SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
----------
For Quarter Ended September 30, 2001 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 75254-8890
-------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 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 November 1, 2001, Registrant had outstanding
19,236,507 shares of Common Stock, Par Value $1 per Share.
Elcor Corporation and Subsidiaries
Form 10-Q Index
<Table>
<Caption>
Page
----
Part I. FINANCIAL INFORMATION (unaudited)
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 2001 and June 30, 2001 1
Consolidated Statements of Operations for the Three Months Ended
September 30, 2001 and 2000 2
Consolidated Statements of Cash Flows for the Three Months Ended
September 30, 2001 and 2000 3
Notes to Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-11
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</Table>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
ELCOR CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited, $ in thousands)
<Table>
<Caption>
September 30, June 30,
ASSETS 2001 2001
------------- ---------
CURRENT ASSETS
Cash and cash equivalents $ 204 $ 128
Trade receivables, less allowance of $1,021 and $985 87,835 73,660
Inventories -
Finished goods 26,440 39,783
Work-in-process 623 411
Raw materials 10,324 10,822
--------- ---------
Total inventories 37,387 51,016
--------- ---------
Prepaid expenses and other 4,850 8,487
Deferred income taxes 4,052 3,977
--------- ---------
Total current assets 134,328 137,268
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, AT COST 319,687 316,865
Less - accumulated depreciation (101,390) (96,829)
--------- ---------
Property, plant and equipment, net 218,297 220,036
--------- ---------
OTHER ASSETS 2,609 2,744
--------- ---------
$ 355,234 $ 360,048
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 44,806 $ 37,159
Accrued liabilities 15,095 10,875
--------- ---------
Total current liabilities 59,901 48,034
--------- ---------
LONG-TERM DEBT 100,000 123,300
DEFERRED INCOME TAXES 28,304 26,612
SHAREHOLDERS' EQUITY -
Common stock, $1 par 19,988 19,988
Paid-in-capital 58,332 58,368
Retained earnings 100,424 95,552
--------- ---------
178,744 173,908
Less - Treasury stock (752,989 and 758,609 shares, at cost) (11,715) (11,806)
--------- ---------
Total shareholders' equity 167,029 162,102
--------- ---------
$ 355,234 $ 360,048
========= =========
</Table>
See accompanying notes to consolidated financial statements.
1
ELCOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, $ in thousands
except per share data)
<Table>
<Caption>
Three Months Ended
September 30,
-----------------------
2001 2000
-------- --------
SALES $143,219 $101,215
-------- --------
COST AND EXPENSES
Cost of sales 116,504 81,433
Selling, general and administrative 15,040 11,439
-------- --------
INCOME FROM OPERATIONS 11,675 8,343
-------- --------
OTHER EXPENSE
Interest expense, net 2,280 505
-------- --------
INCOME BEFORE INCOME TAXES 9,395 7,838
Provision for income taxes 3,561 2,894
-------- --------
NET INCOME $ 5,834 $ 4,944
======== ========
NET INCOME PER SHARE-BASIC $ .30 $ .25
======== ========
NET INCOME PER SHARE-DILUTED $ .30 $ .25
======== ========
DIVIDENDS PER COMMON SHARE $ .05 $ .05
======== ========
</Table>
See accompanying notes to consolidated financial statements.
2
ELCOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, $ in thousands)
<Table>
<Caption>
Three Months Ended
September 30,
------------------------
2001 2000
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,834 $ 4,944
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 4,580 3,419
Deferred income taxes 1,617 673
Changes in assets and liabilities:
Trade receivables (14,175) 277
Inventories 13,629 (6,045)
Prepaid expenses and other 3,637 1,681
Accounts payable and accrued liabilities 11,867 (892)
-------- --------
Net cash provided by operating activities 26,989 4,057
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (2,822) (16,298)
Other 116 49
-------- --------
Net cash used for investing activities (2,706) (16,249)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term borrowings (repayments), net (23,300) 14,000
Dividends on common stock (962) (975)
Treasury stock transactions and other, net 55 (1,389)
-------- --------
Net cash provided by (used for) financing activities (24,207) 11,636
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 76 (556)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 128 4,702
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 204 $ 4,146
======== ========
</Table>
See accompanying notes to consolidated financial statements.
