Congoleurn Corporation (Abridged) Exhibit 1 Ten Year Historical Financial Data 1969 189.90 7.60 0.70 1970 187.

70 7.00 0.65 0.02 11.60 3.90 49.00 42.60 59.10 1971 250.60 12.10 1.07 0.09 24.00 10.10 53.50 40.00 73.30 1972 345.20 23.40 1.67 0.13 30.90 20.70 69.60 42.10 99.50 1973 385.70 4.00 22.20 1.89 0.20 24.60 8.50 88.10 59.30 116.30 1974 377.1 5.50 7.8 0.05 0.27 14.90 2.40 92.80 74.60 113.80 1975 395.90 7.00 9.60 0.83 0.27 9.20 3.00 81.10 52.30 120.30 1976 294.80 10.10 15.70 1.36 0.33 12.90 8.00 76.80 16.60 132.60 1977 388.60 13.20 24.70 2.13 0.40 14.60 8.80 78.00 16.10 153.10 1978 575.80 17.80 41.70 3.58 0.67 26.30 12.00 110.10 14.90 187.50

Net sales (millions $) Royalty revenues (included in net sales) Net income (millions $) Earnings per share Dividends per share Stock price ($) High Low W orking capital (millions $) Long-term debt (millions $) Net worth (millions $)

17.50 7.50 35.20 31.70 58.90

Note: Congoleum acquired Curtis Noll Corporation on October 31, 1977 on a purchase basis. Its performance is consolidated with Congoleurn after October 31, 1977. Certain operations were discontinued in 1976. Results for 1969 to 1975 have not been adjusted for discontinued operations.

Congoleum Corporation (Abridged) Exhibit 2 Historical Income Statements (in thousands except per share data) 1976 Revenues Net sales Royalties a Total revenues Cost of Sales and Operating Expenses Cost of sales Selling and administrative expenses Operating income Other Incom e and Expense Interest expense Miscellaneous income Total other income and expense Income from continuing operations before income taxes Provision for Incom e Taxes Income from continuing operations Loss from discontinued operations Patent infringement settlement Net income Per Share Income from continuing operations Loss from discontinued operations Patent infringement settlement Net income
a

1977

1978

$284,735 10,080 294,815

$375,466 13,163 388,629

$558,633 17,197 575,830

224,028 37,805 32,982

285,770 55,023 47,836

385,851 108,648 81,331

(2,064) 3,821 1,757 34,739 17,400 17,339 (19,500) 17,885 $15,724

(1,734) 3,538 1,804 49,460 24,906 24,740 $24,740

(1,266) 4,281 3,015 84,346 42,600 41,746 0 $41,746

1.50 (1.69) 1.55 1.36000

2.13 2.13000

3.58 3.58000

Royalties are from licenses of the companys resilient flooring patents, as well as license agreements for know-how. These patents expire from 1980 through 1987, although most expire by 1984. Note: The statements above reflect the addition of Curtis Noll Corporation only after October 31, 1977, the date of acquisition. The acquisition was accounted for as a purchase. Restating the results of 1977 and 1976 as if Noll were included yields the following: Year Ended December 31 1976 1977 Total revenues Income from continuing operations Net income Earnings per share $416,000 19,592 17,977 1.56 $497,300 27,725 27,725 2.39

Congoleum Corporation (Abridged) Exhibit 3 Consolidated Balance Sheets (in thousands)

Year Ended December 31 1977 1978 Current Assets Cash and temporary investments Receivables Shipbuilding contracts in progress Inventories Other Total current assets Property, Plant and Equipment Accumulated depreciation and amortization Net Other Assets Goodwill Other Total Current Liabilities Current maturities of long-term debt Accounts payable Accrued liabilities Income taxes Total current liabilities Long-term debt Defferred income taxes and other liabilities Common stock Surplus Retained earnings Treasury stock Net worth Total Liabilities and Equity

$12,369 55,053 18,936 73,318 5,679 165,355 131,621 (60,472) 71,149

$77,254 40,424 24,058 75,258 3,511 20,505

b

135,627 (64,850) 70,777

d e

18,520 11,356 $266,380

18,520 13,250 $323,052

f

$2,055 38,391 28,928 17,985 87,359 16,067 9,886 5,859 11,846 137,256 (1,893) 153,068 $266,380

$460 41,578 30,102 38,267 110,397 14,949 10,221 5,859 11,345 171,229 (948) 187,485 $323,052

Replacement cost data: $79,518, $224,765, $282,267, $188,281, $93,986, $352,710.

