<PAGE> 1
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
---------------
For Quarter Ended September 30, 1996 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)
14643 DALLAS PARKWAY
SUITE 1000, WELLINGTON CENTRE, DALLAS, TEXAS 75240-8871
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 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 November 4, 1996, Registrant had
outstanding 8,775,301 shares of Common Stock, Par Value $1 per Share.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
ELCOR CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited, $ in thousands)
<TABLE>
<CAPTION>
ASSETS 9-30-96 6-30-96
- ------ ------- -------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,775 $ 3,744
Trade receivables, less allowance of $490 and $477 47,301 42,482
Inventories -
Finished goods 13,040 20,512
Work-in-process 761 604
Raw materials 5,678 5,632
---------- ----------
Total inventories 19,479 26,748
---------- ----------
Prepaid expenses and other 946 1,956
Deferred income taxes 2,691 2,734
---------- ----------
Total current assets 73,192 77,664
---------- -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST 172,250 163,053
Less - accumulated depreciation (54,352) (52,846)
---------- ----------
Property, plant and equipment, net 117,898 110,207
---------- ----------
NET ASSETS OF DISCONTINUED OPERATIONS 2,988 2,942
OTHER ASSETS 1,301 1,315
---------- ----------
$ 195,379 $ 192,128
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable $ 14,730 $ 15,503
Accrued liabilities 14,414 13,091
---------- ----------
Total current liabilities 29,144 28,594
---------- ----------
LONG-TERM DEBT 51,900 53,000
DEFERRED INCOME TAXES 9,172 8,336
SHAREHOLDERS' EQUITY -
Common stock 8,802 8,802
Paid-in-capital 71,244 71,555
Retained earnings 25,653 22,499
---------- ----------
105,699 102,856
Less - Treasury stock, at cost, 29,875 and 33,949 shares (536) (658)
---------- ----------
Total shareholders' equity 105,163 102,198
---------- ----------
$ 195,379 $ 192,128
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
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ELCOR CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited, $ in thousands
except per share data)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
9-30-96 9-30-95
------- -------
<S> <C> <C>
SALES $ 64,536 $ 48,528
--------- --------
COST AND EXPENSES
Cost of sales 50,524 35,856
Selling, general and administrative 7,897 6,752
--------- --------
INCOME FROM OPERATIONS 6,115 5,920
--------- --------
OTHER EXPENSE
Interest expense, net 161 25
--------- --------
INCOME BEFORE INCOME TAXES 5,954 5,895
Provision for income taxes 2,186 2,232
--------- --------
NET INCOME $ 3,768 $ 3,663
========= ========
INCOME PER COMMON AND COMMON EQUIVALENT SHARE $ .43 $ .41
========= ========
DIVIDENDS PER COMMON SHARE $ .07 $ .06
========= ========
AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING 8,793 8,843
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
ELCOR CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, $ in thousands)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
9-30-96 9-30-95
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,768 $ 3,663
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 1,915 775
Deferred income taxes 879 857
Changes in assets and liabilities:
Trade receivables (4,819) 1,237
Inventories 7,269 (126)
Prepaid expenses and other 1,010 1,164
Accounts payable and accrued liabilities 550 573
-------- --------
Net cash provided by operating activities 10,572 8,143
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant & equipment (9,599) (8,066)
Other (39) (14)
-------- --------
Net cash provided by (used for) investing
activities (9,638) (8,080)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term borrowings, net (1,100) (1,200)
Dividends on common stock (614) (524)
Treasury stock transactions and other, net (189) (56)
-------- --------
Net cash provided by (used for) financing
activities (1,903) (1,780)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (969) (1,717)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,744 3,731
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,775 $ 2,014
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
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 1996 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 periods ended September 30, 1996 and 1995, 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 October 31, 1996, the Company increased its unsecured revolving
credit facility from $70 million to $80 million, the term was extended
by one year to October 31, 1999, and certain financial covenants were
adjusted. There were no changes to the interest rate the Company
currently pays for either LIBOR based borrowings or prime rate based
borrowings.
