-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TH7q5zNg1Cge0LK8un0vY3tPqZKoObyZm1q741qwJeTzC1h/f4d4QkdlWe61G/i4 XmT5kdX/N5NYZpMUUSxJ/A== 0001005477-98-003170.txt : 19981116 0001005477-98-003170.hdr.sgml : 19981116 ACCESSION NUMBER: 0001005477-98-003170 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981003 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN BILTRITE INC CENTRAL INDEX KEY: 0000004611 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED RUBBER PRODUCTS, NEC [3060] IRS NUMBER: 041701350 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04773 FILM NUMBER: 98748118 BUSINESS ADDRESS: STREET 1: 57 RIVER STREET CITY: WELLESLEY HILLS STATE: MA ZIP: 02181 BUSINESS PHONE: 6172376655 MAIL ADDRESS: STREET 1: 57 RIVER STREET CITY: WELLESLEY HILLS STATE: MA ZIP: 02181 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN BILTRITE RUBBER CO INC DATE OF NAME CHANGE: 19730621 10-Q 1 QUARTERLY REPORT 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 3, 1998 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 incorporation or organization) Identification No.) 57 River Street Wellesley Hills, Massachusetts 02481-2097 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 781-237-6655 ----------------------------- 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 November 10, 1998 - --------------------------- --------------------------------------------- Common Stock 3,646,988 shares FORM 10-Q PART I. FINANCIAL INFORMATION AMERICAN BILTRITE INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In thousands of dollars) October 3, December 31, 1998 1997 ---------- ------------ ASSETS CURRENT ASSETS Cash and cash equivalents $ 50,289 $ 19,306 Short-term investments 3,300 7,900 Accounts receivable, net 42,972 30,254 Inventories 75,370 74,355 Prepaid expenses & other current assets 8,765 9,187 --------- --------- TOTAL CURRENT ASSETS 180,696 141,002 Goodwill, net 22,604 23,421 Deferred income taxes 2,636 2,636 Other assets 13,413 12,171 Property, plant and equipment, net 123,186 120,456 --------- --------- $ 342,535 $ 299,686 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 6,800 $ 5,500 Accounts payable 25,330 19,060 Accrued expenses 54,021 47,769 Current portion of long-term debt 4,307 1,156 --------- --------- TOTAL CURRENT LIABILITIES 90,458 73,485 Long-term debt 114,100 93,253 Other liabilities 50,858 51,271 Non-controlling interests 18,716 16,332 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 64,988 60,924 Equity adjustment from translation (3,927) (2,759) Minimum pension liability (546) (546) Less cost of shares in treasury (11,581) (11,743) --------- --------- 68,403 65,345 --------- --------- $ 342,535 $ 299,686 ========= ========= See accompanying notes to consolidated condensed financial statements. FORM 10-Q PART I. FINANCIAL INFORMATION AMERICAN BILTRITE INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) ($000) Three Months Ended Nine Months Ended Oct. 3, Sept. 27, Oct. 3, Sept. 27, 1998 1997 1998 1997 --------- --------- --------- --------- Net sales $ 110,681 $ 120,036 $ 325,570 $ 317,141 Interest and other income 1,416 383 2,764 1,890 --------- --------- --------- --------- 112,097 120,419 328,334 319,031 --------- --------- --------- --------- Costs and expenses: Cost of products sold 75,280 81,616 224,237 218,773 Selling, general and administrative expenses 26,227 26,713 81,071 78,943 Interest 2,364 2,386 6,577 7,160 --------- --------- --------- --------- 103,871 110,715 311,885 304,876 --------- --------- --------- --------- EARNINGS BEFORE INCOME TAXES AND OTHER ITEMS 8,226 9,704 16,449 14,155 Provision for income taxes 3,212 3,663 6,404 5,436 Non-controlling interests (2,019) (1,221) (3,624) (2,968) --------- --------- --------- --------- Income before extra- ordinary item 2,995 4,820 6,421 5,751 Extraordinary item - early retirement of debt, net of income tax benefit (1,174) (1,174) --------- --------- --------- --------- NET EARNINGS $ 1,821 $ 4,820 $ 5,247 $ 5,751 ========= ========= ========= ========= Earnings per share: Basic Earnings before extraordinary item $ .82 $ 1.33 $ 1.76 $ 1.58 Extraordinary item (.32) (.32) --------- --------- --------- --------- Net income $ .50 $ 1.33 $ 1.44 $ 1.58 ========= ========= ========= ========= Diluted Earnings before extraordinary item $ .79 $ 1.31 $ 1.68 $ 1.55 Extraordinary item (.31) (.31) --------- --------- --------- --------- Net income $ .48 $ 1.31 $ 1.37 $ 1.55 ========= ========= ========= ========= Dividends declared per common share $ .125 $ .10 $ .325 $ .30 See accompanying notes to consolidated condensed financial statements. 