-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ln71bE5W4rPd230n0MnSOa2a3EugCcQ4msrQ4A7uTJ+iMoy7A/TP/RjS2NvfWqWM UI8clulq90/j/xtvaoaYFA== 0000950134-95-000202.txt : 19950615 0000950134-95-000202.hdr.sgml : 19950615 ACCESSION NUMBER: 0000950134-95-000202 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950214 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELCOR CORP CENTRAL INDEX KEY: 0000032017 STANDARD INDUSTRIAL CLASSIFICATION: 2950 IRS NUMBER: 751217920 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05341 FILM NUMBER: 95510263 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 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ FORM 1O-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 _______________ For Quarter Ended December 31, 1994 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 7524-8871 ____________________________________________ __________ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (214) 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 February 1, 1995, Registrant had outstanding 8,743,066 shares of Common Stock, Par Value $1 per Share. 2 ITEM 1. Condensed Financial Statements (See Notes to Condensed Financial Statements) ELCOR CORPORATION CONSOLIDATED BALANCE SHEET (Unaudited, $ in thousands)
ASSETS 12-31-94 6-30-94 - - - - ------ -------- ------- CURRENT ASSETS Cash and cash equivalents $ 1,865 $ 5,919 Trade receivables, less allowance of $725 and $610 23,162 33,537 Inventories - Finished goods 10,255 12,761 Work-in-process 809 807 Raw materials 3,675 3,325 -------- --------- Total inventories 14,739 16,893 -------- --------- Deferred income taxes 2,357 2,596 Prepaid expenses and other 1,851 1,603 Net assets of discontinued operations - current -- 629 -------- --------- Total current assets 43,974 61,177 -------- --------- PROPERTY, PLANT AND EQUIPMENT, AT COST 97,989 81,327 Less - Accumulated Depreciation (52,444) (50,550) -------- --------- Property, plant and equipment, net 45,545 30,777 -------- --------- INVESTMENTS 4,435 5,378 -------- --------- NET ASSETS OF DISCONTINUED OPERATIONS - NONCURRENT 7,225 7,230 -------- --------- OTHER ASSETS 5,295 3,671 -------- --------- $106,474 $ 108,233 ======== ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 5,408 $ 9,291 Accrued liabilities 9,125 12,378 -------- --------- Total current liabilities 14,533 21,669 -------- --------- LONG-TERM DEBT 2,500 -- -------- --------- DEFERRED INCOME TAXES 1,388 1,335 -------- --------- SHAREHOLDERS' EQUITY - Common stock 8,802 8,786 Paid-in-capital 71,770 71,685 Unrealized loss on investments ( 941) -- Retained earnings 9,082 4,758 -------- --------- 88,713 85,229 Less: Treasury stock at cost, 44,000 shares (660) -- -------- --------- Total shareholders' equity 88,053 85,229 -------- --------- $106,474 $ 108,233 ======== =========
2 3 Condensed Financial Statements (See Notes to Condensed Financial Statements) ELCOR CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited, $ in thousands except per share data)
Three Months Ended Six Months Ended ------------------ ---------------- 12-31-94 12-31-93 12-31-94 12-31-93 -------- -------- -------- -------- SALES $ 35,973 $ 36,968 $ 74,450 $79,814 -------- -------- -------- ------- COST AND EXPENSES: Cost of sales 26,960 26,051 54,529 56,276 Selling, general and administrative 7,116 6,526 13,045 12,212 -------- -------- -------- ------- INCOME FROM OPERATIONS 1,897 4,391 6,876 11,326 -------- -------- -------- ------- OTHER INCOME Interest and dividend income, net 51 109 154 213 -------- -------- -------- ------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 1,948 4,500 7,030 11,539 Provision for income taxes 781 1,667 2,707 4,340 -------- -------- -------- ------- INCOME FROM CONTINUING OPERATIONS 1,167 2,833 4,323 7,199 -------- -------- -------- ------- LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX -- (495) -- (789) -------- -------- -------- ------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 1,167 2,338 4,323 6,410 Cumulative effect of change in accounting principle -- -- -- 668 -------- -------- -------- ------- NET INCOME $ 1,167 $ 2,338 $ 4,323 $ 7,078 ======== ======== ======== ======= INCOME PER COMMON AND COMMON EQUIVALENT SHARE From continuing operations $ .13 $ .32 $ .49 $ .81 From discontinued operations -- (.06) -- (.09) -------- -------- -------- ------- Before change in accounting principle .13 .26 .49 .72 Cumulative effect of change in accounting principle -- -- -- .07 -------- -------- -------- ------- INCOME PER COMMON AND COMMON EQUIVALENT SHARE $ .13 $ .26 $ .49 $ .79 ======== ======== ======== ======= AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 8,849 8,899 8,887 8,916 ======== ======== ======== =======
3 4 Condensed Financial Statements (See Notes to Condensed Financial Statements) ELCOR CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited, $ in thousands)
