Congoleum Corporation Reports 2005 Results.MERCERVILLE, N.J. -- Congoleum Corporation (AMEX AMEX See: American Stock Exchange :CGM (1) (Computer Graphics Metafile) An ISO/IEC standard format for 2D graphics images introduced in 1987. Primarily a vector graphics format for technical illustrations and geophysical visualizations, CGM also supports raster graphics and text. ) reported its financial results for the year ended December 31, 2005. The 2005 results include $25.3 million in charges related to asbestos asbestos, mineral asbestos, common name for any of a variety of silicate minerals within the amphibole and serpentine groups that are fibrous in structure and more or less resistant to acid and fire. liabilities, of which $15.5 million were recorded in the second quarter of 2005 and $9.9 million were recorded in the fourth quarter of 2005. This compares to $5.0 million in charges to resolve asbestos liabilities in 2004. Roger S. Marcus, Chairman of the Board, commented "It is unfortunate that the intense litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. surrounding our asbestos situation and reorganization process has greatly increased the time and cost needed to put these problems behind us. However, I am very encouraged by our latest plan, which we are currently preparing and will soon file with the Bankruptcy Court bankruptcy court n. the specialized Federal court in which bankruptcy matters under the Federal Bankruptcy Act are conducted. There are several bankruptcy courts in each state, and each one's territory covers several counties. . We believe this plan will eliminate issues that were the basis of objections by opponents of prior plans. I'm optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op that we will receive the requisite consents to confirm this plan in 2006, and that the charge in the fourth quarter, together with existing reserves, will be adequate to cover costs through the confirmation date." Sales for the year ended December 31, 2005 were $ 237.6 million, an increase of 3.5% compared to the $229.5 million reported in 2004. The net loss for 2005 was $21.6 million after charges for asbestos liabilities, compared with net income of $2.9 million in 2004 after charges for asbestos liabilities. Without the charges for asbestos liabilities, net income before taxes would have been $1.2 million in 2005 and $5.4 million in 2004. The net loss per share in 2005 was $2.61, compared to net income per basic share of $0.36 in 2004. Mr. Marcus commented "Without the asbestos related charges, our operations generated a pre-tax profit of $1.2 million last year, which I consider a major accomplishment in light of the extraordinary increases we experienced in the cost of raw materials and utilities. We aggressively pursued alternative raw material sources to help control costs and assure continuity of supply, and while this program was successful in accomplishing those objectives, the disruption disruption /dis·rup·tion/ (dis-rup´shun) a morphologic defect resulting from the extrinsic breakdown of, or interference with, a developmental process. of changing materials and formulas hurt our manufacturing efficiency until the trials were completed. While we instituted several selling price increases in response to soaring material prices, the time lag was such that we were unable to recover a significant portion of the additional costs we incurred. Despite these challenges, our operating results were positive. We grew our sales through both pricing and volume, including a strong performance in the manufactured housing Manufactured housing (also known as prefab housing) is a type of housing unit that is largely assembled in factories and then transported to sites of use. In the United States, the term "manufactured home" specifically refers to a house built entirely in a protected market. Our manufacturing efficiency improved over 2004 despite the negative impact of qualifying new raw materials. Finally, we continued to implement further cost reductions in operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. ." Mr. Marcus continued "At this point, I am cautiously optimistic about our performance in 2006. We have just introduced an entirely new sheet flooring product called 'K-Tech' which targets the kitchen remodeling remodeling /re·mod·el·ing/ (re-mod´el-ing) reorganization or renovation of an old structure. bone remodeling market. While it is too early to judge the results, it has been well received and we are positioning it to maximize incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. sales opportunities. The demand outlook from the manufactured housing industry also appears very encouraging. Our manufacturing efficiency continues to improve, and we should not face the same need to qualify new materials in 2006. Hopefully the raw material situation has stabilized sta·bi·lize v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es v.tr. 1. To make stable or steadfast. 2. and our selling price increases will recoup recoup To sell an asset at a price sufficient to recover the original outlay or to offset a previous loss. a greater portion of our added costs this year. Based on all this, I'm hopeful that 2006 will be a better year than 2005." On December 31, 2003, Congoleum Corporation filed a voluntary petition with the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Bankruptcy Court for the District of New Jersey (Case No. 03-51524) seeking relief under Chapter 11 of the United States Bankruptcy Code Bankruptcy Code may refer to:
