EX-99.1 2 a5001144ex99_1.txt EXHIBIT 99.1 EXHIBIT 99.1 Press Release dated October 21, 2005 of ElkCorp ElkCorp Reports First Quarter Results; Earnings Per Diluted Share From Continuing Operations Increased 34% Over Prior Year; Strategic Acquisition of RGM Products, Inc. Closed DALLAS--(BUSINESS WIRE)--(Oct. 21, 2005)--ElkCorp (NYSE:ELK) announced today financial results for its first fiscal quarter, ended September 30, 2005. Earnings from continuing operations for the first quarter were $10.5 million, or $0.51 per diluted share. First Quarter Overview ElkCorp Consolidated -- ElkCorp recorded revenue of $215.9 million which is an increase of 32% over the $163.0 million reported for the first quarter of fiscal 2005. -- The Company reported income from continuing operations of $10.5 million, or $0.51 per diluted share, compared to $7.7 million, or $0.38 per diluted share reported for the first quarter of fiscal 2005. Net income was $10.5 million or $0.51 per diluted share compared to $6.8 million, or $0.34 per diluted share for the prior year period. -- First quarter results include $1.9 million, or $0.06 per diluted share for expensing of stock-based compensation compared to $0.3 million, or $0.01 per diluted share in the prior year quarter. Premium Roofing Products -- Revenue for Premium Roofing Products was $194.7 million, a 32% increase over the $147.6 million reported in the first quarter of fiscal 2005. -- Operating income was $27.6 million, up 55% over the $17.8 million reported in the first quarter of fiscal 2005. -- Premium Roofing Products unit volume increased 25% from the same quarter last year, reflecting primarily the capacity utilization of the new Tuscaloosa production line that had just started up at the beginning of the first quarter of fiscal 2005 and the impact of RGM Products, Inc. (RGM) acquired during the quarter. -- Price increases announced in June and September have been able to offset current increases in raw material and transportation costs. The operating margin was 14.2% for the September quarter, an improvement over the 12.0% earned in the same quarter last year. -- The Myerstown facility continues to operate at full capacity despite the issues with its damaged granule storage system as previously reported in our August, 2005 press release. The Company remains optimistic about the ability to continue this pace while repairs are being made. Initial repairs are expected to be completed by the third fiscal quarter. -- Backlog continues to increase as distribution to the storm damaged areas in the Southwest and Southeast increases. Initial reports reflect significant roof damage through East Texas, Louisiana, Mississippi and Alabama. In addition, there is still residual demand from last year's storms in Florida. -- The acquisition of RGM was closed on August 25, 2005. RGM was accretive to results in this first quarter, adding $0.028 per diluted share. Composite Building Products -- Sales in the first quarter were $5.1 million, an increase of 70% over the $3.0 million recorded in the same quarter of fiscal year 2005. -- The operating loss for the first quarter was $4.1 million compared to a loss of $0.7 million in the first quarter of fiscal 2005. -- Pricing and volume improved over the prior year quarter but were more than offset by raw material cost increases, increased expenses associated with the plant expansion, additional returned material that was not consistent with the current formulation, and the additional write down to market value of previously produced non-decking inventory. The returned material and non-decking product adjustments accounted for $2.6 million of the quarterly loss. The Company does not anticipate any additional returned material or non-decking valuation adjustments. Specialty Fabrics -- Revenue was $13.7 million in the first quarter compared to $10.0 million in the same quarter last year. -- Operating income was $1.5 million in the first quarter compared to $0.7 million for the prior year period. Financial Condition At September 30, 2005, the contractual principal amount of ElkCorp's long-term debt, including $7.3 million of debt related to acquisitions, was $202.3 million. Net debt (contractual principal debt minus cash, cash equivalents and short-term investments) was $137.5 million, and the net debt to capital ratio was 32.7%. Liquidity consisted of $64.8 million of cash, cash equivalents and short-term investments and $121.1 million of borrowing availability under a $125 million committed revolving credit facility expiring November 30, 2008. Long-term debt of $204.9 million included $2.6 million representing the net fair market value for two interest rate swap agreements. Business Outlook "We are pleased with our