
Business acquisitions (1,680)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (18,486) (37,591)
FINANCING ACTIVITIES
Net short-term borrowings 6,750 19,000
Long-term borrowings 15,000
Payments on long-term debt (1,981) (17,154)
Purchase and retirement of Congoleum
Class B shares (1,005)
Purchase of treasury shares (801) (604)
Proceeds from exercise of stock options 88 36
Dividends paid (726) (732)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,325 15,546
Effect of foreign exchange 639 669
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (25,851) (27,172)
Cash and cash equivalents at beginning
of period 33,658 39,297
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 7,807 $ 12,125
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 28, 1997
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 six
month period ended June 28, 1997 are not necessarily indicative
of the results that may be expected for the year ending December
31, 1997. 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, 1996.
Note B - Inventories
- --------------------
Inventory at June 28, 1997 and December 31, 1996 consisted of the
following:
<TABLE>
<CAPTION>
June 28, December 31,
1997 1996
---------- ----------
($000)
<S> <C> <C>
Finished goods $ 73,484 $ 55,356
Work-in-process 13,945 9,315
Raw materials and supplies 12,870 16,387
---------- ----------
$ 100,299 $ 81,058
========== ==========
</TABLE>
Note C - Commitments and Contingencies
- --------------------------------------
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.
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 28, 1997
Note D - Earnings Per Share
- ---------------------------
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128 "Earnings Per Share", which simplifies the
calculation of earnings per share and is effective for both
interim and annual periods ending after December 15, 1997. The
Statement is not expected to have a material impact on the
Company's financial statements.
Note E - Reclassifications
- --------------------------
Certain amounts in 1996 have been reclassified to conform to the
1997 presentation.
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 28, 1997
Results of Operations
- ---------------------
Net sales for the second quarter of 1997 were $101.6 million
compared to $110.2 million for the second quarter of 1996,
reflecting a decrease of $8.6 million or 8%. Congoleum
Corporation's ("Congoleum") sales performance in the current
second quarter accounts for the sales decrease. Second quarter
sales at Congoleum were negatively affected by weak retail
demand. Congoleum was also in the process of building inventory
in advance of an extended renovation of a major production line
which limited their ability to conduct sales promotions during
the second quarter. Sales in the second quarter at ABI's tape
and Canadian operations and K&M Associates L.P. ("K&M") were
slightly ahead of last year's second quarter.
Sales for the first six months of 1997 were $197.1 million
compared to $200.1 million last year. Sales performance at
Congoleum, as outlined above, accounts for the largest portion of
the year-to-date decrease. Sales at ABI's tape and Canadian
operations reflect small sales increases over last year. At K&M,
sales are slightly lower than last year due to slowness in first
quarter shipments to its major customers. Plans are under way at
K&M to add in this current third quarter more than 1,700
additional stores for a major customer who is now being serviced
by K&M for over 400 of its stores. If fully implemented, this
program would almost double the number of retail stores
participating in K&M's service program for costume jewelry. At
this time, there is no contractual obligation for either K&M or
the customer to fully implement or continue the program.
Interest and other income decreased in the current six months by
$.6 million due to lower royalty income at K&M, foreign exchange
losses and lower other income at ABI.
Cost of products sold as a percentage of net sales in the current
quarter increased to 69.1% from 68.0% in last year's second
quarter. At Congoleum, a combination of lower sales, competitive
pricing pressures and higher material costs offset the benefits
of improvements in manufacturing efficiency.
Selling, general and administrative expenses as a percentage of
net sales in the current quarter increased to 26.3% from 23.6%
last year and for the current six months increased to 26.5% from
25.3% and is due primarily to increased investment in retail
displays at Congoleum and lower six months sales volume at K&M.
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 28, 1997
Interest expense in both the current quarter and six months
reflects reductions from last year and is due to Congoleum's
major capital expenditure program requiring interest
capitalization.
Net income for the second quarter of 1997 was $.9 million
compared to $1.6 million last year and for the first six months
of 1997 was $.9 million compared to $1.4 million last year. At
ABI, earnings reflect an improvement over last year, Congoleum's
earnings being lower than last year and K&M continuing to reflect
losses.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents, including short-term investments,
declined $18.8 million for the six months ended June 28, 1997 to
$32.4 million. Working capital was $81.6 million, down from
$86.7 million at year end 1996. The ratio of current assets to
current liabilities at June 28, 1997 was 1.8 and at December 31,
1996 was 2.0. Cash used by operations was $10.3 million in the
first six months of 1997 and supported the Congoleum major
inventory build discussed earlier.
