<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, 2000 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 No.)
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 1, 2000, Registrant had
outstanding 19,373,730 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>
September 30, June 30,
2000 2000
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,146 $ 4,702
Trade receivables, less allowance of $958 and $963 71,435 71,712
Inventories -
Finished goods 32,701 29,249
Work-in-process 360 259
Raw materials 13,949 11,457
------------- -------------
Total inventories 47,010 40,965
------------- -------------
Prepaid expenses and other 2,631 4,312
Deferred income taxes 2,897 2,822
------------- -------------
Total current assets 128,119 124,513
------------- -------------
PROPERTY, PLANT AND EQUIPMENT, AT COST 295,103 279,028
Less - accumulated depreciation (87,113) (83,924)
------------- -------------
Property, plant and equipment, net 207,990 195,104
------------- -------------
OTHER ASSETS 2,901 2,957
------------- -------------
$ 339,010 $ 322,574
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 32,510 $ 36,034
Accrued liabilities 14,885 12,253
------------- -------------
Total current liabilities 47,395 48,287
------------- -------------
LONG-TERM DEBT 105,300 91,300
DEFERRED INCOME TAXES 21,831 21,083
SHAREHOLDERS' EQUITY -
Common stock, $1 par 19,988 19,988
Paid-in-capital 58,253 58,480
Retained earnings 94,609 90,641
------------- -------------
172,850 169,109
Less-Treasury stock (502,146 and 436,395 shares, at cost) (8,366) (7,205)
------------- -------------
Total shareholders' equity 164,484 161,904
------------- -------------
$ 339,010 $ 322,574
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 3
ELCOR CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited, $ in thousands
except per share data)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
2000 1999
---------- ----------
<S> <C> <C>
SALES $ 86,201 $ 95,789
---------- ----------
COST AND EXPENSES
Cost of sales 66,419 69,742
Selling, general and administrative 11,439 9,512
---------- ----------
INCOME FROM OPERATIONS 8,343 16,535
---------- ----------
OTHER EXPENSE
Interest expense, net 505 417
---------- ----------
INCOME BEFORE INCOME TAXES 7,838 16,118
Provision for income taxes 2,894 6,109
---------- ----------
NET INCOME $ 4,944 $ 10,009
========== ==========
NET INCOME PER SHARE-BASIC $ .25 $ .51
========== ==========
NET INCOME PER SHARE-DILUTED $ .25 $ .50
========== ==========
DIVIDENDS PER COMMON SHARE $ .05 $ .05
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
ELCOR CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, $ in thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------
2000 1999
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,944 $ 10,009
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 3,419 2,607
Deferred income taxes 673 190
Changes in assets and liabilities:
Trade receivables 277 4,285
Inventories (6,045) 1,862
Prepaid expenses and other 1,681 1,779
Accounts payable and accrued liabilities (892) 9,702
---------- ----------
Net cash provided by operating activities 4,057 30,434
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (16,298) (12,610)
Other 49 (114)
---------- ----------
Net cash used for investing activities (16,249) (12,724)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term borrowings, net 14,000 (18,800)
Dividends on common stock (975) (977)
Treasury stock transactions and other, net (1,389) 142
---------- ----------
Net cash provided by (used for) financing activities 11,636 (19,635)
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (556) (1,925)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,702 4,186
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,146 $ 2,261
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<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 2000 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 ending September 30,
2000 and 1999, 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 or other interim reporting
period should not necessarily be considered as indicative of results
for a full fiscal year.
2. In accordance with the requirements of FASB SFAS No. 131, the company
is segregated into the following segments: Roofing Products,
Electronics Manufacturing Services and Industrial Products. The
Roofing Products segment consists of the various operating
subsidiaries of Elk Corporation of Dallas (collectively Elk). These
companies manufacture and sell premium laminated fiberglass asphalt
residential and accessory roofing products, together with nonwoven
mats used in manufacturing asphalt roofing products and various
industrial applications.
The Electronics Manufacturing Services segment consists of the various
operating subsidiaries of Cybershield, Inc. (collectively
Cybershield). These companies are engaged in the shielding of plastic
electronics enclosures by the use of electroless metallic chemicals,
vacuum metalization, robotic spray metallic paints and conductive
dispense gaskets, application of pad print and/or decorative paint
finishes, installation of antenna components, light tubes, battery
connections, inserts, subassembly operations and other value added
services for the telecommunications, computer and electronic equipment
industries. Due to the increasing materiality of the Electronics
Manufacturing Services business to the company, its operations have
been segregated into a separate segment as of June 30, 2000. These
operations were previously included in the Industrial Products
segment.
