FORM 10-Q

UNITED STATES

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 March 31, 2011 | 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 incorporation or organization) | (I.R.S. Employer Identification No.)



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
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).Yes [   ]   No [   ]



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.



Large accelerated filer [ ] Accelerated
filer [ ] Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [X]



Indicate by check mark whether the registrant
is a shell company (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.



|Class        |  | Outstanding at April 15, 2011
|------------ |  | -----------------------------
|             |  |                              
|Common Stock |  | 3,441,357 shares             







FORWARD LOOKING STATEMENTS



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 American Biltrite Inc.’s expectations as of the date of this report, of future events. American Biltrite Inc. undertakes
no obligation to update any of these forward looking statements, except as may be required by the federal securities laws. Although
American Biltrite Inc. believes that these expectations are based on reasonable assumptions, within the bounds of its knowledge
of its business and experience, there can be no assurance that actual results will not differ materially from expectations. Any
or all of these expectations may turn out to be incorrect and any forward-looking statements made in this report speak only as
of the date of this report unless the statement indicates that another date applies. Readers are cautioned not to place undue reliance
on any forward-looking statements. Actual results could differ significantly as a result of various factors. By their nature, forward-looking
statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur
in the future. It is not possible to predict or identify all factors that could potentially cause actual results to differ materially
from expected and historical results. Factors that could cause or contribute to American Biltrite Inc.’s actual results differing
from its expectations include those factors discussed in Item 1A of Part II of this Quarterly Report on Form 10-Q and in American
Biltrite Inc.’s other filings with the Securities and Exchange Commission, including American Biltrite Inc.’s Annual
Report on Form 10-K for the year ended December 31, 2010.









AMERICAN BILTRITE INC.



INDEX



|PART I.  | FINANCIAL INFORMATION |                                                                                                                                    
|-------- | --------------------- | -----------------------------------------------------------------------------------------------------------------------------------
|         |                       |                                                                                                                                    
|         | Item 1.               | Financial Statements:                                                                                                              
|         |                       |                                                                                                                                    
|         |                       | Consolidated Condensed Balance Sheets – Assets as of March 31, 2011 (Unaudited) and December 31, 2010                              
|         |                       |                                                                                                                                    
|         |                       | Consolidated Condensed Balance Sheets – Liabilities and Stockholders’ Equity as of March 31, 2011 (Unaudited) and December 31, 2010
|         |                       |                                                                                                                                    
|         |                       | Consolidated Condensed Statements of Operations (Unaudited) For the Three Months Ended March 31, 2011 and 2010                     
|         |                       |                                                                                                                                    
|         |                       | Consolidated Condensed Statements of Cash Flows (Unaudited) For the Three Months ended March 31, 2011 and 2010                     
|         |                       |                                                                                                                                    
|         |                       | Notes to Unaudited Consolidated Condensed Financial Statements                                                                     
|         |                       |                                                                                                                                    
|         | Item 2.               | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                              
|         |                       |                                                                                                                                    
|         | Item 4.               | Controls and Procedures                                                                                                            
|         |                       |                                                                                                                                    
|PART II. | OTHER INFORMATION     |                                                                                                                                    
|         |                       |                                                                                                                                    
|         | Item 1.               | Legal Proceedings                                                                                                                  
|         |                       |                                                                                                                                    
|         | Item 1A.              | Risk Factors                                                                                                                       
|         |                       |                                                                                                                                    
|         | Item 5.               | Other Information                                                                                                                  
|         |                       |                                                                                                                                    
|         | Item 6.               | Exhibits                                                                                                                           
|         |                       |                                                                                                                                    
|         | Signature             |                                                                                                                                    









PART I. FINANCIAL INFORMATION



Item 1. Financial Statements





AMERICAN BILTRITE INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS –
ASSETS

(In thousands of dollars)



|                                           |  | March 31,  2011 |         | December 31,  2010
|------------------------------------------ |  | --------------- | ------- | ------------------
|                                           |  | (Unaudited)     |         |                   
|Assets                                     |  |                 |         |                   
|Current assets:                            |  |                 |         |                   
|Cash and cash equivalents                  |  | $               | 368     |                   
|Short-term investments                     |  |                 | 2,400   |                   
|Accounts receivable, net                   |  |                 | 26,189  |                   
|Inventories                                |  |                 | 41,625  |                   
|Taxes receivable                           |  |                 | 484     |                   
|Prepaid expense & other current assets     |  |                 | 2,571   |                   
|Total current assets                       |  |                 | 73,637  |                   
|                                           |  |                 |         |                   
|Property, plant & equipment, net           |  |                 | 29,931  |                   
|                                           |  |                 |         |                   
|Other assets:                              |  |                 |         |                   
|Insurance for asbestos-related liabilities |  |                 | 17,646  |                   
|Other assets                               |  |                 | 8,647   |                   
|                                           |  |                 | 26,293  |                   
|                                           |  |                 |         |                   
|Total assets                               |  | $               | 129,861 |                   



See accompanying notes to consolidated
condensed financial statements.



1





AMERICAN BILTRITE INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS –

LIABILITIES AND STOCKHOLDERS’ EQUITY

(In thousands of dollars)



|                                                    |  | March 31, 2011 |         | December 31, 2010
|--------------------------------------------------- |  | -------------- | ------- | -----------------
|                                                    |  | (Unaudited)    |         |                  
|Liabilities                                         |  |                |         |                  
|Current liabilities:                                |  |                |         |                  
|Accounts payable                                    |  | $              | 12,210  |                  
|Accrued expenses                                    |  |                | 17,176  |                  
|Notes payable                                       |  |                | 7,035   |                  
|Current portion of long-term debt                   |  |                | 1,489   |                  
|Total current liabilities                           |  |                | 37,910  |                  
|                                                    |  |                |         |                  
|Long-term debt, less current portion                |  |                | 5,382   |                  
|Asbestos-related liabilities                        |  |                | 17,700  |                  
|Other liabilities                                   |  |                | 16,589  |                  
|Total liabilities                                   |  |                | 77,581  |                  
|                                                    |  |                |         |                  
|Stockholders’ equity                                |  |                |         |                  
|Common stock                                        |  |                | 46      |                  
|Additional paid-in capital                          |  |                | 20,189  |                  
|Less cost of shares in treasury                     |  |                | (15,133 | )                
|Retained earnings                                   |  |                | 47,254  |                  
|Accumulated other comprehensive loss                |  |                | (1,019  | )                
|Total stockholders’ equity of controlling interests |  |                | 51,337  |                  
|Noncontrolling interests                            |  |                | 943     |                  
|Total stockholders’ equity                          |  |                | 52,280  |                  
|                                                    |  |                |         |                  
|Total liabilities and stockholders’ equity          |  | $              | 129,861 |                  



See accompanying notes to consolidated
condensed financial statements.



2





AMERICAN BILTRITE INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

For the Three Ended March 31, 2011 and
2010

(In thousands of dollars, except share
and per share amounts)



|                                                                       |  | Three Months Ended March 31,
|---------------------------------------------------------------------- |  | ----------------------------
|                                                                       |  | 2011                        
|                                                                       |  |                             
|Net sales                                                              |  | $                           
|Cost of products sold                                                  |  |                             
|Selling, general & administrative expenses                             |  |                             
|Income (loss) from operations                                          |  |                             
|                                                                       |  |                             
|Other income (expense)                                                 |  |                             
|Interest income                                                        |  |                             
|Interest expense                                                       |  |                             
|Other income (expense)                                                 |  |                             
|                                                                       |  |                             
|Income (loss) before income taxes and other items                      |  |                             
|Provision for income taxes                                             |  |                             
|Net income (loss)                                                      |  |                             
|Noncontrolling interests                                               |  |                             
|Net income (loss) from continuing operations of  controlling interests |  |                             
|Net loss of discontinued operation, net of noncontrolling interests    |  |                             
|                                                                       |  |                             
|Net income (loss) attributable to controlling interests                |  | $                           
|                                                                       |  |                             
|Earnings (loss) per share attributable to controlling interests        |  |                             
|Basic                                                                  |  |                             
|Continuing operations                                                  |  | $                           
|Discontinued operation                                                 |  |                             
|                                                                       |  | $                           
|Diluted                                                                |  |                             
|Continuing operations                                                  |  | $                           
|Discontinued operation                                                 |  |                             
|                                                                       |  | $                           
|Weighted average shares outstanding                                    |  |                             
|Basic                                                                  |  |                             
|Diluted                                                                |  |                             



See accompanying notes to consolidated
condensed financial statements.