Capital expenditures in the current six months were $11.4 million
and include the extended renovation of a major production line at
Congoleum. Depreciation and amortization expense was $7.4
million. It is anticipated that total year capital spending will
be approximately $24.0 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, $3.1 million of Congoleum's Common Stock
and $6.9 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 $34.0
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
June 28, 1997
Item 4. Submission of Matters to a Vote of Security Holders:
- ------------------------------------------------------------
At the Annual Meeting of Stockholders held on May 12, 1997,
the following actions were taken:
Two nominees were elected as Class I Directors who will hold
office until the Annual Meeting of Stockholders in 2000 and
until their successors are duly elected and qualify.
Withheld From
Name Votes For All Nominees
---- --------- -------------
Gilbert K. Gailius 3,012,434 298,253
Richard G. Marcus 3,012,434 298,253
Amend and Restate the Company's 1993 Stock Award and
Incentive Plan.
Votes For Votes Against Abstain Broker Non-Vote
--------- ------------- ------- ---------------
2,987,600 318,851 4,236 0
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
--------
The following exhibit is included herein:
(10) 1993 Stock Award and Incentive Plan as Amended and
Restated as of March 4, 1997
(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 June 28, 1997.
<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
June 28, 1997
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: August 6, 1997 BY:/s/ Gilbert K. Gailius
-------------------------
Gilbert K. Gailius
Vice President-Finance
<PAGE>
EXHIBIT 10
AMERICAN BILTRITE INC.
1993 STOCK AWARD AND INCENTIVE PLAN
As Amended and Restated as of March 4, 1997
1. Purpose; Types of Awards; Construction.
The purpose of the American Biltrite Inc. 1993 Stock Award and
Incentive Plan, as amended and restated as of March 4, 1997, is to afford
an incentive to selected employees and independent contractors of the
Company (as defined in Section 2), or any Subsidiary (as defined in Section
2) or Affiliate (as defined in Section 2) which now exists or hereafter is
organized or acquired, to acquire a proprietary interest in the Company, to
continue as employees or independent contractors, as the case may be, to
increase their efforts on behalf of the Company and to promote the success
of the Company's business. Pursuant to Section 6 of the Plan (as defined in
Section 2), there may be granted stock options (including incentive stock
options and nonqualified stock options), stock appreciation rights and
limited stock appreciation rights (either in connection with options
granted under the Plan or independently of options), restricted stock,
restricted stock units, dividend equivalents and other stock-based or
cash-based awards.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as
set forth below:
(a) "Affiliate" means any entity if, at the time of granting of an
Award, (i) the Company, directly or indirectly, owns at least 20% of the
combined voting power of all classes of stock of such entity or at least
20% of the ownership interests in such entity or (ii) such entity, directly
or indirectly, owns at least 20% of the combined voting power of all
classes of stock of the Company.
(b) "Award" means any Option, SAR (including a Limited SAR),
Restricted Stock, Restricted Stock Unit, Dividend Equivalent or Other
Stock-Based Award or Cash-Based Award granted under the Plan.
<PAGE>
(c) "Award Agreement" means any written agreement, contract or
other instrument or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts which
have been designated by a Grantee in his or her most recent written
beneficiary designation filed with the Company to receive the benefits
specified under the Plan upon his or her death, or, if there is no
designated Beneficiary or surviving designated Beneficiary, then the
person, persons, trust or trusts entitled by will or the laws of descent
and distribution to receive such benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Cash-Based Award" means cash awarded under Section 6(h),
including cash awarded as a bonus or upon the attainment of specified
performance criteria or otherwise as permitted under the Plan.
(g) "Change in Control" means a change in control of the Company
which will be deemed to have occurred if:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than an Exempt Person), is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's
then outstanding voting securities;
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described
in clause (i), (iii), or (iv) of this Section 2(f)) whose election by
the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the
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<PAGE>
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority
thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
(1) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or parent entity)
50% or more of the combined voting power of the voting securities of
the Company or such surviving or parent entity outstanding immediately
after such merger or consolidation or (2) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined), other than
an Exempt Person, acquired 50% or more of the combined voting power of
the Company's then outstanding voting securities; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect).
(h) "Change in Control Price" means the higher of (i) the highest
price per share paid in any transaction constituting a Change in Control or
(ii) the highest Fair Market Value per share at any time during the 60-day
period preceding or following a Change in Control.