first quarter results," said Thomas Karol, chairman and chief executive officer of ElkCorp. "We continue to experience strong demand for our roofing products throughout the country, particularly in areas affected by hurricanes Katrina and Rita as well as the residual demand from last year's storms in Florida." Mr. Karol continued, "During the quarter we experienced great enthusiasm in the market for the newly acquired RGM Products, Inc. The addition of the RGM team and product offerings to our nationwide distribution channel has significantly enhanced market awareness of the RGM ridge and underlayment products. We are pleased with the market response to these products and anticipate sales for the RGM lines to increase throughout the fiscal year and beyond." "We reported an operating loss in our composites business for the quarter but we were able to reduce the loss from the $5.5 million loss reported in the fourth quarter of fiscal 2005. We continue to see improvement in this product platform and continue to make progress in expanding our decking and non-decking sales. As we near the end of the traditional decking season, we have seen our sales in this platform increase by 70% over the prior year and the number of distributors increase to more than 100. As we have stated in the past, we believe the composites business is now on a solid foundation with the new expanded production facility and a strong management and sales team in place. Obviously this product platform is not at the level we had anticipated it would be at this point; however, it is progressing at a rapid pace and our goal remains to return the composites business to profitability by the end of the third fiscal quarter." "We have started out fiscal 2006 on a high note and we hope to continue this momentum throughout the year." Earnings Outlook The Company expects earnings for the second quarter of fiscal 2006 to be in the range of $0.50 to $0.53 per diluted share, and to be in the range of $2.25 to $2.40 per diluted share for fiscal 2006. Raw material (primarily asphalt and polypropylene) and transportation costs, however, continue to be volatile and uncertain. We are attempting to recover these costs as well as increased operating expenses through price increases, but there is likely to be some lag resulting in margin erosion in the short term. An additional price increase has been announced for the end of October. Conference Call The ElkCorp management team will host a conference call and live audio webcast on October 24, 2005, at 11:00 a.m. ET to further discuss its earnings and operations for the first quarter fiscal 2006. Investors and other interested parties may listen to the live webcast by visiting the investor relations section of the ElkCorp website at www.elkcorp.com. A replay of the conference call will be available for 24 hours beginning at 1:00 p.m. ET and may be accessed by dialing 1-800-642-1687 and entering passcode 1090096. The webcast replay also will be available on the investor relations section of Company's website. 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," "vision," "outlook," "believe," "estimate," "potential," "forecast," "goal," "project," "expect," "anticipate," "plan," "predict," "could," "should," "may," "likely," or similar words that convey the uncertainty of future events or outcomes and include the earnings outlook for the second quarter and fiscal year 2006. 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, failure to achieve expected efficiencies in new operations, 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, 2005. ElkCorp undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. ElkCorp, through its subsidiaries, manufactures Elk brand premium roofing and building products (over 90% of consolidated revenue) and provides technologically advanced products and services to other industries. Each of ElkCorp's principal operating subsidiaries is a leader within its particular market. Its common stock is listed on the New York Stock Exchange (NYSE:ELK). See www.elkcorp.com for more information. Condensed Results of Operations ($ in thousands) Three Months Ended Twelve Months Ended September 30, September 30, 2005 2004 2005 2004 --------- --------- --------- --------- Sales $215,857 $163,012 $814,564 $569,764 --------- --------- --------- --------- Costs and Expenses: Cost of sales 176,129 133,422 656,632 460,262 Selling, general & administrative 20,106 15,181 74,871 59,871 --------- --------- --------- --------- Operating Income from Continuing Operations 19,622 14,409 83,061 49,631 Interest expense and other, net 2,857 2,094 11,128 6,022 --------- --------- --------- --------- Income from Continuing Operations Before Income Taxes 16,765 12,315 