Congoleum Corporation (Abridged) Exhibit 4 Product Line Data Year Ended December 31 1975 1976 $153 126 85 $364 $27 1 7 $35 $93 38 51 $183 $180 115 95 $390 $34 2 8 $44 $97 42 56 $195 9 Months 1978 $170 158 86 $414 $43 13 7 $63 NA NA NA NA

1974 Revenues by segment Home furnishings Shipbuilding Automotive and industrial distribution Operating income (loss) by segment Home furnishings Shipbuilding Automotive and industrial distribution Identifiable assets by segment Home furnishings Shipbuilding b Automotive and industrial distribution
a

1977 $198 167 105 $470 $42 10 9 $61 $92 54 62 $208

1978 $225 211 115 $551 $58 19 10 $87 $93 59 64 $216

1979 $177 181 89 $447 $40 28 8 $76 NA NA NA NA

$143 107 79 $329 $22 (11) 6 $17 $93 37 48 $178

0perating income does not include an allocation of interest income or expense, miscellaneous and other unallocable expenses, corporate office expenses, or provisions for income taxes. The pro forma amounts for the automotive and industrial distribution segment include the results of Curtis Noll Corporation.

Congoleurn Corporation (Abridged) Exhibit 5 Management Stock and Option Ownership in Congoleum Corporation, Autumn 1979 Number of Shares Subject to Options and Stock Appreciation Rights Byron C. Radaker (Chairman, CEO) Eddy G. Nicholson (Vice Chairman, COO) Harry F. Pearson (Executive Vice President) All directors and officers as a group Weighted Average Exercise Price Number of Other Shares Beneficially Owned Total Number of Shares Beneficially Owned

47,250 27,750 17,000 164,699

$11.87 11.31 15.38 13.07

12,750 11,250 47,492 293,023

60,000 39,000 64,492 457,722

Officers of Congoleum expected to assume equivalent positions in the new firm. It was proposed that Radaker and Nicholson be allowed to purchase 7% and 5% respectively of the new firm's equity, subject to the right of the firm to repurchase the equity if their employment is terminated before 1984. Stock in the new venture was also reserved for other key employees. Radaker and Nicholson wouId be employed under five-year contracts which specified a base salary, incentive compensation, and entitlements in the event of termination. Current and proposed compensation compared as follows:

Radaker 1979 compensation 1980 compensation per contract Maximurn Minimum $370,000 500,000 375,000

Nicholson $295,000 380,000 290,000

Congoleum Corporation (Abridged) Exhibit 6 Data on Comparable Leveraged Buyouts and Other Acquisitions

Company Acquired Houdaille Industries Bliss & Laughlin Carrier Corp. Gardner-Denver Washington Steel Eltra Corp. Studebaker-Worthington Marathon Manufacturing Congoleum

Date 10/28/78 8/10/79 9/1 6/78 1/22/79 3/12/79 6/29/79 7/25/79 8/13/79

Premium/ Price Acquisition One Day of Stock Prior to or Assets Announcements S A A A A A A A A/S 93% 23 39 46 34 25 17 13 50

Offer as a Multiple of Net Income Book Value 13.9x 8.7 10.2 12.2 7.3 11.6 10.7 11.4 9.4 2.0x 1.7 1.6 2.1 1.3 1.5 1.4 2.1 2.4

Senior Debt Total Debt 65.5%

Sub. Debt Total Debt 34.5%

Senior Debt Total Cap. 56.0%

Sub. Debt Total Cap. 29.6%

68.6

31.4

60.4

27.6

Congoleurn Corporation (Abridged) Ex h ib it 7 Valuation Based on a Break-up Price Estimated by Lazard Freres ($ millions) 1979 Es tim ated Res u lts b y Seg m en t Home Furnishings Segment Operating income b Corporate office and other Pretax income Taxes (48%) Net income
a