(i) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(j) "Committee" means the committee or committees established by
the Board to administer the Plan; provided, however, that to the extent
desired for Awards under the Plan to comply with the applicable provisions
of Section 162(m) of the Code or to obtain exemptive relief under Rule
16b-3, "Committee" means either such committee (or a subcommittee thereof)
or such other committee, as the case may be, which shall be constituted to
comply with the applicable requirements of Rule 16b-3 and Section 162(m) of
the Code and the regulations promulgated thereunder.
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(k) "Company" means American Biltrite Inc., a corporation
organized under the laws of the State of Delaware, or any successor
corporation.
(l) "Covered Employee" shall have the meaning set forth in Section
162(m)(3) of the Code.
(m) "Dividend Equivalent" means a right, granted to a Grantee
under Section 6(g), to receive cash, Stock, or other property equal in
value to dividends paid with respect to a specified number of shares of
Stock. Dividend Equivalents may be awarded on a free-standing basis or in
connection with another Award and may be paid currently or on a deferred
basis.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and as now or hereafter construed, interpreted
and applied by rules, regulations, interpretive releases, rulings and
cases.
(o) "Executive Officer" shall have the meaning set forth in Rule
3b-7 under the Exchange Act.
(p) "Exempt Person" means (i) the Company, (ii) any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, (iii) any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of Stock or (iv) any person or group of persons who, immediately
prior to the adoption of this Plan, owned more than 50% of the combined
voting power of the Company's then outstanding voting securities.
(q) "Fair Market Value" means, with respect to Stock or other
property, the fair market value of such Stock or other property determined
by such methods or procedures as shall be established from time to time by
the Committee. Unless otherwise determined by the Committee in good faith,
the per share Fair Market Value of Stock as of a particular date shall mean
(i) the closing sales price per share of Stock on the national securities
exchange on which the Stock is principally traded, for the last preceding
date on which there was a sale of such Stock on such exchange, or (ii) if
the shares of Stock are then traded in an over-the-counter market, the
average of the closing bid and asked prices for the shares of Stock in such
over-the-counter market for the last preceding date on which there was a
4
<PAGE>
sale of such Stock in such market, or (iii) if the shares of Stock are not
then listed on a national securities exchange or traded in an
over-the-counter market, such value as the Committee, in its sole
discretion, shall determine.
(r) "Grantee" means a person who, as an employee or independent
contractor of the Company, a Subsidiary or an Affiliate, has been granted
an Award under the Plan.
(s) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(t) "Limited SAR" means a right granted pursuant to Section 6(c)
which shall, in general, be automatically exercised for cash upon a Change
in Control.
(u) "NQSO" means any Option that is not an ISO.
(v) "Option" means a right, granted to a Grantee under Section
6(b), to purchase shares of Stock. An Option may be either an ISO or an
NQSO, provided that ISO's may not be granted to independent contractors.
(w) "Other Stock-Based Award" means a right or other interest
granted to a Grantee under Section 6(h) that may be denominated or payable
in, valued in whole or in part by reference to, or otherwise based on, or
related to, Stock, including, but not limited to (i) unrestricted Stock
awarded as a bonus or upon the attainment of specified performance criteria
or otherwise as permitted under the Plan and (ii) a right granted to a
Grantee to acquire Stock from the Company for cash and/or a promissory note
containing terms and conditions prescribed by the Committee.
(x) "Plan" means this American Biltrite Inc. 1993 Stock Award and
Incentive Plan, as amended from time to time.
(y) "Restricted Stock" means an Award of shares of Stock to a
Grantee under Section 6(d) that may be subject to certain restrictions and
to a risk of forfeiture.
(z) "Restricted Stock Unit" means a right granted to a Grantee
under Section 6(e) to receive Stock or cash at the end of a specified
5
<PAGE>
deferral period, which right may be conditioned on the satisfaction of
specified performance or other criteria.
(aa) "Rule 16b-3" means Rule 16b-3, as from time to time in effect
promulgated by the Securities and Exchange Commission under Section 16 of
the Exchange Act, including any successor to such Rule.
(ab) "Stock" means the common stock, par value $.01 per share, of
the Company.
(ac) "SAR" or "Stock Appreciation Right" means the right, granted
to a Grantee under Section 6(c), to be paid an amount measured by the
appreciation in the Fair Market Value of Stock from the date of grant to
the date of exercise of the right, with payment to be made in cash, Stock
or property as specified in the Award or determined by the Committee.
(ad) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of granting of an
Award, each of the corporations (other than the last corporation in the
unbroken chain) owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in
the chain.
