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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 December 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 .
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As of close of business on February 1, 1996, Registrant had outstanding
8,763,582 shares of Common Stock, Par Value $1 per Share.
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
ELCOR CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited, $ in thousands)
ASSETS 12-31-95 6-30-95
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CURRENT ASSETS
Cash and cash equivalents $ 5,168 $ 3,731
Trade receivables, less allowance of $377 and
$306 26,192 32,910
Inventories -
Finished goods 11,409 6,091
Work-in-process 603 658
Raw materials 5,085 4,952
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Total inventories 17,097 11,701
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Prepaid expenses and other 1,433 2,931
Deferred income taxes 1,996 2,136
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Total current assets 51,886 53,409
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PROPERTY, PLANT AND EQUIPMENT, AT COST 138,715 123,469
Less - accumulated depreciation (55,274) (53,923)
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Property, plant and equipment, net 83,441 69,546
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DEFERRED PREOPERATING COSTS 9,471 5,640
NET ASSETS OF DISCONTINUED OPERATIONS - NONCURRENT 7,175 7,175
OTHER ASSETS 1,753 1,363
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$ 153,726 $ 137,133
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 12,388 $ 10,849
Accrued liabilities 12,318 10,548
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Total current liabilities 24,706 21,397
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LONG-TERM DEBT 25,000 18,400
DEFERRED INCOME TAXES 5,295 3,720
SHAREHOLDERS' EQUITY -
Common stock 8,802 8,802
Paid-in-capital 71,602 71,680
Retained earnings 19,056 14,316
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99,460 94,798
Less - Treasury stock, at cost, 40,315
and 74,063 shares (735) (1,182)
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Total shareholders' equity 98,725 93,616
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$ 153,726 $ 137,133
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See accompanying notes to consolidated financial statements.
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ELCOR CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited, $ in thousands
except per share data)
Three Months Ended Six Months Ended
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12-31-95 12-31-94 12-31-95 12-31-94
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SALES $ 45,362 $ 35,973 $ 93,890 $ 74,450
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COST AND EXPENSES
Cost of sales 34,523 26,960 70,379 54,529
Selling, general and administrative 7,353 7,116 14,105 13,045
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INCOME FROM OPERATIONS 3,486 1,897 9,406 6,876
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OTHER (INCOME) EXPENSE
Interest expense (income), net 19 (51) 44 (154)
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INCOME BEFORE INCOME TAXES 3,467 1,948 9,362 7,030
Provision for income taxes 1,343 781 3,575 2,707
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NET INCOME $ 2,124 $ 1,167 $ 5,787 $ 4,323
========= ========= ========= ========
INCOME PER COMMON AND COMMON EQUIVALENT
SHARE $ .24 $ .13 $ .65 $ .49
========= ========= ========= ========
DIVIDENDS PER COMMON SHARE $ .06 $ -- $ .12 $ --
========= ========= ========= ========
AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 8,838 8,849 8,840 8,887
========= ========= ========= ========
See accompanying notes to consolidated financial statements.
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ELCOR CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, $ in thousands)
Six Months Ended
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12-31-95 12-31-94
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,787 $ 4,323
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 1,509 1,922
Write-off of assets 558 --
Deferred income taxes 1,715 291
Changes in assets and liabilities:
Trade receivables 6,718 10,376
Inventories (5,396) 2,154
Prepaid expenses and other 1,498 (84)
Accounts payable and accrued liabilities 3,309 (7,135)
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Net cash provided by continuing operations 15,698 11,847
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Net cash provided by discontinued
operations -- 464
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CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant & equipment (15,951) (16,689)
Deferred preoperating costs ( 3,831) (1,980)
Other (401) 362
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Net cash provided by (used for) investing
activities (20,183) ( 18,307)
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CASH FLOWS FROM FINANCING ACTIVITIES
Long-term borrowings 6,600 2,500
Dividends on common stock (1,048) --
Treasury stock transactions and other, net 370 (558)
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Net cash provided by financing activities 5,922 1,942
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,437 (4,054)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,731 5,919
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,168 $ 1,865
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See accompanying notes to consolidated financial statements.
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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 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 1995 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, 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 outstanding stock options. There is
no material difference between primary and fully diluted earnings per
share.
