FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


For Quarter Ended June 30, 2004                    Commission File Number 1-4773

                             AMERICAN BILTRITE INC.
             (Exact name of registrant as specified in its charter)


Delaware                                                 04-1701350
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)


                                 57 River Street
                    Wellesley Hills, Massachusetts 02481-2097
                    (Address of Principal Executive Offices)
                          (781) 237-6655 (Registrant's
                     telephone number, including area code)

                                 Not Applicable
               (Former name, former address and former fiscal year
                          if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X|     No |_|

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes |_|     No |X|

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Title of Each Class                             Outstanding at August 4, 2004
-------------------                             -----------------------------
       Common                                          3,441,551 shares
<PAGE>

                             AMERICAN BILTRITE INC.

                                      INDEX


PART I.  FINANCIAL INFORMATION

         Item 1. Financial Statements:

                 Consolidating Condensed Balance Sheets--Assets as of
                   June 30, 2004 (unaudited) and December 31, 2003.............3

                 Consolidating Condensed Balance Sheets--Liabilities and
                   Stockholders' Equity as of June 30, 2004 (unaudited) and
                   December 31, 2003...........................................4

                 Consolidating Condensed Statements of Operations for the
                   three months ended June 30, 2004 and 2003 (unaudited).......5

                 Consolidating Condensed Statements of Operations for the
                   six months ended June 30, 2004 and 2003 (unaudited).........6

                 Consolidating Condensed Statements of Cash Flows for the six
                   months ended June 30, 2004 and 2003 (unaudited).............7

                 Notes to Unaudited Consolidating Condensed Financial
                   Statements..................................................8

         Item 2. Management's Discussion and Analysis of Financial Condition
                 and Results of Operations....................................24

         Item 3. Quantitative and Qualitative Disclosures About Market Risk...41

         Item 4. Controls and Procedures......................................41

PART II. OTHER INFORMATION

         Item 1. Legal Proceedings............................................42

         Item 3. Defaults Upon Senior Securities..............................42

         Item 4. Submission of Matters to a Vote of Security Holders..........42

         Item 6. Exhibits and Reports on Form 8-K.............................43

         Signature............................................................44


                                       2
<PAGE>

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

                     AMERICAN BILTRITE INC. AND SUBSIDIARIES
                 CONSOLIDATING CONDENSED BALANCE SHEETS - ASSETS
                            (In thousands of dollars)

<TABLE>
<CAPTION>
                                       ABI Consolidated           Eliminations             Congoleum           American Biltrite
                                     June 30,  December 31,  June 30,  December 31,  June 30,  December 31,  June 30,  December 31,
                                       2004        2003        2004        2003        2004        2003        2004       2003
                                   -------------------------------------------------------------------------------------------------
                                   (Unaudited)              (Unaudited)            (Unaudited)             (Unaudited)
<S>                                  <C>         <C>          <C>         <C>       <C>         <C>          <C>         <C>
Assets
Current Assets:
  Cash and cash equivalents          $ 23,832    $  3,959                           $ 23,675    $  2,169     $    157    $  1,790
  Restricted cash                       3,848       1,757                              3,848       1,757
  Accounts receivable, net             49,277      36,010     $(245)      $(280)      24,204      13,560       25,318      22,730
  Inventories                          84,653      81,480      (171)       (240)      43,191      44,995       41,633      36,725
  Assets of discontinued
    operation                           2,656       2,902                                                       2,656       2,902
  Deferred income taxes                10,737      11,033                              8,456       8,752        2,281       2,281
  Prepaid expense & other
    current assets                      9,641      12,530                              6,980       9,672        2,661       2,858
                                   -------------------------------------------------------------------------------------------------
    Total current assets              184,644     149,671      (416)       (520)     110,354      80,905       74,706      69,286

Proper, plant & equipment, net        127,812     134,285                             82,950      87,035       44,862      47,250

Other assets:
  Insurance for asbestos-related
    liabilities                        10,700      10,700                                                      10,700      10,700
  Goodwill, net                        11,300      11,300                                                      11,300      11,300
  Other assets                         11,557      13,440      (186)       (186)       7,680       7,959        4,063       5,667
                                   -------------------------------------------------------------------------------------------------
                                       33,557      35,440      (186)       (186)       7,680       7,959       26,063      27,667
                                   -------------------------------------------------------------------------------------------------

Total assets                         $346,013    $319,396     $(602)      $(706)    $200,984    $175,899     $145,631    $144,203
                                   =================================================================================================
</TABLE>

See accompanying notes to consolidating condensed financial statements.


                                       3
<PAGE>

                     AMERICAN BILTRITE INC. AND SUBSIDIARIES
  CONSOLIDATING CONDENSED BALANCE SHEETS - LIABILITIES AND STOCKHOLDERS' EQUITY
                            (In thousands of dollars)

<TABLE>
<CAPTION>
                                       ABI Consolidated           Eliminations             Congoleum           American Biltrite
                                     June 30,  December 31,  June 30,  December 31,  June 30,  December 31,  June 30,  December 31,
                                       2004        2003        2004        2003        2004        2003        2004       2003
                                   -------------------------------------------------------------------------------------------------
                                   (Unaudited)              (Unaudited)            (Unaudited)             (Unaudited)
<S>                                  <C>         <C>          <C>         <C>        <C>        <C>          <C>         <C>
Liabilities
Current liabilities:
  Accounts payable                   $ 23,856    $ 13,327     $   (245)   $   (280)  $ 12,361   $  4,544     $ 11,740    $  9,063
  Accrued expenses                     43,935      41,678                              27,755     24,785       16,180      16,893
  Asbestos-related liabilities          8,434       9,819                               8,434      9,819           --          --
  Liabilities of discontinued
  operation                               421         688                                  --         --          421         688
  Deferred income taxes                 4,556       4,376                               4,556      4,376           --          --
  Notes payable                        26,233      18,125                              15,342     10,232       10,891       7,893
  Current portion of
    long-term debt                     21,262      21,289                                  --         --       21,262      21,289
                                   -------------------------------------------------------------------------------------------------
    Total current liabilities         128,697     109,302         (245)       (280)    68,448     53,756       60,494      55,826

Long-term debt, less current
  portion                               3,189     103,626                                  --     99,773        3,189       3,853
Asbestos-related liabilities           10,700      10,700                                                      10,700      10,700
Other liabilities                      17,392      62,126           --        (186)     3,900     48,147       13,492      14,165
Noncontrolling interests                  471         663                                                         471         663
Liabilities subject to compromise     152,751          --         (186)         --    152,937         --
                                   -------------------------------------------------------------------------------------------------
                                      313,200     286,417         (431)       (466)   225,285    201,676       88,346      85,207

Stockholders' equity
  Common stock                             46          46          (93)        (93)        93         93           46          46
  Additional paid-in capital           19,548      19,548      (49,105)    (49,105)    49,105     49,105       19,548      19,548
  Retained earnings                    47,264      47,573       35,104      35,035    (45,853)   (46,778)      58,013      59,316
  Accumulated other comprehensive
    loss                              (18,913)    (19,056)       6,110       6,110    (19,833)   (20,384)      (5,190)     (4,782)
  Less treasury shares                (15,132)    (15,132)       7,813       7,813     (7,813)    (7,813)     (15,132)    (15,132)
                                   -------------------------------------------------------------------------------------------------
  Total stockholders' equity           32,813      32,979         (171)       (240)   (24,301)   (25,777)      57,285      58,996
                                   -------------------------------------------------------------------------------------------------
    Total liabilities and
      stockholders' equity           $346,013    $319,396     $   (602)   $   (706)  $200,984   $175,899     $145,631    $144,203
                                   =================================================================================================
</TABLE>

See accompanying notes to consolidating condensed financial statements.


                                        4
<PAGE>

                     AMERICAN BILTRITE INC. AND SUBSIDIARIES
          CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
                For the Three Months Ended June 30, 2004 and 2003
               (In thousands of dollars, except per share amounts)

<TABLE>
<CAPTION>
                                          ABI Consolidated          Eliminations           Congoleum          American Biltrite
                                          2004         2003        2004      2003       2004       2003       2004        2003
                                      --------------------------------------------------------------------------------------------

<S>                                     <C>          <C>           <C>       <C>      <C>        <C>         <C>        <C>
Net sales                               $112,510     $103,481      $133      $ 14     $62,951    $55,000     $49,426    $48,467

Cost of products sold                     79,272       75,914       (87)       38      46,065     42,740      33,294     33,136
Selling, general & administrative
  expenses                                27,601       27,931                          13,016     12,513      14,585     15,418
                                      --------------------------------------------------------------------------------------------
Income (loss) from operations              5,637         (364)      220       (24)      3,870       (253)      1,547        (87)

Other (income) expense
    Interest income                           (6)         (14)                             --         (9)         (6)        (5)
    Interest expense                       3,082        2,728                           2,314      2,249         768        479
    Other (income) expense                  (175)      (1,127)      151        24        (421)      (507)         95       (644)
                                      --------------------------------------------------------------------------------------------
                                           2,901        1,587       151        24       1,893      1,733         857       (170)
                                      --------------------------------------------------------------------------------------------
Income (loss) before taxes and
  other items                              2,736       (1,951)       69       (48)      1,977     (1,986)        690         83

Provision (credit) for income taxes          850           25                             616         --         234         25
Noncontrolling interests                     (59)         (13)                                                   (59)       (13)
                                      --------------------------------------------------------------------------------------------
  Income (loss) from continuing
    operations                             1,827       (1,989)       69       (48)      1,361     (1,986)        397         45
Discontinued operation                      (110)      (9,897)                                                  (110)    (9,897)
                                      --------------------------------------------------------------------------------------------

Net income (loss)                       $  1,717     $(11,886)     $ 69      $(48)    $ 1,361    $(1,986)       $287    $(9,852)
                                      ============================================================================================

Income (loss) per common share
  from continuing operations,
  basic and diluted                     $   0.53     $  (0.57)
Discontinued operation                     (0.03)       (2.88)
                                      ------------------------
  Net income (loss) per common
    share, basic and diluted            $   0.50     $  (3.45)
                                      ========================
</TABLE>

See accompanying notes to consolidating condensed financial statements.


                                       5
<PAGE>

                     AMERICAN BILTRITE INC. AND SUBSIDIARIES
          CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
                 For the Six Months Ended June 30, 2004 and 2003
               (In thousands of dollars, except per share amounts)

<TABLE>
<CAPTION>
                                          ABI Consolidated          Eliminations           Congoleum          American Biltrite
                                          2004         2003        2004      2003       2004       2003       2004        2003
                                      --------------------------------------------------------------------------------------------
<S>                                     <C>          <C>           <C>       <C>      <C>        <C>         <C>        <C>
Net sales                               $211,925     $205,446      $  90     $ 18     $114,951   $108,581     $96,884   $ 96,847

Cost of products sold                    150,578      149,153       (138)      23       84,514     83,654      66,202     65,476
Selling, general & administrative
  expenses                                55,538       56,650                           25,001     25,716      30,537     30,934
                                      --------------------------------------------------------------------------------------------
Income (loss) from operations              5,809         (357)       228       (5)       5,436       (789)        145        437

Other (income) expense
    Interest income                          (63)        (150)                              --        (48)        (63)      (102)
    Interest expense                       6,100        5,551                            4,559      4,484       1,541      1,067
    Other (income) expense                  (268)      (1,634)       159       43         (665)      (650)        238     (1,027)
                                      ---------------------------------------------------------------------------------------------
                                           5,769        3,767        159       43        3,894      3,786       1,716        (62)
                                      ---------------------------------------------------------------------------------------------
Income (loss) before taxes and
  other items                                 40       (4,124)        69      (48)       1,542     (4,575)     (1,571)       499

Provision (credit) for income taxes           53          181                              616         --        (563)       181
Noncontrolling interests                     (23)         (90)                                                    (23)       (90)
                                      ---------------------------------------------------------------------------------------------
  Income (loss) from continuing
    operations                               (36)      (4,395)        69      (48)         926     (4,575)     (1,031)       228
Discontinued operation                      (272)     (10,616)                                                   (272)   (10,616)
                                      ---------------------------------------------------------------------------------------------

Net income (loss)                       $   (308)    $(15,011)     $  69     $(48)    $    926  $  (4,575)   $ (1,303)  $(10,388)
                                      =============================================================================================

Loss per common share from
  continuing operations,
  basic and diluted                     $  (0.01)    $  (1.28)
Discontinued operation                     (0.08)       (3.08)
                                      -------------------------
  Net loss per common share,
    basic and diluted                   $  (0.09)    $  (4.36)
                                      =========================
</TABLE>

See accompanying notes to consolidating condensed financial statements.


