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 July 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 August 1, 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)
<TABLE>
<CAPTION>
July 1, December 31,
2000 1999
-------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 22,618 $ 27,285
Short-term investments 6,503 19,232
Accounts receivable, net 43,282 30,586
Inventories 90,206 82,977
Prepaid expenses & other current assets 10,789 11,672
-------- --------
TOTAL CURRENT ASSETS 173,398 171,752
Goodwill, net 21,943 21,361
Other assets 14,731 14,619
Property, plant and equipment, net 138,634 136,328
-------- --------
TOTAL ASSETS $348,706 $344,060
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 14,500
Accounts payable 26,284 $ 27,453
Accrued expenses 51,834 54,216
Current portion of long-term debt 3,638 3,139
-------- --------
TOTAL CURRENT LIABILITIES 96,256 84,808
Long-term debt 107,410 110,966
Other liabilities 49,998 50,309
Noncontrolling interests 16,876 19,596
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 76,277 75,730
Accumulated other comprehensive loss (3,840) (3,347)
Less cost of shares in treasury (13,740) (13,471)
-------- --------
78,166 78,381
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $348,706 $344,060
======== ========
</TABLE>
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)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 102,398 $ 104,002 $ 204,843 $ 210,989
Interest and other income 1,068 1,471 1,733 1,955
--------- --------- --------- ---------
103,466 105,473 206,576 212,944
--------- --------- --------- ---------
Costs and expenses:
Cost of products sold 73,556 71,740 147,887 146,290
Selling, general and administrative
expenses 27,716 28,122 55,199 55,649
Interest 2,301 2,388 4,439 4,791
--------- --------- --------- ---------
103,573 102,250 207,525 206,730
--------- --------- --------- ---------
(LOSS) EARNINGS BEFORE
INCOME TAXES AND NONCONTROLLING
INTERESTS (107) 3,223 (949) 6,214
(Credit) provision for income taxes (41) 1,287 (344) 2,464
Noncontrolling interests 1,050 (604) 1,939 (960)
--------- --------- --------- ---------
NET EARNINGS $ 984 $ 1,332 $ 1,334 $ 2,790
========= ========= ========= =========
Earnings per share:
Basic $ .28 $ .37 $ .38 $ .77
Diluted $ .28 $ .36 $ .38 $ .75
Dividends declared per common share $ .125 $ .125 $ .25 $ .25
</TABLE>
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)
<TABLE>
<CAPTION>
Six Months Ended
July 1, July 3,
2000 1999
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 1,334 $ 2,790
Adjustments to reconcile net earnings to net cash
used by operating activities:
Depreciation and amortization 8,534 7,891
Deferred income taxes (1,141) 146
Accounts and notes receivable (12,952) (8,759)
Inventories (7,649) (22,172)
Prepaid expenses and other current assets 1,461 (827)
Accounts payable and accrued expenses (3,419) 11,237
Noncontrolling interests (1,939) 960
Other (253) 121
-------- --------
NET CASH USED BY OPERATING ACTIVITIES (16,024) (8,613)
INVESTING ACTIVITIES
Investment in property, plant and equipment (10,424) (10,551)
Purchase of short-term investments (6,453) (4,301)
Maturities of short-term investments 19,182 4,301
-------- --------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES 2,305 (10,551)
FINANCING ACTIVITIES
Net short-term borrowings 14,500 7,700
Payments on long-term debt (3,049) (4,171)
Additional investment in subsidiaries (1,381) (124)
Purchase of treasury shares (466) (3,356)
Dividends paid (879) (903)
-------- --------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 8,725 (854)
Effect of foreign exchange 327 767
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (4,667) (19,251)
Cash and cash equivalents at beginning of year 27,285 59,505
-------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 22,618 $ 40,254
======== ========
</TABLE>
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
July 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 July 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 July 1, 2000 and December 31, 1999 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
July 1, December 31,
2000 1999
------- ------------
<S> <C> <C>
Finished goods $65,538 $61,695
Work-in-process 11,059 8,628
Raw materials and supplies 13,609 12,654
------- -------
$90,206 $82,977
======= =======
</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.