3
ELCOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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
accounting principles generally accepted in the United States 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 2001 Annual Report on Form 10-K. The unaudited financial
information contained herein has been prepared in conformity with
accounting principles generally accepted in the United States 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 periods ending September 30, 2001 and 2000,
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 or other interim reporting period should not necessarily be
considered as indicative of results for a full fiscal year.
2. In accordance with the requirements of FASB SFAS No. 131, the company is
segregated into the following segments: Building Products, Electronics
Manufacturing Services and Industrial Products. The Building Products
segment consists of the various operating subsidiaries of Elk Corporation
of Dallas (collectively Elk). These companies manufacture and sell premium
laminated fiberglass asphalt shingles and accessory roofing products,
together with coated and non-coated nonwoven performance fabrics used in
manufacturing asphalt roofing products and various industrial applications.
This segment was previously identified as Roofing Products. The name change
to Building Products reflects the anticipated increase in importance of
nonwoven performance fabrics to future operations as the company exploits
market opportunities for such products outside its traditional roofing
market.
The Electronics Manufacturing Services segment consists of the various
operating subsidiaries of Cybershield, Inc. (collectively Cybershield).
These companies provide shielding solutions to the digital wireless
telecommunications industry, serving both the handset and infrastructure
segments of the industry. Cybershield is also an important supplier of
shielding solutions to the computer, bar coding and medical electronics
industries.
The Industrial Products segment is comprised of: (1) Chromium Corporation
(Chromium), which provides surface finishes and remanufactured diesel
engine cylinder liners and pistons for the railroad and marine
transportation industries; and (2) Ortloff Engineers, LTD (OEL), which
provides technology licensing and consulting services for the natural gas
processing industry.
4
Financial information by company segment is summarized as follows:
<Table>
<Caption>
(In thousands)
Three Months Ended
September 30,
--------------------------
2001 2000
--------- ---------
SALES
Building products $ 131,025 $ 90,232
Electronics manufacturing services 8,586 8,389
Industrial products 3,608 2,564
Corporate and eliminations -- 30
--------- ---------
$ 143,219 $ 101,215
========= =========
OPERATING PROFIT (LOSS)
Building products $ 14,625 $ 10,999
Electronics manufacturing services (449) 697
Industrial products 542 (1,245)
Corporate and other (3,043) (2,108)
--------- ---------
11,675 8,343
Interest expense, net (2,280) (505)
--------- ---------
Income before income taxes $ 9,395 $ 7,838
========= =========
IDENTIFIABLE ASSETS
Building products $ 296,352 $ 278,230
Electronics manufacturing services 32,095 30,437
Industrial products 9,453 8,666
Corporate 17,334 21,677
--------- ---------
$ 355,234 $ 339,010
========= =========
DEPRECIATION AND AMORTIZATION
Building products $ 3,380 $ 2,193
Electronics manufacturing services 386 460
Industrial products 145 85
Corporate 669 681
--------- ---------
$ 4,580 $ 3,419
========= =========
CAPITAL EXPENDITURES
Building products $ 2,293 $ 13,742
Electronics manufacturing services 11 2,230
Industrial products 447 252
Corporate 71 74
--------- ---------
$ 2,822 $ 16,298
========= =========
</Table>
5
3. Basic earnings per share is computed based on the average number of common
shares outstanding. Diluted earnings per share includes outstanding stock
options. The following table sets forth the computation of basic and
diluted earnings per share:
<Table>
<Caption>
(In thousands)
Three Months Ended
September 30,
---------------------
2001 2000
------- -------
Net income $ 5,834 $ 4,944
======= =======
Denominator for basic earnings
per share - weighted average
shares outstanding 19,231 19,524
Effect of dilutive securities:
Employee stock options 233 231
------- -------
Denominator for dilutive earnings per share - adjusted weighted
average shares and assumed issuance of shares purchased under
incentive stock option plan
using the treasury stock method 19,464 19,755
======= =======
Basic earnings per share $ .30 $ .25
======= =======
Diluted earnings per share $ .30 $ .25
======= =======
</Table>
4. According to the terms of the company's $175,000,000 revolving credit
facility, the company is required to pledge as collateral certain trade
receivables and inventories if the company's leverage ratio, as defined,
exceeds the applicable threshold at each quarter end. At June 30, 2001, the
company's leverage ratio exceeded the applicable threshold. The collateral
trade receivables and inventory will be released if the leverage ratio is
less than the applicable thresholds for two consecutive quarters end. At
September 30, 2001, the company's leverage ratio was below the applicable
threshold.