Six Months Ended ---------------- 12-31-94 12-31-93 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Income from continuing operations $ 4,323 $ 7,199 Adjustments to reconcile income from continuing operations to net cash from operating activities: Depreciation and amortization 1,922 2,074 Deferred income taxes 291 37 Changes in assets and liabilities: Trade receivables 10,376 4,500 Inventories 2,154 (1,037) Prepaid expenses and other (84) 1 Accounts payable and accrued liabilities (7,135) (498) ------- --------- Net cash provided by continuing operations 11,847 12,276 ------- --------- Net cash provided by discontinued operations 464 (19) ------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant & equipment (16,689) (6,049) Deferred preoperating costs (1,980) -- Other 362 (572) ------- --------- Net cash provided by (used for) investing activities (18,307) (6,621) ------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Long-term borrowings 2,500 -- Treasury stock transactions and other, net (558) 150 ------- --------- Net cash provided by financing activities 1,942 150 ------- --------- NET INCREASE (DECREASE) IN CASH (4,054) 5,786 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,919 18,516 ------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,865 $ 24,302 ======= =========
4 5 Notes to Condensed Financial Statements 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 1994 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 and six-month periods ended December 31, 1994, and 1993, 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. 3. In March 1994 the Company discontinued its solid waste baler manufacturing business. Prior year financial information has been restated for this discontinued operation. 4. The Company's investments are in convertible preferred stock of Amdura Corporation and are classified as available-for-sale in accordance with Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equities Securities. Management believes investments are stated at fair value with the unrealized loss reported as a separate component of shareholders' equity. 5. Effective October 31, 1994, the Company increased its unsecured revolving credit facility from $30 million to $50 million and the term was extended by one year to October 31, 1997 at more favorable borrowing rates and commitment fees. 5 6 ITEM 2. Management's Discussion and Analysis of the Results of Operations and Financial Condition RESULTS OF OPERATIONS CHANGES IN THE THREE-MONTH PERIOD ENDED DECEMBER 31,1994, COMPARED TO THE THREE-MONTH PERIOD ENDED DECEMBER 31,1993. During the three-month period ended December 31, 1994, net income decreased to $1,167,000 from $2,338,000 for the same three-month period last year. Sales decreased 3% compared to the same prior year period. Net income in the prior year quarter included a $495,000 net loss from discontinued operations. The decrease in sales was primarily attributable to lower sales prices of certain products in the Roofing Products Group. Reduced income primarily reflects lower sales prices, together with lower operating margins resulting from reduced utilization of manufacturing facilities during the period and increased promotional costs relating to introducing new products. Roofing Products Sales in the Roofing Products Group for the three-month period ended December 31, 1994 decreased 5% compared to the same period in the prior year, despite an increase in shipments of premium laminated fiberglass asphalt shingles. Shipments of Elk Prestique(R) shingles increased over comparable levels in all regions of the United States except for the Western United States where demand in California was sharply lower. Lower net selling prices were received on most products as price adjustments were made to narrow the premium the Company's products receive over competitors' prices for similar types of products. In order to reduce inventory levels, production was reduced at current plant facilities, which resulted in lower operating profit. In addition, the Company introduced enhanced versions of its patented High Definition(R) Prestique Plus(R) and Prestique(R) I product lines and Raised Profile(TM) Prestique(R) II premium laminated fiberglass asphalt shingles. Increased promotional costs relating to the introduction of these new products increased selling, general and administrative costs and reduced operating profit for the three-month period ended December 31, 1994 compared to the same period in the prior year. Continued lower prices, together with startup costs of a new roofing plant in Shafter, California, which is scheduled to begin production in the March 1995 quarter, could result in earnings being lower than prior year comparison periods for the remainder of fiscal 1995 and the early reporting periods of fiscal 1996. 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 constitute about 80% of industry unit sales, are generally less severely affected by economic downturns than product demand for new residential construction. 