ELKCORP - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED JUNE 30, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-5341

ELKCORP
(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.)
14911 QUORUM DRIVE,
SUITE 600,
DALLAS, TEXAS 75254-1491
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (972) 851-0500

Securities registered pursuant to Section 12(b) of the Act:

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 [ ]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

The aggregate market value of common stock held by nonaffiliates as of
December 31, 2002 (the last business day of the Registrant's most recently
completed second quarter) was $322,617,393. This amount is based on the closing
price of the Registrant's Common Stock on the New York Stock Exchange on
December 31, 2002. Shares of stock held by directors and officers of the
Registrant as well as shares allocated to such persons under the Employee Stock
Ownership Plan of the Registrant were not included in the above computation;
however, the Registrant has made no determination that such entities are
"Affiliates" within the meaning of Rule 405 under the Securities Act of 1933, as
amended.

As of the close of business on September 2, 2003, the Registrant had
19,580,778 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the Registrant's definitive proxy statement for the
annual meeting of stockholders to be held on October 28, 2003, are incorporated
by reference into certain Items of Part III hereof. Except for those portions
specifically incorporated herein by reference, such document shall not be deemed
to be filed with the Securities and Exchange Commission as part of this report.
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ELKCORP AND SUBSIDIARIES

FOR THE YEAR ENDED JUNE 30, 2003

INDEX

Page
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PART I.

Item 1. Business ............................................................................... 1
Item 2. Properties ............................................................................. 10
Item 3. Legal Proceedings ...................................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders .................................... 11
Item 4A. Executive Officers of the Registrant ................................................... 12

PART II.

Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters ............... 14
Item 6. Selected Financial Data ................................................................ 15
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations .. 16
Item 7A. Quantitative and Qualitative Disclosures about Market Risk ............................. 30
Item 8. Financial Statements and Supplemental Data ............................................. 31
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ... 60
Item 9A. Controls and Procedures ................................................................ 61

PART III.

Item 10. Directors and Executive Officers of the Company ........................................ 62
Item 11. Executive Compensation ................................................................. 62
Item 12. Security Ownership of Certain Beneficial Owners and Management and related
Stockholder Matters .................................................................... 62
Item 13. Certain Relationships and Related Transactions ......................................... 62
Item 14. Principal Accountant Fees and Services ................................................. 62

PART IV.

Item 15. Exhibits, Financial Statement Schedule, and Reports on Form 8-K ........................ 63

Signatures ......................................................................................... 67

PART I

ITEM 1. BUSINESS

Effective September 1, 2002, the registrant changed its name from Elcor
Corporation to ElkCorp (the company) to better identify itself with the Elk
brand name. ElkCorp, incorporated in 1965 as a Delaware corporation, is a
publicly held corporation headquartered in Dallas, Texas. Shares of the
company's common stock are traded on the New York Stock Exchange with the ticker
symbol - ELK. Segment information for fiscal 2002 and 2001 has been restated to
conform to the fiscal 2003 presentation.

LINES OF BUSINESS

BUILDING PRODUCTS

The company, through Elk Premium Building Products, Inc. and its
subsidiaries (collectively Elk), is engaged in the manufacture and sale of
premium laminated fiberglass asphalt shingles. Elk also manufactures and sells
coated and non-coated nonwoven fabrics used in asphalt shingles and other
applications in the building and construction, filtration, floor coverings and
other industries. Nonwoven fiberglass fabrics are used as a substrate for about
95% of asphalt shingles. Beginning with an October 2002 business acquisition,
Elk began offering nontoxic wood composite decking, marine dock and fencing
products. The Building Products segment accounted for 92%, 91% and 89% of
consolidated sales in fiscal 2003, 2002 and 2001, respectively.

Elk's premium laminated fiberglass asphalt shingle manufacturing plants
are located in (1) Tuscaloosa, Alabama, (2) Ennis, Texas, (3) Shafter,
California and (4) Myerstown, Pennsylvania.

In early fiscal 2003, the company began construction of a second roofing
plant at its Tuscaloosa, Alabama facility and to install certain infrastructure
and material handling improvements designed to enhance the efficiency of the
overall Tuscaloosa facility. The construction is expected to be completed in the
spring of fiscal 2004 at a cost of approximately $73,000,000, and will increase
company-wide capacity by approximately 25%. In addition, the company made
significant productivity enhancements at certain of its other roofing plants in
fiscal 2003.

The major products manufactured at Elk's roofing plants are premium
laminated fiberglass asphalt shingles. Premium roofing products have either a
wood-shake or slate-like look. Elk's shingle product line includes: the
Prestique(R) Gallery Collection(TM), Prestique Plus High Definition(R),
Prestique I High Definition, Prestique High Definition, Prestique Raised
Profile(R), Capstone(R), Domain(R) Winslow(TM), Domain Ashford(TM) High
Definition, and Prestique Grande High Definition.

The following table summarizes limited product warranty and limited wind
warranty for the first five years for each product. Special high-wind
application techniques are required for limited wind warranties of up to 90
miles per hour (mph) and higher.

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Product Limited Warranty Limited Wind Warranty
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Domain Winslow 50 years up to 110 mph
Domain Ashford High Definition 50 years up to 110 mph
Prestique Gallery Collection 50 years up to 110 mph
Prestique Plus High Definition 50 years up to 110 mph
Capstone 40 years up to 110 mph
Prestique Grande High Definition 40 years 90 mph
Prestique I High Definition 40 years 90 mph
Prestique High Definition 30 years 80 mph
Raised Profile 30 years 70 mph

Elk also manufactures starter-strip products, Seal-a-Ridge(R), Z(R) Ridge,
RidgeCrest(TM), Elk Highpoint(TM) hip and ridge products, a built-in
Stainguard(R) treatment in some areas of the country, roof accessory paint for
vents flashings and other accessories.

Elk's roofing products are sold by employee sales personnel primarily to
roofing wholesale distributors, with delivery being made by contract carrier or
by customer vehicles from the manufacturing plants or warehouses. Elk's products
are distributed nationwide. Premium laminated asphalt shingles represent Elk's
target market. Over the last five calendar years, the laminated asphalt shingle
segment has grown at a compound annual growth rate of 12.7%. Industry shipments
of laminated asphalt shingles are expected to continue to grow 7% to 10%
annually. Over 80% of all asphalt shingles are used in reroofing and remodeling
and less than 20% are used in new construction. On average, steep-sloped roofs
are replaced every 18 - 19 years. Approximately 89% of roof replacements are
nondiscretionary and result from roof deterioration, age, leaks, or weather
damage. Appearance upgrades account for the remaining 11% of roof replacements.
The ten largest Building Products customers typically account for approximately
40% to 50% of annual consolidated sales. One customer, ABC Supply Co., Inc., the
largest roofing wholesale distributor in the United States, accounted for 17% of
the company's consolidated sales in fiscal 2003, 17% of consolidated sales in
fiscal 2002, and 20% of consolidated sales in fiscal 2001.

Elk's sales personnel devote considerable time and effort to the education
of roofing installation contractors regarding the superior appearance, quality
and ease of application of Elk's roofing products. Elk believes that its efforts
to develop brand loyalty among roofing installation contractors is an important
marketing activity since the product recommendations of roofing installation
contractors often have a significant influence upon the roofing product brand
selections of homeowners. Elk has instituted a Peak Performance Contractor
Program(TM) to reward top performing contractors for their brand loyalty and
quality of service.

Elk operates two nonwoven fabric (or mat) lines that run in parallel at
its Ennis, Texas facility. Elk manufactures coated and non-coated nonwoven
fabrics formed from fiberglass, polyester, cellulose and blended base fibers.
Non-coated nonwoven fabrics form the core substrate of most residential asphalt
shingles and commercial roofing membranes. Nonwoven fiberglass fabrics provide
strength and fire-resistance to these products. Coated nonwoven fabrics have
been developed by Elk for use in various building product applications,
including roofing underlayment products, facer products and radiant barriers.
Many of the company's coated nonwoven products utilize Elk's proprietary
Versashield(R) fire barrier coating.

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During fiscal 2003, over 93% of nonwoven fabrics produced by the company
were used in the manufacture of residential and commercial roofing and accessory
products, and over 65% of nonwoven fabrics produced by the company were consumed
internally in the manufacture of the company's asphalt shingle and accessory
roofing products. Approximately 7% of nonwoven fabrics produced by the company
were used for other direct applications in building and construction,
filtration, floor coverings and other industries. The company conducts ongoing
research and development activities targeted at expanding the market for its
nonwoven manufacturing capability.

Elk's nonwoven fiberglass roofing mat facilities have the capacity to
supply all of its internal fiberglass roofing mat needs. However, certain Elk
roofing plants may be supplied nonwoven fiberglass roofing mats under buy/sell
agreements of similar, but distinctly different, products with other
manufacturers. Such agreements benefit each party by reducing freight costs to
the manufacturing plants. Nonwoven fabrics are sold by Elk sales personnel and
shipped by contract carrier to its other roofing plants and to its customers'
locations.

On October 16, 2002, the company, through a newly formed, wholly owned
subsidiary, purchased substantially all of the assets of a start-up stage
manufacturer of advanced composite building products. As a result of this
acquisition, the company now manufactures nontoxic wood composite decking,
marine dock and fencing products engineered to yield superior strength,
longevity and dimensional stability. The company is also pursuing the
development of new high-end non-asphalt roofing products. Composite wood
products are sold under the CrossTimbers(TM) name and marketed as an
alternative to treated wood. Composite building products are manufactured in
Lenexa, Kansas, sold by Elk sales personnel, and shipped by contract carrier.

ENGINEERING, TECHNOLOGIES

A unit of the company, OEL, LTD, d/b/a Ortloff Engineers, LTD (Ortloff),
is engaged in licensing proprietary technologies and providing related
engineering services to the natural gas processing industries, with particular
emphasis on the natural gas liquids (NGL) recovery, sulfur recovery, and
liquefied natural gas (LNG) segments. Ortloff's proprietary technologies were
used in a very significant number of the turbo expander plant projects. Ortloff
licenses technology covered by and related to patents owned by the company for
use in new or redesigned natural gas and refinery gas processing facilities, and
utilizes technology licensed from others and its own expertise in the
performance of consulting and engineering assignments. Moreover, Ortloff offers
significant expertise and other nonpatented technology associated with its
processes that are difficult for customers to obtain on a cost effective basis
from others. Ortloff has been successful in expanding its markets into several
parts of the world beyond the Americas where natural gas deposits are being
produced and processed to generate products for sale in the world energy
markets, and has entered into a joint marketing agreement with UOP and a global
license agreement with ExxonMobil to further leverage Ortloff's worldwide
coverage. In fiscal 2003, Ortloff initiated the first stages of a potential
joint venture in China to allow further international exposure to its technology
in key Asian markets. Engineering, Technologies accounted for 2%, 1% and 0% of
consolidated sales in fiscal 2003, 2002, and 2001, respectively.

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Patent license fees are calculated by standard formulas that take into
account both specific project capacity criteria and market conditions, adjusted
for special conditions that exist in a project. Engineering consulting
assignments are performed under consulting services agreements at negotiated
rates.

OTHER, TECHNOLOGIES

Other, Technologies consists of the company's other operations. These
dissimilar operations are combined as none individually meet the materiality
criteria for separate segment reporting. The businesses aggregated together as
Other, Technologies accounted for 6%, 8% and 11% of consolidated sales in fiscal
2003, 2002 and 2001, respectively. The operations included as Other,
Technologies are: (1) the operating subsidiaries of Cybershield, Inc.
(collectively Cybershield), which apply precise conductive metal coatings to
plastic components utilized in electronics enclosures to control the
electromagnetic and radio frequency emissions of such devices and to create
circuitry and antennae for cellular phones, consumer electronics, and other
electronic products; (2) Chromium Corporation (Chromium), which is a leading
provider of hard chrome and other surface finishes designed to extend the life
of steel machinery components operating in abrasive environments; and (3) Elk
Technologies, Inc., a start-up business that develops and markets fabrics
featuring VersaShield(R) fire retardant coated fabrics designed for use outside
of traditional building products applications, including home furnishings and
other consumer products.

Cybershield is engaged in shielding plastic enclosures from
electromagnetic and radio frequency interference. Products include EMI/RFI
shielding, conductive gaskets, decorative paints, metal coatings and EXACT(TM)
metal patterning. Cybershield's markets include digital cellular phones, PDA's,
telecommunications and consumer electronics equipment, bar coding, computer and
computer peripherals, aerospace, automotive, military and medical equipment.
Sales are generated by a network of independent manufacturers' representatives,
augmented by employee sales personnel, with delivery being made primarily by
contract carrier. Cybershield has also formed marketing partnerships with
certain key supply chain partners. The company believes that these strategic
moves will serve to diversify Cybershield's revenue sources.

Cybershield maintains a global licensing arrangement to utilize a
proprietary process (EXACT) to metalize complex patterns of electroless
conductive metals with great precision on three-dimensional plastic parts.
Management believes this technology has potential applications in a variety of
electronic devices that have not historically utilized Cybershield's services.

Chromium Corporation is a leader in plating proprietary finishes for use
in remanufacturing large diesel engine cylinder liners, pistons and valves for
the railroad and marine industries. Chromium has also introduced wear plate
products utilizing its proprietary CRODON(R) hard chrome finish. These products
are designed to extend the service life of steel machinery components operating
in abrasive environments for a number of industries, including roofing
manufacturing, mining and public utility industries.

Elk Technologies, Inc.'s current areas of emphasis include fire retardant
fabrics for mattresses, upholstered furniture, curtains and bed clothing. While
these activities have not produced significant commercial sales to date,
management believes that potentially significant

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demand for products utilizing this technology could result from trends toward
more stringent flammability safety laws and regulations for mattresses and
upholstered furniture.

INFORMATION AS TO INDUSTRY SEGMENTS

For financial information by company segments, see the table on page 55 of
this Annual Report on Form 10-K.

COMPETITIVE CONDITIONS

BUILDING PRODUCTS

Even though the asphalt building products manufacturing business is highly
competitive, the company believes that Elk is a leading manufacturer of premium
laminated fiberglass asphalt shingles and nonwoven fabrics. Elk has been able to
compete successfully with its competitors, some of which are larger in size and
have greater financial resources. Elk's target market for asphalt shingles sales
is the premium laminated segment. The company is the only major roofing
manufacturer that entirely focuses on this segment of the sloped roof market.
Accordingly, the company believes this strategy provides it with a competitive
advantage in developing and maintaining manufacturing efficiencies. The company
believes that many of its competitors have elective manufacturing capacity,
allowing them to manufacture either commodity shingles or premium laminated
shingles. Such elective capacity can affect the supply/demand balance in the
premium laminated sector, which can influence the prices Elk charges its
customers.

In its nonwoven fabrics business, Elk successfully competes with other
manufacturers of nonwoven fabrics, some of which are larger in size and have
greater financial resources. Elk believes that the quality and properties of its
nonwoven fabrics make it a desirable supplier of nonwoven products to other
manufacturers. In fiscal 2003, approximately 81% of Elk's fiscal 2003 external
shipments of nonwoven fabrics were made to other manufacturers of asphalt
shingles and commercial roofing membranes. Many of these customers purchased
nonwoven fabrics from Elk in order to supplement their own internal nonwoven
fabrics production capacity. As a result, changing business conditions may
result in a proportionately larger change in Elk's external nonwoven fabrics
shipments than the proportionate change in overall market demand. Some of Elk's
external nonwoven fabrics shipments result from mutually advantageous
cross-supply arrangements that reduce the transportation costs of each party.
These arrangements are generally not affected by changing market conditions.