5. In the fourth quarter of fiscal 2001, the company conformed its shipping
and handling costs to Emerging Issues Task Force Issue 00-10, "Accounting
for Shipping and Handling Fees and Costs." Accordingly, freight costs for
prior reporting periods have been reclassified to cost of goods sold.
Previously, freight costs were classified as a reduction of sales.
6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Overall Performance
During the three-month period ended September 30, 2001, sales increased 41%
to $143,219,000 compared to $101,215,000 for the same period in the prior fiscal
year. Net income increased 18% to $5,834,000 in the first three months of fiscal
2002 compared to $4,944,000 in the first three months of fiscal 2001. The
Building Products and Industrial Products segments each achieved much higher
sales and operating income in the current year period compared to the same
period last year. The Electronics Manufacturing Services segment reported
modestly higher sales, but incurred an operating loss in the current year
quarter compared to an operating profit in the same prior year quarter.
Consolidated operating income of $11,675,000 in the first three months of
fiscal 2002 was 40% higher than $8,343,000 in the same period last year. As a
percentage of sales, operating income was 8.2% during both the three-month
period ended September 30, 2001 and the same three-month period last year.
Selling, general and administrative (SG&A) costs in the first quarter of fiscal
2002 were significantly higher than in the first quarter of fiscal 2001. The
SG&A increase was primarily due to higher selling expenses related to new
product introductions and overall higher sales levels. However, as a percentage
of sales, SG&A costs were only 10.5% in the first quarter of fiscal 2002
compared to 11.3% in the same quarter last year.
Interest expense was $2,280,000 in the first quarter of fiscal 2002
compared to $505,000 in the same prior year period. However, in the first
quarter of fiscal 2001, the company capitalized $1,248,000 of interest related
to the construction of the Myerstown, Pennsylvania shingle plant and other major
projects. No interest costs were capitalized in the current year period.
Results of Business Segments
Sales in the Building Products segment increased 45% to $131,025,000 for
the three months ended September 30, 2001 compared to $90,232,000 in the same
prior year period. The significant increase in sales reflected a sharp rebound
in shipments of premium laminated asphalt shingles that began in the fourth
quarter of the prior fiscal year and continued throughout the September quarter
of fiscal 2002. Roofing replacement returned to normal historical levels
following harsh weather conditions in many parts of the country last winter and
spring. Demand for Elk's roofing products also benefited from the highly
successful new products and warranty initiatives of its "A Whole Different
Animal(TM)" campaign, which included introducing the Prestique Gallery
Collection(TM) new product line, adding a new Prestique 30 High Definition
product, improving limited product and wind warranties, extending the marketing
area of its Capstone product on a national basis, more aggressively targeting
the builder segment, and increasing management focus on Elk's nonwoven
manufacturing capabilities. Building Products sales further benefited from Elk's
success in penetrating markets served by its new roofing plant in Myerstown,
Pennsylvania, which met its performance test level of operations in the fourth
quarter of fiscal 2001.
Operating income for the Building Products segment increased 33% to
$14,625,000 in the three months ended September 30, 2001 compared to $10,999,000
for the three months ended September 30, 2000. The increase in operating income
is primarily the result of the significant increase in shipments of premium
laminated fiberglass shingles and nonwoven fiberglass performance fabrics.