                                       6
<PAGE>

                     AMERICAN BILTRITE INC. AND SUBSIDIARIES
          CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
                 For the Six Months Ended June 30, 2004 and 2003
                            (In thousands of dollars)

<TABLE>
<CAPTION>
                                                  ABI Consolidated        Eliminations           Congoleum       American Biltrite
                                                  2004       2003        2004      2003       2004      2003      2004       2003
                                                ------------------------------------------------------------------------------------
<S>                                             <C>        <C>           <C>       <C>    <C>       <C>         <C>       <C>
Operating activities
  Net income (loss)                             $   (308)  $(15,011)     $ 69      $(48)  $    926  $ (4,575)   $(1,303)  $(10,388)
  Net loss from discontinued operation               272     10,616                                                 272     10,616
                                                ------------------------------------------------------------------------------------
  Income (loss) from continuing operations           (36)    (4,395)       69       (48)       926    (4,575)    (1,031)       228
  Adjustments to reconcile net income (loss)
    to net cash provided (used) by operating
    activities:
    Depreciation and amortization                  8,847      8,975                          5,714     5,828      3,133      3,147
    Deferred income taxes                            551         --                            551        --
    Change in operating assets and
    liabilities:
      Accounts and notes receivable              (13,412)    (2,438)       58       586    (10,644)   (1,196)    (2,710)    (1,828)
      Inventories                                 (3,486)    (1,325)      (69)       48      1,804    (3,135)    (5,221)     1,762
      Prepaid expenses and other assets            4,462      4,200                          2,692     2,897      1,770      1,303
      Accounts payable and accrued expenses       22,684    (10,309)      (58)     (586)    20,570    (8,851)     2,056       (872)
      Asbestos-related expenses                   (1,385)    (7,097)                        (1,385)   (7,097)
      Noncontrolling interests                      (192)      (260)                                               (192)      (260)
      Other                                         (921)      (274)                          (336)     (480)      (585)       206
                                                ------------------------------------------------------------------------------------
    Net cash provided (used) by operating
      activities                                  17,112    (12,923)       --        --     19,892   (16,609)    (2,780)     3,686
Investing activities
  Investments in property, plant and
    equipment                                     (2,539)    (4,085)                        (1,355)   (2,469)    (1,184)    (1,616)
  Proceeds from sale of property, plant
    and equipment                                     30         --                             30        --
                                                ------------------------------------------------------------------------------------
    Net cash used by investing activities         (2,509)    (4,085)       --        --     (1,325)   (2,469)    (1,184)    (1,616)
Financing activities
  Net short-term borrowings                        8,067     16,824                          5,030    14,859      3,037      1,965
  Payments on long-term debt                        (647)      (121)                                               (647)      (121)
  Net change in restricted cash                   (2,091)    (2,869)                        (2,091)   (2,869)
  Dividends paid                                      --       (645)                                                          (645)
                                                ------------------------------------------------------------------------------------
    Net cash provided by financing
      activities                                   5,329     13,189        --        --      2,939    11,990      2,390      1,199
Effect of foreign exchange rate
  changes on cash                                    234     (2,082)                                                234     (2,082)
                                                ------------------------------------------------------------------------------------
  Net cash provided (used) by continuing
    operations                                    20,166     (5,901)       --        --     21,506    (7,088)    (1,340)     1,187
  Net cash used by discontinued operations          (293)    (3,430)                                               (293)    (3,430)
Cash and cash equivalents at beginning of
  period                                           3,959     20,160                          2,169    18,277      1,790      1,883
                                                ------------------------------------------------------------------------------------

    Cash and cash equivalents at end
      of period                                 $ 23,832   $ 10,829    $   --    $   --   $ 23,675   $11,189    $   157   $   (360)
                                                ====================================================================================
</TABLE>

See accompanying notes to consolidating condensed financial statements.


                                       7
<PAGE>

                     AMERICAN BILTRITE INC. AND SUBSIDIARIES
                   NOTES TO UNAUDITED CONSOLIDATING CONDENSED
                              FINANCIAL STATEMENTS
                                  June 30, 2004
                                   (Unaudited)

Note A - Basis of Presentation

The accompanying unaudited consolidating condensed financial statements which
include the accounts of American Biltrite Inc. and its wholly owned subsidiaries
(and including, unless the context otherwise indicates, K&M Associates, L.P.,
referred to herein as "ABI", "American Biltrite" or the "Company") as well as
entities over which it has voting control have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial information, the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments and provisions for
discontinued operations) considered necessary for a fair presentation have been
included. Operating results for the three and six month periods ended June 30,
2004 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2004. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2003.

Historical financial results have been restated to reflect the classification of
American Biltrite Inc.'s wholly owned subsidiary, Janus Flooring Corporation
("Janus"), as a discontinued operation in accordance with the Financial
Accounting Standards Board's ("FASB") Statement of Financial Accounting
Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of
Long-lived Assets" (See Note H).

As discussed more fully below and elsewhere in these footnotes, the Company's
majority owned subsidiary Congoleum Corporation ("Congoleum") filed for
bankruptcy protection on December 31, 2003. The accompanying consolidating
condensed financial statements include the results for Congoleum for all periods
presented. ABI continues to own a majority of the voting stock of Congoleum. As
a result, the Company expects to continue to control Congoleum while it is in
bankruptcy. Additionally, Congoleum's proposed reorganization plan, which
remains subject to Bankruptcy Court approval, anticipates no changes in the
equity ownership of Congoleum upon emergence from bankruptcy. There can be no
assurance that Congoleum's proposed reorganization plan will not be modified.
The Company understands that Congoleum believes that its pre-packaged bankruptcy
proceeding could be concluded in a relatively short period of time, possibly by
December 31, 2004. Accordingly, the Company has elected to continue to
consolidate the financial statements of Congoleum in its consolidated results
because it believes that is the appropriate presentation given its anticipated
continuing control of Congoleum. However, the accompanying financial statements
also present the details of consolidation to separately show the financial
condition, operating results and cash flows of ABI (excluding Congoleum and its
wholly owned subsidiaries) and Congoleum and its wholly owned subsidiaries,
which may be more meaningful for certain analyses.


                                       8
<PAGE>

Note A - Basis of Presentation (continued)

The financial statements of Congoleum have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. Accordingly, the financial
statements do not include any adjustments that might be necessary should
Congoleum be unable to continue as a going concern. As described in Note J,
there is substantial doubt about Congoleum's ability to continue as a going
concern unless it obtains relief from its substantial asbestos liabilities
through a successful reorganization under Chapter 11 of the United States
Bankruptcy Code.

The American Institute of Certified Public Accountants ("AICPA") Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code" ("SOP 90-7"), provides financial reporting guidance for
entities that are reorganizing under the United States Bankruptcy Code ("the
Bankruptcy Code"). Congoleum has implemented this guidance in its consolidated
financial statements for periods commencing after December 31, 2003. Pursuant to
SOP 90-7, companies are required to segregate pre-petition liabilities that are
subject to compromise and report them separately on the balance sheet.
Liabilities that may be affected by a plan of reorganization are recorded at the
amount of the expected allowed claims, even if they may be settled for lesser
amounts. Liabilities for asbestos claims are recorded based upon the minimum
amount Congoleum expects to spend for its contribution to, and costs to settle
asbestos liabilities through, a plan trust established under Section 524(g) of
the Bankruptcy Code. Obligations arising post-petition, and pre-petition
obligations that are secured or that the Bankruptcy Court has authorized
Congoleum to pay, are not classified as liabilities subject to compromise. Other
pre-petition claims (which would be classified as liabilities subject to
compromise) may arise due to the rejection by Congoleum of executory contracts
or unexpired leases pursuant to the Bankruptcy Code, or as a result of the
allowance by the Bankruptcy Court of contingent or disputed claims.

The consolidated balance sheet at December 31, 2003 has been derived from the
audited financial statements as of that date but does not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements.

Certain amounts appearing in the prior period's consolidated condensed financial
statements have been reclassified to conform to the current period's
presentations.

Note B - Recent Accounting Principles

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,"
which addresses consolidation by business enterprises of variable interest
entities ("VIEs"). In December 2003, the FASB completed deliberations of
proposed modifications to FIN 46 ("Revised Interpretations") resulting in
multiple effective dates based on the nature as well as the creation date of the
VIE. The adoption of FIN 46 and the Revised Interpretation had no impact on the
Company's consolidated financial statements.


                                       9
<PAGE>

Note B - Recent Accounting Principles (continued)

The Company discloses stock-based compensation information in accordance with
FASB issued Statement No. 148 ("SFAS 148"), "Accounting for Stock-Based
Compensation--Transition and Disclosure -an Amendment of FASB Statement No.
123," and Statement no. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation." SFAS 148 provides additional transition guidance for companies
that elect to voluntarily adopt the provisions of SFAS 123. SFAS 148 does not
change the provision of SFAS 123 that permit companies to continue to apply the
intrinsic value method of Accounting Principles Board Opinion No. 25 ("APB 25"),
"Accounting for Stock Issued to Employees." The Company has elected to continue
to account for its stock-based plans under APB 25, as well as to provide
disclosure of stock-based compensation as outlined in SFAS 123 as amended by
SFAS 148.

A reconciliation of net income (loss), as reported, to pro forma net income
(loss) including compensation expense for the Company's stock-based plans as
calculated based on the fair value at the grant dates for awards made under
these plans in accordance with the provisions of SFAS 123 as amended by SFAS
148, as well as a comparison of as reported and pro forma basic and diluted EPS
follows (in thousands, except per share data):

                                       Three Months Ended     Six Months Ended
                                            June 30,             June 30,
                                        2004       2003       2004       2003
                                      --------   --------   --------   --------
Net income (loss):
  As reported                         $  1,717   $(11,886)  $   (308)  $(15,011)
  Deduct: Total stock-based
    employee compensation expense
    determined under fair value
    based method for all awards,
    net of related tax effects,
    pro forma                              (17)        (3)       (20)        (6)
                                      --------   --------   --------   --------

  As adjusted                         $  1,700   $(11,889)  $   (328)  $(15,017)
                                      ========   ========   ========   ========

Net income (loss) per share:
  As reported                         $   0.50   $  (3.45)  $  (0.09)  $  (4.36)

  Pro forma compensation expense         (0.01)        --      (0.01)        --
                                      --------   --------   --------   --------

                                      $   0.49   $  (3.45)  $  (0.10)  $  (4.36)
                                      ========   ========   ========   ========


                                       10
<PAGE>

Note C - Inventories

Inventories at June 30, 2004 and December 31, 2003 consisted of the following
(in thousands):

                                      June 30,          December 31,
                                        2004               2003
                                      --------          ------------

      Finished goods                   $63,561            $62,072
      Work-in-process                   10,709              7,953
      Raw materials and supplies        10,383             11,455
                                       -------            -------

                                       $84,653            $81,480
                                       =======            =======

Note D - Accrued Expenses

Accrued Expenses at June 30, 2004 and December 31, 2003 consisted of the
following (in thousands):

                                           June 30,        December 31,
                                             2004             2003(1)
                                           --------        ------------

      Accrued advertising and sales
        promotions                         $21,937          $19,071
      Employee compensation and
        related benefits                     8,938            7,018
      Warranty                               2,800            2,700
      Interest                                 201            3,879
      Environmental matters                    623            1,559
      Royalties                                818            1,205
      Other                                  8,618            6,246
                                           -------          -------

                                           $43,935          $41,678
                                           =======          =======

(1)   Certain amounts included in the above line-item balances at December 31,
      2003 have been reclassified as liabilities subject to compromise at June
      30, 2004. See Note F.


                                       11
<PAGE>

Note E - Other Liabilities

Other Liabilities at June 30, 2004 and December 31, 2003 consisted of the
following (in thousands):

                                           June 30,        December 31,
                                             2004             2003(1)
                                           --------        ------------

      Pension benefits                      $2,247            $26,278
      Environmental remediation and
        product related liabilities          3,854              9,301
      Other postretirement benefits            483              8,517
      Deferred income taxes                  9,856             10,355
      Accrued workers' compensation
        claims                                  --              5,130
      Accrued compensation                      --                370
      Other                                    952              2,175
                                           -------            -------

                                           $17,392            $62,126
                                           =======            =======

(1)   Certain amounts included in the above line-item balances at December 31,
      2003 have been reclassified as liabilities subject to compromise at June
      30, 2004. See Note F.

Note F - Liabilities Subject to Compromise

As a result of Congoleum's Chapter 11 filing (see Notes A and J to the Unaudited
Consolidating Condensed Financial Statements), pursuant to SOP 90-7, Congoleum
is required to segregate pre-petition liabilities that are subject to compromise
and report them separately on the consolidated balance sheet. Liabilities that
may be affected by a plan of reorganization are recorded at the amount of the
expected allowed claims, even if they may be settled for lesser amounts.
Substantially all of Congoleum's pre-petition debt is recorded at face value and
is classified within liabilities subject to compromise. In addition, Congoleum's
accrued interest expense on its 8 5/8 % Senior Notes Due 2008 is also recorded
in liabilities subject to compromise. See Notes A and J to the Unaudited
Consolidating Condensed Financial Statements for further discussion of
Congoleum's asbestos liability.


