-----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, D+RKOqI2vrDcxnTUImk7Fc/TG9UnRtyawiq5ObyVmXjtibXDlL4pO3QfcELyp4GT jL3+ZjYRPzb4nfg9opSqDQ== 0001005477-97-002429.txt : 19971106 0001005477-97-002429.hdr.sgml : 19971106 ACCESSION NUMBER: 0001005477-97-002429 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971105 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: SEC FILE NUMBER: 001-13612 FILM NUMBER: 97708316 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 FORM 10-Q 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 September 30, 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 October 29, 1997 ---------------------------- -------------------------------- Class A Common Stock 4,311,800 Class B Common Stock 5,255,000 Page 1 of 15 CONGOLEUM CORPORATION Index Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Balance Sheets as of September 30, 1997 (unaudited) and December 31, 1996..............................3 Statements of Operations for the three and nine months ended September 30, 1997 and 1996 (unaudited)..................4 Statements of Changes in Stockholders' Equity for the year ended December 31, 1996 and the nine months ended September 30, 1997 (unaudited)...............................................5 Statements of Cash Flows for the nine months ended September 30, 1997 and 1996 (unaudited)..................6 Notes to Unaudited Condensed Financial Statements .............7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................... 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings.................................................11 Item 2. Changes in Securities.............................................11 Item 3. Defaults Upon Senior Securities...................................11 Item 4. Submission of Matters to a Vote of Security Holders...............11 Item 5. Other Information.................................................11 Item 6. Exhibits and Reports on Form 8-K..................................11 Signatures................................................................12 Exhibit Index.............................................................13 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements CONGOLEUM CORPORATION BALANCE SHEETS September December 31, 30, 1996 1997 (Unaudited) (Dollars in thousands) ASSETS Current assets: Cash and cash equivalents.......................... $ 5,497 $ 30,629 Short-term investments............................. 14,200 17,500 Accounts and notes receivable, net................. 21,588 18,886 Inventories........................................ 54,572 47,450 Prepaid expenses and other current assets.......... 715 1,014 Deferred income taxes.............................. 3,077 2,874 -------- -------- Total current assets............................ 99,649 118,353 Property, plant and equipment, net.................... 87,359 78,313 Goodwill, net......................................... 12,359 12,683 Deferred income taxes................................. 3,089 3,068 Other noncurrent assets............................... 7,796 7,381 -------- -------- Total assets.................................... $210,252 $219,798 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................................... $ 12,855 $ 19,935 Accrued expenses................................... 33,331 32,828 Accrued income taxes............................... 672 1,663 Deferred income taxes.............................. 1,773 1,924 -------- -------- Total current liabilities....................... 48,631 56,350 Long-term debt........................................ 80,925 87,750 Other liabilities..................................... 20,900 19,401 Noncurrent pension liability.......................... 12,632 12,381 Accrued postretirement benefit obligation............. 10,249 10,249 -------- -------- Total liabilities............................... 173,337 186,131 -------- -------- 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 4,557,500 and 4,645,500 shares as of September 30, 1997 and December 31, 1996................................... 47 47 Class B common stock, par value $0.01 per share; 5,255,000 and 5,350,000 shares authorized, issued and outstanding as of September 30, 1997 and December 31, 1996............................... 52 53 Additional paid-in capital............................ 54,194 55,172 Retained deficit...................................... (14,246) (19,561) Minimum pension liability adjustment.................. (1,995) (1,995) Common stock held in Treasury, at cost; 100,500 shares at September 30, 1997 and 4,500 shares at December 31, 1996................................... (1,137) (49) -------- -------- Total stockholders' equity...................... 36,915 33,667 -------- -------- Total liabilities and stockholders' equity...... $210,252 $219,798 ======== ======== The accompanying notes are an integral part of the condensed financial statements. 