-----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, J8I+/rIKsJp7HqJ3Z7/GwB6PdNVN4mWVF91WzK+HOgmAkHa1htmhOJg3R0lYK9AD Q9HJgyf7w/2qocseMmKOng== 0001005477-98-001639.txt : 19980518 0001005477-98-001639.hdr.sgml : 19980518 ACCESSION NUMBER: 0001005477-98-001639 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 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: 98623012 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 QUARTERLY REPORT 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, 1998 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, 1998 ---------------------------- -------------------------------- Class A Common Stock 4,282,800 Class B Common Stock 4,755,000 Page 1 of 16 CONGOLEUM CORPORATION Index Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Balance Sheets as of March 31, 1998 (unaudited) and December 31, 1997..............................3 Statements of Operations for the three months ended March 31, 1998 and 1997 (unaudited)......................4 Statements of Changes in Stockholders' Equity for the year ended December 31, 1997 and the three months ended March 31, 1998 (unaudited)...............................................5 Statements of Cash Flows for the three months ended March 31, 1998 and 1997 (unaudited)......................6 Notes to Unaudited Condensed Financial Statements .............7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.....................................10 PART II. OTHER INFORMATION Item 1. Legal Proceedings.............................................12 Item 2. Changes in Securities.........................................12 Item 3. Defaults Upon Senior Securities...............................12 Item 4. Submission of Matters to a Vote of Security Holders...........12 Item 5. Other Information.............................................12 Item 6. Exhibits and Reports on Form 8-K..............................12 Signatures ...............................................................13 Exhibit Index.............................................................14 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements CONGOLEUM CORPORATION BALANCE SHEETS
March 31, December 31, 1998 1997 (Unaudited) (Dollars in thousands) ASSETS Current assets: Cash and cash equivalents................................... $3,675 $11,069 Short-term investments...................................... 9,200 7,900 Accounts and notes receivable, net.......................... 25,110 14,512 Inventories................................................. 47,137 44,434 Prepaid expenses and other current assets................... 1,469 2,965 Deferred income taxes....................................... 3,041 3,041 -------- ---------- Total current assets..................................... 89,632 83,921 Property, plant and equipment, net.............................. 87,814 88,401 Goodwill, net................................................... 12,143 12,251 Deferred income taxes........................................... 2,636 2,636 Other noncurrent assets......................................... 9,243 9,372 -------- ---------- Total assets............................................. $201,468 $196,581 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............................................ 15,864 13,440 Accrued expenses............................................ 30,574 28,793 Accrued income taxes........................................ 1,155 918 Deferred income taxes....................................... 1,752 1,752 -------- -------- Total current liabilities................................ 49,345 44,903 Long-term debt.................................................. 76,594 76,594 Other liabilities............................................... 22,520 22,305 Noncurrent pension liability.................................... 10,873 11,038 Accrued postretirement benefit obligation....................... 9,926 9,958 -------- --------- Total liabilities........................................ 169,258 164,798 ------- ------- STOCKHOLDERS' EQUITY Class A common stock, par value $0.01 per share; 20,000,000 shares authorized; 4,652,000 shares issued; 4,282,800 shares outstanding as of March 31, 1998 and December 31, 1997, respectively............................. 47 47 Class B common stock, par value $0.01 per share; 4,755,000 shares authorized, issued and outstanding as of March 31, 1998 and December 31, 1997, respectively.................... 47 47 Additional paid-in capital...................................... 49,574 49,574 Retained deficit................................................ (12,393) (12,820) Minimum pension liability adjustment............................ (1,122) (1,122) Common stock held in Treasury, at cost; 375,200 shares at March 31, 1998 and December 31, 1997, respectively.......... (3,943) (3,943) --------- ---------- Total stockholders' equity............................... 32,210 31,783 -------- --------- Total liabilities and stockholders' equity............... $201,468 $196,581 ======== ========
