EX-99.1 2 a5060428ex99_1.txt EXHIBIT 99.1 - PRESS RELEASE EXHIBIT 99.1 ElkCorp Reports Second Quarter Fiscal 2006 Results; Earnings per Share Exceeds Guidance; Sales Increase in All Core Platforms Over Previous Year Quarter DALLAS--(BUSINESS WIRE)--Jan. 20, 2006--ElkCorp (NYSE:ELK) announced today financial results for its second fiscal quarter 2006, ended December 31, 2005. Earnings from continuing operations for the second quarter were $11 million, or $0.54 per diluted share, exceeding the company's guidance of $0.50 to $0.53 per diluted share. Second Quarter Overview ElkCorp Consolidated -- ElkCorp recorded revenue of $228.9 million, an increase of 18% over the $194.1 million reported for the second quarter of fiscal 2005. -- Reported net income was $11.0 million, or $0.54 per diluted share, compared to $14.3 million, or $0.71 per diluted share reported for the second quarter of fiscal 2005. -- Second quarter results include $2.1 million, or $0.06 per diluted share for expensing of stock-based compensation compared to $1.1 million, or $0.03 per diluted share in the prior year quarter. Premium Roofing Products -- Revenue for Premium Roofing Products was $205.6 million, a 14% increase over the $179.8 million reported in the second quarter of fiscal 2005. The majority of the increase was due to sales from ElkCorp's recently acquired subsidiary RGM Products (RGM) and small improvements in both pricing and volume for Elk's existing roofing products. -- Operating income was $26.2 million, compared to $32.0 million for the second quarter of fiscal 2005. -- Operating margin for the quarter was 12.7% compared to 17.8 % for the same quarter last year, which was a record quarter for the company. The margin decline from the second quarter of fiscal 2005 was due to higher raw material and freight costs and significantly lower shipment volume into the Florida storm areas, which is a relatively higher margin market. -- Backlog remains strong and inventories are lower than seasonal norms in the Southwest due to the increased demand from the areas damaged by storms in 2005. Significant shipments into areas affected by Hurricane Wilma in the Southeast are expected to begin in the next quarter and to last at least through calendar year 2006. -- RGM, which was acquired on August 25, completed its first full quarter as a part of the Elk family of roofing products and contributed operating income of $652,000, or $0.02 per diluted share. Composite Building Products -- Sales for the second quarter were $8.7 million, well over double the $3.3 million reported in the same quarter of fiscal year 2005. -- The operating loss for the second quarter was $1.4 million compared to a loss of $3.2 million in the second quarter of fiscal 2005. The prior year quarter included an inventory writedown of $1.3 million for material not meeting current specifications. -- Increased volume and pricing in the quarter were partially offset by higher expenses associated with the start-up of the new composite facility, additional marketing costs in preparation for the upcoming decking season and higher polypropylene prices than in the prior year. -- While the product platform has not yet reached breakeven, results achieved in the month of December validated that profitability in this product platform should be attainable for the fourth fiscal quarter if sales momentum continues and raw material costs do not increase substantially. -- Elk's CrossTimbers decking and Railways offerings further penetrated the decking market and have received favorable feedback from customers. Specialty Fabrics -- Sales for the quarter were $12.3 million compared to $8.8 million in the same quarter last year. -- Operating income was $1.4 million in the second quarter compared to $648,000 for the prior year period. -- Operating margin improved to 11.1% compared to 7.4% recorded in the second quarter of fiscal 2005. This improvement was primarily attributed to increased volume, more favorable pricing and improved sales mix of higher margin products such as air filtration and carpet tile backing. -- Elk continues to penetrate the specialty fabrics market with the introduction of new VersaShield(R) flooring underlayment, a rolled-good, moisture barrier designed for ease of installation under carpet and carpet tiles. This product will be officially introduced at Surfaces 2006, an industry tradeshow in Las Vegas, February 1-3, 2006. Financial Condition At December 31, 2005, the contractual principal amount of ElkCorp's long-term debt, including $6.3 million of debt related to acquisitions, was $201.3 million. Net debt (contractual principal debt minus cash and short-term investments) was $134.2 million, and the net debt to capital ratio was 31.1%. Liquidity consisted of $67.1 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 $203.0 million included $1.7 million representing the net fair market value for two interest rate swap agreements. Business Outlook "We are pleased with the second quarter results and our ability to exceed guidance in light of continued high raw material and transportation costs in our roofing business," said Thomas Karol, chairman and chief executive officer of ElkCorp. "As we had anticipated, rising raw material costs outpaced our price increases in the quarter