Congoleum Corporation is a leading manufacturer of resilient See resiliency. flooring, serving both residential and commercial markets. Its sheet, tile tile, one of the ceramic products used in building, to which group brick and terra-cotta also belong. The term designates the finished baked clay—the material of a wide variety of units used in architecture and engineering, such as wall slabs or blocks, floor and plank products are available in a wide variety of designs and colors, and are used in remodeling, manufactured housing, new construction and commercial applications. The Congoleum brand name is recognized and trusted by consumers as representing a company that has been supplying attractive and durable flooring products for over a century. Congoleum is a 55% owned subsidiary of American Biltrite Inc. (AMEX:ABL). The above news release contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, that involve risks, uncertainties and assumptions. These statements can be identified by the use of the words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "project" and other words of similar meaning. In particular, these include statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc intentions, beliefs or current expectations concerning, among other things, future performance, results of operations, the outcome of contingencies such as bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most and other legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. , and financial conditions. These statements do not relate strictly to historical or current facts. These forward-looking statements are based on Congoleum's expectations, as of the date of this release, of future events, and Congoleum undertakes no obligation to update any of these forward-looking statements. Although Congoleum believes that these 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. Readers are cautioned not to place undue reliance on any forward-looking statements. Any or all of these statements may turn out to be incorrect. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or that may or may not occur in the future. Any forward-looking statements made in this press release speak only as of the date of such statement. It is not possible to predict or identify all factors that could potentially cause actual results to differ materially from expected and historical results. Factors that could cause actual results to differ from expectations include: (i) the future cost and timing of estimated asbestos liabilities and payments, (ii) the availability of insurance coverage and reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. from insurance companies that underwrote the applicable insurance policies for asbestos-related claims, (iii) the costs relating to the execution and implementation of any plan of reorganization pursued by Congoleum, (iv) timely reaching agreement with other creditors, or classes of creditors, that exist or may emerge, (v) satisfaction of the conditions and obligations under Congoleum's outstanding debt instruments, (vi) the response from time to time of Congoleum's and its controlling shareholder's, American Biltrite Inc.'s, lenders, customers, suppliers and other constituencies to the ongoing process arising from Congoleum's strategy to settle its asbestos liability, (vii) Congoleum's ability to maintain debtor-in-possession financing Debtor-in-possession financing New debt obtained by a firm during the Chapter 11 bankruptcy process, Federal Bankruptcy Rule 4001 (c)(1). This financing is unique because it is secured, that is, it has priority over existing debt, equity and other claims. sufficient to provide it with funding that may be needed during the pendency Pend´en`cy n. 1. The quality or state of being pendent or suspended. 2. The quality or state of being undecided, or in continuance; suspense; as, the pendency of a suit s>. of its Chapter 11 case to obtain and exit financing sufficient to provide it with funding that may be needed for its operations after emerging from the bankruptcy process, in each case, on reasonable terms, (viii) timely obtaining sufficient creditor An individual to whom an obligation is owed because he or she has given something of value in exchange. One who may legally demand and receive money, either through the fulfillment of a contract or due to injury sustained as a result of another's Negligence and court approval (including the results of any relevant appeals) of any reorganization plan A scheme authorized by federal law and promulgated by the president whereby he or she alters the structure of federal agencies to promote government efficiency and economy through a transfer, consolidation, coordination, authorization, or abolition of functions. pursued by Congoleum and the court overruling o·ver·rule tr.v. o·ver·ruled, o·ver·rul·ing, o·ver·rules 1. a. To disallow the action or arguments of, especially by virtue of higher authority: any objections to the plan that may be filed, (ix) compliance with the United States Bankruptcy Code, including Section 524(g), (x) costs of developments in, and the outcome of insurance coverage litigation pending in New Jersey state court involving