Congoleum Reports Loss In Second Quarter

Mercerville, NJ, Aug. 12--Congoleum Corporation today reported its financial results for the second quarter ended June 30. Sales for the three months ended June 30 were $55.0 million, compared with sales of $68.0 million reported in the second quarter of 2002, a decrease of 19.1%. The net loss for the quarter ended June 30 was $2.0 million versus net income of $.8 million in the second quarter of 2002. The loss per share for the quarter ended June 30 was $.24, compared with earnings per share of $.10 in the second quarter of 2002. Sales for the six months ended June 30 were $108.6 million, compared with sales of $125.9 million reported in the first six months of 2002, a decrease of 13.8%. The net loss for the six months ended June 30 was $4.6 million, or $.55 per share, versus net income (before a required accounting change) of $.2 million, or $.02 per share, in the first six months of 2002. During the first quarter of 2002, Congoleum recorded a non-cash transition charge of $10.5 million, or $1.27 per share, for impairment of goodwill as required for adoption of Statement of Financial Accounting Standards No. 142. Roger S. Marcus, Chairman of the Board, commented "Our disappointing performance reflects the weakest manufactured housing market in years, considerable softness in residential remodel demand, competitive pressures on margin and product mix driven by the poor economy, and increased costs for pensions, medical benefits, insurance, energy, and raw materials. While the factors influencing this performance are largely out of our control, it is not satisfactory and we are committed to major steps that we expect should considerably reduce our break-even point. These include cost reduction initiatives as well as an already announced price increase of 3-5% that will be effective September 1. "We are continuing to proceed with our planned pre-packaged Chapter 11 reorganization, and while progress at times is frustratingly slow for those of us close to it, much has in fact been accomplished, and we continue to anticipate filing in September with the hope of emerging with our plan confirmed by the end of the year. We continue to enjoy the support of our customers, suppliers, and lenders as we move forward, most recently evidenced by our bondholders' agreement last week to transactions contemplated in our plan. We have seen no apparent negative effects on our day to day business related to the coming reorganization, which I believe is the benefit we have obtained by structuring the plan to protect their interests. "We are committed to achieving profitability in the second half of 2003, and believe this is a realistic goal even without a meaningful improvement in sales. We have taken and are taking a number of steps that should provide better results in the third, and particularly fourth, quarters as the savings phase in. “In addition, the reception to our two latest new product introductions, DuraCeramic and Pacesetter, has been highly favorable. Finally, while we are not allowing optimism to diffuse our cost reduction fervor, we have seen recent indications of economic improvement. Orders from the manufactured housing industry have shown some strengthening over the last six weeks and there are also indications that remodel demand is picking up. Any improvement in industry conditions should further amplify the benefit of the changes we are making in our cost structure."