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 October 2, 1999 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 Identification No.)
incorporation or organization)
57 River Street
Wellesley Hills, Massachusetts 02481-2097
(Address of Principal Executive Offices)
(781) 237-6655
(Registrant's telephone number, including area code)
Not Applicable
(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.
Title of Each Class Outstanding at November 8, 1999
- ------------------- -------------------------------
Common 3,573,376 shares
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(In thousands of dollars)
October 2, December 31,
1999 1998
---------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 38,762 $ 59,505
Accounts receivable, net 40,487 33,551
Inventories 88,490 69,722
Prepaid expenses & other current assets 10,772 9,199
--------- ---------
TOTAL CURRENT ASSETS 178,511 171,977
Goodwill, net 21,636 22,332
Deferred income taxes 1,028 1,863
Other assets 14,065 16,097
Property, plant and equipment, net 131,128 123,770
--------- ---------
$ 346,368 $ 336,039
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 8,500
Accounts payable 24,417 $ 20,596
Accrued expenses 54,263 50,328
Current portion of long-term debt 3,143 4,305
--------- ---------
TOTAL CURRENT LIABILITIES 90,323 75,229
Long-term debt 110,993 114,101
Other liabilities 52,858 56,039
Noncontrolling interests 18,074 19,433
STOCKHOLDERS' EQUITY
Common stock, par value $0.01-authorized
15,000,00 shares, issued 4,607,902 shares 46 46
Additional paid-in capital 19,423 19,423
Retained earnings 71,925 68,247
Accumulated other comprehensive loss (4,333) (4,906)
Less cost of shares in treasury (12,941) (11,573)
--------- ---------
74,120 71,237
--------- ---------
$ 346,368 $ 336,039
========= =========
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 INCOME (Unaudited)
(In thousands of dollars)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 2, October 3, October 2, October 3,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $106,950 $110,681 $317,939 $325,570
Interest and other income 980 1,416 2,935 2,764
-------- -------- -------- --------
107,930 112,097 320,874 328,334
-------- -------- -------- --------
Costs and expenses:
Cost of products sold 72,835 75,280 219,125 224,237
Selling, general and administrative
expenses 27,236 26,227 82,885 81,071
Interest 2,318 2,364 7,109 6,577
-------- -------- -------- --------
102,389 103,871 309,119 311,885
-------- -------- -------- --------
EARNINGS BEFORE INCOME
TAXES AND OTHER ITEMS 5,541 8,226 11,755 16,449
Income taxes 2,003 3,212 4,467 6,404
Noncontrolling interests (701) (2,019) (1,661) (3,624)
-------- -------- -------- --------
INCOME BEFORE EXTRA-
ORDINARY ITEM 2,837 2,995 5,627 6,421
Extraordinary item -- early retirement
of debt, net of income tax benefit (1,174) (1,174)
-------- -------- -------- --------
NET EARNINGS $ 2,837 $ 1,821 $ 5,627 $ 5,247
======== ======== ======== ========
Earnings per share:
Basic
Earnings before extraordinary item $ .79 $ .82 $ 1.56 $ 1.76
Extraordinary item (.32) (.32)
-------- -------- -------- --------
Net income $ .79 $ .50 $ 1.56 $ 1.44
======== ======== ======== ========
Diluted
Earnings before extraordinary item $ .78 $ .79 $ 1.53 $ 1.68
Extraordinary item (.31) (.31)
-------- -------- -------- --------
Net income $ .78 $ .48 $ 1.53 $ 1.37
======== ======== ======== ========
Dividends declared per common share $ .125 $ .125 $ .375 $ .325
</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)
Nine Months Ended
October 2, October 3,
1999 1998
-------- --------
OPERATING ACTIVITIES
Net earnings $ 5,627 $ 5,247
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Depreciation and amortization 11,936 11,458
Loss on early retirement of debt 3,809
Accounts and notes receivable (7,022) (12,804)
Inventories (18,799) (1,235)
Prepaid expenses and other current assets (4,008) 466
Deferred taxes 2,722
Accounts payable and accrued expenses 6,104 12,791
Noncontrolling interests 1,624 2,384
Other 567 (443)
-------- --------
NET CASH (USED) PROVIDED BY OPERATING
ACTIVITIES (1,249) 21,673
INVESTING ACTIVITIES
Investment in property, plant and equipment (18,030) (13,488)
Purchase of short-term investments (4,301) (15,000)
Maturities of short-term investments 4,301 19,600
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (18,030) (8,888)
FINANCING ACTIVITIES
Net short-term borrowings 8,500 1,300
Long-term borrowings 101,728
Debt insurance costs (2,821)
Payments on long-term debt (4,179) (77,787)
Premium payments on early retirement of debt (2,563)
Purchase of treasury shares (4,950) (1)
Proceeds from exercise of stock options 163
Dividends paid (1,350) (1,183)
-------- --------
NET CASH (USED) PROVIDED BY FINANCING
ACTIVITIES (1,979) 18,836
Effect of foreign exchange 515 (638)
-------- --------
(DECREASE) INCREASE IN CASH (20,743) 30,983
Cash and cash equivalents at beginning of period 59,505 19,306
-------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 38,762 $ 50,289
======== ========
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
October 2, 1999
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 three month period ended October
2, 1999 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1999. 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, 1998.
