-----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, I4mbOOotxaUQJHR4dRlIxXFYCrAMAblJ1Vkrdl1+fMifd28eK9djJUr7pmYxHOIJ paB6QIYDlk4r57e/sjphNA== 0000023341-97-000020.txt : 19970508 0000023341-97-000020.hdr.sgml : 19970508 ACCESSION NUMBER: 0000023341-97-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970507 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONGOLEUM CORP CENTRAL INDEX KEY: 0000023341 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 020398678 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13612 FILM NUMBER: 97597117 BUSINESS ADDRESS: STREET 1: 3705 QUAKERBRIDGE RD STE 211 STREET 2: PO BOX 3127 CITY: MERCERVILLE STATE: NJ ZIP: 08619-0127 BUSINESS PHONE: 6095843000 MAIL ADDRESS: STREET 1: 3705 QUAKERBRIDGE RD STE 211 STREET 2: PO BOX 3127 CITY: MERCERVILLE STATE: NJ ZIP: 08619-0127 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 __________________________ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to _________ Commission File Number 1-13612 CONGOLEUM CORPORATION (Exact name of Registrant as specified in Its Charter) DELAWARE 02-0398678 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 3705 Quakerbridge Road P.O. Box 3127 Mercerville, NJ 08619-0127 (Address of Principal Executive Offices, including Zip Code) Telephone number: (609) 584-3000 (Registrant's telephone number, including area code) 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. Class Outstanding at April 30, 1997 - -------------------- ----------------------------- Class A Common Stock 4,644,200 Class B Common Stock 5,350,000 Page 1 of 13 CONGOLEUM CORPORATION Index Page PART I. FINANCIAL INFORMATION ---- Item 1. Financial Statements: Balance Sheets as of March 31, 1997 (unaudited) and December 31, 1996 3 Statements of Operations for the three months ended March 31, 1997 and 1996 (unaudited) 4 Statements of Cash Flows for the three months ended March 31, 1997 and 1996 (unaudited) 5 Notes to Unaudited Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings 10 Item 2. Changes in Securities 10 Item 3. Defaults Upon Senior Securities 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11 Exhibit Index 12 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements CONGOLEUM CORPORATION BALANCE SHEETS
March 31, December 31, 1997 1996 (Unaudited) (Dollars in thousands) ASSETS Current assets: Cash and cash equivalents $ 9,315 $ 30,629 Short-term investments 26,700 17,500 Accounts and notes receivable, net 24,517 18,886 Inventories 55,487 47,450 Prepaid expenses and other current assets 488 1,014 Deferred income taxes 2,874 2,874 --------- --------- Total current assets 119,381 118,353 Property, plant and equipment, net 78,798 78,313 Goodwill, net 12,575 12,683 Deferred income taxes 3,068 3,068 Other noncurrent assets 7,224 7,381 --------- --------- Total assets $221,046 $219,798 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable 17,769 19,935 Accrued expenses 35,196 32,828 Accrued income taxes 1,759 1,663 Deferred income taxes 1,924 1,924 --------- --------- Total current liabilities 56,648 56,350 Long-term debt 87,200 87,750 Other liabilities 19,620 19,401 Noncurrent pension liability 12,632 12,381 Accrued postretirement benefit obligation 10,249 10,249 --------- --------- Total liabilities 186,349 186,131 --------- --------- STOCKHOLDERS' EQUITY Preferred stock, par value $0.01 per share; 1,000,000 shares authorized; none issued or outstanding -- -- Class A common stock, par value $0.01 per share; authorized 20,000,000 shares; issued 4,652,000 and 4,650,000 shares; outstanding 4,646,700 and 4,645,500 shares as of March 31, 1997 and December 31, 1996 47 47 Class B common stock, par value $0.01 per share; 5,350,000 shares authorized, issued and outstanding as of March 31, 1997 and December 31, 1996 53 53 Additional paid-in capital 55,198 55,172 Retained deficit (18,548) (19,561) Minimum pension liability adjustment (1,995) (1,995) Common stock held in Treasury, at cost; 5,300 shares at March 31, 1997 and 4,500 shares at December 31, 1996 (58) (49) --------- --------- Total stockholders' equity 34,697 33,667 --------- --------- Total liabilities and stockholders' equity $221,046 $219,798 ========= =========
The accompanying notes are an integral part of the condensed financial statements. 3 CONGOLEUM CORPORATION STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, ----------------------- 1997 1996 (In thousands, except per share amounts) Net sales $61,083 $54,118 Cost of sales 42,842 40,183 Selling, general and administrative expenses 15,217 14,260 --------- --------- Income (loss) from operations 3,024 (325) Other income (expense): Interest income 505 333 Interest expense (1,983) (2,038) Other income 141 356 Other expense (67) (51) --------- --------- Income (loss) before income taxes 1,620 (1,725) Provision (benefit) for income taxes 607 (681) --------- --------- Net income (loss) $ 1,013 $(1,044) ========= ========= Net income (loss) per common share $ 0.10 $ (0.10) ========= ========= Weighted average number of common shares and equivalent shares outstanding 10,035 10,000 ========= =========
The accompanying notes are an integral part of the condensed financial statements. 4 CONGOLEUM CORPORATION STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, -------------------- 1997 1996 (In thousands) Cash flows from operating activities: Net income (loss) $ 1,013 $ (1,044) Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Depreciation 2,337 1,901 Amortization 266 257 Changes in certain assets and liabilities: Accounts and notes receivable (5,632) (1,611) Inventories (8,037) (4,690) Prepaid expenses and other assets 526 131 Accounts payable (2,165) (5,662) Accrued expenses 2,463 (5,706) Other liabilities 470 (49) --------- --------- Net cash used by operating activities (8,759) (16,473) --------- --------- Cash flows provided (used) by investing activities: Capital expenditures (2,822) (1,996) Purchase of short-term investments (18,100) -- Maturities of short-term investments 8,900 -- --------- --------- Net cash used by investing activities (12,022) (1,996) --------- --------- Cash flows from financing activities: Payments to reduce long-term debt (550) -- Exercise of stock options 26 -- Purchase of treasury stock (9) -- --------- --------- Net cash used by financing activities (533) -- --------- --------- Net decrease in cash and cash equivalents (21,314) (18,469) Cash and cash equivalents: Beginning of period 30,629 40,103 --------- --------- End of period $ 9,315 $ 21,634 ========= =========
