EX-99.1 3 d09760exv99w1.txt PRESS RELEASE EXHIBIT 99.1 Press Release dated October 16, 2003 of ElkCorp 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 ELKCORP REPORTS HIGHER FISCAL 2004 FIRST QUARTER RESULTS DALLAS, TEXAS, October 16, 2003. . . . ElkCorp today reported earnings of $9.1 million, or $0.46 per diluted share, for the three months ending September 30, 2003. During the same quarter last year, ElkCorp earned $9.0 million, or $0.46 per diluted share, inclusive of approximately $3.5 million, or $0.18 per diluted share, of non-cash after-tax income resulting from variable stock option accounting that would not have existed under the fixed method of stock option accounting now utilized by the company. For comparative purposes, management believes it is appropriate to exclude income from variable stock option accounting from the results of the year-ago quarter, since this income resulted solely from changes in ElkCorp's share price and not from operations. Excluding the positive effect of variable stock option accounting, pro forma earnings during the year-ago quarter were $5.5 million, or $0.28 per diluted share. HIGHLIGHTS OF THE FIRST FISCAL QUARTER ENDING SEPTEMBER 30, 2003 Consolidated ElkCorp o Consolidated sales increased 34.4% to $161.3 million, from $120.1 million in the same quarter last year. o Consolidated earnings of $9.1 million were 66.1% higher than above described comparable pro forma earnings of $5.5 million in the same quarter last year. Building Products o Segment sales increased 38.9% to $157.4 million, from $113.3 million in the same quarter last year. Higher sales of roofing products were largely responsible for the increase. o Unit shingle shipments increased 33.8% with most regions seeing strong year-over-year growth. About one-half of higher volumes resulted from strong roof replacement demand in hail-damaged Texas markets. o Average shingle pricing increased about 5.9% over the year-ago quarter. o Segment operating profits of $21.9 million (13.9% of sales) were 51.1% higher than $14.5 million (12.8% of sales) during the year-ago quarter. Significantly better shingle pricing, PRESS RELEASE ElkCorp October 16, 2003 Page 2 relative to asphalt and other raw material costs, and higher shingle volumes were largely responsible for the profit improvement. o An operating loss at Elk Composite Building Products reduced segment operating profits by approximately $1.1 million during the quarter. Manufacturing efficiency improved significantly as the quarter progressed; however, sales were below the break-even level as distribution channel expansion was strategically curtailed during the quarter pending sustainable improvement in manufacturing throughput. Other, Technologies o Combined sales were $4.0 million, compared to $6.8 million in the year-ago quarter. An operating loss of $2.1 million compared to a $1.1 million operating loss during the year-ago quarter. o Cybershield was largely responsible for the decline in combined sales and operating results as cellular phone models that previously utilized Cybershield's traditional shielding and services were discontinued by manufacturers. As the year progresses, sales are expected to recover from the ramp-up of recently awarded new projects and from a growing pipeline of specifically identified new opportunities. During the quarter, commercial production was commenced on several new products utilizing the company's proprietary EXACT(TM) precise metallization technology. o Ortloff recognized no significant license fee income during the quarter, resulting in an operating loss of about $0.5 million, contrary to earlier expectations of approximately $1.3 million of earnings contribution. Subsequent to September 30, 2003, one technology license agreement approximating $0.5 million was executed, and technology license agreements representing the balance of earlier expectations remain pending with no known risks to execution. o Chromium and the Electro-Motive Division of General Motors ("GM EMD") signed a manufacturer's representation agreement under which GM EMD will promote and market Chromium's reciprocating engine components through the extensive GM EMD sales network in international and specific domestic markets. o Elk Technologies had no significant sales of fire-retardant mattress fabrics during the quarter. FINANCIAL CONDITION At September 30, 2003, long-term debt of $150.5 million included a $5.5 million valuation adjustment required by hedge accounting to match the $5.5 million fair market value of an interest rate hedge recorded in other assets. The contractual principal amount of ElkCorp's long-term debt was $145.0 million. Liquidity consisted of $22.8 million of cash and cash equivalents and $97.4 million of borrowing