-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kl2bWTKiiYxS4HsoF6kZBW6Ln9eEaJNtNNqLcJfO29uk4Sshi8GfeiChhZQMCsT2 iWeVMyz6/Ig8JF3MiIGL5w== 0000950134-97-008295.txt : 19971114 0000950134-97-008295.hdr.sgml : 19971114 ACCESSION NUMBER: 0000950134-97-008295 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELCOR CORP CENTRAL INDEX KEY: 0000032017 STANDARD INDUSTRIAL CLASSIFICATION: ASPHALT PAVING & ROOFING MATERIALS [2950] IRS NUMBER: 751217920 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05341 FILM NUMBER: 97713720 BUSINESS ADDRESS: STREET 1: 14643 DALLAS PKWY STE 1000 STREET 2: WELLINGTON CTR CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2148510500 MAIL ADDRESS: STREET 1: WELLINGTON CENTRE STE 1000 STREET 2: 14643 DALLAS PKWY CITY: DALLAS STATE: TX ZIP: 75240-8871 FORMER COMPANY: FORMER CONFORMED NAME: ELCOR CHEMICAL CORP DATE OF NAME CHANGE: 19761119 10-Q 1 FORM 10-Q FOR QUARTER ENDED 09/30/97 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------- FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 --------- For Quarter Ended September 30, 1997 Commission File number 1-5341 ------------------ ------ ELCOR CORPORATION ---------------------------------------------------- (Exact name of Registrant as specified in its charter) DELAWARE 75-1217920 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 14643 DALLAS PARKWAY SUITE 1000, WELLINGTON CENTRE, DALLAS, TEXAS 75240-8871 - -------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (972) 851-0500 -------------- 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 ----- ----- As of close of business on November 3, 1997, Registrant had outstanding 8,819,166 shares of Common Stock, Par Value $1 per Share. 2 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements ELCOR CORPORATION CONSOLIDATED BALANCE SHEET (Unaudited, $ in thousands)
ASSETS 9-30-97 6-30-97 - ------ ------- ------- CURRENT ASSETS Cash and cash equivalents $ 3,242 $ 3,601 Trade receivables, less allowance of $711 and $545 50,826 43,178 Inventories - Finished goods 21,607 26,400 Work-in-process 364 441 Raw materials 5,938 6,586 --------- --------- Total inventories 27,909 33,427 --------- --------- Prepaid expenses and other 1,455 3,572 Deferred income taxes 2,433 2,508 --------- --------- Total current assets 85,865 86,286 --------- --------- PROPERTY, PLANT AND EQUIPMENT, AT COST 181,906 180,115 Less - accumulated depreciation (65,324) (62,648) --------- --------- Property, plant and equipment, net 116,582 117,467 --------- --------- OTHER ASSETS 3,512 3,490 --------- --------- $ 205,959 $ 207,243 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES Accounts payable $ 13,965 $ 15,899 Accrued liabilities 14,718 12,386 --------- --------- Total current liabilities 28,683 28,285 --------- --------- LONG-TERM DEBT 45,500 52,600 DEFERRED INCOME TAXES 14,276 13,578 SHAREHOLDERS' EQUITY - Common stock 8,817 8,814 Paid-in-capital 71,044 71,350 Retained earnings 37,639 33,039 --------- --------- 117,500 113,203 Less - Treasury stock, at cost, 17,500 shares at June 30, 1997 -- (423) --------- --------- Total shareholders' equity 117,500 112,780 --------- --------- $ 205,959 $ 207,243 ========= =========
See accompanying notes to consolidated financial statements 2 3 ELCOR CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited, $ in thousands except per share data)
Three Months Ended ------------------ 9-30-97 9-30-96 ------- ------- SALES $73,516 $64,536 ------- ------- COST AND EXPENSES Cost of sales 55,401 50,524 Selling, general and administrative 8,805 7,897 ------- ------- INCOME FROM OPERATIONS 9,310 6,115 ------- ------- OTHER EXPENSE Interest expense, net 759 161 ------- ------- INCOME BEFORE INCOME TAXES 8,551 5,954 Provision for income taxes 3,157 2,186 ------- ------- NET INCOME $ 5,394 $ 3,768 ======= ======= INCOME PER COMMON AND COMMON EQUIVALENT SHARE $ .60 $ .43 ======= ======= DIVIDENDS PER COMMON SHARE $ .09 $ .07 ======= ======= AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 8,963 8,793 ======= =======
See accompanying notes to consolidated financial statements. 3 4 ELCOR CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited, $ in thousands)
Three Months Ended ------------------ 9-30-97 9-30-96 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 5,394 $ 3,768 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 2,683 1,915 Deferred income taxes 773 879 Changes in assets and liabilities: Trade receivables (7,648) (4,819) Inventories 5,518 7,269 Prepaid expenses and other 2,117 1,010 Accounts payable and accrued liabilities 398 550 -------- -------- Net cash provided by operating activities 9,235 10,572 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant & equipment (1,791) (9,599) Other (29) (39) -------- -------- Net cash used for investing activities (1,820) (9,638) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Long-term borrowings, net (7,100) (1,100) Dividends on common stock (794) (614) Treasury stock transactions and other, net 120 (189) -------- -------- Net cash used for financing activities (7,774) (1,903) -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (359) (969) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,601 3,744 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,242 $ 2,775 ======== ========