                                       12
<PAGE>

Note F - Liabilities Subject to Compromise (continued)

Liabilities subject to compromise at June 30, 2004 are as follows (in
thousands):

Debt (at face value)                                               $100,000
Pre-petition other payables and accrued interest                      9,587
Pension liability                                                    23,259
Other post-retirement benefit obligation                              8,309
Pre-petition other liabilities                                       11,782
                                                                   --------
                                                                    152,937
Elimination--Payable to American Biltrite                              (186)
                                                                   --------

        Total liabilities subject to compromise                    $152,751
                                                                   ========

Additional pre-petition claims (which would be classified as liabilities subject
to compromise) may arise due to the rejection by Congoleum of executory
contracts or unexpired leases, or as a result of the allowance by the Bankruptcy
Court of contingent or disputed claims.

Note G - Pension Plans

The Company and Congoleum sponsor several noncontributory defined benefit
pension plans covering most of their employees. Benefits under the plans are
based on years of service and employee compensation. Amounts funded annually by
the Company and Congoleum are actuarially determined using the projected unit
credit and unit credit methods and are equal to or exceed the minimum required
by government regulations. Congoleum also maintains health and life insurance
programs for retirees (reflected in the table below under the columns entitled
"Other Benefits").


                                       13
<PAGE>

Note G - Pension Plans (continued)

The following summarizes the components of the net periodic benefit cost for the
Company's and Congoleum's pension and other benefit plans during the three and
six months ended June 30, 2004 and 2003 (in thousands):

                                       Three Months Ended    Three Months Ended
                                          June 30, 2004         June 30, 2003
                                      -------------------   -------------------
                                                  Other                 Other
                                      Pension    Benefits   Pension    Benefits
                                      -------    --------   -------    --------
Components of Net Periodic
  Benefit Cost:
  Service cost                        $   503     $  50     $   463     $  47
  Interest cost                         1,372       140       1,360       137
  Expected return on plan assets       (1,204)       --      (1,012)       --
  Recognized net actuarial loss           (62)       11         (62)        9
  Amortization of transition
    obligation                            (34)       --         (42)       --
  Amortization of prior service
    cost                                  349      (116)        399      (116)
                                      -------     -----     -------     -----

Net periodic benefit cost             $   924     $  85     $ 1,106     $  77
                                      =======     =====     =======     =====

                                       Six Months Ended      Six Months Ended
                                         June 30, 2004         June 30, 2003
                                      -------------------   -------------------
                                                  Other                 Other
                                      Pension    Benefits   Pension    Benefits
                                      -------    --------   -------    --------
Components of Net Periodic
  Benefit Cost:
  Service cost                        $ 1,057     $ 100     $   919     $  94
  Interest cost                         2,804       280       2,709       274
  Expected return on plan assets       (2,425)       --      (2,012)       --
  Recognized net actuarial loss          (123)       22        (124)       18
  Amortization of transition
    obligation                            (69)       --         (82)       --
  Amortization of prior service
    cost                                  749      (232)        798      (232)
                                      -------     -----     -------     -----

Net periodic benefit cost             $ 1,993     $ 170     $ 2,208     $ 154
                                      =======     =====     =======     =====


                                       14
<PAGE>

Note G - Pension Plans (continued)

The weighted average assumptions used to determine net periodic benefit cost
were as follows:

                                    Six Months Ended         Six Months Ended
                                      June 30, 2004            June 30, 2003
                                 ----------------------   ----------------------
                                                 Other                   Other
                                   Pension     Benefits     Pension     Benefits
                                 ----------------------   ----------------------

Discount rate                    6.25% - 6.75%   6.75%    6.25% - 6.75%   6.75%
Expected long-term return on
  plan assets                    7.00% - 7.50%    --      7.00% - 7.50%     --

Rate of compensation increase    4.00% - 5.50%    --      4.00% - 5.50%     --

Note H - Discontinued Operation

During 2003, the Company decided to discontinue the operations of its Janus
subsidiary, a manufacturer of pre-finished hardwood flooring, and sell the
related assets. Results of Janus, including charges resulting from the shutdown,
are being reported as a discontinued operation.

Note I - Commitments and Contingencies

In the ordinary course of their businesses, the Company and Congoleum become
involved in lawsuits, administrative proceedings, product liability and other
matters, as more fully described below. In some of these proceedings, plaintiffs
may seek to recover large and sometimes unspecified amounts, and the matters may
remain unresolved for several years.

The Company and Congoleum record a liability for environmental remediation
claims when it becomes probable that the Company or Congoleum, as applicable,
will incur costs relating to a clean-up program or will have to make claim
payments and the costs or payments can be reasonably estimated. As assessments
are revised and clean-up programs progress, these liabilities are adjusted to
reflect such revisions and progress.

Liabilities of Congoleum comprise the substantial majority of the environmental
and other liabilities reported on the Company's consolidated balance sheet. Due
to the relative magnitude and wide range of estimates of these liabilities and
the fact that recourse related to these liabilities is generally limited to
Congoleum, these matters are discussed separately following matters for which
ABI has actual or potential liability. However, since ABI includes Congoleum in
ABI's consolidating financial statements, to the extent that Congoleum incurs a
liability or expense, it will be reflected in ABI's consolidating financial
statements.


                                       15
<PAGE>

Note I - Commitments and Contingencies (continued)

American Biltrite Inc.

ABI is a co-defendant with many other manufacturers and distributors of asbestos
containing products in approximately 1,889 pending claims involving
approximately 3,382 individuals as of June 30, 2004. The claimants allege
personal injury or death from exposure to asbestos or asbestos-containing
products. Activity related to ABI's asbestos claims is as follows:

                                          Six Months        Year Ended
                                             Ended         December 31,
                                         June 30, 2004         2003
                                         -------------     ------------

      Beginning claims                       1,954               884
      New claims                               267             1,367
      Settlements                              (11)              (14)
      Dismissals                              (321)             (283)
                                           -------            ------

      Ending claims                          1,889             1,954
                                           =======            ======

The total indemnity costs incurred to settle claims during the six months ended
June 30, 2004 and twelve months ended December 31, 2003 were $874 thousand and
$270 thousand, respectively, all of which were paid by ABI's insurance carriers
pursuant to ABI's relevant insurance policies, as were the related defense
costs. The average indemnity cost per resolved claim was approximately $2.6
thousand for the six months ended June 30, 2004 and $900 for the year ended
December 31, 2003.

In general, governmental authorities have determined that asbestos-containing
sheet and tile products are nonfriable (i.e., cannot be crumbled by hand
pressure) because the asbestos was encapsulated in the products during the
manufacturing process. Thus, governmental authorities have concluded that these
products do not pose a health risk when they are properly maintained in place or
properly removed so that they remain nonfriable. The Company has issued warnings
not to remove asbestos-containing flooring by sanding or other methods that may
cause the product to become friable. The Company estimates its liability to
defend and resolve current and reasonably anticipated future asbestos-related
claims (not including claims asserted against Congoleum), based upon a strategy
to actively defend or seek settlement for those claims in the normal course of
business. Factors such as recent and historical settlement and trial results,
the incidence of past and recent claims, the number of cases pending against it
and asbestos litigation developments that may impact the exposure of the Company
were considered in performing these estimates. In 2003, the Company engaged an
outside actuary to assist it in developing estimates of the Company's liability
for resolving asbestos claims at December 31, 2003. The actuary estimated the
range of liability for settlement of current claims pending and claims
anticipated to be filed through 2009 was $10.7 million to $16.0 million. The
Company believes no amount within this


                                       16
<PAGE>

Note I - Commitments and Contingencies (continued)

range is more likely than any other, and accordingly has recorded the minimum
liability estimate of $10.7 million in its consolidated financial statements.
The Company also believes that, based on this minimum liability estimate, the
corresponding amount of insurance probable of recovery is $10.7 million at
December 31, 2003 and June 30, 2004, which has been included in other assets.

Due to the numerous variables and uncertainties, including the effect of
Congoleum's pre-packaged Chapter 11 case and proposed plan of reorganization on
the Company's liabilities, the Company does not believe that reasonable
estimates can be developed of liabilities for asbestos-related claims against
the Company (not including claims asserted against Congoleum) beyond a five year
horizon. The Company will continue to evaluate its range of future exposure, and
the related insurance coverage available, and when appropriate, record future
adjustments to those estimates, which could be material.

The Company anticipates that resolution of its asbestos related liabilities
resulting from Congoleum's anticipated plan will be limited to liabilities
derivative of claims asserted against Congoleum as may be afforded under Section
524(g)(4) of the Bankruptcy Code.

ABI reported in its December 31, 2003 Annual Report on Form 10-K that it has
been named as a Potentially Responsible Party ("PRP") within the meaning of the
Federal Comprehensive Environmental Response Compensation and Liability Act, as
amended ("CERCLA"), with respect to four sites located in three separate states.
ABI also reported that it is potentially responsible for response and
remediation costs with respect to three state-supervised sites. There have been
no material developments relating to these sites during the six month period
ended June 30, 2004.

A lawsuit was brought by Olin Corporation ("Olin"), the present owner of a
former chemical plant site in Wilmington, Massachusetts (the "Olin Site"), which
alleged that ABI and three other named defendants were liable for a portion of
the site's soil and groundwater response and remediation costs at the site. A
wholly-owned subsidiary of ABI owned and operated the Wilmington plant from 1959
to 1964 and for approximately one month during 1964 American Biltrite Inc. held
title to the property directly.

In 2000, ABI and The Biltrite Corporation ("TBC") entered into a settlement
agreement with Olin that resolved all claims and counterclaims among the
parties. Under the terms of the agreement, ABI and TBC together paid Olin $4.1
million in settlement of their share of Olin's $18 million of alleged past
response costs incurred through December 31, 1998. ABI and TBC also agreed to
reimburse Olin for 21.7% of Olin's response costs incurred at the Olin Site
after January 1, 1999, plus pay an annual reimbursement of $100 thousand for
Olin's internal costs until the response is completed. Under an agreement
between ABI and TBC, TBC is liable for 37.5% of the costs that may be incurred
by ABI in connection with this lawsuit and 37.5% of the amounts due under the
settlement agreement with Olin.


                                       17
<PAGE>

Note I - Commitments and Contingencies (continued)

Additional expenditures, principally consisting of remediation and oversight
costs, will be required to remediate the Olin Site. As of June 30, 2004, ABI has
estimated Olin's total response costs will be in the range of $12.9 million to
$25.6 million. As of June 30, 2004, ABI has estimated its potential liability to
Olin net of expected recoveries from TBC to be in the range of $1.8 million to
$3.5 million excluding the annual reimbursement of $100 thousand for Olin's
internal costs and any recoveries from insurance.

The State of Maine Department of Environmental Protection has put the present
owner of a former ABI plant on notice to clean up a dumpsite where there is
exposed asbestos from sheet vinyl waste along with other hazardous substances.
ABI is reviewing the condition of the site and its potential liability for its
share of any clean-up costs. ABI believes, at this time, that the cost of site
investigation, remediation, maintenance and monitoring at the site will be
approximately $1 million. ABI has not yet entered a final cost sharing agreement
with the current owner. Under an agreement between ABI and TBC, TBC is liable
for 37.5% of those costs incurred by ABI at this site.

ABI has made demands against its insurance carriers to provide defense and
indemnity for ABI's liabilities at the CERCLA sites, the state supervised sites,
the Olin Site and the Maine Site. An agreement was executed by ABI and its
carriers regarding the payment of the defense costs for the Olin Site. ABI has
reached agreements with three of its insurance carriers whereby the carriers
have reimbursed the Company $1.9 million for past and current environmental
claims. One carrier has agreed to reimburse the Company for 2.5% of the
Company's liabilities regarding future environmental expenses related to the
Olin Site, $28 thousand of which was reimbursed through June 30, 2004 and which
reimbursement was shared 37.5% with TBC pursuant to the Company's agreement with
TBC. ABI and its insurance carriers continue to discuss ABI's remaining demands
for insurance coverage for these sites. As of June 30, 2004, the Company has
accrued $4.5 million for ABI's estimable and probable amounts for
environmental-related contingencies described above. Additionally, the Company
has recorded an asset related to insurance recoveries relating to those
contingencies, net of reimbursements to certain PRP's, for approximately $900
thousand.

In connection with the transfer of ABI's Trenton, NJ tile plant to Congoleum in
1993, the Company signed an administrative consent order whereby the Company has
provided a self-guarantee in the amount of $750 thousand to the New Jersey
Department of Environmental Protection to assure the funding for any
environmental remediation the state may require at that location. Pursuant to
the contribution in 1993 of the Company's former tile division to Congoleum,
Congoleum assumed liability for the cost of cleaning up the site. The Company
remains contingently liable in the event that Congoleum fails to perform or fund
any required remediation relating to this site.

The outcome of these matters could result in significant expenses incurred by,
or judgments assessed against, the Company, which could have a material adverse
effect on the financial position of the Company.