The Industrial Products segment is comprised of: (1) surface finishing
of original equipment and remanufactured reciprocating diesel engine
components used in the railroad and marine transportation industries;
and (2) technology licensing and consulting services for the natural
gas processing industry.
4
<PAGE> 6
Financial information by company segment is summarized as follows:
<TABLE>
<CAPTION>
(In thousands)
Three Months Ended
September 30,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
SALES
Roofing products $ 75,218 $ 82,939
Electronics manufacturing services 8,389 9,144
Industrial products 2,564 3,662
Corporate and eliminations 30 44
------------ ------------
$ 86,201 $ 95,789
============ ============
OPERATING PROFIT
Roofing products $ 10,999 $ 16,277
Electronics manufacturing services 697 1,360
Industrial products (1,245) 169
Corporate and other (2,108) (1,271)
------------ ------------
8,343 16,535
Interest expense, net (505) (417)
------------ ------------
Income before income taxes $ 7,838 $ 16,118
============ ============
IDENTIFIABLE ASSETS
Roofing products $ 278,230 $ 207,728
Electronics manufacturing services 30,437 23,735
Industrial products 8,666 6,972
Corporate 21,677 14,175
------------ ------------
$ 339,010 $ 252,610
============ ============
DEPRECIATION AND AMORTIZATION
Roofing products $ 2,193 $ 2,101
Electronics manufacturing services 460 377
Industrial products 85 91
Corporate 681 38
------------ ------------
$ 3,419 $ 2,607
============ ============
CAPITAL EXPENDITURES
Roofing products $ 13,742 $ 9,242
Electronics manufacturing services 2,230 1,903
Industrial products 252 20
Corporate 74 1,445
------------ ------------
$ 16,298 $ 12,610
============ ============
</TABLE>
5
<PAGE> 7
3. Basic earnings per share is computed based on the average number of
common shares outstanding. Diluted earnings per share includes
outstanding stock options. The following table sets forth the
computation of basic and diluted earnings per share:
<TABLE>
<CAPTION>
(In thousands)
Three Months Ended
September 30,
---------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net income $ 4,944 $ 10,009
============ ============
Denominator for basic earnings
per share - weighted average
shares outstanding 19,524 19,528
Effect of dilutive securities:
Employee stock options 231 454
------------ ------------
Denominator for dilutive earnings
per share - adjusted weighted
average shares and assumed
issuance of shares purchased
under incentive stock option plan
using the treasury stock method 19,755 19,982
============ ============
Basic earnings per share $ .25 $ .51
============ ============
Diluted earnings per share $ .25 $ .50
============ ============
</TABLE>
6
<PAGE> 8
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
During the three-month period ended September 30, 2000, net income
decreased 51% to $4,944,000 compared to $10,009,000 in the same prior year
period. Sales decreased 10% to $86,201,000 in the first three months of fiscal
2001 compared to $95,789,000 in the first three months of fiscal 2000.
Decreased sales and income were reported in each of the company's three
business segments.
Sales for the Roofing Products segment decreased 9% to $75,218,000 for the
three months ended September 30, 2000 compared to $82,939,000 in the same prior
year quarter. The decrease in sales reflected a decline in sales of both
laminated asphalt shingles and nonwoven fiberglass roofing mat sold to other
roofing manufacturers. Shipments for laminated asphalt shingles remained strong
in the Southwestern United States, but shipments in many other regions,
particularly the Western United States were lower in the first quarter of
fiscal 2001 compared to the same quarter last year. Currently, the company
believes that the overall supply of laminated shingles exceeds demand because
some asphalt shingle manufacturers may have increased their production of
laminated shingles to compensate for lower demand for commodity shingles.
Operating income for the Roofing Products segment decreased 32% to $10,999,000
for the three months ended September 30, 2000 compared to $16,277,000 in the
prior year quarter. The decrease in operating income compared to the prior year
is primarily the result of the decrease in shipments of premium laminated
fiberglass shingles and nonwoven fiberglass mats, combined with significantly
higher costs for raw materials and higher expenses relating to the start-up of
new facilities and products. The price of asphalt, which accounts for about 24%
of cost of goods sold for laminated asphalt shingles, increased about 50% for
the first quarter of fiscal 2001 compared to the same quarter last year.
Laminated shingles average selling prices were 2.9% higher in the three months
ended September 30, 2000 compared to the same prior year quarter, but higher
selling prices could only partially offset the much higher raw material costs.
The company expects market conditions to remain difficult for most of fiscal
2001 due to the current excess in supply of laminated shingles over anticipated
demand, higher raw materials prices and stiff competition that is keeping
pressure on selling prices.