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 Oct. 3, Sept. 27, 1998 1997 -------- -------- OPERATING ACTIVITIES Net earnings $ 5,247 $ 5,751 Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Depreciation and amortization 11,458 11,030 Loss on early retirement of debt 3,809 Accounts and notes receivable (12,804) (15,692) Inventories (1,235) (8,711) Prepaid expenses and other current assets 466 1,423 Accounts payable 6,370 (2,878) Accrued expenses 6,421 2,015 Non-controlling interests 2,384 2,968 Other (443) 1,339 -------- -------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 21,673 (2,755) INVESTING ACTIVITIES Investment in property, plant & equipment (13,488) (18,175) Purchase of short-term investments (15,000) (43,000) Maturities of short-term investments 19,600 46,300 -------- -------- NET CASH USED BY INVESTING ACTIVITIES (8,888) (14,875) FINANCING ACTIVITIES Net short-term borrowings 1,300 7,000 Long-term borrowings 101,728 Debt issuance costs (2,821) Payments on long-term debt (77,787) (7,981) Premium payments on early retirement of debt (2,563) Purchase and retirement of Congoleum Class B shares (1,005) Purchase of treasury shares (1) (1,089) Proceeds from exercise of stock options 163 88 Dividends paid (1,183) (1,090) -------- -------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 18,836 (4,077) Effect of foreign exchange (638) 473 -------- -------- INCREASE (DECREASE) IN CASH 30,983 (21,234) Cash at beginning of period 19,306 33,658 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 50,289 $ 12,424 ======== ======== See accompanying notes to consolidated condensed financial statements. FORM 10-Q PART I. FINANCIAL INFORMATION AMERICAN BILTRITE INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS October 3, 1998 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 October 3, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. 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, 1997. Note B - Inventories Inventory at October 3, 1998 and December 31, 1997 consisted of the following: (in thousands) October 3, December 31, 1998 1997 ---------- ------------ Finished goods $ 52,822 $ 53,139 Work-in-process 11,245 9,422 Raw materials and supplies 11,303 11,794 -------- -------- $ 75,370 $ 74,355 ======== ======== 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. FORM 10-Q PART I. FINANCIAL INFORMATION AMERICAN BILTRITE INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS October 3, 1998 Note D - Long-Term Debt On August 3, 1998, Congoleum Corporation ("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. The Indenture under which the notes were issued includes certain restrictions on additional indebtedness and dividend payments. The Senior Notes are redeemable at the option of Congoleum, in whole or in part, at any time on or after August 1, 2003 at a predetermined redemption price (ranging from 104% to 100%), plus accrued and unpaid interest to date of redemption. In connection with this offering, Congoleum recorded an extraordinary after-tax charge of $2.4 million, ABI's share of this charge was $1.2 million ($.32 per share), to write off debt issuance costs and premiums associated with the repurchase of the 9% Senior Notes. 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. The following table presents Comprehensive Income for the three months and nine months ended October 3, 1998 and September 27, 1997: (in thousands) Three Months Ended Nine Months Ended Oct. 3, Sept. 27, Oct. 3, Sept. 27, 1998 1997 1998 1997 ------- ------- ------- ------- Net income $ 1,821 $ 4,820 $ 5,247 $ 5,751 Foreign translation adjustments (748) (245) (1,168) (507) ------- ------- ------- ------- Comprehensive Income $ 1,073 $ 4,575 $ 4,079 $ 5,244 ======= ======= ======= ======= Form 10-Q PART I. FINANCIAL INFORMATION AMERICAN BILTRITE INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS October 3, 1998 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 3, 1998 and September 27, 1997: (in thousands, except per share amounts) Three Months Ended Nine Months Ended Oct. 3, Sept. 27, Oct. 3, Sept. 27, 1998 1997 1998 1997 ------- --------- -------- --------- Numerator: Net income $1,821 $4,820 $5,247 $5,751 ====== ====== ====== ====== Denominator: Denominator for basic earnings per share: Weighted-average shares 3,643 3,635 3,640 3,632 Denominator for diluted earnings per share: Dilutive employee stock options 163 31 184 82 ------ ------ ------ ------ Weighted-average shares and assumed conversions 3,806 3,666 3,824 3,714 ====== ====== ====== ====== Basic earnings per share $ .50 $ 1.33 $ 1.44 $ 1.58 ====== ====== ====== ====== Diluted earnings per share $ .48 $ 1.31 $ 1.37 $ 1.55 ====== ====== ====== ====== Note G- Reclassifications For comparative purposes, certain prior years' amounts have been reclassified to conform to the current year presentation. FORM 10-Q PART I. FINANCIAL INFORMATION AMERICAN BILTRITE INC. AND SUBSIDIARIES MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS October 3, 1998 Results of Operations Net sales for the third quarter of 1998 were $110.7 million compared to $120.0 million for the third quarter of 1997, reflecting a decrease of $9.3 million or 8%. Net sales for the third quarter of 1998 were lower than 1997 at all of the Company's businesses, particularly at K&M Associates L.P. ("K&M"). Sales for the third quarter of 1997 included the initial shipments to 1,700 new stores K&M began servicing for a major customer. Net sales for the first nine months of 1998 were $325.6 million, an increase of $8.4 million or 3% over last year's sales of $317.1 million. The largest sales increase occurred at Congoleum from higher sales to the manufactured housing and home center channels. Sales were higher in 1998 at K&M and slightly lower at the Tape and Canadian divisions. Interest and other income increased in the current third quarter by $1 million and by $.9 million for the first nine months of 1998. Higher interest and royalty income at Congoleum and