Congoleum operating loss improves to $14.71 million in 2009

By Caroline Salls

Pittsburgh, March 11 - Congoleum Corp. reported a $14.71 million loss from operations for the year ended Dec. 31 on $134.92 million in net sales, according to a company news release.

In comparison, the company posted a $16.28 million loss from operations for the year ended Dec. 31, 2008 on $172.64 million in net sales.

The net loss for 2009 was $15.17 million, widening from a $14.62 million 2008 net loss.

Congoleum posted a $7.92 million loss from operations for the quarter ended Dec. 31 on $28.1 million in net sales, compared to a $7.73 million loss from operations for the quarter ended Dec. 31, 2008 on $31.7 million in net sales.

The net loss for the fourth quarter of 2009 was $8.19 million, declining from a $6.39 million net loss for the same period of 2008.

Congoleum had $16.07 million of cash and cash equivalents at Dec. 31, up from $15.08 million at Dec. 31, 2008.

"While our end markets remained weak in the fourth quarter of 2009, several additional factors contributed to our loss," chairman of the board Roger S. Marcus said in the release.

"First, we took a charge of $5.2 million for what we expect the remaining costs will be to complete our reorganization in 2010. Second, distributor inventory reductions cost us about $1.2 million in lost margin and contribution to fixed manufacturing overhead.

"Finally, the fourth quarter was burdened with an additional $1.5 million in pension expense due to depressed asset values at the end of 2008. Without these negative factors, we would have essentially broken even for the quarter despite the poor economy.

"2009 was an extraordinarily challenging year due to the economic and credit climate. Demand for our products fell sharply in all our markets - new construction, remodel, and especially manufactured housing.

"While our loss for the year was significant, it was greatly mitigated by the steps we took. Generating cash was a focus throughout the year, and we ended 2009 with $16.1 million in unrestricted funds, up $1 million from the year before and providing us necessary financial flexibility heading into 2010.

"Our business plan for 2010 was conservatively developed on the assumption that economic conditions will not improve this year and that our success will depend on bringing out new products.

"Toward that end, we introduced a major new product line in the fourth quarter of 2009, another in the first quarter of 2010, and have a third that will be introduced during the second quarter of 2010. We believe these introductions will help generate incremental sales in 2010 despite a lackluster economy.

"We also anticipate some relief on the increased pension expense we experienced in 2009, as the recovery in asset values should reduce the 2010 expense level by $1.7 million versus 2009.

"In addition, we do not expect further inventory reductions to hurt our 2010 production efficiencies as happened in 2009. Even without any recovery in the economy, I expect we will see significantly improved operating results in 2010 versus 2009."

Marcus said he expects the company's plan of reorganization to be confirmed in the second quarter, and that it will emerge "reasonably promptly therafter."

"Putting the bankruptcy behind us in 2010 will be a major step forward," Marcus said in the release.

Congoleum, a Mercerville, N.J.-based flooring company, filed for bankruptcy on Dec. 31, 2003 in the U.S. Bankruptcy Court for the District of New Jersey. Its Chapter 11 case number is 03-51524.

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