                                       18
<PAGE>

Note I - Commitments and Contingencies (continued)

Congoleum

Congoleum is a defendant in a large number of asbestos-related lawsuits and on
December 31, 2003, filed a pre-packaged plan of reorganization under Chapter 11
of the Bankruptcy Code. See Note J - "Congoleum Asbestos Liabilities and
Reorganization."

Congoleum is named, together with a large number (in most cases, hundreds) of
other companies, as a PRP in pending proceedings under CERCLA and similar state
laws. In addition, in four other instances, although not named as a PRP,
Congoleum has received a request for information. These pending proceedings in
which Congoleum is a named PRP currently relate to four disposal sites in New
Jersey, Pennsylvania, Maryland, and Connecticut in which recovery from
generators of hazardous substances is sought for the cost of cleaning up the
contaminated waste sites. Congoleum's ultimate liability in connection with
those other sites depends on many factors, including the volume of material
contributed to the site by Congoleum, the number of other PRP's and their
financial viability, the remediation methods and technology to be used and the
extent to which costs may be recoverable by Congoleum insurance policies.
However, under CERCLA, and certain other laws, as a PRP, Congoleum can be held
jointly and severally liable for all environmental costs associated with a site.

The most significant exposure to which Congoleum has been named a PRP relates to
a recycling facility site in Elkton, Maryland. The PRP group at this site is
made up of 81 companies, substantially all of which are large financially
solvent entities. Two removal actions were substantially complete as of December
31, 1998; however, the groundwater remediation phase has not begun and the
remedial investigation/feasibility study related to the groundwater remediation
has not been approved. The PRP group estimated that future costs of groundwater
remediation for this site, based on engineering and consultant studies
conducted, would be approximately $26 million. Congoleum's proportionate share,
based on waste disposed at the site, is estimated to be approximately 5.8%.

Congoleum also accrues remediation costs for certain facilities owned by
Congoleum on an undiscounted basis. Congoleum has entered into an administrative
consent order with the New Jersey Department of Environmental Protection and has
self-guaranteed certain remediation funding sources and financial
responsibilities. Estimated total clean-up costs, including capital outlays and
future maintenance costs for soil and groundwater remediation are primarily
based on engineering studies.

The outcome of these matters could result in significant expenses incurred by,
or judgments assessed against, Congoleum, which could have a material adverse
effect on the financial position of Congoleum.


                                       19
<PAGE>

Note J - Congoleum Asbestos Liabilities and Reorganization

On December 31, 2003, Congoleum and two of its subsidiaries each filed their
respective voluntary petitions commencing cases for reorganization relief under
Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for
the District of New Jersey. These Chapter 11 cases are being jointly
administered as Case No. 03-51524 (KCF), styled In re Congoleum Corporation, et
al., and were commenced in order to resolve Congoleum's asbestos-related
liabilities and any future asbestos-related liability that might be asserted
against Congoleum. During 2003, Congoleum obtained the asbestos personal injury
claimant votes necessary for approval of a proposed pre-packaged Chapter 11 plan
of reorganization, and, in January 2004, filed its pre-packaged plan of
reorganization and disclosure statement with the Bankruptcy Court. The
Bankruptcy Court has approved the disclosure statement and a confirmation
hearing is scheduled for October 5, 2004. There can be no assurance that the
hearing will not be rescheduled to a later date or that the proposed plan will
not be modified. Congoleum is also involved in litigation with certain insurance
carriers related to disputed insurance coverage for asbestos related
liabilities, and certain insurance carriers have filed various objections to
Congoleum's pre-packaged plan of reorganization and related matters.

The pre-packaged plan, if confirmed, would leave most of Congoleum's
non-asbestos creditors unimpaired and would resolve all pending and future
asbestos claims against Congoleum. The plan of reorganization would provide for,
among other things, an assignment of, or grant a security interest in, certain
rights in, and proceeds of, Congoleum's applicable insurance to a plan trust
established under Section 524(g) of the Bankruptcy Code that would fund
distributions to pending and future asbestos claimants and provide for the
issuance of an injunction that would protect Congoleum from all future
asbestos-related litigation and liabilities by channeling all current and future
asbestos claims to the plan trust. Congoleum's general unsecured creditors would
be unimpaired under the plan.

As part of Congoleum's plan of reorganization, ABI expects that Congoleum's
indemnification obligations to ABI with respect to current and future asbestos
personal injury claims related to ABI's former tile division operations that it
contributed to Congoleum in 1993 not covered by ABI insurance will be channeled
to the plan trust established under Section 524(g) of the Bankruptcy Code. ABI
and Congoleum expect to contribute, among other things, to the plan trust that
would be established pursuant to Congoleum's Chapter 11 reorganization $250
thousand in cash from ABI and a note from Congoleum in an initial aggregate
principal amount of $2.7 million with payment of such note contribution secured
by a pledge by ABI of both the common stock of Congoleum that it owns as well as
certain of its rights to receive certain indemnity payments from Congoleum. ABI
does not expect that Congoleum's note contribution to the plan trust would have
a material adverse effect on ABI's liquidity or capital resources. The principal
amount of the note that Congoleum will contribute to the trust under the
proposed plan is expected to be subject to future increase in an amount equal to
the amount by which 51% of


                                       20
<PAGE>

Note J - Congoleum Asbestos Liabilities and Reorganization (continued)

the equity value of Congoleum as of the last trading day of the 90 consecutive
trading day period commencing on the first anniversary of the effective date of
Congoleum's confirmed Chapter 11 plan of reorganization exceeds $2.7 million.
This adjustment amount could result in the principal amount of the note
increasing materially. The adjusted principal amount of the note would be
effective as of the measurement date of the adjustment. The proposed
pre-packaged plan also provides for a possible additional contribution by ABI to
the plan trust in the event ABI sells its interest in Congoleum before the third
anniversary of the date as of which the principal amount of the note contributed
by Congoleum to the plan trust is measured for purposes of determining whether
the principal amount is to be increased. The expected amount of any additional
contribution by ABI would be equal to 50% of any amount by which 51% of the
equity value of Congoleum implied by ABI's sale of its interest in Congoleum
exceeds the aggregate principal amount of the note contributed by Congoleum to
the plan trust outstanding as of the measurement date for determining whether
the principal amount of that note would be increased and after taking into
account any such increase in the principal amount.

While Congoleum believes its plan is feasible and in the best interest of all of
Congoleum's constituents, there are sufficient risks and uncertainties such that
no assurances of the outcome of Congoleum's pre-packaged Chapter 11 case can be
given. Congoleum expects that its remaining costs to confirm and effect its
proposed pre-packaged plan, consisting principally of legal and advisory fees
and contributions to the plan trust to be established upon confirmation of the
plan will be approximately $8.4 million at a minimum.

Note K - Comprehensive Income (Loss)

The following table presents total comprehensive income (loss) for the three and
six months ended June 30, 2004 and 2003 (in thousands):

<TABLE>
<CAPTION>
                                              Three Months Ended        Six Months Ended
                                                   June 30,                 June 30,
                                              2004         2003         2004         2003
                                            --------     --------     --------     --------

<S>                                         <C>          <C>          <C>          <C>
Net income (loss)                           $  1,717     $(11,886)    $   (308)    $(15,011)
Foreign currency translation adjustments        (155)       1,432         (408)       2,423
Minimum pension liability adjustment             551           --          551           --
                                            --------     --------     --------     --------

Total comprehensive income (loss)           $  2,113     $(10,454)    $   (165)    $(12,588)
                                            ========     ========     ========     ========
</TABLE>


                                       21
<PAGE>

Note L - Earnings (Loss) Per Share

Earnings (loss) per share is calculated by dividing net income (loss) by the
weighted average number of shares of common stock outstanding.

Note M - Industry Segments

Description of Products and Services

The Company has four reportable segments: flooring products, tape products,
jewelry and a Canadian division that produces flooring and rubber products. The
flooring products segment consists of Congoleum, a manufacturer of resilient
floor coverings, which are sold primarily through floor covering distributors to
retailers and contractors for commercial and residential use. The tape products
segment manufactures paper, film, HVAC, electrical, shoe and other tape products
for use in industrial and automotive markets in two production facilities in the
United States, and in finishing and sales facilities in Belgium and Singapore.
The jewelry segment consists of the Company's majority-owned subsidiary K&M
Associates L.P., a national costume jewelry supplier to mass merchandisers and
department stores. The Company's Canadian division produces flooring, rubber,
and other industrial products.

<TABLE>
<CAPTION>
                                         Three Months Ended           Six Months Ended
                                               June 30,                   June 30,
                                         2004          2003          2004          2003
                                      ---------     ---------     ---------     ---------
<S>                                   <C>           <C>           <C>           <C>
Net Sales
Net sales to external customers:
    Flooring products                 $  63,084     $  55,014     $ 115,041     $ 108,599
    Tape products                        23,335        20,856        44,353        40,225
    Jewelry                              15,119        16,998        30,873        37,272
    Canadian division                    10,972        10,613        21,658        19,350
                                      ---------     ---------     ---------     ---------
      Total net sales to external
        customers                       112,510       103,481       211,925       205,446
Intersegment net sales:
    Flooring products                        18            13            69            33
    Tape products                            29            39            46            72
    Jewelry                                  --            --            --            --
    Canadian division                     1,713         1,881         2,900         3,863
                                      ---------     ---------     ---------     ---------
      Total intersegment net sales
                                          1,760         1,933         3,015         3,968
Reconciling items
Intersegment net sales                   (1,760)       (1,933)       (3,015)       (3,968)
                                      ---------     ---------     ---------     ---------

Total consolidated net sales          $ 112,510     $ 103,481     $ 211,925     $ 205,446
                                      =========     =========     =========     =========
</TABLE>


                                       22
<PAGE>

Note M - Industry Segments (continued)

<TABLE>
<CAPTION>
                                       Three Months Ended         Six Months Ended
                                            June 30,                  June 30,
                                       2004         2003         2004         2003
                                     --------     --------     --------     --------
<S>                                  <C>          <C>          <C>          <C>
Segment profit (loss)
    Flooring products                $  1,977     $ (1,986)    $  1,542     $ (4,575)
    Tape products                         111          235          (87)        (200)
    Jewelry                             1,518         (107)         804        1,580
    Canadian division                    (692)          40       (1,143)        (134)
                                     --------     --------     --------     --------
      Total segment profit (loss)       2,914       (1,818)       1,116       (3,329)
                                     --------     --------     --------     --------

Reconciling items
    Corporate items                      (164)         (58)      (1,168)        (748)
    Intercompany profit (loss)            (14)         (75)          92          (47)
                                     --------     --------     --------     --------
      Total consolidated income
         (loss) before income
         taxes and other items       $  2,736     $ (1,951)    $     40     $ (4,124)
                                     ========     ========     ========     ========
</TABLE>

                                                    June 30,       December 31,
                                                      2004             2003
                                                   ---------       ------------
Segment assets
    Flooring products                              $ 200,984        $ 175,899
    Tape products                                     56,913           54,415
    Jewelry                                           37,011           37,272
    Canadian division                                 39,429           35,642
                                                   ---------        ---------
      Total segment assets                           334,337          303,228

Reconciling items
    Assets of discontinued operation                   2,656            2,902
    Corporate items                                   23,890           23,257
    Intersegment accounts receivable                 (14,507)          (9,575)
    Intersegment profit in inventory                    (177)            (248)
    Intersegment other asset                            (186)            (186)
                                                   ---------        ---------

      Total consolidated assets                    $ 346,013        $ 319,396
                                                   =========        =========


                                       23
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Some of the information presented in or incorporated by reference in this report
constitutes "forward-looking statements," within the meaning of the Private
Securities Litigation Reform Act of 1995, that involve risks, uncertainties and
assumptions. These forward-looking statements are based on the Company's (and
its majority-owned subsidiary Congoleum's) expectations, as of the date of this
report, of future events and the Company undertakes no obligation to update any
of these forward-looking statements. Although the Company believes that these
expectations are based on reasonable assumptions, within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from its expectations. Readers are cautioned
not to place undue reliance on any forward-looking statements. Factors that
could cause or contribute to the Company's actual results differing from its
expectations include those factors discussed elsewhere in this report, including
in the section of this report entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Risk Factors That May Affect
Future Results," in the Company's Annual Report on Form 10-K for the year ended
December 31, 2003 and in the Company's other filings with the Securities and
Exchange Commission.

