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EXHIBIT (20)
QUARTERLY REPORT
REPORT TO SHAREHOLDERS
Our new patented enhanced High Definition(R) and Raised Profile(TM)
Prestique(R) premium laminated fiberglass asphalt shingles are being received
very well in the market. Shipments are growing again, and prices are beginning
to improve. Our new Shafter, California laminated asphalt shingle plant is in
start-up, and we expect production operations to get underway within a matter
of weeks. Our Industrial Products group has achieved a significant turnaround
in operations. While sales and earnings are still below year-ago levels, we
believe the growing demand for our Elk Prestique shingles and the continued
improvement of our Industrial Products segment will result in higher sales and
earnings in fiscal 1996.
OPERATING HIGHLIGHTS
Income from continuing operations and net income were $1,614,000, or $.18 per
share, on sales of $37,816,000 for the third quarter. In last year's third
quarter, Elcor reported income from continuing operations of $3,454,000, or
$.39 per share, and net income of $2,749,000, or $.31 per share, including a
loss from discontinued operations of $705,000, or $.08 per share. Fiscal 1994
third-quarter sales were $37,961,000.
For the first nine months ending March 31, 1995, Elcor reported income
from continuing operations and net income of $5,937,000, or $.67 per share, on
sales of $112,266,000, compared to income from continuing operations of
$10,653,000, or $1.20 per share, and net income of $9,827,000, or $1.10 per
share in the year-ago period. Net income in the prior year period included a
loss from discontinued operations of $1,494,000, or $. 17 per share, and a
gain of $668,000, or $.07 per share, for the cumulative effect of a change in
accounting for income taxes, in accordance with the Statement of Accounting
Standards No. 109, Accounting for Income Taxes. Sales were $117,775,000 in the
first nine months last year.
FINANCIAL POSITION
Elcor maintains a strong financial position with $90 million in shareholders'
equity and $17.8 million in long-term debt, as of March 31, 1995. Long-term
debt amounted to only 16.5% of total invested capital at quarter end.
During the first nine months of fiscal 1995, we invested about $32
million to increase productivity and to expand operations. These investments
were financed with cash flow from operations, available cash and $17.8 million
of borrowings under the company's $50 million unsecured three-year revolving
credit facility. On April 24, 1995, the company received about $5.4 million in
cash from the sale of its Amdura Corporation Preferred Stock.
OPERATIONS
Despite lower results, the outlook for the Roofing Products segment brightened
as the quarter progressed. Elk reported a 6% increase in shipments of Prestique
premium laminated fiberglass asphalt shingles compared to the year-ago third
quarter. However, lower average selling prices and mix changes, combined with
higher transportation/distribution costs, resulted in 4% lower net sales for
the quarter and significantly lower operating income than in the same quarter
last year.
A modest price increase was implemented on March 1, 1995, and a second
price increase has been announced for June 1, 1995. Since then, prices have
remained firm and most manufacturers have announced a further price increase
to become effective in May or June, 1995. Good market demand throughout the
country, plus higher fiberglass and asphalt raw material costs, should support
a further price increase in the June quarter.
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In addition, roofing contractors and distributors in California expect
brisk demand for calendar year 1995. That state's record rainfall during this
year's March quarter should substantially increase demand as many homeowners
replace leaking roofs. Elk's new California plant is well positioned to supply
this anticipated increased demand. Shafter will produce Elk's patented new
enhanced High Definition and Raised Profile Prestique premium laminated
fiberglass asphalt shingles, which will be introduced into the Western States
market when the Shafter plant begins shipments this spring.
Construction of Elk's new $30 million nonwoven fiberglass mat plant at
its Ennis, Texas facility is underway, with start-up operations expected in
the spring of 1996. During the March quarter, a decision was implemented to
increase the initial capacity of the plant to 75 million squares per year (7.5
billion square feet) while operating at 1,500 feet per minute on a 2.0 pounds
per square fiberglass roofing mat, rather than wait until 1998 to increase
capacity.
Our Industrial Products segment reported substantially improved third
quarter operating results. This segment achieved both higher sales and
operating profits in the March quarter than the earlier quarters of this
fiscal year. Its Chromium Corporation subsidiary continued a significant
turnaround in performance, offsetting lower operating results for Ortloff
Engineers, which reported lower patent licensing income during this year's
third quarter.