See accompanying notes to consolidated financial statements. 4 5 ELCOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The attached condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. As a result, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The company believes that the disclosures included herein are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the company's 1997 Annual Report on Form 10-K. The unaudited financial information contained herein has been prepared in conformity with generally accepted accounting principles on a consistent basis and does reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the three-month periods ended September 30, 1997 and 1996, but are, however, subject to year-end audit by the company's independent auditors. Because of seasonal, weather-related conditions in some of the company's market areas, sales can vary at times, and results of any one quarter should not necessarily be considered as indicative of results for a full fiscal year. 2. Net income per common and common equivalent share is computed based on the average number of common and common equivalent shares outstanding. Common equivalent shares include outstanding stock options. There is no material difference between primary and fully diluted earnings per share. 5 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS During the first quarter ended September 30, 1997, net income increased 43% to $5,394,000 from $3,768,000 in last year's first quarter. Sales increased 14% compared to the prior year first quarter. The increases in sales and net income were primarily the result of increased production and a record level of shipments of the company's patented Enhanced High Definition(R) and Raised Profile(TM) Prestique(R) premium laminated fiberglass asphalt shingles, together with much higher sales and income contribution by the Industrial Products Group. A significant part of the increased shipments were in the western United States. Homeowners' concerns in California that severe El Nino conditions could cause rain damage from leaking roofs resulted in a strong increase in demand for Elk Prestique premium laminated shingles. The Industrial Products Group achieved sharply higher sales and operating profit, sparked by strong demand for Chromium Corporation's Compushield(R) conductive coatings used in the telecommunications and electronic equipment industries. In addition, increased demand for remanufactured diesel engine components used in the transportation industry, and increased use of Ortloff Engineers' technology licensing and consulting services for the natural gas processing industry also contributed to improved results. The overall increase in gross margin on sales to 24.6% for the quarter ended September 30, 1997 from 21.7% in the prior year quarter is primarily attributable to higher sales with better margins in the Industrial Products Group. Selling, general and administrative (S,G&A) expenses increased 11% during the first quarter of fiscal 1998 compared to the same prior year quarter. However, S,G&A costs remained at 12% of sales in the current year quarter, the same as in the prior year quarter. Interest expense was significantly higher in the first quarter of fiscal 1998 as compared to the same quarter in the prior fiscal year. During the previous year quarter, most interest costs were capitalized in connection with the company's major facilities expansion program, which was completed in March 1997. The company's roofing products business is cyclical and is affected by some of the same economic factors that affect the housing industry generally, including interest rates, the availability of financing and general economic conditions. However, reroofing and remodeling, which constitutes about 80% of industry unit sales, are generally less severely affected by economic downturns than product demand for new residential construction. FINANCIAL CONDITION Total invested capital at September 30, 1997 was $163,000,000. Long-term debt of $45,500,000 represented 28% of total capitalization. At September 30, 1997, $32,910,000 was available under the company's $80 million unsecured revolving line of credit. However, the company plans to increase its unsecured revolving credit facility to a total of $100 million to assure funding of its potential capital expenditure needs for future growth opportunities. 