5
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
July 1, 2000
Note D - Comprehensive Income
The following table presents total comprehensive income for the three months and
six months ended July 1, 2000 and July 3, 1999 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
------ ------- ------ ------
<S> <C> <C> <C> <C>
Net earnings $ 984 $ 1,332 $ 1,334 $ 2,790
Foreign currency translation adjustments (405) 365 (493) 698
------ ------- ------- -------
Total comprehensive income $ 579 $ 1,697 $ 841 $ 3,488
====== ======= ======= =======
</TABLE>
Note E - Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share for the three months and six months ended July 1, 2000 and July 3, 9999:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
------ ------- ------ ------
<S> <C> <C> <C> <C>
Numerator:
Net income $ 984 $ 1,332 $1,334 $2,790
====== ======= ====== ======
Denominator:
Denominator for basic earnings per share:
Weighted-average shares 3,517 3,584 3,519 3,616
Denominator for diluted earnings
per share:
Dilutive employee stock options 24 70 24 91
------ ------- ------ ------
Weighted-average shares and
assumed conversions 3,541 3,654 3,543 3,707
====== ======= ====== ======
Basic earnings per share $ .28 $ .37 $ .38 $ .77
====== ======= ====== ======
Diluted earnings per share $ .28 $ .36 $ .38 $ .75
====== ======= ====== ======
</TABLE>
6
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
July 1,2000
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 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 Six Months Ended
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues
Revenues from external customers:
Flooring products $ 55,169 $ 64,130 $ 111,925 $ 129,292
Tape products 24,825 22,237 47,790 43,840
Jewelry 9,869 6,662 20,204 17,199
Canadian division 12,535 10,973 24,924 20,658
--------- --------- --------- ---------
Total revenues from external
customers 102,398 104,002 204,843 210,989
--------- --------- --------- ---------
Intersegment revenues:
Flooring products 94 177 205 402
Tape products 4 45 85 105
Jewelry
Canadian division 1,558 2,421 3,082 4,497
--------- --------- --------- ---------
Total intersegment revenues 1,656 2,643 3,372 5,004
--------- --------- --------- ---------
104,054 106,645 208,215 215,993
Reconciling items
Intersegment revenues (1,656) (2,643) (3,372) (5,004)
--------- --------- --------- ---------
Total consolidated revenues $ 102,398 $ 104,002 $ 204,843 $ 210,989
========= ========= ========= =========
</TABLE>
7
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
July 1, 2000
Note F - Industry Segments continued
<TABLE>
<CAPTION>
(In thousands) Three Months Ended Six Months Ended
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Segment profit (loss)
Flooring products $ (2,891) $ 1,915 $ (5,961) $ 3,098
Tape products 2,127 1,523 3,587 2,862
Jewelry 19 (1,092) (50) (1,255)
Canadian division 1,085 1,183 2,256 2,034
--------- --------- --------- ---------
Total segment profit 340 3,529 (168) 6,739
Reconciling items
Corporate office loss (422) (251) (795) (428)
Intercompany profit (25) (55) 14 (97)
--------- --------- --------- ---------
Total consolidated earnings before
income taxes and other items $ (107) $ 3,223 $ (949) $ 6,214
========= ========= ========= =========
<CAPTION>
July 1, Dec. 31,
2000 1999
--------- ---------
<S> <C> <C>
Segment assets
Flooring products $ 228,182 $ 231,817
Tape products 65,305 49,876
Jewelry 18,238 15,737
Canadian division 28,148 27,146
--------- ---------
Total segment assets 339,873 324,576
Reconciling items
Corporate office assets 28,988 26,702
Intersegment accounts receivable (19,954) (7,003)
Intersegment profit in inventory (201) (215)
--------- ---------
Total consolidated assets $ 348,706 $ 344,060
========= =========
</TABLE>
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
July 1, 2000
Results of Operations
Net sales for the second quarter of 2000 were $102.4 million compared to $104.0
million for the second quarter of 1999, a decrease of $1.6 million or 1.5%. This
decrease was due to lower revenues in the flooring segment (Congoleum) resulting
from decreased distributor purchases and weakness in the manufactured housing
industry. This more than offset the sales improvements in the tape, jewelry and
Canadian segments.