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The company believes that industry-wide sales of composite wood products
account for approximately 7% of the estimated potential market for composite
wood used in building and construction applications. It is anticipated that the
high growth potential of this emerging market may attract numerous competitors.
Competitors include companies focusing on traditional wood products and
companies offering wood alternative products. Some of these competitors are
larger in size and have greater financial resources than the company, but the
market currently is generally fragmented without dominant competitors. The
company believes that its established building products distribution channels
will enhance its ability to compete successfully in this market.

There are a number of major national and regional manufacturers marketing
their products in a portion or all of the market areas served by the company's
plants. The company competes primarily on the basis of product quality, design
and service. Typically, the company is able to sell its building products at
higher prices than many of its competitors receive for similar type products.

ENGINEERING, TECHNOLOGIES

The company believes that it holds significant state-of-the-art patents
covering some of the most competitive processes for the cryogenic processing of
refinery and natural gas streams to remove the higher value components, such as
ethane and propane, which are primarily used as petrochemical feedstocks. In
addition, Ortloff has developed technologies and filed applications for patents
covering processes for the production of liquefied natural gas (LNG) which it
believes will provide considerable efficiency improvements in and cost savings
for the design and construction of those facilities. The company further
believes that Ortloff has widely recognized expertise in the design and
operation of facilities for natural gas and refinery gas processing and sulfur
recovery. Ortloff competes with several larger international engineering firms
with greater financial and geographic resources and manpower. It has entered
into cooperative marketing and global licensing agreements with larger companies
to better compete in international projects.

OTHER, TECHNOLOGIES

Prior to fiscal 2003, Cybershield was principally a North American
provider of shielding solutions to the digital wireless telecommunications
industry, serving both the handset and infrastructure segments of the industry.
In recent years most worldwide cellular phone production has shifted to Asia
where the company has no production facilities. During fiscal 2003, Cybershield
implemented strategies to diversify its customer base among a wider spectrum of
electronic device manufacturers serving the cellular, consumer, military,
automotive, medical equipment, aerospace and other industries. Introduction of
its proprietary EXACT process will be a critical factor in Cybershield's ability
to compete in cellular and other markets. The company competes primarily on the
basis of the breadth and quality of its product offering, design and service.
Cybershield has several competitors, some of which are larger in size and have
greater financial resources, serving specific portions of Cybershield's markets.

The company believes that Chromium is a leading remanufacturer of diesel
engine cylinder liners and pistons for the railroad and marine transportation
industries and is the primary supplier of hard chrome plated finishes for
original equipment diesel engine cylinder liners to all of the major domestic
locomotive manufacturers. The company believes it has smaller competitors in the
locomotive diesel engine cylinder liner market, but competes with larger,

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better capitalized manufacturers in certain markets. Chromium has achieved a
leading position in remanufacturing markets through competition on the basis of
product performance, quality, service and price. In addition, technical
innovations that enhance quality and performance are also increasing the
value-added content per unit produced.

BACKLOG

Backlog is not significant, nor is it material, in the company's
operations.

RAW MATERIALS

BUILDING PRODUCTS

In the asphalt building products manufacturing businesses, the significant
raw materials are ceramic coated granules, asphalt, glass fibers, resins and
mineral filler. All of these materials are presently available from several
sources and are in adequate supply. However, temporary shortages or disruption
in supply of raw materials do result from time to time for a variety of causes.
Historically, the company has been able to pass some of the higher raw material
and transportation costs through to the customer. In the wood composites
business, the significant raw materials are polypropylene and wood particles.
These materials are presently available from several sources and are in adequate
supply.

ENGINEERING, TECHNOLOGIES

No raw materials are utilized in the company's engineering consulting and
technology licensing business.

OTHER, TECHNOLOGIES

In Cybershield's shielding business, copper, nickel, paint and gasketing
materials are the significant raw materials. These materials are presently
available from several sources and in adequate supply.

In Chromium's business of hard chrome plating and remanufacturing diesel
engine cylinder liners, chromic acid is a significant raw material and is
presently available from a number of domestic suppliers. The company believes
these domestic suppliers obtain the ore for manufacturing chromic acid
principally from sources outside the United States, some of which may be subject
to political uncertainty. The company has been advised by its suppliers that
they maintain substantial inventories of chromic acid in order to minimize the
potential effects of foreign interruption in ore supply.

PATENTS, LICENSES, FRANCHISES AND CONCESSIONS

The company or its subsidiaries hold certain patents, particularly in its
engineering consulting and licensing business, which are significant to its
operations. The company believes that it holds significant state-of-the-art
patents covering some of the most competitive processes for the cryogenic
processing of refinery and natural gas streams to remove the higher value

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components, such as ethane and propane, which are primarily used as
petrochemical feedstocks. In addition, Ortloff has developed technologies and
filed applications for patents covering processes for the production of
liquefied natural gas (LNG) which it believes will provide considerable
efficiency improvements in and cost savings for the design and construction of
those facilities. However, the company does not believe that the loss of any one
of these patents or of any license, franchise or concession would have a
material adverse effect on the company's overall business operations.

ENVIRONMENTAL MATTERS

The company and its subsidiaries are subject to federal, state and local
requirements regulating the discharge of materials into the environment, the
handling and disposal of solid and hazardous wastes, and protection of the
public health and the environment generally (collectively, Environmental Laws).
Certain facilities of the company's subsidiaries ship waste products to various
waste management facilities for treatment or disposal. Governmental authorities
have the power to require compliance with these Environmental Laws, and
violators may be subject to civil or criminal penalties, injunctions or both.
Third parties may also have the right to sue for damages and/or to enforce
compliance and to require remediation of contamination. If there are releases or
if these facilities do not operate in accordance with Environmental Laws, or
their owners or operators become financially unstable or insolvent, the
company's subsidiaries are subject to potential liability.

The company and its subsidiaries are also subject to environmental laws
that impose liability for the costs of cleaning up contamination resulting from
past spills, disposal, and other releases of hazardous substances. In
particular, an entity may be subject to liability under the Federal
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or
Superfund) and similar state laws that impose liability -- without a showing of
fault, negligence, or regulatory violations -- for the generation,
transportation or disposal of hazardous substances that have caused or may
cause, environmental contamination. In addition, an entity could be liable for
cleanup of property it owns or operates even if it did not contribute to the
contamination of such property. From time to time, the company or its
subsidiaries may incur such remediation and related costs at the company-owned
plants and certain offsite locations.

Chromium has engaged in limited remediation activities at its former
plating operation in Lufkin, Texas. Soil sampling results from a pre-closing
environmental evaluation of the site indicated the necessity of localized
cleanup. Chromium has entered the property into the Texas Voluntary Cleanup
Program (VCP). Under this program, the Texas Commission on Environmental Quality
(TCEQ) reviews the voluntary cleanup plan the applicant submits, and, when the
work is complete, issues a certificate of completion, evidencing cleanup to
levels protective of human health and the environment and releasing prospective
purchasers and lenders from liability to the state. Properties entered into the
VCP are protected from TCEQ enforcement actions.

Under the VCP, Chromium submitted a testing program, which the TCEQ has
approved, for a supplemental groundwater and soil assessment at the facility.
This program was designed to, among other things, further define the cleanup
requirements at the site. Once the investigation is complete, Chromium intends
to clean up the site under the VCP to a site specific risk-based cleanup
standard as prescribed by the Texas Risk Reduction Program. Preliminary results
from

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recent groundwater and soil assessments indicate that there has been no
environmental impairment beyond company property boundaries or to any
groundwater. However, until Chromium has the final results from its supplemental
assessment and TCEQ approval of a cleanup plan, the range of costs to remediate
the site are not determinable, nor can the company determine at this point in
time if it is reasonably possible that it will incur material additional costs
at the site. If a remediation plan similar to a plan successfully used at
another Chromium plant is approved by TCEQ, remediation costs will be immaterial
to the company's consolidated results of operations, financial position and
liquidity. However, other potential scenarios, none of which are reasonably
expected at this time, could potentially result in material costs to the
company. By December 31, 2003, management currently believes that a range of
exposure may be determinable. Therefore, the company currently believes
sufficient information for establishing a reserve for this environmental
exposure in accordance with SFAS No. 5, "Accounting for Contingencies," may be
available by December 31, 2003, and further anticipates that it may be in a
position at that time to determine if it is reasonably possible that the company
will incur material additional costs with regard to this site.

The company's operations are subject to extensive federal, state and local
laws and regulations relating to environmental matters. Other than the possible
costs associated with the previously described Chromium matter, 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 manufacturing operations
utilize hazardous materials in their production processes. As a result, the
company incurs costs for recycling or disposal of such materials and may incur
costs for remediation activities at its facilities and off-site from time to
time. The company establishes and maintains reserves for such known remediation
activities in accordance with SFAS No. 5 when appropriate.

In addition to the aforementioned Chromium item, the company anticipates
that its subsidiaries will incur costs to comply with Environmental Laws,
including remediating any existing non-compliance with such laws and achieving
compliance with anticipated future standards for air emissions and reduction of
waste streams. Such subsidiaries expend funds to minimize the discharge of
materials into the environment and to comply with governmental regulations
relating to the protection of the environment. Other than possible costs
associated with the previously described Chromium matter, neither expenditures
nor other activities initiated to comply with environmental laws is expected to
have a material impact on the consolidated results of operations, financial
position or liquidity of the company.

PERSONS EMPLOYED

At June 30, 2003, the company and its subsidiaries had 1,202 employees. Of
this total, 833 were employed in the Building Products business segment, 21 were
employed in Engineering, Technologies, 190 were employed in Other, Technologies
and 158 (including most sales personnel) were employed at the corporate office.
Included in these totals are 120 employees in Building Products and 40 employees
in Other, Technologies who were represented by labor unions. The company
believes that it has good relations with its employees.

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EXTENDED PAYMENT TERMS

The company's Building Products business typically provides extended
payment terms to certain customers for roofing products shipped during the late
winter and early spring months, with payment generally due during late spring or
early summer. As of June 30, 2003, $7,291,000 in receivables relating to such
shipments were outstanding, all of which were due and collected in the first
quarter of fiscal 2004.

SEASONAL BUSINESS

The company's Engineering, Technologies and Other, Technologies businesses
are substantially nonseasonal. The company's Building Products business is
seasonal to the extent that cold, wet or icy weather conditions during the late
fall and winter months in some of its marketing areas typically limit the
installation of residential building products which causes sales to be slower
during such periods. Damage to roofs from extreme weather such as severe wind,
hurricanes and hail storms can result in higher demand for periods up to
eighteen to twenty-four months depending upon the extent of roof damage. Working
capital requirements and related borrowings fluctuate during the year because of
seasonality. Generally, working capital requirements and borrowings are higher
in the spring and summer months, and lower in the fall and winter months.

AVAILABLE INFORMATION

The company's primary web site is www.elkcorp.com. In the Investor
Relations section of the web site, the company posts the following filings as
soon as reasonably practicable after they are electronically filed with or
furnished to the Securities and Exchange Commission: annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934. All such filings on the Investor Information
web page, which also includes Forms 3, 4 and 5 filed pursuant to Section 16(a)
of the Securities Exchange Act of 1934, are available to be viewed on this page
free of charge. Information contained on the web site is not part of this annual
report on Form 10-K or our other filings with the Securities and Exchange
Commission. We assume no obligation to update or revise any forward-looking
statements in this annual report on Form 10-K, whether as a result of new
information, future events or otherwise. A copy of this Form 10-K is available
without charge upon written request to Investor Relations, ElkCorp, 14911 Quorum
Drive, Suite 600, Dallas, Texas 75254.

ITEM 2. PROPERTIES

All manufacturing facilities, except for the composite building products
facility in Lenexa, Kansas, are owned by the company and its subsidiaries and
are not subject to any significant encumbrances.

BUILDING PRODUCTS

Asphalt building products are manufactured at plants located in
Tuscaloosa, Alabama, Ennis, Texas, Shafter, California and Myerstown,
Pennsylvania. Fiberglass roofing mat,

- 10 -

nonwoven industrial, reinforcement and filtration products are manufactured on
two parallel production lines located in Ennis, Texas. Remote leased warehouse
storage locations are maintained in (1) Denver, Colorado, (2) Fridley,
Minnesota, (3) Plant City, Florida, (4) West Columbia, South Carolina, (5)
Kansas City, Missouri, and (6) Richmond, British Columbia, Canada. Composite
building products are manufactured at leased facilities in Lenexa, Kansas.

Corporate headquarters and administrative offices for the Building
Products operations are located in the same leased facility as the company's
corporate offices in Dallas, Texas.

ENGINEERING, TECHNOLOGIES

The Ortloff engineering and process licensing group is located in
leased offices in Midland, Texas.

OTHER, TECHNOLOGIES

Cybershield's operating facility is located in Lufkin, Texas. Corporate
headquarters and most administrative offices for Cybershield are located at the
same leased facility as the company's corporate offices in Dallas, Texas. Some
administrative offices are located in Lufkin, Texas. The Canton, Georgia
facility was closed in fiscal 2002 and is held for sale.

Chromium's operating facilities are located in Cleveland, Ohio.
Corporate headquarters and most administrative offices for Chromium are located
at the same leased facility as the company's corporate offices in Dallas, Texas.
Some administrative offices are located at the Cleveland, Ohio manufacturing
facility.

CORPORATE OFFICES

In August 2003, the company's corporate headquarters was relocated to
14911 Quorum Drive, Suite 600, Dallas, Texas. The corporate headquarters is
located in leased offices in Dallas, Texas, as was the company's former
corporate headquarters.

ITEM 3. LEGAL PROCEEDINGS

There are various lawsuits and claims pending against the company and its
subsidiaries arising in the ordinary course of their businesses. In the opinion
of the company's management, based in part on advice of counsel, none of these
actions should have a material adverse effect on the company's consolidated
results of operations, financial position, or liquidity.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of the year ended June 30, 2003.

- 11 -

ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY

Certain information concerning the company's executive officers is set
forth below:

Period
Served Age as of
Name Title As Officer Sept. 1, 2003
---- ----- ---------- -------------

Thomas D. Karol Chairman of the Board and 2 years 45
Chief Executive Officer of
ElkCorp; Officer and Director of
all subsidiaries except one

Richard A. Nowak President and Chief Operating 2 years 61
Officer of ElkCorp and each
Building Products subsidiary; Officer
and Director of all subsidiaries
except one

Harold R. Beattie, Jr. Senior Vice President, Chief 4 years 49
Financial Officer and Treasurer
of ElkCorp; Officer of all
subsidiaries except one

David G. Sisler Senior Vice President, General 8 years 45
Counsel and Secretary of ElkCorp;
Officer of and Counsel to all
subsidiaries except one; Director
of one subsidiary

James J. Waibel Senior Vice President, 9 years 59
Administration of ElkCorp

Matti Kiik Senior Vice President, Research 2 years 61
and Development of ElkCorp

Gregory J. Fisher Senior Vice President and Controller 2 years 53
of ElkCorp

Leonard R. Harral Vice President and Chief 9 years 51
Accounting Officer of ElkCorp;
Director of one subsidiary

Thomas W. Cave Vice President and Assistant Secretary 11 years 48
of ElkCorp

- 12 -

All of the executive officers except Mr. Karol and Mr. Beattie have been
employed by the company or its subsidiaries in responsible management positions
for more than the past five years. Mr. Nowak, Mr. Kiik and Mr. Fisher were
employed in responsible management positions at an ElkCorp subsidiary company
for more than the past five years.