The accompanying notes are an integral part of the condensed financial statements. 5 CONGOLEUM CORPORATION NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) 1. Basis of Presentation The condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with Rule 10-01 of Regulation S- X and have not been audited by the Company's independent accountants. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles for complete financial statements have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission. The preparation of condensed financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair presentation of the Company's financial position have been included. The results of operations for the three months ended March 31, 1997 are not necessarily indicative of the results to be expected for a full year. These condensed financial statements should be read in conjunction with the Company's audited financial statements which appear in the Company's Annual Report to Stockholders for the period ended December 31, 1996. 2. Inventories A summary of the major classifications of inventories is as follows:
March 31, December 31, 1997 1996 ---------- -------------- Finished goods $43,275 $34,920 Work-in-process 3,563 2,089 Raw materials and supplies 8,649 10,441 -------- -------- $55,487 $47,450 ======== ========
If the FIFO (first-in, first-out) method of inventory accounting (which approximates current cost) had been used, inventories would have been approximately $1,346 and $2,027 lower than reported at March 31, 1997 and December 31, 1996, respectively. 6 3. Earnings Per Share Earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding. For the three months ended March 31, 1997, common stock equivalents have been included in the weighted average number of shares of common stock outstanding and amounts to approximately 38,000 shares. For the three months ended March 31, 1996, common stock equivalents have not been included in the weighted average number of shares of common stock outstanding since the effect would be antidilutive. For the three month periods ending March 31, 1997 and 1996, there is no difference between primary and fully diluted net income per common share. In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard No. 128, "Earnings Per Share," which simplifies the calculation of earnings per share (EPS) 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. 4. Commitments and Contingencies The Company is subject to federal, state and local environmental laws and regulations and certain legal and administrative claims are pending or have been asserted against the Company. Among these claims, the Company is a named party in several actions associated with waste disposal sites, asbestos- related claims, and general liability claims. These actions include possible obligations to remove or mitigate the effects on the environment of wastes deposited at various sites, including Superfund sites and certain of the Company's owned and previously owned facilities. The contingencies also include claims for personal injury and/or property damage. The exact amount of such future cost and timing of payments are indeterminable due to such unknown factors as the magnitude of clean-up costs, the timing and extent of the remedial actions that may be required, the determination of the Company's liability in proportion to other potentially responsible parties, and the extent to which costs may be recoverable from insurance. The Company records a liability for environmental remediation, asbestos-related claim costs, and general liability claims when a clean-up program or claim payment becomes probable and the costs can be reasonably estimated. As assessments and clean-ups progress, these liabilities are adjusted based upon progress in determining the timing and extent of remedial actions and the related costs and damages. The extent and amounts of the liabilities can change substantially due to factors such as the nature or extent of contamination, changes in remedial requirements and technological improvements. The recorded liabilities are not discounted for delays in future payments and are not reduced by the amount of estimated insurance recoveries. Such estimated insurance recoveries are considered probable of recovery. Although the outcome of these matters could result in significant expenses or judgments, management does not believe based on present facts and circumstances that their disposition will have a material adverse effect on the financial position of the Company. 5. Reclassifications For comparison purposes, certain amounts have been reclassified to conform to the current year presentation. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- Three months ended March 31, 1997 as compared to three months ended March 31, 1996. Net sales for the first quarter of 1997 were $61.1 million as compared to $54.1 million for the first quarter of 1996, an increase of $7.0 million or 12.9%. This increase was due to generally stronger demand in the residential and manufactured housing segments than in the first quarter of 1996. Also contributing to the increase were sales to new customers and earlier shipments of the Company's spring season new product introductions. Gross profit for the first quarter of 1997 was $18.2 million compared to $13.9 million for the first quarter of 1996, an increase of $4.3 million. As a percent of sales, gross profit was 29.9% in the first quarter of 1997, as compared to 25.7% in the first quarter of 1996. The increase in gross profits was due to both higher sales and improved gross profit margins. Gross profit margins improved primarily due to increased manufacturing efficiency resulting from higher production volume and investments in capital equipment. Selling, general, and administrative expenses were $15.2 million in the first quarter of 1997, up from $14.3 million in the first quarter of 1996, primarily due to costs associated with the sales increase. As a percentage of sales, selling, general, and administrative expenses were 24.9% for the first quarter of 1997, down from 26.3% for the first quarter of 1996, as a result of the higher sales which more than offset the related selling expense increase. Income from operations for the first quarter of 1997 was $3.0 million (4.9% of net sales), compared to a loss of $0.3 million for the first quarter of 1996, an increase of $3.3 million. The increase resulted from the higher level of sales and improved gross profit margins. Net income for the first quarter of 1997 was $1.0 million, compared to a loss of $1.0 million for the first quarter of 1996, an increase of $2.1 million. Liquidity and Capital Resources - ------------------------------- Cash and cash equivalents, including short-term investments, declined $12.1 million for the three months ended March 31, 1997, to $36.0 million. Working capital at March 31, 1997 was $62.7 million, up from $62.0 million at December 31, 1996. The ratio of current assets to current liabilities at March 31, 1997 was 2.1, unchanged from December 31, 1996. The ratio of debt to total capital at March 31, 1997 was .39 compared to .40 at December 31, 1996. Cash used by operations was $8.8 million for the first quarter of 1997, compared to $16.5 million in the first quarter of 1996. Capital expenditures were $2.8 million for the first quarter of 1997, but are expected to increase during the balance of the year. Total 1997 capital spending is budgeted to be approximately $18 to $20 million. 8 During 1996, the Company's Board of Directors authorized the repurchase of $5 million of the Company's Class A common stock and $10 million of its 9% senior notes. At March 31, 1997, $0.1 million had been expended on stock repurchases and $2.8 million had been expended on note repurchases pursuant to these authorizations. The Company has recorded what it believes are adequate provisions for environmental remediation and product-related liabilities, including provisions for testing for potential remediation of conditions at its own facilities. While the Company believes its estimate of the future amount of these liabilities is reasonable, that such amounts will not have a material adverse effect on the financial position of the Company and that they will paid over a period of five to ten years, the timing and amount of such payments may differ significantly from the Company's assumptions. Although the effect of future government regulation could have a significant effect on the Company's costs, the Company is not aware of any pending legislation which could have a material adverse effect on its results of operations or financial position. There can be no assurances that such costs could be passed along to its customers. The Company's principal sources of liquidity are net cash provided by operating activities and borrowings under its Amended and Restated Financing Agreement. The Company believes that these sources will be adequate to fund working capital requirements, debt service payments, stock and note repurchases, and planned capital expenditures through the foreseeable future. 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings: None Item 2. Changes in Securities: None Item 3. Defaults Upon Senior Securities: None Item 4. Submission of Matters to a Vote of Security Holders: None Item 5. Other Information: None Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits: 11. Computation of Per Share Earnings (b) Reports on Form 8-K: None 10 CONGOLEUM CORPORATION 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. CONGOLEUM CORPORATION (Registrant) Date: May 8, 1997 By:/s/ Howard N. Feist III -------------------------- (signature) Howard N. Feist III Sr. Vice President - Finance (Principal Financial & Accounting Officer) 11 EXHIBIT INDEX Exhibit Number - ------- ------ Computation of Per Share Earnings 11 12 EX-11 2 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 Congoleum Corporation Computation of Income Per Common Share (Amounts in thousands, except earnings per share)
Three Months Ended March 31, Primary Earnings Per Common Share: 1997 1996 - ---------------------------------- ------------------- Income per common and common equivalent share $ 1,013 $(1,044) -------- -------- Weighted average common shares outstanding 9,997 10,000 Effect of assumed exercise of dilutive stock options (1) 38 -- -------- -------- Weighted average common and common equivalent shares 10,035 10,000 ======== ======== Income per common and common equivalent share $ 0.10 $ (0.10) ======== ======== Fully Diluted Earnings Per Common Share - --------------------------------------- Income per common and common equivalent share $ 1,013 $(1,044) ======== ======== Weighted average common shares outstanding 9,997 10,000 Effect of assumed exercise of dilutive stock options (1) 38 -- -------- -------- Weighted average common and common equivalent shares 10,035 10,000 ======== ======== Income per common and common equivalent share $ 0.10 $ (0.10) ======== ========
(1) Computed based on the treasury stock method. 13 EX-27 3
5 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 9,315 26,700 24,517 0 55,487 119,381 78,798 0 221,046 56,648 87,200 0 0 100 34,597 221,046 61,083 61,729 42,842 42,842 15,217 0 1,983 1,620 607 1,013 0 0 0 1,013 0.10 0.10
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