6 7 Industrial Products Sales in the Industrial Products Group for the three-month period ended December 31, 1994 increased 8% and the Group reported an operating profit in the current year period compared to an operating loss in the same prior year period. Increased sales volume for several of Chromium Corporation's product lines, primarily coatings of plastic enclosures for electronic equipment, together with reduced operating costs throughout Chromium accounted for the majority of the improvement in operating results. Ortloff Engineers Ltd. recorded lower patent licensing income and operating results during the current quarter as compared to the same quarter in the prior year. The Industrial Products Group is expected to continue to post improved operating results in fiscal 1995 reporting periods as compared to comparable prior year periods. Other Selling, general and administrative expenses increased 9% in the December 1994 quarter as compared to the prior year quarter, primarily as a result of increased sales and marketing expenses in the Roofing Products Group, including significantly increased promotional costs for introducing new products. Interest income was generated from the investment of available cash resources and dividend income was from the investment in preferred stock of Amdura Corporation resulting from the March 1994 sale of the Company's solid waste baler manufacturing business. CHANGES IN THE SIX-MONTH PERIOD ENDED DECEMBER 31,1994, AS COMPARED TO THE SIX-MONTH PERIOD ENDED DECEMBER 31,1993. During the six-month period ended December 31, 1994, net income decreased to $4,323,000 from $7,078,000 in the same period last year. Sales decreased 7% compared to the comparable prior year period. Net income last year included a $668,000 cumulative effect of adopting Statement of Accounting Standards No. 109, Accounting for Income Taxes, and a $789,000 net loss from discontinued operations. The decrease in sales was primarily attributable to reduced shipments in the earlier months of the current fiscal year and lower prices received for certain products in the Rooming Products Group during the six-month period ended December 31, 1994. The reduced income is primarily attributable to the lower operating results in the Roofing Products Group. Roofing Products Sales in the Roofing Products Group for the first half of fiscal 1995 decreased 8% compared to last year's first half and operating profit was substantially lower. Price increases implemented in the June 1994 quarter were not met by the competition and these higher prices for the Group's Prestique(R) products limited sales volume in the early months of the current fiscal year. In addition, lower prices from price adjustments for some of its products also resulted in lower net sales. 7 8 During the first quarter of fiscal 1995, the Company introduced enhanced versions of its patented High Definition(R) Plus and Prestique(R) I product lines and Raised Profile(TM) Prestique(R) II premium laminated fiberglass asphalt shingles. The higher cost of introducing these new products, together with pricing adjustments, higher transportation costs and lower production from current plants to reduce inventory levels, significantly reduced operating results during the first half of fiscal 1995 as compared to the prior year. Industrial Products Sales in the Industrial Products Group for the first six months of fiscal 1995 increased 5% and the Group reported an operating profit compared to an operating loss in same prior year period. Increased sales volume for several of Chromium Corporation's product lines, including hard chrome plated diesel engine cylinder liner and remanufactured pistons for the railroad, marine and stationary power industries, and coatings of plastic enclosures for electronic equipment, together with reduced operating costs at that subsidiary accounted for the majority of the improvement in operating results. Ortloff Engineers reported lower operating results for the six-month period ended December 31, 1994 as compared to the same period in the prior year. FINANCIAL CONDITION Cash and cash equivalents decreased $4,054,000 during the first six months of fiscal 1995. Excluding the decrease in cash and cash equivalents, working capital requirements decreased $6,013,000 primarily as a result of a $10,376,000 reduction in receivables and a $2,154,000 reduction in inventories, offset by a $7,135,000 reduction in trade payable and accrued liabilities. The decrease in receivables is primarily due to the seasonal reduction in sales and the collection of deferred receivables from promotional programs to certain customers. Inventories decreased primarily due to increased shipments of the new, enhanced Prestique(R) shingles during the latter months of the current period and a lower level of production at the roofing plants. Historically, working capital requirements fluctuate during the year because of seasonality in some market areas. Generally, working capital requirements and borrowings are higher in the spring and summer months, and lower in the fall and winter months. Capital expenditures during the first half of fiscal 1995 were $16,689,000, primarily