FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended April 1, 2000 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 May 10, 2000
- ------------------- ---------------------------
Common 3,517,386 shares
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(In thousands of dollars)
April 1, December 31,
2000 1999
-------- ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 26,250 $ 27,285
Short-term investments 4,478 19,232
Accounts receivable, net 47,203 30,586
Inventories 86,829 82,977
Prepaid expenses & other current assets 10,671 11,672
--------- ---------
TOTAL CURRENT ASSETS 175,431 171,752
Goodwill, net 21,204 21,361
Other assets 14,489 14,619
Property, plant and equipment, net 138,734 136,328
--------- ---------
$ 349,858 $ 344,060
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 10,750
Accounts payable 30,252 $ 27,453
Accrued expenses 51,776 54,216
Current portion of long-term debt 3,136 3,139
--------- ---------
TOTAL CURRENT LIABILITIES 95,914 84,808
Long-term debt 107,916 110,966
Other liabilities 49,989 50,309
Noncontrolling interests 18,013 19,596
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 75,732 75,730
Accumulated other comprehensive loss (3,435) (3,347)
Less cost of shares in treasury (13,740) (13,471)
--------- ---------
78,026 78,381
--------- ---------
$ 349,858 $ 344,060
========= =========
See accompanying notes to consolidated condensed financial statements.
2
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
(In thousands of dollars)
Three Months Ended
April 1, April 3,
2000 1999
--------- ---------
Net sales $ 102,445 $ 106,987
Interest and other income 665 484
--------- ---------
103,110 107,471
--------- ---------
Costs and expenses:
Cost of products sold 74,331 74,550
Selling, general and administrative
expenses 27,483 27,527
Interest 2,138 2,403
--------- ---------
103,952 104,480
--------- ---------
(LOSS) EARNINGS BEFORE
INCOME TAXES AND NON-
CONTROLLING INTERESTS (842) 2,991
(Credit) provision for income taxes (303) 1,177
Noncontrolling interests 889 (356)
--------- ---------
NET EARNINGS $ 350 $ 1,458
========= =========
Earnings per share:
Basic $ .10 $ .40
========= =========
Diluted $ .10 $ .39
========= =========
Dividends declared per common share $ .125 $ .125
========= =========
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands of dollars)
Three Months Ended
April 1, April 3,
2000 1999
--------- ---------
OPERATING ACTIVITIES
Net earnings $ 350 $ 1,458
Adjustments to reconcile net earnings to net cash
used by operating activities:
Depreciation and amortization 4,183 4,006
Deferred income taxes 346 63
Accounts and notes receivable (16,751) (15,017)
Inventories (4,049) (10,279)
Prepaid expenses and other current assets 494 206
Accounts payable and accrued expenses 224 7,994
Noncontrolling interests (889) 356
Other (151) (43)
--------- ---------
NET CASH USED BY OPERATING ACTIVITIES (16,243) (11,256)
INVESTING ACTIVITIES
Investment in property, plant and equipment (6,251) (3,762)
Maturities of short-term investments 14,754
--------- ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 8,503 (3,762)
FINANCING ACTIVITIES
Net short-term borrowings 10,750 4,950
Payments on long-term debt (3,039) (4,243)
Additional investment in subsidiaries (309)
Purchase of treasury shares (466) (1,689)
Dividends paid (440) (456)
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 6,496 (1,438)
Effect of foreign exchange 209 624
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (1,035) (15,832)
Cash and cash equivalents at beginning of period 27,285 59,505
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF
QUARTER $ 26,250 $ 43,673
========= =========
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
April 1, 2000
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 April 1,
2000 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2000. 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, 1999.
Note B - Inventories
Inventory at April 1, 2000 and December 31, 1999 consisted of the following (in
thousands):
April 1, December 31,
2000 1999
-------- ------------
Finished goods $64,841 $61,695
Work-in-process 10,789 8,628
Raw materials and supplies 11,199 12,654
------- -------
$86,829 $82,977
======= =======
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 - Comprehensive Income
During the first quarter of 2000 and 1999, total comprehensive income amounted
to $262,000 and $1,791,000 respectively. Other comprehensive income consisted
only of foreign currency translation adjustments.
5
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
April 1, 2000
Note E - Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share for the three months ended April 1, 2000 and April 3, 1999:
Three Months Ended
Apri1 1, April 3,
2000 1999
--------- ---------
Numerator:
Net income $ 350 $ 1,458
========= =========
Denominator:
Denominator for basic
earnings per share:
Weighted-average shares 3,520 3,646
Denominator for diluted
earnings per share:
Dilutive employee stock options 25 113
--------- ---------
Weighted-average shares and
assumed conversions 3,545 3,759
========= =========
Basic earnings per share $ .10 $ .40
========= =========
Diluted earnings per share $ .10 $ .39
========= =========
Note F - 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
6
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
April 1, 2000
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.