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CONDENSED RESULTS OF OPERATIONS
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(Unaudited, $ in thousands except per share data) Third Quarter Trailing
Three Months Ended Nine Months Ended Twelve Months Ended
March 31, March 31, March 31,
1995 1994 1995 1994 1995 1994
--------- --------- --------- --------- --------- ---------
SALES ................................................. $ 37,816 $ 37,961 $ 112,266 $ 117,775 $ 151,522 $ 159,546
--------- --------- --------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of sales ........................................ 27,736 26,657 82,265 82,933 106,891 111,460
Selling, general & administrative .................... 7,388 5,874 20,433 18,086 27,283 23,869
Interest and dividend (income) expense, net .......... 39 (98) (115) (311) (208) (139)
--------- --------- --------- --------- --------- ---------
Total Costs and Expenses .............................. 35,163 32,433 102,583 100,708 133,966 135,190
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INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES .................................. 2,653 5,528 9,683 17,067 17,556 24,356
Provision for income taxes ............................ 1,039 2,074 3,746 6,414 6,701 9,236
--------- --------- --------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS ..................... 1,614 3,454 5,937 10,653 10,855 15,120
--------- --------- --------- --------- --------- ---------
DISCONTINUED OPERATIONS:
Operating loss, net of tax ........................... 0 (623) 0 (1,412) 0 (1,782)
Loss on disposal, net of tax ......................... 0 (82) 0 (82) 0 (82)
--------- --------- --------- --------- --------- ---------
LOSS FROM DISCONTINUED OPERATIONS ..................... 0 (705) 0 (1,494) 0 (1,864)
--------- --------- --------- --------- --------- ---------
INCOME BEFORE CHANGE IN ACCOUNTING .................... 1,614 2,749 5,937 9,159 10,855 13,256
Cumulative effect of change in
accounting for income taxes .......................... 0 0 0 668 0 668
--------- --------- --------- --------- --------- ---------
NET INCOME ............................................ $ 1,614 $ 2,749 $ 5,937 $ 9,827 $ 10,855 $ 13,924
========= ========= ========= ========= ========= =========
INCOME (LOSS) PER COMMON SHARE:
From continuing operations ........................... $ 0.18 $ 0.39 $ 0.67 $ 1.20 $ 1.22 $ 1.75
From discontinued operations ......................... 0.00 (0.08) 0.00 (0.17) 0.00 (0.22)
--------- --------- --------- --------- --------- ---------
Before change in accounting ........................... 0.18 0.31 0.67 1.03 1.22 1.53
Cumulative effect of change in
accounting for income taxes .......................... 0.00 0.00 0.00 0.07 0.00 0.08
--------- --------- --------- --------- --------- ---------
NET INCOME PER SHARE .................................. $ 0.18 $ 0.31 $ 0.67 $ 1.10 $ 1.22 $ 1.61
========= ========= ========= ========= ========= =========
AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING ....................... 8,782 8,920 8,852 8,917 8,872 8,664
========= ========= ========= ========= ========= =========
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CONDENSED STATEMENT OF CASH FLOWS
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(Unaudited, $ in thousands) For the Nine Months Ended
March 31,
1995 1994
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CASH FLOWS FROM:
OPERATING ACTIVITIES
Income from continuing operations ....................................... $ 5,937 $ 10,653
Adjustments to income from continuing operations
Depreciation and amortization ........................................ 2,858 3,120
Write-off of assets .................................................. 0 478
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 from continuing operations ..................................... 11,290 9,135
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Net cash from discontinued operations ................................... 635 (147)
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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 from investing activities ...................................... (32,201) (11,577)
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FINANCING ACTIVITIES
Long-term borrowing .................................................. 17,800 0
Treasury stock transactions and other, net ........................... (1,149) 323
-------- --------
Net cash from financing activities ...................................... 16,651 323
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................... (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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CONDENSED BALANCE SHEET
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(Unaudited, $ in thousands) March 31,
1995 1994
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ASSETS
Cash and cash equivalents .................... $ 2,294 $ 16,250
Receivables, net ............................ 30,113 28,177
Inventories ................................. 13,613 11,956
Deferred income taxes......................... 2,219 1,771
Prepaid expenses and other.................... 1,655 1,151
Net assets of discontinued
operations - current.......................... 0 23
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Total Current Assets .................... 49,894 59,328
Property, plant and equipment, net .......... 56,287 25,166
Net assets of discontinued
operations - noncurrent ..................... 7,225 7,445
Investments ................................ 5,378 5,344
Other assets ................................. 7,503 3,173
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Total Assets............................... $126,287 $100,456
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March 31,
1995 1994
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LIABILITIES AND
SHAREHOLDERS' Equity
Accounts payable and
accrued liabilities........................... $ 17,056 $ 20,559
Current maturities on long-term debt ......... 0 0
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Total Current Liabilities ................. 17,056 20,559
Deferred income taxes ....................... 1,414 0
Long-term debt, net ......................... 17,800 0
Shareholders' equity ........................ 90,017 79,897
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Total Liabilities and
Shareholders' Equity ..................... $126,287 $100,456
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OUTLOOK
Demand for our Elk Prestique premium laminated fiberglass asphalt shingles is
very good in all areas of the country. With one price increase already in place,
we believe that favorable market conditions will permit a second increase in
June. In addition, our Shafter, Calffornia laminated fiberglass asphalt roofing
shingle plant should be coming on-line just when market demand in California is
significantly above calendar year 1994's depressed levels.
Presently, we expect higher shipments of our Elk Prestique premium
laminated fiberglass asphalt shingles will lead to higher fourth quarter sales;
however, operating profit will be affected as a result of lower prices, higher
raw material costs and the initial operating losses as the new Shafter plant
gets up and running. Looking ahead to fiscal 1996, however, we expect sales and
earnings should show solid improvement over fiscal 1995. Sales and earnings in
the years ahead should also benefit from increasing sales and production levels
at the two new plants.
/s/ ROY E. CAMPBELL
Roy E. Campbell
Chairman and President
April 28, 1995
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[PICTURE]
The introduction of the new patented enhanced Prestique High Definition premium
laminated fiberglass asphalt shingles in fiscal 1995 continues Elk's leadership
position in product innovation. A few years ago, Elk introduced the original
patented Prestique High Definition shingles with a new shading effect for a
thicker appearance. Now, the new enhanced High Definition design, with its
improved shading effect, provides more impressive definition than ever.
New enhanced High Definition shingles are available in both Prestique Plus
and Prestique I premium laminated designs and in a variety of colors to
compliment any style of roof. Other product innovations from Elk, such as Z(R)
ridge and Seal-A-Ridge(R) Plus ridge products and Elk's matching roof accessory
paint, continue to make Elk The Premium Choice(R) for discerning homeowners,
architects and builders all across the country.
[ELCOR LOGO]
Wellington Centre, Suite 1000
14643 Dallas Parkway
Dallas, Texas 75240-8871