as a result of construction of a new plant in Shafter, California to manufacture premium laminated fiberglass asphalt shingles. Production of laminated asphalt shingles at the new plant is expected to commence in the March 1995 quarter. Consolidated capital expenditures are anticipated to be about $40 million in fiscal 1995. The majority of these expenditures relate to the completion of the roofing plant in Shafter, California and beginning construction of a new plant at the Company's Ennis, Texas facility to manufacture fiberglass substrate materials and industrial facer products for the construction industry. This new plant is scheduled to be operational by the spring of 1996. Total combined cost of the two new plants when completed is estimated to be about $65 million. Total cumulative combined expenditures have been approximately $30 million on the two new plants to date. The new plants should provide the potential to significantly increase the Company's sales, earnings and cash flow when completed and operating at near capacity in the years ahead. On September 27, 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 8 9 corporate purposes, including employee stock compensation and benefit plans. As of December 31, 1994, 44,000 shares with cumulative cost of $660,000 had been repurchased under this program. Management believes that current cash and cash equivalents, cash flows from operations and its $50 million revolving credit facility should be sufficient during fiscal 1995 and beyond to support the construction of the two new plants, other capital expenditures, working capital needs, stock repurchases and other cash requirements. The Company's operations are subject to extensive federal, state and local laws and regulations relating to environmental matters. Although the company is not aware of any requirements in the near future to expend amounts which will have a material adverse affect 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 Companys industrial products operations utilize hazardous materials in their production processes. As a result, the Company incurs costs for remediation activities at its facilities from time to time. The Company establishes and maintains reserves for such remediation activities, when appropriate, in accordance with Statement of 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 operation. 9 10 PART II. OTHER INFORMATION ITEM 1: Legal Proceedings On February 8, 1994, Elk Corporation of Dallas ("Elk") was granted a design patent covering the ornamental aspects of its Prestique(R) shingles. On December 6, 1994, Elk was granted a utility patent on the functional aspects of the Prestique(R) shingles. Elk has sued GAF Building Materials Corporation and related GAF entities (collectively "GAF") in federal court in Dallas, Texas, for infringement of both its design patent and its utility patent. Elk claims that the GAF Timberline Natural Shadow and Timberline Ultra Natural Shadow shingles infringe all claims of both the design patent and the utility patent. In the design patent case, Elk seeks to recover as damages the total profit that GAF has made from sale of the infringing shingles. In the utility patent case, Elk seeks to recover as damages its lost profit or, in the alternative, a reasonable royalty. In both cases, Elk seeks a permanent injunction prohibiting GAF from making or selling its infringing shingles. GAF has asserted claims against Elk, originally in the two actions that GAF filed in federal court in New Jersey and more recently in counterclaims to Elk's Dallas, Texas, actions. GAF seeks a declaratory judgment that the Elk patents are not infringed and are either invalid or unenforceable. GAF has also asserted claims for unfair competition, violation of the Lanham Act, and fraud, generally alleging damages of not less than $25 million. Elk disputes GAF's claims, and management intends vigorously to defend them. The New Jersey judge has transferred GAF's New Jersey actions to the federal court in Dallas, Texas. GAF challenged the transfer by Petition for Writ of Mandamus filed with the Court of Appeals for the Federal Circuit. The Federal Circuit denied GAF's Petition for Writ of Mandamus on January 13, 1995. GAF has also directly appealed the transfer order, and Elk has moved to dismiss that appeal on the ground that the transfer order is nonappealable. The parties are engaged in discovery. None of these cases is now set for trial. Elk's management intends vigorously to enforce its intellectual property rights. ITEM 4: Submission of Matters to a Vote of Security Holders
NUMBER OF VOTES --------------- AUTHORITY FOR WITHHELD --- --------- (a) Annual Meeting on October 25, 1994 (b) Directors Elected: Robert M. Leibrock 8,048,737 60,676 W.F. Ortloff 8,042,985 66,428
10 11 Other Directors Whose Term Continued After the Meeting: Roy E. Campbell James E. Hall F.H. Callaway Phil Simpson (c) Other matters voted upon at the meeting and the number of affirmative votes, negative votes, and abstentions.