3 CONGOLEUM CORPORATION STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 1997 1996 1997 1996 (In thousands, except per share amounts) Net sales .................................. $ 69,526 $ 71,900 $ 195,518 $ 200,398 Cost of sales .............................. 49,850 47,527 137,796 137,034 Selling, general and administrative expenses 14,677 15,896 45,737 45,797 -------- -------- --------- --------- Income from operations ............... 4,999 8,477 11,985 17,567 Other income (expense): Interest income ......................... 293 497 1,252 1,186 Interest expense ........................ (1,610) (2,044) (5,209) (6,126) Other income ............................ 146 393 958 1,057 Other expense ........................... (311) (64) (485) (134) -------- -------- --------- --------- Income before income taxes ........... 3,517 7,259 8,501 13,550 Provision for income taxes .............. 1,319 2,867 3,186 5,352 -------- -------- --------- --------- Net income ........................... $ 2,198 $ 4,392 $ 5,315 $ 8,198 ======== ======== ========= ========= Net income per common share .......... $ 0.22 $ 0.44 $ 0.54 $ 0.82 ======== ======== ========= ========= Weighted average number of common shares and equivalent shares outstanding ................... 9,823 9,997 9,934 9,999 ======== ======== ========= =========
The accompanying notes are an integral part of the condensed financial statements. 4 CONGOLEUM CORPORATION STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Dollars in thousands) (Unaudited)
Common Stock Minimum par value $0.01 Additional Pension ------------------ Paid-in Retained Liability Treasury Class A Class B Capital Deficit Adjustment Stock Total ------- ------- ---------- -------- ---------- -------- ----- Balance, December 31, 1995 ....... $47 $53 $55,172 $(31,658) $(1,012) $22,602 ======= ======== ======== ======== ======== ======= Purchase of treasury stock ....... $(49) (49) Minimum pension liability Adjustment, net of tax benefit (983) (983) Net income ....................... 12,097 12,097 -------- -------- -------- -------- -------- -------- ------- Balance, December 31, 1996 ....... 47 53 55,172 (19,561) (1,995) (49) 33,667 -------- -------- -------- -------- -------- -------- ------- Purchase of treasury stock ....... (1,088) (1,088) Purchase and retirement of Class B Common Stock ........ (1) (1,004) (1,005) Exercise of stock options ........ 26 26 Net income ....................... 5,315 5,315 -------- -------- -------- -------- -------- -------- ------- Balance, September 30, 1997 ...... $47 $52 $54,194 $(14,246) $(1,995) $(1,137) $36,915 ======== ======== ======== ======== ======== ======== =======
The accompanying notes are an integral part of the condensed financial statements. 5 CONGOLEUM CORPORATION STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, -------------------- 1997 1996 (In thousands) Cash flows from operating activities: Net income ............................................ $5,315 $8,198 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation ........................................ 6,828 5,800 Amortization ........................................ 912 769 Deferred taxes ...................................... (375) (Gain) loss on disposal of property, plant and equipment ...................................... (196) 7 Changes in certain assets and liabilities: Accounts and notes receivable ..................... (2,702) (12,065) Inventories ....................................... (7,122) 507 Prepaid expenses and other assets ................. 299 (303) Accounts payable .................................. (7,080) (7,424) Accrued expenses .................................. (12) 6,146 Other liabilities ................................. 750 27 --------- --------- Net cash provided (used) by operating activities (3,383) 1,662 --------- --------- Cash flows from investing activities: Capital expenditures ................................ (16,401) (9,462) Proceeds from sale of property, plant and equipment . 244 -- Purchase of short-term investments .................. (43,000) (35,100) Maturities of short-term investments ................ 46,300 -- --------- --------- Net cash used by investing activities ........... (12,857) (44,562) --------- --------- Cash flows from financing activities: Payments to reduce long-term debt ................... (6,825) -- Exercise of stock options ........................... 26 -- Purchase and retirement of Class B stock ............ (1,005) -- Bank checks outstanding less cash in bank ........... -- 2,846 Purchase of treasury stock .......................... (1,088) (49) --------- --------- Net cash provided (used) by financing activities (8,892) 2,797 --------- --------- Net decrease in cash and cash equivalents ............... (25,132) (40,103) Cash and cash equivalents: Beginning of period ................................... 30,629 40,103 --------- --------- End of period ......................................... $5,497 $ -- ========= =========
