Mercerville, NJ, Mar. 11--Congoleum Corporation reported its financial results for year ended December 31, 2003. Sales for the year were $220.7 million, a decrease of 7.0% compared to the $237.2 million reported in 2002.
The net loss for 2003 was $6.8 million, which included a previously announced $3.7 million pre-tax charge for asbestos liabilities, compared with a loss of $29.8 million in 2002. The 2002 loss included a $17.3 million charge for asbestos liabilities and a $10.5 million non-cash goodwill impairment charge. The net loss per share in 2003 was $.82, compared to $3.60 in 2002.
Roger S. Marcus, Chairman of the Board, commented "There are five major factors that caused our disappointing performance in 2003. First, due to delays in finalizing our pre-packaged reorganization plan, we recorded a $3.7 million asbestos-related charge for the legal fees and other costs to complete the reorganization process. Second, further declines in the manufactured housing industry from 2002 resulted in $4 million less sales and a substantial loss of profit contribution. Third, we experienced substantial increases in difficult to control costs for medical and pension benefits, energy, and insurance; these costs increased an aggregate $3.5 million over 2002. Fourth, sales of tile to the home center channel dropped sharply in 2003 due to the previously announced loss of a major chain's business. Finally, both Congoleum and its largest customer reduced inventories significantly during 2003, which hurt gross margin and manufacturing efficiency.
"We took a number of steps during 2003 to mitigate these factors and improve both profitability and liquidity in 2004. We reduced our workforce by 146 people or 14%, for a savings of over $7 million, the majority of which will be realized in 2004. We instituted manufacturing waste reduction initiatives saving $3.5 million and took steps to cut operating expenses by $3 million, also with the bulk of the savings to be achieved in 2004. Finally, we instituted a 3% price increase in the fourth quarter of 2003 to help offset inflation in benefits, energy, and certain raw materials.
"Based on the actions we have taken to reduce our cost structure, we are optimistic that our results in 2004 will be significantly better than 2003. Our reorganization is now progressing on schedule and we believe we have made adequate provision for the cost of its completion. It appears the manufactured housing market may have at last bottomed out, and any growth in that industry would further help our 2004 performance. Finally, we are developing a major new sheet product, to be introduced in the second half of 2004, which we believe will be the best in the industry."
During 2003, Congoleum elected to pursue a pre-packaged bankruptcy proceeding as a means to resolve claims asserted against it related to the use of asbestos in its products decades ago and obtained the asbestos claimant votes necessary for approval of its proposed plan of reorganization. On December 31, Congoleum Corporation filed a voluntary petition with the United States Bankruptcy Court for the District of New Jersey seeking relief under Chapter 11 of the United States Bankruptcy Code. The Bankruptcy Court has issued a final financing order approving its Debtor-in-Possession revolving credit facility. The court has also authorized Congoleum to pay its suppliers in the ordinary course of business for amounts owed on account of goods and services supplied prior to the bankruptcy filing. Congoleum has filed its plan of reorganization and disclosure statement with the court and is seeking confirmation of the plan as promptly as possible.