NUMBER OF VOTES --------------- AFFIRMATIVE NEGATIVE ABSTENTIONS ----------- -------- ----------- Ratification of Arthur Andersen LLP 8,046,909 26,371 36,133 as independent auditors of the Company for the fiscal year ending June 30, 1995.
ITEM 6: Exhibits and Reports of Form 8-K (a) Exhibits: Exhibit (11): Computation of Income Per Common and Common Equivalent Share Exhibit (20): Quarterly Report to Shareholders for the period ended December 31, 1994. (b) No reports on Form 8-K was filed on during the quarter ended December 31, 1994. 11 12 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: February 13,1995 /s/ RICHARD J. ROSEBERY -------------------------------- Richard J. Rosebery Executive Vice President, Chief Administrative & Financial Officer, and Treasurer 12 13
EXHIBIT NUMBER DESCRIPTION - - - - ------- ----------- Exhibit (11): Computation of Income Per Common and Common Equivalent Share Exhibit (20): Quarterly Report to Shareholders for the period ended December 31, 1994. Exhibit (27): Financial Data Schedule
EX-11 2 COMPUTATION OF INCOME PER COMMON 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 December 31, 1994 Three Months Ended and December 31, 1993 ---------------------------------- 12-31-94 12-31-93 -------- -------- Net Income $ 1,167 $ 2,338 ======== ========= Shares: Weighted average common shares outstanding 8,787 8,699 Adjustments: (a) Assumed issuance of shares purchased under incentive stock option plan using the treasury stock method 62 200 ------- ------- Total Common and Common Equivalent Shares 8,849 8,899 ======= ======= Income per Common and Common Equivalent Share $ .13 $ .26 ======= =======
2. Six Months Ended December 31, 1994 Six Months Ended and December 31, 1993 ---------------------------------- 12-31-94 12-31-93 -------- -------- Net Income $ 4,323 $ 7,078 ======= ======= Shares: Total Common and Common Equivalent Shares Three months ended 9/30/94 and 9/30/93 8,925 8,932 Three months ended 12/31/94 and 12/31/93 8,849 8,899 ------- ------- Average Six Months ended 12/31/94 and 12/31/93 8,887 8,916 ======= ======= Income per Common and Common Equivalent Share $ .49 $ .79 ======= =======
EX-20 3 QUARTERLY REPORT 1 EXHIBIT (20) 2nd QUARTER REPORT Period Ended December 31, 1994 FELLOW SHAREHOLDERS: We are disappointed with our second quarter results, which were adversely affected by lower prices, mix and production, as well as higher promotion and new product introduction expenses. However, these results were favorably influenced by better manufacturing costs and significantly improved results from our Industrial Products Group. We are focusing our management effort on getting the new Shafter, California plant into production in the March quarter and increasing the sales of our patented new enhanced High Definition(R) and Raised Profile(TM) Prestique(R) shingles. We believe the actions we are taking should enable us to achieve an improvement in earnings in our new fiscal year which begins July 1, 1995. OPERATING HIGHLIGHTS Income from continuing operations and net income were $1,167,000, or $.13 per share, on sales of $35,973,000 for the fiscal 1995 second quarter ending December 31, 1994. Results did not match the second quarter last year when income from continuing operations was $2,833,000 or $.32 per share, and net income was $2,338,000, or $.26 per share, including a loss of $495,000 or $.06 per share, from discontinued operations. Fiscal 1994 second-quarter sales were $36,968,000. For the first half ending December 31, 1994, income from continuing operations and net income were $4,323,000, or $.49 per share, on sales of $74,450,000. In the first half of last year, income from continuing operations was $7,199,000, or $.81 per share, and net income was $7,078,000, or $.79 per share. Net income in the year-ago half included a loss from discontinued operations of $789,000, or $.09 per share, and a gain of $668,000, or $.07 per share, for the cumulative effect of a change in accounting for income taxes, in accordance with the Statement of Accounting Standards No.109, Accounting for Income Taxes. Sales were $79,814,000 in the first half of last year. FINANCIAL POSITION Elcor maintained its strong financial position with $88 million in equity and only $2.5 million in long-term debt, as of December 31, 1994. Long-term debt is provided under Elcor's $50 million unsecured three-year revolving credit facility, which is available to provide additional financial resources. OPERATIONS ROOFING PRODUCTS' second quarter sales and operating income were lower than the year-ago quarter primarily as a result of lower prices and higher promotional expenses for introducing Elk's patented new enhanced High Definition and Raised Profile Prestique product lines. The new product lines are being well received in the markets, and shipments were higher than last year's second quarter. In fact, shipments of Elk Prestique shingles rose in all regions of the country except for the West where demand in California was sharply lower. Industry shipments of laminated shingles in California during the September 1994 quarter fell 18% from the prior year quarter. For the nine months ending September 1994, industry shipments to California were down 10% from the same period last year. Although the California economy has been slow, it is generally believed that sharply lower demand for roofing resulted from a lack of rain, especially in Southern California. In areas where rainfall is sparse, homeowners may not become aware of roofing deterioration until heavy rainfalls occur and leaking water creates interior damage. The record rainfall throughout the state of California during the first half of January is expected to significantly stimulate replacement roofing demand in the year ahead. Elk's major new laminated fiberglass asphalt roofing plant in Shafter, California is nearly complete. Functional checkout of the various plant systems is underway, with initial production and qualification of products expected during mid-February to mid-March. Product shipments are expected to begin in the late March to early April time frame. The recent torrential rains and other factors have delayed the plant's start-up by about a month. The new Shafter, California plant is well positioned to supply the anticipated increased demand resulting from the state's recent record rainfall. The new plant will produce Elk's patented new enhanced High Definition and Raised Profile Prestique premium laminated fiberglass asphalt shingles, which will be introduced into the Western United States when Shafter begins shipments this spring. Elk's new $30 million nonwoven fiberglass mat plant at its Ennis, Texas facility is proceeding on schedule with start-up operations expected in the spring of 1996. On December 6, 1994, the United States Patent and Trademark Office issued to our wholly owned subsidiary, Elk Corporation of Dallas ("Elk"), United States Patent No. 5,369,929, a utility patent covering the High Definition and Raised Profile Prestique premium laminated fiberglass asphalt shingles made and sold by Elk subsidiaries. This is the second patent issued to Elk covering aspects of these novel product lines. The new patent is a continuation-in-part of U.S. Design Patent No. 344,144 issued to Elk in February 1994. Following the award of the new utility patent, Elk sued GAF Building Materials Corporation ("GAF") and Building Materials Corporation of America in Dallas for infringement of this patent. Furthermore, the Elk design patent has also been the subject of infringement litigation in federal court in both Newark, New Jersey and Dallas, Texas. Each case centers around the alleged infringement of the Elk design patent by the Timberline(R) Natural Shadow(TM) and Timberline(R) Ultra(R) Natural Shadow(TM) shingles produced by GAF. GAF has counterclaimed seeking to invalidate the 344,144 Design Patent and seeking damages. We believe GAF's counterclaims lack merit. 2 CONDENSED RESULTS OF OPERATIONS (Unaudited, $ in thousands except per share data)
Second Quarter Six Months Ended Trailing Twelve Three Months December 31, Months Ended Ended December 31, December 31 1994 1993 1994 1993 1994 1993 ------- ------- ------- ------- -------- -------- SALES.................................. $35,973 $36,968 $74,450 $79,814 $151,667 $161,280 COSTS AND EXPENSES: Cost of sales........................ 26,960 26,051 54,529 56,276 105,812 112,343 Selling, general & administrative.... 7,116 6,526 13,045 12,212 25,769 23,845 Interest and dividend income, net.... (51) (109) (154) (213) (345) 184 ------- ------- ------- ------- -------- -------- Total Costs and Expenses............... 