availability under a $100.0 million committed revolving credit facility. Net debt (contractual principal debt minus cash and cash equivalents) was $122.2 million, and the net debt to capital ratio was 37.3%. The company had no off-balance sheet arrangements or transactions with unconsolidated, special purpose entities. PRESS RELEASE ElkCorp October 16, 2003 Page 3 OUTLOOK Thomas D. Karol, Chairman of the Board and Chief Executive Officer of ElkCorp said, "We are bullish regarding the near-term outlook for our roofing business. Roofing volumes are strong and we believe that industry-wide supplies of roofing inventories have tightened relative to demand. It is likely that a portion of the strong roof replacement demand that resulted from calendar 2003 storm damage will carry over into the calendar 2004 roofing season. Reflective of these conditions, effective October 1, 2003, we implemented a price increase of approximately 1.5% in most markets. "We are committed to achieving profitable operations at our composite wood business and at Cybershield. As a result of significantly improved manufacturing performance at our composite wood business, we are now more confident of achieving the manufacturing throughput required to reliably supply an expanded distribution network. We recently resumed efforts to expand our composite wood distribution channels, and we believe that growing sales of our composite decking and fencing products in coming months should result in profitability. We are also encouraged by significant growth in our pipeline of active product testing and bid opportunities at Cybershield. We expect to see growing sales from EXACT and non-cellular applications flow from this pipeline as the year progresses. "In late August 2003, Serta, the second largest U.S. mattress manufacturer, announced that it would incorporate flame-resistant protection in all of its 2004 product lines. Serta's intention to nationally distribute flame-resistant products, well in advance of California's January 1, 2005 date for statutory compliance, will likely result in other mattress manufacturers' competitive early release of flame-resistant mattress lines. We remain confident that we are well positioned to successfully compete in the emerging market for flame-resistant bedding. "We currently expect earnings of $0.27 to $0.30 during our second fiscal quarter ending December 31, 2003, and we remain comfortable with the analysts' consensus estimate of $1.59 for full fiscal year 2004. Shingle granules in the region supplying our Myerstown, PA roofing plant are currently in short supply and our earnings outlook includes expected granule allocations. While we are hopeful that our VersaShield(R) coated, flame-resistant mattress fabrics could gain some sales traction during the second half of fiscal 2004, our earnings outlook does not yet include a contribution from this potential source. Risks to our near-term outlook include an early outbreak of severe winter weather that could restrain roofing activity in affected markets, and any greater than expected curtailment in our supply of shingle granules," Karol concluded. CONFERENCE CALL ElkCorp will host a conference call tomorrow, Friday, October 17, 2003, at 11:00 a.m. Eastern time (10:00 a.m. Central time). Interested parties can access the conference call by dialing (719) 457-2665 and providing confirmation code 513998. The conference call will also be broadcast live over the internet and can be accessed through the ElkCorp website at www.elkcorp.com (Investor Relations / Calls & Presentations) or by visiting www.firstcallevents.com. PRESS RELEASE ElkCorp October 16, 2003 Page 4 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 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," "likely," or similar words that convey the uncertainty of future events or outcomes. These statements are based on judgments the company believes are reasonable; however, ElkCorp'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, acts of God, war or terrorism, 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, 2003, and subsequent Forms 8-K and 10-Q. - - - - - - - - ElkCorp, 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 ElkCorp'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 ElkCorp October 16, 2003 Page 5 CONDENSED RESULTS OF OPERATIONS ($ in thousands)