71,933 43,609 Provision for income taxes 6,238 4,655 26,370 16,277 --------- --------- --------- --------- Income from Continuing Operations 10,527 7,660 45,563 27,332 Income (Loss) from Discontinued Operations, Net 0 (851) 5,022 (9,154) --------- --------- --------- --------- Net Income $10,527 $6,809 $50,585 $18,178 ========= ========= ========= ========= Income (Loss) Per Common Share-Basic Continuing Operations $0.52 $0.39 $2.29 $1.39 Discontinued Operations 0.00 (0.04) 0.25 (0.46) --------- --------- --------- --------- $0.52 $0.35 $2.54 $0.93 ========= ========= ========= ========= Income (Loss) Per Common Share-Diluted Continuing Operations $0.51 $0.38 $2.23 $1.37 Discontinued Operations 0.00 (0.04) 0.25 (0.46) --------- --------- --------- --------- $0.51 $0.34 $2.48 $0.91 ========= ========= ========= ========= Average Common Shares Outstanding Basic 20,185 19,671 19,917 19,641 ========= ========= ========= ========= Diluted 20,576 19,915 20,420 19,948 ========= ========= ========= ========= Financial Information by Company Segments ($ in thousands) Three Months Ended Twelve Months Ended September 30, September 30, 2005 2004 2005 2004 --------- --------- --------- --------- Sales Premium Roofing Products $194,717 $147,593 $740,758 $518,315 Composite Building Products 5,080 2,983 21,522 10,775 Specialty Fabrics Technologies 13,744 10,003 43,192 31,824 Surface Finishes 2,316 2,433 9,092 8,850 --------- --------- --------- --------- $215,857 $163,012 $814,564 $569,764 ========= ========= ========= ========= Operating Profit (Loss) Premium Roofing Products $27,559 $17,779 $114,012 $63,417 Composite Building Products (4,120) (717) (15,225) (1,903) Specialty Fabrics Technologies 1,510 698 2,895 835 Surface Finishes 273 327 90 906 Corporate and other (5,600) (3,678) (18,711) (13,624) --------- --------- --------- --------- $19,622 $14,409 $83,061 $49,631 ========= ========= ========= ========= Condensed Balance Sheet ($ in thousands) September 30, Assets 2005 2004 ------- ------------- ------------ Cash and cash equivalents $9,934 $294 Short-term investments 54,887 0 Receivables, net 150,241 107,231 Inventories 75,515 64,122 Deferred income taxes 8,281 4,169 Prepaid expenses and other 8,838 8,520 Discontinued operations -- current 2,434 9,661 ------------- ------------ Total Current Assets 310,130 193,997 Property, plant and equipment, net 296,483 275,253 Other assets 28,297 8,834 Discontinued operations -- noncurrent 2,423 4,319 ------------- ------------ Total Assets $637,333 $482,403 ============= ============ September 30, Liabilities and Shareholders' Equity 2005 2004 ------------------------------------ ------------- ------------ Accounts payable and accrued liabilities $93,685 $57,011 Discontinued operations 937 1,348 Current maturities on long-term debt 963 0 ------------- ------------ Total Current Liabilities 95,585 58,359 Long-term debt, net 204,853 154,987 Deferred income taxes 53,598 47,360 Shareholders' equity 283,297 221,697 ------------- ------------ Total Liabilities and Shareholders' Equity $637,333 $482,403 ============= ============ Condensed Statement of Cash Flows ($ in thousands) Three Months Ended September 30, 2005 2004 --------- --------- Cash Flows From: Continuing Operating Activities Income from continuing operations $10,527 $7,660 Adjustments to income from continuing operations Depreciation and amortization 5,900 5,619 Deferred income taxes (388) 4,939 Stock based compensation 1,936 273 Changes in assets and liabilities: Trade receivables 5,883 2,583 Inventories 2,861 (1,993) Prepaid expenses and other (286) 0 Accounts payable and accrued liabilities (7,390) (4,210) --------- --------- Net cash from continuing operating activities 19,043 14,871 Net cash from discontinued operations 54 1,480 --------- --------- Net cash from operating activities 19,097 16,351 --------- --------- Investing Activities Additions to property, plant and equipment (3,941) (9,840) Sales and redemptions of short-term investments, net 14,273 0 Acquisition of business (24,285) 0 Other, net (895) (764) --------- --------- Net cash from investing activities (14,848) (10,604) --------- --------- Financing Activities Long-term borrowing (payments) on Revolving Credit Facility, net 0 (5,300) Payments on other borrowings (3,601) 0 Dividends on common stock (1,020) (999) Proceeds from stock option exercises and other, net 1,045 573 --------- --------- Net cash from financing activities (3,576) (5,726) --------- --------- Net Increase in Cash and Cash Equivalents 673 21 Cash and Cash Equivalents at Beginning of Year 9,261 273 --------- --------- Cash and Cash Equivalents at End of Period $9,934 $294 ========= ========= CONTACT: ElkCorp, Dallas Stephanie Elwood, 972-851-0472