On February 5, 2001, Mr. Karol was elected by the Board of Directors as
President and Chief Executive Officer of the company effective March 26, 2001.
On March 31, 2002, Mr. Karol was elected by the Board of Directors as Chairman
of the Board and Chief Executive Officer. From May 1991 until its purchase by
Beaulieu of America in December 1999, Mr. Karol served as Chief Executive
Officer of Pro Group Holdings, Inc., a privately owned manufacturer and
distributor of carpet products. From December 1999 until January 2001, Mr. Karol
was employed as President of the Brinkman Hard Surfaces Division of Beaulieu of
America. Mr. Karol has served on the company 's Board of Directors since
November 1998.

On March 27, 2000, Mr. Beattie was elected by the Board of Directors as
Vice President - Finance and Treasurer of the company. On October 23, 2001, Mr.
Beattie was elected as Vice President, Chief Financial Officer and Treasurer.
Effective May 1, 2002, Mr. Beattie was elected Senior Vice President, Chief
Financial Officer and Treasurer. Mr. Beattie was employed by Bank of America
from 1977 to 2000, most recently as a Managing Director of Banc of America
Securities LLC.

Officers are elected annually by the Board of Directors following the
Annual Meeting of Shareholders.

- 13 -

PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The principal market on which the company's common stock is traded is the
New York Stock Exchange. The company's common stock is also traded on the
Boston, Midwest and Philadelphia Stock Exchanges. There were 1,034 holders of
record and approximately 4,100 beneficial owners of the company's common stock
on September 2, 2003.

The quarterly dividend declared per share and the high and low sale prices
per share of the company's common stock for each quarter during fiscal year 2003
and fiscal year 2002 are set forth in the following table:

Period Dividend High Low
------ -------- ---- ---

Fiscal 2003

First Quarter $.05 $27.93 $14.85
Second Quarter $.05 $18.60 $14.60
Third Quarter $.05 $19.32 $14.55
Fourth Quarter $.05 $22.60 $18.63

Fiscal 2002

First Quarter $.05 $22.30 $16.65
Second Quarter $.05 $29.29 $20.80
Third Quarter $.05 $28.05 $21.10
Fourth Quarter $.05 $28.94 $20.70

Subject to the limitations discussed below, the company currently intends
to continue to pay quarterly dividends for the foreseeable future. However, the
final determination of the timing, amount and payment of dividends on the common
stock is at the discretion of the Board of Directors and will depend on, among
other things, the company's profitability, liquidity, financial condition and
capital requirements.

In September 1998, the company's Board of Directors authorized the
purchase of up to $10,000,000 of common stock from time to time on the open
market to be used for general corporate purposes. In August 2000, the Board of
Directors authorized the repurchase of up to an additional $10,000,000 of common
stock. As of June 30, 2003, 600,590 shares with a cumulative cost of $9,366,000
had been purchased from time to time under these authorizations. No common stock
was repurchased in fiscal 2003.

Limitations affecting the future payment of dividends by the company are
imposed as a part of the company's revolving credit facility. Total cumulative
dividends and stock repurchased since November 30, 2000 are subject to a formula
limitation based on cumulative consolidated net income during the term of the
company's $100,000,000 Revolving Credit Facility, which extends through November
30, 2005. As of June 30, 2003, such limitation was $31,581,000 and actual
expenditures for these items were $11,037,000.

Equity Compensation Plan Information for the company is presented in Part
III, Item 12 on page 62 of this Annual Report on Form 10-K.

- 14 -

ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and notes
thereto included elsewhere in this report.

FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
($ In thousands, except per share data)

Year Ended June 30,
----------------------------------------------------------------------------
2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- --------

Sales $ 506,146 $ 506,526 $ 379,156 $ 395,198 $358,596
========== ========== ========== ========== ========

Net Income $ 24,100 $ 15,093 $ 8,762 $ 29,932 $ 20,943
Cumulative Effect Of
Accounting Change(1) -- -- -- -- 4,340
Noncash stock option
compensation (3,496) 3,922 -- -- --
---------- ---------- ---------- ---------- --------
Pro forma Earnings(2) $ 20,604 $ 19,015 $ 8,762 $ 29,932 $ 25,283
========== ========== ========== ========== ========
Net Income Per Share - Basic $ 1.24 $ .78 $ .45 $ 1.53 $ 1.07
========== ========== ========== ========== ========
Net Income Per Share - Diluted $ 1.23 $ .77 $ .45 $ 1.49 $ 1.05
========== ========== ========== ========== ========
Pro forma Earnings Per Share -
Basic $ 1.06 $ .98 $ .45 $ 1.53 $ 1.29
========== ========== ========== ========== ========
Pro forma Earnings Per Share -
Diluted $ 1.05 $ .97 $ .45 $ 1.49 $ 1.27
========== ========== ========== ========== ========

Total Assets $ 442,137 $ 381,428 $ 360,048 $ 322,574 $252,182
========== ========== ========== ========== ========
Long-Term Debt $ 152,526 $ 119,718 $ 123,300 $ 91,300 $ 63,000
========== ========== ========== ========== ========
Shareholders' Equity $ 196,528 $ 176,092 $ 162,102 $ 161,904 $137,251
========== ========== ========== ========== ========
Cash Dividends Per Share $ .20 $ .20 $ .20 $ .20 $ .19
========== ========== ========== ========== ========

(1) Cumulative prior year impact of a change in accounting for the costs of
start-up activities.

(2) In fiscal 2002, the company changed its accounting from "fixed" to
"variable" accounting for certain stock options. Item represents pro forma
amount excluding $3,496 of benefit, net of tax, (or $.18 per basic and
diluted share) and $3,922 of expense, net of tax, (or $.20 per basic and
diluted share) for noncash stock option compensation in fiscal 2003 and
2002, respectively. Management believes excluding these amounts for pro
forma purposes is appropriate for comparative purposes since these amounts
resulted solely from changes in ElkCorp's share price and not from
operations. Pro forma amounts should not be considered to be in accordance
with accounting principles generally accepted in the United States of
America.

- 15 -

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS RESULTS OF OPERATIONS

OPERATING SEGMENTS

Effective September 1, 2002, the company changed its corporate name from
Elcor Corporation to ElkCorp to better identify itself with the Elk brand name
of its principal Building Products subsidiaries.

The Building Products segment consists of Elk Premium Building Products,
Inc. and its operating subsidiaries (collectively Elk). These companies
manufacture (1) premium laminated fiberglass asphalt shingles, (2) coated and
non-coated nonwoven fabrics used in asphalt shingles and other applications in
the building and construction, filtration, floor coverings and other industries,
and (3) beginning with an October 2002 business acquisition, nontoxic wood
composite decking, marine dock, and fencing products. Building Products
accounted for 92% of consolidated sales in fiscal 2003.

In fiscal 2003, operating profit from the company's Engineering,
Technologies business, which provides proprietary technologies and related
engineering services to the natural gas processing industry as Ortloff
Engineers, LTD (Ortloff), exceeded 10% of consolidated operating profit. In
accordance with Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an
Enterprise and Related Information," this business is required to be presented
as a separate segment because it exceeded this quantitative threshold. This
business has not historically met the 10% reporting test, nor is it typically
expected to in the future.

Other, Technologies consists of the company's other operations. These
dissimilar operations are combined, as none individually meets the materiality
criteria for separate segment reporting. Other, Technologies includes (1) the
operating subsidiaries of Cybershield, Inc. (collectively Cybershield), which
applies precise conductive metal coatings to plastic components utilized in
electronics enclosures to control the electromagnetic and radio frequency
emissions of such devices, and to create circuitry and antennae for digital
cellular phones, consumer electronics, and other electronic products; and, (2)
Chromium Corporation (Chromium), which is a leading provider of hard chrome and
other surface finishes designed to extend the life of steel machinery components
operating in abrasive environments. A third operation, Elk Technologies, Inc.,
develops and markets fabrics featuring VersaShield fire retardant coatings
designed for use outside of traditional building products applications,
including home furnishings and other consumer products. This business has not
yet produced significant commercial sales.

- 16 -

FISCAL 2003 COMPARED TO FISCAL 2002

OVERALL PERFORMANCE

During the fiscal year ended June 30, 2003, net income of $24,100,000 was
60% higher than $15,093,000 in fiscal 2002. Sales of $506,146,000 were
marginally lower in fiscal 2003 than sales of $506,526,000 in fiscal 2002.
Consolidated operating income of $44,692,000 in fiscal 2003 was 45% higher than
$30,824,000 in the prior fiscal year. Operating income for fiscal 2003 included
a $5,378,000 benefit from the reversal of noncash stock option compensation,
compared to a $6,034,000 charge for this noncash item in fiscal 2002. In fiscal
2002, the company changed its accounting for certain stock options from fixed
awards with no compensation expense to variable awards, which generally results
in periodic expense or income, as the company determined that variable
accounting was more appropriate for such stock options. Pursuant to variable
option accounting, income is charged or credited during each accounting period
to reflect any excess or deficit of the market value of shares underlying vested
options, from the exercise price of vested options. Based on a decline in the
company's share price subsequent to June 30, 2002 and actions taken by the Board
of Directors to terminate the feature of the 1998 Incentive Stock Option Plan
that caused certain stock options to be accounted for as variable awards, the
company recorded a reversal of the majority of fiscal 2002 noncash stock option
compensation in the first quarter of fiscal 2003. The company now has no options
subject to variable stock option accounting. Accordingly, subsequent to the
quarter ended September 30, 2002, income has not been affected by variable
accounting for stock options. The company does not expect to issue further stock
options requiring variable accounting.

Operating income in fiscal 2002 also included a favorable settlement with
a vendor resulting in $5,625,000 of income, and plant closure costs of
$5,273,000. As a percentage of sales, operating income was 8.8% in fiscal 2003
compared to 6.1% in fiscal 2002. Cost of sales was 80.3% of sales in fiscal 2003
compared to 81.0% in the prior fiscal year. The impact of higher asphalt costs
in fiscal 2003 was partially offset by, among other things, lower unit
manufacturing costs and strict management of controllable expenses at the
company's roofing plants. The prior year percentage of cost of sales to sales
was adversely affected by the aforementioned plant closure costs. Selling,
general and administrative (SG&A) costs in fiscal 2003 were $862,000 higher than
in fiscal 2002. However, fiscal 2002 benefited from the $5,625,000 vendor
settlement. Other SG&A costs declined substantially in fiscal 2003, primarily as
a result of benefits received from the consolidation of Cybershield's operations
in the third quarter of fiscal 2002. As a percentage of sales, SG&A costs were
11.9% in fiscal 2003, compared to 11.7% in fiscal 2002.

Interest expense was $6,184,000 in fiscal 2003 compared to $6,192,000 in
fiscal 2002. In fiscal 2003, the company capitalized $995,000 of interest
related to the construction of an additional Tuscaloosa, Alabama shingle plant
and other significant capital projects. No interest cost was capitalized in
fiscal 2002. The average interest rate paid on indebtedness was 5.0% in fiscal
2003 compared to 5.1% in fiscal 2002.

The company's effective tax rate was 37.8% for fiscal 2003 compared to
39.0% for fiscal 2002. The difference between years primarily relates to the
impact of noncash stock option compensation on the effective tax rate.

- 17 -

RESULTS OF BUSINESS SEGMENTS

Sales in the Building Products segment increased 1.6% to $467,002,000 for
the year ended June 30, 2003 compared to $459,673,000 in fiscal 2002. In fiscal
2003, roofing products sales, which represented 93.2% of Building Products
segment sales, increased 4.7% compared to fiscal 2002. Unit shingle shipments in
the last half of fiscal 2003 more than offset the impact of a general slowing in
the roofing market early in fiscal 2003. The increase in demand for the
company's roofing products was driven by strong roof replacement demand in the
Texas market as a result of widespread spring 2003 hail damage. Roofing activity
in the Northeast and Midwest areas of the United States was hampered in the
latter part of fiscal 2003 by persistent record spring rainfall from April to
mid-June 2003. For the year, unit shingle shipments in fiscal 2003 increased
3.7% over fiscal 2002. For the month of June 2003, unit shingle shipments set a
company record. Strong demand is expected to continue during the remaining
calendar 2003 roofing season as more normal summer weather patterns permit
increased roofing activity in areas previously affected by persistent spring
rains.

Average selling prices for premium laminated asphalt shingles were about
3.0% higher in fiscal 2003 than in fiscal 2002, primarily as a result of shingle
price increases in the second half of fiscal 2003 to recover higher asphalt
costs and increases in other energy related costs. However, the increases in
unit sales and average selling prices were somewhat offset by a sales mix
weighted proportionately more to lower priced products.

In fiscal 2003, outside sales of performance nonwoven fabrics, which
represented 6.6% of Building Product sales, decreased 30.2% compared to fiscal
2002, primarily as a result of a weak commercial roofing market. Although
overall production of nonwoven fabrics was comparable in fiscal 2003 to the
prior fiscal year, in the current fiscal year a much higher proportion of
nonwoven fabric production was consumed internally in the company's own
manufacturing of shingle products. Intercompany nonwoven fabrics sales are
eliminated in consolidation. Composite building products, which began operations
in October 2002, accounted for 0.2% of Building Products sales in fiscal 2003.

Despite increased sales in fiscal 2003, operating income for the Building
Products segment of $45,901,000 was 13.9% lower compared to $53,325,000 in
fiscal 2002. Prior year operating income included a $5,625,000 favorable vendor
settlement. Asphalt costs in fiscal 2003 were $16,900,000 higher than in the
prior fiscal year. Approximately $7,900,000 of these higher asphalt costs were
offset by higher average sales per shingle unit. Management believes that the
improved relationship between shingle pricing and asphalt costs in the latter
part of fiscal 2003 will continue into fiscal 2004. In the fourth quarter of
fiscal 2003, shingle inventories were repositioned into the Texas market from
other geographic areas to meet strong demand and to serve the company's Texas
market share. Higher freight transfer costs related to inventory repositioning
negatively impacted fiscal 2003 operating earnings by approximately $1,500,000.

Start-up inefficiencies in composite building products further reduced
Building Products operating income in fiscal 2003. Delayed delivery and
production inefficiencies related to the start-up of newly installed equipment
reduced operating income for the year by approximately $2,700,000. Despite these
difficulties, management believes that demand for CrossTimbers decking products
currently exceeds the company's ability to produce it and that profitable
operations will be achieved once anticipated production efficiency has been
achieved.

- 18 -

Sales in the Engineering, Technologies segment increased 56.6% to
$10,693,000 in fiscal 2003 compared to $6,829,000 in fiscal 2002. The increase
in licensing revenues was primarily the result of several key international
projects in 2003. Higher international licensing fees are the result of the
company's strategy of establishing cooperative marketing or licensing
arrangements with several key international suppliers of process technologies,
providing Ortloff with the opportunity to bid its technology packages on large
international projects that might not otherwise be available to it. Licensing
revenues can vary significantly between reporting periods since this business is
largely project driven.

Engineering, Technologies operating income of $5,773,000 in fiscal 2003
was 84.5% higher than $3,129,000 earned in fiscal 2002, primarily as a result of
higher technology licensing fees.

The Other, Technologies companies reported combined sales of $28,451,000
in fiscal 2003 compared to $40,024,000 in fiscal 2002. Significantly reduced
volumes of cellular handset business caused Cybershield's sales to decline
significantly in fiscal 2003. Cellular handset production previously in the
United States and Latin America has largely shifted to Asia where the company
has no significant operations. The company does not expect these sales to return
to the United States. Accordingly, Cybershield's strategy has shifted away from
reliance nearly solely on the cellular handset business to new markets for
existing production capabilities and new technologies. Commercialization of
EXACT, a proprietary process for applying precise conductive metal patterns to
plastics or other components, together with other strategic moves including
marketing partnerships with key supply chain partners and utilizing a network of
manufacturing representatives to augment Cybershield's internal sales efforts,
are key strategies to diversify Cybershield's sales among a wider variety of
consumer, medical and military electronics applications. Management believes
these strategic initiatives will return Cybershield to profitability. However,
there are no assurances that they will be successful. In the event that these
initiatives are unsuccessful in returning Cybershield to profitability, the
company may be required to record an impairment charge relating to long-lived
assets. The carrying amount of Cybershield's long-lived assets was $11,200,000
at June 30, 2003. Chromium's sales were also lower in fiscal 2003 compared to
the prior year period as a result of deferred maintenance expenditures by its
railroad customers.