On December 31, 2003, the Company's subsidiary Congoleum and two of Congoleum's
subsidiaries each filed their respective voluntary petitions commencing cases
for reorganization relief under Chapter 11 of the Bankruptcy Code in the United
States Bankruptcy Court for the District of New Jersey. These Chapter 11 cases
are being jointly administered as Case No. 03-51524 (KCF), styled In re
Congoleum Corporation, et al., to resolve claims that have been or might in the
future be asserted against Congoleum related to the use of asbestos in its
products decades ago. During 2003, Congoleum obtained the asbestos personal
injury claimant votes necessary for approval of a proposed pre-packaged Chapter
11 plan of reorganization, and in January 2004, filed its pre-packaged plan of
reorganization and disclosure statement with the Bankruptcy Court. There can be
no assurance that Congoleum's proposed reorganization plan will not be modified.
Based on its pre-packaged bankruptcy strategy, which included Congoleum settling
certain asbestos claims prior to commencing its Chapter 11 case, Congoleum has
made provision in its financial statements for the minimum amount of the range
of estimates for its contribution and costs to effect its plan to settle
asbestos liabilities through a plan trust established under Section 524(g) of
the Bankruptcy Code. Congoleum recorded charges of $17.3 million in the fourth
quarter of 2002, and an additional charge of $3.7 million in the fourth quarter
of 2003, to increase its recorded liability to the estimated minimum cost to
complete its plan of reorganization. Actual amounts that will be contributed to
the plan trust and costs for obtaining confirmation of and implementing the plan
of reorganization could be materially higher, which could have a material effect
on ABI's and Congoleum's consolidated results of operations as well as
Congoleum's financial position.

During 2003, the Company decided to discontinue the operations of its Janus
Flooring Corporation subsidiary ("Janus"), a manufacturer of pre-finished
hardwood flooring, and sell the related assets. Results of Janus, including
charges resulting from the shutdown, are being reported as a discontinued
operation.


                                       24
<PAGE>

Due to Congoleum's Chapter 11 proceedings and separate capital structure, the
Company believes that presenting ABI and its non-debtor subsidiaries separately
from Congoleum is the most meaningful way to discuss and analyze its financial
condition and results of operations.

Application of Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities as of the date of
our financial statements and the reported amounts of revenues and expenses
during the reporting period. Our actual results may differ from these estimates
under different assumptions or conditions.

Critical accounting policies are defined as those that reflect significant
judgments and uncertainties, and could potentially result in materially
different results under different assumptions and conditions. We believe that
our most critical accounting policies, upon which our financial condition
depends and which involve the most complex or subjective decisions or
assessments, are those described in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2003, filed with the Securities and Exchange
Commission. There have been no material changes of what we consider to be our
critical accounting policies or the disclosure we provided regarding those
policies in that Form 10-K.

Results of Operations

ABI & Non-Debtor Subsidiaries

Net sales for the second quarter of 2004 were $49.4 million compared to $48.5
million in the second quarter of 2004, an increase of $0.9 million or 1.9%. This
increase was due to higher revenues realized from sales of paper, film, and HVAC
products at the Tape division and improved revenues from sales of industrial
rubber products at the Canadian division, offset by lower jewelry revenues
generated at K&M. Tape and Canadian division revenues increased principally as a
result of the strengthening economy, while the decline in jewelry revenues was
primarily due to the timing of back-to-school program shipments, which, in 2003,
took place in the second quarter but, in 2004, will occur in the third quarter,
and reduced service revenues. Net sales for the first six months of 2004 were
$96.9, up $0.1 million from the first half of 2003, as improved sales at the
Tape division were largely offset by lower jewelry revenues from sales at K&M.

Cost of products sold as a percentage of net sales was 67.4% in the second
quarter of 2004 compared to 68.4% in the second quarter of 2003. This
improvement was primarily due to improved margins in the Jewelry business as a
result of reduced provisions for inventory shrinkage, better sourcing, and lower
costs for fixtures. Gross profit margins also improved slightly at the Tape
division as efficiency from increased volumes offset inflation of raw materials,
while gross margins narrowed at the Canadian division due to higher raw material
costs. For the six months ended June 30, 2004, cost of products sold as a
percentage of net sales was 68.3% compared with 67.6% during the same period one


                                       25
<PAGE>

year earlier. This increase was principally due to increased costs for raw
materials at the Tape and Canadian divisions, together with a lower proportion
of jewelry revenues generated at K&M, which have higher gross margins than the
other segments' sales, in the sales mix for the first half of 2004 versus 2003.

Selling, general and administrative expenses in the second quarter of 2004 were
$14.6 million, a decrease of 5.4% or $0.8 million compared with the second
quarter of 2003. This decrease was primarily due to reduced expenses associated
with lower jewelry service revenues at K&M. Selling, general and administrative
expenses as a percentage of net sales in the second quarter of 2004 were 29.5%,
down from 31.8% in the second quarter of 2003, as expenses were reduced despite
the increase in sales. For the six months ended June 30, 2004, selling, general
and administrative expenses as a percentage of net sales were 31.5%, down from
31.9% in the first half of 2003, also reflecting the reduced expenses despite a
slight overall sales increase.

Interest expense for the second quarter of 2004 was $0.8 million compared to
$0.5 million in the second quarter of 2003. For the six months ended June 30,
2004 and 2003, interest expense was $1.5 million and $1.1 million, respectively.
The increase in interest expense for the three and six month periods of 2004
versus 2003 was due to higher interest rates on certain of the Company's
borrowings and the interest on borrowings related to Janus, which are included
in loss of discontinued operation in 2003 but in interest expense of continuing
operations in 2004.

Other expense was $0.1 million for the second quarter of 2004 compared to other
income of $0.6 million for the same quarter of 2003. For the six months ended
June 30, 2004, other expense was $0.2 million versus other income of $1.0
million for the six months ended June 30, 2003. The increase in other expense
for the three and six month periods of 2004 versus 2003 was primarily due to
unfavorable changes in foreign exchange.

The income from continuing operations in the second quarter of 2004 was $397
thousand compared to income from continuing operations of $45 thousand in the
corresponding prior year period due to improved operating results largely offset
by unfavorable foreign exchange conversion rates and higher interest and income
tax expenses. The loss from continuing operations for the six months ended June
30, 2004 was $1.0 million compared to income of $228 thousand for the same
period last year. The change from income last year to a loss this year is due
primarily to unfavorable foreign exchange rates and higher interest expense,
partially offset by a benefit from income taxes.

Congoleum

Net sales for the quarter ended June 30, 2004 were $63.0 million as compared to
$55.0 million for the quarter ended June 30, 2003, an increase of $8.0 million
or 14.5%. The increase resulted primarily from improvements in sales to the
manufactured housing industry coupled with higher resilient sheet sales
reflecting initial distributor inventory shipments of a new product introduction
and an inventory build by Congoleum's largest distributor. Year to date net
sales for 2004 totaled $115.0 million as compared to $108.6 million for the same
period last year, an increase of $6.4 million, or 5.9%. Stronger sales to the
manufactured housing industry and increased commercial tile sales accounted for
substantially all of the increase partially offset by weaker sales of resilient
sheet specials.


                                       26
<PAGE>

Gross profit for the quarter ended June 30, 2004 totaled $16.9 million, or 26.8%
of net sales, compared to $12.3 million or 22.3% of net sales for the same
period last year. The increase in gross profit reflects the higher sales, an
improvement in sales mix and the benefit of cost reduction programs instituted
in late 2003 partially offset by higher raw material pricing. Year to date gross
profit was $30.4 million, or 26.5% of net sales as compared to $24.9 million or
23.0% of net sales for the same period last year. The increase is the result of
the same factors contributing to the second quarter 2004 gross profit
improvement. Congoleum expects the higher raw material pricing, experienced in
the second quarter, will continue to pressure profit margins during the balance
of 2004.

Selling, general and administrative expenses were $13.0 million for the quarter
ended June 30, 2004 as compared to $12.5 million for the quarter ended June 30,
2003, an increase of $0.5 million. The increase in expenses reflects higher
merchandising and research costs related to the new product introduction and
higher medical, pension costs and incentive compensation expenses. As a percent
of sales, selling, general and administrative expenses were 20.7% of net sales
for the quarter ended June 30, 2004, as compared to 22.8% for the same period
last year. Year to date selling, general and administrative expenses totaled
$25.0 million down $0.7 million versus the same period for 2003, reflecting
savings from workforce reductions and other cost reductions initiated in May and
August of 2003. Selling, general and administrative expenses totaled 21.7% of
net sales for the first half of 2004 as compared to 23.7% for the same period in
the prior year.

Income from operations was $3.9 million for the quarter ended June 30, 2004
compared to a loss of $0.3 million for the quarter ended June 30, 2003. The
improvement in operating income reflected the higher gross profit partially
offset by higher selling, general and administrative expenses. Year to date
income from operations for 2004 totaled $5.4 million, versus a loss of $0.8
million for the same period last year resulting from higher gross margins and
lower selling, general and administrative expenses.

Liquidity and Capital Resources

ABI & Non-Debtor Subsidiaries

Cash and cash equivalents, including short term investments, declined $1.6
million in the first six months of 2004 to $0.2 million. Cash used by operating
activities, principally for seasonal working capital increases, were financed
with short term borrowings. Working capital at June 30, 2004 was $14.2 million,
up from $13.5 million at December 31, 2003. The ratio of current assets to
current liabilities at June 30, 2004 was 1.23, essentially the same as at
December 31, 2003.

Capital expenditures in the first six months of 2004 were $1.2 million compared
to $1.6 million for the first six months of 2003. It is anticipated that capital
spending for the full year 2004 will be between $3 million and $4 million.


                                       27
<PAGE>

The Company has recorded provisions which it believes are adequate for
environmental remediation and non-asbestos product-related liabilities,
including provisions for testing for potential remediation of conditions at its
own facilities. While the Company believes its estimate of the future amount of
these liabilities is reasonable, that most of such amounts will be paid over a
period of three to ten years and that the Company expects to have sufficient
resources to fund such amounts, the actual timing and amount of such payments
may differ significantly from the Company's assumptions. Although the effect of
future government regulation could have a significant effect on the Company's
costs, the Company is not aware of any pending legislation or regulation which
would have a material adverse effect on its consolidated results of operations
or financial position. There can be no assurances that such costs could be
passed along to its customers.

Cash requirements for capital expenditures, working capital, debt service, and
any share repurchases are expected to be financed from operating activities and
borrowings under existing bank lines of credit. As of June 30, 2004,
approximately $27.8 million in the aggregate was available for borrowing by the
Company under its bank lines of credit subject to the value from time to time of
the collateral securing outstanding borrowings under those lines of credit. At
June 30, 2004, $10.9 million was outstanding under revolving credit lines and
$0.8 million was outstanding under letters of credit. An additional $13.1
million was available for borrowing as of that date under the Company's
revolving credit lines. The Company believes that its cash flow from operations,
expected proceeds from the sale of the Janus assets and borrowings available
under its existing bank lines of credit will be adequate for its expected
capital expenditure, working capital, and debt service needs, subject to
compliance with the covenants contained in its debt agreements referred to below
and the ability of the Company to replace or refinance its existing credit
facility that is scheduled to expire on December 31, 2004 on satisfactory terms.

American Biltrite Inc. has two principal debt agreements that it is party to as
borrower. The first of those agreements is a credit agreement (the "Credit
Facility") with Fleet National Bank ("Fleet"). The Credit Facility provides the
Company with a revolving credit facility of up to $20 million, including up to
$5 million for the issuances of lines of credit. The amounts that the Company
can borrow under the Credit Facility are subject to reduction from time to time
if the borrowing base is less than $20 million. Interest is payable on amounts
borrowed under the Credit Facility at rates which generally vary between a LIBOR
based rate plus 1.0% to a LIBOR based rate plus 2.75% depending on the Company's
leverage ratio, as determined under the Credit Facility. Certain domestic
subsidiaries of the Company have agreed to guarantee the Company's obligations
under the Credit Facility. The Credit Facility expires on December 31, 2004.

The second principal debt agreement that American Biltrite Inc. is a party to
(the "Note Agreement") is with The Prudential Insurance Company of America
("Prudential"). Under the Note Agreement, the Company previously issued notes in
an aggregate principal amount of $20 million (the "Series A Notes"). The Series
A Notes generally bear interest at a rate of 7.91% per annum, and the Company is
obligated to pay Prudential an additional fee on each interest payment date if
the Company's and certain of its subsidiaries' ratio of debt to EBITDA, as
defined under the Note Agreement, exceeds certain levels. The amount of those
fees that may be payable by the Company varies depending on the extent the
Company's and certain of its subsidiaries' debt exceeds EBITDA, as determined
under the Note Agreement, and is capped at 2% of the outstanding principal
amount of the Series A Notes. Principal on the Senior A Notes is repayable in


                                       28
<PAGE>

five annual installments of $4.0 million beginning on August 28, 2006. In
addition, the Note Agreement provides for possible issuances of additional notes
by the Company for up to an aggregate principal amount of $15 million, which
additional notes will mature not later than 10 years after the date of issuance
and will bear interest at rates to be determined on or about the time of
issuance.