3





AMERICAN BILTRITE INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH
FLOWS (Unaudited)

(In thousands of
dollars)



|                                                                                                |  | Three Months Ended  March 31,
|----------------------------------------------------------------------------------------------- |  | -----------------------------
|                                                                                                |  | 2011                         
|Operating activities                                                                            |  |                              
|Net income (loss)                                                                               |  | $                            
|Net loss of discontinued operation, net of noncontrolling interests                             |  |                              
|Net income (loss) from continuing operations                                                    |  |                              
|Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: |  |                              
|Depreciation and amortization                                                                   |  |                              
|Stock compensation expense                                                                      |  |                              
|Change in operating assets and liabilities:                                                     |  |                              
|Accounts and notes receivable                                                                   |  |                              
|Inventories                                                                                     |  |                              
|Prepaid expenses and other assets                                                               |  |                              
|Accounts payable and accrued expenses                                                           |  |                              
|Other                                                                                           |  |                              
|Net cash used by operating activities                                                           |  |                              
|Continuing operations                                                                           |  |                              
|Discontinued operation                                                                          |  |                              
|Net cash used by operating activities                                                           |  |                              
|Investing activities                                                                            |  |                              
|Investments in property, plant and equipment                                                    |  |                              
|Purchase of short-term investments                                                              |  |                              
|Proceeds from sale of short-term investments                                                    |  |                              
|Net cash used by investing activities                                                           |  |                              
|Continuing operations                                                                           |  |                              
|Discontinued operation                                                                          |  |                              
|Net cash used by investing activities                                                           |  |                              
|Financing activities                                                                            |  |                              
|Net short-term borrowings                                                                       |  |                              
|Payments on long-term debt                                                                      |  |                              
|Net cash provided by financing activities                                                       |  |                              
|Continuing operations                                                                           |  |                              
|Discontinued operation                                                                          |  |                              
|Net cash provided by financing activities                                                       |  |                              
|Effect of foreign exchange rate changes on cash                                                 |  |                              
|Net decrease in cash                                                                            |  |                              
|Cash and cash equivalents at beginning of period                                                |  |                              
|Cash and cash equivalents at end of period                                                      |  |                              
|Less cash and cash equivalents of discontinued operation at end of period                       |  |                              
|                                                                                                |  |                              
|Cash and cash equivalents of continuing operations at end of period                             |  | $                            



See accompanying notes to consolidated
condensed financial statements.



4





AMERICAN BILTRITE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED CONDENSED

FINANCIAL STATEMENTS

March 31, 2011

(Unaudited)



Note A – Basis of Presentation



The
accompanying unaudited consolidated condensed financial statements which include the accounts of American Biltrite Inc. and its
wholly owned subsidiaries (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 (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information
and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three
months ended March 31, 2011 are not necessarily indicative of the results that may be expected for future periods, including the
year ending December 31, 2011. For further information, refer to the consolidated financial statements and the notes to those financial
statements included in American Biltrite Inc.'s Annual Report on Form 10-K for the year ended December 31, 2010.



The consolidated condensed balance sheet
at December 31, 2010 has been derived from the audited financial statements as of that date but does not include all of the information
and notes required by U.S. GAAP for complete financial statements.



The Company’s former subsidiary Congoleum
Corporation (“Congoleum”) filed a voluntary petition on December 31, 2003, with the United States Bankruptcy Court
for the District of New Jersey (the “Bankruptcy Court”) seeking relief under Chapter 11 of the United States Bankruptcy
Code (the “Bankruptcy Code”) as a means to resolve claims asserted against it related to the use of asbestos in its
products decades ago, and on August 17, 2009, the United States District Court for the District of New Jersey (the “District
Court”) withdrew the reference of Congoleum’s Chapter 11 case from the Bankruptcy Court and assumed authority over
the proceedings. Congoleum’s plan of reorganization was confirmed by the District Court on June 7, 2010 and became effective
July 1, 2010. Upon effectiveness of Congoleum’s plan of reorganization, ABI’s ownership interests in Congoleum were
cancelled. Consequently, the results of reorganized Congoleum are not included in the consolidated results of the Company subsequent
to June 30, 2010. In the accompanying unaudited consolidated condensed financial statements, the historical results of Congoleum
have been reported as a discontinued operation.



5





Note B – Inventories



Inventories at March 31, 2011 and December
31, 2010 consisted of the following (in thousands):



|                           |  | March 31,  2011 |        | December 31, 2010
|-------------------------- |  | --------------- | ------ | -----------------
|                           |  |                 |        |                  
|Finished goods             |  | $               | 20,026 |                  
|Consigned inventory        |  |                 | 5,140  |                  
|Work-in-process            |  |                 | 9,405  |                  
|Raw materials and supplies |  |                 | 7,054  |                  
|                           |  |                 |        |                  
|                           |  | $               | 41,625 |                  



Note C – Accrued Expenses



Accrued expenses at March 31, 2011 and
December 31, 2010 consisted of the following (in thousands):



|                                           |  | March 31, 2011 |        | December 31, 2010
|------------------------------------------ |  | -------------- | ------ | -----------------
|                                           |  |                |        |                  
|Accrued advertising and sales promotions   |  | $              | 4,015  |                  
|Employee compensation and related benefits |  |                | 5,429  |                  
|Environmental matters                      |  |                | 951    |                  
|Royalties                                  |  |                | 864    |                  
|Income taxes                               |  |                | 841    |                  
|Professional fees                          |  |                | 908    |                  
|Other                                      |  |                | 4,168  |                  
|                                           |  |                |        |                  
|                                           |  | $              | 17,176 |                  



6





Note D – Financing Arrangements



American Biltrite Inc.’s primary
sources of borrowings are the revolving credit facility (the “Revolver”) and the term loan (“Term Loan”)
it has with Wachovia Bank, National Association (“Wells Fargo”) pursuant to a loan and security agreement (the “Credit
Agreement”). (At the end of 2008, Wells Fargo Bank completed its acquisition
of Wachovia Bank.) The Credit Agreement was entered into on June 30, 2009, and initial borrowings under the Credit Agreement
were used to pay off borrowings from another financial institution and to pay fees and expenses in connection with the refinancing.



The Credit Agreement provides American
Biltrite Inc. and its subsidiaries with (i) a $30.0 million commitment under the Revolver (including a $12.0 million Canadian revolving
credit facility sublimit) and (ii) an $8.0 million Term Loan. The Credit Agreement also provides letter of credit facilities with
availability of up to $6.0 million (including a $3.0 million Canadian letter of credit facility sublimit) subject to availability
under the Revolver. The Revolver expires on June 30, 2012, and all indebtedness under the Credit Agreement other than the Term
Loan, matures on that date. The Term Loan principal is payable in 72 monthly installments of $111 thousand beginning August 1,
2009 and ending on July 1, 2015. The maximum amount available for revolving debt borrowings is reduced to the amount of the borrowing
base if that amount is lower. The borrowing base is based upon eligible assets of the Company, including accounts receivables and
inventory. The Company’s obligations under the Credit Agreement are secured by a lien on the assets of the Company and its
subsidiaries. At March 31, 2011, the Company had $7.0 million and $5.7 million outstanding under the Revolver and Term Loan, respectively,
and $12.5 million of additional unused borrowing capacity available under the Revolver.



Interest is payable monthly on borrowings
under the Credit Agreement at rates based on a base interest rate plus an applicable margin for each type of loan, which varies
depending on whether the loan is based on U.S., Canadian, or Eurodollar rate loans and which ranges from an applicable rate of
two hundred basis points over U.S. and Canadian base rates to four hundred basis points over Eurodollar base rates for revolving
debt loans and three hundred basis points over U.S. base rates and five hundred basis points over Eurodollar base rates for the
Term Loan. The Credit Agreement charges the Company a monthly unused borrowing line fee, at a rate equal to five-eighths of one
percent (0.625%) per annum. In addition, the Credit Agreement imposes a monthly letter of credit fee equal to four percent (4%)
per annum for outstanding letters of credit.



The Credit Agreement contains customary
bank covenants, including limitations on incurrence of debt and liens or other encumbrances on assets or properties, sale of assets,
making of loans or investments, including paying dividends and redemptions of capital stock, the formation or acquisition of subsidiaries
and transactions with affiliates. The Credit Agreement requires the Company to maintain, on a consolidated basis, a minimum fixed
charge coverage ratio of 1.0:1.0. The Credit Agreement also requires that the Company to maintain, on a consolidated basis, a minimum
amount of earnings before interest, taxes, depreciation, and amortization, as determined under the Credit Agreement.



7





Note D – Financing Arrangements
(continued)



In March 2010, the Company and Wells Fargo
entered into an amendment to the Credit Agreement. The amendment reduced the minimum required levels of earnings before interest,
taxes, depreciation, and amortization under the Credit Agreement for 2010. It further provided that, for the remaining term of
the Credit Agreement, meeting such minimums would not be required for any monthly test period during which the Company’s
unused available credit under the Credit Agreement was at least $6.0 million for 30 consecutive days. The Company paid a fee of
$30 thousand to Wells Fargo in connection with this amendment.



The Company currently anticipates it will
be able to comply with its covenants under the Credit Agreement. However, the Company had to receive covenant waivers on several
occasions under its prior credit agreement or enter amendments to that agreement to address failures to satisfy covenants under
that prior credit agreement, and it is possible that, in the future, the Company may need to obtain waivers for failures to satisfy
its covenants under the Credit Agreement or enter amendments to the Credit Agreement to address any such failures or obtain replacement
financing as a result. There can be no assurance the Company would be successful in obtaining any such waiver, entering any such
amendment or obtaining any such replacement financing.