Note B - Inventories
Inventory at October 2, 1999 and December 31, 1998 consisted of the following
(in thousands):
October 2, December 31,
1999 1998
------- -------
Finished goods $65,361 $50,683
Work-in-process 10,774 9,201
Raw materials and supplies 12,355 9,838
------- -------
$88,490 $69,722
======= =======
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.
Note D - Income Taxes
The Company anticipates an effective income tax rate of 38% in 1999 compared to
39% in 1998 based upon a lower tax rate from a subsidiary for 1999. During the
third quarter of 1999, the Company recorded an adjustment to reflect the
expected income tax rate for 1999.
Note E - Comprehensive Income
As of January 1, 1998, the Company adopted Statement 130, Reporting
Comprehensive Income. Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or shareholders'
equity. Statement 130 requires foreign currency translation adjustments, which
prior to adoption were reported separately in shareholders' equity, to be
included in other comprehensive income.
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
October 2, 1999
The following table presents total comprehensive income for the three months and
nine months ended October 2, 1999 and October 3, 1998 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 2, October 3, October 2, October 3,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings $ 2,837 $ 1,821 $ 5,627 $ 5,247
Foreign currency translation
adjustments (125) (748) 573 (1,168)
------- ------- ------- -------
Total comprehensive income $ 2,712 $ 1,073 $ 6,200 $ 4,079
======= ======= ======= =======
</TABLE>
Note F - Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share for the three months and nine months ended October 2, 1999 and October 3,
1998 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 2, October 3, October 2, October 3,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator:
Net income $2,837 $1,821 $5,627 $5,247
====== ====== ====== ======
Denominator:
Denominator for basic earnings
per share:
Weighted-average shares 3,573 3,643 3,602 3,640
Denominator for diluted earnings
per share:
Dilutive employee stock options 71 163 84 184
------ ------ ------ ------
Weighted-average shares and
assumed conversions 3,644 3,806 3,686 3,824
====== ====== ====== ======
Basic earnings per share $ .79 $ .50 $ 1.56 $ 1.44
====== ====== ====== ======
Diluted earnings per share $ .78 $ .48 $ 1.53 $ 1.37
====== ====== ====== ======
</TABLE>
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
October 2, 1999
Note G - Industry Segments
Description of Products and Services
The Company has four reportable segments: flooring products, tape products,
jewelry and a Canadian division which produces flooring and rubber products.
Congoleum represents the Company's flooring products segment, which manufactures
vinyl and vinyl composition floor coverings with distribution primarily through
floor covering distributors, retailers and contractors for commercial and
residential use. The tape products segment consists of two production facilities
in the United States and finishing and sales facilities in Belgium and
Singapore. The tape products segment manufactures paper, film, HVAC, electrical,
shoe and other tape products for use in industrial and automotive markets. The
jewelry segment reflects the results of K&M Associates L.P., a national costume
jewelry supplier to the mass merchandiser markets. The Company's Canadian
division produces flooring, rubber products, including materials used by
footwear manufacturers, and other industrial products.