Both the Credit Facility and the Note Agreement contain certain covenants that
the Company must satisfy. The covenants included in the Credit Facility and the
Note Agreement include certain financial tests, restrictions on the ability of
the Company to incur additional indebtedness or to grant liens on its assets and
restrictions on the ability of the Company to pay dividends on its capital
stock. Pursuant to the Credit Facility and the Note Agreement, the Company and
certain of its domestic subsidiaries granted Fleet and Prudential a security
interest in most of the Company's and its domestic subsidiaries' assets. The
security interest granted does not include the shares of capital stock of the
Company's majority-owned subsidiary Congoleum Corporation or the assets of
Congoleum Corporation.

In the past, the Company has had to amend its credit agreements in order to
avoid being in default of those agreements as a result of failing to satisfy
certain financial covenants contained in those agreements. While the Company was
in compliance with the financial covenants contained in the Credit Facility and
the Note Agreement as of June 30, 2004, there can be no assurance that it will
be able to satisfy all covenants as of September 30, 2004, the next measurement
date for determining compliance with those covenants. Furthermore, there can be
no assurance that the Company will be able to obtain any amendments to any
covenants that might be necessary to enable it to achieve compliance. If it
fails to satisfy those covenants it will be in default under the respective debt
agreements. Pursuant to the terms of the Credit Facility and the Note Agreement,
a default by the Company under one of those agreements triggers a cross-default
under the other agreement. If a default occurs, Fleet and Prudential could
respectively require the Company to repay all amounts outstanding under the
respective debt agreements. If a default occurs and the Company is unable to
obtain a waiver from Fleet and Prudential and the Company is required to repay
all amounts outstanding under those agreements, the Company would need to obtain
funding from another source. Otherwise, the Company would likely be unable to
repay those outstanding amounts, in which case, Fleet as administrative agent
over the collateral securing the amounts outstanding under the Credit Facility
and the Note Agreement, might exercise Fleet's and Prudential's rights over that
collateral. Any default by the Company under the Credit Facility or the Note
Agreement that results in the Company being required to immediately repay
outstanding amounts under its debt agreements would have a material adverse
effect on the Company's business, results of operations and financial condition.

In addition, under the Note Agreement, the Company must enter into a definitive
commitment by November 14, 2004 to replace or refinance not less than $15
million of the amounts under the Credit Facility on substantially similar terms
and with a maturity of not less than one year. Failure to do so would constitute
an event of default under the Note Agreement.

As noted above, the Credit Facility and the Note Agreement restrict the
Company's ability to obtain additional financing. Moreover, since the Company
and most of its domestic subsidiaries have already granted security interests in


                                       29
<PAGE>

most of their assets, the Company's ability to obtain any additional debt
financing may be limited. The Company currently believes that its cash flow from
operations, expected proceeds from the sale of the Janus assets and borrowings
available under its existing credit facilities will be adequate for its expected
capital expenditure, working capital and debt service needs, subject to
compliance with the covenants contained in its debt agreements and the ability
of the Company to replace or refinance its existing credit facility that is
scheduled to expire on December 31, 2004 on satisfactory terms. However, if
circumstances change, the inability of the Company to obtain any necessary
additional debt financing would likely have a material adverse effect on its
business, operations and financial condition.

Under Congoleum's anticipated plan of reorganization, it is expected that
certain rights that the Company may have to receive indemnification for claims
under the plan of reorganization or the joint venture agreement relating to the
contribution by ABI to Congoleum in 1993 of the Company's tile division, subject
to certain exceptions, will not be paid to the Company for so long as any
obligations owed to the plan trust established pursuant to Congoleum's plan by
Congoleum under the promissory note expected to be contributed by Congoleum to
the plan trust remain outstanding. Instead, those amounts will be held in escrow
by the plan trust and be pledged by the Company as collateral securing
Congoleum's obligations under that promissory note until released from such
escrow and paid to the Company pursuant to the terms of Congoleum's plan of
reorganization, the promissory note and the pledge agreement expected to be
entered by the Company with regard to the collateral expected to be pledged by
the Company to secure Congoleum's obligations under the promissory note. To the
extent the amounts that are subject to that escrow are material, that could have
a material adverse effect on the Company's liquidity and capital resources since
those escrowed amounts represent amounts that would have already been paid by
the Company but not yet reimbursed to the Company to the extent they remain in
escrow.

In addition, the terms of Congoleum's plan of reorganization are expected to
provide that the Company will no longer have certain other rights to receive
indemnification under the joint venture agreement or Congoleum's plan of
reorganization for asbestos-related property damage claims. To the extent that
the Company pays material amounts for asbestos-related property damage claims
that the Company would have been entitled to be reimbursed for by Congoleum
absent the provisions of Congoleum's plan of reorganization, that could have a
material adverse effect on the Company's liquidity and capital resources.
Furthermore, to the extent that the amount of any of the Company's indemnity
claims against the plan trust established pursuant to Congoleum's plan of
reorganization are reduced to an amount less than the corresponding amount paid
by the Company pursuant to the distribution procedures under the Company's plan
of reorganization, that could have a material adverse effect on the Company's
liquidity and capital resources.

The Company has not declared a dividend subsequent to the third quarter of 2003.
Future dividends, if any, will be determined by the Company's board of directors
based upon the financial performance and capital requirements of the Company,
among other considerations. Under the Credit Facility, aggregate dividend
payments (since June 30, 2003) are generally limited to 50% of cumulative
consolidated net income (computed treating Congoleum under the equity method of
accounting), as determined under the Credit Facility, earned after June 30,


                                       30
<PAGE>

2003. Under the Note Agreement, aggregate dividend payments (since December 31,
2000) generally may not exceed the sum of $6 million plus 50% of cumulative
consolidated net income (accounting for Congoleum under the equity method of
accounting), as determined under the Note Agreement, earned after December 31,
2000.

In addition, under the terms of Congoleum's plan of reorganization, the Company
expects to contribute $250 thousand in cash to the plan trust to be established
upon confirmation of the Congoleum plan.

Congoleum

The consolidated financial statements of Congoleum have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. Accordingly, the consolidating
condensed financial statements do not include any adjustments that might be
necessary should Congoleum be unable to continue as a going concern. As
described more fully in the Notes to the unaudited consolidating condensed
financial statements contained in Item 1 of this Quarterly Report on Form 10-Q,
there is substantial doubt about Congoleum's ability to continue as a going
concern unless it obtains relief from its substantial asbestos liabilities
through a successful reorganization under Chapter 11 of the Bankruptcy Code.

Congoleum is a defendant in a large number of asbestos-related lawsuits and, on
December 31, 2003, filed a pre-packaged plan of reorganization under Chapter 11
of the United States Bankruptcy Code as part of its strategy to resolve this
liability. See Notes A and J of the notes to the unaudited consolidating
condensed financial statements, which are contained in Item 1 of the Quarterly
Report on Form 10-Q. These matters have had and will continue to have a material
adverse impact on liquidity and capital resources. During 2003, Congoleum paid
$5.3 million in defense and indemnity costs related to asbestos-related claims
and $13.5 million in fees and expenses related to implementation of its planned
reorganization under Chapter 11 and litigation with certain insurance companies.
During the first six months of 2004, Congoleum spent $1.4 million and during the
balance of 2004, expects to spend a further $8.4 million at a minimum in fees,
expenses, and trust contributions in connection with obtaining confirmation of
its plan. Actual amounts that will be contributed to the Plan Trust and costs
for implementing the Plan of Reorganization could be materially higher.
Congoleum also expects to recover $3.6 million from the Collateral Trust or its
successor pursuant to terms of the Claimant Agreement and related documents,
which provide for the Collateral Trust to reimburse certain expenses of
Congoleum. Timing of such recovery will depend on when the trust receives funds
from insurance settlements or other sources.

Unrestricted cash and cash equivalents, including short-term investments at June
30, 2004, were $23.7 million, an increase of $21.5 million from December 31,
2003. Under the terms of its revolving credit agreement, payments on Congoleum's
accounts receivable are deposited in an account assigned by Congoleum to its
lender and the funds in that account are used by the lender to pay down any loan
balance. Restricted cash represents funds deposited in this account but not yet
applied to the loan balance. Working capital was $41.9 million at June 30, 2004,
up from $27.1 million at December 31, 2003. The ratio of current assets to
current liabilities at June 30, 2004 was 1.6 to one, compared to 1.5 to one at
December 31, 2003. Net cash provided by operations during the first six months


                                       31
<PAGE>

of 2004 was $19.9 million, as compared to cash used by operations of $16.6
million in the first six months of 2003. The increase in cash provided by
operations in the first six months of 2004 versus the first six months of 2003
was primarily due to the unusually low level of accounts payable and accrued
expenses at December 31, 2003. This unusually low level was due to limited
manufacturing activity, coupled with creditors managing their pre-petition
credit exposure and Congoleum prepaying certain expenses prior to its December
31, 2003 bankruptcy filing. As a result of its bankruptcy filing, Congoleum was
not permitted to make the $4.3 million interest payment on its Senior Notes that
was due February 1, 2004, which also reduced cash usage in the first half of
2004 compared to 2003. Expenditures related to asbestos liabilities and
Congoleum's reorganization plan were $1.4 million in 2004, compared to $4.2
million in 2003, which also contributed to the increase in cash from operations.
Capital expenditures in the first six months of 2004 totaled $1.4 million.
Congoleum is currently planning capital expenditures of approximately $5 million
in 2004.

In January 2004, the Bankruptcy Court authorized entry of a final order
approving Congoleum's debtor-in-possession financing, which replaced its
pre-petition credit facility on substantially similar terms. The
debtor-in-possession financing provides a one-year revolving credit facility
with borrowings up to $30 million. Interest is based on .75% above the prime
rate. This financing agreement contains certain covenants, which include the
maintenance of a minimum tangible net worth and EBITDA. It also includes
restrictions on the incurrence of additional debt and limitations on capital
expenditures. The covenants and conditions under this financial agreement must
be met in order for Congoleum to borrow from the facility. Congoleum was in
compliance with these covenants at June 30, 2004. Borrowings under this facility
are collateralized by inventory and receivables. At June 30, 2004, based on the
level of receivables and inventory, $27.3 million was available under the
facility, of which $3.4 million was utilized for outstanding letters of credit
and $15.3 million was utilized by the revolving loan. Congoleum anticipates that
its debtor-in-possession financing facility will be replaced with a revolving
credit facility on substantially similar terms upon confirmation of its plan of
reorganization. While Congoleum expects the facilities discussed above will
provide it with sufficient liquidity, there can be no assurances that it will
continue to be in compliance with the required covenants, that Congoleum will be
able to obtain a similar or sufficient facility upon exit from bankruptcy, or
that the debtor-in-possession facility would be renewed if Congoleum's plan of
reorganization is not confirmed by that facility's expiration on December 31,
2004.

In addition to the provision for asbestos litigation discussed previously,
Congoleum has also recorded what it believes are adequate provisions for
environmental remediation and product-related liabilities (other than
asbestos-related claims), including provisions for testing for potential
remediation of conditions at its own facilities. Congoleum is subject to
federal, state and local environmental laws and regulations and certain legal
and administrative claims are pending or have been asserted against Congoleum.
Among these claims, Congoleum is a named party in several actions associated
with waste disposal sites (see Note I). These actions include possible
obligations to remove or mitigate the effects on the environment of wastes
deposited at various sites, including Superfund sites and certain of Congoleum's
owned and previously owned facilities. The contingencies also include claims for
personal injury and/or property damage. The exact amount of such future cost and
timing of payments are indeterminable due to such unknown factors as the
magnitude of cleanup costs, the timing and extent of the remedial actions that


                                       32
<PAGE>

may be required, the determination of Congoleum's liability in proportion to
other potentially responsible parties, and the extent to which costs may be
recoverable from insurance. Congoleum has recorded provisions in its financial
statements for the estimated probable loss associated with all known general and
environmental contingencies. While Congoleum believes its estimate of the future
amount of these liabilities is reasonable, and that they will be paid over a
period of five to ten years, the timing and amount of such payments may differ
significantly from Congoleum's assumptions. Although future government
regulation could have a significant effect on Congoleum's costs, Congoleum is
not aware of any pending legislation, which would reasonably have such an
effect. There can be no assurances that the costs of any future government
regulations could be passed along to customers. Estimated insurance recoveries
related to these liabilities are reflected in other non-current assets.

The outcome of these environmental matters could result in significant expenses
incurred by, or judgments assessed against, Congoleum.

Congoleum's principal sources of capital are net cash provided by operating
activities and borrowings under its financing agreement. Although Congoleum did
not generate cash from operations in 2003, Congoleum anticipates that it will
generate cash from operations in 2004. Congoleum believes these sources will be
adequate to fund working capital requirements, debt service payments, and
planned capital expenditures for the foreseeable future, plus its current
estimates for costs to settle and resolve its asbestos liabilities through its
pre-packaged Chapter 11 plan of reorganization. Congoleum's inability to obtain
confirmation of the proposed plan in a timely manner would have a material
adverse effect on Congoleum's ability to fund its operating, investing and
financing requirements. Congoleum also anticipates it will be able to obtain
exit financing upon confirmation of its proposed plan. Such financing will be
required to replace its debtor-in-possession credit facility and permit
Congoleum to pay accrued interest on its Senior Notes and other obligations
needed to be satisfied in connection with the confirmation of the proposed plan
of reorganization.