The accompanying notes are an integral part of the condensed financial statements. 6 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 audited 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 and nine months ended September 30, 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: September 30, December 31, 1997 1996 --------- ----------- Finished goods..................... $40,761 $34,920 Work-in-process.................... 5,717 2,089 Raw materials and supplies......... 8,094 10,441 -------- ------- $54,572 $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 $451 and $2,027 lower than reported at September 30, 1997 and December 31, 1996, respectively. 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 and nine months ended September 30, 1997, common stock equivalents have been included in the weighted average number of shares of common 7 stock outstanding and amount to approximately 3,000 and 14,000 shares respectively. For the three and nine months ended September 30, 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 and nine month periods ending September 30, 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 currently-owned and previously-owned facilities. The contingencies also include claims for personal injury and/or property damage. The exact amount of such future costs 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 any 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. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Three and nine months ended September 30, 1997 as compared to three and nine months ended September 30, 1996. Net sales for the third quarter of 1997 were $69.5 million as compared to $71.9 million for the third quarter of 1996, a decrease of $2.4 million or 3.3%. Year-to-date net sales for the first nine months of 1997 were $195.5 million, a decrease of $4.9 million or 2.4% from the first nine months of 1996. The primary reason for the decline in sales from the third quarter of 1996 to the third quarter of 1997 was the virtual elimination of purchases by Color Tile, Inc., which closed its remaining retail stores in the third quarter of this year. Third quarter net sales in 1997 were also negatively affected by weak retail demand and a promotional pricing environment for the Company's products. Gross profit for the third quarter of 1997 was $19.7 million, down $4.7 million from $24.4 million in the third quarter of 1996. Gross profit as a percent of net sales in the third quarter of 1997 was 28.3%, compared to 33.9% in the third quarter of 1996. Year-to-date gross profit for the first nine months of 1997 was $57.7 million (29.5% of net sales), down from $63.4 million (31.6% of net sales) in the first nine months of 1996. Third quarter and nine month year-to-date 1997 gross profits were lower than the comparable periods in 1996 due to lower sales, promotional pricing pressures, higher raw material costs, and the disruptive effect of rebuilding the Company's largest production line during the summer of 1997. Selling, general, and administrative costs decreased by $1.2 million or 7.7% to $14.7 million in the third quarter of 1997 from $15.9 million in the third quarter of 1996. As a percent of net sales, selling, general, and administrative costs were 21.1% for the third quarter of 1997 and 22.1% for the third quarter of 1996. Year-to-date selling, general and administrative expenses for the first nine months of 1997 were $45.7 million (23.4% of net sales), compared to $45.8 million (22.9% of net sales) in the same period last year. The decline in operating expenses from the third quarter of 1996 to the third quarter of 1997 is due to the lower sales level and cost reductions initiated as a result thereof. For the nine months ended September 30, 1997 reductions in operating expenses from the same period in 1996 have been largely offset by increased spending on retail displays. Income from operations for the third quarter of 1997 was $5.0 million (7.2% of net sales), compared to $8.5 million (11.8% of net sales) for the third quarter of 1996, a decrease of $3.5 million, or 41.0%. This decline was due to the lower net sales and gross profit margins during the third quarter of 1997. Income from operations for the nine months ended September 30, 1997 totaled $12.0 million, $5.6 million lower than the same period in 1996. Net income for the third quarter of 1997 was $2.2 million, compared to $4.4 million for the third quarter of 1996, a decrease of $2.2 million, reflecting the lower income from operations and an increase in other expenses for accelerated amortization of debt issuance costs as a result of debt repurchases. For the nine months ended September 30, 1997, net income was $5.3 million, $2.9 million lower than net income in the first nine months of 1996. 