Any waivers, amendments and/or
replacement financing, if obtained, could result in significant cost to the Company. If an event of default under the Credit Agreement
were to occur, the lenders could cease to make borrowings available under the Revolver and require the Company to repay all amounts
outstanding under the Credit Agreement. If the Company were unable to repay those amounts due, the lenders could have their rights
over the collateral exercised, which would likely have a material adverse effect on the Company’s business, results of operations
or financial condition.



Note E – Other Liabilities



Other Liabilities at March 31, 2011 and
December 31, 2010 consisted of the following (in thousands):



|                                                          |  | March 31, 2011 |        | December 31, 2010
|--------------------------------------------------------- |  | -------------- | ------ | -----------------
|                                                          |  |                |        |                  
|Pension benefits                                          |  | $              | 6,403  |                  
|Environmental remediation and product related liabilities |  |                | 7,516  |                  
|Income taxes                                              |  |                | 1,058  |                  
|Other                                                     |  |                | 1,612  |                  
|                                                          |  |                |        |                  
|                                                          |  | $              | 16,589 |                  



8





Note
F – Pension Plans



The Company sponsors several noncontributory
defined benefit pension plans covering most of its employees. Benefits under the plans are based on years of service and employee
compensation. Amounts funded annually by the Company are actuarially determined using the projected unit credit and unit credit
methods and are equal to or exceed the minimum required by government regulations.



The table below summarizes the components
of the net periodic benefit cost for the Company's pension plans during the three months ended March 31, 2011 and 2010 (in thousands):



|                                     |  | Three Months Ended
March 31,
|------------------------------------ |  | ----------------------------
|                                     |  | 2011                        
|                                     |  |                             
|Service cost                         |  | $                           
|Interest cost                        |  |                             
|Expected return on plan assets       |  |                             
|Recognized net actuarial loss (gain) |  |                             
|Amortization of prior service cost   |  |                             
|                                     |  |                             
|Net periodic benefit cost            |  | $                           



The weighted average assumptions used
to determine net periodic benefit cost for the three months ended March 31, 2011 and 2010 were as follows:



|                                         | 2011          |  | 2010         
|---------------------------------------- | ------------- |  | -------------
|                                         |               |  |              
|Discount rate                            | 5.50%         |  | 5.75% - 6.25%
|Expected long-term return on plan assets | 6.75% - 7.00% |  | 6.75% - 7.00%
|Rate of compensation increase            | 3.00% - 3.50% |  | 3.00% - 3.50%



9





Note G – Commitments and Contingencies



The Company is subject to federal, state
and local environmental laws and regulations, and certain legal and administrative claims are pending or have been asserted against
the Company. Among these claims, the Company is a named party in several actions associated with waste disposal sites. 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 the Company’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 may be required,
the determination of the Company’s liability in proportion to other potentially responsible parties, the financial viability
of other potentially responsible parties, and the extent to which costs may be recoverable from insurance or other third party
sources. Provisions in the financial statements have been recorded for the estimated probable loss associated with all known general
and environmental contingencies for the Company. While the Company believes its estimate of the future amount of these liabilities
is reasonable, and that it will be paid for the most part over a period of five to twenty-five years, the 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 that it currently
expects would have a material adverse effect on its results of operations or financial position. There can be no assurances that
the costs of any future government regulations could be passed along by the Company to its customers. Estimated insurance recoveries
related to these liabilities are reflected in other non-current assets.



The Company records a liability for environmental
remediation claims when the Company determines that it is probable that the Company 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 as appropriate to reflect such revisions and progress.



10





Note G – Commitments and Contingencies
(continued)



ABI is a co-defendant with many other
manufacturers and distributors of asbestos containing products in approximately 1,280 pending claims involving approximately 1,826
individuals as of March 31, 2011. These claims relate to products of ABI’s former Tile division, which ABI contributed to
Congoleum in 1993. The claimants allege personal injury or death from exposure to asbestos or asbestos-containing products. Activity
related to asbestos claims during the three months ended March 31, 2011 and year ended December 31, 2010 was as follows:



|                 |  | Three months ended March 31, 2011 |       | Year Ended December 31, 2010
|---------------- |  | --------------------------------- | ----- | ----------------------------
|                 |  |                                   |       |                             
|Beginning claims |  |                                   | 1,261 |                             
|New claims       |  |                                   | 89    |                             
|Settlements      |  |                                   | (11   | )                           
|Dismissals       |  |                                   | (59   | )                           
|                 |  |                                   |       |                             
|Ending claims    |  |                                   | 1,280 |                             



ABI has multiple excess layers of insurance
coverage for asbestos claims. The total indemnity costs incurred to settle claims during the three months ended March 31, 2011
and the year ended December 31, 2010 were $1.8 million and $5.7 million, respectively, all of which were paid by ABI's first-layer
excess umbrella insurance carriers, as were the related defense costs.



In addition to coverage available under
the first-layer excess umbrella coverage (the “Umbrella Coverage”), ABI has additional excess liability insurance policies
that should provide further coverage if and when limits of certain policies within the Umbrella Coverage exhaust. While ABI expects
the Umbrella Coverage will result in the substantial majority of defense and indemnity costs for asbestos claims against ABI being
paid by its insurance carriers for the foreseeable future, ABI may incur uninsured costs related to asbestos claims, and those
costs could be material. If ABI were to incur significant uninsured costs for asbestos claims, or its insurance carriers failed
to fund insured costs for asbestos claims, such costs could have a material adverse impact on its liquidity, financial condition
and results of operations.



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 for indemnity to resolve currentand reasonably anticipated future
asbestos-related claims, based upon a strategy to vigorously defend against and strategically settle those claims on a case-by-case
basis in the normal course of business. Factors such as recent and historical settlement and trial results, the court dismissal
rate

11





Note G – Commitments and Contingencies
(continued)



of claims, 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. Changes in factors could have a material impact on the Company’s liability.
For instance, the estimate is sensitive to changes in the mesothelioma acceptance rate. For example, if the calibration window
is shifted by two years, the mesothelioma acceptance rate decreases by 1.2% to 4.6%, and this would reduce the low end of the estimated
liability range discussed below by about 20% (assuming all other variables remain constant).



The Company
utilizes an actuarial study periodically to assist it in developing estimates of the Company’s potential liability
for resolving present and possible future asbestos claims. Projecting future asbestos claim costs requires estimating numerous
variables that are difficult to predict, including the incidence of claims, the disease that may be alleged by future claimants,
future settlement and trial results, future court dismissal rates for claims, and possible asbestos legislation developments. Furthermore,
any predictions with respect to these variables are subject to even greater uncertainty as the projection period lengthens. In
light of these inherent uncertainties, the Company believes that six years is the most reasonable period over which to include
future claims that may be brought against the Company for recognizing a reserve for future costs. Due to the numerous variables
and uncertainties, the Company does not believe that reasonable estimates can be developed of liabilities for claims beyond a six
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 estimated range of liability for settlement
of current claims pending and claims anticipated to be filed in the next six years, excluding defense costs, was $17.7 million
to $62.0 million as of December 31, 2010. The Company believes no amount within this range is more likely than any other, and accordingly
has recorded a liability of $17.7 million in its financial statements which the Company believes represents
a probable and reasonably estimable amount for the future liability at the present time. The Company also believes thatbased
on this liability estimate, the corresponding amount of insurance probable of recovery is $17.6 million
at March 31, 2011 and December 31, 2010, which has been included in other assets. The same factors that affect developing forecasts
of potential indemnity costs for asbestos-related liabilities also affect estimates of the total amount of insurance that is probable
of recovery, as do a number of additional factors. These additional factors include the financial viability of the insurance companies,
the method in which losses will be allocated to the various insurance policies and the years covered by those policies, how legal
and other loss handling costs will be covered by the insurance policies, and interpretation of the effect on coverage of various
policy terms and limits and their interrelationships. These amounts were based on currently known facts
by ABI and a number of assumptions. However, the uncertainties referred to above, including the difficulty projecting future events,
such as the number of new claims to be filed each year, the average cost of disposing of each such claim, and the continuing solvency
of various insurance companies, as well as numerous uncertainties surrounding asbestos legislation in the United States, could
cause the actual liability and insurance recoveries for the Company to be higher or lower than those projected or recorded.

12





Note G – Commitments and Contingencies
(continued)



There can be no assurance that the Company’s
accrued asbestos liabilities will approximate its actual asbestos-related settlement costs, or that it will receive the insurance
recoveries which it has accrued or that its insurance will adequately cover the Company’s costs and liabilities with respect
to asbestos claims. The Company believes that it is reasonably possible that it will incur charges for resolution of asbestos claims
in the future, which could exceed the Company’s existing reserves. The Company believes it has substantial insurance coverage
to mitigate future costs related to this matter.