6 7 Cash provided by operations for the three months ended September 30, 1997 was $9,235,000. The current ratio was 3.0 to 1 at September 30, 1997. During the first quarter ended September 30, 1997, increased sales, especially during the month of September 1997, resulted in a $7,648,000 increase in receivables, which was partially offset by a $5,518,000 decrease in inventories. Historically, working capital requirements fluctuate during the year because of seasonality in some market areas. Generally, working capital requirements and related borrowings are higher in the spring and summer months, and lower in the fall and winter months. The company utilized $7,774,000 for financing activities in the first quarter of fiscal 1998, primarily for repayment of long-term debt and dividends on common stock. The company used $1,820,000 for investing activities in the first quarter of fiscal 1998. Capital expenditures for fiscal 1998 are now expected to be in the range of $12,000,000 to $15,000,000. The majority of currently planned capital expenditures are for productivity, capacity, and cost improvement projects at the current roofing plants. In addition, the company is expanding its capacity in the Chromium Corporation Conductive Coatings Division to meet rapidly growing demand for its Compushield process for conductive coatings of plastic enclosures for electronic equipment. In September 1997, the Board of Directors increased the regular quarterly cash dividend to nine cents per common share (before giving effect to a stock split) and declared a three-for-two stock split payable in the form of a stock dividend to be distributed on November 12, 1997 to shareholders of record at the close of business on October 16, 1997. In September 1994, the company's Board of Directors authorized the purchase of up to $10 million of the company's common shares from time to time on the open market to be used for general corporate purposes. As of September 30, 1997, 136,300 shares with a cumulative cost of $2,271,000 had been repurchased under this program. The company's operations are subject to extensive federal, state and local laws and regulations relating to environmental matters. Although the company does not believe it will be required to expend amounts which will have a material adverse effect on the company's consolidated financial position or results of operations by reason of environmental laws and regulations, such laws and regulations are frequently changed and could result in significantly increased cost of compliance. Further, certain of the company's industrial products operations utilize hazardous materials in their production process. As a result, the company incurs costs for remediation activities off-site and at its facilities from time to time. The company establishes and maintains reserves for such remediation activities, when appropriate, in accordance with Statement of Financial Accounting Standard No. 5, "Accounting for Contingencies." Current reserves established for known or probable remediation activities are not material to the company's financial position or results of operations. Management believes that cash and cash equivalents, cash flows from operations and its revolving credit facility should be sufficient during fiscal 1998 and beyond to fund its currently projected capital expenditure requirements, working capital needs, dividends, stock repurchases and other cash requirements. 7 8 PENDING ACCOUNTING PRONOUNCEMENT The Accounting Standards Executive Committee (AcSEC) of the American Institute of Certified Public Accountants has issued an exposure draft on "Reporting on the Costs of Start-Up Activities." If the exposure draft were to be finalized in its proposed form, it would require companies to expense on a current basis previously capitalized start-up costs. At September 30, 1997, the company had $8,399,000 of unamortized capitalized start-up costs. While the company does not agree with the accounting treatment proposed in the AcSEC exposure draft and believes that capitalizing costs incurred in constructing major new facilities provides a better matching of revenues and expenses, the company will adopt this statement of position if and when it is finalized. FORWARD-LOOKING STATEMENTS This Form 10-Q contains "forward-looking statements" about the company's prospects for the future. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected. Such risks and uncertainties include, but are not limited to, the following: 1. The company's roofing products business is cyclical and is affected by weather and some of the same economic factors that affect the housing and home improvement industries generally, including interest rates, the availability of financing and general economic conditions. In addition, the asphalt roofing products manufacturing business is highly competitive. Actions of competitors, including changes in pricing, or slowing demand for asphalt roofing products due to general or industry economic conditions or the amount of inclement weather could result in decreased demand for the Company's products, lower prices received or reduced utilization of plant facilities. 2. In the asphalt roofing products business, the significant raw materials are ceramic coated granules, asphalt, glass fibers, resins and mineral filler. Increased costs of raw materials can result in reduced margins, as can higher trucking and rail costs. Historically, the company has been able to pass some of the higher raw material and transportation costs through to the customer. Should the company be unable to recover higher raw material and transportation costs from price increases of its products, operating results could be lower than projected. 