Increased
7
product sales more than offset higher marketing costs and depreciation relating
to the new Myerstown, Pennsylvania roofing plant. Incremental, fixed costs of
the Myerstown plant were the primary cause of the year-over-year operating
profit growth rate trailing comparable sales growth. Beyond the break-even
level, operating profit is expected to grow at a faster rate than sales. The
Myerstown roofing plant was profitable in each of the first three months of
fiscal 2002 as production and sales volumes exceeded the plant's break-even
level. Despite a price increase in July 2001, average selling prices in the
first quarter of fiscal 2002 were lower than in the same quarter last year due
primarily to declines in product prices subsequent to last year's first quarter.
A more significant price increase in September 2001 is expected to benefit
subsequent quarters of fiscal 2002.
While the economy in the United States has apparently entered a recession,
the company believes that the Building Products segment is well positioned to
potentially outperform other industries in a weakening economic environment. The
company believes that strong sales momentum during the first quarter of fiscal
2002 reflects that necessary roof replacements will continue to be made in a
significantly weakening economy. Management anticipates that asphalt and other
raw materials may decline in fiscal 2002 as a weaker economy exhibits downward
pressure on energy consumption and world oil prices. Further, reduced interest
rates are expected to favor mortgage refinancing transactions, funds from which
are often earmarked for home improvement. New order levels for the Building
Products segment have remained strong subsequent to the September 11, 2001
terrorist attacks. However, weather conditions in key market areas may reduce
shipment levels in the upcoming seasonally slower December quarter.
Sales for the Electronics Manufacturing Services segment increased 2% to
$8,586,000 in the first quarter of fiscal 2002 compared to $8,389,000 in the
same prior year quarter. Cybershield's unit volumes declined as cellular handset
manufacturers continued to reduce excess channel inventories during the quarter.
Average unit selling prices increased compared to the prior year quarter,
primarily as a result of higher sales mix of units containing purchased plastic
parts. Despite increased sales, the Electronics Manufacturing Services segment
reported an operating loss of $449,000 in the three-month period ended September
30, 2001 compared to operating income of $697,000 in the same three-month period
last year. The deterioration in operating results primarily reflects lower unit
volumes and related margins, together with the ramp up of several new handset
components during the first quarter of fiscal 2002, as production start-up
inefficiencies temporarily increased operating costs during the September 2001
quarter.
For the remainder of fiscal 2002, sales and operating profit for the
Electronics Manufacturing Services segment are expected to improve based on
currently visible customer production requirements and recent improvements in
manufacturing efficiency on new handset models. Excess cellular handset channel
inventories have been reduced to more normal levels, and customer demand appears
to have increased subsequent to the September 11, 2001 terrorist attacks.
Sales for the Industrial Products segment increased 41% in the first
quarter of fiscal 2002 to $3,608,000 from $2,564,000 in the same prior year
quarter. Operating income of $542,000 was achieved in the current year quarter
compared to a $1,245,000 operating loss in the first quarter last year. Most of
the operating loss in the prior year quarter was the result of the consolidation
of manufacturing operations and initial production of products new to Chromium's
Cleveland, Ohio plant. Chromium generated a small operating profit in the
current year quarter. OEL also experienced improved revenues and operating
results in the first quarter of fiscal 2002 as its patented cryogenic gas
processing technologies were licensed for use in projects in Argentina,
Indonesia and Thailand.
8
Operating results for the Industrial Products segment for the remainder of
fiscal 2002 are expected to exceed comparable fiscal 2001 results as OEL's
cryogenic technology has been selected for use in many international projects
that are now commencing. Chromium's unit volumes are expected to come under
pressure during the remainder of fiscal 2002 as railroads defer maintenance
expenditures in a weaker United States economy. However, cost reductions
achieved beginning in fiscal 2001 should enable Chromium to remain profitable in
fiscal 2002.