Congoleum and certain insurers, (xi) the extent to which Congoleum is able to obtain reimbursement for costs of the coverage litigation, (xii) developments in, and the outcome of, proposed federal legislation that, if adopted, would establish a national trust to provide compensation to victims of asbestos-related injuries that would be funded by assessments against companies with asbestos-related liabilities such as Congoleum, (xiii) increases in raw material prices or disruption in supply, (xiv) increased competitive activity from companies in the flooring industry, some of which have greater resources and broader distribution channels than Congoleum, (xv) increases in the costs of environmental compliance and remediation or the exhaustion Exhaustion Situation in which a majority of participants trading in the same asset are either long or short, leaving few investors to take the other side of the transaction when participants wish to close their positions. of insurance coverage for such expenses, (xvi) unfavorable developments in the national economy or in the housing industry in general, including developments arising from the war in Iraq, (xvii) shipment delays, depletion depletion n. when a natural resource (particularly oil) is being used up. The annual amount of depletion may, ironically, provide a tax deduction for the company exploiting the resource because if the resource they are exploiting runs out, they will no longer be able of inventory and increased production costs resulting from unforeseen disruptions of operations at any of Congoleum's facilities or distributors, (xviii) product warranty costs, (xix) changes in distributors of Congoleum's products, (xx) Congoleum's interests may not be the same as its controlling shareholder American Biltrite, Inc., (xxi) possible future sales by ABI Abi (ā`bī) [short for Abijah], in the Bible, King Hezekiah's mother. (Application Binary Interface) A specification for a specific hardware platform combined with the operating system. could adversely affect the market for Congoleum's stock, and (xxii) the loss of any key executive would likely harm Congoleum's business. In any event, if Congoleum is not successful in obtaining sufficient creditor and court approval of its plan of reorganization, such failure would have a material adverse effect upon its business, results of operations and financial condition. Actual results could differ significantly as a result of these and other factors discussed in Congoleum's annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2004 and subsequent filings made by Congoleum with the Securities and Exchange Commission.
CONGOLEUM CORPORATION
RESULTS OF OPERATIONS
(In thousands, except per share amounts.)
(Unaudited)
For the Three
Months Ended For the Year Ended
December 31, December 31,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Net Sales $ 61,381 $ 55,671 $237,626 $229,493
Cost of Sales 48,157 41,518 183,734 167,844
Selling, General and
Administrative Expenses 10,542 9,964 43,503 47,925
Asbestos Related Reorganization
Charge 9,871 5,000 25,326 5,000
--------- --------- --------- ---------
Income (Loss) from Operations $ (7,189) $ (811) $(14,937) $ 8,724
Interest Income 165 88 438 114
Interest Expense (2,623) (2,470) (10,411) (9,446)
Other Income 122 134 760 1,011
--------- --------- --------- ---------
Income (Loss) before Income
Taxes $ (9,525) $ (3,059) $(24,150) $ 403
Income Tax Benefit (2,575) (3,929) (2,575) (2,545)
--------- --------- --------- ---------
Net Income (Loss) $ (6,950) $ 870 $(21,575) $ 2,948
========= ========= ========= =========
Net Income / (Loss) Per Share,
Basic $ (.84) $ 0.11 $ (2.61) $ 0.36
========= ========= ========= =========
Net Income / (Loss) Per Share,
Diluted $ (.84) $ 0.10 $ (2.61) $ 0.35
========= ========= ========= =========
Weighted Average number of
Common Shares Outstanding -
Basic 8,262 8,260 8,262 8,260
========= ========= ========= =========
Weighted Average number of
Common Shares Outstanding -
Diluted 8,262 8,727 8,262 8,498
========= ========= ========= =========
ADDITIONAL FINANCIAL
INFORMATION:
Capital Expenditures $ 634 $ 1,182 $ 4,274 $ 3,428
Depreciation and Amortization $ 2,631 $ 2,883 $ 11,002 $ 11,428
CONDENSED BALANCE SHEET
(In thousands)
December 31, December 31,
------------ ------------
2005 2004
------------ ------------
ASSETS:
Cash and cash equivalents $ 24,511 $ 29,710
Restricted cash 11,644 15,682
Accounts receivable, net 17,092 17,621
Inventories 34,607 39,623
Other current assets 36,874 15,802
------------ ------------
Total current assets $ 124,728 $ 118,438
Property, plant & equipment (net) 73,207 79,550
Other assets (net) 9,412 14,894
------------ ------------
Total assets $ 207,347 $ 212,882
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable, accrued liabilities and
deferred income taxes $ 63,317 $ 59,440
Revolving credit loan - secured debt 9,404 9,500
Liabilities subject to compromise - current 23,990 14,225
------------ ------------
Total current liabilities 96,711 83,165
Liabilities subject to compromise 138,861 137,290
Long term debt - -
Other liabilities 16,735 13,416
------------ ------------
Total liabilities $ 252,307 $ 233,871
Stockholders' equity (deficit) (44,960) (20,989)
------------ ------------
Total liabilities and stockholders' equity $ 207,347 $ 212,882
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