5
<PAGE> 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
During the first quarter ended September 30, 1996, net income increased to
$3,768,000 from $3,663,000 in last year's first quarter. Sales increased 33%
compared to the prior year first quarter. Sales for the first quarter of
fiscal 1997 were significantly higher and net income improved compared to last
year's first quarter, 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. A
significant part of the increased shipments were from the new roofing plant at
Shafter, California. The ability of this new plant to better serve customers
in the Western United States has permitted the Company to expand its sales and
marketing efforts to better serve customers in the Midwestern and Northeastern
United States with products from its other roofing plants. Overall gross
margin, as a percentage of sales, was 21.7% during the quarter ended September
30, 1996 compared to 26.1% during the same prior year quarter. This reduction
in gross margin is primarily attributable to an operating loss of about
$1,300,000 at the new Shafter, California plant during the quarter. Certain
planned changes were being made to the new plant's production line towards the
end of the first quarter which are expected to enhance the plant's overall
performance in subsequent periods.
Selling, general and administrative (S,G&A) expenses increased 17% during the
first quarter of fiscal 1997 compared to the same prior year quarter. However,
S,G&A costs were only 12% of sales in the current year quarter compared to 14%
of sales in the prior year quarter. The Company has established a larger sales
organization to better serve growing market areas. This larger organization
has been able to service the significant increase in sales orders without a
proportionate increase in overall selling costs.
Start-up operations at the Company's new nonwoven fiberglass mat plant at
Ennis, Texas were underway during the first quarter. During the quarter ended
September 30, 1996, about $1,700,000 of deferred preoperating costs at the new
Ennis facility were included in capital expenditures.
The Company's industrial products businesses, which account for less than 10%
of consolidated sales and earnings, also reported improved sales and operating
income during the quarter ended September 30, 1996 as compared to the same
prior year quarter.
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 now constitute about 85% of industry
unit sales, are generally less severely affected by economic downturns than
product demand for new residential construction.
6
<PAGE> 7
FINANCIAL CONDITION
The Company's financial condition at September 30, 1996 was very strong. Total
invested capital was $157,063,000. Long-term debt represented 33% of total
capitalization. At September 30, 1996, $16,100,000 was available under the
Company's $70 million unsecured revolving line of credit. Effective October
31, 1996, the revolving credit facilities were increased to $80 million to
provide additional financial resources to support the Company's growth
strategies.
Cash generated by operations for the three months ended September 30, 1996 was
$10,572,000. Working capital requirements (excluding cash and cash equivalents)
decreased $4,053,000. The current ratio was 2.5 to 1 at September 30, 1996.
During the first quarter ended September 30, 1996, the substantial increase in
sales resulted in a $7,269,000 decrease in inventory, partially offset by a
$4,819,000 increase in trade receivables. 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 $9,638,000 for investing activities in the first quarter of
fiscal 1997. The majority of these investments were for capital expenditures
and related deferred preoperating expenses incurred in connection with the new
nonwoven fiberglass mat plant at the Ennis, Texas facility, which was in
start-up during the quarter ended September 30, 1996, and changes in the
production line at the Shafter, California plant to enhance the plant's overall
performance. Total capital expenditures are expected to be significantly less
in fiscal 1997 than in recent years, which included significant capital
expenditures relating to the construction of the two new major manufacturing
facilities.
The Company utilized $1,903,000 for financing activities in the first quarter
of fiscal 1996, primarily for repayment of long-term debt and dividends on
common stock.
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 September 30, 1996,
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. In September 1996, the Board of
Directors increased the regular quarterly cash dividend by 17% to seven cents
per common share.
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 effect 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 off-site and at its facilities from
time to time. The Company establishes and maintains reserves for such
remediation activities, when appropriate, in accordance with Statement of
Financial 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 operations.
7
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Management believes that cash and cash equivalents, cash flows from operations
and its revolving credit facility should be sufficient during fiscal 1997 and
beyond to fund its currently projected capital expenditure requirements,
working capital needs, dividends, stock repurchases and other cash
requirements.
OUTLOOK
At the present time, we expect that strong demand for our patented Enhanced
High Definition and Raised Profile Prestique shingles will increase shipments
and sales to record levels for fiscal 1997. We continue to believe that
earnings per share during the second and third quarters should be in the
general range of, or possibly lower than, the fiscal 1996 comparable quarters
until the manufacturing output and sales at both new plants rise above the
break-even point. We expect that fourth quarter earnings will benefit from the
seasonal increase in demand for products produced by these two new major
facilities. Our current forecast for earnings per share for fiscal year ending
June 30, 1997 remains in the range of $1.30 to $1.50 per share, up from $1.16
per share in fiscal 1996.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains "forward-looking statements" about the Company's
prospects for the future. Such statements are subject to certain risks and
uncertainties which could cause actual results to differ materially from those
projected. Such risks and uncertainties include, but are not limited to, the
following:
1. The Company's roofing products business is cyclical and is
affected by weather and some of the same economic factors that
affect the housing and home improvement industries generally,
including interest rates, the availability of financing and
general economic conditions. In addition, the asphalt roofing
products manufacturing business is highly competitive.
