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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.
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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
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Total inventories 14,739 16,893
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Deferred income taxes 2,357 2,596
Prepaid expenses and other 1,851 1,603
Net assets of discontinued operations - current -- 629
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Total current assets 43,974 61,177
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PROPERTY, PLANT AND EQUIPMENT, AT COST 97,989 81,327
Less - Accumulated Depreciation (52,444) (50,550)
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Property, plant and equipment, net 45,545 30,777
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INVESTMENTS 4,435 5,378
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NET ASSETS OF DISCONTINUED OPERATIONS - NONCURRENT 7,225 7,230
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OTHER ASSETS 5,295 3,671
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$106,474 $ 108,233
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,408 $ 9,291
Accrued liabilities 9,125 12,378
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Total current liabilities 14,533 21,669
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LONG-TERM DEBT 2,500 --
-------- ---------
DEFERRED INCOME TAXES 1,388 1,335
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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
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88,713 85,229
Less: Treasury stock at cost, 44,000 shares (660) --
-------- ---------
Total shareholders' equity 88,053 85,229
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$106,474 $ 108,233
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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
======== ======== ======== =======
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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
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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)
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Net cash provided by continuing operations 11,847 12,276
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Net cash provided by discontinued
operations 464 (19)
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CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant & equipment (16,689) (6,049)
Deferred preoperating costs (1,980) --
Other 362 (572)
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Net cash provided by (used for) investing
activities (18,307) (6,621)
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CASH FLOWS FROM FINANCING ACTIVITIES
Long-term borrowings 2,500 --
Treasury stock transactions and other, net (558) 150
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Net cash provided by financing
activities 1,942 150
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NET INCREASE (DECREASE) IN CASH (4,054) 5,786
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,919 18,516
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,865 $ 24,302
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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.
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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.
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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.
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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
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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.
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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
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AUTHORITY
FOR WITHHELD
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(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
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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
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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.
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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
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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