3. Administration.
The Plan shall be administered by the Committee or Committees
established for that purpose. Each Committee administering the Plan shall
have the authority in its discretion, subject to and not inconsistent with
the express provisions of the Plan, to administer the Plan and to exercise
all the powers and authorities either specifically granted to it under the
Plan or necessary or advisable in the administration of the Plan, including
without limitation the authority: to grant Awards; to determine the persons
to whom and the time or times at which Awards shall be granted; to
determine the type and number of Awards to be granted, the number of shares
of Stock to which an Award may relate and the terms, conditions,
restrictions and performance criteria relating to any Award; and to
determine whether, to what extent, and under what circumstances an Award
may be settled, cancelled, forfeited, exchanged, or surrendered; to make
6
<PAGE>
adjustments in the terms and conditions of, and the criteria and
performance objectives included in, Awards in recognition of unusual or
non-recurring events affecting the Company or any Subsidiary or Affiliate
or the financial statements of the Company or any Subsidiary or Affiliate,
or in response to changes in applicable laws, regulations or accounting
principles; to designate Affiliates; to construe and interpret the Plan and
any Award; to prescribe, amend and rescind rules and regulations relating
to the Plan; to determine the terms and provisions of the Award Agreements
(which need not be identical for each Grantee); and to make all other
determinations deemed necessary or advisable for the administration of
the Plan.
Each Committee may appoint a chairperson and a secretary, may make
such rules and regulations for the conduct of its business as it shall deem
advisable and shall keep minutes of its meetings. All determinations of
each Committee shall be made by a majority of its members either present in
person or participating by conference telephone at a meeting or by written
consent. Each Committee may delegate to one or more of its members or to
one or more agents such administrative duties as it may deem advisable, and
each Committee or any person to whom it has delegated duties as aforesaid
may employ one or more persons to render advice with respect to any
responsibility such Committee or such person may have under the Plan. All
decisions, determinations and interpretations of each Committee shall be
final and binding on all persons, including the Company, and any
Subsidiary, Affiliate or Grantee (or any person claiming any rights under
the Plan from or through any Grantee) and any stockholder.
No member of the Board or any Committee shall be liable for any
action taken or determination made in good faith with respect to the Plan
or any Award granted hereunder.
4. Eligibility.
Awards may be granted to selected employees and independent
contractors of the Company and its present or future Subsidiaries and
Affiliates, in the discretion of the Committee authorized to make the
Award. In determining the persons to whom Awards shall be granted and the
type of Award granted (including the number of shares to be covered by such
7
<PAGE>
Award), each Committee shall take into account such factors as it shall deem
relevant in connection with accomplishing the purposes of the Plan.
5. Stock Subject to the Plan.
The maximum number of shares of Stock reserved for the grant of
Awards under the Plan shall be 550,000 shares of Stock, subject to
adjustment as provided herein. Such shares may, in whole or in part, be
authorized but unissued shares or shares that shall have been or may be
reacquired by the Company in the open market, in private transactions or
otherwise. Notwithstanding the foregoing, Awards to any individual under
the Plan which are made in or based upon shares of Stock may not exceed
100,000 shares per calendar year. If any shares subject to an Award are
forfeited, cancelled, exchanged or surrendered or if an Award otherwise
terminates or expires without a distribution of shares to the Grantee, the
shares of Stock with respect to such Award shall, to the extent of any such
forfeiture, cancellation, exchange, surrender, termination or expiration,
again be available for Awards under the Plan; provided that, in the case of
forfeiture, cancellation, exchange or surrender of shares of Restricted
Stock or Restricted Stock Units with respect to which dividends or Dividend
Equivalents have been paid or accrued, the number of shares subject to such
Awards shall not be available for Awards hereunder unless, in the case of
shares with respect to which dividends or Dividend Equivalents were accrued
but unpaid, such dividends and Dividend Equivalents are also forfeited,
cancelled, exchanged or surrendered. Upon the exercise of any Award granted
in tandem with any other Award or Awards, such related Award or Awards
shall be cancelled to the extent of the number of shares of Stock as to
which the Award is exercised and, notwithstanding the foregoing, such
number of shares shall no longer be available for Awards under the Plan.