Bath Iron W orks

Automotive and Total Industrial Corporate Distribution Consolidated $11.9 0.7 11.2 5.4 $5.8 $97.0 3.1 93.9 45.1 $45.8

$56.1 1.1 55.0 26.4 $28.6

$29.0 1.3 27.7 13.3 $14.4

Valu atio n B as ed o n As s u m ed Pr ic e-Ear n in g s Ratio Low 9.0x $257.4

c

Assumed price-eamings rato Derived valuation Plu s : Estimated excess cash on 12/31/79 L es s : Estimated long-term debt and current maturity of long-term debt on 12/31/79 Unfunded vested pension liabilities (as of 12/31/78) Net break-up value Per share (based on 12,201,000 fully diluted shares)

High 1 0.0x $286.0

Low 5.0x $72.0

High 6.0x $86.4

Low 10.0x $58.0

High 11.0x $63.8

Low $387.4 95.1

High $436.2 95.1

15.6 34.5 $432.4 $35.44

15.6 34.5 $481.2 $39.43

Frorn Congoleum's internal reporting of quarterly operating income and performance report. Operating income for the Home Furnishings Segment was reduced by $2.7 million attributable to the Kinder Division. This operation has been assumed to be sold for $10 million by the end of 1979. Allocated based on 1979 estimated sales (excluding $36.0 million attributable to Kinder and excluding royalty payments).

Total cash at year-end estimated at $103.1 million minus $8 million. Excess cash is, therefore, estimated at $95.1 million.

Congoleum Corporation (Abridged) Exhibit 8 Forecast of Congoleum Operations (in millions except per share data) These data are from an internal forecast by Congoleum prepared in the summer of 1978, and subsequently made available to First Boston Corp. 1979 For the year ended December 31 Revenues Operating income Net income Net income per share Dividends per share At December 31 Cash and temporary investments Working capital Long-term debt Stockholders' investment 93 140 15 220 136 169 14 259 182 209 14 304 $596 86 45 3.80 0.90 $680 97 51 4.35 1.10 $737 112 60 5.00 1.30 1980 1981

Congoleum Corporation (Abridged) Exbibit 9 Financial Data on Market Segment Competitors 5-Year Expected Growth Home Furnishings Armstrong Cork GAF Corp Shipbuilding Todd Shipyards Automotive and industrial distribution Genuine Parts General Automotive Parts Barnes Group Congoleurn 1982-1984 Expected Div. Yield

P/E

a
5.8 6 1.00 1.15

LT Debt % Cap.

1979 ROE

17.5% 14

18.2% 35

11.6% 10.4

3.2% 2.6

21

5.3

1.00

69

22.0

2.0

16 16 12.5 22.5

10.4 9.6 5.1 7.9

0.95 0.75 0.85 1.25

5 7 18 7

19.2 19.0 20.6 23.0

2.5 2.4 2.7 3.0

The risk-free rate was assumed to be 9.5% and the market premium 8.6%.

Congoleum Corporation (Abridged) Exhibit 10 Average or Comparable Debt Yields by Quality, September 1979 Ratio of Debt to Total Capital (%)

S & P Rating AAA AA A BBB BB

Yield 9.35 9.54 9.78 10.49 13.76 11.06 11.86 10.59 13.32 12.70 11.98 12.46 12.87 16.11 13.32 17.22 14.26 15.02

Firm Name

Action Industries Control Data Sun Chemical Talley Industries APL Corp. Arrow Electronics Charter Company Columbia Pictures Texas Intemational Airlines Altec Corp. General Host Grolier Inc. LTV Corp. Rapid American Corp.

56.90 21.10 47.60 43.00 57.90 49.70 50.40 41.30 51.00 70.80 74.40 NA 73.80 75.70

CCC

Congoleum Corporation (Abridged) Exhibit 11 Average or Comparable Preferred Stock Dividend Yields by Quality, September 1979 Ratio of Debt to Total Capital

Moodys Rating Aaa Aa A Baa (S & P Rating) BB

Yield (%) NR 9.60 10.34 10.49

Firm Name

10.0 10.8 10.0 11.5 12.1 11.5 12.5 12.6 18.2 11.9 14.0 15.0 14.0 13.0

Control Data Evans Products Fairmont Foods Flexi-Van Corp. Eastern Airlines Humana Inc. Norin Corp. Petro-Lewis Chrysler Corp. Continental Copper Steel Susquehanna Corp. United Brands Warnaco Wheeling Pittsburgh Steel