foreign exchange gains at ABI positively affected results for both periods compared to last year. Cost of products sold as a percentage of net sales in the 1998 third quarter remained the same at 68.0% compared to last year and improved slightly to 68.9% in 1998 from 69.0% in last year's first nine months. Selling, general and administrative expenses as a percentage of net sales in the current quarter increased to 23.7% from 22.3% last year. Expenditure levels for the quarter were about the same as last year but sales were off $9.3 million as noted above. Expense as a percentage of net sales for the nine months 1998 was 24.9%, the same as last year. Interest expense in the current nine months is lower than last year resulting from lower borrowing requirements at both ABI and K&M. Income before extraordinary item for the third quarter of 1998 was $3.0 million compared to $4.8 million last year. Congoleum's earnings were higher than last year's third quarter but earnings were lower at ABI and K&M. For the nine months 1998, income before extraordinary item was $6.4 million compared to $5.8 million last year. Earnings are higher in 1998 at Congoleum and the Canadian division, but lower at K&M and the Tape division. FORM 10-Q PART I. FINANCIAL INFORMATION AMERICAN BILTRITE INC. AND SUBSIDIARIES MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS October 3, 1998 As described in the Liquidity and Capital Resources section, Congoleum refinanced its long-term debt during the quarter 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. Net income after extraordinary item for the third quarter of 1998 was $1.8 million compared with $4.8 million in the third quarter of 1997. Net income after extraordinary item for the first nine months of 1998 was $5.3 million compared with $5.6 million during the same period in 1997. Liquidity and Capital Resources Cash and cash equivalents, including short-term investments, increased $26.4 million for the nine months ended October 3, 1998 to $53.6 million. Working capital was $90.2 million, up from $67.5 million at year end 1997. The ratio of current assets to current liabilities at October 3, 1998 was 2.0 to 1.0 and at December 31, 1997 was 1.9 to 1.0. Cash provided by operations was $21.7 million for the first nine months of 1998 compared to $2.8 million cash used by operations in the first nine months of last year. Capital expenditures in the current nine months were $13.5 million. Depreciation and amortization expense was $11.5 million. It is anticipated that total year capital spending will be in the range of $20 to $22 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. 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. FORM 10-Q PART I. FINANCIAL INFORMATION AMERICAN BILTRITE INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS October 3, 1998 The Company has completed an assessment of the steps it believes will be necessary for its existing and planned data processing systems and equipment to operate properly when confronted with dates beginning in the year 2000. A plan has been developed which identifies the systems affected and the steps that will be required to assure year 2000 compliance. The Company's existing plan to improve operations by replacing or upgrading systems in the ordinary course of business during 1998 and 1999 will have the additional benefit of providing year 2000 compliance in many instances. The resources required to make the remaining systems compliant have been estimated and are being provided by a combination of existing employees and outside contractors. The Company has retained or believes it will be able to retain the necessary employees and outside resources to accomplish this, and that the cost to achieve compliance will not be material to the Company's financial position, liquidity or results of operations. As of September 1998, the Company has completed converting 61% of the systems identified as requiring modification. The timing and resource requirements to date have been consistent with the Company's plan, and the Company anticipates that all of its mission-critical systems will be year 2000 compliant by the end of the first half of 1999. However, if any governmental agencies, key customers or key suppliers are unable to make the necessary computer system changes on a timely basis, such inability could negatively impact the Company's results of operations. Cash requirements for capital expenditures, working capital, debt service and the current authorization to repurchase $4.7 million of ABI's Common Stock and $.4 million of Congoleum's Common Stock are expected to be financed from existing funds, 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. FORM 10-Q PART II. OTHER INFORMATION AMERICAN BILTRITE INC. AND SUBSIDIARIES October 3, 1998 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 3, 1998. 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 12, 1998 BY: /s/ Gilbert K. Gailius ------------------------------ Gilbert K. Gailius Vice President-Finance EX-27 2 FDS
5 1,000 9-MOS DEC-31-1998 JAN-01-1998 OCT-03-1998 50,289 3,300 42,972 0 75,370 180,696 123,186 0 342,535 90,458 0 0 0 46 68,354 342,535 325,570 328,334 224,237 311,885 0 0 6,577 16,449 6,404 6,421 0 (1,174) 0 5,247 1.44 1.37
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