9 Liquidity and Capital Resources Cash and cash equivalents, including short-term investments, declined $28.4 million for the nine months ended September 30, 1997, to $19.7 million. Working capital at September 30, 1997 was $51.0 million, down from $62.0 million at December 31, 1996. The ratio of current assets to current liabilities at September 30, 1997 was 2.0 to 1.0, compared to 2.1 to 1.0 at December 31, 1996. The ratio of debt to total capital at September 30, 1997 was .38 to 1.0 compared to .40 to 1.0 at December 31, 1996. Cash used by operations was $3.4 million for the first nine months of 1997, compared to cash generated from operations of $1.7 million in the first nine months of 1996. Capital expenditures were $16.4 million for the first nine months of 1997, and are expected to continue at that rate during the balance of the year, with full year expenditures projected to be $20 million in 1997 and 1998. The Company's Board of Directors has authorized the repurchase of $5 million of the Company's common stock and $20 million of its 9% senior notes. At September 30, 1997, $3.6 million had been expended on stock repurchases and $9.1 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 be 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. Some of the information presented in or incorporated by reference in this report constitutes "forward-looking statements" within meaning of the Private Securities Litigation Reform Act of 1995. Although the Registrant believes that its expectations are based on reasonable assumptions, within the bounds of its knowledge of its business and operations, there can be no assurance that actual results will not differ materially from its expectations. Factors that could cause actual results to differ from expectations include: (i) increases in raw material prices, (ii) increased competitive activity from companies in the flooring industry, some of which have greater resources and broader distribution channels than the Registrant, (iii) unfavorable developments in the national economy or in the housing industry in general, (iv) shipment delays, depletion of inventory and increased production costs resulting from unforeseen disruptions of operations at any of the Registrant's facilities or distributors and (v) the future cost and timing of payments associated with environmental, product and general liability claims. 10 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 27. Financial Data Schedule (b) Reports on Form 8-K: None 11 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: November 3, 1997 By: /s/ Howard N. Feist III ------------------------ Howard N. Feist III Sr. Vice President - Finance (Principal Financial & Accounting Officer) 12 EXHIBIT INDEX Exhibit Number - ------- ------ Computation of Per Share Earnings 11 Financial Data Schedule 27 13 EXHIBIT 11 Congoleum Corporation Computation of Income Per Common Share (Amounts in thousands, except earnings per share)
Three Months Ended Nine Months Ended September 30, September 30, Primary Earnings Per Common Share: 1997 1996 1997 1996 - ---------------------------------- ------ ------ ------ ------ Income per common and common equivalent share $2,198 $4,392 $5,315 $8,198 ====== ====== ====== ====== Weighted average common shares outstanding 9,820 9,995 9,920 9,998 Effect of assumed exercise of dilutive stock options (1) 3 2 14 1 ------ ------ ------ ------ Weighted average common and common equivalent shares 9,823 9,997 9,934 9,999 Income per common and common equivalent share $0.22 $0.44 $0.54 $0.82 ====== ====== ====== ====== Fully Diluted Earnings Per Common Share: Income per common and common equivalent share $2,198 $4,392 $5,315 $8,198 ====== ====== ====== ====== Weighted average common shares outstanding 9,820 9,995 9,920 9,998 Effect of assumed exercise of dilutive stock options (1) 3 4 14 1 ------ ------ ------ ------ Weighted average common and common equivalent shares 9,823 9,999 9,934 9,999 ====== ====== ====== ====== Income per common and common equivalent share $0.22 $0.44 $0.54 $0.82 ====== ====== ====== ======
(1) Computed based on the treasury stock method. 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the consolidated balance sheets, statements of operations and statements of cash flows as reported in the form 10-Q and is qualified in its entirety by reference to such financial statements. 1000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 5,497 14,200 25,202 3,614 54,572 99,649 87,359 6,828 210,252 48,631 80,925 0 0 99 36,816 210,252 195,518 197,728 137,796 137,796 45,737 0 5,209 8,501 3,186 5,315 0 0 0 5,315 .54 .54
-----END PRIVACY-ENHANCED MESSAGE-----