Sales for the Electronics Manufacturing Services segment decreased 8% to
$8,389,000 in the first quarter of fiscal 2001 compared to $9,144,000 in the
same prior year quarter. Lower sales were primarily the result of reduced
demand for mature digital cell phone models served by Cybershield as new models
are being introduced to the market. Operating income decreased 49% to $697,000
in the three-month period ended September 30, 2000 from $1,360,000 in the same
three-month period last year. Decreased operating income is primarily
attributable to reduced sales and higher costs during initial production
ramp-ups on six new digital wireless handset products for three of North
America's four leading digital wireless handset manufacturers. Sales and
operating profit for the Electronics Manufacturing Services segment are
expected to increase as fiscal 2001 progresses due to escalating production
volumes of these new products.
Sales for the Industrial Products segment decreased 30% in the three-month
period ending September 30, 2000 to $2,564,000 from $3,662,000 in the same
prior year quarter. A $1,245,000 operating loss was reported in the current
year quarter compared to a $169,000 operating profit in the prior year quarter.
Most of the operating loss occurred in the month of July 2000 and was the
result of the consolidation of manufacturing operations and initial production
of products new to Chromium Corporation's Cleveland, Ohio plant. Chromium
generated a small operating profit for the months of August and September 2000,
and the outlook appears good for substantial improvement as fiscal 2001
progresses. Ortloff Engineers also experienced lower operating results for the
first quarter; however, its
7
<PAGE> 9
outlook appears bright for awards of significant projects for licenses of
Elcor's leading edge patented cryogenic gas processing technology as fiscal
year 2001 progresses.
Overall selling, general and administrative costs (SG&A) in the
three-month period ending September 30, 2000 were significantly higher than in
the same period in the prior fiscal year. Increased costs compared to the prior
year period included higher sales and marketing costs in the Roofing Products
segment, severance related costs within the Industrial Products segment and
higher depreciation at corporate relating to the new enterprise resource
system.
Interest expense in the first quarter of fiscal 2001 was $505,000 compared
to $417,000 in the same prior year period. The company capitalized $1,248,000
of interest in the current year quarter compared to $275,000 in the prior year
quarter. Capitalized interest expense in both years related to the construction
of the new Myerstown, Pennsylvania shingle plant and other major projects.
FINANCIAL CONDITION
During the first three months of fiscal 2001, the company generated cash
flows of $4,057,000 despite a $5,054,000 increase in working capital (excluding
cash and cash equivalents). The primary increase in working capital related to
higher inventories of premium laminated fiberglass shingles, roofing mats and
advance purchases of certain raw materials. Planned production levels at the
Shafter, California plant were reduced in the latter part of the quarter ended
September 30, 2000 to reflect current economic conditions in the roofing
materials industry and further adjustments in planned production of laminated
shingles and roofing mats may occur during the winter months.
Trade receivables were $277,000 higher at September 30, 2000 compared to
June 30, 2000 as sales for the last two months of the quarter ended September
30, 2000 exceeded sales for the last two months of fiscal 2000 (the periods to
which most outstanding receivables apply). All deferred receivables applicable
to promotional programs to certain customers outstanding at the end of fiscal
2000 were collected in accordance with their terms in the first quarter of
fiscal 2001.
The current ratio at September 30, 2000 was 2.7:1 compared to 2.6:1 at the
end of fiscal 2000. 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 $16,249,000 for net investing activities in the first
three months of fiscal 2001. Most expenditures were for additions to property,
plant and equipment. About $12,500,000 of capital expenditures in the first
three months of fiscal 2001 were for construction costs relating to the new
Myerstown, Pennsylvania premium laminated fiberglass asphalt shingle plant.
This new facility is nearing completion with limited manufacturing operations
scheduled to begin in the December 2000 quarter. The Myerstown plant is
expected to increase the company's overall laminated shingle capacity by about
38%. The company plans to continue its significant expansion plan over the next
several years based on growth in market demand. Expansion plans include
completion of its fourth roofing plant currently under construction, evaluation
of the need for a fifth roofing plant in two to three years, expanding capacity
and improving productivity at existing plants, installing production lines for
new products, and increasing capacity for Cybershield's digital wireless
cellular phone business, including international expansion.
8
<PAGE> 10
Cash flows from financing activities were $11,636,000 during the first
quarter of fiscal 2001, primarily resulting from a $14,000,000 increase in
long-term debt. Long-term debt represented 39% of the $269,784,000 of invested
capital (long-term debt plus shareholders' equity) at September 30, 2000.
