EX-99.1 3 d99437exv99w1.txt PRESS RELEASE EXHIBIT 99.1 PRESS RELEASE TRADED: NYSE FOR IMMEDIATE RELEASE SYMBOL: ELK FOR FURTHER INFORMATION: Harold R. Beattie, Jr. Sr. Vice President, Chief Financial Officer and Treasurer (972) 851-0523 ELCOR CORPORATION CHANGES ITS ACCOUNTING FOR EMPLOYEE STOCK OPTIONS DALLAS, TEXAS, August 23, 2002 . . . . Elcor Corporation said today that it has changed its accounting for certain previously issued employee stock options under APB No. 25, and related interpretations, from the "fixed" to "variable" method of accounting for certain periods prior to August 13, 2002. As previously reported, prior to August 13, 2002, Elcor's 1998 Incentive Stock Option Plan contained a cashless exercise provision that permitted an optionee to relinquish vested options to Elcor in exchange for Elcor common shares having a current market value equal to the difference between the market value and aggregate exercise price of the relinquished options. Under APB No. 25, the aforementioned cashless relinquishment feature can potentially cause options issued under the 1998 Plan to be considered stock appreciation rights ("SAR's") in substance, if not in form, unless past experience and economic incentives indicate that optionees are more likely to exercise, rather than relinquish, the options. Under APB No. 25, SAR's are accounted for using the "variable" method of accounting whereby income is charged (or credited) during each accounting period to reflect any excess of the market value of shares underlying vested SAR's, over the exercise price of vested SAR's. With the concurrence of its prior auditor, Elcor had concluded that its use of "fixed" accounting for employee stock options was appropriate, based upon the very limited number of historical cashless relinquishments and the existence of certain economic incentives for employees to prefer a cash exercise. Prior to March 2002, no optionee ever utilized the cashless relinquishment alternative, and a total of only three optionees, none being executive officers of Elcor, have ever utilized this exercise alternative. However, after consultation with its new auditor, PricewaterhouseCoopers, Elcor agreed to change to "variable" accounting for employee stock options issued under the 1998 PRESS RELEASE Elcor Corporation August 23, 2002 Page 2 Plan, for the period commencing with Elcor's adoption of the 1998 Plan through August 13, 2002. On August 13, 2002, the Compensation Committee of Elcor's Board of Directors terminated the availability of the cashless relinquishment alternative under the 1998 Plan, thereby removing any question regarding the appropriateness of "fixed" accounting for these employee stock options after August 13, 2002. Had the company accounted for all options granted under the 1998 Plan as "variable" awards in prior fiscal years, cumulative after-tax net income for all fiscal years, prior to fiscal 2002, would have been reduced by about $0.4 million. That amount was recorded in fiscal 2002. The cumulative effect of the change in accounting method on fiscal 2001 and all prior fiscal years, and the effect on each such fiscal year, was not considered to be material; however, share price volatility did cause a more significant difference (some positive, some negative) in individual fiscal quarters. As a result of Elcor's changing share price, the application of "variable" option accounting had the following non-cash effect on after-tax net income during each of the periods presented below:
$ Amount Per Share -------- --------- Q1 Fiscal 2002(1) - $0.9 million - $0.05 Q2 Fiscal 2002 - $2.6 million - $0.13 Q3 Fiscal 2002 + $2.2 million + $0.11 Q4 Fiscal 2002 - $2.6 million - $0.13 -------------- ------- Full Fiscal 2002 - $3.9 million - $0.20 Q1 Fiscal 2003 to + $3.5 million + $0.18 August 13, 2002(2)
(1) Includes the cumulative effect on all prior fiscal years (2) On August 13, 2002, the cashless relinquishment feature of the 1998 Plan was terminated. Thereafter, "fixed" option accounting is applicable. Condensed financial statements for the quarter and full fiscal year ending June 30, 2002 are attached reflecting Elcor's change to "variable" option accounting. SAFE HARBOR PROVISIONS In accordance with the safe harbor provisions of the securities law regarding forward-looking statements, in addition to the historical information contained herein, the above discussion contains forward-looking statements that involve risks and uncertainties. The statements that are not historical facts are forward-looking statements PRESS RELEASE Elcor Corporation August 23, 2002 Page 3 within the meaning of the Private Securities Litigation Reform Act of 1995. These statements usually are accompanied by words such as "optimistic," "outlook," "believe," "estimate," "potential," "project," "expect," "anticipate," "plan," "predict," "could," "should," "may," or similar words that convey the uncertainty of future events or outcomes. These statements are based on judgments the company believes are reasonable; however, Elcor's actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences could include, but are not limited to, changes in demand, prices, raw material costs, transportation costs, changes in economic conditions of the various markets the company serves, changes in the amount and severity of inclement weather, as well as the other risks detailed herein and in the company's reports filed with the Securities and Exchange Commission, including but not limited to its Form 10-K for the fiscal year ending June 30, 2001, and subsequent Forms 8-K and 10-Q. ---------- Elcor, through its subsidiaries, manufactures Elk brand premium roofing and building products (over 90% of consolidated sales) and provides technologically advanced products and services to other industries. Each of Elcor's principal operating subsidiaries is the leader or one of the leaders within its particular market. Its common stock is listed on the New York Stock Exchange (ticker symbol: ELK). PRESS RELEASE Elcor Corporation August 23, 2002 Page 4 CONDENSED RESULTS OF OPERATIONS ($ in thousands)