The accompanying notes are an integral part of the condensed financial statements. 3 CONGOLEUM CORPORATION STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, ----------------------- 1998 1997 (In thousands, except per share amounts) Net sales........................................................... $63,875 $61,083 Cost of sales....................................................... 46,518 42,842 Selling, general and administrative expenses........................ 15,224 15,217 -------- -------- Income from operations....................................... 2,133 3,024 Other income (expense): Interest income................................................. 178 505 Interest expense................................................ (1,675) (1,983) Other income.................................................... 95 141 Other expense................................................... (59) (67) -------- -------- Income before income taxes................................... 672 1,620 Provision (benefit) for income taxes............................ 245 607 -------- -------- Net income................................................... $ 427 $ 1,013 ======== ======== Net income per common share, basic and diluted............... $ 0.05 $ 0.10 ======== ======== Weighted average number of common and equivalent shares outstanding........................... 9,039 10,035 ======== ========
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)
Accumulated Other Common Stock Additional Comprehensive par value $0.01 Paid-in Retained Income/(Loss) Treasury Class A Class B Capital Deficit Adjustment* Stock Total ------- ------- ------- ------- ----------- ----- ----- Balance, December 31, 1996....$ 47 $ 53 $ 55,172 $(19,561) $ (1,995) $ (49) $33,667 ========= ========= ========= ======== =========== ========= ======= Purchase of treasury stock.... (3,894) (3,894) Purchase and retirement of Class B Common Stock...... (6) (5,624) (5,630) Exercise of stock options..... 26 26 Minimum pension liability 873 873 Adjustment, net of tax Net income.................... 6,741 6,741 --------- --------- --------- -------- ----------- --------- ------- Balance, December 31, 1997.... 47 47 49,574 (12,820) (1,122) (3,943) 31,783 --------- --------- --------- -------- ----------- --------- ------- Purchase of treasury stock.... Purchase and retirement of Class B Common Stock...... Exercise of stock options..... Minimum pension liability Adjustment, net of tax Net income.................... 427 427 --------- --------- --------- -------- ----------- --------- ------- Balance, March 31, 1998....... $47 $47 $49,574 $(12,393) $(1,122) $(3,943) $32,210 ========= ========= ========= ======== =========== ========= =======
* Entire amount relates to minimum pension liability adjustment. The accompanying notes are an integral part of the condensed financial statements. 5 CONGOLEUM CORPORATION STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, ----------------------------- 1998 1997 (In thousands) Cash flows from operating activities: Net income.................................................................... $ 427 $1,013 Adjustments to reconcile net income to net cash (used) by operating activities: Depreciation.............................................................. 2,419 2,337 Amortization and write-off of deferred refinancing fees................... 237 266 Changes in certain assets and liabilities: Accounts and notes receivable........................................ (10,598) (6,224) Inventories.......................................................... (2,703) (8,037) Prepaid expenses and other current assets............................ 1,496 1,118 Accounts payable..................................................... 2,424 (2,165) Accrued expenses..................................................... 2,018 2,463 Other liabilities.................................................... 18 470 --------- --------- Net cash used by operating activities........................... (4,262) (8,759) --------- --------- Cash flows from investing activities: Capital expenditures...................................................... (1,832) (2,822) Purchase of short-term investments........................................ (9,200) (18,100) Maturities of short-term investments...................................... 7,900 8,900 --------- --------- Net cash used by investing activities........................... (3,132) (12,022) --------- --------- 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.......................................... (7,394) (21,314) Cash and cash equivalents: Beginning of period........................................................... 11,069 30,629 --------- --------- End of period ................................................................ $ 3,675 $ 9,315 ========= =========
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 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, 1998 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, 1997. 2. Inventories A summary of the major classifications of inventories is as follows: March 31, December 31, 1998 1997 --------- ----------- Finished goods..................... $36,190 $34,914 Work-in-process.................... 4,458 3,160 Raw materials and supplies......... 6,489 6,360 ------- ------- $47,137 $44,434 ======= ======= If the FIFO (first-in, first-out) method of inventory accounting (which approximates current cost) had been used, inventories would have been approximately $1,322 and $340 lower than reported at March 31, 1998 and December 31, 1997, respectively. 7 3. Income Per Share Income per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding. Due to the immaterial effect of common stock equivalents, there is no difference between basic and fully diluted net income per common share for the three month periods ending March 31, 1998 and 1997. 