EXHIBIT 99.1
ElkCorp Reports Higher Second Quarter Results
DALLAS--(BUSINESS WIRE)--Jan. 20, 2005--
Earnings Per Diluted Share More Than Doubles Prior Year;
Company Raises Fiscal 2005 Earnings Expectations to
$2.40 to $2.50 per Diluted Share
ElkCorp (NYSE:ELK) announced today financial results for its
second fiscal quarter, ended December 31, 2004. Earnings from
continuing operations for the second quarter were $14.4 million, or
$0.71 per diluted share, which is in line with the company's revised
guidance of $0.60 or more per diluted share. The company anticipates
earnings from continuing operations for the third fiscal quarter to be
in the range of $0.62 to $0.67 per diluted share and expects earnings
per diluted share for fiscal 2005 to be in the range of $2.40 to
$2.50, an increase of 20% over its prior guidance of $2.00 to $2.05
per diluted share.
Second Quarter Overview
ElkCorp Consolidated
-- Reported income from continuing operations of $14.4 million,
or $0.71 per diluted share, more than double the $7.0 million,
or $0.35 per diluted share reported for the second quarter of
fiscal 2004.
-- Recorded revenue of $195 million which is a 58% increase over
the $123 million reported in the second quarter of fiscal
2004.
Building Products Segment
-- Revenue in the building products segment was $192 million, a
61% increase over the $119 million reported in the year ago
quarter. This reflects realization of recent roofing price
increases and record shingle shipments.
-- Operating income in the building products segment was $29.6
million, 15.4% of sales, approximately double the $14.9
million recorded in the second quarter of fiscal 2004.
Roofing
-- The decision to invest capital into productivity improvements
over the past two years is paying off with record high
productivity achieved in the quarter at Elk's roofing plants.
-- Asphalt and transportation costs continued to rise in the
December quarter. Asphalt increased 3% from the September
quarter and has increased 15% from the second quarter of
fiscal 2004. Transportation costs increased 5% over the prior
quarter and 17% over the year ago quarter.
-- The new facility in Tuscaloosa was profitable and operated
above 50% of capacity in the December quarter.
-- An additional 1-2% price increase was implemented in January
2005, which will continue to help offset the increased asphalt
and transportation costs in the roofing business.
Composite Lumber
-- The composite lumber business achieved sales of $3.3 million
in the quarter compared to $1.4 million in the second quarter
of fiscal 2004. The company anticipates sales for this product
platform to significantly increase throughout the remainder of
the fiscal year.
-- The composite business recorded an operating loss of $3.2
million in the December quarter, compared to a $1.0 million
loss in the prior year, primarily due to inventory adjustments
and expenses for start up of the new manufacturing facility.
-- During the quarter Elk continued to recycle certain old
product that was not up to current specifications and the
company does not anticipate requiring any additional reserves.
The composites business would have achieved profitability in
the month of December with record shipments of decking,
fencing, railing and OEM products, if not for the inventory
adjustments in the quarter.
-- Elk Composite Building Products has signed a letter of intent
to acquire the principal assets of RailWayz Inc., a
privately-held composite railing company based in New Jersey.
RailWayz(TM) manufactures an exceptional railing product that,
in conjunction with Elk's CrossTimbers(TM) decking product,
would enable the company to offer its distributors a more
diverse decking and railing product line. This transaction is
subject to several conditions, including satisfactory due
diligence and the negotiation of a definitive purchase
agreement.
Other, Technologies Segment
-- The other, technologies segment recorded a slight operating
loss of $70,000 for the fiscal second quarter compared to a
profit of $1.3 million in the year ago quarter. The decline is
primarily due to the timing of Ortloff licensing fees and the
recording of reserves for estimated environmental clean-up at
the former Chromium facility in Lufkin, Texas.
-- Chromium recorded an operating loss of $183,000 for the
quarter which included a $400,000 reserve for estimated
environmental clean-up at its former plating operation located
in Lufkin.
-- The divestiture of Chromium and Ortloff is proceeding well
with several parties expressing interest in each of these
businesses.
-- The fire barrier business recorded increased revenue for the
quarter, which included sales to some additional regional
mattress manufacturers. The operating loss in this business
decreased from $257,000 in the September quarter to a loss of
$133,000 in the December quarter.