The Other, Technologies companies reported a combined operating loss of
$1,593,000 in fiscal 2003 compared to an operating loss of $7,483,000 in fiscal
2002. Chromium reported an approximate $100,000 operating loss during the
current fiscal year compared to a modest operating profit in fiscal 2002.
Despite the significant reduction in revenues at Cybershield, cost reductions
allowed that subsidiary to limit its operating loss in fiscal 2003 to
approximately $1,100,000 compared to an approximate $7,500,000 operating loss in
fiscal 2002 which included $5,273,000 of plant closure costs relating to its
Canton, Georgia plant. The Canton plant and certain idle equipment are being
held for sale. The carrying value of these assets was $5,411,000 at June 30,
2003 based on estimated fair value, less cost of disposal. If the company is
unable to realize the current carrying value, or if market conditions for these
assets do not improve, additional write-downs of these assets may be necessary.
The remaining fiscal 2003 loss in Other, Technologies resulted from start-up
costs relating to Elk Technologies, Inc.

- 19 -

FISCAL 2002 COMPARED TO FISCAL 2001

OVERALL PERFORMANCE

During the fiscal year ended June 30, 2002, net income of $15,093,000 was
72% higher than $8,762,000 in fiscal 2001. Sales of $506,526,000 were 34% higher
in fiscal 2002 compared to $379,156,000 in fiscal 2001. The significant increase
in both sales and income in fiscal 2002 is primarily attributable to significant
improvements in operations in the Building Products segment.

Consolidated operating income of $30,824,000 in fiscal 2002 was 78% higher
than $17,354,000 in the prior fiscal year. Operating income for fiscal 2002 was
reduced by $6,034,000 of noncash stock option compensation, due to the change in
accounting for certain stock options from fixed awards with no compensation
expense to variable awards, which can result in periodic expense or income. In
fiscal 2002, the company determined that variable accounting is more appropriate
for such stock options. The impact of variable accounting in fiscal 2001 was not
material. Operating income for fiscal 2002 also included a favorable cash
settlement with a vendor resulting in income of $5,625,000, and plant closure
and related costs of $5,273,000. As a percentage of sales, operating income was
6.1% in fiscal 2002 compared to 4.6% in fiscal 2001. Costs of sales were 81.0%
in fiscal 2002 compared to 82.7% in fiscal 2001. The fiscal 2002 percentage of
costs of sales to sales was adversely affected by Cybershield's plant closure
costs, higher depreciation costs relating to the Myerstown, Pennsylvania roofing
plant, together with higher raw material and energy costs. SG&A costs in fiscal
2002 were significantly higher than in the prior fiscal year, due primarily to
overall higher sales levels, increased selling expenses related to new product
introductions, higher incentive compensation resulting from improved performance
and retirement expenses related to management succession. As a percentage of
sales, SG&A costs were 11.7% of sales in fiscal 2002 compared to 12.7% in fiscal
2001.

Interest expense was $6,192,000 in fiscal 2002 compared to $3,494,000 in
fiscal 2001. However, in fiscal 2001, the company capitalized $5,337,000 of
interest related to the construction of the Myerstown, Pennsylvania roofing
plant and other major projects. No interest cost was capitalized in fiscal 2002.
The average interest rate paid on indebtedness was 5.1% in fiscal 2002 compared
to 7.25% in fiscal 2001.

The company's effective tax rate was 39.0% in fiscal 2002 compared to
37.3% in fiscal 2001. The increase in the fiscal 2002 effective tax rate related
primarily to the impact of noncash stock option compensation recorded on the
effective tax rate and higher state income taxes.

RESULTS OF BUSINESS SEGMENTS

Sales in the Building Products segment increased 37% to $459,673,000 for
the year ended June 30, 2002 compared to $335,971,000 in fiscal 2001. The
significant increase in sales reflected a sharp rebound in shipments of premium
laminated fiberglass asphalt shingles that began in the fourth quarter of fiscal
2001 and continued throughout fiscal 2002, together with higher average selling
prices in fiscal 2002, which were 2.5% higher than in fiscal 2001.

- 20 -

Highly successful new products and warranty initiatives and a favorable
inventory position, combined with lower interest rates in fiscal 2002
contributed to sharply higher sales for this business segment. Building Products
sales further benefited from success in penetrating markets served by its new
Myerstown, Pennsylvania roofing plant, which met its performance test level of
operations in the fourth quarter of fiscal 2001. In fiscal 2001, shipments of
laminated shingles were adversely affected by weak economic conditions and harsh
winter weather conditions in the Northern United States and heavy winter and
spring rains in many other parts of the country.

Operating income for the Building Products segment increased 109% to
$53,325,000 in fiscal 2002 compared to $25,539,000 for fiscal 2001. Fiscal 2002
operating income included a $5,625,000 favorable vendor settlement. The cash
settlement represented a reimbursement of certain general and administrative
costs previously incurred by Elk. The increase in recurring operating income is
primarily the result of a significant increase in shipments of premium laminated
fiberglass asphalt shingles and performance nonwoven fabrics. Increased product
sales more than offset higher marketing costs and depreciation relating to the
new Myerstown, Pennsylvania roofing plant.

Revenues for the Engineering, Technologies segment were $6,829,000 in
fiscal 2002 compared to $2,203,000 in fiscal 2001 as a result of a higher level
of licensing and consulting fees from international gas processing projects.
Operating income for the Engineering, Technologies segment was $3,129,000 in
fiscal 2002 compared to a $533,000 operating loss in fiscal 2001, primarily as a
result of the aforementioned increase in licensing and consulting fees.

Sales for the Other, Technologies companies decreased 2.1% to $40,024,000
in fiscal 2002 compared to $40,886,000 in fiscal 2001. Cybershield's unit
volumes declined, but average selling prices were higher, primarily as a result
of an increased sales mix of units containing purchased plastic parts. Sales for
Chromium were also lower in fiscal 2002 compared to the prior fiscal year due to
lower unit volumes as railroads deferred maintenance expenditures.

The Other, Technologies companies reported a $7,483,000 operating loss in
fiscal 2002 compared to $1,190,000 in operating income in fiscal 2001. The
fiscal 2002 operating loss included $5,273,000 of plant closure and related
costs pertaining to consolidating Cybershield's operations. Fiscal 2001 included
$750,000 of costs relating to the consolidation of manufacturing operations and
initial production of products new to Chromium's Cleveland, Ohio plant.
Operating income for the Other, Technologies companies also reflect lower unit
volumes and related margins at Cybershield, costs associated with the ramp of
several new handset components and production start-up inefficiencies during the
early part of fiscal 2002 at Cybershield, and lower unit volumes at Chromium.
Despite these lower volumes, Chromium was able to maintain modest profitability
in fiscal 2002 due to cost reductions.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows from operating activities are generally the result of net
income, deferred taxes, depreciation and amortization, and changes in working
capital. In fiscal 2003, the company generated cash flows of $23,659,000 from
operating activities compared to

- 21 -

$27,661,000 in fiscal 2002 and $10,406,000 in fiscal 2001. The decrease in cash
flows generated in fiscal 2003 was primarily the result of changing dynamics in
the significant components of working capital (trade receivables, inventories,
accounts payable and accrued liabilities).

Trade receivables at June 30, 2003 were $25,324,000 higher than at June
30, 2002. The majority of this increase was the result of record shipments in
the Building Products segment in the latter part of fiscal 2003, together with
increased Engineering, Technologies receivables from technology licensing fees.
In accordance with normal industry practices, extended payment terms are granted
to certain customers for roofing products shipped during the late winter and
early spring months, with payments generally due during the spring or early
summer. At June 30, 2003, receivables from customer programs with extended due
dates were $7,291,000 compared to $8,608,000 at June 30, 2002. Extended term
receivables outstanding at June 30, 2003 were due and collected in the first
quarter of fiscal 2004.

At June 30, 2003, manufactured inventories were $6,956,000 higher than at
June 30, 2002 as production at the company's roofing plants continued at high
rates throughout much of the current year. The company believes that current
year inventories are at favorable levels. In the prior year, roofing product
inventories had been reduced to less than desired levels.

The $5,087,000 decrease in accrued liabilities at June 30, 2003 compared
to June 30, 2002 is primarily the result of the reversal of an accrual for
noncash stock option compensation during the current fiscal year due to the
impact of variable accounting for stock options and a declining stock price
through the date that variable accounting was eliminated. Higher trade payables
were primarily the result of cash management techniques and strategies used to
maximize the company's cash flow.

The current ratio was 3.4 to 1 at June 30, 2003 compared to 3.3 to 1 at
June 30, 2002. 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.

Cash flows from investing activities primarily reflect the company's
capital expenditure strategy. Net cash used for investing activities was
$52,375,000 in fiscal 2003, $10,637,000 in fiscal 2002 and $38,416,000 in fiscal
2001. Approximately $29,100,000 of current year capital expenditures relate to
construction of a second shingle plant at Tuscaloosa, Alabama, including the
installation of certain infrastructure and material handling improvements
designed to enhance the overall efficiency of the expanded facility.
Approximately $11,000,000 was expended for productivity enhancements at certain
of its other roofing plants. During the current fiscal year, the company
utilized $2,224,000 of cash for a business acquisition and subsequently invested
$3,810,000 in incremental capital expenditures for this new subsidiary to
increase manufacturing capacity. Capital expenditures are projected to be
approximately $69,000,000 in fiscal 2004, including approximately $43,000,000 to
complete the new Tuscaloosa plant, approximately $6,000,000 for productivity
enhancement projects, and approximately $6,000,000 to upgrade certain key
information technology platforms. After fiscal 2004, planned capital
expenditures are currently expected to be approximately $15,000,000 -
$20,000,000 per year.

- 22 -

Cash flows from financing activities generally reflect changes in the
company's borrowings during the period, together with dividends paid on common
stock, treasury stock transactions and exercises of stock options. Net cash
provided by financing activities was $21,336,000 in fiscal 2003, compared to
$4,716,000 used in fiscal 2002 and funds provided in fiscal 2001 of $23,436,000.
In June 2002, the company sold $120,000,000 in Senior Unsecured Notes in a
private placement transaction with a group of institutional investors. In March
2003 the company sold $25,000,000 in an incremental note placement. The proceeds
of the original note placement were used to repay indebtedness outstanding under
the company's existing Revolving Credit Facility. The incremental note placement
proceeds were primarily used in the short-term to fund increased seasonal
working capital needs. Longer term, this debt will be used to fund the company's
capital expansion plans. There was no outstanding balance on the company's
$100,000,000 Revolving Credit Facility at June 30, 2003 other than $2,597,000
currently reserved for outstanding letters of credit.

An additional $7,808,000 increase in long-term debt during fiscal 2003
was the result of a noncash adjustment in the fair value of long-term debt
resulting from an interest rate swap to effectively convert the interest rate
from fixed to floating on $60,000,000 of long-term debt through 2012. This fair
market adjustment is offset by recording a corresponding noncash amount in other
assets for the value of the interest rate swap instrument.

The changes in the company's debt structure were made to extend the
maturity structure of the company's debt on favorable terms, increase the
company's total committed borrowing availability and better diversify the
company's funding sources. At June 30, 2003, liquidity consisted of $5,056,000
of cash and cash equivalents and $97,403,000 of available borrowings under its
$100,000,000 committed Revolving Credit Facility. The debt to capital ratio
(after deducting cash and cash equivalents of $5,056,000 from $145,000,000 of
principal debt) was 41.6%. During fiscal 2004, the company estimates it will
internally generate approximately $40,000,000 in operating cash flows to
partially fund its capital expenditures budget and other cash requirements.
Borrowings under the Revolving Credit Facility will be used to supply the
balance of required funds. The company has no off-balance sheet arrangements or
transactions with unconsolidated, special purpose entities.

The company's Board of Directors has authorized the purchase of common
stock from time to time on the open market. As of June 30, 2003, the company has
repurchase authority of approximately $10,600,000 remaining. No shares of common
stock were repurchased in fiscal 2003.

The following table summarizes the company's future payments relating
to contractual obligations at June 30, 2003:

(In thousands)
Payments Due by Period
--------------------------------------------------------------------
Less than 1 - 3 4 - 5 After 5
Contractual Obligations Total 1 year years years years
- ----------------------- -------- -------- -------- -------- --------

Long-term Debt $145,000 $ -- $ -- $ 25,000 $120,000
Operating Leases 14,522 1,866 2,660 1,964 8,032
Plant Construction Commitments 25,011 25,011 -- -- --
-------- -------- -------- -------- --------
Total Contractual Obligations $184,533 $ 26,877 $ 2,660 $ 26,964 $128,032
======== ======== ======== ======== ========

- 23 -

The only other significant commercial commitment the company has at
June 30, 2003 is its $100,000,000 Revolving Credit Facility, the term of which
extends through November 30, 2005.

The company's operations are subject to extensive federal, state and
local laws and regulations relating to environmental matters. Such laws and
regulations are frequently changed and could result in significantly increased
cost of compliance. Certain of the company's manufacturing 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.

Management believes that current cash and cash equivalents, projected
cash flows from operations, and its existing debt capacity should be sufficient
during fiscal 2004 and beyond to fund the Tuscaloosa, Alabama plant
construction, other planned capital expenditures, working capital needs,
dividends, stock repurchases and other cash requirements.

CRITICAL ACCOUNTING POLICIES

The company's consolidated financial statements were prepared in
conformity with accounting principles generally accepted in the United States of
America. As such, management is required to make certain estimates, judgments
and assumptions it believes are reasonable based on the information available.
The accounting policies which management believes are the most critical to fully
understanding and evaluating the company's reported financial results include
the following.

Collectibility of Accounts Receivable -

The majority of the company's sales are in the Building Products
segment and its primary customers are building material distributors. Due to
consolidation in the industry, credit risk is concentrated. Ten customers
typically account for about 40% to 50% of consolidated sales. The company
evaluates the collectibility of accounts receivables based on a combination of
factors. The balance in the reserve for doubtful accounts is evaluated on an
ongoing basis based on such factors as customer's past payment history, length
of time the receivables are past due, the status of customer's financial
condition and ongoing credit evaluations.

Accruals for Loss Contingencies -

Contingencies, or uncertainties, by their nature, require management to
exercise judgment both in assessing the likelihood that a liability has been
incurred as well as in estimating the amount of loss. Accruals are established
for loss contingencies when it is probable that a liability has been incurred
and the amount of loss can be estimated reasonably. Accrual balances are
reviewed and adjusted periodically based on management's judgment of changes in
specific facts and circumstances for each loss accrual.

- 24 -

Key loss accruals for the company include:

- Product warranties - Product warranties are estimated and
recorded based on factors such as an examination of known
defects for potential exposure, claims paid history,
independent data as to average length of time between asphalt
roofing replacements and average length of home ownership.

- Litigation - Litigation reserves are determined on a case
specific basis from evaluations by both management and outside
counsel as to any probable exposure from litigation.

- Environmental exposure - Environmental exposure, primarily
related to Other, Technologies companies, is evaluated by
management and its environmental consultants when known or
probable exposure is identified.

- Self-insurance reserves - The company partially insures itself
against losses for both casualty and medical insurance.
Reserves are calculated and maintained based on historical
experience and specifically identified losses.

