Mercerville, NJ, Mar.31--Congoleum Corp. said it has reached an agreement in principle with attorneys representing more than 75% of the known present claimants with asbestos claims pending against Congoleum.
When consummated, the company said the agreement will result in a global settlement of more than 75% of the asbestos personal injury claims pending against the company. The agreement in principle also contemplates a Chapter 11 reorganization that seeks confirmation of a pre-packaged plan that would leave non-asbestos creditors unimpaired and would resolve all pending and future personal injury asbestos claims against Congoleum and its distributors and affiliates. Approval of the plan will require the supporting vote of at least 75% of the asbestos claimants with claims against Congoleum.
Congoleum chairman Roger S. Marcus said he was pleased with the progress indicated by reaching this agreement in principle. He said the company’s employees, customers, suppliers, lenders, and shareholders have been supportive of its plans and should be encouraged by this development.
Marcus said that additional effort and challenges lie ahead, but the company believes it is proceeding successfully with its plan to put the asbestos problem permanently behind it in 2003. Based on this progress, he said, the company has recorded a charge of $17.3 million in its 2002 results for the resolution of its asbestos liabilities through a reorganization plan. While the charge is substantial, he said, the company believes taking this initiative now is the most favorable and economical approach for the company.
Congoleum also announced its financial results for fiscal 2002. The company reported a net loss for the year of $29.8 million, which included a $17.3 million charge for asbestos liabilities and a $10.5 million non-cash goodwill impairment charge. In the same period of 2001 the company posted a loss of $1.6 million. The net loss per share in 2002 was $3.60, compared to $0.20 in 2001. The asbestos and goodwill charges accounted for virtually all the increase in the net loss from 2001 to 2002.
Sales for the year ended December 31, 2002 were $237.2 million, an increase of 8.4% over the $218.8 million reported in 2001.
Commenting on the 2002 results, Marcus said that even without the asbestos issue, the company faced a very challenging environment last year. Sales performance in that climate, he said, demonstrates that the company’s product development and marketing strategies are enabling it to gain market share. Said Marcus, “I believe our decision to continue to invest aggressively in the development and introduction of new products and expanding sales at the expense of short term profitability will serve us well in the long run."
He added, "On the positive side, our DuraStone and Ultima product lines continue to perform very well. We have been awarded a patent on the coating technology we developed, which we expect will further enhance our image as the industry product innovator. Our new builder products also contributed to sales growth in 2002, as did the establishment of a tile and sheet program with Lowe's. Our manufacturing efficiency and performance improvements are on target, and we have added capacity where needed, such as doubling our DuraStone output capability. Lastly, we were able to institute price increases in August ranging from 2% - 6%, the first meaningful increase our industry has had in years."