Actions of competitors, including changes in pricing, or
slowing demand for asphalt roofing products due to general or
industry economic conditions or the amount of inclement
weather could result in decreased demand for the Company's
products, lower prices received or reduced utilization of
plant facilities.
2. In the asphalt roofing products business, the significant raw
materials are ceramic coated granules, asphalt, glass fibers,
resins and mineral filler. Increased costs of raw materials
can result in reduced margins, as can higher trucking and rail
costs. Historically, the Company has been able to pass some
of the higher raw material and transportation costs through to
the customer. Should the company be unable to recover higher
raw material and transportation costs from price increases of
its products, operating results could be lower than projected.
3. The Company has completed a $100 million expansion program
which included a new roofing plant in Shafter, California and
the construction of a new plant at the Company's Ennis, Texas
facility to manufacture nonwoven fiberglass roofing mat and
industrial facer products for the construction
8
<PAGE> 9
industry. As new facilities, their progress in achieving
anticipated operating efficiencies and financial results
is difficult to predict. If such progress is slower than
anticipated, or if demand for products produced at either of
these new plants does not meet current expectations, operating
results could be adversely affected.
4. Certain facilities of the Company's industrial products
subsidiaries must utilize hazardous materials in their
production process. As a result, the Company could incur
costs for remediation activities at its facilities or
off-site, and other related exposures from time to time in
excess of established reserves for such activities.
5. The Company's litigation, including its patent infringement
suits against GAF Building Materials Corporation and certain
affiliates, is subject to inherent and case-specific
uncertainty. The outcome of such litigation depends on
numerous interrelated factors, many of which cannot be
predicted.
Parties are cautioned not to rely on any such forward-looking beliefs or
judgments in making investment decisions.
9
<PAGE> 10
PART II. OTHER INFORMATION
ITEM 1: Legal Proceedings
GAF Patent Litigation
A hearing before the District Court for the Northern District of Texas
to interpret the claims of Elk's design and utility patents is scheduled
for December 9, 1996, with trial in the design patent case scheduled for
April 21, 1997, and trial in the utility patent case yet to be
scheduled.
For further information and background on the GAF Patent Litigation and other
legal proceedings involving the Company, see "Part I, Item 3. Legal
Proceedings" in the Company's Annual Report on Form 10-K for the year ended
June 30, 1996.
ITEM 6. Exhibits and Reports of Form 8-K
(a) Exhibits
Exhibit (4.9): Third Amendment dated October 31, 1996
to Loan Agreement dated September 29, 1993
among Elcor Corporation, NationsBank of
Texas, N.A., as Issuer, Administrative
Lender, and Lender; and Bank of America -
Texas, N.A. and Comerica Bank - Texas as
Lenders.
Exhibit (11): Computation of Income Per Common and
Common Equivalent Share
Exhibit (27): Financial Data Schedule (EDGAR Submission
only)
(b) The Registrant filed a Form 8-K on August 20, 1996 relating to
a press release containing "forward-looking statements" about its prospects for
the future.
10
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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: November 12, 1996 /s/ Richard J. Rosebery
------------------------- -----------------------------------------
Richard J. Rosebery
Executive Vice President,
Chief Administrative & Financial Officer,
and Treasurer
/s/ Leonard R. Harral
-----------------------------------------
Leonard R. Harral
Vice President and Chief
Accounting Officer
11
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
Exhibit (4.9): Third Amendment dated October 31, 1996
to Loan Agreement dated September 29, 1993
among Elcor Corporation, NationsBank of
Texas, N.A., as Issuer, Administrative
Lender, and Lender; and Bank of America -
Texas, N.A. and Comerica Bank - Texas as
Lenders.