Inventories -

Inventories are stated at the lower of cost or market value. Cost is
determined by the first-in, first-out method. The company records adjustments to
the value of inventories based on various factors. For the Building Products
segment, adjustments may be made to inventory values based on the physical
condition (e.g. age and quality) of the inventories. For Other, Technologies
companies, inventory adjustments are generally based upon the forecasted plans
to sell its products and the sales prices that are expected to be realized.
Inventories are adjusted to the lower of cost or market or written off if
unsaleable. These adjustments are estimates and can vary from actual
requirements if inventories deteriorate, become otherwise damaged or obsolete,
or if competitive conditions differ from expectations.

Revenue Recognition -

The company recognizes revenue in accordance with SEC Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101), as
amended. The majority of sales are for manufactured products, where revenue is
recognized at the time products are shipped to customers. Such revenues,
particularly in the Building Products segment, are subject to returns,
discounts, volume rebates and other incentives, which are estimated and recorded
based on sales activity and historical trends. Differences in revenues could
result if actual experience differs from the historical trends used in
management's estimates.

License revenue is recognized when (a) a customer contracts for the
nonexclusive use of inventions covered by company patents; (b) there are no
remaining items relating to the license contract that have to be accomplished by
the company; and (c) the license fee is nonrefundable. Service revenues are
recognized as they are performed. Revenue recognition may be subject to judgment
and interpretation that the specific requirements of SAB 101 have been met.

- 25 -

Impairment of Long-Lived Assets -

Long-lived assets, primarily plant, property and equipment, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amounts of any such assets may not be recoverable. If the
estimated sum of undiscounted cash flows is less than the carrying value of the
assets being reviewed, the company recognizes an impairment loss, measured as
the amount that the carrying value exceeds the fair value of the assets. The
estimate of future cash flows is based upon, among other things, certain
assumptions about expected future operating performance. The company's estimate
of undiscounted cash flows may differ from actual cash flow due to, among other
things, changes in general economic conditions, industry conditions, customer
requirements, technology or the company's business model.

MARKET RISKS

In addition to the risks inherent in its operations, the company is
exposed to financial, market, political and economic risks. The following
discussion provides additional detail regarding the company's exposure to the
risks of changing commodity prices and interest rates. The company has no
significant foreign exchange risk. Derivatives are held from time to time only
as part of a formally documented risk management program. Derivatives are held
to mitigate uncertainty, volatility or to cover underlying exposures. No
derivatives are held for trading purposes. The company has entered into
derivative transactions related to its exposure to natural gas used in its
manufacturing plants and to interest rate risk.

The company is required to purchase natural gas for use in its
manufacturing facilities. These purchases expose the company to the risk of
higher natural gas prices. To hedge this risk, the company entered into hedge
transactions to fix the price on 50% of its projected natural gas usage through
October 2002. At expiration, this hedge was not renewed. There are no natural
gas hedge transactions in effect at June 30, 2003. However, it is anticipated
that similar hedging strategies will likely be utilized in the future.

The company uses interest rate swaps to help maintain a reasonable
balance between fixed and floating rate debt. The company has entered into an
interest rate swap to effectively convert the interest rate from fixed to
floating on $60,000,000 of its outstanding debt. The fair value of this swap was
$7,526,000 at June 30, 2003. Based on outstanding debt at June 30, 2003, the
company's interest costs would increase or decrease $600,000 for each
theoretical 1% increase or decrease in the floating interest rate.

CREDIT RISK

The company is subject to credit risks applicable to cash and cash
equivalents and accounts receivable. Cash and cash equivalents are maintained at
financial institutions or in short-term investments with high credit quality.
Concentrations of credit risk with respect to accounts receivable primarily
relate to the large building material distributors that are the company's
primary customers. The company's largest customer accounted for 17% of
consolidated sales in both fiscal 2003 and fiscal 2002. The company performs
ongoing credit evaluations of its customers' financial condition to determine
the need for an allowance for

- 26 -

doubtful accounts. The company has not experienced significant credit losses for
many years. Concentration of credit risk with respect to accounts receivable is
limited to those customers to whom the company makes significant sales.

NEW ACCOUNTING STANDARDS

In June 2001, FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This statement is effective for the company in fiscal
2004. SFAS No. 143 requires legal obligations associated with the retirement of
long-lived assets to be recognized at their fair value at the time that the
obligations are incurred. Upon initial recognition of a liability, that cost is
capitalized as part of the related long-lived asset and allocated to expense
over the useful life of the asset. Based on current circumstances, the company
does not believe the adoption of SFAS No. 143 will have a material impact on the
company's financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at a date of commitment to an exit or disposal plan. SFAS
No. 146 is to be applied prospectively to exit or disposal activities after
December 31, 2002. In August 2003, the company relocated its corporate office to
new leased space. In accordance with SFAS No. 146, total unexpired lease costs
of $653,000 on its previous leased space will be recorded to expense through
March 2004.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45). FIN 45 addresses the disclosures
to be made by a guarantor in its interim and annual financial statements about
its obligations under guarantees. FIN 45 also clarifies the requirements related
to the recognition of a liability by a guarantor at the inception of a guarantee
for the guarantor's noncontingent obligations associated with such guarantee.
The disclosure requirements of this interpretation are already effective and
disclosed in the Product Warranties and Acquisition footnotes. The initial
recognition and measurement provisions are applicable on a prospective basis for
guarantees issued or modified after December 31, 2002. The company does not
expect the adoption of the recognition and measurement provisions of FIN 45 to
have a material effect on its consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities, an Interpretation of ARB No. 51" (FIN 46). FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective for all
new variable interest entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied for the first interim or annual period
beginning after June 15, 2003. The company has no current or planned variable
interest entities. Therefore, the adoption of FIN 46 had no impact on the
company's financial condition, results of operations or cash flows.

- 27 -

INFLATION AND CHANGING PRICES

The company's primary financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America
based on historical dollars. Accordingly, the financial statements do not
portray the effects of inflation. In recent years, inflation in the company's
key markets has been moderate. Cost controls and improving productivity
generally minimize the impact of inflation.

The costs of manufacturing, transportation and key raw materials,
including but not limited to ceramic-coated granules, asphalt, glass fibers,
resins and mineral filler, together with the company's ability to pass along
higher costs are generally influenced by factors other than inflation. These
factors include general economic and industry conditions, supply and demand,
surpluses and shortages, and actions of key competitors.

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
of the results of operations and financial condition and other sections of this
Form 10-K contain "forward-looking statements" that involve risks and
uncertainties 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 "optimistic," "outlook," "believe," "estimate,"
"potential," "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, actions of competitors, new and planned facilities not
meeting expected productivity rates and projected financial results, and
technological changes, together with other risks detailed herein.

1. The company's building products business is substantially
non-cyclical, but can be affected by weather, the availability of
financing, insurance claims paying practices, 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 and insurance 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.

2. In the building 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 energy, trucking and rail costs.
Historically, the company has been able to pass some of the higher
raw material,

- 28 -

energy and transportation costs through to the customer. Should the
company be unable to recover higher raw material, energy and/or
transportation costs from price increases of its products, operating
results could be adversely affected and/or lower than projected.

3. Temporary shortages or disruption in supply of raw materials or
transportation do result from time to time from a variety of causes.
If the company experiences temporary shortages or disruption of
supply of raw materials, operating results could be adversely
affected and/or lower than projected.

4. The company has been involved in a significant expansion plan over
the past several years, including the construction of new facilities
and the expansion of existing facilities. Progress in achieving
anticipated operating efficiencies and financial results is
difficult to predict for new and expanded plant facilities. If such
progress is slower than anticipated, or if demand for products
produced at new or expanded plants does not meet current
expectations, operating results could be adversely affected.

5. Certain facilities of the company's 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.

6. The company's litigation is subject to inherent and case-specific
uncertainty. The outcome of such litigation depends on numerous
interrelated factors, many of which cannot be predicted.

7. 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 or its cost of alternative sources of capital.

8. Each of the company's businesses, especially Cybershield's business,
is subject to the risks of technological changes and competition
that is based on technology improvement or labor savings. These
factors could affect the demand for or the relative cost of the
company's technology, products and services, or the method and
profitability of the method of distribution or delivery of such
technology, 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.
Cybershield has lost substantial business as a result of most
cellular handset production moving to Asia where Cybershield has no
significant presence. Low labor costs in Asia make other coating
processes competitive with those Cybershield would use.
Cybershield's future viability may depend on the successful
commercialization of the EXACT process, or other value added
services, which are unproven as yet on a large commercial scale.

- 29 -

9. 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
these or other events, including but not limited to acts of God, war
or terrorism.

10.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. Products using VersaShield fire retardant coatings have
not yet produced significant commercial sales. Its market potential
may be dependent on the stringency of federal and state regulatory
requirements, which are difficult to predict. If such development
activities are not successful, regulatory requirements are less
stringent than currently predicted, market demand is less than
expected, 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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In addition to the risks inherent in its operations, the company is
exposed to financial, market, political and economic risks. The following
discussion provides additional detail regarding the company's exposure to the
risks of changing commodity prices and interest rates. The company has no
significant foreign exchange risk. Derivatives are held from time to time only
as part of a formally documented risk management program. Derivatives are held
to mitigate uncertainty, volatility or to cover underlying exposures. No
derivatives are held for trading purposes. The company has entered into
derivative transactions related to interest rate risk and its exposure to
natural gas used in its manufacturing plants, as summarized in the following
paragraphs.

The company is required to purchase natural gas for use in its
manufacturing facilities. These purchases expose the company to the risk of
higher natural gas prices. To hedge this risk, the company entered into hedge
transactions to fix the price on 50% of its projected natural gas usage through
October 2002. At expiration, this hedge was not renewed. There are no natural
gas hedge transactions in effect at June 30, 2003. However, it is anticipated
that similar hedging strategies will likely be utilized in the future.

The company uses interest rate swaps to help maintain a reasonable
balance between fixed and floating rate debt. The company has entered into an
interest rate swap to effectively convert the interest rate from fixed to
floating on $60,000,000 of its outstanding debt at June 30, 2003. The fair value
of this swap was $7,526,000 at June 30, 2003. Based on outstanding debt at June
30, 2003, the company's interest costs would increase or decrease $600,000 for
each theoretical 1% increase or decrease in the floating interest rate.

- 30 -

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

Index to Financial Statements and Financial Statement Schedule

Financial Statements: Page
- --------------------- ----

Report of Independent Auditors 32
Independent Auditors' Report 33
Consolidated Balance Sheets at June 30, 2003 and 2002 34
Consolidated Statements of Operations for the years ended
June 30, 2003, 2002, and 2001 35
Consolidated Statements of Cash Flows for the years ended
June 30, 2003, 2002, and 2001 36
Consolidated Statements of Shareholders' Equity for the years
ended June 30, 2003, 2002, and 2001 37
Summary of Significant Accounting Policies 38
Notes to Consolidated Financial Statements 45

Financial Statement Schedules:

Report of Independent Auditors 57
Independent Auditors' Report 58
Schedule II - Consolidated Valuation and Qualifying Accounts 59

All other schedules are omitted because they are not required, are not
applicable, or the information is included in the financial statements or
notes thereto.

- 31 -

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors,
ElkCorp

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity and cash flows
present fairly, in all material respects, the financial position of ElkCorp and
subsidiaries at June 30, 2003 and 2002, and the results of their operations and
their cash flows for each of the two years in the period ended June 30, 2003, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion. The consolidated financial statements of
ElkCorp for the year ended June 30, 2001, prior to the revisions to the segment
information in the notes to the consolidated financial statements, were audited
by other independent auditors who have ceased operations. Those independent
auditors expressed an unqualified opinion on those financial statements in their
report dated August 13, 2001.

As discussed above, the financial statements of ElkCorp (formerly Elcor
Corporation) for the year ended June 30, 2001 were audited by other independent
auditors who have ceased operations. As described in the notes to the
consolidated financial statements, these consolidated financial statements have
been revised to reflect a change in the company's reportable segments and
certain other segment disclosures. We audited the adjustments described in the
notes to the consolidated financial statements regarding segments that were
applied to revise the fiscal 2001 financial statements. In our opinion, such
adjustments are appropriate and have been properly applied. However, we were not
engaged to audit, review or apply any procedures to the fiscal 2001 consolidated
financial statements of the company other than with respect to such adjustments
and, accordingly, do not express an opinion or any other form of assurance on
the fiscal 2001 financial statements taken as a whole.

/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP

Dallas, Texas
August 13, 2003

- 32 -

INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Directors,
Elcor Corporation

We have audited the accompanying consolidated balance sheets of Elcor
Corporation (a Delaware corporation) and subsidiaries as of June 30, 2001 and
2000, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended June 30,
2001. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Elcor Corporation
and subsidiaries as of June 30, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 2001, in conformity with accounting principles generally accepted in
the United States.

/s/ Arthur Andersen LLP
- -----------------------
Arthur Andersen LLP

Dallas, Texas
August 13, 2001

This is a copy of the audit report previously issued by Arthur Andersen LLP for
the consolidated balance sheet as of June 30, 2001 and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended June 30, 2001. This audit report has not been
reissued by Andersen in connection with this annual report. See Item 9 and
Exhibit 23.2 for further information.

- 33 -

ELKCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

($ In thousands) June 30,
-------------------------
Assets 2003 2002
---------- ----------

Current Assets
Cash and cash equivalents $ 5,056 $ 12,436
Trade receivables, less allowance of $1,029 and $734 120,268 94,764
Inventories 54,094 46,910
Prepaid expenses and other 6,723 9,474
Deferred income taxes 2,654 5,727
---------- ----------
Total current assets 188,795 169,311
---------- ----------

Property, Plant and Equipment, at Cost
Land 5,243 5,290
Buildings 91,514 90,896
Machinery and equipment 228,617 223,246
Construction in progress 43,007 1,263
---------- ----------
368,381 320,695
Less - Accumulated depreciation (131,114) (114,216)
---------- ----------
Property, plant and equipment, net 237,267 206,479
---------- ----------

Other Assets 16,075 5,638
---------- ----------
$ 442,137 $ 381,428
========== ==========

Liabilities and Shareholders' Equity

Current Liabilities
Accounts payable $ 35,971 $ 27,418
Accrued liabilities 19,568 24,655
---------- ----------
Total current liabilities 55,539 52,073
---------- ----------

Long-Term Debt 152,526 119,718
---------- ----------

Deferred Income Taxes 37,544 33,545
---------- ----------

Commitments and Contingencies (See Note)

Shareholders' Equity
Common stock ($1 par, 19,988,078 shares issued) 19,988 19,988
Paid-in capital 57,331 58,419
Unearned compensation - unvested restricted stock (385) --
Accumulated other comprehensive income -- 31
Retained earnings 126,969 106,772
---------- ----------
203,903 185,210
Less - Treasury stock (451,185 and 527,076 shares at cost) (7,375) (9,118)
---------- ----------
Total shareholders' equity 196,528 176,092
---------- ----------
$ 442,137 $ 381,428
========== ==========

The Summary of Significant Accounting Policies and Notes to Consolidated
Financial Statements are an integral part of these statements.

- 34 -

ELKCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

($ In thousands, except per share data) Year Ended June 30,
----------------------------------------
2003 2002 2001
---------- ---------- ----------

Sales $ 506,146 $ 506,526 $ 379,156
---------- ---------- ----------

Costs and Expenses

Cost of goods sold 406,579 410,277 313,605
Selling, general and administrative 60,253 59,391 48,197
Noncash stock option compensation (benefit) (5,378) 6,034 --
---------- ---------- ----------
Income From Operations 44,692 30,824 17,354
---------- ---------- ----------

Other Income (Expense)

Interest expense (6,184) (6,192) (3,494)
Other 207 105 103
---------- ---------- ----------

Income Before Income Taxes 38,715 24,737 13,963

Provision for income taxes 14,615 9,644 5,201
---------- ---------- ----------

Net Income $ 24,100 $ 15,093 $ 8,762
========== ========== ==========

Income Per Common Share:
Basic $ 1.24 $ .78 $ .45
========== ========== ==========
Diluted $ 1.23 $ .77 $ .45
========== ========== ==========

The Summary of Significant Accounting Policies and Notes to Consolidated
Financial Statements are an integral part of these statements.