In the event that either of the Committees shall determine that
any dividend or other distribution (whether in the form of cash, Stock or
other property), recapitalization, stock split, reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase,
or share exchange, or other similar corporate transaction or event, affects
the Stock such that an adjustment is appropriate in order to prevent
8
<PAGE>
dilution or enlargement of the rights of Grantees under the Plan, then that
Committee shall make such equitable changes or adjustments as it deems
necessary or appropriate to any or all of (i) the number and kind of shares
of Stock which may thereafter be issued in connection with Awards, (ii) the
number and kind of shares of Stock issued or issuable in respect of
outstanding Awards and (iii) the exercise price, grant price, or purchase
price relating to any Award; provided that, with respect to ISOs, such
adjustment shall be made in accordance with Section 424(h) of the Code.
6. Specific Terms of Awards.
(a) GENERAL. The term of each Award shall be for such period as
may be determined by the Committee granting the Award. Subject to the terms
of the Plan and any applicable Award Agreement, payments or benefit
distributions to be made by the Company or a Subsidiary or Affiliate upon
the grant, maturation or exercise of an Award may be made in such forms as
the Committee granting the Award shall determine at the date of grant or
thereafter, including without limitation cash, Stock or other property, and
may be made in a single payment or transfer, in installments or on a
deferred basis. Each Committee may make rules relating to installment or
deferred payments or distributions with respect to Awards, including the
rate of interest to be credited with respect to such payments. In addition
to the foregoing, the Committee granting the Award may impose on such Award
or the exercise thereof, at the date of grant or thereafter, such
additional terms and conditions, not inconsistent with the provisions of
the Plan, as that Committee shall determine.
(b) OPTIONS. Each Committee is authorized to grant Options to
Grantees on the following terms and conditions:
(i) TYPE OF AWARD. The Award Agreement evidencing the grant of
an Option under the Plan shall designate the Option as an ISO or an
NQSO.
(ii) EXERCISE PRICE. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee
granting the Award; provided that, in the case of an ISO, such
exercise price shall be not less than the Fair Market Value of a
share of Stock on the date of grant of such Option, and in no event
9
<PAGE>
shall the exercise price for the purchase or shares be less than par
value. The exercise price for Stock subject to an Option may be paid
in cash, by an exchange of Stock previously owned by the Grantee or
in a combination of both in an amount having a combined value equal
to such exercise price. A Grantee may also elect to pay all or a
portion of the aggregate exercise price by having shares of Stock
with a Fair Market Value on the date of exercise equal to the
aggregate exercise price withheld by the Company or sold by a
broker-dealer under circumstances meeting the requirements of 12
C.F.R. ss.220 or any successor thereto.
(iii) TERM AND EXERCISABILITY OF OPTIONS. The date on which a
Committee adopts a resolution expressly granting an Option shall be
considered the day on which such Option is granted; provided that
Option grants made prior to approval of the Plan by requisite vote of
the Company's stockholders shall be deemed to have been granted on
the date of such approval. Options shall be exercisable over the
exercise period (which shall not exceed ten years from the date of
grant), at such times and upon such conditions as the Committee
granting the Award may determine, as reflected in the Award
Agreement; provided that the Committee granting the Award shall have
the authority to accelerate the exercisability of any outstanding
Option at such time and under such circumstances as it, in its sole
discretion, deems appropriate. An Option may be exercised to the
extent of any or all full shares of Stock as to which the Option has
become exercisable, by giving written notice of such exercise to the
Committee granting the Award or its designated agent.
(iv) TERMINATION OF EMPLOYMENT, ETC. An Option may not be
exercised unless the Grantee is then in the employ of, or then
maintains an independent contractor relationship with, the Company or
a Subsidiary or an Affiliate (or a company or a parent or subsidiary
company of such company issuing or assuming the Option in a
transaction to which Section 424(a) of the Code applies) and unless
the Grantee has remained continuously so employed or has continuously
maintained such relationship since the date of grant of the Option;
provided that the Award Agreement may contain provisions extending
the exercisability of Options, in the event of specified
terminations, to a date not later than the expiration date of such
Option.
10
<PAGE>
(v) OTHER PROVISIONS. Options may be subject to such other
conditions, including without limitation restrictions on
transferability of the shares acquired upon exercise of such Options,
as the Committee granting the Award may prescribe in its discretion.
(c) SARS AND LIMITED SARS. Each Committee is authorized to grant
SARs and Limited SARs to Grantees on the following terms and conditions:
(i) IN GENERAL. Unless the Committee granting the Award
determines otherwise, an SAR or a Limited SAR (1) granted in tandem
with an NQSO may be granted at the time of grant of the related NQSO
or at any time thereafter or (2) granted in tandem with an ISO may
only be granted at the time of grant of the related ISO. An SAR or a
Limited SAR granted in tandem with an Option shall be exercisable
only to the extent the underlying Option is exercisable.