Exhibit (11): Computation of Income Per Common and
Common Equivalent Share
Exhibit (27): Financial Data Schedule (EDGAR Submission
only)
12
<PAGE> 1
EXHIBIT 4.9
THIRD AMENDMENT DATED OCTOBER 31, 1996 TO LOAN AGREEMENT DATED SEPTEMBER 19,
1993 AMONG ELCOR CORPORATION, NATIONSBANK OF TEXAS, N.A., AS ISSUER,
ADMINISTRATIVE LENDER, AND LENDER; AND BANK OF AMERICA-TEXAS, N.A. AND COMERICA
BANK - TEXAS AS LENDERS.
<PAGE> 2
EXHIBIT 4.9
THIRD AMENDMENT TO LOAN AGREEMENT
THIS THIRD AMENDMENT TO LOAN AGREEMENT (this "Third Amendment"), dated
as of October 31, 1996, is entered into among ELCOR CORPORATION, a Delaware
corporation ("Company"), the lenders listed on the signature pages hereof
("Lenders"), NATIONSBANK OF TEXAS, N.A., as Issuer (in said capacity,
"Issuer"), and NATIONSBANK OF TEXAS, N.A., as Administrative Lender (in said
capacity, "Administrative Lender").
BACKGROUND
A. Company, the Lenders, Issuer and Administrative Lender are
parties to that certain Loan Agreement, dated as of September 29, 1993, as
amended by that certain First Amendment to Loan Agreement, dated as of October
31, 1994, and that certain Second Amendment to Loan Agreement, dated as of
December 15, 1995 (said Loan Agreement, as amended, the "Loan Agreement"; the
terms defined in the Loan Agreement and not otherwise defined herein shall be
used herein as defined in the Loan Agreement).
B. Company, Lenders, Issuer and Administrative Lender desire to
amend the Loan Agreement to (i) increase the Commitment to $80,000,000, (ii)
extend the Termination Date, and (iii) make certain other amendments thereto.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, Company,
Lenders, Issuer and Administrative Lender covenant and agree as follows:
1. AMENDMENTS TO LOAN AGREEMENT.
(a) The dollar amount of "$70,000,000" set forth in the
Background paragraph of the Credit Agreement is hereby amended to be
"$80,000,000".
(b) The definition of "Applicable Margin" set forth in
Article I of the Loan Agreement is hereby amended to read as follows:
"Applicable Margin" means the following per annum percentages,
applicable in the following situations:
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<TABLE>
<CAPTION>
Prime Rate LIBOR
Applicability Basis Basis
------------- ---------- -----
<S> <C> <C> <C>
(i) If the Fixed Charge Coverage Ratio is less 0.000 1.000
than 1.25 to 1
(ii) If the Fixed Charge Coverage Ratio is greater 0.000 0.625
than or equal to 1.25 to 1 but less than 1.50 to
1
(iii) If the Fixed Charge Coverage Ratio is greater 0.000 0.500
than or equal to 1.50 to 1
</TABLE>
In addition, the per annum percentages set forth above (A) in
all cases for the LIBOR Basis shall be increased by 0.25% if the
Capitalization Ratio is not less than 40% and (B) in the case of
clause (i) above only for the Prime Rate Basis shall be increased by
0.25% if the Capitalization Ratio is not less than 40%. The Applicable
Margin payable by Company on the Advances outstanding hereunder shall
be subject to reduction or increase, as applicable and as set forth in
the table above, on a quarterly basis according to the performance of
Company as tested by the Fixed Charge Coverage Ratio and, where
appropriate, the Capitalization Ratio. Any such increase or reduction
in the Applicable Margin provided for herein shall be effective on the
first calendar day of the month next succeeding the date of receipt by
Administrative Lender of the applicable financial statements. If
financial statements of Company setting forth the Fixed Charge
Coverage Ratio and the Capitalization Ratio are not received by
Administrative Lender by the date required pursuant to Section 5.5
hereof, the Applicable Margin shall be determined as if the Fixed
Charge Coverage Ratio is less than 1.25 to 1 and the Capitalization
Ratio is not less than 40% until such time as such financial
statements are received. For the final quarter of any fiscal year of
Company, Company may provide its unaudited financial statements,
subject only to year-end adjustments, for the purpose of adjusting the
Applicable Margin."
(c) The definition of "Commitment" set forth in Article 1
of the Loan Agreement is hereby amended to read as follows:
"Commitment" means as to any Lender, the amount set forth
opposite such Lender's name under the column titled "Commitment" on
Schedule 7 hereto, as the same may be reduced or terminated pursuant
to Article 2, which at no time shall exceed such Lender's Specified
Percentage of $80,000,000."