34,025 32,468 67,420 68,275 131,236 136,372 ------- ------- ------- ------- -------- -------- INCOME BEFORE CONTINUING OPERATIONS BEFORE INCOME TAXES.................. 1,948 4,500 7,030 11,539 20,431 24,908 Provision for income taxes............. 781 1,667 2,707 4,340 7,736 9,474 ------- ------- ------- ------- -------- -------- INCOME FROM CONTINUING OPERATIONS...... 1,167 2,833 4,323 7,199 12,695 15,434 ------- ------- ------- ------- -------- -------- DISCONTINUED OPERATIONS: Operating loss, net of tax........... 0 (495) 0 (789) (623) (1,014) Loss on disposal, net of tax......... 0 0 0 0 (82) 0 ------- ------- ------- ------- -------- -------- LOSS FROM DISCONTINUED OPERATIONS...... 0 (495) 0 (789) (705) (1,014) ------- ------- ------- ------- -------- -------- INCOME BEFORE CHANGE IN ACCOUNTING..... 1,167 2,338 4,323 6,410 11,990 14,420 Cumulative effect of change in accounting for income taxes.......... 0 0 0 668 0 668 ------- ------- ------- ------- -------- -------- NET INCOME............................. $ 1,167 $ 2,338 $ 4,323 $ 7,078 $ 11,990 $ 15,088 ======= ======= ======= ======= ======== ======== INCOME (LOSS) PER COMMON SHARE: From continuing operations........... $ 0.13 $ 0.32 $ 0.49 $ 0.81 $ 1.43 $ 1.84 From discontinued operations......... 0.00 (0.06) 0.00 (0.09) (0.08) (0.12) ------- ------- ------- ------- -------- -------- Before change in accounting............ 0.13 0.26 0.49 0.72 1.35 1.72 Cumulative effect of change in accounting for income taxes.......... 0.00 0.00 0.00 0.07 0.00 0.08 ------- ------- ------- ------- -------- -------- NET INCOME PER SHARE................... $ 0.13 $ 0.26 $ 0.49 0.79 $ 1.35 $ 1.80 ======= ======= ======= ======= ======== ======== AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING................... 8,849 8,899 8,887 8,916 8,907 8,377 ======= ======= ======= ======= ======== ========
3 CONDENSED STATEMENT OF CASH FLOWS (Unaudited, $ in thousands)
For the Six Months Ended December 31, 1994 1993 -------- ------- CASH FLOWS FROM: OPERATING ACTIVITIES Income from continuing operations....................................... $ 4,323 $ 7,199 Adjustments to income from continuing operations Depreciation and amortization......................................... 1,922 2,074 Deferred income taxes................................................. 291 37 Changes in assets and liabilities: Trade receivables..................................................... 10,376 4,500 Inventories........................................................... 2,154 (1,037) Prepaid expenses and other............................................ (84) 1 Accounts payable and accrued liabilities.............................. (7,135) (498) -------- ------- Net cash from continuing operations..................................... 11,847 12,276 -------- ------- Net cash from discontinued operations................................... 464 (19) -------- ------- INVESTING ACTIVITIES Additions to property, plant & equipment.............................. (16,689) (6,049) Deferred preoperating costs........................................... (1,980) 0 Other................................................................. 362 (572) -------- ------- Net cash from investing activities...................................... (18,307) (6,621) -------- ------- FINANCING ACTIVITIES Long-term borrowings.................................................. 2,500 0 Treasury stock transactions and other, net............................ (558) 150 -------- ------- Net cash from financing activities...................................... 1,942 150 -------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................... (4,054) 5,786 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.......................... 5,919 18,516 -------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD.............................. $ 1,865 $24,302 ======== =======
4 CONDENSED BALANCE SHEET (Unaudited, $ in thousands)