Risk Factors That May Affect Future Results

The Company and its majority-owned subsidiary Congoleum have significant
asbestos liability and funding exposure, and the Company's and Congoleum's
strategies for resolving this exposure may not be successful.

As more fully set forth in Notes A, I and J of the Notes to Unaudited
Consolidated Condensed Financial Statements, which are included in this report,
the Company and its majority-owned subsidiary Congoleum have significant
liability and funding exposure for asbestos-related personal injury claims, and
in light of Congoleum's asbestos liability, Congoleum has filed a pre-packaged
Chapter 11 plan of reorganization in Bankruptcy Court. In connection with
Congoleum's strategy for resolving its asbestos liability, it previously entered
into settlement agreements with various asbestos claimants, which provided for
an aggregate settlement value of approximately $491 million. Settlement of this
obligation pursuant to the terms of Congoleum's proposed pre-packaged plan is
dependent on Bankruptcy Court confirmation of the plan, including determinations
by the Bankruptcy Court that, among other things, the plan has satisfied certain
criteria under the Bankruptcy Code.


                                       33
<PAGE>

There can be no assurance that Congoleum will be successful in obtaining
confirmation of Congoleum's pre-packaged plan in a timely manner or at all. Any
alternative plan of reorganization pursued by Congoleum or confirmed by the
Bankruptcy Court could vary significantly from the description in this report.
Furthermore, the estimated costs and contributions required to confirm and to
effect the proposed pre-packaged plan of reorganization or an alternative plan
could be significantly greater than currently estimated. Any plan of
reorganization pursued by Congoleum will be subject to numerous conditions,
approvals and other requirements, including Bankruptcy Court approvals, and
there can be no assurance that such conditions, approvals and other requirements
will be satisfied or obtained. As part of Congoleum's plan, Congoleum would
contribute to the plan trust certain of Congoleum's rights to receive insurance
proceeds for asbestos liabilities under its applicable insurance policies.
Congoleum is currently involved in litigation with certain of its insurance
carriers related to disputed insurance coverage for asbestos related
liabilities, and certain insurance carriers have filed various objections to
Congoleum's plan of reorganization and related matters. It is expected that
these insurers will continue to vigorously contest any obligation to provide
Congoleum with insurance coverage for Congoleum's asbestos liabilities and seek
to prevent any contribution by Congoleum of its rights to receive insurance for
asbestos matters to the plan trust. There can be no assurance that these
insurers will not be successful in these regards. If the insurers are able to
successfully refuse an obligation to provide Congoleum with insurance coverage
for Congoleum's asbestos liabilities or prevent Congoleum's proposed
contribution of its rights to receive insurance proceeds for asbestos matters to
the plan trust as part of Congoleum's plan of reorganization, that would have a
material adverse effect on Congoleum's ability to obtain approval of its
pre-packaged plan of reorganization.

The Company has its own direct asbestos liability as well. The Company's
strategy remains to vigorously defend and strategically settle its asbestos
claims on a case-by-case basis. To date, the Company's insurers have funded
substantially all of the Company's liabilities and expenses related to its
asbestos liability under the Company's applicable insurance policies. The
Company expects to be able to receive insurance proceeds for its asbestos
liabilities for the foreseeable future. If, however, it were not able to receive
reimbursement from its insurers for the Company's asbestos liabilities and
expenses that would likely have a material adverse effect on the Company's
financial position.

Some additional factors that could cause actual results to differ from
Congoleum's and the Company's goals for resolving asbestos liability by
Congoleum pursuing its pre-packaged plan of reorganization bankruptcy filing
include: (i) the future cost and timing of estimated asbestos liabilities and
payments and availability of insurance coverage and reimbursement from insurance
companies, which underwrote the applicable insurance policies for Congoleum and
the Company, for asbestos-related claims, (ii) costs relating to the execution
and implementation of any plan of reorganization pursued by Congoleum, (iii)
timely reaching an agreement with other creditors, classes of creditors, or
other parties in the Bankruptcy proceeding, that exist or may emerge, (iv) the
Company's and Congoleum's satisfaction of the conditions and obligations under
their respective outstanding debt instruments, and amendment of those
outstanding debt instruments, as necessary, to permit the contemplated note
contribution by Congoleum to the plan trust and pledge by the Company of certain
of its assets including the shares of Congoleum stock owned by the Company and


                                       34
<PAGE>

certain amounts the Company would otherwise be entitled to receive from
Congoleum as indemnification for certain liabilities and expenses relating to
the Company's former tile division, in connection with Congoleum's pre-packaged
plan of reorganization and to make certain financial covenants in those debt
instruments less restrictive, (v) the response from time-to-time of the
Company's and Congoleum's lenders, customers, suppliers and other constituencies
to the ongoing process arising from the strategy to settle asbestos liability,
(vi) Congoleum's ability to maintain debtor-in-possession financing to provide
it with sufficient funding during the pendency of its Chapter 11 case and exit
financing to provide it with sufficient funding for its operations after
emerging from the bankruptcy process, in each case, on reasonable terms (vii)
timely obtaining sufficient creditor and court approval of any reorganization
plan (viii) developments in and the outcome of the insurance coverage litigation
pending in New Jersey State Court involving Congoleum, the Company and certain
insurers and (ix) compliance with the Bankruptcy Code, including section 524(g).
In addition, in view of American Biltrite's relationships with Congoleum,
American Biltrite could be affected by Congoleum's negotiations, and there can
be no assurance as to what that impact, positive or negative, might be. In any
event, the failure of Congoleum to obtain confirmation of its proposed
pre-packaged plan of reorganization would have a material adverse effect on
Congoleum's business, results of operations or financial condition and could
have a material adverse effect on American Biltrite's business, results of
operations or financial condition.

In addition, there has been federal legislation proposed that, if adopted, would
establish a national trust to provide compensation to victims of
asbestos-related injuries and channel all current and future asbestos-related
personal injury claims to that trust. Due to the uncertainties involved with the
pending legislation, the Company does not know what effects any such
legislation, if adopted, may have upon its or Congoleum's businesses, results of
operations or financial conditions, or upon any plan of reorganization Congoleum
may decide to pursue. To date, Congoleum has expended significant amounts
pursuant to resolving its asbestos liability relating to its proposed
prepackaged Chapter 11 plan of reorganization. To the extent any federal
legislation is enacted which does not credit Congoleum for amounts paid by
Congoleum pursuant to its plan of reorganization or requires the Company or
Congoleum to pay significant amounts to any national trust or otherwise, such
legislation could have a material adverse effect on the Company or Congoleum's
businesses, results of operations and financial conditions.

As a result of Congoleum's significant liability and funding exposure for
asbestos claims, there can be no assurance that if Congoleum were to incur any
unforecasted or unexpected liability or disruption to its business or operations
it would be able to withstand that liability or disruption and continue as an
operating company. Any significant increase of the Company's asbestos liability
and funding exposure would likely have a material adverse effect on the
Company's business, operations and financial condition and possibly its ability
to continue as a going concern.

For further information regarding the Company's and Congoleum's asbestos
liability, insurance coverage and strategies to resolve that asbestos liability,
please see Notes A, I and J of the Notes to Unaudited Consolidated Condensed
Financial Statements, which are included in this report.


                                       35
<PAGE>

The Company relies on debt financing to help fund its operations and other
general corporate purposes and any default by it under its credit facilities or
inability to obtain any necessary debt financing would likely have a material
adverse effect on its business, operations and financial condition.

The Company relies on borrowings under its existing credit facilities to help
finance, among other things, its operations, working capital and capital
expenditures. The Company and most of its domestic subsidiaries have granted a
security interest to the lenders under the Company's primary credit facilities
in most of the Company's and its domestic subsidiaries' assets. The collateral
that is subject to this security interest does not include the shares of capital
stock of Congoleum or assets of Congoleum.

The Company's credit facility (the "Credit Facility") with Fleet National Bank
("Fleet") has a final maturity date of December 31, 2004. In addition, under the
Company's debt agreement (the "Note Agreement") with The Prudential Insurance
Company of America ("Prudential"), the Company is obligated to enter into a
definitive commitment by November 14, 2004 to replace or refinance not less than
$15 million of the amounts under the Credit Facility on substantially similar
terms and with a maturity of not less than one year. Failure to do so would
constitute an event of default under the Note Agreement.

If the Company defaults under the Credit Facility or Note Agreement
(collectively, the "Facilities"), the respective lenders under those Facilities
have certain rights and remedies under those Facilities, and Fleet, in its
capacity as collateral agent, has obligations to such lenders and associated
rights with respect to the collateral, including the right to accelerate payment
of all amounts outstanding under the facilities and certain rights to
administration, assembly and sale of collateral in connection with certain
defaults.

There can be no assurances that the Company will be able to meet certain of the
financial covenants contained in the Credit Facility and the Note Agreement as
of September 30, 2004, the next measurement date for determining compliance with
those covenants, or that the Company will be able to obtain any amendments to
any covenants that might be necessary to enable it to achieve compliance. Any
default by the Company under the Facilities that is not waived would likely have
a material adverse effect on its business, operations and financial condition.

Under the terms of the Facilities, the Company's ability to obtain additional
debt financing is limited. Moreover, since the Company and most of its domestic
subsidiaries have already granted security interests in most of their assets,
the Company's ability to obtain any additional debt financing may be limited.
The inability of the Company to obtain any necessary additional debt financing
and to replace or refinance the Credit Facility on satisfactory terms would
likely have a material adverse effect on its business, operations and financial
condition.


                                       36
<PAGE>

The Company and its majority-owned subsidiary Congoleum may incur substantial
liability for environmental claims and compliance matters.

Due to the nature of the Company's and its majority-owned subsidiary Congoleum's
businesses and certain of the substances which are or have been used, produced
or discharged by them, the Company's and Congoleum's operations and facilities
are subject to a broad range of federal, state, local and foreign legal and
regulatory provisions relating to the environment, including those regulating
the discharge of materials into the environment, the handling and disposal of
solid and hazardous substances and wastes and the remediation of contamination
associated with releases of hazardous substances at Company and Congoleum
facilities and off-site disposal locations. The Company and Congoleum have
historically expended substantial amounts for compliance with existing
environmental laws or regulations, including environmental remediation costs at
both third-party sites and Company and Congoleum-owned sites. The Company and
Congoleum will continue to be required to expend amounts in the future because
of the nature of their prior activities at their facilities, to comply with
existing environmental laws, and those amounts may be substantial. Although the
Company and Congoleum expect that they would have sufficient resources to fund
any such liabilities, there is no certainty that these amounts will not have a
material adverse effect on their respective financial positions because, as a
result of environmental requirements becoming increasingly strict, neither the
Company nor Congoleum is able to determine the ultimate cost of compliance with
environmental laws and enforcement policies. Moreover, in addition to
potentially having to pay substantial amounts for compliance, future
environmental laws or regulations may require or cause the Company or Congoleum
to modify or curtail their operations, which could have a material adverse
effect on the Company's business, results of operations and financial condition.

The Company and its majority-owned subsidiary Congoleum may incur substantial
liability for other product and general liability claims.

 In the ordinary course of their businesses, the Company and its majority-owned
subsidiary Congoleum become involved in lawsuits, administrative proceedings,
product liability claims (in addition to asbestos related claims) and other
matters. In some of these proceedings, plaintiffs may seek to recover large and
sometimes unspecified amounts and the matters may remain unresolved for several
years. These matters could have a material adverse effect on the Company's
business, results of operations and financial condition if the Company or
Congoleum, as applicable, is unable to successfully defend against or settle
these matters and its insurance coverage is insufficient to satisfy any
judgments against it or settlements relating to these matters or the Company or
Congoleum, as applicable, is unable to collect insurance proceeds relating to
these matters.

The Company and its majority-owned subsidiary Congoleum are dependent upon a
continuous supply of raw materials from third-party suppliers and would be
harmed if there were a significant, prolonged disruption in supply or increase
in its raw material costs.

The Company and its majority-owned subsidiary Congoleum generally design and
engineer their own products. Most of the raw materials required by the Company
for its manufacturing operations are available from multiple sources; however,
the Company does purchase some of its raw materials from a single source or


                                       37
<PAGE>

supplier. In addition, the Company is dependent on foreign suppliers for
economical sourcing of its jewelry and certain other goods. Any significant
delay in or disruption of the supply of goods (including disruptions resulting
from political risks or shipping disruptions) could substantially increase the
Company's cost of materials, require product reformulation or require
qualification of new suppliers, any one or more of which could materially
adversely affect the Company's business, results of operations or financial
condition. The Company's majority-owned subsidiary Congoleum does not have
readily available alternative sources of supply for specific designs of transfer
print paper, which are produced utilizing print cylinders engraved to
Congoleum's specifications. Although Congoleum does not anticipate any loss of
this source of supply, replacement could take a considerable period of time and
interrupt production of certain products, which could have a material adverse
effect on Congoleum's business, results of operations or financial condition and
the Company's business and results of operations.