(d) The definition of "Termination Date" set forth in
Article 1 of the Loan Agreement is hereby amended to read as follows:
-2-
<PAGE> 4
"Termination Date" means October 31, 1999, or such earlier
date that the Commitment is terminated or such later date that the
Commitment is extended pursuant to Section 2.19 hereof."
(e) Section 5.13 of the Loan Agreement is hereby amended
to read as follows:
"5.13 Capitalization Ratio. Company and its Subsidiaries
will maintain a Capitalization Ratio at the end of each fiscal quarter
of not greater than 45%."
(f) Schedule 1 to the Loan Agreement is hereby amended
and supplemented as set forth on Schedule 1 to this Third Amendment.
(g) Schedule 4 to the Loan Agreement is hereby amended
and supplemented as set forth on Schedule 4 to this Third Amendment.
(h) Schedule 5 to the Loan Agreement is hereby amended
and supplemented as set forth on Schedule 5 to this Third Amendment.
(i) Schedule 7 to the Loan Agreement is hereby amended to
be in the form of Schedule 7 to this Third Amendment.
2. REPRESENTATIONS AND WARRANTIES TRUE: NO EVENT OF DEFAULT. By
its execution and delivery hereof, Company represents and warrants that, as of
the date hereof and after giving effect to the amendments contemplated by the
foregoing Section 1:
(a) the representations and warranties contained in the
Loan Agreement are true and correct on and as of the date hereof as if
made on and as of such date;
(b) no event has occurred and is continuing which
constitutes a Default or an Event of Default;
(c) Company has full power and authority to execute and
deliver this Third Amendment, the $40,000,000 Note payable to the
order of NationsBank in the form of Exhibit A hereto (the "NationsBank
Note"), the $25,000,000 Note payable to the order of Bank of America
in the form of Exhibit B hereto (the "Bank of America Note"), and the
$15,000,000 Note payable to the order of Comerica in the form of
Exhibit C hereto (the "Comerica Note") (the NationsBank Note, the Bank
of America Note and the Comerica Note are collectively referred to
herein as the "Notes"), and this Third Amendment, the Loan Agreement,
as amended hereby, and the Notes constitute the legal, valid and
binding obligations of Company, enforceable in accordance with their
respective terms, except as enforceability may be limited by
applicable debtor relief laws and by general principles of equity
(regardless of whether enforcement is sought in a
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proceeding in equity or at law) and except as rights to indemnity may
be limited by federal or state securities law; and
(d) no authorization, approval, consent, or other action
by, notice to, or filing with, any governmental authority or other
Person (other than the Board of Directors of Company), is required for
the execution, delivery or performance by Company of this Third
Amendment or the Notes or the acknowledgement of this Third Amendment
by each Subsidiary which executed the Guaranty Agreement (a
"Guarantor").
3. CONDITIONS OF EFFECTIVENESS. This Third Amendment shall be
effective as of October 31, 1996, subject to the following:
(a) Administrative Lender shall have received
counterparts of this Third Amendment executed by each Lender and
Issuer;
(b) Administrative Lender shall have received
counterparts of this Third Amendment executed by Company and
acknowledged by each Guarantor;
(c) Each Lender shall have received its respective Note
executed by Company;
(d) Administrative Lender shall have received certified
copies of resolutions of Company authorizing execution, delivery and
performance of this Third Amendment and the Notes; and
(e) Administrative Lender shall have received, in form
and substance satisfactory to Administrative Lender and its counsel,
such other documents, certificates and instruments as Administrative
Lender shall require.
4. GUARANTORS ACKNOWLEDGEMENT. By signing below, each of the
Guarantors (i) acknowledges and consents to the execution, delivery and
performance by Company of this Third Amendment, (ii) agrees that its
obligations in respect of the Guaranty Agreement (A) are not released,
modified, impaired or affected in any manner by this Third Amendment or any of
the provisions contemplated herein, and (B) cover, among other things, the
Commitment as increased by this Third Amendment, and (ii) acknowledges that it
has no claims or offsets against, or defenses or counterclaims to, the Guaranty
Agreement.
5. REFERENCE TO THE LOAN AGREEMENT.
(a) Upon the effectiveness of this Third Amendment, each
reference in the Loan Agreement to "this Agreement", "hereunder", or
words of like import shall mean and be a reference to the Loan
Agreement, as affected and amended by this Third Amendment.