3. Effective December 15, 1995, the Company increased its unsecured
revolving credit facility from $50 million to $70 million and the term
was extended by one year to October 31, 1998. The rate the Company
pays on LIBOR borrowings, based on current financial ratios, was
lowered from LIBOR plus.625% to LIBOR plus.5%. There was no change to
the interest rate for any borrowings based on the lender's prime rate.
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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
CHANGES IN THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1995 COMPARED TO THE
THREE-MONTH PERIOD ENDED DECEMBER 31,1994.
During the three-month period ended December 31, 1995, net income increased 82%
to $2,124,000 from $1,167,000 for the same three-month period last year. Sales
increased 26% compared to the same prior year quarter. The increases in sales
and income were primarily attributable to increased production and shipments of
premium laminated fiberglass asphalt shingles in the Roofing Products Group.
Roofing Products
Sales and operating profit in the Roofing Products Group for the three-month
period ended December 31, 1995 were significantly higher compared to the same
period in the prior year, primarily as a result of increased production and
shipments of the Company's patented Enhanced High Definition(R) and Raised
Profile(tm) Prestique(R) premium laminated fiberglass asphalt shingles. In
addition, average selling prices improved over the prior year quarter and
transportation costs were lower. Although sales from existing plants increased,
the new plant at Shafter, California accounted for a significant part of the
sales increase. This major new plant is still in startup operations, but
production levels are increasing. During this startup phase, certain costs are
being expensed, thereby causing an operating loss at the Shafter facility, but
other costs from the facility are being capitalized as deferred preoperating
costs. During the three-month period ended December 31, 1995, costs of
$1,997,000 were capitalized at the Shafter facility.
Demand is expected to remain good in the Company's major market areas for the
remainder of fiscal 1996. However, quarterly earnings are expected to be
affected by higher operating losses at the new Shafter facility following the
completion of the startup phase until the plant's operating level comes up to
the break-even point.
The Company's roofing products business is cyclical and is affected by some of
the same economic factors that effect 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 months ended December 31,
1995 decreased and the Group reported lower operating profit compared to the
prior year quarter. Several of Chromium Corporation's customers reduced
shipment orders during the quarter due to model changes and inventory
adjustments resulting in decreased sales and lower operating profit at that
subsidiary.
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Ortloff Engineers LTD. recorded lower patent licensing income during the
current quarter as compared to the same quarter in the prior year.
CHANGES IN THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1995, AS COMPARED TO THE
SIX-MONTH PERIOD ENDED DECEMBER 31,1994.
During the six-month period ended December 31, 1995, net income increased to
$5,787,000 from $4,323,000 in the same period last year. Sales increased 26%
compared to the comparable prior year period. The increases in sales and income
were primarily attributable to increased shipments in the Roofing Products
Group during the six-month period ended December 31, 1995.
Roofing Products
Sales in the Roofing Products Group for the first half of fiscal 1996 increased
compared to last year's first half and operating profit was substantially
higher. Increased shipments, higher prices and lower transportation costs
improved both sales and operating profit for the Roofing Products Group. Sales
from the new plant at Shafter, California accounted for a significant part of
the sales increase. During the six-month period ended December 31, 1995, costs
of $3,328,000 have been capitalized as deferred preoperating costs for the
Shafter facility, which is currently in startup operations.
Asphalt and glass fiber raw material costs were higher in the first half of
fiscal 1996 as compared to the same period in the prior year. However, the
Company was able to implement price increases to offset these higher raw
material costs.
Industrial Products
Sales in the Industrial Products Group for the first six months of fiscal 1996
decreased slightly and the Group reported lower operating profit compared to
the same prior year period. Increased sales volume for several of Chromium
Corporation's product lines during the early part of fiscal 1996, together with
lower operating costs, resulted in a small overall increase in sales and
operating profit for that subsidiary as compared to the prior year period.
However, these increases were offset by lower revenues and operating results at
Ortloff Engineers for the six-month period ended December 31, 1995 as compared
to the same period in the prior year.
FINANCIAL CONDITION
Total invested capital at December 31, 1995 was $123,725,000. Long-term debt
represents 20% of total capitalization. At December 31, 1995, $42,718,000 was
available under the Company's $70 million unsecured revolving line of credit.