As of March 31, 2011 and December 31, 2010,
ABI recorded a reserve of $8.3 million, which the Company believes represents the probable and reasonably estimable amounts to
cover the anticipated remediation costs described in the Company’s Annual Report on Form 10-K for the fiscal year ended December
31, 2010 and above based on facts and circumstances known to the Company. The Company has also recorded a receivable of $3.2 million
as of March 31, 2011 and December 31, 2010, for what the Company believes is its estimable and probable recoveries for the contingencies
described above. These projects tend to be long-term in nature, and these assumptions are subject to refinement as facts change.
As such, it is possible that the Company may need to revise its recorded liabilities and receivables for environmental costs in
future periods, resulting in potentially material adjustments to the Company’s earnings and estimated funding obligations
with respect to these matters in future periods. The Company monitors existing and potential environmental matters to consider
the reasonableness of its estimates and assumptions.



In the Company’s Annual Report on
Form 10-K for the year ended December 31, 2010, the Company disclosed various legal proceedings. There have been no material developments
relating to the environmental sites or the other environmental or other legal matters relating to ABI that were disclosed in ABI's
Annual Report on Form 10-K for the year ended December 31, 2010, during the three month period ended March 31, 2011.



In addition to the matters referenced
above, in the ordinary course of its business, the Company becomes involved in lawsuits and administrative proceedings in connection
with 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.



13





Note H – Income Taxes



The effective tax rate for the three months
ended March 31, 2011 and 2010 was 36.6% and (2.4)%, respectively. During the first quarter of 2010, the Company did not recognize
the tax benefit of losses incurred because of the uncertainty of the Company’s ability to generate future taxable income
to utilize the deferred tax assets. As of December 31, 2010, the Company determined that the net deferred tax assets of its Canadian
division did not require a valuation allowance, resulting in the recognition of a $1.7 million benefit for 2010.



The Company’s Canadian subsidiary, American
Biltrite (Canada) Ltd. (“AB Canada”), is currently under audit by the Canadian Revenue Authority (“CRA”)
for the years ending 2002 through 2007. In January 2011, the CRA notified AB Canada that certain amounts related to the Company’s
management fees and net operating loss carryforwards of a discontinued operation will be disallowed. If the CRA positions are sustained
in full, the Company’s tax liability would increase by approximately $3.6 million plus interest and penalties for these years.
In May 2011, AB Canada received a formal notice of assessment from the CRA for approximately $600 thousand, plus $400 thousand
for interest and penalties. This assessment addresses only part of the CRA’s audit conclusions stated in its January 2011
notification, and AB Canada may receive further assessments. The Company intends to vigorously defend its positions. The Company’s
estimate of its potential liability for the CRA audit conclusions and assessment is included in its allowance for uncertain tax
positions; however, the final outcome of this audit is uncertain and therefore, the impact on the financial position and results
of operations of the Company cannot be fully determined. The Company’s allowance for uncertain tax positions was $1.6 million
at March 31, 2011 and December 31, 2010.



14





Note I – Stockholders’ (Deficit)
Equity



The following table reconciles stockholders’
(deficit) equity for the year ended December 31, 2010 and the three months ended March 31, 2011 (in thousands):



|                                                      |  | Stockholders’ (Deficit) Equity of Controlling Interests |         | Non-Controlling Interests |  | Total  Equity
|----------------------------------------------------- |  | ------------------------------------------------------- | ------- | ------------------------- |  | -------------
|                                                      |  |                                                         |         |                           |  |              
|December 31, 2009                                     |  | $                                                       | (44,624 | )                         |  | $            
|Net income for the year ended December 31, 2010       |  |                                                         |         |                           |  |              
|Continuing operations                                 |  |                                                         | 4,231   |                           |  |              
|Discontinued operation                                |  |                                                         | 52,938  |                           |  |              
|Foreign currency translation adjustments              |  |                                                         | 997     |                           |  |              
|Defined benefit plans adjustment                      |  |                                                         | (719    | )                         |  |              
|Stock compensation expense                            |  |                                                         | 198     |                           |  |              
|Purchase of treasury stock                            |  |                                                         | (1      | )                         |  |              
|Taxes payable adjustment for noncontrolling interests |  |                                                         | —       |                           |  |              
|K &M distribution                                     |  |                                                         | —       |                           |  |              
|Deconsolidation of Congoleum                          |  |                                                         | 37,127  |                           |  |              
|                                                      |  |                                                         |         |                           |  |              
|December 31, 2010                                     |  |                                                         | 50,147  |                           |  |              
|                                                      |  |                                                         |         |                           |  |              
|Net income for the three months ended March 31, 2011  |  |                                                         | 485     |                           |  |              
|Foreign currency translation adjustments              |  |                                                         | 664     |                           |  |              
|Stock compensation expense                            |  |                                                         | 41      |                           |  |              
|                                                      |  |                                                         |         |                           |  |              
|March 31, 2011                                        |  | $                                                       | 51,337  |                           |  | $            



Prior to July 1, 2010, American Biltrite owned
55% of Congoleum’s outstanding shares of Class A and Class B common stock. The noncontrolling interests recorded in American
Biltrite’s consolidated financial statements included the 45% of outstanding shares of Congoleum Class A and Class B common
stock not owned by American Biltrite. Prior to January 1, 2009, American Biltrite reported in its consolidated results 100% of
Congoleum’s losses from the period Congoleum incurred a deficit in earnings during 2002 through December 31, 2008, in accordance
with accounting rules in effect through December 31, 2008. Effective January 1, 2009, the Company adopted the FASB’s new
accounting standard for the accounting of noncontrolling interests. Under the new standard, 45% of Congoleum’s income or
loss was attributed to the noncontrolling interests even if the attribution of a loss results in a negative balance for noncontrolling
interest.

15





Note I – Stockholders’ (Deficit)
Equity (continued)



Upon effectiveness of Congoleum’s plan
of reorganization as of July 1, 2010, ABI’s ownership interests in Congoleum were cancelled by operation of the plan. Consequently,
the results of reorganized Congoleum are not included in the consolidated results of the Company subsequent to June 30, 2010. Congoleum’s
historical results through June 30, 2010 included losses (including other comprehensive losses) of $90.7 million in excess of the
value of ABI’s investment in Congoleum. The deconsolidation of Congoleum in July 2010 resulted in the elimination from American
Biltrite’s consolidated stockholders’ equity of the accumulated deficit attributed to Congoleum, $37.1 million of which
was recorded against accumulated other comprehensive income for prior period pension adjustments and $53.6 million was recorded
as a gain from deconsolidation in net income of discontinued operation. Net income of the discontinued operation for the year ended
December 31, 2010 is comprised of (in thousands):



|Gain on deconsolidation                                              |  | $ | 53,565 |  
|-------------------------------------------------------------------- |  | - | ------ | -
|Net loss of Congoleum for the six months ended June 30, 2010         |  |   | (1,140 | )
|Noncontrolling interest of Congoleum’s net loss                      |  |   | 513    |  
|                                                                     |  |   |        |  
|Net income of discontinued operation, net of noncontrolling interest |  | $ | 52,938 |  



In March 2010, in accordance with its partnership
agreement, the Company’s majority-owned (94.5%) subsidiary K&M Associates L.P. (“K&M”) made a $1.8 million
distribution to its partners. The amount of the distribution made to the minority partner of K&M was $98 thousand (5.5%), which
reduced noncontrolling interests. On August 23, 2010, the Company acquired the 5.5% minority interest in K&M in a non-cash
transaction. The Company recognized $44 thousand of income attributable to non-controlling interests in K&M, net of tax, for
the eight months ended August 28, 2010.



Note J – Comprehensive Income
(Loss)



The following table presents total comprehensive
income for the three months ended March 31, 2011 and 2010 (in thousands):



|                                         |  | Three Months Ended
March 31,
|---------------------------------------- |  | ----------------------------
|                                         |  | 2011                        
|Net income (loss)                        |  |                             
|Continuing operations                    |  | $                           
|Discontinued operation                   |  |                             
|Foreign currency translation adjustments |  |                             
|                                         |  |                             
|Total comprehensive income               |  | $                           



16





Note K – Income (Loss) Per Share



Basic earnings per share is based on the
weighted-average number of shares of common stock outstanding, and diluted earnings per share is based on the weighted-average
number of shares of common stock outstanding and all dilutive potential common stock equivalents outstanding. The dilutive effect
of options is determined under the treasury stock method using the average market price for the period. Common stock equivalents
are included in the per share calculations when the effect of their inclusion would be dilutive. The Company’s common stock
equivalents consist only of stock options granted under the Company’s employee and non-employee director stock option plans.



Note L – Industry Segments



Description of Products and Services



The Company has three segments for financial
reporting purposes: the tape division, jewelry and a Canadian division. The tape division 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 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.