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<PAGE> 6
(b) The Loan Agreement, as amended by this Third
Amendment, and all other Loan Papers shall remain in full force and
effect and are hereby ratified and confined.
6. COSTS, EXPENSES AND TAXES. Company agrees to pay on demand
all costs and expenses of Administrative Lender in connection with the
preparation, reproduction, execution and delivery of this Third Amendment, the
Notes, and the other instruments and documents to be delivered hereunder
(including the reasonable fees and out-of-pocket expenses of counsel for
Administrative Lender with respect thereto and with respect to advising
Administrative Lender as to its rights and responsibilities under the Loan
Agreement, as amended by this Third Amendment).
7. EXECUTION IN COUNTERPARTS. This Third Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
8. GOVERNING LAW: BINDING EFFECT. This Third Amendment shall be
governed by and construed in accordance with the laws of the State of Texas and
shall be binding upon Company, each Lender, Issuer and Administrative Lender
and their respective successors and assigns.
9. HEADINGS. Section headings in this Third Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Third Amendment for any other purpose.
10. ENTIRE AGREEMENT. THE LOAN AGREEMENT, AS AMENDED BY THIS THIRD
AMENDMENT, AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AS TO THE SUBJECT MATTER THEREIN AND HEREIN AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN
THE PARTIES.
***************************************************************************
* *
* REMAINDER OF PAGE LEFT INTENTIONALLY BLANK* *
* *
***************************************************************************
-5-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment as of the date first above written.
ELCOR CORPORATION
By: /s/ RICHARD J. ROSEBERY
----------------------------------------
Richard J. Rosebery, Executive Vice
President, Treasurer, Chief
Administrative and Financial Officer
NATIONSBANK OF TEXAS, N.A.
as Administrative Lender, Lender and Issuer
By: /s/ BIANCA HEMMEN
----------------------------------------
Name: Bianca Hemmen
-----------------------------------
Title: Senior Vice President
----------------------------------
BANK OF AMERICA - TEXAS, N.A.
By: /s/ DONALD P. HELLMAN
----------------------------------------
Name: Donald P. Hellman
-----------------------------------
Title: Vice President
----------------------------------
COMERICA BANK - TEXAS
By: /s/ GARY L. EMERY
----------------------------------------
Name: Gary L. Emery
-----------------------------------
Title: Vice President
----------------------------------
-6-
<PAGE> 8
ELK CORPORATION OF DALLAS
ELK CORPORATION OF TEXAS
ELK CORPORATION OF AMERICA
ELK CORPORATION OF ARKANSAS
ELK CORPORATION OF ALABAMA
CHROMIUM CORPORATION
OEL, LTD.
By: /s/ RICHARD J. ROSEBERY
-------------------------------------
Richard J. Rosebery
Vice President for all
GA INDUSTRIES CORPORATION
M MACHINERY COMPANY,
INCORPORATED
(formerly known as Mosley
Machinery Company, Incorporated)
M SERVICE CORPORATION
(formerly known as Mosley
Service Corporation)
By: /s/ RICHARD J. ROSEBERY
-------------------------------------
Richard J. Rosebery
President for all
ELCOR SERVICE CORPORATION
By: /s/ RICHARD J. ROSEBERY
-------------------------------------
Richard J. Rosebery
Executive Vice President
-7-
<PAGE> 9
EXHIBIT A
PROMISSORY NOTE
$40,000,000.00 Dated: ,1996
--------
FOR VALUE RECEIVED, the undersigned, ELCOR CORPORATION, a Delaware
corporation ("Company"), hereby promises to pay to the order of NATIONSBANK OF
TEXAS, N.A. ("Lender") the principal amount of each Advance made by Lender to
Company pursuant to the Loan Agreement (as hereinafter defined). All Advances
remaining unpaid shall be repaid in full on the Termination Date. Company
promises to pay interest on the unpaid principal balance of each Advance from
the date of such Advance until said principal amount is paid in full, at the
times and at the rate or rates as specified in the Loan Agreement.
Both principal and interest are payable in lawful money of the United
States of America to NationsBank of Texas, N.A., as Administrative Lender, at
901 Main Street, Dallas, Texas 75202, in immediately available funds. Each
Advance made by Lender to Company pursuant to the Loan Agreement and all
payments made on account of principal hereof shall be recorded by Lender and,
prior to any transfer hereof, endorsed on the grid attached hereto which is
part of this Note; provided, however, failure to make any such recordation or
endorsement shall not affect the obligations of Company hereunder or under the
Loan Agreement.