and created short-term margin erosion for this business. However, we believe that margins should return to a more normalized level in the near future as we begin to realize more of our announced price increases. Additionally, RGM continued to be a great asset to the company, contributing $0.02 per diluted share for the quarter. We are pleased with the excitement that the RGM products have generated in the market and we expect continued success as we roll these products out nationwide." Mr. Karol continued, "One of our most significant accomplishments in the quarter was the progress made in our composite building products business. We were able to almost triple quarterly sales from a year ago and improve sales 69% from the first quarter of fiscal 2006. Additionally, improvements in yield, operating performance, and effective use of regrind scrap have helped us to offset the increases in polypropylene pricing that occurred in the December quarter. We anticipate these improvements will be sustainable and should assist us in achieving profitability." "The improvements made in our decking line in the last year have given us an outstanding product line that has been well received by our customers and increased our presence in the decking industry. We experienced strong demand in the month of December as distributors began to build inventory for the upcoming decking season. The increased demand combined with the positive feedback we have received on the quality of our product, have validated our commitment to the success of this product line and its value in expanding Elk's presence in the building products industry. Additionally, the development of other composite building product applications is progressing well. We believe that in the next twelve months you will see some exciting products emerge from the composites business including an enhanced composite railing line. We remain confident that this product platform will achieve profitability in the fourth quarter of fiscal 2006." "We have completed the first half of fiscal 2006 on a positive note with continued strength in our roofing and specialty fabric technologies businesses, the successful acquisition and integration of RGM and progress toward achieving profitability in our composite building products platform. We expect this momentum to continue through the second half of the year." Earnings Outlook The Company expects earnings for the third quarter of fiscal 2006 to be in the range of $0.50 to $0.53 per diluted share, and remain 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. Price increases have been announced for January 2006. Additionally, the fourth quarter results are expected to reflect a significant increase in profitability due to improved seasonal volume and pricing in all major product platforms. Conference Call The ElkCorp management team will host a conference call and live audio webcast on January 20, 2006, at 11:00 a.m. ET to further discuss its earnings and operations for the second quarter fiscal 2006. Investors and other interested parties may listen to the live webcast by visiting the investor relations section of the ElkCorp Web site 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 4114200. The webcast replay also will be available on the investor relations section of Company's Web site. 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 third 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 (90% of consolidated revenue) and provides technologically advanced products and services to other industries. 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 Six Months Ended December 31, December 31, 2005 2004 2005 2004 --------- --------- --------- --------- Sales $228,949 $194,099 $444,806 $357,111 --------- --------- --------- --------- Costs and Expenses: Cost of sales 186,812 152,897 362,941 286,319 Selling, general & administrative: 21,521 15,880 41,627 31,061 --------- --------- --------- --------- Operating Income from Continuing Operations 20,616 25,322 40,238 39,731 Interest expense, net 2,968 2,382 5,825 4,476 --------- --------- --------- --------- Income from Continuing Operations Before Income Taxes 17,648 22,940 34,413 35,255 Provision for income taxes 6,567 8,742 12,805 13,397 --------- --------- --------- --------- Income from Continuing Operations 11,081 14,198 21,608 21,858 Income (Loss) from Discontinued Operations, Net (66) 128 (66) (723) --------- --------- --------- --------- Net Income $11,015 $14,326 $21,542 $21,135 ========= ========= ========= ========= Income (Loss) Per Common Share- Basic Continuing Operations $0.54 $0.72 $1.07 $1.11 Discontinued Operations (0.00) 0.01 (0.00) (0.04) --------- --------- --------- --------- $0.54 $0.73 $1.07 $1.07 ========= ========= ========= ========= Income (Loss) Per Common Share- Diluted Continuing Operations $0.54 $0.70 $1.05 $1.09 Discontinued Operations (0.00) 0.01 (0.00) (0.04) --------- --------- --------- --------- $0.54 $0.71 $1.05 $1.05 ========= ========= ========= ========= Average Common Shares Outstanding Basic 20,270 19,697 20,227 19,684 ========= ========= ========= ========= Diluted 20,595 20,154 20,586 20,035 ========= ========= ========= ========= Twelve Months Ended December 31, 2005 2004 --------- --------- Sales $849,414 $643,092 --------- --------- Costs