-- External specialty fabric sales increased 56% over the prior
year primarily due to increased sales of roofing mat, facer
and filtration products in the quarter.
Discontinued Operations
-- ElkCorp has accepted an offer for the sale of the Canton, GA.
facility that was once part of Cybershield, divested by the
company in August 2004. The sale is expected to close before
the end of this fiscal year and is subject to several
conditions, including satisfactory due diligence.
Financial Condition
At December 31, 2004, the contractual principal amount of
ElkCorp's long-term debt was $195 million. Net debt (contractual
principal debt minus cash) was $154.7 million, and the net debt to
capital ratio was 39.6%. Liquidity consisted of $40.3 million of cash
and $121.6 million of borrowing availability under a $125 million
committed revolving credit facility expiring November 30, 2008.
Long-term debt of $199.1 million included $4.1 million representing
the fair market value for two interest rate swap agreements. On
November 15, 2004, the company issued an additional $50 million in
senior notes. These new notes mature in November 2014 and carry a
coupon rate of 6.28%. The proceeds will be used to provide funds for
growth and expansion initiatives, including possible acquisitions to
extend our premium building products line of business.
Business Outlook
"We were pleased with the results for the second quarter and
remain confident in the opportunities for growth that lie ahead in the
second half of fiscal 2005, "said Thomas Karol, chairman and chief
executive officer of ElkCorp. "During the quarter, we experienced
increased shingle demand in the majority of our markets throughout the
country and anticipate demand to stay strong, particularly in the
Southeast, throughout the fiscal year. Asphalt and transportation
costs remained high in the December quarter and continue to be an
issue in the industry. Although oil prices have declined slightly from
their high, it often takes 60 to 90 days for this to be reflected in
the price of asphalt which can also be affected by supply and demand
issues. However, we feel confident that our current pricing structure
should enable us to maintain our margins in this business."
Mr. Karol continued, "We also achieved a significant milestone in
the growth of our composites business with limited production
beginning in our expanded composite lumber facility in December. We
anticipate the increased capacity available through this larger
facility will position us to further penetrate the fencing, decking
and railing market as well as the transportation market and enable us
to further develop applications outside these markets. We believe the
composite lumber industry will see double-digit growth in the coming
years and with the new facility, we believe we are better positioned
to take advantage of this increased demand as consumers become more
aware of the benefits of composite lumber verses wood."
Mr. Karol concluded, "The positives for our business in fiscal
2005 continue to be the increased shingle demand primarily in the
Southeast and the increased capacity available as our new Tuscaloosa
facility ramps its production throughout the fiscal year. We have also
made significant progress in our composite lumber business that we
believe will fuel our growth for the future along with the expansion
of our operations in Lenexa and the possible addition of RailWayz
Inc., which will enable us to offer a more complete fencing, decking
and railing product line and expand our presence in this rapidly
growing market."
"During the quarter we saw increased interest in the products
available through our specialty fabric technologies platform and
believe that this platform offers many opportunities for future
growth. We also anticipate sales for our fire barrier products to
continue to increase as California mattress manufacturers adjust to
the recently adopted TB603 legislation and as other manufacturers
begin to produce and distribute mattresses with flame retardant
components nationwide. Finally, we are still exploring opportunities
to add a fourth building product platform during fiscal 2005 that will
round out our exterior building product offerings. We remain committed
to achieving our goal of $1 billion in annual revenue by the end of
fiscal 2007. There are still challenges that lie ahead; however, we
believe that the second half of fiscal 2005 will continue to be strong
for ElkCorp and will lay the groundwork for achieving this goal."
Earnings Outlook
The Company expects earnings for the third quarter of fiscal 2005
to be in the range of $0.62 to $0.67 per diluted share, and to be in
the range of $2.40 to $2.50 per diluted share for fiscal 2005.
Conference Call
The ElkCorp management team will host a conference call and live
audio webcast to discuss the second fiscal quarter financial results
beginning at 11:00 a.m. (EST) on Friday, January 21, 2005. Investors
and other interested parties are invited to listen to the live webcast
by visiting the investor relations section of the ElkCorp Web site at
www.elkcorp.com. A replay of the conference call will be available for
48 hours beginning at 1 p.m. ET. and may be accessed by dialing
1-800-642-1687 and entering passcode 3300441. The webcast replay will
be available on the investor relations section of company's Web site.