This Note is one of the Notes referred to in, and is entitled to the
benefits of and obligations pertaining to, the Loan Agreement dated as of
September 29, 1993 (said Loan Agreement, as amended, modified or supplemented
from time to time, the "Loan Agreement") among Company, Lender, certain other
Lenders, and NationsBank of Texas, N.A., as Administrative Lender, and this
Note is a substitution for (but is not an extinguishment or novation of any
indebtedness in respect of) that certain Note of Company payable to the order
of Lender dated December 15, 1995, in the principal amount of $40,000,000.00.
The Loan Agreement, among other things, (i) provides for the making of
Advances by Lender to Company from time to time in an aggregate amount not to
exceed at any time outstanding the U.S. dollar amount first above mentioned,
the indebtedness of Company resulting from each such Advance being evidenced by
this Note, and (ii) contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events and also for prepayments on account
of principal hereof prior to the maturity hereof upon the terms and conditions
therein specified. All terms not expressly defined herein shall have the same
definitions as set forth in the Loan Agreement.
ELCOR CORPORATION
By:
---------------------------------------
Richard J. Rosebery
Executive Vice President, Treasurer,
Chief Administrative and Financial Officer
<PAGE> 10
EXHIBIT B
PROMISSORY NOTE
$25,000,000.00 Dated: ,1996
------
FOR VALUE RECEIVED, the undersigned, ELCOR CORPORATION, a Delaware
corporation ("Company"), hereby promises to pay to the order of BANK OF AMERICA
TEXAS, N.A. ("Lender") the principal amount of each Advance made by Lender to
Company pursuant to the Loan Agreement (as hereinafter defined). All Advances
remaining unpaid shall be repaid in full on the Termination Date. Company
promises to pay interest on the unpaid principal balance of each Advance from
the date of such Advance until said principal amount is paid in full, at the
times and at the rate or rates as specified in the Loan Agreement.
Both principal and interest are payable in lawful money of the United
States of America to NationsBank of Texas, N.A., as Administrative Lender, at
901 Main Street, Dallas, Texas 75202, in immediately available funds. Each
Advance made by Lender to Company pursuant to the Loan Agreement and all
payments made on account of principal hereof shall be recorded by Lender and,
prior to any transfer hereof, endorsed on the grid attached hereto which is
part of this Note; provided, however, failure to make any such recordation or
endorsement shall not affect the obligations of Company hereunder or under the
Loan Agreement.
This Note is one of the Notes referred to in, and is entitled to the
benefits of and obligations pertaining to, the Loan Agreement dated as of
September 29, 1993 (said Loan Agreement, as amended, modified or supplemented
from time to time, the "Loan Agreement") among Company, Lender, certain other
Lenders, and NationsBank of Texas, N.A., as Administrative Lender, and this
Note is a substitution for (but is not an extinguishment or novation of any
indebtedness in respect of) that certain Note of Company payable to the order
of Lender dated December 15, 1995 in the principal amount of $20,000,000.00.
The Loan Agreement, among other things, (i) provides for the making of
Advances by Lender to Company from time to time in an aggregate amount not to
exceed at any time outstanding the U.S. dollar amount first above mentioned,
the indebtedness of Company resulting from each such Advance being evidenced by
this Note, and (ii) contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events and also for prepayments on account
of principal hereof prior to the maturity hereof upon the terms and conditions
therein specified. All terms not expressly defined herein shall have the same
definitions as set forth in the Loan Agreement.
ELCOR CORPORATION
By:
------------------------------------------
Richard J. Rosebery
Executive Vice President, Treasurer,
Chief Administrative and Financial Officer
<PAGE> 11
EXHIBIT C
PROMISSORY NOTE
$15,000,000.00 Dated: ,1996
------
FOR VALUE RECEIVED, the undersigned, ELCOR CORPORATION, a Delaware
corporation ("Company"), hereby promises to pay to the order of COMERICA BANK -
TEXAS ("Lender") the principal amount of each Advance made by Lender to Company
pursuant to the Loan Agreement (as hereinafter defined). All Advances remaining
unpaid shall be repaid in full on the Termination Date. Company promises to pay
interest on the unpaid principal balance of each Advance from the date of such
Advance until said principal amount is paid in full, at the times and at the
rate or rates as specified in the Loan Agreement.