<TABLE>
<CAPTION>
Segment Profit and Assets
(In thousands) Three Months Ended Nine Months Ended
October 2, October 3, October 2, October 3,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Revenues from external customers:
Flooring products $ 61,779 $ 68,411 $191,071 $201,583
Tape products 21,902 19,851 65,742 61,932
Jewelry 12,643 13,791 29,842 34,465
Canadian division 10,626 8,628 31,284 27,590
-------- -------- -------- --------
Total revenues from external
customers 106,950 110,681 317,939 325,570
-------- -------- -------- --------
Intersegment revenues:
Flooring products 715 233 1,117 686
Tape products 32 46 137 159
Jewelry
Canadian division 1,026 1,212 5,523 5,074
-------- -------- -------- --------
Total intersegment revenues 1,773 1,491 6,777 5,919
-------- -------- -------- --------
108,723 112,172 324,716 331,489
Reconciling items
Intersegment revenues (1,773) (1,491) (6,777) (5,919)
-------- -------- -------- --------
Total consolidated revenues $106,950 $110,681 $317,939 $325,570
======== ======== ======== ========
</TABLE>
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
October 2, 1999
Note G - Industry Segments continued
<TABLE>
<CAPTION>
(In thousands) Three Months Ended Nine Months Ended
October 2, October 3, October 2, October 3,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Segment profit (loss)
Flooring products $ 2,417 $ 6,151 $ 5,515 $ 10,989
Tape products 1,548 738 4,410 2,222
Jewelry 860 1,030 (395) 1,806
Canadian division 972 651 3,006 2,422
-------- -------- -------- --------
Total segment profit 5,797 8,570 12,536 17,439
Reconciling items
Corporate office loss (293) (375) (721) (927)
Intercompany profit 37 31 (60) (63)
-------- -------- -------- --------
Total consolidated earnings before
income taxes and other items $ 5,541 $ 8,226 $ 11,755 $ 16,449
======== ======== ======== ========
</TABLE>
October 2, December 31,
1999 1998
---- ----
Segment assets
Flooring products $ 234,598 $ 231,865
Tape products 58,645 48,308
Jewelry 20,454 16,298
Canadian division 25,294 20,710
--------- ---------
Total segment assets 338,991 317,181
Reconciling items
Corporate office assets 27,699 29,446
Intersegment accounts receivable (20,110) (10,436)
Intersegment profit in inventory (212) (152)
--------- ---------
Total consolidated assets $ 346,368 $ 336,039
========= =========
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
October 2, 1999
Note H - Changes in Accounting Principles
Effective January 1, 1999, the Company adopted AICPA Statement of Position (SOP)
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." This Statement requires certain costs of internally developed
software to be capitalized for years beginning after December 15, 1998. The
adoption of this SOP did not have a material impact on the Company's financial
statements.
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
October 2, 1999
Results of Operations
Net sales for the third quarter of 1999 were $107.0 million compared to $110.7
million for the third quarter of 1998, reflecting a decrease of $3.7 million or
3%. This sales decrease occurred at Congoleum Corporation ("Congoleum") and at
K&M Associates L.P. ("K&M"). At Congoleum, the decline in sales is due primarily
to lower average selling prices and declines in sales of commercial products and
promotional goods. At K&M, sales were lower than last year mainly due to the
late delivery of third quarter orders to certain major customers that did ship
in the fourth quarter. Sales at ABI's Tape and Canadian operations were higher
than last year.
Sales for the first nine months of 1999 were $317.9 million compared to $325.6
million last year. Sales performance at Congoleum and K&M, as noted above,
accounts for the year-to-date decrease, partially offset by increased sales at
ABI's Tape and Canadian operations.
Interest and other income decreased in the current quarter to $1.0 million from
$1.4 million in last year's third quarter. The decrease in the current quarter
is primarily due to lower foreign exchange gains experienced in Belgium compared
to last year.
Cost of products sold as a percentage of net sales remained unchanged with the
current quarter increasing to 68.1% from 68.0% in last year's third quarter and
for the nine month period was 68.9% in both years. At Congoleum, cost of
products sold as a percentage of net sales was higher in both the third quarter
and nine months of 1999 compared to 1998 due to lower production volumes and
lower average selling prices in 1999, which more than offset benefits from their
improved manufacturing efficiencies. At ABI's Tape and Canadian operations, cost
of products sold was improved in 1999 during both the third quarter and nine
months from increased sales and greater production volume.