In September 1998, the company's Board of Directors authorized the
purchase of up to $10,000,000 of common shares from time to time on the open
market to be used for general corporate purposes. On August 28, 2000, the Board
of Director authorized the repurchase of up to an additional $10,000,000 of
common stock. As of September 30, 2000, 307,990 shares with cumulative cost of
$5,372,000 had been repurchased under these authorizations.
The company anticipates increasing its revolving credit facility from
$125,000,000 to $150,000,000 - $175,000,000 to support its capital expansion
program. Management believes that current cash and cash equivalents, projected
cash flows from operations, combined with an increased unsecured revolving
credit facility should be sufficient during fiscal 2001 and beyond to fund its
expansion plans, working capital needs, dividends, stock repurchases and other
cash requirements.
The company's operations are subject to extensive federal, state and local
laws and regulations relating to environmental matters. Although the company
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
result 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 and electronics manufacturing services operations utilize hazardous
materials in their production processes. 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. Current reserves established for known or probable
remediation activities are not material to the company's financial position or
results of operations.
FORWARD-LOOKING STATEMENTS
In an effort to give investors a well-rounded view of the company's
current condition and future opportunities, management's discussion and
analysis and the results of operations and financial condition and other
sections of this Form 10-Q contain "forward-looking statements" about its
prospects for the future. 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 "outlook," "believe," "estimate," "plan," "project," "expect,"
"anticipate," "predict," "could," "should," "may," or similar words that convey
the uncertainty of future events or outcomes. These statements are based on
judgments the company believes are reasonable; however, the company's actual
results could differ materially from those discussed here. Such risks and
uncertainties include, but are not limited to, the following:
1. The company's roofing products business is substantially
non-cyclical, but can be affected by weather, 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. Further, changes in
building codes and other standards from time to time can
cause changes in demand, or increases in costs that may not
be passed through to customers.
9
<PAGE> 11
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/or transportation costs from
price increases of its products, operating results could be
adversely affected and/or lower than projected.
3. The company plans to continue its significant expansion plan
over the next several years, including the construction of
new facilities. Progress in achieving anticipated operating
efficiencies and financial results is difficult to predict
for new plant facilities. If such progress is slower than
anticipated, if substantial cost overruns occur in building
new plants, or if demand for products produced at new plants
does not meet current expectations, operating results could
be adversely affected.
4. Certain facilities of the company's electronics manufacturing
services and 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 Elk's defense of
purported class action lawsuits, is subject to inherent and
case-specific uncertainty. The outcome of such litigation
depends on numerous interrelated factors, many of which
cannot be predicted.
6. Although the company currently anticipates that most of its
needs for new capital in the near future will be met with
internally generated funds or borrowings under its available
credit facilities, significant increases in interest rates
could substantially affect its borrowing costs under its
existing loan facility, or its cost of alternative sources of
capital.
7. Each of the company's businesses, especially Cybershield's
shielding business, is subject to the risks of technological
changes that could affect the demand for or the relative cost
of the company's products and services, or the method and
profitability of the method of distribution or delivery of
such products and services. In addition, the company's
businesses each could suffer significant setbacks in revenues
and operating income if it lost one or more of its largest
customers, or if its customers' plans and/or markets should
change significantly.
8. Although the company insures itself against physical loss to
its manufacturing facilities, including business interruption
losses, natural or other disasters and accidents, including
but not limited to fire, earthquake, damaging winds and
explosions, operating results could be adversely affected if
any of its manufacturing facilities became inoperable for an
extended period of time due to such events.
9. Each of the company's businesses is actively involved in the
development of new products, processes and services which are
expected to contribute to the company's ongoing long-term
growth and earnings. If such development activities are not
10
<PAGE> 12
successful, or the company cannot provide the requisite
financial and other resources to successfully commercialize
such developments, the growth of future sales and earnings
may be adversely affected.
Parties are cautioned not to rely on any such forward-looking beliefs
or judgments in making investment decisions.
11
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 6: Exhibits and Reports of Form 8-K
(a) Exhibit:
Exhibit (27): Financial Data Schedule (EDGAR submission
only).
(b) The registrant filed one report on Form 8-K during the
quarter ended September 30, 2000. The registrant filed a Form
8-K on August 15, 2000 relating to a press release containing
"forward-looking statements" about its prospects for the
future.
12
<PAGE> 14
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 13, 2000 /s/ Richard J. Rosebery
---------------------------------
Richard J. Rosebery
Vice Chairman, Chief Financial &
Administrative Officer
/s/ Leonard R. Harral
---------------------------------
Leonard R. Harral
Vice President and Chief
Accounting Officer
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