(ii) SARS. An SAR shall confer on the Grantee a right to
receive with respect to each share subject thereto, upon exercise
thereof, the excess of (1) the Fair Market Value of one share of
Stock on the date of exercise over (2) the grant price of the SAR
(which in the case of an SAR granted in tandem with an Option shall
be equal to the exercise price of the underlying Option, and which in
the case of any other SAR shall be such price as the Committee
granting the Award may determine).
(iii) LIMITED SARS. A Limited SAR shall confer on the Grantee
a right to receive with respect to each share subject thereto,
automatically upon the occurrence of a Change in Control, an amount
equal to the excess of (1) the Change in Control Price (or, in the
case of a Limited SAR granted in tandem with an ISO, the Fair Market
Value of one share of Stock on the date of such Change in Control)
over (2) the grant price of the Limited SAR (which in the case of a
Limited SAR granted in tandem with an Option shall be equal to the
exercise price of the underlying Option, and which in the case of any
other Limited SAR shall be such price as the Committee granting the
Award determines).
(d) RESTRICTED STOCK. Each Committee is authorized to grant
Restricted Stock to Grantees on the following terms and conditions:
11
<PAGE>
(i) ISSUANCE AND RESTRICTIONS. Restricted Stock shall be
subject to such restrictions on transferability and other
restrictions, if any, as the Committee granting the Award may impose
at the date of grant or thereafter, which restrictions may lapse
separately or in combination at such times, under such circumstances,
in such installments or otherwise, as the Committee granting the
Award may determine. Except to the extent restricted under the Award
Agreement relating to the Restricted Stock, a Grantee granted
Restricted Stock shall have all of the rights of a stockholder,
including without limitation the right to vote Restricted Stock and
the right to receive dividends thereon.
(ii) FORFEITURE. Upon termination of employment or termination
of the independent contractor relationship during the applicable
restriction period, Restricted Stock and any accrued but unpaid
dividends or Dividend Equivalents that are at that time subject to
restrictions shall be forfeited; provided, however, that the
Committee granting the Award may provide, by rule or regulation or in
any Award Agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Stock
will be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee granting the Award
may in other cases waive in whole or in part the forfeiture of
Restricted Stock.
(iii) CERTIFICATES FOR STOCK. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee granting
the Award shall determine. If certificates representing Restricted
Stock are registered in the name of the Grantee, such certificates
shall bear an appropriate legend referring to the terms, conditions
and restrictions applicable to such Restricted Stock, and the Company
shall retain physical possession of the certificate.
(iv) DIVIDENDS. Dividends paid on Restricted Stock shall be
either paid at the dividend payment date, or deferred for payment at
such later date as determined by the Committee granting the Award, in
cash or in shares of unrestricted Stock having a Fair Market Value
equal to the amount of such dividends. Stock distributed in
connection with a stock split or stock dividend and other property
distributed as a dividend shall be subject to restrictions and a risk
12
<PAGE>
of forfeiture to the same extent as the Restricted Stock with respect
to which such Stock or other property has been distributed.
(e) RESTRICTED STOCK UNITS. Each Committee is authorized to grant
Restricted Stock Units to Grantees, subject to the following terms and
conditions:
(i) AWARD AND RESTRICTIONS. Delivery of Stock or cash, as
determined by the Committee granting the Award, will occur upon
expiration of the deferral period specified for Restricted Stock
Units by the Committee granting the Award. In addition, Restricted
Stock Units shall be subject to such restrictions as the Committee
granting the Award may impose, at the date of grant or thereafter,
which restrictions may lapse at the expiration of the deferral period
or at earlier or later specified times, separately or in combination,
in installments or otherwise, as the Committee granting the Award may
determine.
(ii) FORFEITURE. Upon termination of employment or termination
of the independent contractor relationship during the applicable
deferral period or portion thereof to which forfeiture conditions
apply, or upon failure to satisfy any other conditions precedent to
the delivery of Stock or cash to which such Restricted Stock Units
relate, all Restricted Stock Units that are then subject to deferral
or restriction shall be forfeited; provided, however, that the
Committee granting the Award may provide, by rule or regulation or in
any Award Agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Stock
Units will be waived in whole or in part in the event of termination
resulting from specified causes, and the Committee may in other
cases waive in whole or in part the forfeiture of Restricted Stock
Units.
