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 March 31, 2001 Commission File Number 1-4773
AMERICAN BILTRITE INC.
(Exact name of registrant as specified in its charter)
Delaware 04-1701350
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
57 River Street
Wellesley Hills, Massachusetts 02481-2097
(Address of Principal Executive Offices)
(781) 237-6655
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former
fiscal year if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date covered by this report.
Title of Each Class Outstanding at May 1, 2001
------------------- --------------------------
Common 3,449,985 shares
FORM 10-Q
PART I. Item 1. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(In thousands of dollars)
March 31, December 31,
2001 2000
---------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,982 $ 16,859
Short-term investments 4,195 12,097
Accounts receivable, net 55,339 45,378
Inventories 91,670 87,175
Prepaid expenses & other current assets 13,143 12,891
-------- --------
TOTAL CURRENT ASSETS 171,329 174,400
Goodwill, net 24,704 23,431
Other assets 22,110 22,374
Property, plant and equipment, net 146,474 144,197
-------- --------
TOTAL ASSETS $364,617 $364,402
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 30,137 $ 31,101
Accrued expenses 56,690 55,891
Notes payable 23,691 11,698
Current portion of long-term debt 3,104 3,713
-------- --------
TOTAL CURRENT LIABILITIES 113,622 102,403
Long-term debt 104,410 108,425
Other liabilities 59,058 59,868
Noncontrolling interests 11,845 14,159
STOCKHOLDERS' EQUITY
Common stock, par value $0.01-authorized
15,000,000 shares, issued 4,607,902 shares 46 46
Additional paid-in capital 19,521 19,521
Retained earnings 77,236 79,663
Accumulated other comprehensive loss (6,522) (5,514)
Less cost of shares in treasury (14,599) (14,169)
-------- --------
75,682 79,547
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $364,617 $364,402
======== ========
See accompanying notes to consolidated condensed financial statements.
2
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands of dollars, except per share amounts)
Three Months Ended
March 31, April 1,
2001 2000
--------------------------
Net sales $ 99,697 $102,445
Interest and other income 321 665
-------- --------
100,018 103,110
-------- --------
Costs and expenses:
Cost of products sold 74,385 74,331
Selling, general and administrative
expenses 28,816 27,483
Interest 2,514 2,138
-------- --------
105,715 103,952
-------- --------
LOSS BEFORE INCOME TAXES AND NONCONTROLLING
INTERESTS (5,697) (842)
Credit for income tax benefit (2,065) (303)
Noncontrolling interests 1,641 889
-------- --------
NET (LOSS) EARNINGS $ (1,991) $ 350
======== ========
(Loss) Earnings per share:
Basic $ (.57) $ .10
Diluted $ (.57) $ .10
Dividends declared per common share $ .125 $ .125
See accompanying notes to consolidated condensed financial statements.
3
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands of dollars)
Three Months Ended
March 31, April 1,
2001 2000
-------------------------
OPERATING ACTIVITIES
Net (loss) earnings $ (1,991) $ 350
Adjustments to reconcile net (loss) earnings to net cash
used by operating activities:
Depreciation and amortization 4,938 4,183
Deferred income taxes (2,193) 346
Accounts and notes receivable (10,345) (16,751)
Inventories (5,375) (4,049)
Prepaid expenses and other current assets 1,839 494
Accounts payable and accrued expenses (397) 224
Noncontrolling interests (1,641) (889)
Other (209) (151)
-------- --------
NET CASH USED BY OPERATING ACTIVITIES (15,374) (16,243)
INVESTING ACTIVITIES
Purchases of short-term investments (1,471)
Proceeds from sales of short-term investments 9,373 14,754
Investments in property, plant and equipment (8,154) (6,251)
Proceeds from sale of property, plant and equipment 648
Purchase of additional partnership interests in K&M (2,066) (309)
-------- --------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (1,670) 8,194
FINANCING ACTIVITIES
Net short-term borrowings 12,191 10,750
Payments on long-term debt (4,610) (3,039)
Purchase of treasury shares (502) (466)
Dividends paid (436) (440)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,643 6,805
Effect of foreign exchange 524 209
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (9,877) (1,035)
Cash and cash equivalents at beginning of period 16,859 27,285
-------- --------
CASH AND CASH EQUIVALENTS AT END OF
QUARTER $ 6,982 $ 26,250
======== ========
See accompanying notes to consolidated condensed financial statements.
4
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2001
Note A - Basis of Presentation
The accompanying unaudited consolidated condensed financial statements which
include the accounts of American Biltrite Inc. and its wholly-owned subsidiaries
("ABI") as well as entities over which it has voting control have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the three month period ended March 31,
2001 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2001. 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, 2000.
