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 27, 1997 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 781-237-6655
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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
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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, 1997
- ------------------------------- ---------------------------------------
Common Stock 3,634,988 shares
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(In thousands of dollars)
Sept. 27, December 31,
1997 1996
-------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 12,424 $ 33,658
Short-term investments 14,200 17,500
Accounts receivable, net 50,231 34,849
Inventories 89,191 81,058
Prepaid expenses & other current assets 7,396 8,660
-------- --------
TOTAL CURRENT ASSETS 173,442 175,725
Goodwill, net 23,693 24,510
Deferred income taxes 3,089 3,068
Other assets 9,966 9,779
Property, plant and equipment, net 119,718 111,884
-------- --------
$ 329,908 $ 324,966
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 17,250 $ 10,250
Accounts payable 24,389 27,342
Accrued expenses 52,224 50,259
Current portion of long-term debt 1,156 1,156
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TOTAL CURRENT LIABILITIES 95,019 89,007
Long-term debt 97,584 105,565
Other liabilities 51,532 49,735
Non-controlling interests 20,447 18,898
STOCKHOLDERS' EQUITY
Common stock, par value $0.01-authorized
15,000,000 shares, issued 4,607,902 shares 46 46
Additional paid-in capital 19,423 19,423
Retained earnings 60,931 56,920
Equity adjustment from translation (2,428) (1,921)
Minimum pension liability (877) (877)
Less cost of shares in treasury (11,769) (11,830)
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65,326 61,761
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$ 329,908 $ 324,966
======== ========
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)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
1997 1996 1997 1996
-------- -------- -------- ------
Net sales $ 120,036 $ 111,263 $ 317,141 $ 311,343
Interest and other income 383 999 1,890 3,122
-------- -------- -------- --------
120,419 112,262 319,031 314,465
-------- -------- -------- --------
Costs and expenses:
Cost of products sold 81,616 75,872 218,773 215,936
Selling, general and
administrative expenses 26,713 26,350 78,943 77,029
Interest 2,386 2,757 7,160 7,991
-------- -------- -------- --------
110,715 104,979 304,876 300,956
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES
AND NON-CONTROLLING
INTERESTS 9,704 7,283 14,155 13,509
Provision for income taxes 3,663 3,067 5,436 5,712
Non-controlling interests (1,221) (2,472) (2,968) (4,623)
-------- -------- -------- --------
NET EARNINGS $ 4,820 $ 1,744 $ 5,751 $ 3,174
======== ======== ======== ========
Earnings per common share:
Primary $ 1.32 $ .48 $ 1.55 $ .87
Fully diluted $ 1.29 $ .48 $ 1.53 $ .87
Dividends declared per
common share $ .10 $ .10 $ .30 $ .30
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)
Nine Months Ended
Sept. 27, Sept. 28,
1997 1996
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OPERATING ACTIVITIES
Net earnings $ 5,751 $ 3,174
Adjustments to reconcile net earnings to
net cash used by operating activities:
Depreciation and amortization 11,030 9,655
Accounts and notes receivable (15,692) (23,493)
Inventories (8,711) (104)
Prepaid expenses and other current assets 1,423 1,289
Accounts payable (2,878) (5,306)
Accrued expenses 2,015 4,815
Non-controlling interests 2,968 4,594
Other 1,339 19
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NET CASH USED BY OPERATING ACTIVITIES (2,755) (5,357)
INVESTING ACTIVITIES
Investment in property, plant & equipment (18,175) (15,813)
Purchase of short-term investments (43,000) (35,100)
Maturities of short-term investments 46,300
Business acquisitions (1,680)
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NET CASH USED BY INVESTING ACTIVITIES (14,875) (52,593)
FINANCING ACTIVITIES
Net short-term borrowings 7,000 21,250
Long-term borrowings 15,000
Payments on long-term debt (7,981) (17,207)
Bank checks outstanding, net 5,401
Purchase and retirement of Congoleum
Class B shares (1,005)
Purchase of treasury shares (1,089) (878)
Proceeds from exercise of stock options 88
Dividends paid (1,090) (1,095)
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NET CASH (USED) PROVIDED BY FINANCING
ACTIVITIES (4,077) 22,471
Effect of foreign exchange 473 573
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DECREASE IN CASH (21,234) (34,906)
Cash at beginning of period 33,658 39,297
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CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 12,424 $ 4,391
======= =======
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
September 27, 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 nine month period ended September
27, 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 September 27, 1997 and December 31, 1996 consisted of the
following:
Sept. 27, December 31,
1997 1996
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($000)
Finished goods $ 63,202 $ 55,356
Work-in-process 12,250 9,315
Raw materials and supplies 13,739 16,387
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$ 89,191 $ 81,058
======== =======
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
September 27, 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
September 27, 1997
Results of Operations
Net sales for the third quarter of 1997 were $120.0 million compared to $111.3
million for the third quarter of 1996, reflecting an increase of $8.7 million or
8%. Key to this increase was increased sales volume at K&M Associates L.P.