Selling, general and administrative expenses as a percentage of net sales in the
current quarter increased to 25.5% from 23.7% last year and for the current nine
months increased to 26.1% from 24.9% and is primarily the result of lower sales
volume levels experienced in both the current quarter and nine months with only
minor expense increases.
Interest expense for the nine months of 1999 reflects a slight increase compared
to last year and is due to higher debt outstanding 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
October 2, 1999
Income before extraordinary item for the third quarter of 1999 was $2.8 million
compared to $3.0 million last year and for the first nine months of 1999 was
$5.6 million compared to $6.4 million last year. Operating results were positive
at American Biltrite's Tape and Canadian operations in both the current quarter
and nine months while profits were lower at Congoleum. K&M was profitable during
the third quarter at a level comparable to last year, but they generated losses
in the first and second quarters this year compared to profits in 1998.
The Company anticipates an effective income tax rate of 38% in 1999 compared to
39% in 1998 based upon a lower tax rate from a subsidiary for 1999. During the
third quarter of 1999, the Company recorded an adjustment to reflect the
expected income tax rate for 1999.
As described in the Liquidity and Capital Resources section, Congoleum
refinanced its long-term debt during the third quarter of 1998 and recorded an
extraordinary after-tax charge of $2.4 million, ABI's share being $1.2 million
or $.32 per share for debt extinguishment costs in connection with this
transaction.
Liquidity and Capital Resources
Cash and cash equivalents decreased $20.7 million for the nine months ended
October 2, 1999 to $38.8 million. Working capital was $88.2 million, down from
$96.7 million at year end 1998. The ratio of current assets to current
liabilities at October 2, 1999 was 2.0 and at December 31, 1998 was 2.3. Cash
used by operations was $1.2 million in the first nine months of 1999 primarily
due to purchases of inventory at Congoleum for the introduction of their new
wood laminate product line and increases in their sheet products inventory
resulting from larger, more economical production runs.
Capital expenditures in the current nine months were $18.0 million and
depreciation and amortization expense was $11.9 million. It is anticipated that
total year capital spending will be in the range of $24 to $26 million.
On August 3, 1998, Congoleum issued $100 million of 8 5/8% Senior Notes maturing
August 1, 2008 priced at 99.505 to yield 8.70%. Proceeds of the offering were
used to redeem all of the 9% Senior Notes, including accrued interest and
prepayment premium, to pay certain fees and expenses in connection with the
offering, and for working capital and general corporate purposes. In connection
with this offering, Congoleum recorded an extraordinary after-tax charge of $2.4
million in the third quarter of 1998, ABI's share of this charge was $1.2
million.
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
October 2, 1999
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 $3.3 million of ABI's Common Stock and
$1.2 million of Congoleum's Common Stock are expected to be financed from
operating activities and borrowings under existing bank lines of credit which at
ABI are presently $35.0 million and at Congoleum are $30.0 million. During the
nine months ended October 2, 1999, ABI repurchased $1.4 million of its Common
Stock and Congoleum repurchased $3.6 million of its Common Stock.
In 1996, the Company began the initial planning of a comprehensive initiative to
address the impact of the Year 2000 on its information and equipment systems.
The Company organized a Year 2000 oversight team to develop a strategy of
evaluation, implementation, testing and contingency planning to address the
Company's Year 2000 readiness. The evaluation phase involved performing a
complete, company-wide inventory to identify all internal, general purpose and
production hardware and software systems, as well as any embedded logic devices
used to control equipment or facilities, that required modification to become
Year 2000 compliant. In addition to the Company's internal assessment, the
Company communicated with all its distributors and all key third party suppliers
of goods and services to determine their states of Year 2000 readiness,
implementation of Year 2000 compliant systems and related contingency plans.
In the second quarter of 1997, the Company began the implementation and testing
phase of replacing or modifying system hardware, software and devices. As of
September 1999, the Company has completed work on 98% of the systems identified
as requiring modification. The remaining projects, which will be completed in
the current fourth quarter, are not business essential.
Costs directly associated with achieving Year 2000 compliance, including
modifying computer software or converting to new programs, consist of payments
to third parties as well as an allocation of the payroll and benefits of its
employees based on the amount of their time devoted to this activity. These
costs are expensed as incurred. Costs for new hardware are capitalized in
accordance with the Company's fixed asset policy, and any equipment retired is
written off.