Note B - Changes in Acounting Principles
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133, as amended by SFAS 138), which requires that
an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. The Company adopted
SFAS 133 in the first quarter of fiscal 2001. Adoption of this pronouncement had
no effect on the Company's consolidated financial position or results of
operations.
Note C - Inventories
Inventories at March 31, 2001 and December 31, 2000 consisted of the following
(in thousands):
March 31, December 31,
2001 2000
---------------------------------------
Finished goods $66,414 $63,810
Work-in-process 11,794 9,764
Raw materials and supplies 13,462 13,601
------- -------
$91,670 $87,175
======= =======
5
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2001
Note D - Distributor Transition Costs
During the third quarter of 2000, Congoleum Corporation ("Congoleum"), a
consolidated majority owned subsidiary, announced the appointment of Mohawk
Industries, Inc. as a national distributor. At the same time, Congoleum
announced it was terminating its distribution arrangements with LDBrinkman &
Co., who had been its exclusive distributor in much of the southwestern United
States, accounting for 21% of Congoleum's sales in 1999. LDBrinkman & Co.
contested Congoleum's right to terminate its distributor agreement and the
matter went to arbitration in the fourth quarter of 2000. The parties signed a
final settlement agreement in February 2001.
Congoleum recorded a charge of $7,717,000 in the fourth quarter of 2000 to
provide for the nonrecurring costs associated with the transition. Included in
this charge were certain costs incurred by Congoleum for establishing Mohawk as
a distributor. Also included in the charge are certain termination payments to
be made to LDBrinkman pursuant to the terms of the settlement agreement.
Congoleum has provided right-of-return provisions to LDBrinkman in the
termination agreement whereby LDBrinkman may return certain unsold inventory
purchased from Congoleum that meets minimum size and quality requirements.
Therefore, Congoleum has deferred the recognition of revenue for its estimate of
returns of inventory under this right-of-return agreement.
Of the $7,717,000 in costs incurred during 2000, $3,517,000 remains unpaid as of
March 31, 2001. These amounts are anticipated to be paid by July 31, 2001.
Note E - Commitments and Contingencies
In the ordinary course of its business, ABI and Congoleum become involved in
lawsuits, administrative proceedings, product liability and other matters, as
more fully described below. In some of these proceedings, plaintiffs may seek to
recover large and sometimes unspecified amounts, and the matters may remain
unresolved for several years. On the basis of information furnished by counsel
and others, management does not believe that these matters, individually or in
the aggregate, will have a material adverse effect on their business or
financial condition.
American Biltrite Inc.
ABI records a liability for environmental remediation claims when it becomes
probable that ABI will incur costs relating to a clean-up program or will have
to make claim payments and the costs or payments can be reasonably estimated. As
assessments are revised and clean-up programs progress, these liabilities are
adjusted to reflect such revisions and progress.
6
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2001
Note E - Commitments and Contingencies (continued)
ABI is a co-defendant with many other manufacturers and distributors of
asbestos-containing products in approximately 419 pending claims involving
approximately 1,364 individuals as of March 31, 2001. The claimants allege
personal injury from exposure to asbestos or asbestos-containing products.
Activity related to asbestos claims was as follows:
Quarter Ended Year Ended
March 31, 2001 December 31, 2000
-------------- -----------------
Beginning claims 330 63
New claims 93 298
Settlements (2) (11)
Dismissals (2) (20)
--- ---
Ending claims 419 330
=== ===
ABI reported in its December 31, 2000 Form 10-K that it has been named as a
Potentially Responsible Party ("PRP") within the meaning of the Federal
Comprehensive Environmental Response Compensation and Liability Act, as amended,
with respect to two sites in two separate states. There have been no new
developments relating to these sites during the quarter ended March 31, 2001.
With regard to the Olin Corporation ("Olin") site in Wilmington, MA, Olin has
requested reimbursement from ABI for the period from July 1, 2000 to December
31, 2000 in the amount of $489,000. Olin has estimated that the response cost
for 2001 will be $6 million with ABI's allocated share being $814,000. ABI, in
discussion with Olin, has estimated that beyond 2001 the response costs will be
in the range of $16.3 million to $29 million. As of March 31, 2001, ABI has
estimated its share of potential liability for Olin to be in the range of $3.3
million to $5 million before any recoveries from insurance.