Prior to July 1, 2010, the Company had a flooring
segment, which consisted of Congoleum, a manufacturer of resilient floor coverings. On July 1, 2010, Congoleum’s plan of
reorganization became effective and, consequently, ABI’s ownership interest in Congoleum was cancelled by operation of that
plan (see Notes A and M). In the accompanying unaudited consolidated condensed financial statements, the historical results of
Congoleum have been reported as a discontinued operation. Net sales and segment profit provided below relate to the segments of
the continuing operations. Intersegment net sales recorded in 2010 and reported below were sales made by the Tape and Canadian
divisions to Congoleum for periods through June 30, 2010. Subsequent to June 30, 2010, the Tape and Canadian divisions continued
to sell products to reorganized Congoleum. Net sales made by ABI to reorganized Congoleum for the three months ended March 31,
2011 totaled $716 thousand and have been included in net sales to external customers.



17





Note L – Industry Segments (continued)



Net sales by segment for the three ended
March 31, 2011 and 2010 were as follows (in thousands):



|                                      |  | Three Months Ended March 31,
|------------------------------------- |  | ----------------------------
|                                      |  | 2011                        
|Net sales to external customers:      |  |                             
|Tape division                         |  | $                           
|Jewelry                               |  |                             
|Canadian division                     |  |                             
|Total net sales to external customers |  |                             
|Intersegment net sales:               |  |                             
|Tape division                         |  |                             
|Jewelry                               |  |                             
|Canadian division                     |  |                             
|Total intersegment net sales          |  |                             
|Intersegment net sales                |  |                             
|                                      |  |                             
|Total consolidated net sales          |  | $                           



Segment profit or loss is before income
tax expense or benefit and noncontrolling interests. Profit (loss) by segment for the three months ended March 31, 2011 and 2010
was as follows (in thousands):



|                                                                     |  | Three Months Ended March 31,
|-------------------------------------------------------------------- |  | ----------------------------
|                                                                     |  | 2011                        
|Segment profit (loss)                                                |  |                             
|Tape products                                                        |  | $                           
|Jewelry                                                              |  |                             
|Canadian division                                                    |  |                             
|Total segment profit                                                 |  |                             
|Reconciling items                                                    |  |                             
|Corporate expenses                                                   |  |                             
|Intercompany profit                                                  |  |                             
|Total consolidated income (loss) before income taxes and other items |  | $                           



18





Note L – Industry Segments (continued)



The tape products segment and the Canadian
division were more profitable in the first quarter of 2011 compared to the first quarter of 2010 primarily as a result of a 22.5%
and 21.3% increase in net sales, respectively. The tape and Canadian segments also recorded foreign exchange gains in the first
three months of 2011 compared to foreign exchange losses in the same period of 2010. While the jewelry segment had a 5.6% decrease
in sales, it was more profitable in the first quarter of 2011 compared to the first quarter of 2010 as a result of lower markdowns
and allowances and a more profitable customer mix. Lower royalty income recognized during the first quarter of 2011 at the corporate
level resulted in net expense of $230 thousand. During the first quarter of 2010, intercompany profit of $179 thousand for sales
made to Congoleum were eliminated. Subsequent to the deconsolidation of Congoleum in July 2010 (see Notes A and M), the Company
did not eliminate profit from sales made to Congoleum in accordance with U.S. GAAP.



Assets by segment as of March 31, 2011
and December 31, 2010 were as follows (in thousands):



|                                 |  | March 31, 2011 |         | December 31, 2010
|-------------------------------- |  | -------------- | ------- | -----------------
|Segment assets                   |  |                |         |                  
|Tape products                    |  | $              | 50,123  |                  
|Jewelry                          |  |                | 17,230  |                  
|Canadian division                |  |                | 36,017  |                  
|Total segment assets             |  |                | 103,370 |                  
|Reconciling items                |  |                |         |                  
|Corporate items                  |  |                | 31,098  |                  
|Intersegment accounts receivable |  |                | (4,607  | )                
|                                 |  |                |         |                  
|Consolidated assets              |  | $              | 129,861 |                  



19





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



Economic conditions in the United States
have been challenging, including in the industries in which the Company conducts business.  Although the United States
economy and the Company’s business have experienced improvements during the recent recovery from the United States and global
recession ended, growth is modest and the recovery could be threatened by a number of factors, including consumer response to higher
costs for oil and other goods, effects of a weakening US dollar, increases in interest rates, and geopolitical instability.



In addition, raw material and energy costs
increased sharply during 2010 and continued to be high during the first quarter of 2011, which has negatively impacted the Company’s
business and operating results. Global economic recovery and political instability in oil producing nations may contribute to further
increasing price levels, and any such further increases could be significant. The Company may be unable to pass increased raw material
and energy costs on to its customers.



ABI is a defendant in a number of asbestos-related
lawsuits. See Note G to the Unaudited Consolidated Condensed Financial Statements contained in Part I, Item 1 of this Quarterly
Report on Form 10-Q, which is incorporated herein by reference. These matters could have a material adverse impact on the Company’s
business, results of operations or financial condition.



American Biltrite’s consolidated financial
statements included its majority-owned subsidiary, Congoleum through June 30, 2010. Congoleum’s plan of reorganization was
confirmed by the District Court on June 7, 2010 and became effective July 1, 2010. Upon effectiveness of Congoleum’s plan
of reorganization, ABI’s ownership interests in Congoleum were cancelled. Consequently, the results of reorganized Congoleum
are not included in the consolidated results of the Company subsequent to June 30, 2010. The historical results of Congoleum are
reported as a discontinued operation.



The Congoleum plan of reorganization governs
an intercompany settlement and ongoing intercompany arrangements among American Biltrite and its subsidiaries and reorganized Congoleum,
pursuant to which American Biltrite and reorganized Congoleum entered into a management services and commercial agreement effective
as of July 1, 2010, which agreement has a term of two years. The management services and commercial agreement includes the provision
of management services by American Biltrite to reorganized Congoleum and other business relationships substantially consistent
with their traditional relationships. For further description of the management services and commercial agreement, see American
Biltrite’s Current Report on Form 8-K, which was filed with the Securities and Exchange Commission on July 8, 2010. In addition,
a copy of that agreement is filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission’s
website at http://www.sec.gov.



20





Application of Critical Accounting
Policies and Estimates



The discussion and analysis of the Company’s
financial condition and results of operations are based upon the Company’s consolidated financial statements, which have
been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires the Company to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities
as of the date of the Company’s financial statements and the reported amounts of revenues and expenses during the reporting
period. The Company’s 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. The Company believes that its most critical accounting policies, upon which its financial
condition depends and which involve the most complex or subjective decisions or assessments, are those described in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2010, filed with the Securities and Exchange Commission.
There have been no material changes in what the Company considers to be its critical accounting policies or the applicability of
the disclosure the Company provided regarding those policies in that Form 10-K.



Results of Operations



|                                           |  | Three Months Ended March 31,
|------------------------------------------ |  | ----------------------------
|                                           |  | 2011                        
|                                           |  | (In thousands)              
|                                           |  |                             
|Net sales                                  |  | $                           
|Cost of sales                              |  |                             
|Gross profit                               |  |                             
|Selling, general & administrative expenses |  |                             
|Operating income (loss)                    |  |                             
|                                           |  |                             
|Interest expense, net                      |  |                             
|Other   income (expense), net              |  |                             
|Income (loss) before taxes and other items |  |                             
|Provision for income taxes                 |  |                             
|Noncontrolling interests                   |  |                             
|Net income (loss) of continuing operations |  | $                           



21





Net sales in the first quarter of 2011
were $53.9 million compared to $46.6 million in the first quarter of 2010, an increase of $7.3 million or 15.5%. Tape division
sales increased by $5.0 million or 22.5% from the first quarter of 2010 primarily due to increased demand for HVAC, graphics, footwear,
electrical and film products, particularly in developing markets. Canadian division sales in the first quarter of 2011 increased
$2.9 million or 21.3% from the first quarter of 2010 to the first quarter of 2011 with most of the growth resulting from an increase
in the sale of industrial rubber products. Jewelry sales declined $620 thousand or 5.6% in the first quarter of 2011 compared to
sales during the first quarter of 2010 primarily due to decreased shipments to mass merchandisers and mid-tier retailers, partly
offset by higher sales to department stores and specialty retail channels.



Gross profit margin percentage decreased
from 26.9% of net sales for the first quarter of 2010 to 24.3% of net sales for the first quarter of 2011. Gross profit margins
declined for both the Tape and Canadian divisions due to higher raw material costs, which were partially offset by improved gross
profit margins for the Jewelry division, which occurred primarily due to lower markdowns and allowances together with a more profitable
customer mix. The sales mix by segment in the first quarter of 2011, which had a lower proportion of the higher margin Jewelry
segment sales than 2010, also contributed to the decrease in overall gross profit margins and partially offset the improvements
in gross profit margins for the Jewelry segment.



The Company includes the cost of purchasing
and finished goods inspection in selling, general and administrative (“SG&A”) expenses. Some companies also record
such costs in operating expenses while others record them in cost of goods sold. Consequently, the Company’s gross profit
margins may not be comparable to other companies. Had the Company recorded these expenses in cost of sales, the gross profit margins
for the quarter ended March 31, 2011 and 2010 would have been 23.4% and 26.8%, respectively.