FINANCIAL CONDITION
Cash flows from operating activities are generally the result of net
income, deferred taxes, depreciation and amortization, and changes in working
capital. During the first three months of fiscal 2002, the company generated
cash flows of $26,989,000 compared to $4,057,000 for the first three months in
the prior fiscal year. Cash flows from higher net income, deferred taxes,
depreciation and amortization were enhanced by a $14,883,000 decrease in working
capital (excluding cash and cash equivalents). The increase in depreciation and
amortization was primarily attributable to the Myerstown, Pennsylvania roofing
plant being placed in service.
The decrease in working capital requirements primarily related to much
lower finished goods inventories of premium laminated fiberglass shingles,
together with higher current liabilities from improved cash management
strategies and initiatives, and the receipt of a refund for overpayment of
fiscal 2001 federal income taxes. Lower inventories at September 30, 2001, as
compared to June 30, 2001, were primarily the result of record shipments of
premium laminated fiberglass shingles, even though production was maintained at
high rates throughout the quarter at all roofing plants. Trade receivables were
$14,175,000 higher at September 30, 2001 compared to June 30, 2001 as sales
during the first quarter of fiscal 2002 were 32% higher than in the fourth
quarter of 2001 (the periods to which most outstanding receivables apply). All
deferred receivables applicable to promotional programs to certain customers
outstanding at the end of fiscal 2001 were collected in accordance with their
terms in the first quarter of fiscal 2002.
The current ratio at September 30, 2001 was 2.2 to 1 compared to 2.9 to 1
at the end of fiscal 2001. Historically, working capital requirements fluctuate
during the year because of seasonality in some market areas. Generally, working
capital requirements and related borrowings are higher in the spring and summer
months, and lower in the fall and winter months.
Cash flows from investing activities primarily reflect the company's
capital expenditure strategy. Net cash used for investing activities was
$2,706,000 in the three-month period ended September 30, 2001 compared to
$16,249,000 in the same period in the prior fiscal year. After several years of
aggressive plant capacity expansion, including the Myerstown, Pennsylvania
roofing plant, capital expenditures in fiscal 2002 are currently planned to be
about $13,000,000, most of which relates to improving productivity at existing
plants and extending production capacity for new products.
Cash flows from financing activities generally reflect changes in the
company's borrowings during the period, together with dividends paid on common
stock, treasury stock transactions and exercises of stock options. Net cash used
for financing activities was $24,207,000 the first three months of fiscal 2002
compared to $11,636,000 provided by financing activities for the same period in
fiscal 2001. The fiscal 2002 amount includes a $23,300,000 reduction in
long-term debt compared to net long-term borrowings of $14,000,000 in the
comparable prior year period. Long-term debt represented 37.4% of the
$267,029,000 of invested capital (long-term debt plus shareholders' equity) at
September 30, 2001.
9
In September 1998, the company's Board of Directors authorized the purchase
of up to $10,000,000 of common stock from time to time on the open market to be
used for general corporate purposes. On August 28, 2000, the Board of Directors
authorized the aggregate purchase of up to an additional $10,000,000 of common
stock. As of September 30, 2001, 600,590 shares with cumulative cost of
$9,366,000 had been repurchased from time to time under these authorizations.
The company's operations are subject to extensive federal, state and local
laws and regulations relating to environmental matters. Although the company
does not believe it will be required to expend amounts which will have a
material adverse effect 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 company's industrial
products and electronics manufacturing services operations utilize hazardous
materials in their production processes. As a result, the company incurs costs
for remediation activities off-site and at its facilities from time to time. The
company establishes and maintains reserves for such remediation activities, when
appropriate. Current reserves established for known or probable remediation
activities are not material to the company's financial position or results of
operations.
FORWARD-LOOKING STATEMENTS
In an effort to give investors a well-rounded view of the company's current
condition and future opportunities, management's discussion and analysis of
financial condition and results of operations contain "forward-looking
statements" that involve risks and uncertainties about its prospects for the
future. 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 "outlook,"
"believe," "estimate," "plan," "project," "expect," "anticipate," "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, actual results could differ materially from those
discussed here. Such risks and uncertainties include, but are not limited to,
the following:
1. The company's building products business is substantially
non-cyclical, but can be affected by weather, the availability of
financing and general economic conditions. In addition, the asphalt
roofing products manufacturing business is highly competitive. Actions
of competitors, including changes in pricing, or slowing demand for
asphalt roofing products due to general or industry economic
conditions or the amount of inclement weather could result in
decreased demand for the company's products, lower prices received or
reduced utilization of plant facilities. Further, changes in building
and insurance codes and other standards from time to time can cause
changes in demand, or increases in costs that may not be passed
through to customers.