Safe Harbor Provisions
In accordance with the safe harbor provisions of the securities
law regarding forward-looking statements, in addition to the
historical information contained herein, the above discussion contains
forward-looking statements that involve risks and uncertainties. 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 "optimistic," "vision," "outlook," "believe," "estimate,"
"potential," "forecast," "project," "expect," "anticipate," "plan,"
"predict," "could," "should," "may," "likely," or similar words that
convey the uncertainty of future events or outcomes. These statements
are based on judgments the company believes are reasonable; however,
ElkCorp's actual results could differ materially from those discussed
here. Factors that could cause or contribute to such differences could
include, but are not limited to, changes in demand, prices, raw
material costs, transportation costs, changes in economic conditions
of the various markets the company serves, changes in the amount and
severity of inclement weather, acts of God, war or terrorism, as well
as the other risks detailed herein, and in the company's reports filed
with the Securities and Exchange Commission, including but not limited
to, its Form 10-K for the fiscal year ending June 30, 2004 and Form
10-Q for the quarter ended September 30, 2004..
ElkCorp, through its subsidiaries, manufactures Elk brand premium
roofing and building products (over 90% of consolidated revenue) and
provides technologically advanced products and services to other
industries. Each of ElkCorp's principal operating subsidiaries is a
leader within its particular market. Its common stock is listed on the
New York Stock Exchange (NYSE:ELK). See www.elkcorp.com for more
information.
Condensed Results of Operations
($ in thousands)
Three Months Ended Six Months Ended
December 31, December 31,
2004 2003 2004 2003
------------ -------- -------- --------
Sales $ 195,158 $123,208 $358,543 $282,947
-------------- --------- --------- ---------
Costs and Expenses:
Cost of sales 152,974 95,917 286,452 222,472
Selling, general &
administrative: 16,615 14,514 32,692 30,080
Interest expense, net 2,382 1,331 4,476 2,714
-------------- --------- --------- ---------
Total Costs and Expenses 171,971 111,762 323,620 255,266
-------------- --------- --------- ---------
Income from Continuing
Operations
Before Income Taxes 23,187 11,446 34,923 27,681
Provision for income taxes 8,835 4,410 13,271 10,565
-------------- --------- --------- ---------
Income from Continuing
Operations 14,352 7,036 21,652 17,116
Loss from Discontinued
Operations, Net
(26) (7,879) (517) (8,822)
-------------- --------- --------- ---------
Net Income $ 14,326 $ (843) $ 21,135 $ 8,294
============== ========= ========= =========
Income (Loss) Per Common
Share-Basic
Continuing Operations $ 0.73 $ 0.36 $ 1.10 $ 0.87
Discontinued Operations (0.00) (0.40) (0.03) (0.45)
-------------- --------- --------- ---------
$ 0.73 $ (0.04) $ 1.07 $ 0.42
============== ========= ========= =========
Income (Loss) Per Common
Share-Diluted
Continuing Operations $ 0.71 $ 0.35 $ 1.08 $ 0.86
Discontinued Operations (0.00) (0.39) (0.03) (0.44)
-------------- --------- --------- ---------
$ 0.71 $ (0.04) $ 1.05 $ 0.42
============== ========= ========= =========
Average Common Shares
Outstanding
Basic 19,697 19,587 19,684 19,566
============== ========= ========= =========
Diluted 20,154 19,909 20,035 19,866
============== ========= ========= =========
Twelve Months Ended
December 31,
2004 2003
-------------- ------------
Sales $ 648,572 $ 550,051
---------------- -------------
Costs and Expenses:
Cost of sales 517,796 435,415
Selling, general & administrative: 65,864 61,022
Interest expense, net 7,073 5,638
---------------- -------------
Total Costs and Expenses 590,733 502,075
---------------- -------------
Income from Continuing Operations
Before Income Taxes 57,839 47,976
Provision for income taxes 21,633 18,298
---------------- -------------
Income from Continuing Operations 36,206 29,678
Loss from Discontinued Operations, Net
(2,859) (9,096)
---------------- -------------
Net Income $ 33,347 $ 20,582
================ =============