3. During fiscal 1997, the company completed construction of a new plant at the company's Ennis, Texas facility to manufacture nonwoven fiberglass roofing mats and other mats for a variety of industrial uses. As a new facility, its progress in achieving anticipated operating efficiencies and financial results is difficult to predict. If such progress is slower than anticipated, or if demand for products produced at this new plant does not meet expectations, operating results could be adversely affected. 8 9 4. Certain facilities of the company's industrial products subsidiaries must utilize hazardous materials in their production process. As a result, the company could incur costs for remediation activities at its facilities or off-site, and other related exposures from time to time in excess of established reserves for such activities. 5. The company's litigation, including its patent infringement suits against GAF Building Materials Corporation and certain affiliates, is subject to inherent and case-specific uncertainty. The outcome of such litigation depends on numerous interrelated factors, many of which cannot be predicted. Parties are cautioned not to rely on any such forward-looking beliefs or judgments in making investment decisions. 9 10 PART II. OTHER INFORMATION ITEM 1: Legal Proceedings GAF Patent Litigation In the ongoing patent litigation with GAF, the district court made two significant rulings. The first concerned the coverage of Elk of Dallas's design and utility patents and was generally favorable. The second concerned GAF's inequitable conduct defenses and was unfavorable. Although the court found that the issue was close, it concluded that the design patent was unenforceable due to inadequate disclosure to the patent examiner of certain prior art. Elk of Dallas and its outside counsel disagree strongly with the ruling of inequitable conduct and will appeal from the ruling at an appropriate time. In the interim, trial on the trade dress claim in the case and trial in the utility patent case is unscheduled but pending. While management can give no assurances regarding the ultimate outcome of the litigation, outside counsel believe that Elk of Dallas will prevail on its patent and trade dress claims and that Elk of Dallas will defeat GAF's counterclaims. Even if the outcome were to be adverse to Elk of Dallas, it is not expected to have a material effect on the Registrant's financial position or liquidity. Gibraltar Tort Litigation The court in the Daniels case has vacated the October 27, 1997 trial date without resetting it. A hearing in that case on the Generator Defendants' motion for summary judgement is scheduled for November 18, 1997. For further information and background on the GAF Patent Litigation and other legal proceedings involving the company, see "Part I, Item 3. Legal Proceedings" in the company's Annual Report on Form 10-K for the year ended June 30, 1997. ITEM 6: Exhibits and Reports of Form 8-K (a) Exhibits: Exhibit (11): Computation of Income Per Common and Common Equivalent Share Exhibit (27): Financial Data Schedule (EDGAR submission only) (b) The Registrant filed two reports on Form 8-K during the quarter ended September 30, 1997. The Registrant filed a Form 8-K on August 19, 1997 relating to a press release containing "forward-looking statements" about its prospects for the future. The Registrant also filed a Form 8-K on August 27, 1997 relating to the death of Roy E. Campbell, the company's Chairman, President and Chief Executive Officer and the subsequent election by the Board of Directors of Harold K. Work as the new Chairman, President and Chief Executive Officer. 10 11 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ELCOR CORPORATION DATE: November 12, 1997 /s/ Richard J. Rosebery ------------------------- ----------------------------- Richard J. Rosebery Vice Chairman, Chief Financial & Administrative Officer and Treasurer /s/ Leonard R. Harral ----------------------------- Leonard R. Harral Vice President and Chief Accounting Officer 11 12 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- Exhibit (11): Computation of Income Per Common and Common Equivalent Share Exhibit (27): Financial Data Schedule (EDGAR submission only)
EX-11 2 COMPUTATION: INCOME PER COMMON/COMMON EQUIVL SHARE 1 EXHIBIT (11) Elcor Corporation and Subsidiaries Computation of Income Per Common and Common Equivalent Share (In thousands, except per share amounts)
1. Three Months Ended September 30, 1997 Three Months Ended ----------------------------- and September 30, 1996 9-30-97 9-30-96 ---------- --------- Net Income $ 5,394 $ 3,768 ========== ========= Shares: Weighted average common shares outstanding 8,801 8,758 Adjustments: (a) Assumed issuance of shares purchased under incentive stock option plan using the treasury stock method 162 35 ---------- --------- Total Common and Common Equivalent Shares 8,963 8,793 ========== ========= Income per Common and Common Equivalent Share $ .60 $ .43 ========== =========
EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JUN-30-1998 JUL-01-1997 SEP-30-1997 3,242 0 51,537 711 27,909 85,865 181,906 65,324 205,959 28,683 45,500 0 0 8,817 108,683 205,959 73,516 73,516 55,401 64,206 0 0 759 8,551 3,157 5,394 0 0 0 5,394 .60 .60
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