Congoleum Corp. said lower operating costs together with strong sales of its Xclusive and DuraCeramic residential lines helped drive gains in sales and income last year. While the company said it will be "challenged" this year by a shortage of raw materials, it assured investors that it would protect its margins.It also said 2005 was the year Congoleum expects to move past "the financial and management burden of our asbestos liabilities."

Congoleum said sales in 2004 were just shy of $230 million, an increase of 4 percent over the $220.7 million reported in 2003. Operating income in 2004 was $8.7 million, compared to a loss of $3.1 million a year earlier. Basic net income for 2004 was $2.9 million, compared with a loss of $6.8 million in 2003.

The company noted that the results include charges of $5 million in 2004 and $3.7 million in 2003 for resolution of asbestos liabilities. It added that income in 2004 is expected to include $2.9 million in tax benefits related to its resolution of asbestos liabilities.

"Sales improved in 2004 due to a combination of price increases, higher residential sales of our Xclusive and DuraCeramic product lines, and greater shipments to the manufactured housing industry," said Congoleum chairman, Roger S. Marcus. "Our overall sales growth would have been higher were it not for lower sales in the do-it-yourself tile category, where we faced continued price pressure from China and other overseas sources, and by lower sales of specials and off-goods. The resulting sales mix was more profitable than 2003, and margins benefited further from increases in manufacturing efficiencies. Unfortunately, we also experienced significant inflation in raw material costs, particularly resins, which exceeded our price increases and offset much of the margin improvement."

Marcus continued "We lowered operating expenses by $4 million last year as a result of cost reduction steps taken in both 2003 and 2004, despite continued increases in medical and benefit costs. This reduction helped us achieve an $11.8 million improvement in income from operations, which swung from a loss of $3.1 million in 2003 to $8.7 million in income in 2004. We also increased our cash position considerably during the year, with unrestricted cash balances growing from $2.2 million at the end of 2003 to $29.7 million at the end of 2004.

"While the raw material situation will continue to be a challenge in 2005, we are committed to taking steps to protect our margins while continuing to build on the success of the new products we develop," said Marcus. " We also hope to complete our reorganization process during the third quarter of 2005, putting the financial and management burden of our asbestos liabilities behind us."