Trailing Three Months Ended Twelve Months Ended September 30, September 30, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ SALES $ 161,344 $ 120,082 $ 547,408 $ 483,389 ------------ ------------ ------------ ------------ COSTS AND EXPENSES: Cost of sales 128,955 95,428 440,106 389,201 Selling, general & administrative: Noncash stock option compensation 0 (5,378) 0 (781) Other SG&A 16,222 14,102 62,373 58,453 Interest expense, net 1,383 1,680 5,680 5,487 ------------ ------------ ------------ ------------ Total Costs and Expenses 146,560 105,832 508,159 452,360 ------------ ------------ ------------ ------------ INCOME BEFORE INCOME TAXES 14,784 14,250 39,249 31,029 Provision for income taxes 5,647 5,254 15,008 11,840 ------------ ------------ ------------ ------------ NET INCOME $ 9,137 $ 8,996 $ 24,241 $ 19,189 ============ ============ ============ ============ INCOME PER COMMON SHARE-BASIC $ 0.47 $ 0.46 $ 1.24 $ 0.99 ============ ============ ============ ============ INCOME PER COMMON SHARE-DILUTED $ 0.46 $ 0.46 $ 1.23 $ 0.97 ============ ============ ============ ============ PRO FORMA INFORMATION: NET INCOME $ 9,137 $ 8,996 $ 24,241 $ 19,189 AFTERTAX NONCASH STOCK OPTION COMPENSATION 0 (3,496) 0 (508) ------------ ------------ ------------ ------------ PROFORMA EARNINGS $ 9,137 $ 5,500 $ 24,241 $ 18,681 ============ ============ ============ ============ INCOME PER COMMON SHARE-BASIC $ 0.47 $ 0.28 $ 1.24 $ 0.96 ============ ============ ============ ============ INCOME PER COMMON SHARE-DILUTED $ 0.46 $ 0.28 $ 1.23 $ 0.95 ============ ============ ============ ============ AVERAGE COMMON SHARES OUTSTANDING Basic 19,545 19,461 19,502 19,369 ============ ============ ============ ============ Diluted 19,823 19,594 19,657 19,689 ============ ============ ============ ============
PRESS RELEASE ElkCorp October 16, 2003 Page 6 FINANCIAL INFORMATION BY COMPANY SEGMENTS ($ in thousands)
Trailing Three Months Ended Twelve Months Ended September 30, September 30, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ SALES Building Products $ 157,367 $ 113,316 $ 511,053 $ 441,964 Other, Technologies 3,977 6,766 36,355 41,425 Corporate & Eliminations 0 0 0 0 ------------ ------------ ------------ ------------ $ 161,344 $ 120,082 $ 547,408 $ 483,389 ============ ============ ============ ============ OPERATING PROFIT (LOSS) Building Products $ 21,904 $ 14,498 $ 53,307 $ 53,198 Other, Technologies (2,063) (1,089) 3,206 (5,536) Corporate & Eliminations Before noncash stock option compensation (3,674) (2,857) (11,584) (11,927) Noncash stock option compensation 0 5,378 0 781 ------------ ------------ ------------ ------------ Total Corporate & Eliminations (3,674) 2,521 (11,584) (11,146) ------------ ------------ ------------ ------------ $ 16,167 $ 15,930 $ 44,929 $ 36,516 ============ ============ ============ ============
PRESS RELEASE ElkCorp October 16, 2003 Page 7 CONDENSED BALANCE SHEET ($ in thousands)
September 30, ASSETS 2003 2002 ------ ------------ ------------ Cash and cash equivalents $ 22,759 $ 21,148 Receivables, net 117,477 79,687 Inventories 40,077 57,206 Deferred income taxes 2,872 3,887 Prepaid expenses and other 4,556 6,316 ------------ ------------ Total Current Assets 187,741 168,244 Property, plant and equipment, net 249,750 209,511 Other assets 14,206 12,280 ------------ ------------ Total Assets $ 451,697 $ 390,035 ============ ============
September 30, LIABILITIES AND SHAREHOLDERS' EQUITY 2003 2002 ------------------------------------ ------------ ------------ Accounts payable and accrued liabilities $ 56,575 $ 45,604 Current maturities on long-term debt 0 0 ------------ ------------ Total Current Liabilities 56,575 45,604 Long-term debt, net 150,492 125,989 Deferred income taxes 39,392 34,321 Shareholders' equity 205,238 184,121 ------------ ------------ Total Liabilities and Shareholders' Equity $ 451,697 $ 390,035 ============ ============
PRESS RELEASE ElkCorp October 16, 2003 Page 8 CONDENSED STATEMENT OF CASH FLOWS ($ in thousands)
Three Months Ended September 30, 2003 2002 ------------ ------------ CASH FLOWS FROM: OPERATING ACTIVITIES Net income $ 9,137 $ 8,996 Adjustments to net income Depreciation and amortization 4,667 4,550 Deferred income taxes 1,630 2,615 Changes in assets and liabilities: Trade receivables 2,791 15,077 Inventories 14,017 (10,296) Prepaid expenses and other 2,167 3,158 Accounts payable and accrued liabilities 1,036 (6,187) ------------ ------------ Net cash from operations 35,445 17,913 ------------ ------------ INVESTING ACTIVITIES Additions to property, plant and equipment (17,163) (7,575) Other, net (140) (676) ------------ ------------ Net cash from investing activities (17,303) (8,251) ------------ ------------ FINANCING ACTIVITIES Long-term borrowings (repayments), net 0 0 Dividends on common stock (980) (973) Treasury stock transactions and other, net 541 23 ------------ ------------ Net cash from financing activities (439) (950) ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS 17,703 8,712 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,056 12,436 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 22,759 $ 21,148 ============ ============