Congoleum Corporation
Congoleum is subject to federal, state and local environmental laws and
regulations, and certain legal and administrative claims are pending or have
been asserted against Congoleum. Among these claims, Congoleum 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 Congoleum's owned and previously
owned facilities. The contingencies also include claims for personal injury
and/or property damage. The exact amount of
7
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2001
Note E - Commitments and Contingencies (continued)
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 Congoleum's
liability in proportion to other potentially responsible parties and the extent
to which costs may be recoverable from insurance.
Congoleum 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 Congoleum.
Congoleum is one of many defendants in approximately 2,098 pending claims
(including workers' compensation cases) involving approximately 14,072
individuals as of March 31, 2001, alleging personal injury from exposure to
asbestos or asbestos-containing products. There were 1,754 claims at December
31, 2000 that involved approximately 12,079 individuals. Activity related to
asbestos claims was as follows:
Quarter Ended Year ended
March 31, 2001 December 31, 2000
-------------- -----------------
Beginning claims 1,754 670
New claims 371 1,302
Settlements (10) (76)
Dismissals (17) (142)
----- -----
Ending claims 2,098 1,754
===== =====
Nearly all claims allege that various diseases were caused by exposure to
asbestos-containing products, including sheet vinyl and resilient tile
manufactured by Congoleum (or, in the workers' compensation cases, exposure to
asbestos in the course of employment with Congoleum). Congoleum discontinued the
manufacture of asbestos-containing sheet vinyl products in 1983 and
asbestos-containing tile products in 1974. In general, governmental authorities
have determined that asbestos-containing sheet and tile products are nonfriable
(i.e., cannot be crumbled by hand pressure) because the asbestos was
encapsulated in the products during the manufacturing process.
8
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2001
Note E - Commitments and Contingencies (continued)
Thus, governmental authorities have concluded that these products do not pose a
health risk when they are properly maintained in place or properly removed so
that they remain nonfriable. Congoleum has issued warnings not to remove
asbestos-containing flooring by sanding or other methods that may cause the
product to become friable.
Congoleum regularly evaluates its estimated liability to defend and resolve
current and reasonably anticipated future asbestos-related claims. It reviews,
among other things, recent and historical settlement and trial results, the
incidence of past and recent claims, the number of cases pending against it, and
asbestos litigation developments that may impact the exposure of Congoleum. One
such development, the declarations of bankruptcy by several companies that are
typically lead defendants in asbestos-related cases, may have negatively
impacted Congoleum's claim experience. The estimates developed are highly
uncertain due to the limitations of the available data and the difficulty of
forecasting the numerous variables that can affect the range of the liability.
During the fourth quarter of fiscal 2000, Congoleum updated its evaluation of
the range of potential defense and indemnity costs for asbestos-related
liabilities and the insurance coverage in place to cover these costs. As a
result of Congoleum's analysis, Congoleum has determined that its range of
probable and estimable losses for asbestos-related claims through the year 2049
is $35.1 million to $161.3 million before considering the effects of insurance
recoveries and before discounting to present value. As discussed previously, it
is very difficult to forecast a liability for Congoleum's ultimate exposure for
asbestos-related claims as there are multiple variables that can affect the
timing, severity, and quantity of claims. Therefore, Congoleum has concluded
that no amount within that range is more likely than any other, and therefore
has determined that the amount of the gross liability it should record for
asbestos-related claims is equal to $35.1 million in accordance with generally
accepted accounting principles.
For a majority of the period that Congoleum produced asbestos-containing
products, Congoleum purchased primary and excess insurance policies that cover
bodily injury asbestos claims. Congoleum believes that it has in excess of $1
billion primary and excess insurance coverage available as of December 31, 2000
to cover asbestos-related claims. To date, all claims and defense costs have
been paid through primary insurance coverage, and Congoleum anticipates that
primary insurance coverage will continue to cover these costs in the near
future.
The same factors that affect developing forecasts of potential defense and
indemnity costs for asbestos-related liabilities also affect estimates of the
total amount of insurance that is probable of recovery, as do a number of
additional factors. These additional factors include the financial viability of
some of the insurance companies, the method in which losses will be allocated to
the various insurance policies and the years covered by those policies, and how
legal and other loss handling costs will be covered by the insurance policies.