("K&M") where shipments of costume jewelry to the 1,700 additional stores of a
major customer were begun. By the end of the year, plans are that K&M will be
servicing the entire 2,100 stores of this customer. Sales at ABI's tape and
Canadian operations reflect sales increases over last year. Congoleum
Corporation's ("Congoleum") sales performance in the current third quarter was
below last year due to the continuation of a weak retail demand and the closure
of Color Tile, Inc., formerly a major customer.
Net sales for the first nine months of 1997 were $317.1 million, an increase of
$5.8 million or 2% over last year's sales of $311.3 million. The increase at K&M
described earlier and the sales increase at ABI's tape and Canadian operations
are the positive factors affecting current sales. Congoleum has experienced
lower sales volume than last year for the first nine months of 1997 due to poor
retail demand and the Color Tile closure.
Interest and other income decreased in the current third quarter by $.6 million
and by $1.2 million for the first nine months of 1997. Lower commission income
at K&M, lower royalty income at Congoleum, foreign exchange losses and lower
other income at ABI affected results for both periods compared to last year.
Cost of products sold as a percentage of sales decreased to 68.0% from 68.2% in
last year's third quarter and to 69.0% from 69.4% in last year's first nine
months. The improvement in both the current quarter and nine months is
attributable to the increase in sales volume at K&M where gross margins are
higher than those historically experienced at both ABI and Congoleum. Partially
offsetting this improvement were the current nine months results at Congoleum
where a combination of lower sales, promotional pricing pressures and higher
material costs tended to reduce gross profit margins.
Selling, general and administrative expenses as a percentage of net sales in the
current quarter decreased to 22.3% from 23.7% last year. The decline in
operating expenses is primarily due to lower sales levels at Congoleum and cost
reductions initiated as a result thereof. The slight increase in this area for
the first nine months with expenses as a percentage of sales increasing to 24.9%
from 24.7% last year are due mainly to increased spending on retail displays at
Congoleum.
<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 27, 1997
Interest expense in both the current quarter and nine months reflects reductions
from last year and is due to Congoleum's major capital expenditure program
requiring interest capitalization.
Net income for the third quarter of 1997 was $4.8 million compared to $1.7
million last year. At ABI, earnings are at the same level as last year,
Congoleum's earnings being lower than last year and K&M contributing the major
portion of third quarter earnings resulting in K&M reversing the losses incurred
in the first six months of 1997.
Liquidity and Capital Resources
Cash and cash equivalents, including short-term investments, declined $24.5
million for the nine months ended September 27, 1997 to $26.6 million. Working
capital was $78.4 million, down from $86.7 million at year end 1996. The ratio
of current assets to current liabilities at September 27, 1997 was 1.8 to 1.0
and at December 31, 1996 was 2.0 to 1.0. Cash used by operations was $2.8
million for the first nine months of 1997 compared to $5.4 million cash used by
operations in the first nine months of last year.
Capital expenditures in the current nine months were $18.2 million and include
the extended renovation of a major production line at Congoleum. Depreciation
and amortization expense was $11.0 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, $1.4
million of Congoleum's Common Stock and $10.9 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
September 27, 1997
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibit is included herein:
(11) Statement re: computation of earnings per share
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended
September 27, 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: November 5, 1997 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 27, 1997
Item 6. Exhibits
(11) STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Nine Months Ended
Sept. 27, Sept. 27,
1997 1997
------------------ -----------------
(In thousands, except per share data)
Primary:
Average shares outstanding 3,635 3,632
Net effect of dilutive
stock options-based on
the treasury stock method
using average market price 30 82
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Totals 3,665 3,714
====== ======
Net income $ 4,820 $ 5,751
====== ======
Per share amount $ 1.32 $ 1.55
====== ======
Fully diluted:
Average shares outstanding 3,635 3,632
Net effect of dilutive
stock options-based on
the treasury stock method
using quarter-end market
price 112 118
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Totals 3,747 3,750
====== ======
Net income $ 4,820 $ 5,751
====== ======
Per share amount $ 1.29 $ 1.53
====== ======
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> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-27-1997
<CASH> 12,424
<SECURITIES> 14,200
<RECEIVABLES> 50,231
<ALLOWANCES> 0
<INVENTORY> 89,191
<CURRENT-ASSETS> 173,442
<PP&E> 119,718
<DEPRECIATION> 0
<TOTAL-ASSETS> 329,908
<CURRENT-LIABILITIES> 95,019
<BONDS> 97,584
0
0
<COMMON> 46
<OTHER-SE> 65,280
<TOTAL-LIABILITY-AND-EQUITY> 329,908
<SALES> 317,141
<TOTAL-REVENUES> 319,031
<CGS> 218,773
<TOTAL-COSTS> 304,876
<OTHER-EXPENSES> 78,943
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,160
<INCOME-PRETAX> 14,155
<INCOME-TAX> 5,436
<INCOME-CONTINUING> 5,751
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,751
<EPS-PRIMARY> 1.55
<EPS-DILUTED> 1.53
</TABLE>