- 35 -

ELKCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

($ In thousands) Year Ended June 30,
----------------------------------------
2003 2002 2001
---------- ---------- ----------

Cash Flows From Operating Activities

Net income $ 24,100 $ 15,093 $ 8,762
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization, including $3,360 of
impairment in 2002 18,471 21,331 13,697
Deferred income taxes 7,072 5,183 4,374
Changes in assets and liabilities, net of acquisition:
Trade receivables (25,324) (21,104) (1,948)
Inventories (6,956) 4,106 (10,051)
Prepaid expenses and other 2,830 (987) (4,175)
Accounts payable 8,553 (9,741) 1,125
Accrued liabilities (5,087) 13,780 (1,378)
---------- ---------- ----------
Net cash provided by operating activities 23,659 27,661 10,406
---------- ---------- ----------

Cash Flows From Investing Activities

Additions to property, plant and equipment (49,378) (11,378) (38,543)
Acquisition of business (2,224) -- --
Other, net (773) 741 127
---------- ---------- ----------
Net cash used for investing activities (52,375) (10,637) (38,416)
---------- ---------- ----------

Cash Flows From Financing Activities

Proceeds from sale of Senior Notes 25,000 120,000 --
Long-term debt borrowings (repayments) on Revolving
Credit Facility, net -- (123,300) 32,000
Dividends paid on common stock (3,903) (3,873) (3,851)
Treasury stock transactions, net 231 2,739 (4,713)
Other, net 8 (282) --
---------- ---------- ----------
Net cash provided by (used for) financing activities 21,336 (4,716) 23,436
---------- ---------- ----------

Net Increase (Decrease) in Cash and Cash Equivalents (7,380) 12,308 (4,574)
Cash and Cash Equivalents at Beginning of Year 12,436 128 4,702
---------- ---------- ----------
Cash and Cash Equivalents at End of Year $ 5,056 $ 12,436 $ 128
========== ========== ==========

The Summary of Significant Accounting Policies and Notes to Consolidated
Financial Statements are an integral part of these statements.

- 36 -

ELKCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

($ In thousands, except per share data)
Accumulated
Other Total
Comprehensive Common Paid-in Retained Treasury Unearned Comprehensive Shareholders'
Income Stock Capital Earnings Stock Compensation Income Equity
------------- ------- ------- -------- -------- ------------ ------------- -------------

BALANCE, June 30, 2000 $19,988 $58,480 $ 90,641 $ (7,205) $ -- $ -- $161,904

Net income and
comprehensive income $ 8,762 -- -- 8,762 -- -- -- 8,762
=======
Treasury stock purchases -- -- -- (5,436) -- -- (5,436)
Exercises of stock options,
net of tax benefit of $148 -- (112) -- 835 -- -- 723
Dividends, $.20 per share -- (3,851) -- -- -- (3,851)
------- ------- -------- -------- ------- ------- --------

BALANCE, June 30, 2001 19,988 58,368 95,552 (11,806) -- -- 162,102

Net income $15,093 -- -- 15,093 -- -- -- 15,093
Unrealized gains on
derivatives, net of tax 31 -- -- -- -- -- 31 31
-------
Comprehensive income $15,124
=======
Exercises of stock options,
net of tax benefit of $757 -- 51 -- 2,688 -- -- 2,739
Dividends, $.20 per share -- -- (3,873) -- -- -- (3,873)
------- ------- -------- -------- ------- ------- --------

BALANCE, June, 30, 2002 19,988 58,419 106,772 (9,118) -- 31 176,092

Comprehensive income:
Net income $24,100 -- -- 24,100 -- -- -- 24,100
Derivative transactions,
net of tax (31) -- -- -- -- -- (31) (31)
-------
Comprehensive income $24,069
=======
Exercises of stock options,
net of tax benefit of $0 -- (925) -- 1,156 -- -- 231
Restricted stock grants -- (163) -- 587 (424) --
Restricted stock vesting -- -- -- -- 39 -- 39
Dividends, $.20 per share -- -- (3,903) -- -- -- (3,903)
------- ------- -------- --------- ------- ------- --------

BALANCE, June 30, 2003 $19,988 $57,331 $126,969 $(7,375) $ (385) $ -- $196,528
======= ======= ======== ======== ======= ======= ========

The Summary of Significant Accounting Policies and Notes to Consolidated
Financial Statements are an integral part of these statements.

- 37 -

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Effective September 1, 2002, the company changed its corporate name from
Elcor Corporation to ElkCorp to better identify itself with the Elk brand name
of its principal Building Products subsidiaries.

The Building Products segment consists of Elk Premium Building Products,
Inc. and its operating subsidiaries (collectively Elk). These companies
manufacture (1) premium laminated fiberglass asphalt shingles, (2) coated and
non-coated nonwoven fabrics used in asphalt shingles and other applications in
the building and construction, filtration, floor coverings and other industries,
and (3) beginning with an October 2002 business acquisition, nontoxic wood
composite decking, marine dock and fencing products. Building Products accounted
for 92% of consolidated sales in fiscal 2003.

In fiscal 2003, operating profit from the company's Engineering,
Technologies business, which provides proprietary technologies and related
engineering services to the natural gas processing industry as Ortloff
Engineers, LTD (Ortloff), exceeded 10% of consolidated operating profit. In
accordance with Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an
Enterprise and Related Information," this business is required to be presented
as a separate segment because it exceeded this quantitative threshold. This
business has not historically met the 10% reporting test nor is it typically
expected to in the future.

Other, Technologies consists of the company's other operations. These
dissimilar operations are combined, as none individually meet the materiality
criteria for separate segment reporting. Other, Technologies includes (1) the
operating subsidiaries of Cybershield, Inc. (collectively Cybershield), which
apply precise conductive metal coatings to plastic components utilized in
electronics enclosures to control the electromagnetic and radio frequency
emissions of such devices, and to create circuitry and antennae for digital
cellular phones, consumer electronics, and other electronic products; and, (2)
Chromium Corporation (Chromium), which is a leading provider of hard chrome and
other surface finishes designed to extend the life of steel machinery components
operating in abrasive environments. A third operation, Elk Technologies, Inc.,
develops and markets fabrics featuring VersaShield fire retardant coatings
designed for use outside of traditional building products applications,
including home furnishings and other consumer products. This business has not
yet produced significant commercial sales.

PRINCIPLES OF CONSOLIDATION / USE OF ESTIMATES

The consolidated financial statements include the accounts of the company
and all subsidiaries after elimination of significant intercompany balances and
transactions. The consolidated financial statements are prepared in conformity
with accounting principles generally accepted in the United States of America
and require management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements. They also affect
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ significantly from those estimates upon subsequent
resolution of the identified matters.

- 38 -

CASH AND CASH EQUIVALENTS

Cash equivalents are highly liquid investments purchased with an original
maturity of, or which are subject to redemption in, three months or less. Cash
equivalents were $5,000,000 at June 30, 2003 and $12,400,000 at June 30, 2002.

CONCENTRATION OF CREDIT RISK

The majority of the company's sales are in the Building Products segment,
which accounted for 92% of consolidated sales in fiscal 2003. Its primary
customers are building materials distributors. The ten largest Building Products
customers typically account for 40% to 50% of annual consolidated sales. One
customer accounted for 17%, 17% and 20% of consolidated sales in fiscal years
2003, 2002 and 2001, respectively. The company performs ongoing credit
evaluations and maintains reserves for potential credit losses.

REVENUE RECOGNITION

Significant revenue recognition policies are as follows:

- Manufactured Products - Revenue is recognized at the time products
are shipped to customers. All risks and rewards of ownership pass to
the customer upon shipment. Damaged or defective products may be
returned for replacement or credit. In Building Products, sales
volume rebates or contractual allowance payments are offered to
customers based on their level of sales activity. The effects of
returns, discounts and other incentives are estimated and recorded
at the time of shipment. Volume rebates and allowances are estimated
and recorded as a reduction of sales.

- Service Revenues - Service revenues and related expenses are
immaterial and are not disaggregated in the financial statements.
When services are provided, generally by companies in Engineering,
Technologies and Other, Technologies, revenue is recognized as
services are performed.

- License Fees - License fees are generally recognized by Engineering,
Technologies when (a) a customer contracts for a nonexclusive
license to use the inventions covered by company patents; (b) there
are no remaining items relating to the license contract that have to
be accomplished by the company; and (c) the license fee is
nonrefundable. Licenses are granted without term on an individual
project basis.

FREIGHT COSTS

Freight costs for all reporting periods are included in cost of goods
sold.

- 39 -

INVENTORIES

Inventories are stated at the lower of cost (including direct materials,
labor, and applicable overhead) or market, using the first-in, first-out (FIFO)
method. The cost of raw materials inventories is reduced for volume rebates from
suppliers as such rebates are earned. Inventories are comprised of:

(In thousands)
June 30,
--------------------
2003 2002
-------- --------

Raw Materials $ 9,353 $ 9,484
Work-In-Process 94 538
Finished Goods 44,647 36,888
-------- --------
$ 54,094 $ 46,910
======== ========

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Major renewals and
improvements are capitalized, while maintenance and repairs are expensed when
incurred. Depreciation is computed over the estimated useful lives of
depreciable assets using the straight-line method. Useful lives for property and
equipment are as follows:

Buildings and improvements 10 - 40 years
Machinery and equipment 5 - 20 years
Computer equipment 3 - 6 years
Office furniture and equipment 5 - 12 years

During 2003, 2002 and 2001, the company recorded to expense $18,405,000,
$17,869,000 and $13,603,000, respectively, in depreciation expense.

The cost and accumulated depreciation for property, plant and equipment
sold, retired, or otherwise disposed of are relieved from the accounts, and
resulting gains or losses are reflected in income. Interest is capitalized in
connection with the construction of major projects. The capitalized interest is
recorded as part of the asset to which it relates and is amortized over the
asset's estimated useful life. In fiscal 2003 and 2001, $995,000 and $5,337,000
of interest cost was capitalized, respectively. In 2002, no interest cost was
capitalized.

GOODWILL AND OTHER INTANGIBLE ASSETS

In March 2002, all unamortized goodwill was written off in connection with
the consolidation of Cybershield's operations. There is no recorded goodwill at
June 30, 2003. Future goodwill and other intangibles with indefinite useful
lives, when recorded, will not be amortized but will be tested at least annually
for impairment. The effect of the adoption of SFAS 142, "Goodwill and Other
Intangible Assets," is immaterial to prior years presented in this report.

- 40 -

PATENTS

Patents are amortized over their useful lives. Patent amortization expense
is immaterial.

LONG-LIVED ASSETS

Effective July 1, 2002, the company adopted SFAS No. 144, "Accounting for
the Impairment and Disposal of Long-Lived Assets." This statement superseded
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." SFAS No. 144 requires that long-lived
assets be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets is measured by comparing the carrying amount of an
asset to future undiscounted net cash flows expected to be generated by the
asset. These evaluations for impairment are significantly impacted by estimates
of revenues, costs and expenses and other factors. If these assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of these assets exceeds the fair value of
the assets. In fiscal 2002, in accordance with the provisions of SFAS No. 121,
the company recorded a $3,360,000 impairment charge for the write-down of
long-lived assets at Cybershield's Canton, Georgia manufacturing facility. The
impairment charge is included as a component of cost of sales in the
accompanying statement of operations.

INCOME TAXES

Deferred income taxes are provided to reflect temporary differences
between the financial reporting basis and the tax basis of the company's assets
and liabilities using presently enacted tax rates.

SUPPLEMENTAL CASH FLOWS

Supplemental cash flow amounts were as follows:

(In thousands)

Fiscal Year Ended June 30,
------------------------------
2003 2002 2001
---- ---- ----

Interest paid $7,256 $5,961 $9,280
Income taxes paid $5,415 $2,805 $3,284

- 41 -

ACCOUNTING FOR STOCK-BASED COMPENSATION

The company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and its related interpretations to measure compensation expense for
stock-based compensation plans. Refer to the Noncash Stock Option Compensation
footnote for a detailed description of the company's application of APB No. 25.
If compensation cost for stock-based compensation plans had been determined
under SFAS No. 123, "Accounting for Stock-Based Compensation," pro forma net
income, stock option compensation expense, and basic and diluted earnings per
common share for the fiscal years ended June 30, 2003, 2002 and 2001,
respectively, assuming all options granted in 1996 and thereafter were valued
using the Black-Scholes model, would have been as follows (in thousands, except
per share amounts):

Fiscal Year Ended
June 30,
------------------------------------------
2003 2002 2001
---------- ---------- ----------

Net income:

As reported $ 24,100 $ 15,093 $ 8,762

Add: Stock-based employee compensation
expense included in reported net income,
net of related tax effects
(3,496) 3,922 --

Deduct: Total stock-based compensation
expense determined under fair value based
method for all awards granted since
January 1, 1996, net of related tax effects (2,273) (3,975) (2,111)
---------- ---------- ----------
Pro forma $ 18,331 $ 15,040 $ 6,651
========== ========== ==========

Earnings per common share:

Basic - as reported $ 1.24 $ .78 $ .45

Basic - pro forma $ .94 $ .78 $ .34

Diluted - as reported $ 1.23 $ .77 $ .45

Diluted - pro forma $ .94 $ .77 $ .34

The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions for fiscal 2003, 2002 and 2001: dividend yields of 0.9%, 1.0% and
1.1%; risk-free interest rates of 5.1%, 5.1% and 6.2%; expected market price
volatility of .489, .420 and .432; and expected lives of options of 9.0 years.
Based on this model, the weighted-average fair value of stock options granted in
fiscal 2003, 2002 and 2001 was $15.52, $11.94 and $10.42, respectively, per
share.

- 42 -

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Derivatives are held from time to time as part of a formally documented
risk management program. No derivatives are held for trading purposes. The
company measures hedge effectiveness by formally assessing, on a quarterly
basis, the historical and probable future high correlation of changes in the
fair value or expected future cash flows of the hedged item. The ineffective
portions are recorded in other income or expense in the current period.

The company is required to purchase natural gas for use in its
manufacturing facilities. This purchase exposes the company to the risk of
higher natural gas prices. In November 2001, the company adopted an Energy Risk
Management Policy, and an Energy Committee was appointed to develop strategies
to manage the company's risks of adverse changes in the energy markets. The
company entered into hedge transactions to set the price relating to
approximately 50% of its anticipated use of natural gas not subject to fixed
rate contracts through October 2002. For this cash flow hedge, the fair value of
the derivative was recorded on the balance sheet. The effective portion of the
changes in the fair value of this derivative was recorded in other comprehensive
income and reclassified to cost of sales in the period in which earnings were
impacted by the hedged items. At June 30, 2002, Accumulated Other Comprehensive
Income was made up of $50,000 ($31,000 net of tax) relating to the cash flow
hedge of natural gas usage. At expiration, this hedge was not renewed. There are
no hedge commitments on natural gas at June 30, 2003. However, it is anticipated
that hedging strategies will likely be utilized in the future.