December 31, ASSETS 1994 1993 -------- ------- Cash and cash equivalents............................................... $ 1,865 $24,302 Receivables, net........................................................ 23,162 21,518 Inventories............................................................. 14,739 9,362 Deferred income taxes................................................... 2,357 1,771 Prepaid expenses and other.............................................. 1,851 1,230 Net assets of discontinued operations -- current........................ 0 4,968 -------- ------- Total Current Assets.................................................. 43,974 63,151 Property, plant and equipment, net...................................... 45,545 22,308 Net assets of discontinued operations -- noncurrent..................... 7,225 8,006 Investments............................................................. 4,435 0 Other assets............................................................ 5,295 2,760 -------- ------- Total Assets.......................................................... $106,474 $96,225 ======== ======= LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued liabilities................................ $ 14,533 $19,249 Current maturities on long-term debt.................................... 0 0 -------- ------- Total Current Liabilities............................................. 14,533 19,249 Deferred income taxes................................................... 1,388 0 Long-term debt, net..................................................... 2,500 0 Shareholders' equity.................................................... 88,053 76,976 -------- ------- Total Liabilities and Shareholders' Equity............................ $106,474 $96,225 ======== =======
5 Elk plans to continue to vigorously protect its intellectual property rights. In November, 1994, the New Jersey Court transferred the New Jersey cases to Dallas, where Elk had already filed suit for infringement of its U.S. Design Patent No. 344,144. On January 13, 1995, the United States Court of Appeals for the Federal Circuit denied a GAF appeal of the New Jersey Court's decisions. INDUSTRIAL PRODUCTS continued to achieve substantially improved operating results. This segment increased sales and was profitable in the December quarter. Its Chromium Corporation subsidiary continues to sustain a significant turnaround performance, offsetting lower sales and operating income for Ortloff Engineers, which was affected by lower patent licensing income during the second quarter. OUTLOOK At the present time, it appears likely that the delays in the start-up of our new Shafter, California plant, along with lower prices, will result in second-half earnings being more in line with our first-half earnings for fiscal 1995. This could delay a return to higher earnings levels into the first half of our fiscal year 1996. We feel very good about Elcor's future and believe that the significant capital investments we are making to increase capacity have the potential to significantly increase earnings in the years ahead. /s/ ROY E. CAMPBELL Roy E. Campbell Chairman and President February 3, 1995 NEW PRODUCT REPORT [HOUSE PICTURE] The most recent innovation in design is the new patented Raised Profile(TM) Prestique(R) II premium laminated fiberglass asphalt shingle from Elk. These mid-weight, dimensional shingles, shown here in Hickory color, are gaining rapid acceptance as a preferred alternative to flat-looking commodity single-ply three-tab shingles because they improve the appearance and value of the home. STOCK REPURCHASE PROGRAM On September 27, 1994, your Board of Directors approved the repurchase of up to $10 million of Elcor common stock from time to time in the open market. If all of the stock were purchased at then current prices on the New York Stock Exchange, about 600,000 shares, or about 7% of our common stock, could be repurchased. The company had 8,793,434 shares outstanding at September 30, 1994. In view of Elcor's strong financial position and the price level of our stock, we believe that the repurchase of our own shares represents an attractive investment opportunity for the company. The repurchased shares will be used for general corporate purposes, including employee stock compensation and benefit plans. Elcor began repurchasing its shares during the second quarter. ELCOR CORPORATION Wellington Centre, Suite 1000 14643 Dallas Parkway Dallas, Texas 75240-8871 EX-27 4 FINANCIAL DATA SCHEDULES
5 1,000 6-MOS JUN-30-1995 JUL-01-1994 DEC-31-1994 1,865 0 23,887 725 14,739 43,974 97,989 52,444 106,474 14,533 2,500 8,802 0 0 79,251 106,474 74,450 74,450 54,529 54,529 0 0 0 7,030 2,707 4,323 0 0 0 4,323 .49 .49
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