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. 8 5. Reclassifications For comparative purposes, certain amounts have been reclassified to conform to the current year presentation. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Three months ended March 31, 1998 as compared to three months ended March 31, 1997. Net sales for the first quarter of 1998 were $63.9 million as compared to $61.1 million for the first quarter of 1997, an increase of 2.8 million or 4.6%. This increase was due to greater shipments to mass merchandise retailers and to the Company's manufactured housing industry distributor, which was reducing its inventory in the first quarter of 1997. Gross profit for the first quarter of 1998 was $17.3 million compared to $18.2 million for the first quarter of 1997, a decrease of $0.9 million. As a percent of sales, gross profit was 27.2% in the first quarter of 1998, as compared to 29.9% in the first quarter of 1997. The decrease in gross profits and gross profit margins was due to a less profitable sales mix, declines in selling prices of certain products, and lower production volumes, which offset improvements in manufacturing efficiency. Selling, general, and administrative expenses were $15.2 million in both the first quarter of 1998 and the first quarter of 1997. As a percentage of sales, selling, general, and administrative expenses were 23.8% for the first quarter of 1998, down from 24.9% for the first quarter of 1997. Increase in sales-related expenses were offset by reductions in other expenses, primarily as a result of lower headcount. Income from operations for the first quarter of 1998 was $2.1 million (3.3% of net sales), compared to $3.0 million for the first quarter of 1997, a decrease of $0.9 million. The decrease resulted from the decline in gross profit margins, which offset the increased sales volume. Net income for the first quarter of 1998 was $0.4 million, compared to $1.0 million for the first quarter of 1997, a decrease of $0.6 million. Liquidity and Capital Resources Cash and cash equivalents, including short-term investments, declined $6.1 million for the three months ended March 31, 1998, to $12.9 million. Working capital at March 31, 1998 was $40.3 million, up from 39.0 million at December 31, 1997. The ratio of current assets to current liabilities at March 31, 1998 was 1.8 compared to 1.9 at December 31, 1997. The ratio of debt to total capital at March 31, 1998 was .38 compared to .39 at December 31, 1997. Cash used by operations was $4.2 million for the first quarter of 1998, compared to $8.8 million in the first quarter of 1997. Capital expenditures were $1.8 million for the first quarter of 1998, but are expected to increase during the balance of the year. Total 1998 capital spending is projected to be approximately $18.0 to $20.0 million. 10 In 1996, the Company's Board of Directors approved a plan to repurchase up to $5.0 million (increased to $10.0 million in 1997) of the Company's common stock (Class A and Class B shares) and up to $10.0 million of its 9% Senior Notes (increased to $20.0 million in 1997). At March 31, 1998, $9.6 million had been expended on stock purchases and $13.4 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 has completed an assessment of the steps it believes will be necessary for its existing and planned data processing systems 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 plans 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. 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. 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 the 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 11 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. 12 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 13 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 15, 1998 By: /s/ ------------------------------ (signature) Howard N. Feist III Sr. Vice President - Finance (Principal Financial & Accounting Officer) 14 EXHIBIT INDEX Exhibit Number - ------- ------ Computation of Per Share Earnings 11 Financial Data Schedule 27 15 EX-11 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Congoleum Corporation Computation of Income Per Common Share (Amounts in thousands, except earnings per share)
Three Months Ended March 31, Basic Earnings Per Common Share: 1998 1997 - --------------------------------- --------------- --------------- Income per common and common equivalent share $ 427 $ 1,013 ======= ========= Weighted average common shares outstanding 9,038 9,997 ------- --------- Weighted average common shares 9,038 9,997 ======= ========= Income per common share $ 0.05 $ 0.10 ======= ========= Diluted Earnings Per Common Share Income per common and common equivalent share $ 427 $ 1,013 ======= ========= Weighted average common shares outstanding 9,038 9,997 Effect of assumed exercise of dilutive stock options (1) 1 38 ------- --------- Weighted average common and common equivalent shares 9,039 10,035 ======= ========= Income per common and common equivalent share $ 0.05 $ 0.10 ======= =========
(1) Computed based on the treasury stock method. 16 EX-27 3 FDS
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. 1,000 3-mos Dec-31-1998 Jan-1-1998 Mar-31-1998 3,675 9,200 28,687 3,577 47,137 89,632 174,254 86,440 201,468 49,345 76,594 0 0 94 32,116 201,468 63,875 64,148 46,518 46,518 15,224 0 1,675 672 245 427 0 0 0 427 .05 .05
-----END PRIVACY-ENHANCED MESSAGE-----