21.1 36.8 39.0 64.0 68.1 72.1 49.5 67.2 33.8 45.0 25.3 33.3 35.0 33.7

CCC

Congoleum Corporation (Abridged) Exhibit 12 Sources and Allocation of Purchase Premium a (in millions)

Cost of stock ($38 x 12.2 mm shares) Expenses Purchase price Stockholders' investment 12/31/78 Claim settlement Proceeds from exercise of stock options Estimated 1979 additions to retained earnings Stockholders' investment 12/31/79 Less: Unfunded pension liabilities Adjusted stockholders' investment 12/31/79 Purchase premium
a

$463.6 7.0 $470.6 187.5 3.5 5.0 37.7 233.7 34.5 199.2 $271.4

Allocation of purchase premium Inventory write-up from recapture of LIFO reserve Fixed assets Patents Goodwill Purchase premium

$4.2 83.4 150.0 33.8 $271.4

After the July 16, 1979 bid, First Boston retained American Appraisal Company to render a "comfort level" opinion of the fair market value of inventories as of June 30, 1979 and the shipbuilding contract backlog and patents and patent licensing agreement at December 31, 1979. Their report concluded that the net realizable value of the inventories was $83,633,000, of the backlog was $73,500,000, and of the patents and patent licensing agreement was $174,000,000. The book value of inventories at June 30, 1979 was $50,000,000. Shipbuilding contract backlog and patents and patent licensing agreements had been carried on the books at nominal values.

Congoleum Corporation (Abridged) Exhibit 13 Income and Cash Flow Forecast for Congoleum Reflecting the Terms of the Proposed Leveraged Buyout 1978-1984 ($ millions) 19801984 Totals

Line # 1 2 3 4 5 6 7 8 Operating income (Exhibit 15) Less: corporate expenses depreciation & amortization Earnings before interest & taxes Less: interest expense (net) Profit before taxes Less: tax (@ 48%) Profit after taxes Adjustments: 9 10 11 12 13 14 15 16 17 18 19 20
a a

1978 Actual 95.5 7.5 6.7 81.3 (3.0) 84.3 40.5 43.8

1979E 105.9 8.6 7.5 89.8 (5.7) 95.5 45.8 49.7

1980 111.5 4.3 35.51 71.7 42.92 28.8 13.8 15.0

1981 132.2 5.1 36.26 90.8 40.55 50.3 24.1 26.2

1982 158.7 5.9 37.07 115.7 37.33 78.4 37.6 40.8

1983 175.9 6.8 37.95 131.2 34.12 97.0 46.6 50.5

1984 166.1 7.6 21.23 137.3 29.87 107.40 51.6 55.8

Add back depreciation + amortization Less capital expenditures Less investment in working capital required Less preferred dividends Less principal repayments Free cash flow (to common stock) Add: dividends, interest, and principal Free cash flow (to all capital) Less: Bank & preexisting interest and principal Free cash flow (to nonbank buyout participants) Net working capital Change in net working capital
c

35.51 (15) (3.5) (17.14) 12.84 63.56 76.40 35.85 40.55 122 2

36.26 (16.2) (2) (3.5) (24.75) 3.91 68.80 72.71 33.46 39.25 136 14

37.07 (17.5) (14) (3.5) (24.52) 10.02 65.35 75.37 30.86 44.51 159.3 23.3

37.95 (18.9) (23.3) (3.5) (36.75) 18.06 74.37 92.43 40.74 51.69 170.5 11.2

21.23 (20.4) (11.2) (3.5) (24.55) 15.83 57.96 73.79 25.28 48.51 183.3 12.8

(12.8) (17.5) (127.7) 60.8 330.0 390.8 166.2 224.6

120

W ith no leveraged buyout, Congoleum's net interest expenses were expected to be $(2.0),$(2.0),$(2.1),$(2.1), and $(3.0) million over the years 1980-1984. W ith no leveraged buyout, Congoleum's depreciation and amortization expenses were expected to be $7.5, $8.3, $9.0, $9.9, and $10.9 million over the years 1980-1984. Because of covenants prohibiting dividends, these free cash flows would be reinvested (presumably in cash and marketable securities), reducing financial risk, and increasing the free cash flow. Does not reflect income from the reinvestment of surplus cash.