Both principal and interest are payable in lawful money of the United
States of America to NationsBank of Texas, N.A., as Administrative Lender, at
901 Main Street, Dallas, Texas 75202, in immediately available funds. Each
Advance made by Lender to Company pursuant to the Loan Agreement and all
payments made on account of principal hereof shall be recorded by Lender and,
prior to any transfer hereof, endorsed on the grid attached hereto which is
part of this Note; provided, however, failure to make any such recordation or
endorsement shall not affect the obligations of Company hereunder or under the
Loan Agreement.
This Note is one of the Notes referred to in, and is entitled to the
benefits of and obligations pertaining to, the Loan Agreement dated as of
September 29, 1993 (said Loan Agreement, as amended, modified or supplemented
from time to time, the "Loan Agreement") among Company, Lender, certain other
Lenders, and NationsBank of Texas, N.A., as Administrative Lender, and this
Note is a substitution for (but is not an extinguishment or novation of any
indebtedness in respect of) that certain Note of Company payable to the order
of Lender dated December 15, 1995 in the principal amount of $10,000,000.00.
The Loan Agreement, among other things, (i) provides for the making of
Advances by Lender to Company from time to time in an aggregate amount not to
exceed at any time outstanding the U.S. dollar amount first above mentioned,
the indebtedness of Company resulting from each such Advance being evidenced by
this Note, and (ii) contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events and also for prepayments on account
of principal hereof prior to the maturity hereof upon the terms and conditions
therein specified. All terms not expressly defined herein shall have the same
definitions as set forth in the Loan Agreement.
ELCOR CORPORATION
By:
------------------------------------------
Richard J. Rosebery
Executive Vice President, Treasurer,
Chief Administrative and Financial Officer
<PAGE> 12
SCHEDULE 1
EXISTING LITIGATION
This schedule is confidential and has been omitted.
<PAGE> 13
SCHEDULE 4
FIXED ASSETS HELD FOR SALE
This schedule is confidential and has been omitted.
<PAGE> 14
SCHEDULE 5
ENVIRONMENTAL MATTERS
This schedule is confidential and has been omitted.
<PAGE> 15
SCHEDULE 7
<TABLE>
<CAPTION>
LENDER COMMITMENT SPECIFIED PERCENTAGE
------ ---------- --------------------
<S> <C> <C>
NationsBank of Texas, N.A. $40,000,000 50.00%
Bank of America - Texas, N.A. $25,000,000 31.25%
Comerica Bank - Texas $15,000,000 18.75%
</TABLE>
<PAGE> 1
EXHIBIT 11
COMPUTATION OF INCOME PER COMMON
AND COMMON EQUIVALENT SHARE
<PAGE> 2
EXHIBIT (11)
Elcor Corporation and Subsidiaries
Computation of Income Per Common and Common Equivalent Share
(In thousands, except per share amounts)
<TABLE>
<S> <C>
1. Three Months Ended September 30, 1996 Three Months Ended
------------------
and September 30, 1995 9-30-96 9-30-95
------------------
Net Income $ 3,768 $ 3,663
======= =======
Shares:
Weighted average common shares
outstanding 8,758 8,723
Adjustments:
(a) Assumed issuance of shares purchased
under incentive stock option plan using
the treasury stock method 35 120
------- -------
Total Common and Common Equivalent Shares 8,793 8,843
======= =======
Income per Common and Common Equivalent Share $ .43 $ .41
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,775
<SECURITIES> 0
<RECEIVABLES> 47,791
<ALLOWANCES> 490
<INVENTORY> 19,479
<CURRENT-ASSETS> 73,192
<PP&E> 172,250
<DEPRECIATION> 54,352
<TOTAL-ASSETS> 195,379
<CURRENT-LIABILITIES> 29,144
<BONDS> 51,900
0
0
<COMMON> 8,802
<OTHER-SE> 96,361
<TOTAL-LIABILITY-AND-EQUITY> 195,379
<SALES> 64,536
<TOTAL-REVENUES> 64,536
<CGS> 50,524
<TOTAL-COSTS> 58,421
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 161
<INCOME-PRETAX> 5,954
<INCOME-TAX> 2,186
<INCOME-CONTINUING> 3,768
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,768
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
</TABLE>
