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SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
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FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
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For Quarter Ended March 31, 1995 Commission File number 1-5341
ELCOR CORPORATION
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(Exact name of Registrant as specified in its charter)
DELAWARE 75-1217920
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14643 DALLAS PARKWAY
SUITE 1000, WELLINGTON CENTRE, DALLAS, TEXAS 75240-8871
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(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 May 1, 1995, Registrant had outstanding
8,715,749 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)
3-31-95 6-30-94
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ASSETS
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CURRENT ASSETS
Cash and cash equivalents $ 2,294 $ 5,919
Trade receivables, less allowance of $762 and $610 30,113 33,537
Inventories -
Finished goods 7,862 12,761
Work-in-process 749 807
Raw materials 5,002 3,325
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Total inventories 13,613 16,893
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Deferred income taxes 2,219 2,596
Prepaid expenses and other 1,655 1,603
Net assets of discontinued operations - current -- 629
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Total current assets 49,894 61,177
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PROPERTY, PLANT AND EQUIPMENT, AT COST 109,504 81,327
Less - accumulated depreciation (53,217) (50,550)
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Property, plant and equipment, net 56,287 30,777
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INVESTMENTS 5,378 5,378
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NET ASSETS OF DISCONTINUED OPERATIONS - NONCURRENT 7,225 7,230
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OTHER ASSETS 7,503 3,671
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$ 126,287 $ 108,233
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LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES
Accounts payable $ 7,310 $ 9,291
Accrued liabilities 9,746 12,378
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Total current liabilities 17,056 21,669
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LONG-TERM DEBT 17,800 --
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DEFERRED INCOME TAXES 1,414 1,335
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SHAREHOLDERS' EQUITY -
Common stock 8,802 8,786
Paid-in-capital 71,760 71,685
Retained earnings 10,696 4,758
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91,258 85,229
Less: Treasury stock at cost, 84,374 shares (1,241) --
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Total shareholders' equity 90,017 85,229
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$ 126,287 $ 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 Nine Months Ended
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3-31-95 3-31-94 3-31-95 3-31-94
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SALES
$ 37,816 $ 37,961 $112,266 $117,775
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COST AND EXPENSES:
Cost of sales 27,736 26,657 82,265 82,933
Selling, general and administrative 7,388 5,874 20,433 18,086
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INCOME FROM OPERATIONS 2,692 5,430 9,568 16,756
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OTHER INCOME
Interest and dividend income (expense), net (39) 98 115 311
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INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES 2,653 5,528 9,683 17,067
Provision for income taxes 1,039 2,074 3,746 6,414
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INCOME FROM CONTINUING OPERATIONS 1,614 3,454 5,937 10,653
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LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX -- (705) -- (1,494)
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INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 1,614 2,749 5,937 9,159
Cumulative effect of change in accounting principle -- -- -- 668
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NET INCOME $ 1,614 $ 2,749 $ 5,937 $ 9,827
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INCOME PER COMMON AND COMMON EQUIVALENT SHARE
From continuing operations $ .18 $ .39 $ .67 $ 1.20
From discontinued operations -- (.08) -- (.17)
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Before change in accounting principle .18 .31 .67 1.03
Cumulative effect of change in accounting principle -- -- -- .07
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INCOME PER COMMON AND COMMON EQUIVALENT SHARE $ .18 $ .31 $ .67 $ 1.10
======== ======== ======== ========
AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING 8,782 8,920 8,852 8,917
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Condensed Financial Statements (See Notes to Condensed Financial Statements)
ELCOR CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, $ in thousands)
Nine Months Ended
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3-31-95 3-31-94
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CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations $ 5,937 $ 10,653
Adjustments to reconcile income from continuing
operations to net cash from operating activities:
Depreciation and amortization 2,858 3,120
Write-off of assets -- 478
Deferred income taxes 456 37
Changes in assets and liabilities:
Trade receivables 3,424 (2,159)
Inventories 3,280 (3,631)
Prepaid expenses and other (52) 68
Accounts payable and accrued liabilities (4,613) 569
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Net cash provided by continuing operations 11,290 9,135
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Net cash provided by discontinued
operations 635 (147)
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CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant & equipment (28,366) (10,482)
Deferred preoperating costs (4,230) (795)
Other 395 (300)
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Net cash provided by (used for) investing
activities (32,201) (11,577)
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CASH FLOWS FROM FINANCING ACTIVITIES
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Long-term borrowings 17,800
Treasury stock transactions and other, net (1,149) 323
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Net cash provided by financing
activities 16,651 323
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NET INCREASE (DECREASE) IN CASH (3,625) (2,266)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,919 18,516
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,294 $ 16,250
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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 nine-month periods ended March 31, 1995, and 1994, 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 the dilutive effect of outstanding
stock options. There is no material difference between primary and
fully diluted earnings per share.
3. 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. On April 24, 1995,
these securities were sold following a tender offer by another company
for Amdura Corporation's common stock. There was no gain or loss to the
Company on the sale of these securities.
4. 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. Borrowings under the
facility currently bear interest at (1) the higher of the federal funds
rate plus .5% or the lender's prime rate, or (2) at the Company's
option, LIBOR, in each case plus specified basis points based on the
ratio of the Company's total indebtedness to total capital. The credit
facility provides for a commitment fee on the average unused portion of
the line and is also based on the ratio of the Company's total
indebtedness to total capital. Based on current financial ratios, the
LIBOR borrowing rate is LIBOR plus .625% and the commitment fee rate is
.25%.