9
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2001
Note E - Commitments and Contingencies (continued)
Congoleum has determined, based on its review of its insurance policies and the
advice of legal counsel, that approximately $20 million of the estimated $35
million gross liability is highly probable of recovery. This determination was
made after considering the terms of the available insurance coverage and the
financial viability of the insurance companies. Congoleum believes that the
criteria to offset the estimated gross liability with this highly probable
insurance recovery, as defined by generally accepted accounting principles, have
been met. The balance of the estimated gross liability of $15 million has been
reflected in the balance sheet as a long-term liability as of December 31, 2000
and March 31, 2001. Congoleum has also recorded in the balance sheet an
insurance receivable of $7 million that represents an estimate of probable
insurance recoveries that do not qualify for offsetting against the gross
liability. This insurance receivable has been recorded in other long-term assets
as of December 31, 2000 and March 31, 2001.
Since many uncertainties exist surrounding asbestos litigation, Congoleum will
continue to evaluate its asbestos-related estimated liability and corresponding
estimated insurance assets as well as the underlying assumptions used to derive
these amounts. It is reasonably possible that Congoleum's total exposure to
asbestos-related claims may be greater than the recorded liability and that
insurance recoveries may be less than the recorded asset. These uncertainties
may result in Congoleum incurring future charges to income to adjust the
carrying value of recorded liabilities and assets. Congoleum does not believe,
however, that asbestos-related claims will have a material adverse effect on its
financial position or liquidity.
Note F - Comprehensive Income
During the first quarter of 2001 and 2000, total comprehensive (loss) income
amounted to $(2,999,000) and $262,000, respectively. Other comprehensive income
consisted only of foreign currency translation adjustments.
10
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2001
Note G - Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share for the three months ended March 31, 2001 and April 1, 2000 (in thousands,
except per share amounts:)
Three Months Ended
March 31, April 1,
2001 2000
----------------------
Numerator:
Net (loss) earnings $(1,991) $ 350
======= ======
Denominator:
Denominator for basic earnings per share:
Weighted-average shares 3,489 3,520
Denominator for diluted earnings
per share:
Dilutive employee stock options -- 25
------- ------
Weighted-average shares and
assumed conversions 3,489 3,545
======= ======
Basic (loss) earnings per share $ (.57) $ .10
======= ======
Diluted (loss) earnings per share $ (.57) $ .10
======= ======
Note H - Industry Segments
Description of Products and Services
The Company has four reportable segments: flooring products, tape products,
jewelry and a Canadian division which produces flooring and rubber products.
Congoleum, which manufactures vinyl and vinyl composition floor coverings with
distribution primarily through floor covering distributors, retailers and
contractors for commercial and residential use, represents the majority of the
Company's flooring products segment. During 2000, the Company acquired Janus
Flooring Corporation, which has been included in the flooring products segment
effective October 12, 2000. The tape products segment consists of two production
facilities in the United States and finishing and sales facilities in Belgium,
Singapore and Italy. The tape products segment manufactures paper, film, HVAC,
electrical, shoe and other tape products for use in industrial and automotive
11
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2001
Note H - Industry Segments (continued)
markets. The jewelry segment reflects the results of K&M Associates L.P., a
national costume jewelry supplier to the mass merchandiser markets. The
Company's Canadian division produces flooring, rubber products, including
materials used by footwear manufacturers, and other industrial products.
Segment Profit (Loss) and Assets
--------------------------------
(In thousands) Three Months Ended
March 31, April 1,
2001 2000
--------------------------
Revenues
Revenues from external customers:
Flooring products $ 54,764 $ 56,756
Tape products 22,635 22,965
Jewelry 10,757 10,335
Canadian division 11,541 12,389
-------- --------
Total revenues from external
customers 99,697 102,445
-------- --------
Intersegment revenues:
Flooring products 111 111
Tape products 28 81
Jewelry
Canadian division 1,825 1,524
-------- --------
Total intersegment revenues 1,964 1,716
-------- --------
101,661 104,161
Reconciling items
Intersegment revenues (1,964) (1,716)
-------- --------
Total consolidated revenues $ 99,697 $102,445
======== ========
12
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2001
Note H - Industry Segments (continued)
(In thousands) Three Months Ended
March 31, April 1,
2001 2000
--------------------------
Segment (loss) profit
Flooring products $ (6,098) $ (3,070)
Tape products 621 1,460
Jewelry (117) (69)
Canadian division 573 1,171
-------- --------
Total segment loss (5,021) (508)
Reconciling items
Corporate office loss (695) (373)
Intercompany profit 19 39
-------- --------
Total consolidated loss before
income taxes and other items $ (5,697) $ (842)
======== ========
March 31, December 31,
2001 2000
--------------------------
Segment assets
Flooring products $239,378 $244,574
Tape products 65,420 53,724
Jewelry 20,304 19,193
Canadian division 29,271 29,858
-------- --------
Total segment assets 354,373 347,349
Reconciling items
Corporate office assets 32,574 30,163
Intersegment accounts receivable (22,230) (12,991)
Intersegment profit in inventory (100) (119)
-------- --------
Total consolidated assets $364,617 $364,402
======== ========
Tape product segment assets increased from $53,724 to $65,420 due to seasonal
increases in inventories, receivables and intersegment accounts.