In September 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. As of December 31, 1995,
94,800 shares with a cumulative cost of $1,440,000 had been repurchased under
this program. In September 1995, the Board of Directors reinstated the
Company's regular quarterly cash dividend at six cents per common share.
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Cash generated by operations for the six month period ended December 31, 1995
was $15,698,000. Working capital (excluding cash and cash equivalents)
decreased $6,269,000 primarily as a result of a seasonal $6,718,000 decrease in
receivables. Inventories increased $5,396,000 from year end, primarily due to
increased production during the seasonally slower months in anticipation of
good demand in many of the Company's primary market areas for the remainder of
fiscal 1996.
The current ratio was 2.1 to 1 at December 31, 1995. 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.
The Company used $20,183,000 for investing activities in the first six months
of fiscal 1996. The majority of these expenditures were for capital
expenditures and related deferred preoperating expenses incurred in connection
with the roofing plant in Shafter, California, which is currently in startup,
and the 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 nonwoven plant is scheduled to
begin operations near the end of spring of 1996.
The Company is spending about $100 million in capital expenditures and related
deferred preoperating startup costs over a three-year period on these two new
facilities. As of December 31, 1995, cumulative total expenditures for this
expansion program have been approximately $79.5 million. The new plants should
provide the potential to significantly increase the Company's sales, earnings
and cash flow when completed and operating at expected levels in the years
ahead.
Net financing activities provided $5,922,000 in the first half of fiscal 1996,
primarily resulting from increased long-term borrowings to finance the
expansion program, partially offset by dividends on common stock.
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 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 process. As a
result, the Company incurs costs for remediation activities at its facilities
from time to time. The Company establishes and maintains reserves for
remediation activities, when appropriate, in accordance with Statement of
Accounting Standards 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.
Management believes that current cash and cash equivalents, cash flows from
operations and its revolving credit facility should be sufficient during fiscal
1996 and beyond to fund the construction of the two new plants, other capital
expenditures, working capital needs, dividends, stock repurchases and other
cash requirements.
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PART II. OTHER INFORMATION
ITEM 4: Submission of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Shareholders
was held on October 24, 1995 for the purpose of
electing two directors and ratifying the appointment
of the Company's independent auditors.
(b) Directors Elected: NUMBER OF VOTES
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AUTHORITY
FOR WITHHELD
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Roy E. Campbell 8,209,663 70,993
James E. Hall 8,196,805 83,851
Other Directors Whose Term Continued After the Meeting:
F.H. Callaway
Phil Simpson (1)
Robert M. Leibrock
W.F. Ortloff
(1) Mr. Simpson resigned as of a Director in January 1996 due to
increased demands on his time from the rapid growth of Republic
Group (formerly Republic Gypsum Company), where Mr. Simpson
serves as Chairman of the Board, President and Chief Executive
Officer.
(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 AGAINST ABSTENSIONS
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Ratification of Arthur 8,224,496 13,207 42,952
Andersen LLP as
independent auditors of
the Company for the fiscal
year ending June 30, 1996.
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ITEM 6: Exhibits and Reports of Form 8-K
(a) Exhibits:
Exhibit (4.8): Second Amendment dated December 15, 1995 to Loan
Agreement dated September 29, 1993 among Elcor
Corporation, NationsBank of Texas, N.A., as Issuer,
and NationsBank Texas, N.A. as Administrative Lender.
Exhibit (11): Computation of Income Per Common and Common Equivalent
Share
Exhibit (27): Financial Data Schedule (EDGAR Submission only)
(b) No reports on Form 8-K were filed during the quarter ended December
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: February 13,1996 /s/ Richard J. Rosebery
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Richard J. Rosebery
Executive Vice President,
Chief Administrative &
Financial Officer, and
Treasurer
/s/ Leonard R. Harral
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Leonard R. Harral
Vice President and Chief
Accounting Officer
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EXHIBIT INDEX
(a) Exhibits:
Exhibit (4.8): Second Amendment dated December 15, 1995 to
Loan Agreement dated September 29, 1993
among Elcor Corporation, NationsBank of
Texas, N.A., as Issuer, and NationsBank
Texas, N.A. as Administrative Lender.
Exhibit (11): Computation of Income Per Common and Common
Equivalent Share
Exhibit (27): Financial Data Schedule (EDGAR Submission
only)