and Expenses: Cost of sales 690,547 517,358 Selling, general & administrative: 80,512 62,076 --------- --------- Operating Income from Continuing Operations 78,355 63,658 Interest expense, net 11,714 7,073 --------- --------- Income from Continuing Operations Before Income Taxes 66,641 56,585 Provision for income taxes 24,195 21,174 --------- --------- Income from Continuing Operations 42,446 35,411 Income (Loss) from Discontinued Operations, Net 4,828 (2,064) --------- --------- Net Income $47,274 $33,347 ========= ========= Income (Loss) Per Common Share-Basic Continuing Operations $2.12 $1.80 Discontinued Operations 0.24 (0.10) --------- --------- $2.36 $1.70 ========= ========= Income (Loss) Per Common Share-Diluted Continuing Operations $2.07 $1.77 Discontinued Operations 0.23 (0.10) --------- --------- $2.30 $1.67 ========= ========= Average Common Shares Outstanding Basic 20,060 19,668 ========= ========= Diluted 20,530 20,010 ========= ========= Financial Information by Company Segments ($ in thousands) Three Months Ended Six Months Ended December 31, December 31, 2005 2004 2005 2004 --------- --------- --------- --------- Sales Premium Roofing Products $205,642 $179,823 $400,359 $327,416 Composite Building Products 8,678 3,259 13,758 6,242 Specialty Fabrics Technologies 12,336 8,791 26,080 18,794 Surface Finishes 2,293 2,226 4,609 4,659 --------- --------- --------- --------- $228,949 $194,099 $444,806 $357,111 ========= ========= ========= ========= Operating Profit (Loss) Premium Roofing Products $26,160 $32,034 $53,719 $49,813 Composite Building Products (1,398) (3,183) (5,518) (3,900) Specialty Fabrics Technologies 1,373 648 2,883 1,346 Surface Finishes 171 (184) 444 143 Corporate & Eliminations (5,690) (3,993) (11,290) (7,671) --------- --------- --------- --------- $20,616 $25,322 $40,238 $39,731 ========= ========= ========= ========= Twelve Months Ended December 31, 2005 2004 --------- --------- Sales Premium Roofing Products $766,577 $586,026 Composite Building Products 26,941 12,623 Specialty Fabrics Technologies 46,737 35,096 Surface Finishes 9,159 9,347 --------- --------- $849,414 $643,092 ========= ========= Operating Profit (Loss) Premium Roofing Products $108,138 $79,651 Composite Building Products (13,440) (4,042) Specialty Fabrics Technologies 3,620 1,520 Surface Finishes 445 665 Corporate & Eliminations (20,408) (14,136) --------- --------- $78,355 $63,658 ========= ========= Condensed Balance Sheet ($ in thousands) December 31, Assets 2005 2004 ------------------------------------- --------- --------- Cash and cash equivalents $5,385 $6,283 Short-term investments 61,700 34,060 Receivables, net 137,725 136,646 Inventories 89,804 67,284 Deferred income taxes 8,287 4,894 Prepaid expenses and other 8,035 8,606 Discontinued operations 2,606 10,482 --------- --------- Total Current Assets 313,542 268,255 Property, plant and equipment, net 295,556 280,763 Other assets 29,704 8,041 Discontinued operations - noncurrent 2,251 3,451 --------- --------- Total Assets $641,053 $560,510 ========= ========= December 31, Liabilities and Shareholders' Equity 2005 2004 ------------------------------------- --------- --------- Accounts payable and accrued liabilities $86,270 $75,250 Discontinued operations 881 1,321 Current maturities on long-term debt 971 0 --------- --------- Total Current Liabilities 88,122 76,571 Long-term debt, net 202,985 199,094 Deferred income taxes 53,150 48,654 Shareholders' equity 296,796 236,191 --------- --------- Total Liabilities and Shareholders' Equity $641,053 $560,510 ========= ========= Condensed Statement of Cash Flows ($ in thousands) Six Months Ended December 31, 2005 2004 --------- --------- Cash Flows From: Continuing Operating Activities Income from continuing operations $21,608 $21,858 Adjustments to income from continuing operations Depreciation and amortization 12,766 11,457 Deferred income taxes (842) 5,508 Stock-based compensation 4,040 1,399 Changes in assets and liabilities: Trade receivables 16,911 (26,832) Inventories (11,428) (5,155) Prepaid expenses and other 517 (85) Accounts payable and accrued liabilities (14,904) 14,029 --------- --------- Net cash from continuing operating activities 28,668 22,179 Net cash from discontinued operations (68) 1,628 --------- --------- Net cash from operating activities 28,600 23,807 --------- --------- Investing Activities Additions to property, plant and equipment (9,538) (21,181) Short-term investments, net 7,460 (34,060) Acquisition of business (24,285) 0 Other, net (1,974) (872) --------- --------- Net cash from investing activities (28,337) (56,113) --------- --------- Financing Activities Proceeds from sale of Senior Notes 0 50,000 Long-term payments on Revolving Credit Facility, net 0 (10,300) Payments on other borrowings (4,542) 0 Dividends on common stock (2,044) (1,995) Purchases of common stock (1,444) (587) Exercises of stock options 3,891 1,198 --------- --------- Net cash from financing activities (4,139) 38,316 --------- --------- Net Increase in Cash and Cash Equivalents (3,876) 6,010 Cash and Cash Equivalents at Beginning of Year 9,261 273 --------- --------- Cash and Cash Equivalents at End of Period $5,385 $6,283 ========= ========= CONTACT: ElkCorp, Dallas Stephanie Elwood, 972-851-0472