The Board of Directors and company management determined that prudent
interest rate strategy is to maintain a debt mix that is balanced between fixed
rate debt and variable rate debt. In June 2002, the company entered into an
interest rate swap to effectively convert the interest rate from fixed to
floating on $60,000,000 of debt through 2012. For this fair value hedge, both
the fair value of the derivative and the underlying hedged item are reported in
the balance sheet. Changes in the fair value of the derivative and the
underlying hedged item offset and are recorded each period in other income or
expense, as applicable. However, since the interest rate swap is 100% effective,
as defined, there is no net effect on the company's results of operations from
marking the interest rate swap to market.

The company is exposed to credit loss in the event of nonperformance by
counterparties on derivative instruments. Although nonperformance is possible,
the company does not anticipate nonperformance on the interest rate swap, as
this contract is, in management's opinion, with a creditworthy counterparty.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the company's cash, cash equivalents, trade
receivables, accounts payable, long-term debt and derivative instruments
approximate fair value.

ACCRUALS FOR LOSS CONTINGENCIES

Contingencies, or uncertainties, by their nature, require management to
exercise judgment both in assessing the likelihood that a liability has been
incurred as well as in estimating the amount of loss. Accruals are established
for loss contingencies when it is probable that a liability has been

- 43 -

incurred and the amount of loss can be estimated reasonably. Accrual balances
are reviewed and adjusted periodically based on management's judgment of changes
in specific facts and circumstances for each loss accrual. Key loss accruals for
the company include product warranties, litigation, environmental exposures and
self-insurance reserves.

NEW ACCOUNTING STANDARDS

In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This statement is effective for the company in fiscal 2004. SFAS
No. 143 requires legal obligations associated with the retirement of long-lived
assets to be recognized at their fair value at the time that the obligations are
incurred. Upon initial recognition of a liability, that cost is capitalized as
part of the related long-lived asset and allocated to expense over the useful
life of the asset. Based on current circumstances, the company does not believe
the adoption of SFAS No. 143 will have a material impact on the company's
financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at a date of a commitment to an exit or disposal plan. SFAS
No. 146 is to be applied prospectively to exit or disposal activities after
December 31, 2002. In August 2003, the company relocated its corporate office to
new leased space. In accordance with SFAS No. 146, total unexpired lease costs
of $653,000 on its previous leased space will be recorded to expense through
March 2004.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45). FIN 45 addresses the disclosures
to be made by a guarantor in its interim and annual financial statements about
its obligations under guarantees. FIN 45 also clarifies the requirements related
to the recognition of a liability by a guarantor at the inception of a guarantee
for the guarantor's noncontingent obligations associated with such guarantee.
The disclosure requirements of this interpretation are already effective and
disclosed in the Product Warranties and Acquisition footnotes. The initial
recognition and measurement provisions are applicable on a prospective basis for
guarantees issued or modified after December 31, 2002. The company does not
expect the adoption of the recognition and measurement provisions of FIN 45 to
have a material effect on its consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51" (FIN 46). FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective for all
new variable interest entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied for the first interim or annual period
beginning after June 15, 2003. The company has no current or planned variable
interest entities. Therefore, the adoption of FIN 46 had no impact on the
company's financial condition, results of operations or cash flows.

- 44 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS PER SHARE

Basic earnings per share were computed by dividing net income by the
weighted average number of shares of common stock outstanding during the year.
The reconciliation of basic earnings per share to diluted earnings per share is
shown in the following table:

(In thousands, except per share data)

Fiscal Year Ended June 30,
--------------------------------
2003 2002 2001
-------- -------- --------

Net income $ 24,100 $ 15,093 $ 8,762
======== ======== ========

Denominator for basic earnings per share-weighted average shares
outstanding 19,481 19,311 19,322

Effect of dilutive securities:
Restricted shares and employee stock options 119 346 171
-------- -------- --------

Denominator for dilutive earnings per share - adjusted weighted average
shares and assumed issuance of shares purchased under the incentive stock
option plan and vesting of restricted shares using the treasury stock
method 19,600 19,657 19,493
======== ======== ========

Basic earnings per share $ 1.24 $ .78 $ .45
======== ======== ========

Diluted earnings per share $ 1.23 $ .77 $ .45
======== ======== ========

LONG-TERM DEBT

(In thousands)
June 30, June 30,
2003 2002
---------- ----------

Senior Notes $ 145,000 $ 120,000
Fair value of interest rate swap 7,526 (282)
Revolving Credit Facility -- --
---------- ----------
$ 152,526 $ 119,718
========== ==========

In June 2002, the company issued $120,000,000 of Senior Notes (Notes) and
in March 2003, issued an incremental $25,000,000 in Notes. Of the Notes,
$25,000,000 mature in fiscal 2008 and carry a coupon rate of 4.69%, $60,000,000
mature in fiscal 2009 and carry a coupon rate of 6.99%, and $60,000,000 mature
in fiscal 2012 and carry a coupon rate of 7.49%. Interest is payable
semiannually on June 15 and December 15 of each year for $120,000,000 of Notes
and on July 15 and January 15 of each year for $25,000,000 of Notes. In
conjunction with the sale of the Notes in

- 45 -

June 2002, the company reduced its Revolving Credit Facility (Facility) to
$100,000,000 of primary credit, including up to a maximum of $10,000,000 in
letters of credit through November 30, 2005. No borrowings were outstanding on
the Facility at June 30, 2003, although letters of credit totaling $2,597,000
were outstanding.

Borrowings under the Facility bear interest at (1) the lender's prime
rate, or (2) at the company's option, a Eurodollar rate, in each case plus
specified basis points based on the company's leverage ratio, as defined, at
each quarter end. The Facility also provides for a commitment fee on the average
unused portion of the line and for fees payable in the face amount of letters of
credit issued under the Facility. The commitment fee and letter of credit fees
are also determined by the company's leverage ratio.

In June 2002, the company entered into an interest rate swap to
effectively convert the interest rate from fixed to floating on $60,000,000 of
Notes through 2012. For this fair value hedge, both the fair value of the
derivative and the underlying hedged item are reported in the balance sheet. At
June 30, 2003, the fair value of the derivative was $7,526,000 and this amount
was included in other assets and as an increase in the carrying value of
long-term debt. Changes in the fair value of the derivative and the underlying
hedged item offset and are recorded each period in other income or expense, as
applicable.

Both the Notes and the Facility require that the company maintain a
specified minimum consolidated net worth, and a maximum debt to capitalization
ratio, based on defined terms. The Facility also contains a minimum fixed charge
coverage ratio and the Notes contains a minimum interest coverage ratio, also
based on defined terms. At June 30, 2003, the company was in compliance with all
requirements. Dividend payments and stock repurchases are also limited to
certain specified levels by the Facility agreement.

The company has no off-balance sheet arrangements or transactions with
unconsolidated, limited purpose entities.

SHAREHOLDERS' EQUITY

Authorized common stock, par value $1.00, is 100,000,000 shares, of which
19,988,078 shares were issued at June 30, 2003. The Board of Directors is
authorized to issue up to 1,000,000 shares of preferred stock, without par
value, in one or more series and to determine the rights, preferences, and
restrictions applicable to each series. No preferred stock has been issued.

SHAREHOLDER RIGHTS PLAN

On May 26, 1998, the company's Board of Directors adopted a new
Shareholder Rights Plan which took effect when the existing rights plan expired
on July 8, 1998. Under the new plan, rights were constructively distributed as a
dividend at the rate of one right for each share of common stock of the company
held by the shareholders of record as of the close of business on July 8, 1998.
Until the occurrence of certain events, the rights are represented by and trade
in tandem with common stock. Each right will separate and entitle shareholders
to buy stock upon an occurrence of certain takeover or stock accumulation
events. Should any person or group (Related Person), other than certain bona
fide institutional investors to whom a 20% threshold applies, acquire beneficial

- 46 -

ownership of 15% or more of the company's common stock all rights not held by
the Related Person become rights to purchase one one-hundredth of a share of
preferred stock for $110 or $110 of ElkCorp common stock at a 50% discount. If
after such an event the company merges, consolidates or engages in a similar
transaction in which it does not survive, each holder has a "flip over" right to
buy discounted stock in the surviving entity.

Under certain circumstances, the rights are redeemable at a price of $0.01
per right. Further, upon defined stock accumulation events, the Board of
Directors has the option to exchange one share of common stock per right. The
rights will expire by their terms on July 8, 2008.

ACQUISITION

On October 16, 2002, a newly formed, wholly owned subsidiary of the
company purchased substantially all of the assets of Advanced Composites
Technologies, L.L.C. (ACT), a start-up stage manufacturer of advanced composite
building products. The total purchase price was $2,224,000, plus contingent
future earn-out payments based upon the profitability above certain thresholds
of the newly formed subsidiary. For five years, the contingent earn-out amount
is unlimited in amount and is calculated using a defined formula. The company is
currently unable to estimate an amount for maximum potential payment in the
first five years. If in the first five years, the total contingent earn-out
payments are less than $12,725,000, the obligation continues indefinitely, based
on the defined formula, limited however, so that total contingent payments
cannot exceed this amount. If in the first five years the total earn-out
payments exceed $12,725,000, then the payment obligation terminates at the end
of such five year period and no further payments are due. Existing cash
resources were used to fund the acquisition. Assets acquired included $180,000
in trade receivables, $228,000 in inventory, $79,000 in other current assets,
$1,123,000 in property and equipment and $614,000 in patents and other
intangibles. The operating results attributable to the acquired assets have been
included in the company's consolidated financial statements since the date of
acquisition. ACT's sales were not significant in its most recent fiscal year
prior to acquisition. The company has not made any earn-out payments to date.

PRODUCT WARRANTIES

The company provides its customers with limited warranties on certain
products. Limited warranties relating to products sold by the Building Products
segment generally range from 20 to 50 years. Warranties relating to the
Engineering, Technologies and Other, Technologies companies are not significant
to their operations. Warranty reserves are established based on known or
probable claims, together with historical experience factors. During 2003, 2002
and 2001, the company recorded to expense $2,853,000, $2,769,000 and $1,680,000,
respectively, in warranty claim settlements and reserves. The company
periodically assesses the adequacy of its recorded warranty liability and
adjusts the amount as necessary. Changes in the company's warranty liability
during the current year period were as follows:

(in thousands)
--------------------------
Fiscal Year Ended June 30,
--------------------------
2003 2002
-------- --------

Balance at beginning of year $ 2,395 $ 1,722
Amounts charged to expense 2,853 2,769
Warranty settlements (2,573) (2,096)
-------- --------
Balance at end of year $ 2,675 $ 2,395
======== ========

- 47 -

RESTRICTED STOCK AND STOCK OPTIONS

In October 2002, shareholders approved the 2002 ElkCorp Equity Incentive
Compensation Plan (Equity Incentive Compensation Plan), which provides for
grants of restricted stock to employees of the company. Grantees generally have
all rights of a shareholder except that unvested shares are held in escrow.
Restricted shares generally vest 20% per year over a five year restriction
period. In fiscal 2003, 25,535 restricted shares were granted at market prices
ranging from $15.45 to $20.40. At grant date, the value of restricted stock is
reflected as unearned compensation in shareholders' equity and is being
amortized over the applicable restriction period. In fiscal 2003, compensation
expense of $39,000 was recognized relating to restricted stock awards.

The company's Equity Incentive Compensation Plan also provides for the
granting of incentive and nonqualified stock options to directors, officers and
key employees of the company for purchase of the company's common stock. Stock
options are generally granted for a ten-year term. Options granted to officers
and key employees generally vest ratably over five years. Options granted to
directors vest at grant date.

Information relating to options is as follows:

Weighted
Number Option Price Average Option
of Shares Range per Share Price per Share
--------- --------------- ---------------

Outstanding at June 30, 2000 1,241,448 $5.39 - $34.25 $18.05
Granted 538,500 $11.31 - $19.94 $19.09
Cancelled (50,479) $7.56 - $28.04 $17.59
Exercised (58,935) $5.39 - $14.67 $ 8.49
---------
Outstanding at June 30, 2001 1,670,534 $7.56 - $34.25 $18.74
Granted 357,260 $17.20 - $26.04 $20.20
Cancelled (48,137) $8.44 - $28.04 $21.45
Exercised (278,011) $8.33 - $19.94 $11.47
---------
Outstanding at June 30, 2002 1,701,646 $7.56 - $34.25 $20.16
Granted 362,450 $15.45 - $27.93 $27.16
Cancelled (41,605) $19.94 - $27.93 $21.22
Exercised (23,480) $8.44 - $20.07 $ 9.75
---------
Outstanding at June 30, 2003 1,999,011 $7.56 - $34.25 $21.51
=========

The following table summarizes information about options outstanding at
June 30, 2003:

Options Outstanding Options Exercisable
----------------------------------------------------------------------------
Weighted-Average
---------------------------- Weighted
Range of Number Remaining Exercise Number Average
Exercise Prices Outstanding Contractual Life Price Exercisable Exercise Price
- --------------- ----------- ---------------- -------- ----------- --------------

$7.56 - $14.99 288,380 3.73 yrs. $11.53 241,128 $11.01
$15.00 - $22.50 940,396 7.30 yrs. $19.38 514,905 $19.28
$22.51 - $34.25 770,235 7.44 yrs. $27.85 344,782 $27.66

- 48 -

At June 30, 2003, 2002 and 2001, options for 1,100,815, 864,554, and
508,857 shares were exercisable, respectively. A total of 1,463,803, 665,006,
and 974,129 shares were reserved for future grants of stock options and
restricted stock at June 30, 2003, 2002 and 2001, respectively.

EMPLOYEE BENEFIT PLANS

The company's Employee Stock Ownership Plan (ESOP) became effective
January 1, 1981. Under the plan, the company may contribute a percentage of each
participant's annual compensation into a trust, either as treasury stock
contributions or cash, which is then used to purchase ElkCorp common stock.
Employees vest 20% after one year of employment and 20% per year thereafter,
with the stock distributed at retirement, death, disability, or as authorized by
the Plan Administrative Committee. Effective January 1, 1990, the company
established an Employee Savings Plan under Internal Revenue Code section 401(k).
Under the 401(k) Plan, the company may contribute a percentage of each
participant's annual compensation into the 401(k) Plan to be invested among
various defined alternatives at the participants' direction. Investment
alternatives under the 401(k) Plan do not include ElkCorp common stock. Vesting
of company contributions is in accordance with the same schedule as that of the
ESOP. All full-time employees, except those covered by plans established through
collective bargaining, are eligible for participation in the above plans after
meeting minimum service requirements.

Since 1998, the Board of Directors annually has authorized total
contributions of 5.0%, including forfeitures, of each participant's annual
compensation, as defined, split equally between the ESOP and 401(k) Plans. In
addition, the company contributes an additional $.50 for every $1.00 of employee
contributions into the 401(k) Plan limited to a maximum matching company
contribution of 2% of an employee's compensation. Total contributions charged to
expense for these plans were $3,769,000, $3,140,000 and $2,558,000, in 2003,
2002 and 2001, respectively.

Under the company's Stock/Loan Plan, which became effective July 1, 1975,
approximately 200 employees have been granted loans, based on a percentage of
their salaries and the performance of their operating units, for the purpose of
purchasing the company's common stock. Under the Stock/Loan Plan, a ratable
portion of the loans, which are unsecured, and any accrued interest are forgiven
and recognized as compensation expense over five years of continuing service
with the company. If employment is terminated for any reason except death,
disability or retirement, the balance of the loan becomes due and payable. Loans
outstanding at June 30, 2003 and 2002 totaling $2,035,000 and $1,105,000,
respectively, are included in other assets. In compliance with certain
provisions of the Sarbanes - Oxley Act of 2002, no loans were granted to
executive officers of ElkCorp in fiscal 2003. In lieu of stock loans, 25,535
shares of restricted stock were granted to executive officers.