(f) STOCK AWARDS IN LIEU OF CASH AWARDS. Each Committee is
authorized to grant Stock as a bonus, or to grant other Awards, in
lieu of Company commitments to pay cash under other plans or compensatory
arrangements. Stock or Awards granted hereunder shall have such other
terms as shall be determined by the Committee granting the Award.
(g) DIVIDEND EQUIVALENTS. Each Committee is authorized to grant
Dividend Equivalents to Grantees. The Committee granting the Award may
provide, at the date of grant or thereafter, that Dividend Equivalents
13
<PAGE>
shall be paid or distributed when accrued or shall be deemed to have
been reinvested in additional Stock or other investment vehicles as the
Committee granting the Award may specify; provided that Dividend
Equivalents (other than freestanding Dividend Equivalents) shall be
subject to all conditions and restrictions of the underlying Awards to
which they relate.
(h) OTHER STOCK-BASED AWARDS AND CASH-BASED AWARDS. Each Committee
is authorized to grant to Grantees Other Stock-Based Awards or Cash-Based
Awards as an element of or supplement to any other Award under the
Plan, as deemed by the Committee granting the Award to be consistent
with the purposes of the Plan. Such Awards may be granted with value
and payment contingent upon performance of the Company or any other
factors designated by the Committee granting the Award, or valued by
reference to the performance of specified Subsidiaries or Affiliates.
The Committee granting the Award shall determine the terms and
conditions of such Awards at the date of grant or thereafter. Cash-Based
Awards made under the Plan to any individual shall not exceed $100,000
in any calendar year.
(i) To the extent necessary to comply with the provisions of
Section 162(m) of the Code, each Committee may require that Awards made
under the Plan will be paid only on account of the attainment of one or
more preestablished Performance Factors. The Performance Factors shall be
the criteria and objectives, determined by the Committee granting the
Award, which must be met during a specified period as a condition of the
Participant's receipt of payment or a distribution with respect to an
Award. Performance Factors may include any or all of the following: (i)
revenue growth, (ii) EBITA, (iii) operating cash flow, (iv) operating
income growth or level, (v) market share, (vi) working capital, (vii) net
customer sales per product line, (viii) net income, (ix) earnings or
earnings per share, (x) earnings from operations, (xi) return on equity or
return on assets or (xii) the extent of increase or decrease of any one or
more of the foregoing over the specified period. Such Performance Factors
may relate to the performance of the Company, a business unit thereof or
any combination of the two. With respect to participants who are not
Covered Employees, Performance Factors may also include such subjective
Performance Factors as each Committee may, from time to time, establish.
14
<PAGE>
Each Committee shall have the sole discretion to determine whether, or to
what extent, Performance Factors are achieved; provided, however, that
payment of Awards conditioned upon the attainment of each Performance
Factors shall not be made to Covered Employees until achievement of each
Performance Factor has been certified by the Committee granting the Award.
7. Change in Control Provisions. In the event of a
Change of Control:
(a) any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and vested; and
(b) the restrictions, deferral limitations, payment conditions and
forfeiture conditions applicable to any other Award granted under the
Plan shall lapse, such Awards shall be deemed fully vested and any
performance conditions imposed with respect to Awards shall be deemed
fully achieved.
8. General Provisions.
(a) COMPLIANCE WITH LEGAL AND REGULATORY REQUIREMENTS. The Plan,
the granting and exercising of Awards thereunder and the other
obligations of the Company under the Plan and any Award Agreement
shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any regulatory or governmental
agency as may be required. The Company, in its discretion, may
postpone the issuance or delivery of Stock under any Award until
completion of any stock exchange listing or registration or
qualification of such Stock or other required action under
any state, federal or foreign law, rule or regulation as the Company
may consider appropriate and may require any Grantee to make such
representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of Stock in
compliance with applicable laws, rules and regulations.
(b) NON-TRANSFERABILITY. Unless otherwise provided in an Award
Agreement, Awards shall not be transferable by a Grantee except by
will or the laws of descent and distribution.
15
<PAGE>
(c) NO RIGHT TO CONTINUED EMPLOYMENT, ETC. Nothing in the Plan or
in any Award granted or Award Agreement entered into pursuant hereto
shall confer upon any Grantee the right to continue in the employ of,
or as an independent contractor of, the Company, any Subsidiary or any
Affiliate, or to be entitled to any remuneration or benefits not set
forth in the Plan or such Award Agreement, or to interfere with or
limit in any way the right of the Company or any such Subsidiary or
Affiliate to terminate such Grantee's employment or independent
contractor relationship.