Segment Profit and Assets
- -------------------------
(In thousands) Three Months Ended
April 1, April 3,
2000 1999
---- ----
Revenues
Revenues from external customers:
Flooring products $ 56,756 $ 65,162
Tape products 22,965 21,603
Jewelry 10,335 10,537
Canadian division 12,389 9,685
--------- ---------
Total revenues from external
customers 102,445 106,987
--------- ---------
Intersegment revenues:
Flooring products 111 225
Tape products 81 60
Jewelry
Canadian division 1,524 2,076
--------- ---------
Total intersegment revenues 1,716 2,361
--------- ---------
104,161 109,348
Reconciling items
Intersegment revenues (1,716) (2,361)
--------- ---------
Total consolidated revenues $ 102,445 $ 106,987
========= =========
7
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
April 1, 2000
Note F - Industry Segments continued
(In thousands) Three Months Ended
April 1, April 3,
2000 1999
---- ----
Segment (loss) profit
Flooring products $ (3,070) $ 1,183
Tape products 1,460 1,339
Jewelry (69) (163)
Canadian division 1,171 851
--------- ---------
Total segment (loss) profit (508) 3,210
Reconciling items
Corporate office loss (373) (177)
Intercompany profit 39 (42)
--------- ---------
Total consolidated (loss) earnings
before income taxes and other items $ (842) $ 2,991
========= =========
April 1, April 3,
2000 1999
--------- ---------
Segment assets
Flooring products $ 228,447 $ 238,448
Tape products 60,779 56,711
Jewelry 22,500 18,053
Canadian division 27,548 22,853
--------- ---------
Total segment assets 339,274 336,065
Reconciling items
Corporate office assets 29,499 27,294
Intersegment accounts receivable (18,739) (18,384)
Intersegment profit in inventory (176) (194)
--------- ---------
Total consolidated assets $ 349,858 $ 344,781
========= =========
8
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
April 1, 2000
Results of Operations
Net sales for the first quarter of 2000 were $102.4 million compared to $107.0
million for the first quarter of 1999, a decrease of $4.6 million or 4.2%. Lower
revenues in the flooring products segment (Congoleum) offset increases in
revenues from the Canadian division and Tape products segments.
Cost of products sold as a percentage of sales increased to 72.6% in the first
quarter of 2000 from 69.7% in the first quarter of 1999. This increase was
primarily due to higher raw material costs in all manufacturing segments and
lower production volumes at Congoleum.
Selling, general and administrative expenses in the first quarter of 2000 were
$27.5 million, or 26.8% of sales, compared with $27.5 million, or 25.7% of
sales, in the same period one year earlier. Higher selling related expenses in
the Tape products and Canadian divisions were largely offset by reductions in
selling, general and administrative expenses at Congoleum.
Net income for the first quarter of 2000 was $.4 million, down from $1.5 million
one year earlier, as a result of the loss in the flooring products segment,
which offset improved results from the Tape products and Canadian division
segments.
Liquidity and Capital Resources
Cash and cash equivalents declined $1.0 million in the first quarter of 2000, to
$26.3 million, compared with a decline of $15.8 million in the first quarter of
1999. The lower decline in the first quarter of 2000 was primarily due to $14.8
million of maturing investments, which largely offset the normal seasonal
working capital needs. Working capital at April 1, 2000 was $79.5 million, down
from $86.9 million at December 31, 1999. The ratio of current assets to current
liabilities at April 1, 2000 was 1.8, down from 2.0 at December 31, 1999.
Capital expenditures in the first quarter of 2000 were $6.3 million. It is
anticipated that capital spending for the full year 2000 will be in the range of
$22 to $24 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.
9
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
April 1, 2000
Cash requirements for capital expenditures, working capital, debt service and
the current authorization to repurchase $2.5 million of ABI's Common Stock and
$0.7 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
first quarter of 2000, ABI repurchased $.3 million of its Common Stock and
Congoleum repurchased $.2 million of its Class A Common Stock. ABI also
purchased $.2 million of Congoleum Class A Common Stock during the first quarter
of 2000.
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 April 1, 2000 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 April 1, 2000, 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.
10
<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
April 1, 2000
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 April
1, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN BILTRITE INC.
----------------------
(Registrant)
Date: May 11, 2000 BY: /s/
--------------------------
Howard N. Feist III
Vice President-Finance
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> APR-01-2000
<CASH> 26,250
<SECURITIES> 4,478
<RECEIVABLES> 47,203
<ALLOWANCES> 0
<INVENTORY> 86,829
<CURRENT-ASSETS> 175,431
<PP&E> 138,734
<DEPRECIATION> 0
<TOTAL-ASSETS> 349,858
<CURRENT-LIABILITIES> 95,914
<BONDS> 0
0
0
<COMMON> 46
<OTHER-SE> 77,980
<TOTAL-LIABILITY-AND-EQUITY> 349,858
<SALES> 102,445
<TOTAL-REVENUES> 103,110
<CGS> 74,331
<TOTAL-COSTS> 103,952
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,138
<INCOME-PRETAX> (842)
<INCOME-TAX> (303)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 350
<EPS-BASIC> .10
<EPS-DILUTED> .10
</TABLE>