Congoleum Corporation (Abridged) Exhibit 14 Assumptions for Financial Projections Corporate Expenses $8.6 million in 1979, growing at 8% thereafter from 1980 to 1984. A savings of $5 million annually is assumed as a result of Congoleurn being a private company. Depreciation and Amortization The amortization of patents was proposed as follows: Value Remaining (millions) Life Chemical embossing process Code keycutter Future value of U.S. royalties Future value of foreign royalties Total $40 40 30 40 $150 4 10 4 10 Years Years Years Years

Amortization of patents will be the same for book and tax purposes. Depreciation of Plant and Equipment For tax purposes the fixed asset base will be $200.2 million. Of this, 50% is assumed to relate to plant, and will be depreciated over 20 years. The other 50%, related to equipment, will be depreciated over seven years. All subsequent capital expenditures will be depreciated over 20 years. For book purposes, the fixed asset base will be $154.0 million. The other policies above will apply. Interest Expense and Principal Repayments Bank Debt Assume 14% interest on principal of $120 million. Principal is to be amortized at $16.666 million annually starting in 1980. Senior Notes 11 /4% interest on principal of $115 million, amortized at 7,636,000 per year starting on January 30, 1981. Subordinated Notes 12 /4% interest on principal of $92 million, amortized at 7,636,000 per yea r starting on January 20, 1989. Covenants Prohibit the payment of dividends on other than the preferred stock. Taxes The corporate income tax rate is assumed to be 48%. Capital Expenditures Assumed to be $15 million in 1980 and increasing 8% annually thereafter. Minimum Working Capital 20% of nonroyalty sales. Net working capital immediately following the buyout is projected to be $120 million. Required Cash Assumed to be 2.5% of the nonroyalty sales. Note: By 1980, a pattern of leveraged buyouts had emerged such that the firms were taken public again within a few years--usually when the various value-creating effects were diminished. The end of 1984 was one such horizon for Congoleum. 17
1 1

Congoleurn Corporation (Abridged) Exhibit 15 Projected Operating Income 1979-1984 These data are from projections made by First Boston Corporation, and assume the buyout is complete.

Actual 1978 Revenues 1. Home furnishings net 2. Home furnishings royalties 3. Total home furnishings 4. Shipbuilding 5. Automotive--expediter 6. Automotive--conventional 7. Total automotive 8. Total revenues Operating Income 9. Home furnishings net 10. Home furnishings royalties 11. Total home furnishings 12. Shipbuilding 13. Automotive-expediter 14. Automotive--conventional 15. Total automotive 16. Total operating income $43.7 17.2 60.9 21.7 NA NA 12.9 $95.5 $207.9 17.2 225.1 211.0 78.8 45.0 123.8 $559.9

1979

1980

1981

1982

1983

1984

$234.9 20.6 255.5 230.4 90.6 45.0 135.6 $621.5

$217.9 24.8 242.7 247.9 104.2 40.0 144.2 $634.8

$241.9 29.7 271.6 279.2 119.8 40.0 159.8 $710.6

$273.3 35.7 309.0 345.1 137.8 40.0 177.8 $831.9

$308.8 42.8 351.6 345.1 158.5 40.0 198.5 $895.2

$349.0 21.4 370.4 345.1 182.3 40.0 222.3 $937.8

$42.0 20.6 62.6 31.5 11.8 0 11.8 $105.9

$39.2 24.8 64.0 33.9 13.6 0 13.6 $111.5

$48.4 29.7 78.1 38.5 15.6 0 15.6 $132.2

$57.4 35.7 93.1 47.7 17.9 0 17.9 $158.7

$64.8 42.8 107.6 47.7 20.6 0 20.6 $175.9

$73.3 21.4 94.7 47.7 23.7 0 23.7 $166.1

Note: Neither depreciations nor corporate-level expenses are reflected in operating income, nor is income from the reinvestment of surplus cash.