Published: August 12, 2009
Congoleum Corporation Reports Second Quarter Results
Congoleum Corporation (PINKSHEETS: CGMC)
today reported its financial results for the second quarter ended June 30,
2009. Sales for the three months ended June 30, 2009 were $39.4 million,
compared with sales of $47.2 million reported in the second quarter of
2008, a decrease of 16.6%. The net loss for the quarter was $942 thousand,
versus net income of $212 thousand in the second quarter of 2008. The net
loss per share was $0.11 in the second quarter of 2009 compared with net
income of $0.03 per share in the second quarter of 2008.
Sales for the six months ended June 30, 2009 were $69.5 million, compared
with sales of $94.9 million in the first six months of 2008. The net loss
for the six months ended June 30, 2009 was $5.0 million, or $.61 per share,
versus net income of $1.9 million, or $.23 per share, in the first six
months of 2008.
Roger S. Marcus, Chairman of the Board, commented, "Our markets remained
extremely weak in the second quarter, particularly manufactured housing.
While sales were up $9.2 million over the first quarter of 2009, this
increase reflected seasonal factors and the stabilization of inventories in
the distribution channel. Our distributors had reduced their inventories
by over $4 million in the first quarter. While not yet improving, at least
conditions seem to have bottomed out.
"We have made considerable progress realigning our cost structure with
current demand. Thanks to steps taken earlier this year, our operating
expenses and plant overhead spending in the second quarter declined $2.5
million from the first quarter. Unfortunately, our second quarter results
were adversely affected by a $7.0 million reduction in our own inventory
levels, which we were able to accomplish after our distributors stabilized
their purchasing. That decrease gave us less production over which to
spread fixed factory overhead, negatively affecting profitability in the
quarter by nearly $2 million. If not for the inventory reduction, we would
have had a profitable quarter even on the depressed sales level. We think
we've turned the corner with the actions taken to date."
Mr. Marcus continued, "Our debtor-in-possession credit facility has been
extended through the end of 2009, and we ended the quarter with $13.8
million in available cash and borrowing capacity, which we believe gives us
adequate liquidity for the foreseeable future. I'm also pleased to report
that we were just recently awarded a patent covering, among other things,
our popular DuraCeramic product line. The DuraCeramic product has
attracted numerous competitors as the market for this product type
continues to grow rapidly despite the weak economy. We believe that the
advantages of this product line, particularly its attractive look, cannot
be achieved without infringing on our recently issued patent."
"We feel the market for the majority of our product lines has at least
bottomed out, and our current reduced level of expenditures can be
maintained for the balance of the year. Even modest improvements in any of
our end markets could provide healthy incremental profits. I am optimistic
not only about the opportunities presented by our recently issued patent
but also about a major new product line we will be introducing in the
fourth quarter of this year.
"This has been an exceedingly difficult period, but we've taken the steps
necessary to maintain our viability and to position ourselves to benefit
when the eventual recovery takes place. This could not have been achieved
without the extraordinary effort of Congoleum's employees during this very
difficult time. Despite significant downsizing, we have maintained our
spirit, our ability to create new products, our quality, and our confidence
in the future of Congoleum."
Congoleum Corporation is a leading manufacturer of resilient flooring,
serving both residential and commercial markets. Its sheet, tile 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.
The above news release contains certain forward-looking statements, within
the meaning of the Private Securities Litigation Reform Act 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
intentions, beliefs or current expectations concerning, among other things,
future performance, results of operations, the outcome of contingencies
such as bankruptcy and other legal proceedings, 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 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 from insurance companies that underwrote the applicable
insurance policies for the Company 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
sufficient to provide it with funding that may be needed during the
pendency of its Chapter 11 case and to obtain 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 and court approval (including
the results of any relevant appeals) of any reorganization plan pursued by
Congoleum, and the court overruling any objections to the plan that may be
filed, (ix) successfully overturning the Bankruptcy Court's order
dismissing Congoleum's reorganization proceedings, (x) compliance with the
United States Bankruptcy Code, including Section 524(g), (xi) costs of,
developments in, and the outcome of insurance coverage litigation pending
in New Jersey state court involving Congoleum and certain insurers, (xii)
the possible adoption of another party's plan of reorganization which may
prove to be unfeasible, (xiii) increases in raw material and energy 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 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 and Afghanistan and from the
tightening of credit availability, (xvii) shipment delays, depletion 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, and (xx) Congoleum's interests may not be the same as
its controlling shareholder, American Biltrite Inc. In any event, if
Congoleum is not successful in obtaining sufficient creditor and court
approval of a 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 for
the year ended December 31, 2008 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 For the Six Months
Ended June 30, Ended June 30,
------------------ ------------------
2009 2008 2009 2008
-------- -------- -------- --------
Net Sales $ 39,350 $ 47,166 $ 69,456 $ 94,863
Cost of Sales 32,858 37,277 58,818 74,101
Selling, General & Administrative
Expenses 7,447 9,238 15,697 18,370
-------- -------- -------- --------
(Loss)/Income from Operations (955) 651 (5,059) 2,392
Interest (Expense) Income, (net) (99) 64 (205) 995
Other Income (expense) 112 (350) 230 (414)
-------- -------- -------- --------
Net (Loss)/Income before Income
Taxes (942) 365 (5,034) 2,973
Provision for Taxes - 153 15 1,082
-------- -------- -------- --------
Net (Loss) /Income $ (942) $ 212 $ (5,049) $ 1,891
======== ======== ======== ========
Net (Loss)/Income Per Share, Basic
& Diluted $ (0.11) $ 0.03 $ (0.61) $ 0.23
======== ======== ======== ========
Weighted Average Number of Common
Shares Outstanding - Basic &
Diluted 8,272 8,272 8,272 8,272
======== ======== ======== ========
ADDITIONAL FINANCIAL INFORMATION:
Capital Expenditures $ 661 $ 1,036 $ 1,520 $ 1,504
Depreciation and Amortization $ 2,403 $ 2,626 $ 4,835 $ 5,299
CONDENSED BALANCE SHEET
(In thousands, except per share amounts)
(Unaudited)
June 30, December 31,
------------ ------------
2009 2008
------------ ------------
ASSETS:
Cash and cash equivalents $ 13,803 $ 15,077
Restricted cash 30,767 29,680
Accounts & notes receivable, net 15,036 13,789
Inventory 31,101 35,814
Other current assets 2,883 3,922
------------ ------------
Total current assets 93,590 98,282
Property, plant & equipment (net) 53,205 56,520
Other assets (net) 17,065 17,065
------------ ------------
Total assets $ 163,860 $ 171,867
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable, accrued expenses
& deferred income taxes $ 72,989 $ 80,924
Revolving credit loan - secured debt 17,246 13,994
Liabilities subject to compromise - current 4,997 4,997
------------ ------------
Total current liabilities 95,232 99,915
Liabilities subject to compromise 163,223 161,503
Long term debt -- --
Other liabilities -- --
------------ ------------
Total liabilities 258,455 261,418
Stockholders' equity (deficit) (94,595) (89,551)
------------ ------------
Total liabilities & stockholders' equity $ 163,860 $ 171,867
------------ ------------
ADDITIONAL FINANCIAL INFORMATION:
Working Capital $ (1,642) $ (1,633)
Current Ratio 1.0 1.0
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