SG&A expenses in the first quarter
of 2011 increased by $266 thousand or 2.1% compared to the first quarter of 2010, primarily due to freight and commission costs
for increased sales.



Net interest expense for the first quarter
of 2011 was lower than the first quarter of 2010 primarily due to a lower weighted average effective interest rate on the Company’s
borrowings and lower borrowing levels.



Other income (expense) consists of realized
foreign exchange gains for the first quarter of 2011 and realized foreign exchange losses for the first quarter of 2010. Other
income (expense) also included royalty income of $203 thousand and $435 thousand for the three months ended March 31, 2011 and
2010, respectively.



The effective tax rate was 36.6% in the
first quarter of 2011 and (2.4)% in the first quarter of 2010. During 2010, substantially all of the Company’s losses were
not reduced by applicable statutory tax rates due to uncertainty in the Company’s ability to generate sufficient taxable
income in future periods to realize tax benefits from current year losses.



22





Liquidity and Capital Resources



Cash, cash equivalents, and short-term
investments (consisting of bank certificates of deposit with original maturity greater than three months), decreased $499 thousand
in the three months ended March 31, 2011 to $2.8 million. Working capital at March 31, 2011 was $35.7 million compared to $35.1
million at December 31, 2010. The ratio of current assets to current liabilities of the continuing operations at March 31, 2011
was 1.94 compared to 2.10 at December 31, 2010. Net cash used by operating activities was $1.3 million for the three months ended
March 31, 2011, compared to net cash used by operating activities of $1.2 million for the three months ended March 31, 2010.



Capital expenditures in the first three
months of 2011 were $621 thousand compared to $321 thousand for the first three months of 2010. It is currently anticipated that
capital spending for the full year 2011 will be approximately $3.0 million.



American Biltrite Inc.’s primary
source of borrowings are the revolving credit facility (the “Revolver”) and the term loan (“Term Loan”)
it has with Wachovia Bank, National Association (“Wells Fargo”) pursuant to a loan and security agreement (the “Credit
Agreement”). (At the end of 2008, Wells Fargo Bank completed its acquisition of Wachovia Bank.) The Credit Agreement was
entered into on June 30, 2009, and initial borrowings under the Credit Agreement were used to pay off borrowings from another financial
institution and to pay fees and expenses in connection with the refinancing.



The Credit Agreement provides American
Biltrite Inc. and its subsidiaries with (i) a $30.0 million commitment under the Revolver (including a $12 million Canadian revolving
credit facility sublimit) and (ii) an $8.0 million Term Loan. The Credit Agreement also provides letter of credit facilities with
availability of up to $6.0 million (including a $3 million Canadian letters of credit facility sublimit) subject to availability
under the Revolver. The maximum amount available for revolving debt borrowings is reduced to the amount of the borrowing base if
that amount is lower. The borrowing base is based upon eligible assets of the Company, including accounts receivables and inventory.
The Company’s obligations under the Credit Agreement are secured by assets of the Company and its subsidiaries. At March
31, 2011, the Company had $7.0 million and $5.7 million outstanding under the Revolver and Term Loan, respectively, and $12.5 million
of additional unused borrowing capacity available under the Revolver.



The Term Loan principal is payable in
72 monthly installments of $111 thousand beginning August 1, 2009 and ending on July 1, 2015. All indebtedness under the Credit
Agreement, other than the Term Loan, matures on June 30, 2012.



Interest is payable monthly on borrowings
under the Credit Agreement at rates based on a base interest rate plus an applicable margin for each type of loan, which varies
depending on whether the loan is based on U.S., Canadian, or Eurodollar rate loans and which ranges from an applicable rate of
two hundred basis points over U.S. and Canadian base rates to four hundred basis points over Eurodollar base rates for revolving
debt loans and three hundred basis points over U.S. base rates and five hundred basis points over Eurodollar base rates for the
Term Loan. The Credit Agreement charges the Company a monthly unused borrowing line fee, at a rate equal to five-eighths of one
percent (0.625%) per annum. In addition, the Credit Agreement imposes a monthly letter of credit fee equal to four percent (4%)
per annum for outstanding letters of credit.



23





Pursuant to the Credit Agreement, payments
on the Company’s accounts receivable are deposited in accounts assigned by the Company to Wells Fargo and the funds in that
account may be used by Wells Fargo to pay down outstanding borrowings under the Credit Agreement.



The Credit Agreement contains customary
bank covenants, including limitations on incurrence of debt and liens or other encumbrances on assets or properties, sale of assets,
making of loans or investments, including paying dividends and redemptions of capital stock, the formation or acquisition of subsidiaries
and transactions with affiliates. The Credit Agreement requires the Company to maintain, on a consolidated basis, a minimum fixed
charge coverage ratio of 1.0:1.0. The Credit Agreement also requires that the Company to maintain, on a consolidated basis, a minimum
amount of earnings before interest, taxes, depreciation, and amortization, as determined under the Credit Agreement.



In March 2010, the Company and Wells Fargo
entered into an amendment to the Credit Agreement. The amendment reduced the minimum required levels of earnings before interest,
taxes, depreciation, and amortization under the Credit Agreement for 2010. It further provided that, for the remaining term of
the Credit Agreement, meeting the minimum level of earnings before interest, taxes, depreciation, and amortization and the minimum
fixed charge coverage ratio would not be required for any monthly test period during which the Company’s unused available
credit under the Credit Agreement was at least $6.0 million for 30 consecutive days. The Company paid a fee of $30 thousand to
Wells Fargo in connection with this amendment.



The Company currently anticipates it will
be able to comply with its covenants under the Credit Agreement. However, the Company had to receive covenant waivers on several
occasions under its prior credit agreement or enter amendments to that agreement to address failures to satisfy covenants under
that prior credit agreement, and it is possible that, in the future, the Company may need to obtain waivers for failures to satisfy
its covenants under the Credit Agreement or enter amendments to the Credit Agreement to address any such failures or obtain replacement
financing as a result. There can be no assurance the Company would be successful in obtaining any such waiver, entering any such
amendment or obtaining any such replacement financing.



Any waivers, amendments and/or
replacement financing, if obtained, could result in significant cost to the Company. If an event of default under the Credit Agreement
were to occur, the lenders could cease to make borrowings available under the Revolver and require the Company to repay all amounts
outstanding under the Credit Agreement. If the Company were unable to repay those amounts due, the lenders could have their rights
over the collateral exercised, which would likely have a material adverse effect on the Company’s business, results of operations
or financial condition.



24





The Company has not declared a dividend
since 2003. The Credit Agreement generally prohibits the Company from paying cash dividends to its stockholders. Therefore, so
long as the Credit Agreement remains outstanding, the Company would need to obtain the consent of the lenders under the Credit
Agreement to pay dividends to its stockholders in the future. In addition to this need for lender consent, any determination to
pay future dividends would be made by the Company's Board of Directors based upon, among other considerations, the financial performance
and capital requirements of the Company, as well as market conditions.



The Company has recorded what it believes
are adequate provisions for environmental remediation and product-related liabilities (including asbestos-related claims). The
Company is subject to federal, state and local environmental laws and regulations and certain legal and administrative claims are
pending or have been asserted against the Company. Among these claims, the Company is a named party in several actions associated
with waste disposal sites (more fully discussed in Note G to the Unaudited Consolidated Condensed Financial Statements contained
in Part I, Item 1 of this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K for the year ended December
31, 2010). 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 the Company’s 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 may be required,
the determination of the Company’s liability in proportion to other potentially responsible parties, and the extent to which
costs may be recoverable from insurance or other third party sources. Provisions in the financial statements have been recorded
for the estimated probable loss associated with all known general and environmental contingencies for the Company. While the Company
believes its estimate of the future amount of these liabilities is reasonable, and that they will be paid over a period of five
to twenty-five years, the timing and amount of such payments may differ significantly from the Company’s assumptions. In
addition, legislation and regulation regarding climate change, including greenhouse gas emissions, and other environmental matters
may be adopted or administered and enforced differently in the future, which could require the Company to expend significant amounts.
Although the effect of future government regulations could have a significant effect on the Company’s costs, the Company
is not aware of any pending legislation that it currently expects would have a material adverse effect on its consolidated results
of operations or financial position. There can be no assurances that the costs of any future government regulations could be passed
along by the Company to its customers. Estimated insurance and third party recoveries related to these liabilities are reflected
in other non-current assets.



The outcome of these environmental and
product liability matters could result in significant expenses incurred by or judgments assessed against the Company.



25





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, as 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, the Company’s disclosure controls and procedures
were effective, in that they provide reasonable assurance that information required to be disclosed by
the Company in the reports that it files or submits 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, and is accumulated and communicated to the Company’s management, including the Company’s
Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(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



There have been no material developments
during the first quarter ending March 31, 2011, in the legal proceedings regarding the Company that were previously disclosed in
the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.