2. In the building products business, the significant raw materials are
ceramic-coated granules, asphalt, glass fibers, resins and mineral
filler. Increased costs of raw materials can result in reduced
margins, as can higher energy, trucking and rail costs. Historically,
the company has been able to pass some of the higher raw material,
energy and transportation costs through to the customer. Should the
company be unable to recover higher raw material, energy and/or
transportation costs from price increases of its products, operating
results could be adversely affected and/or lower than projected.
10
3. The company has been involved in a significant expansion plan over the
past several years, including the construction of new facilities.
Progress in achieving anticipated operating efficiencies and financial
results is difficult to predict for new plant facilities. If such
progress is slower than anticipated, or if demand for products
produced at new plants does not meet current expectations, operating
results could be adversely affected.
4. Certain facilities of the company's electronics manufacturing services
and industrial products subsidiaries must utilize hazardous materials
in their production process. As a result, the company could incur
costs for remediation activities at its facilities or off-site, and
other related exposures from time to time in excess of established
reserves for such activities.
5. The company's litigation, including Elk's defense of purported class
action lawsuits, is subject to inherent and case-specific uncertainty.
The outcome of such litigation depends on numerous interrelated
factors, many of which cannot be predicted.
6. Although the company currently anticipates that most of its needs for
new capital in the near future will be met with internally generated
funds or borrowings under its available credit facilities, significant
increases in interest rates could substantially affect its borrowing
costs under its existing loan facility, or its cost of alternative
sources of capital.
7. Each of the company's businesses, especially Cybershield's shielding
business, is subject to the risks of technological changes that could
affect the demand for or the relative cost of the company's products
and services, or the method and profitability of the method of
distribution or delivery of such products and services. In addition,
the company's businesses each could suffer significant setbacks in
revenues and operating income if it lost one or more of its largest
customers, or if its customers' plans and/or markets should change
significantly.
8. Although the company insures itself against physical loss to its
manufacturing facilities, including business interruption losses,
natural or other disasters and accidents, including but not limited to
fire, earthquake, damaging winds, explosions or acts of war, operating
results could be adversely affected if any of its manufacturing
facilities became inoperable for an extended period of time due to
such events.
9. Each of the company's businesses is actively involved in the
development of new products, processes and services which are expected
to contribute to the company's ongoing long-term growth and earnings.
If such development activities are not successful, market demand is
less than expected, or the company cannot provide the requisite
financial and other resources to successfully commercialize such
developments, the growth of future sales and earnings may be adversely
affected.
Parties are cautioned not to rely on any such forward-looking beliefs or
judgments in making investment decisions.
11
PART II. OTHER INFORMATION
ITEM 6: Exhibits and Reports of Form 8-K
(a) Exhibits:
Exhibit (10.5): Separation and Consulting Agreement between Elcor
Corporation and Richard J. Rosebery.
(b) The registrant filed three reports on Form 8-K during the quarter
ended September 30, 2001. The registrant filed Forms 8-K on August 14,
2001 and September 21, 2001 relating to press releases containing
"forward-looking statements" about its prospects for the future and
certain other information concerning the company's disclosures under
Regulation F-D, and a Form 8-K on September 27, 2001 relating to
certain management changes.
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: November 7, 2001 /s/ Harold R. Beattie, Jr.
----------------------------- -----------------------------------------
Harold R. Beattie, Jr.
Vice President, Chief Financial Officer
and Treasurer
/s/ Leonard R. Harral
-----------------------------------------
Leonard R. Harral
Vice President and Chief
Accounting Officer
13
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.5 Separation and Consulting Agreement between Elcor Corporation and Richard J. Rosebery.
</Table>