13
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
Item 2. MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
March 31, 2001
Results of Operations
Net sales for the first quarter of 2001 were $99.7 million compared to $102.4
million for the first quarter of 2000, a decrease of $2.7 million or 2.7%.
Including sales of Janus Flooring on a pro forma basis, comparable first quarter
2000 sales were $105.0 million.
Revenue declined in all segments except jewelry, reflecting the impact of the
slowing economy on demand for durable and industrial goods, and depressed
conditions in the manufactured housing industry, which is a major flooring
customer.
Cost of products sold as a percentage of sales increased to 74.6% in the first
quarter of 2001 from 72.6% in the first quarter of 2000. This increase was due
to lower production volume and increased costs for raw materials and energy.
Selling, general and administrative expenses in the first quarter of 2001 were
$28.8 million, or 28.9% of sales, compared with $27.5 million, or 26.8% of
sales, in the same period one year earlier. Including Janus, first quarter 2000
selling, general and administrative expenses would have been $27.7 million or
26.4% of comparable basis sales. Expenses in the first quarter of 2001 include
$.7 million for severance related to a 13% reduction of Congoleum's workforce.
Other factors contributing to the increase in expenses were higher freight costs
and increases in spending on promotional programs and new product development.
The net loss for the first quarter of 2001 was $2.0 million compared to net
income of $.4 million ($.7 million including Janus) one year earlier, as a
result of reduced profitability at all operations.
Liquidity and Capital Resources
Cash and cash equivalents, including short term investments, declined $17.8
million in the first quarter of 2001 to $11.2 million, compared with a decline
of $15.8 million in the first quarter of 2000. The higher use of cash was due to
increased capital expenditures and the purchase of additional partnership
interests in K&M, together with lower net income. These uses were partly offset
by lower growth in receivables. Working capital at March 31, 2001 was $57.7
million, down from $72.0 million at December 31, 2000. The ratio of current
assets to current liabilities at March 31, 2001 was 1.5, down from 1.7 at
December 31, 2000.
Capital expenditures in the first quarter of 2001 were $8.2 million. It is
anticipated that capital spending for the full year 2001 will be in the range of
$25 - $26 million.
14
FORM 10-Q
PART I. FINANCIAL INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
March 31, 2001
The Company has recorded provisions which it believes are adequate 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
three to ten years, the actual 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.
Cash requirements for capital expenditures, working capital, debt service and
the current authorization to repurchase $.9 million of ABI's Common Stock and
$5.3 million of Congoleum's Common Stock are expected to be financed from
operating activities and borrowings under existing bank lines of credit, which
at ABI are presently $41.6 million and at Congoleum are $30.0 million. During
the first quarter of 2001, ABI repurchased $.5 million of its Common Stock.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The Company is exposed to changes in prevailing market interest rates affecting
the return on its investments but does not consider this interest rate market
risk exposure to be material to its financial condition or results of
operations. The Company invests primarily in highly liquid debt instruments with
strong credit ratings and short-term (less than one year) maturities. The
carrying amount of these investments approximates fair value due to the
short-term maturities. Substantially all of the Company's outstanding long-term
debt as of March 31, 2001 consisted of indebtedness with a fixed rate of
interest, which is not subject to change based upon changes in prevailing market
interest rates.
The Company operates internationally, principally in Canada, Europe and the Far
East, giving rise to exposure to market risks from changes in foreign exchange
rates. Foreign currency exchange rate movements also affect the Company's
competitive position, as exchange rate changes may affect business practices
and/or pricing strategies of non-U.S. based competitors. For foreign currency
exposures existing at March 31, 2001, a 10% unfavorable movement in currency
exchange rates in the near term would not materially affect ABI's consolidated
operating results, financial position or cash flows.
The Company does not currently use derivative financial instruments, derivative
commodity instruments or other financial instruments to manage its exposure to
changes in interest rates, foreign currency exchange rates, commodity prices or
equity prices.
15
FORM 10-Q
PART II. OTHER INFORMATION
AMERICAN BILTRITE INC. AND SUBSIDIARIES
March 31, 2001
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 March
31, 2001.
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: May 9, 2001 BY: /s/ Howard N. Feist III
-------------------------
Howard N. Feist III
Vice President-Finance
16