Item 1A. Risk Factors



The Company has significant asbestos
liability and funding exposure, and the Company’s strategies for resolving this liability and exposure may not be successful.



The Company has significant liability
and funding exposure for asbestos personal injury claims. The Company’s strategy remains to vigorously defend against and
strategically settle its asbestos claims on a case-by-case basis in the normal course of business. 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 its insurance carriers will continue to defend and indemnify
it for a substantial amount of its asbestos liabilities for the foreseeable future pursuant to an umbrella/first-layer excess policies
arrangement between the Company and the applicable insurance carriers. However, it is possible that asbestos claims may be asserted
against the Company alleging exposure allocable solely to years in which the Company’s insurance policies excluded coverage
for asbestos, that the policies providing coverage under the umbrella/first-layer excess policies arrangement or other applicable
excess layer policies will exhaust, or that the carriers responsible for such policies may at some future date be unwilling or
unable to fund coverage under the policies or that arrangement. If ABI were to incur significant additional asbestos liabilities
for which it did not have insurance coverage or was not able to receive recoveries under its insurance policies, ABI may have to
fund such liabilities, which could have a material adverse effect on ABI’s business, results of operations or financial condition.



26





In the past, federal legislation has been
proposed which 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. In light of the numerous uncertainties surrounding this
and other possible asbestos legislation in the United States, ABI does not know what effects any such legislation, if adopted,
may have upon its business, results of operations or financial conditions.



In addition, by operation of the Congoleum
plan of reorganization, the joint venture agreement between ABI and Congoleum was effectively terminated. As a result, ABI’s
previous rights and claims to indemnification from Congoleum under that joint venture agreement have been terminated. To the extent
ABI incurs material amounts for which it would have been entitled to receive indemnification from Congoleum pursuant to that former
joint venture agreement, ABI’s financial condition and results of operations may be materially adversely affected.



For further information regarding the
Company's asbestos liability, insurance coverage and strategies to resolve that asbestos liability, please see Note G of the Notes
to Unaudited Consolidated Condensed Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the
Company’s Annual Report on Form 10-K for the year ended December 31, 2010.



ABI continues to have
business arrangements with Congoleum, ABI’s executives continue to provide services to Congoleum, which reduces their availability
to the Company, and expiration or termination of the Company’s business arrangements with Congoleum could have a material
adverse impact on ABI’s business, operations and financial condition.



Although ABI’s equity
interests in Congoleum were cancelled effective as of July 1, 2010 by operation of Congoleum’s plan of reorganization, ABI
continues to have business arrangements with Congoleum. In particular, pursuant to Congoleum’s plan of reorganization, ABI
and Congoleum entered into a management services and commercial agreement. Pursuant to that agreement, ABI’s current Chief
Executive Officer, Mr. Roger Marcus, serves as a director and the chief executive officer of Congoleum and American Biltrite’s
current Chief Financial Officer, Mr. Howard Feist III, serves as the chief financial officer of Congoleum. In addition, the Company’s
President and Chief Operating Officer, Mr. Richard Marcus, currently serves as an executive vice president of Congoleum. Pursuant
to the management services and commercial agreement, substantially all of Mr. Roger Marcus’s time, approximately 25% of Mr.
Richard Marcus’s time and approximately 50% of Mr. Feist’s time, in each case, during normal working hours on a monthly
basis, is required to be made available to Congoleum. As a result, the availability of those executives to the Company is reduced,
which could have a material adverse impact on the Company to the extent they are unable to provide services to the Company which
the Company needs or which would further the Company’s business and operations.



27





The management services and
commercial agreement also includes certain other commercial arrangements between ABI and its subsidiaries and Congoleum, which
are substantially consistent with their traditional relationships, including purchase and sale of floor tile products and urethane,
rights of American Biltrite to resell Congoleum vinyl, vinyl composition or other floor tile in Canada, the cross-licensing of
urethane technology, and the provision of information technology services by Congoleum to American Biltrite.



The management services and
commercial agreement expires on July 1, 2012, unless renewed. That agreement provides that it may be terminated in whole or in
part with respect to the provision of certain management services prior to the expiration of that two year term and there can be
no assurances that an early termination will not occur, and the agreement may give rise to other possible sources of claims. The
expiration or termination of the Company’s business arrangements with Congoleum would have a material adverse impact on ABI’s
business, operations and financial condition.



The Company relies on debt financing to
fund its business, operations and working capital needs; it has had to amend its debt agreements in the past in order to avoid
being in default under those agreements and may have to do so again in the future, and the Company’s ability to obtain additional
financing may be limited.



The Company relies on borrowings under
its revolving and letter of credit facilities to fund its working capital requirements and operations. The credit agreement governing
those credit facilities requires the Company to satisfy certain financial and other covenants. In the past, the Company has had
to amend its debt agreements in order to avoid defaulting under those agreements as a result of failing to satisfy certain financial
covenants contained in those agreements.  Most recently, the Company amended its current credit agreement in March 2010
to reduce the minimum required levels of earnings before interest, taxes, depreciation, and amortization under the credit agreement,
and further provide that meeting the minimum level of earnings before interest, taxes, depreciation, and amortization and the minimum
fixed charge coverage ratio would not be required for any monthly test period during which the Company’s unused available
credit under the credit agreement was at least $6 million for 30 consecutive days. Although the Company currently anticipates it
will be able to comply with its covenants under its credit agreement, due to economic or other conditions or reasons, the Company
may in the future fail to comply with its covenants. If that were to occur, the Company would likely need to obtain a waiver of
such covenant breach from the lenders or enter into an amendment to the credit agreement to address the covenant breach, or obtain
replacement financing. There can be no assurance that the Company would be successful in obtaining any such waiver, entering into
any such amendment or obtaining such replacement financing.



28





If an event of default under the credit
agreement were to occur, the lenders could cease to make borrowings available under the credit facilities and require the Company
to repay all amounts outstanding under the credit agreement, including amounts outstanding under the term loan and revolving credit
facilities. If the Company were unable to repay those amounts due, the lenders could have their rights over the collateral exercised,
which would likely have a material adverse effect on the Company’s business, results of operations or financial condition.



In addition, under the terms of the credit
agreement, the Company’s ability to obtain additional debt financing is limited.  Moreover, since the Company and its
subsidiaries have already granted security interests in most of their assets, the Company’s ability to obtain any additional
debt financing may be limited.  Further, in light of the recent and current economic, industry and global credit market
conditions and the Company’s recent operating losses, credit may be more expensive and difficult for the Company to obtain,
which if such conditions continue, may further limit the availability of any additional financing for the Company.



All indebtedness under the credit agreement,
other than the term loan, matures on June 30, 2012. If the Company is unable to renew the credit agreement or obtain replacement
financing on satisfactory terms, its ability to fund its operations and capital expenditures would be materially negatively impacted,
which would likely have a material adverse effect on the Company’s business, results of operations or financial condition.



The Company sells its products on credit
and its customers may fail to pay, or they may extend the payment period, for products sold to them on credit.



The Company sells its products on credit.
Customers purchasing goods on credit from the Company may default on their obligations to pay, or they may extend the payment period,
for products sold to them on credit, which may result in an increased investment in accounts receivable by the Company. In light
of the recent difficult economic and industry conditions, the risk that the Company may realize an increased investment in accounts
receivable may be greater. To the extent the Company is unable to collect receivables owed to it in a timely fashion, increased
demands may be placed on its working capital, which could have a material adverse effect on its business, results of operations
or financial condition.



The Company may incur substantial liability
or be required to expend significant amounts for environmental claims and compliance matters, including possible climate change
related matters.



Due to the nature of the Company’s
business and certain of the substances which are or have been used, produced or discharged with respect to its business, the Company’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
facilities and off-site disposal locations. The Company has historically expended substantial amounts for compliance with existing
environmental laws or regulations, including environmental remediation costs at both third-party sites and Company-owned sites.
The

29





Company will continue to be required to
expend amounts in the future because of the nature of its prior activities at its facilities, in order to comply with existing
environmental laws, and those amounts may be substantial. In addition, legislation and regulation regarding climate change, including
greenhouse gas emissions, and other environmental matters may be adopted or administered and enforced differently in the future,
which could require the Company to expend significant amounts. Further, legislation and regulations that limit carbon emissions
may cause the Company’s energy costs at its facilities to increase. Although the Company believes that those amounts should
not have a material adverse effect on its results of operations or financial position, there is no certainty that these amounts
will not have such an effect because, as a result of environmental requirements becoming increasingly strict, the Company is unable
to determine the ultimate cost of compliance with environmental laws and enforcement policies. For instance, such an effect could
occur in connection with those matters disclosed in Item 3 (Legal Proceedings) and Note 8 to the Notes to Consolidated Financial
Statements set forth in Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, as
such matters may be updated by this Quarterly Report on Form 10-Q, including as set forth in Note G to the Notes to Unaudited Consolidated
Condensed Financial Statements set forth in Part I, Item 1 and as set forth in Part II, Item 1.