Sales for the first six months of 2000 were $204.8 million compared to $211.0
million last year. Sales performance at Congoleum, as noted above, accounts for
the year-to-date decrease, despite significantly higher sales at ABI's tape,
jewelry and Canadian operations.
Interest and other income decreased in the current quarter to $1.1 million from
$1.5 million in last year's second quarter and decreased to $1.7 million for six
months this year from $2.0 million last year. The primary cause of this decrease
in 2000 is due to lower licensing income at Congoleum.
Cost of products sold as a percentage of net sales increased in the current
quarter to 71.8% from 69.0% in last year's second quarter. For the six month
period ending July 1, 2000, cost of products sold as a percentage of sales was
72.2% versus 69.3% one year earlier. This increase was primarily due to reduced
production available to absorb overhead at Congoleum.
Selling, general and administrative expenses as a percentage of net sales in the
current quarter increased to 27.1% from 27.0% last year and for the current six
months increased to 26.9% from 26.4% and is the result of lower sales volume
levels experienced in the current quarter coupled with reductions in expenses.
Interest expense in both the current quarter and six months reflects slight
decreases compared to last year and is due to a greater portion of interest
being capitalized in connection with capital projects in the current year.
Net earnings for the second quarter of 2000 was $1.0 million compared to $1.3
million last year and for the first six months of 2000 was $1.3 million compared
to $2.8 million last year. Income increased for the three and six month periods
in 2000 at both the tape and Canadian segments, while results improved at the
jewelry operation to break even from a loss in the year earlier periods.
Congoleum reported losses for the three and six month periods of this year,
compared with income in the prior year.
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
July 1, 2000
Liquidity and Capital Resources
Cash and cash equivalents decreased $4.7 million for the six months ended July
1, 2000 to $22.6 million. Working capital was $77.1 million, down from $86.9
million at year end 1999. The ratio of current assets to current liabilities at
July 1, 2000 was 1.8 and at December 31, 1999 was 2.0. Cash used by operations
was $15.8 million in the first six months of 2000 due to increases in accounts
receivable arising from seasonal sales patterns and increases in inventory
levels for planned vacation shutdown of certain plants in the third quarter.
Capital expenditures in the current six months were $10.4 million and
depreciation and amortization expense was $8.5 million. It is anticipated that
total year capital spending will be in the range of $20 to $22 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 $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
six months ended July 1, 2000, ABI repurchased $0.3 million of its Common Stock,
Congoleum repurchased $0.2 million of its Common Stock and ABI purchased $0.2
million of Congoleum Common Stock.
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 July 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.
10
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
July 1, 2000
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. 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 July 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.
The Company does not currently 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.
11
<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
July 1, 2000
Item 4. Submission of Matters to a Vote of Security Holders:
At the Annual Meeting of Stockholders held on May 9, 2000, the
following action was taken:
Three nominees were elected as Class I Directors who will hold office
until the Annual Meeting of Stockholders in 2003 and until their
successors are duly elected and qualify.
<TABLE>
<CAPTION>
Witheld From
Name Votes For All Nominees
---- --------- ------------
<S> <C> <C>
Gilbert K. Gailius 3,061,691 11,837
Richard G. Marcus 3,062,695 10,833
Frederick H. Joseph 3,062,291 11,237
</TABLE>
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
July 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: August 2, 2000 BY: /s/ Howard N. Feist III
------------------------
Howard N. Feist III
Vice President-Finance
12