The Company and its majority-owned subsidiary Congoleum operate in highly
competitive markets and some of their competitors have greater resources, and in
order to be successful, the Company and Congoleum must keep pace with and
anticipate changing customer preferences.

The market for the Company's and its majority-owned subsidiary Congoleum's
products and services is highly competitive. Some of their respective
competitors have greater financial and other resources and access to capital.
Furthermore, to the extent any of the Company's or Congoleum's competitors make
a filing under Chapter 11 of the Bankruptcy Code and emerge from bankruptcy as a
continuing operating company that has shed much of their pre-filing liabilities,
those competitors could have a cost competitive advantage over the Company or
Congoleum. In addition, in order to maintain their competitive positions, the
Company and Congoleum may need to make substantial investments in their
businesses, including, as applicable, product development, manufacturing
facilities, distribution network and sales and marketing activities. Competitive
pressures may also result in decreased demand for their products and in the loss
of market share for their products. Moreover, due to the competitive nature of
their industries, they may be commercially restricted from raising or even
maintaining the sales prices of their products, which could result in the
incurrence of significant operating losses if their expenses were to increase or
otherwise represent an increased percentage of sales.

The markets in which the Company and Congoleum compete are characterized by
frequent new product introductions and changing customer preferences. There can
be no assurance that the Company's and Congoleum's existing products and
services will be properly positioned in the market or that the Company and
Congoleum will be able to introduce new or enhanced products or services into
their respective markets on a timely basis, or at all, or that those new or
enhanced products or services will receive customer acceptance. The Company's
and Congoleum's failure to introduce new or enhanced products or services on a
timely basis, keep pace with industry or market changes or effectively manage
the transitions to new products, technologies or services could have a material
adverse effect on the Company's business, results of operations or financial
condition.


                                       38
<PAGE>

The Company and its majority-owned subsidiary Congoleum are subject to general
economic conditions and conditions specific to their respective industries.

The Company and its majority-owned subsidiary Congoleum are subject to the
effects of general economic conditions. A sustained general economic slowdown
could have serious negative consequences for the Company's business, results of
operations and financial condition. Moreover, their businesses are affected by
the economic factors that affect their respective industries.

The Company and its majority-owned subsidiary Congoleum could realize shipment
delays, depletion of inventory and increased production costs resulting from
unexpected disruptions of operations at any of the Company's or Congoleum's
facilities.

The Company's and its majority-owned subsidiary Congoleum's businesses depend
upon their ability to timely manufacture and deliver products that meet the
needs of their customers and the end users of their products. If the Company or
Congoleum were to realize an unexpected, significant and prolonged disruption of
its operations at any of its facilities, including disruptions in its
manufacturing operations, it could result in shipment delays of its products,
depletion of its inventory as a result of reduced production and increased
production costs as a result of taking actions in an attempt to cure the
disruption or carry on its business while the disruption remains. Any resulting
delay, depletion or increased production cost could result in increased costs,
lower revenues and damaged customer and product end user relations, which could
have a material adverse effect on the Company's business, results of operations
and financial condition.

The Company and its majority-owned subsidiary Congoleum offer limited warranties
on their products which could result in the Company or Congoleum incurring
significant costs as a result of warranty claims.

The Company and its majority-owned subsidiary Congoleum offer a limited warranty
on many of their products against manufacturing defects. In addition, as a part
of its efforts to differentiate mid- and high-end products through color, design
and other attributes, Congoleum offers enhanced warranties with respect to wear,
moisture discoloration and other performance characteristics, which generally
increase with the price of such products. If the Company or Congoleum were to
incur a significant number of warranty claims, the resulting warranty costs
could be substantial.

The Company and its majority-owned subsidiary Congoleum rely on a small number
of customers and distributors for a significant portion of their sales or to
sell their products.

The Company's tape and flooring divisions principally sell their products
through distributors. Sales to five unaffiliated customers have historically
accounted for 20% to 25% of the Company's tape division net sales. The loss of
the largest unaffiliated customer and/or two or more of the other affiliated
customers could have a material adverse effect on the Company's business,
results of operations and financial condition.

The Company's majority-owned subsidiary Congoleum principally sells its products
through distributors. Although Congoleum has more than one distributor in some
of its distribution territories and actively manages its credit exposure to its


                                       39
<PAGE>

distributors, the loss of a major distributor could have a materially adverse
impact on the Company's business, results of operations and financial condition.
Congoleum derives a significant percentage of its sales from two of its
distributors. These two distributors have historically accounted for 60% to 65%
of Congoleum's net sales.

The Company's subsidiary K&M Associates L.P. sells its products through its own
direct sales force and, indirectly, through a wholly owned subsidiary and
through third-party sales representatives. Three of K&M Associates L.P.'s
customers have historically accounted for 70% to 75% of K&M's net sales. The
loss of K&M Associates L.P.'s largest customer would likely have a material
adverse effect on the Company's business, results of operations and financial
condition.

The Company and its majority-owned subsidiary Congoleum depend on key executives
to run their businesses, and the loss of any of these executives would likely
harm the Company's business.

The Company and its majority-owned subsidiary Congoleum depend on key executives
to run their businesses. In particular, the same persons that serve as key
executives at the Company also serve as key executives at Congoleum. The
Company's future success will depend largely upon the continued service of these
key executives, none of whom have an employment contract with the Company or
Congoleum, as applicable, and may terminate their employment at any time without
notice. Although certain key executives of the Company and Congoleum are,
directly or indirectly, large shareholders of the Company or Congoleum, and thus
are less likely to terminate their employment, the loss of any key executive, or
the failure by the key executive to perform in his current position, could have
a material adverse effect on the Company's business, results of operations and
financial condition.


                                       40
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to changes in prevailing market interest rates affecting
the return on its investments but does not consider this interest rate market
risk exposure to be material to its financial condition or results of
operations. The Company invests primarily in highly liquid debt instruments with
strong credit ratings and short-term (less than one year) maturities. The
carrying amount of these investments approximates fair value due to the
short-term maturities. The substantial majority of the Company's outstanding
consolidated long-term debt as of June 30, 2004 consisted of indebtedness with a
fixed rate of interest, which is not subject to change based upon changes in
prevailing market interest rates.

The Company operates internationally, principally in Canada, Europe and Asia,
giving rise to exposure to market risks from changes in foreign exchange rates.
Foreign currency exchange rate movements also affect the Company's competitive
position, as exchange rate changes may affect business practices and/or pricing
strategies of non-U.S. based competitors. For foreign currency exposures
existing at June 30, 2004, a 10% unfavorable movement in currency exchange rates
in the near term would not materially affect ABI's consolidated operating
results, financial position or cash flows.

The Company does not currently use derivative financial instruments, derivative
commodity instruments or other financial instruments to manage its exposure to
changes in interest rates, foreign currency exchange rates, commodity prices or
equity prices and does not hold any instruments for trading purposes.

Item 4: Controls and Procedures

a)    Evaluation of Disclosure Controls and Procedures. The Company's
      management, with the participation of the Company's Chief Executive
      Officer and Chief Financial Officer, has evaluated the effectiveness of
      the Company's disclosure controls and procedures (as such term is defined
      in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
      1934, amended (the "Exchange Act")), as of the end of the period covered
      by this report. Based on such evaluation, the Company's Chief Executive
      Officer and Chief Financial Officer have concluded that, as of the end of
      such period, our disclosure controls and procedures were (1) designed to
      ensure that material information relating to the Company, including its
      consolidated subsidiaries, is made known to our Chief Executive Officer
      and Chief Financial Officer by others within those entities, particularly
      during the period in which this report was being prepared, and (2)
      effective, in that they provide reasonable assurance that information
      required to be disclosed by us in the reports that we file or submit under
      the Exchange Act is recorded, processed, summarized, and reported within
      the time periods specified in the Securities and Exchange Commission's
      rules and forms.


                                       41
<PAGE>

(b)   Changes in Internal Control Over Financial Reporting. There have not been
      any changes in the Company's internal control over financial reporting (as
      such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
      Act) during the fiscal quarter to which this report relates that have
      materially affected, or are reasonably likely to materially affect, the
      Company's internal control over financial reporting.


PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information contained in Note I "Commitments and Contingencies" and Note J
"Congoleum Asbestos Liabilities and Planned Reorganization" of the Notes to
Unaudited Consolidating Condensed Financial Statements is incorporated herein by
reference.

Item 3. Defaults Upon Senior Securities

The commencement of the Chapter 11 proceedings by Congoleum constituted an event
of default under the indenture governing Congoleum's 8 5/8% Senior Notes Due
2008. In addition, due to the Chapter 11 proceedings, Congoleum was not
permitted to make the interest payment due February 1, 2004 on the Senior Notes.
The amount of accrued interest that was not paid on the Senior Notes on that
date is approximately $4.3 million. As of June 30, 2004, the aggregate
outstanding principal amount of the Senior Notes is approximately $100 million.
These amounts, plus $155,000 of accrued interest on the unpaid interest that was
due on February 1, 2004 with respect to the Senior Notes, are included in the
line item "Liabilities Subject to Compromise" in the Company's consolidated
balance sheet included in this report.

Item 4. Submission of Matters to a Vote of Security Holders

        At the annual meeting of the Company's stockholders held on May 10,
        2004, all director nominees were elected.

        The three Nominees who were elected as Class II Directors will hold
        office until the annual meeting of stockholders to be held in 2007 and
        until their successors are duly elected and qualify. The results of the
        vote for the election of those directors are set forth below.

                                    Number of                        Number of
        Name                        Votes For                    Votes Withheld
        ----                        ---------                    --------------

        John C. Garrels III         2,874,364                          71,631
        James S. Marcus             2,873,714                          72,281
        Roger S. Marcus             2,776,264                         169,731


                                       42
<PAGE>

Item 6. Exhibits and Reports on Form 8-K

(a)     Exhibits

Exhibit No.                        Description
----------------------------------------------------------------

3.1     II                 Restated Certificate of Incorporation

3.2     I                  By-Laws, amended and restated as of
                           March 13, 1991

31.1                       Certification of the Principal
                           Executive Officer of the Registrant
                           Pursuant to Rule 13a-14(a) and Rule
                           15d-14(a) of the Securities and
                           Exchange Act of 1934, as amended.

31.2                       Certification of the Chief Financial
                           Officer of the Registrant Pursuant
                           to Rule 13a-14(a) and Rule 15d-14(a)
                           of the Securities and Exchange Act
                           of 1934, as amended.

32                         Certification of the Chief Executive
                           Officer and Chief Financial Officer
                           pursuant to 18 U.S.C. Section 1350,
                           as adopted pursuant to Section 906
                           of the Sarbanes-Oxley Act of 2002.

      ----------
      I     Incorporated by reference to the exhibits to the Company's Annual
            Report on Form 10-K for the year ended December 31, 1991. (1-4773)

      II    Incorporated by reference to the exhibits to the Company's Annual
            Report on Form 10-K for the year ended December 31, 1996.

(b)   Reports on Form 8-K

On May 11, 2004, the Registrant furnished a Current Report on Form 8-K under
Item 12 relating to the Company's press release dated May 10, 2004 announcing
its financial results for the three months ended March 31, 2004.


                                       43
<PAGE>

                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                                AMERICAN BILTRITE INC.
                                                ----------------------
                                                     (Registrant)


Date:   August 12, 2004                  BY:  /s/  Howard N. Feist III
                                              -------------------------
                                              Howard N. Feist III
                                              Vice President-Finance
                                              (Duly Authorized Officer and
                                              Principal Financial and Accounting
                                              Officer)


                                       44
<PAGE>

                                INDEX OF EXHIBITS

Exhibit No.                        Description
----------------------------------------------------------------

3.1     II                 Restated Certificate of Incorporation

3.2     I                  By-Laws, amended and restated as of
                           March 13, 1991

31.1                       Certification of the Principal Executive Officer of
                           the Registrant Pursuant to Rule 13a-14(a) and Rule
                           15d-14(a) of the Securities and Exchange Act of
                           1934, as amended.

31.2                       Certification of the Chief Financial Officer of the
                           Registrant Pursuant to Rule 13a-14(a) and Rule
                           15d-14(a) of the Securities and Exchange Act of
                           1934, as amended.

32                         Certification of the Chief Executive Officer and
                           Chief Financial Officer pursuant to 18 U.S.C.
                           Section 1350, as adopted pursuant to Section 906
                           of the Sarbanes-Oxley Act of 2002.

      ----------
      I     Incorporated by reference to the exhibits to the Company's Annual
            Report on Form 10-K for the year ended December 31, 1991. (1-4773)

      II    Incorporated by reference to the exhibits to the Company's Annual
            Report on Form 10-K for the year ended December 31, 1996.


                                       45