(d) TAXES. The Company or any Subsidiary or Affiliate is
authorized to withhold from any Award, any payment or distribution
including a distribution of Stock relating to an Award, or any other
payment or distribution to a Grantee under this Plan, amounts for
withholding taxes and other taxes due in connection with any transaction
involving an Award and to take such other action as the Committee granting
the Award may deem advisable to enable the Company and Grantees to satisfy
obligations for the payment of withholding and other tax obligations
relating to any Award. This authority shall include without limitation
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Grantee's tax
obligations.
(e) AMENDMENT AND TERMINATION OF THE PLAN. The Board may at any
time and from time to time alter, amend, suspend or terminate the Plan
in whole or in part. Notwithstanding the foregoing, no amendment shall
affect adversely any of the rights of any Grantee, without such
Grantee's consent, under any Award theretofore granted under the Plan.
(f) NO RIGHTS TO AWARDS; NO STOCKHOLDER RIGHTS. No Grantee shall
have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Grantees. Except as provided
specifically herein, a Grantee or a transferee of an Award shall have
no rights as a stockholder with respect to any shares covered by an
Award until the date of the issuance of a stock certificate to him,
her or it for such shares.
(g) UNFUNDED STATUS OF AWARDS. The Plan is intended to constitute
an "unfunded" plan for incentive and deferred compensation. With
respect to any payments or distributions not yet made to a Grantee
16
<PAGE>
pursuant to an Award, nothing contained in the Plan or any Award shall
give any such Grantee any rights that are greater than those of a
general creditor of the Company.
(h) NO FRACTIONAL SHARES. No fractional shares of Stock shall be
issued or delivered pursuant to the Plan or any Award. The Committee
granting the Award shall determine whether cash, other Awards or other
property shall be issued or paid in lieu of such fractional shares or
whether such fractional shares or any rights thereto shall be forfeited
or otherwise eliminated.
(i) GOVERNING LAW. The Plan and all determinations made and
actions taken pursuant hereto shall be governed by the laws of the
State of Delaware without giving effect to the conflicts of law
principles thereof.
(j) EFFECTIVE DATE; PLAN TERMINATION. The Plan shall take effect
upon adoption by the Board (the "Effective Date"), but the Plan, any
grants of Awards made prior to the stockholder approval mentioned
herein and any amendments thereto requiring stockholder approval shall
be subject to the approval of the holders of a majority of the voting
power of all issued and outstanding voting securities of the Company
entitled to vote thereon, which approval must occur within twelve
months of the date the Plan or amendment is adopted by the Board. In
the absence of such approval, such Awards shall be null and void.
<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
June 28, 1997
Item 6. Exhibits
- -------------------
(11) STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 28, June 28,
1997 1997
----------- -----------
(000's omitted, except per share data)
<S> <C> <C>
Primary:
Average shares outstanding 3,631 3,631
Net effect of dilutive
stock options-based on
the treasury stock method
using average market price 102 107
-------- -------
Totals 3,733 3,738
======== =======
Net income $ 884 $ 931
======== ========
Per share amount $ .24 $ .25
======== ========
Fully diluted:
Average shares outstanding 3,631 3,631
Net effect of dilutive
stock options-based on
the treasury stock method
using the higher of quarter-end
or average market price for
each quarter 102 120
-------- --------
Totals 3,733 3,751
======== ========
Net income $ 884 $ 931
======== ========
Per share amount $ .24 $ .25
======== ========
Note: There was no dilutive effect from stock options in 1996.
Weighted average shares outstanding for the three months
and six months ended June 29, 1996 were 3,647,989 and
3,659,236, respectively.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-28-1997
<CASH> 7,807
<SECURITIES> 24,600
<RECEIVABLES> 40,889
<ALLOWANCES> 0
<INVENTORY> 100,299
<CURRENT-ASSETS> 180,334
<PP&E> 116,456
<DEPRECIATION> 0
<TOTAL-ASSETS> 334,282
<CURRENT-LIABILITIES> 98,724
<BONDS> 103,584
0
0
<COMMON> 46
<OTHER-SE> 61,164
<TOTAL-LIABILITY-AND-EQUITY> 334,282
<SALES> 197,105
<TOTAL-REVENUES> 198,612
<CGS> 137,157
<TOTAL-COSTS> 137,157
<OTHER-EXPENSES> 52,230
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,774
<INCOME-PRETAX> 4,451
<INCOME-TAX> 1,773
<INCOME-CONTINUING> 931
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 931
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