Moreover, in addition to potentially having
to pay substantial amounts for compliance, future environmental laws or regulations may require or cause the Company to modify
or curtail its operations, which could have a material adverse effect on the Company’s business, results of operations or
financial condition.



The Company may incur substantial liability
for other product and general liability claims.



In the ordinary course of its business, the
Company becomes involved in lawsuits, administrative proceedings, product liability 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 or financial condition
if the Company is unable to successfully defend against or settle these matters, its insurance coverage is insufficient to satisfy
judgments against it or settlements relating to these matters, or the Company is unable to collect insurance proceeds relating
to these matters.



Raw material and energy costs have been
volatile and are at high levels, which has and may continue to negatively impact the Company’s results of operations and
liquidity.



Raw material and energy costs have been
volatile over the past several years, and the Company experienced significant inflation in its inputs during certain periods, including
2010. Global economic recovery and political instability in oil producing nations may contribute to further increasing price levels,
and any such further increases could be significant. In addition to supply and demand issues affecting raw material and energy
costs, the adoption of new, or any heightened administration and enforcement of existing, legislation and regulations that impact
those costs, such as legislation or regulations regarding climate change, including greenhouse gas emissions, may result in increased
raw material and energy costs for the Company. In light of the current and forecasted economic conditions in the United States
and the industries in which the Company conducts business, the Company may be unable to pass increased raw material and energy
costs on to its customers.



30





The Company is 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 or other costs of sales, such as energy costs.



The Company generally designs and engineers
its 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 supplier. Any significant delay in
or disruption of the supply of raw materials 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 has occasionally experienced significant price increases for
some of its raw materials. Although the Company has been able to obtain sufficient supplies of raw materials, there can be no assurances
that it may not experience difficulty in the future, particularly if global supply conditions deteriorate, which could have a material
adverse effect on profit margins.



The Company operates in highly competitive
markets and some of its competitors have greater resources, and in order to be successful, the Company must keep pace with and
anticipate changing customer preferences.



The market for the Company’s products
and services is highly competitive. Some of its competitors have greater financial and other resources and access to capital. In
addition, in order to maintain its competitive position, the Company may need to make substantial investments in its business,
including, as applicable, product development, manufacturing facilities, distribution network and sales and marketing activities.
Competitive pressures may also result in decreased demand for its products and in the loss of market share for its products. Moreover,
due to the competitive nature of its industries, it may be commercially restricted from raising or even maintaining the sales prices
of its products, which could result in the incurrence of significant operating losses if its expenses were to increase or otherwise
represent an increased percentage of sales.



The markets in which the Company competes
are characterized by frequent new product introductions and changing customer preferences. There can be no assurance that the Company’s
existing products and services will be properly positioned in the market or that the Company will be able to introduce new or enhanced
products or services into its markets on a timely basis, or at all, or that those new or enhanced products or services will receive
customer acceptance. The Company’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.



31





The Company is subject to general economic
conditions and conditions specific to its industries.



While the United States economy and the
Company’s business appeared to experience some economic recovery during 2010 and the first quarter of 2011, certain end markets
such as construction remain weak. Both the Tape division and the Canadian division sell into the construction market as well as
other industrial markets, while the Jewelry division’s sales are influenced by consumer and retail spending levels.



The Company expects economic conditions
may negatively impact or restrain the Company’s business and operations and that that impact will depend on the speed, extent
and sustainability of the United States and global economic recovery as well as geopolitical factors.



The Company could realize shipment delays,
depletion of inventory and increased production costs resulting from unexpected disruptions of operations at any of the Company’s
facilities.



The Company depends upon the timely manufacturing
and delivery of products that meet the needs of its customers and the end users of its products. If the Company 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 or financial condition.



The Company offers limited warranties
on its products which could result in the Company incurring significant costs as a result of warranty claims.



The Company offers a limited warranty on many
of its products against manufacturing defects. If the Company were to incur a significant number of warranty claims, the resulting
warranty costs could be substantial.



The Company relies on a small number of
customers, distributors and sales representatives for a significant portion of its sales and to sell its products.



The Company’s Tape division principally
sells its products through distributors. Sales to five unaffiliated customers accounted for approximately 23% of the Tape division’s
net sales for the year ended December 31, 2010. The loss of the largest unaffiliated customer and/or two or more of the other four
unaffiliated customers could have a material adverse effect on the Tape division’s business, results of operations or financial
condition.



32





The Company’s Canadian division
sells its products through distributors and a direct sales force. Sales to five unaffiliated customers accounted for approximately
24% of the Canadian division’s net sales for the year ended December 31, 2010. The loss of the largest unaffiliated customer
and/or two or more of the other four unaffiliated customers could have a material adverse effect on the Canadian division’s
business, results of operations or financial condition.



The Jewelry division sells its products
through its own direct sales force and, indirectly, through a wholly owned subsidiary and through third-party sales representatives.
Three of Jewelry division’s customers accounted for approximately 54% of its net sales for the year ended December 31, 2010.
The loss of the largest of these customers would have a material adverse effect on the Jewelry division’s business, results
of operations and financial condition and would likely have a material adverse effect on the Company’s business, results
of operations or financial condition.



The failure of the Company’s distributors
or sales representatives to adequately perform with respect to the sale of the Company’s products and furtherance of the
Company’s business could have a material adverse effect on the Company’s business, results of operations or financial
condition.



The Company depends on key executives
to run its business, and the loss of any of these executives would likely harm the Company’s business.



The Company depends on key executives
to run its business. Three of the persons that serve as key executives at the Company also serve as key executives at Congoleum
pursuant to the management services and commercial agreement the Company and Congoleum entered into pursuant to Congoleum’s
plan of reorganization effective as of July 1, 2010. The Company’s future success will depend largely upon the continued
service of these key executives, all of whom have no employment contract with the Company and may terminate their employment at
any time without notice. Although certain key executives of the Company are large stockholders of the Company, 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 or financial condition.



33





Item 5. Other Information



Submission of Matters to a Vote of
Security Holders



At the 2011 Annual Meeting of the Stockholders
of American Biltrite Inc. held on May 9, 2011 in New York, New York, the following directors were re-elected to the Board of Directors
for a term of three years expiring at the 2014 Annual Meeting of Stockholders:



|Nominees              |  | Votes For |  | Votes Withheld
|--------------------- |  | --------- |  | --------------
|                      |  |           |  |               
|Mark N. Kaplan        |  | 2,620,187 |  | 302,312       
|Kenneth I. Watchmaker |  | 2,920,320 |  | 2,179         
|William M. Marcus     |  | 2,626,036 |  | 296,463       



Financial Information



On May 10, 2011, the Company issued a
press release announcing its financial results for the three months ended March 31, 2011. A copy of that press release is being
furnished to the Securities and Exchange Commission pursuant to this Part II, Item 5 of Form 10-Q and is attached hereto as Exhibit
99.1.



34





Item 6. Exhibits



|Exhibit No. | Description                                                                                                                                                                                        
|----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                                                                                                    
|3.1     I   | Restated Certificate of Incorporation                                                                                                                                                              
|            |                                                                                                                                                                                                    
|3.2     II  | By-Laws, amended and restated as of November 7, 2007                                                                                                                                               
|            |                                                                                                                                                                                                    
|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 Exchange Act of 1934, as amended                                
|            |                                                                                                                                                                                                    
|31.2        | Certification of the Principal Financial Officer of the Registrant Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended                                
|            |                                                                                                                                                                                                    
|32          | Certification of the Chief Executive Officer and Chief Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|            |                                                                                                                                                                                                    
|99.1        | Press release dated May 10, 2011                                                                                                                                                                   

___________________________



|I  | Incorporated by reference to the Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1996 filed with the Securities and Exchange Commission on March 27, 1997 (1-4773) 
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                            
|II | Incorporated by reference to the Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 filed with the Securities and Exchange Commission on November 14, 2007

35











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:    May 13, 2011 | BY:                   
|                      |                       
|                      |                       
|                      |                       
|                      |                       
|                      |                       



36





INDEX OF EXHIBITS



|Exhibit No. | Description                                                                                                                                                                                        
|----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                                                                                                    
|3.1     I   | Restated Certificate of Incorporation                                                                                                                                                              
|            |                                                                                                                                                                                                    
|3.2     II  | By-Laws, amended and restated as of November 7, 2007                                                                                                                                               
|            |                                                                                                                                                                                                    
|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 Exchange Act of 1934, as amended                                
|            |                                                                                                                                                                                                    
|31.2        | Certification of the Principal Financial Officer of the Registrant Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended                                
|            |                                                                                                                                                                                                    
|32          | Certification of the Chief Executive Officer and Chief Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|            |                                                                                                                                                                                                    
|99.1        | Press release dated May 10, 2011                                                                                                                                                                   

___________________________



|I  | Incorporated by reference to the Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1996 filed with the Securities and Exchange Commission on March 27, 1997 (1-4773) 
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                            
|II | Incorporated by reference to the Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 filed with the Securities and Exchange Commission on November 14, 2007



37