Income (Loss) Per Common Share-Basic
Continuing Operations $ 1.84 $ 1.52
Discontinued Operations (0.14) (0.47)
---------------- -------------
$ 1.70 $ 1.05
================ =============
Income (Loss) Per Common Share-Diluted
Continuing Operations $ 1.81 $ 1.50
Discontinued Operations (0.14) (0.46)
---------------- -------------
$ 1.67 $ 1.04
================ =============
Average Common Shares Outstanding
Basic 19,668 19,528
================ =============
Diluted 20,010 19,739
================ =============
Financial Information by Company Segments ($ in thousands)
Three Months Ended Six Months Ended
December 31, December 31,
2004 2003 2004 2003
-------- -------- -------- --------
Sales
Building Products $191,821 $119,042 $352,385 $276,409
Other, Technologies 3,337 4,166 6,158 6,538
---------- --------- --------- ---------
$195,158 $123,208 $358,543 $282,947
========== ========= ========= =========
Operating Profit (Loss)
Building Products $ 29,632 $ 14,908 $ 47,649 $ 36,812
Other, Technologies (70) 1,350 (579) 702
Corporate & Eliminations (3,993) (3,481) (7,671) (7,119)
---------- --------- --------- ---------
$ 25,569 $ 12,777 $ 39,399 $ 30,395
========== ========= ========= =========
Twelve Months Ended
December 31,
2004 2003
--------- ---------
Sales
Building Products $ 633,552 $ 531,473
Other, Technologies 15,020 18,578
---------- -----------
$ 648,572 $ 550,051
========== ===========
Operating Profit (Loss)
Building Products $ 77,867 $ 60,724
Other, Technologies 1,181 5,425
Corporate & Eliminations (14,136) (12,535)
---------- -----------
$ 64,912 $ 53,614
========== ===========
Condensed Balance Sheet
($ in thousands)
Assets
- ------
Cash and cash equivalents
Receivables, net December 31,
Inventories 2004 2003
-------- --------
Deferred income taxes
Prepaid expenses and other $ 40,343 $ 31,072
Discontinued operations 143,519 81,117
67,284 51,960
Total Current Assets 4,894 3,812
8,672 7,498
Property, plant and equipment, net 2,985 8,052
--------- ---------
Other assets
267,697 183,511
Total Assets
280,845 250,875
11,968 6,421
--------- ---------
$560,510 $440,807
========= =========
Liabilities and Shareholders' Equity
- ------------------------------------
Accounts payable and accrued liabilities
Discontinued operations December 31,
Current maturities on long-term debt 2004 2003
-------- --------
Total Current Liabilities $ 76,386 $ 47,539
185 1,657
Long-term debt, net 0 0
--------- ---------
Deferred income taxes
Shareholders' equity 76,571 49,196
Total Liabilities and Shareholders' Equity 199,094 148,402
48,654 39,601
236,191 203,608
--------- ---------
$560,510 $440,807
========= =========
Condensed Statement of Cash Flows
($ in thousands)
Six Months Ended
December 31,
2004 2003
--------- ---------
Cash Flows From:
Continuing Operating Activities
Income from continuing operations $ 21,652 $ 17,116
Adjustments to income from continuing operations
Depreciation and amortization 11,475 8,797
Deferred income taxes 5,508 898
Changes in assets and liabilities:
Trade receivables (25,879) 37,135
Inventories (5,155) 1,561
Prepaid expenses and other (85) (809)
Accounts payable and accrued liabilities 13,720 (6,788)
--------- ---------
Net cash from continuing operating activities 21,236 57,910
Net cash from discontinued operations 1,248 2,942
--------- ---------
Net cash from operating activities 22,484 60,852
--------- ---------
Investing Activities
Additions to property, plant and equipment (21,197) (33,378)
Other, net (932) (245)
--------- ---------
Net cash from investing activities (22,129) (33,623)
--------- ---------
Financing Activities
Proceeds from sale of Senior Notes 50,000 0
Long-term payments on Revolving Credit
Facility, net (10,300) 0
Dividends on common stock (1,995) (1,962)
Treasury stock transactions and other, net 2,010 749
--------- ---------
Net cash from financing activities 39,715 (1,213)
--------- ---------
Net Increase in Cash and Cash Equivalents 40,070 26,016
Cash and Cash Equivalents at Beginning of Year 273 5,056
--------- ---------
Cash and Cash Equivalents at End of Period $ 40,343 $ 31,072
========= =========
CONTACT: ElkCorp
Investor Relations Contact
Stephanie Elwood, 972-851-0472