Unaudited Audited Three Months Ended Fiscal Year Ended June 30, June 30, 2002 2001 2002 2001 ------------ ------------ ------------ ------------ SALES $ 131,004 $ 108,410 $ 506,526 $ 379,156 ------------ ------------ ------------ ------------ COSTS AND EXPENSES: Cost of sales 103,821 91,506 410,277 313,605 Selling, general & administrative 15,167 12,545 59,391 48,197 Noncash stock option compensation 3,939 636 6,034 0 Interest expense and other, net 1,614 1,360 6,087 3,391 ------------ ------------ ------------ ------------ Total Costs and Expenses 124,541 106,047 481,789 365,193 ------------ ------------ ------------ ------------ INCOME BEFORE INCOME TAXES 6,463 2,363 24,737 13,963 Provision for income taxes 2,660 905 9,644 5,201 ------------ ------------ ------------ ------------ NET INCOME $ 3,803 $ 1,458 $ 15,093 $ 8,762 ============ ============ ============ ============ INCOME PER COMMON SHARE-BASIC $ 0.20 $ 0.08 $ 0.78 $ 0.45 ============ ============ ============ ============ INCOME PER COMMON SHARE-DILUTED $ 0.19 $ 0.08 $ 0.77 $ 0.45 ============ ============ ============ ============ PROFORMA INFORMATION: EXCLUDING NONCASH STOCK OPTION COMPENSATION -- NET INCOME $ 6,363 $ 1,876 $ 19,015 $ 8,762 ============ ============ ============ ============ INCOME PER COMMON SHARE-BASIC $ 0.33 $ 0.10 $ 0.98 $ 0.45 ============ ============ ============ ============ INCOME PER COMMON SHARE-DILUTED $ 0.32 $ 0.10 $ 0.97 $ 0.45 ============ ============ ============ ============ AVERAGE COMMON SHARES OUTSTANDING Basic 19,412 19,229 19,311 19,322 ============ ============ ============ ============ Diluted 19,808 19,390 19,657 19,493 ============ ============ ============ ============
PRESS RELEASE Elcor Corporation August 23, 2002 Page 5 FINANCIAL INFORMATION BY COMPANY SEGMENTS ($ in thousands)
Unaudited Audited Three Months Ended Twelve Months Ended June 30, June 30, 2002 2001 2002 2001 --------- --------- --------- --------- SALES Building Products $ 120,140 $ 98,575 $ 459,673 $ 335,971 Electronics Manufacturing Services 5,972 29,528 Industrial Products 3,856 13,561 --------- --------- --------- --------- Other, Technologies 10,864 9,828 46,853 43,089 Corporate & Eliminations 0 7 0 96 --------- --------- --------- --------- $ 131,004 $ 108,410 $ 506,526 $ 379,156 ========= ========= ========= ========= OPERATING PROFIT (LOSS) Building Products $ 14,594 $ 7,269 $ 53,325 $ 25,539 Electronics Manufacturing Services (780) 1,392 Industrial Products 384 (735) --------- --------- --------- --------- Other, Technologies 358 (396) (4,354) 657 Corporate & Eliminations (6,875) (3,150) (18,147) (8,842) --------- --------- --------- --------- $ 8,077 $ 3,723 $ 30,824 $ 17,354 ========= ========= ========= =========
PRESS RELEASE Elcor Corporation August 23, 2002 Page 6 CONDENSED BALANCE SHEET (Audited, $ in thousands)
June 30, ASSETS 2002 2001 ----------- ----------- Cash and cash equivalents $ 12,436 $ 128 Receivables, net 94,764 73,660 Inventories 46,910 51,016 Deferred income taxes 5,727 3,977 Prepaid expenses and other 9,474 8,487 ----------- ----------- Total Current Assets 169,311 137,268 Property, plant and equipment, net 206,479 220,036 Other assets 5,638 2,744 ----------- ----------- Total Assets $ 381,428 $ 360,048 =========== ===========
June 30, LIABILITIES AND SHAREHOLDERS' EQUITY 2002 2001 ----------- ----------- Accounts payable and accrued liabilities $ 52,073 $ 48,034 Current maturities on long-term debt 0 0 ----------- ----------- Total Current Liabilities 52,073 48,034 Long-term debt, net 119,718 123,300 Deferred income taxes 33,545 26,612 Shareholders' equity 176,092 162,102 ----------- ----------- Total Liabilities and Shareholders' Equity $ 381,428 $ 360,048 =========== ===========
PRESS RELEASE Elcor Corporation August 23, 2002 Page 7 CONDENSED STATEMENT OF CASH FLOWS (Audited, $ in thousands)
Fiscal Year Ended June 30, 2002 2001 ----------- ----------- CASH FLOWS FROM: OPERATING ACTIVITIES Net income $ 15,093 $ 8,762 Adjustments to net income Depreciation and amortization, including $3,360 of 21,331 13,697 impairment in 2002 Deferred income taxes 5,183 4,374 Changes in assets and liabilities: Trade receivables (21,104) (1,948) Inventories 4,106 (10,051) Prepaid expenses and other (987) (4,175) Accounts payable and accrued liabilities 4,039 (253) ----------- ----------- Net cash from operations 27,661 10,406 ----------- ----------- INVESTING ACTIVITIES Additions to property, plant and equipment (11,378) (38,543) Other, net 741 127 ----------- ----------- Net cash from investing activities (10,637) (38,416) ----------- ----------- FINANCING ACTIVITIES Long-term borrowings (repayments), net (3,582) 32,000 Dividends on common stock (3,873) (3,851) Treasury stock transactions and other, net 2,739 (4,713) ----------- ----------- Net cash from financing activities (4,716) 23,436 ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 12,308 (4,574) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 128 4,702 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,436 $ 128 =========== ===========