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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 MARCH 31, 1995, COMPARED TO THE
THREE-MONTH PERIOD ENDED MARCH 31, 1994.
During the three-month period ended March 31, 1995, net income decreased to
$1,614,000 from $2,749,000 for the same three-month period last year. Sales
were virtually unchanged compared to the same prior year period. Net income in
the prior year quarter included a $705,000 net loss from discontinued
operations. Reduced income primarily reflects lower operating margins resulting
from reduced sales prices, higher transportation and distributions costs and
increased selling costs by the Roofing Products Group and certain adjustments
to increase medical and casualty self-insurance reserves.
Roofing Products
Sales in the Roofing Products Group for the three-month period ended March 31,
1995 decreased 4% compared to the same period in the prior year, despite a 6%
increase in shipments of premium laminated fiberglass asphalt shingles. Lower
average net selling prices were received on most products in the current year
period and continued lower comparative net selling prices are expected for the
remainder of fiscal 1995. However, a small price increase was implemented on
March 1, 1995 and another price increase has been scheduled for June 1, 1995.
Strong market demand is currently in evidence in most market regions. Improved
demand in the Western United States, especially California, is expected as a
result of heavy rainfall in the region in recent months. Higher raw materials
costs, particularly asphalt and fiberglass, are projected for the remainder of
fiscal 1995, but these increased costs are expected to be offset by the
increased sales prices.
Continued lower comparative period prices, together with initial operating
losses of a new roofing plant in Shafter, California, which is currently in
production startup, could result in earnings in the fourth quarter of fiscal
1995 being lower than the prior year comparison period.
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.
Industrial Products
Sales in the Industrial Products Group for the three-month period ended March
31, 1995 increased 21% 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, including a substantial increase in revenues from conductive coatings of
plastic enclosures for electronic equipment, together with reduced operating
costs throughout Chromium accounted for the majority of the improvement in
operating results.
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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 for the remainder of fiscal 1995.
Other
Selling, general and administrative expenses increased 26% in the March 1995
quarter as compared to the prior year quarter, primarily as a result of
increased selling and marketing expenses in the Roofing Products Group and
increased medical and casualty self-insurance reserves in the March 1995
quarter. The increased selling and marketing expenses are the result of
increasing promotional activities and establishing a larger sales organization
to better serve growing markets.
CHANGES IN THE NINE-MONTH PERIOD ENDED MARCH 31, 1995, AS COMPARED TO THE
NINE-MONTH PERIOD ENDED MARCH 31, 1994.
During the nine-month period ended March 31, 1995, net income decreased to
$5,937,000 from $9,827,000 in the same period last year. Sales decreased 5%
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 $1,494,000 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 Roofing Products Group during the
nine-month period ended March 31, 1995. 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 nine months of fiscal 1995
decreased 7% compared to the same period last year 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 during the current year nine-month
period.
Late in the first quarter of fiscal 1995, the Company introduced enhanced
versions of its patented High Definition(R) Prestique(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 during the seasonally
slower winter months significantly reduced operating results during the first
nine months of fiscal 1995 as compared to the prior year.
Industrial Products
Sales in the Industrial Products Group for the first nine months of fiscal 1995
increased 11% and the Group reported an operating profit compared to an
operating loss in same prior year period.
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Increased sales volume for many of Chromium Corporation's product lines,
including hard chrome plated diesel engine cylinder liners and remanufactured
pistons for the railroad, marine and stationary power industries, and
conductive 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 nine-month period ended March 31, 1995 as compared to
the same period in the prior year.
FiNANCIAL CONDITION
Cash and cash equivalents decreased $3,625,000 during the first nine months of
fiscal 1995. Excluding the decrease in cash and cash equivalents, working
capital requirements decreased $3,045,000 primarily as a result of a $3,424,000
reduction in receivables and a $3,280,000 reduction in inventories, offset by a
$4,613,000 reduction in trade payables and accrued liabilities. The reduction
in receivables was the result of lower seasonal sales in the March 1995 quarter
as compared to the fourth quarter of fiscal 1994. Finished goods inventories
were reduced from the unusually high levels at year end that occurred from
lower than anticipated demand during the fourth quarter of fiscal 1994. Raw
materials inventories increased as a result of raw material purchase
requirements for the new Shafter, California roofing plant. 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 nine months of fiscal 1995 were
$28,366,000, primarily as a result of construction of a new plant in Shafter,
California to manufacture premium laminated fiberglass asphalt shingles.
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 nonwoven 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 cost of the two new plants when completed is estimated to be about $70
million of which $40 million relates to the Shafter plant and $30 million
relates to the Ennis, Texas facility. Total cumulative combined expenditures
have been approximately $42 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 April 24, 1995, the company sold its investment in convertible preferred
stock of Amdura Corporation for its book value of $5,378,000. Proceeds from
this sale will be used to reduce long-term debt.
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 corporate purposes, including employee stock
compensation and benefit plans. As of March 31, 1995, 85,500 shares with
cumulative cost of $1,259,000 had been repurchased under this program.
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Management believes that current cash and cash equivalents, cash flows from
operations and borrowings under 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 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 Company's 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 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 March 31, 1995.
(b) No reports on Form 8-K was filed on during the quarter ended
March 31, 1995.
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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: May 10, 1995 /s/Richard J. Rosebery
Richard J. Rosebery
Executive Vice President,
Chief Administrative & Financial Officer,
and Treasurer
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EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
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27 Financial Data Schedule