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
October 2, 1999
The following table summarizes the Company's direct Year 2000 compliance
expenditures (actual and planned) by year:
(In thousands) 1997 1998 1999
---- ---- ----
Expenses paid to third parties $307 $464 $412
Allocated payroll costs 457 538 254
Capital expenditures 120 415 194
In addition to work undertaken explicitly to achieve Year 2000 compliance, the
Company has replaced or upgraded a number of systems in the ordinary course of
business where the replacement or upgrade has, in addition to its primary
benefits, also provided Year 2000 compliance. The nature of these costs, and
their accounting treatment, is the same as described above. The following table
summarizes the Company's actual or planned expenditures on systems improvements
undertaken for reasons unrelated to the Year 2000, but also serving to achieve
Year 2000 compliance:
(In thousands) 1997 1998 1999
---- ---- ----
Expenses paid to third parties $118 $505 $836
Allocated payroll costs 74 300 255
Capital expenditures 244 470 535
The costs of achieving Year 2000 compliance, and of improving the Company's
systems, are being funded through operating cash flow. With respect to embedded
logic devices used to monitor or control equipment or facilities, the Company
has completed a survey of all locations and identified 21 devices which must be
modified or replaced at an estimated aggregate cost of $0.3 million. As of the
first week in October 1999, the Company has replaced all of these devices.
Although the Company believes it has taken the necessary steps to ensure that
the Company will be Year 2000 compliant, there can be no assurances that all
third parties will be Year 2000 compliant or that unforeseen Year 2000 issues
will not arise. Management currently believes the worst case scenario with any
reasonable probability is that a small number of vendors, who are not critical
to the operation of the Company's business, will be unable to supply materials
for a short time after January 1, 2000, and that minor additional systems
modifications not identified during evaluation or testing will be identified and
corrected in a matter of days. The Company does not anticipate any disruption of
service to its customers.
The Company has prepared contingency plans for the various potential disruptions
that could occur in spite of its own efforts and representations from its
distributors and suppliers.
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
October 2, 1999
Market Risk
The Company is exposed to changes in prevailing market interest rates affecting
the return on its investments but does not consider this interest rate market
risk exposure to be material to its financial condition or results of
operations. The Company invests primarily in highly liquid debt instruments with
strong credit ratings and short-term (less than one year) maturities. The
carrying amount of these investments approximates fair value due to the
short-term maturities. Substantially all of the Company's outstanding long-term
debt as of October 2, 1999 consisted of indebtedness with a fixed rate of
interest which is not subject to change based upon changes in prevailing market
interest rates.
The Company operates internationally, principally in Canada, Europe and the Far
East, giving rise to exposure to market risks from changes in foreign exchange
rates. To a certain extent, foreign currency exchange rate movements also affect
the Company's competitive position, as exchange rate changes may affect business
practices and/or pricing strategies of non-U.S. based competitors. For foreign
currency exposures existing at October 2, 1999, a 10% unfavorable movement in
currency exchange rates in the near term would not materially affect ABI's
consolidated operating results, financial position or cash flows.
Under its current policies, the Company does not use derivative financial
instruments, derivative commodity instruments or other financial instruments to
manage its exposure to changes in interest rates, foreign currency exchange
rates, commodity prices or equity prices.
<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
October 2, 1999
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended October
2, 1999.
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 9, 1999 BY: /s/ Gilbert K. Gailius
----------------------
Gilbert K. Gailius
Vice President-Finance
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> OCT-02-1999
<CASH> 38,762
<SECURITIES> 0
<RECEIVABLES> 40,487
<ALLOWANCES> 0
<INVENTORY> 88,490
<CURRENT-ASSETS> 178,511
<PP&E> 131,128
<DEPRECIATION> 0
<TOTAL-ASSETS> 346,368
<CURRENT-LIABILITIES> 90,323
<BONDS> 0
0
0
<COMMON> 46
<OTHER-SE> 74,074
<TOTAL-LIABILITY-AND-EQUITY> 346,368
<SALES> 317,939
<TOTAL-REVENUES> 320,874
<CGS> 219,125
<TOTAL-COSTS> 309,119
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,109
<INCOME-PRETAX> 11,755
<INCOME-TAX> 4,467
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,627
<EPS-BASIC> 1.56
<EPS-DILUTED> 1.53
</TABLE>