NONCASH STOCK OPTION COMPENSATION

Prior to fiscal 2002, the company followed the "fixed" method of
accounting for all employee stock options under APB No. 25, "Accounting for
Stock Issued to Employees," and related interpretations, and the disclosure-only
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation."
Accordingly, no compensation expense was recorded prior to fiscal 2002 with
respect to the company's stock option plan, as options were granted with an
exercise price equal to the stock's fair market value at date of grant.

- 49 -

The company's 1998 Incentive Stock Option Plan (the 1998 Plan) contained a
cashless relinquishment provision that permitted an optionee to relinquish
vested options to the company in exchange for common shares having a current
market value equal to the net exercised market value of the relinquished
options. Under APB No. 25, the aforementioned cashless relinquishment feature
can cause options issued under the 1998 Plan to be considered stock appreciation
rights (SAR's) in substance, if not in form, unless past experience and economic
incentives indicate that optionees are more likely to exercise, rather than
relinquish, the options. Under APB No. 25, SAR's are accounted for using
"variable" accounting whereby income is charged (or credited) during each
accounting period to reflect any excess of the market value of shares underlying
vested SAR's, over the exercise price of vested SAR's.

It was never the company's intention to issue SAR's under the 1998 Plan.
Prior to March 2002, no optionee ever utilized the cashless relinquishment
alternative, and a total of only three optionees, none being executive officers
of the company, utilized this exercise alternative for a nominal number of
shares. The company believed that its prior use of "fixed" accounting for
options outstanding under the 1998 Plan was appropriate. However, in fiscal 2002
the company determined that options granted under the 1998 Plan should have been
accounted for using "variable" option accounting. Noncash stock compensation
expense of $6,034,000 ($3,922,000 net of tax, or $.20 per diluted share) was
recorded in fiscal 2002. The impact of variable accounting on each year prior to
fiscal 2002 was not material.

In keeping with the company's original intent, effective August 13, 2002,
the Compensation Committee of the Board of Directors terminated the availability
of the relinquishment alternative under the 1998 Plan, thereby removing any
question regarding the appropriateness of "fixed" accounting for these employee
stock options thereafter. Based on this action, together with a decline in the
company's share price subsequent to June 30, 2002, the company recorded a
reversal of fiscal 2002 noncash stock option compensation expense of $5,378,000
($3,496,000, net of tax, or $.18 per diluted share) in the first quarter of
fiscal 2003. Subsequent to August 13, 2002, the company is again utilizing the
"fixed" method of stock option accounting.

COMMITMENTS AND CONTINGENCIES

The company and its subsidiaries lease certain office space, facilities,
and equipment under operating leases, expiring on various dates through 2017.
Total rental expense was $3,746,000 in 2003, $2,912,000 in 2002, and $2,436,000
in 2001. At June 30, 2003, future minimum rental commitments under
noncancellable operating leases, payable over the remaining lives of the leases,
are:

(In thousands)
Minimum Rental
Fiscal Year Commitments
----------- -----------

2004 $1,866
2005 1,547
2006 1,113
2007 1,016
2008 948
Thereafter 8,032
-----------
Total $14,522
===========

- 50 -

In conjunction with the construction of a new shingle plant at Tuscaloosa,
Alabama, the company has commitments for purchase orders and construction
contracts totaling $25,011,000 at June 30, 2003.

The company and its subsidiaries are involved in various legal actions and
claims, including claims arising in the ordinary course of business. Based on
advice from legal counsel, management believes such litigation and claims will
be resolved without material adverse effect on the consolidated financial
statements.

Chromium has engaged in limited remediation activities at its former
plating operation in Lufkin, Texas. Soil sampling results from a pre-closing
environmental evaluation of the site indicated the necessity of localized
cleanup. Chromium has entered the property into the Texas Voluntary Cleanup
Program (VCP). Under this program, the Texas Commission on Environmental Quality
(TCEQ) reviews the voluntary cleanup plan the applicant submits, and, when the
work is complete, issues a certificate of completion, evidencing cleanup to
levels protective of human health and the environment and releasing prospective
purchasers and lenders from liability to the state. Properties entered into the
VCP are protected from TCEQ enforcement actions.

Under the VCP, Chromium submitted a testing program, which the TCEQ has
approved, for a supplemental groundwater and soil assessment at the facility.
This program was designed to, among other things, further define the cleanup
requirements at the site. Once the investigation is complete, Chromium intends
to clean up the site under the VCP to a site specific risk-based cleanup
standard as prescribed by the Texas Risk Reduction Program. Preliminary results
from recent groundwater and soil assessments indicate that there has been no
environmental impairment beyond company property boundaries or to any
groundwater. However, until Chromium has the final results from its supplemental
assessment and TCEQ approval of a cleanup plan, the range of costs to remediate
the site are not determinable, nor can the company determine at this point in
time if it is reasonably possible that it will incur material additional costs
at the site. If a remediation plan similar to a plan successfully used at
another Chromium plant is approved by TCEQ, remediation costs will be immaterial
to the company's consolidated results of operations, financial position and
liquidity. However, other potential scenarios, none of which are reasonably
expected at this time, could potentially result in material costs to the
company. By December 31, 2003 management currently believes that a range of
exposure may be determinable. Therefore, the company currently believes
sufficient information for establishing a reserve for this environmental
exposure in accordance with SFAS No. 5, "Accounting for Contingencies," may be
available by December 31, 2003, and further anticipates that it may be in a
position at that time to determine if it is reasonably possible that the company
will incur material additional costs with regard to this site.

The company's operations are subject to extensive federal, state and local
laws and regulations relating to environmental matters. Other than the possible
costs associated with the previously described Chromium matter, 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 manufacturing operations
utilize hazardous materials in their production processes. As a result, the
company incurs costs for recycling or disposal of such materials and may incur
costs for remediation activities at its facilities and off-site from time to
time. The company establishes and maintains reserves for such known remediation
activities in accordance with SFAS No. 5 when appropriate.

- 51 -

SETTLEMENT WITH VENDOR

In fiscal 2002, the company reached a cash settlement relating to a
dispute with a vendor and the company recorded $5,625,000 of nonrecurring
income. The cash settlement primarily represented a reimbursement of costs
previously recorded to expense as selling, general and administrative costs.
This cash settlement was recorded as a reduction of selling, general and
administrative costs in fiscal 2002.

PLANT CLOSURE COSTS

In fiscal 2002, the company's Cybershield subsidiary consolidated its
operations. Accordingly, the Georgia facility was closed, and certain employees
and manufacturing equipment transferred to Cybershield's Texas facility. In
fiscal 2002, the company recorded a charge of $5,273,000, including noncash
costs of $3,600,000 (primarily related to the impairment of property, plant and
equipment and goodwill, and an inventory write-down) and other costs of
$1,673,000 (primarily related to severance, relocation costs and the settlement
of a dispute with a customer concerning certain inventory produced at the
Georgia facility for that customer). The charge is included as a component of
cost of sales in fiscal 2002. Remaining assets, all of which are held for sale,
include $4,000,000 of land and buildings and $1,411,000 of idle equipment. These
amounts are included in other assets.

In fiscal 2000, all operations of Chromium Corporation's reciprocating
engine components business at the Lufkin, Texas facility were transferred to the
Cleveland, Ohio plant. Costs to relocate equipment and other consolidation items
of approximately $750,000 were incurred and recorded to cost of sales in fiscal
2001.

ACCRUED LIABILITIES

Accrued liabilities consist of the following:

(In thousands)
June 30,
----------------------
2003 2002
-------- --------

Product warranty reserves $ 2,675 $ 2,395
Self-insurance reserves 1,488 1,061
Compensation and employee benefits 5,481 8,585
Noncash stock option compensation 656 5,896
All other 9,268 6,718
-------- --------
$ 19,568 $ 24,655
======== ========

- 52 -

INCOME TAXES

The company's effective tax rate was 37.8% in 2003, 39.0% in 2002, and
37.3% in 2001. The difference between the federal statutory tax rate and the
effective tax rate is reconciled as follows:

2003 2002 2001
-------- -------- --------

Federal statutory tax rate 35.0% 35.0% 35.0%
Change in tax rate resulting from:
State income taxes, net of federal tax effect 2.4% 3.2% 1.0%
Miscellaneous items .4% .8% 1.3%
-------- -------- --------
37.8% 39.0% 37.3%
======== ======== ========

Components of the income tax provisions consist of the following:

(In thousands)
2003 2002 2001
-------- -------- --------

Federal:
Current $ 7,319 $ 3,661 $ 568
Deferred, net 6,382 5,183 4,374
State 914 800 259
-------- -------- --------
$ 14,615 $ 9,644 $ 5,201
======== ======== ========

The significant components of the company's deferred tax assets and liabilities
are summarized below:

(In thousands)
2003 2002 2001
-------- -------- --------

Deferred tax assets:
Accrued liabilities, difference in
expense recognition $ 2,648 $ 4,249 $ 1,683
Receivables, bad debt reserve 360 257 345
Inventories, difference in capitalization 1,179 979 1,346
Alternative minimum taxes paid -- -- 530
Nonqualified deferred compensation plan 525 262 73
Asset impairment 861 1,115 --
Other 71 -- --
-------- -------- --------
5,644 6,862 3,977
-------- -------- --------

Deferred tax liabilities:
Fixed assets, primarily depreciation method
differences and deferred testing costs (38,412) (34,660) (26,612)
Deferred license fees (2,122) -- --
Other -- (20) --
-------- -------- --------
(40,534) (34,680) (26,612)
-------- -------- --------

Net deferred tax liability $(34,890) $(27,818) $(22,635)
======== ======== ========

- 53 -

In August 2003, the Internal Revenue Service (IRS) completed audits of the
company's consolidated tax returns through fiscal 2001. A notice of proposed
adjustment disallowing the timing of certain deductions for tax years 1998
through 2001 was rendered in connection with these audits. If the entire
proposed adjustment were upheld, $2,900,000 of income tax receivable would be
converted to approximately $3,700,000 of income tax payable and noncurrent
deferred income taxes would be reduced by approximately $6,600,000. The proposed
adjustment would have no impact on net income or earnings per share. The company
does not agree with the IRS proposed adjustments and believes its tax positions
are supportable and consistent with the applicable provisions of the Internal
Revenue Code. The company currently intends to appeal the IRS proposed
adjustments. Accordingly, the company has not made any reclassification of
deferred income taxes to taxes currently payable resulting from the IRS proposed
adjustments.

- 54 -

FINANCIAL INFORMATION BY COMPANY SEGMENTS

Segment information for fiscal 2002 and 2001 has been restated to conform
to the fiscal 2003 presentations.

(In thousands)
2003 2002 2001
--------- --------- ---------

SALES
Building Products $ 467,002 $ 459,673 $ 335,971
Engineering, Technologies 10,693 6,829 2,203
Other, Technologies 28,451 40,024 40,886
Corporate -- -- 96
--------- --------- ---------
$ 506,146 $ 506,526 $ 379,156
========= ========= =========
INCOME FROM OPERATIONS
Building Products $ 45,901 $ 53,325 $ 25,539
Engineering, Technologies 5,773 3,129 (533)
Other, Technologies (1,593) (7,483) 1,190
Corporate (5,389) (18,147) (8,842)
--------- --------- ---------
44,692 30,824 17,354
Other income 207 105 103
Interest expense (6,184) (6,192) (3,494)
--------- --------- ---------
Income before income taxes $ 38,715 $ 24,737 $ 13,963
========= ========= =========
IDENTIFIABLE ASSETS
Building Products $ 376,110 $ 314,668 $ 297,727
Engineering, Technologies 11,317 2,612 586
Other, Technologies 26,825 31,560 40,522
Corporate 27,885 32,588 21,213
--------- --------- ---------
$ 442,137 $ 381,428 $ 360,048
========= ========= =========
DEPRECIATION AND AMORTIZATION
Building Products $ 13,738 $ 13,239 $ 8,991
Engineering, Technologies 72 76 50
Other, Technologies, including $3,360
impairment in 2002 1,836 5,314 1,981
Corporate 2,825 2,702 2,675
--------- --------- ---------
$ 18,471 $ 21,331 $ 13,697
========= ========= =========
CAPITAL EXPENDITURES
Building Products $ 47,528 $ 9,161 $ 33,385
Engineering, Technologies 48 10 32
Other, Technologies 390 1,816 4,856
Corporate 1,412 391 270
--------- --------- ---------
$ 49,378 $ 11,378 $ 38,543
========= ========= =========

- 55 -

PRODUCT SALES

The following table summarizes sales by product category, excluding
intercompany sales:

(In thousands)
2003 2002 2001
-------- -------- --------

Premium roofing $435,036 $415,659 $309,721
Performance nonwoven fabrics 30,726 44,014 26,250
Composite building products 1,240 -- --
Technology licensing and consulting fees 10,693 6,829 2,203
Conductive metal coatings 21,019 31,195 29,528
Hard chrome and other surface finishes 7,417 8,829 11,358
Other 15 -- 96
-------- -------- --------
$506,146 $506,526 $379,156
======== ======== ========

QUARTERLY SUMMARY OF OPERATIONS

(Unaudited, $ in thousands, except per share amounts)

First Quarter Second Quarter Third Quarter Fourth Quarter
------------------- ------------------- ------------------- -------------------
2003 2002 2003 2002 2003 2002 2003 2002
-------- -------- -------- -------- -------- -------- -------- --------

Sales $120,082 $143,219 $109,063 $113,128 $129,772 $119,175 $147,229 $131,004
Gross Profit 24,654 26,715 19,932 23,021 24,222 19,330(1) 30,759 27,183(1)
Net Income 8,996 4,900 2,816 1,263 4,462 5,127(2) 7,826 3,803
Net Income per Share:
Basic .46 .25 .14 .07 .23 .26 .40 .20
Diluted .46 .25 .14 .07 .23 .26 .40 .19

(1) In the third quarter and fourth quarter of fiscal 2002, gross profit
was reduced by $4,851 ($2,959 net of tax) and $422 ($257 net of
tax), respectively, for plant closure costs and related items
pertaining to closing Cybershield's Canton, Georgia facility.

(2) Net income in the third quarter of fiscal 2002 included $5,625
($3,431 net of tax) relating to a favorable cash settlement with a
vendor.

- 56 -

REPORT OF INDEPENDENT AUDITORS
ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors
of ElkCorp:

Our audits of the consolidated financial statements referred to in our report
dated August 13, 2003 appearing in the 2003 Annual Report on Form 10-K of
ElkCorp also included an audit of the financial statement schedule information
for the years ended June 30, 2003 and 2002 listed in Item 15(a)(2) of this Form
10-K. In our opinion, this financial statement schedule information presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. The financial
statement schedule of ElkCorp for the year ended June 30, 2001 was audited by
other independent accountants who have ceased operations. Those independent
accountants expressed an unqualified opinion on that financial statement
schedule information in their report dated August 13, 2001.

/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP

Dallas, Texas
August 13, 2003

- 57 -

INDEPENDENT AUDITORS' REPORT
ON SUPPLEMENTAL SCHEDULE
DATED JUNE 30, 2001(1)

To the Shareholders and Board of Directors of Elcor Corporation:

We have audited in accordance with auditing standards generally
accepted in the United States, the accompanying consolidated financial
statements of Elcor Corporation and have issued our report thereon dated
August 13, 2001. Our audits were made for the purpose of forming an
opinion on those statements taken as a whole. The Supplemental Schedule II
is the responsibility of the company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth herein in relation to
the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP
-----------------------
Arthur Andersen LLP

Dallas, Texas
August 13, 2001

(1) The company has not been able to obtain, after reasonable efforts, the
reissued report of Authur Andersen LLP related to the 2001 financial
statement schedule. Therefore, a copy of their previously issued report is
included. See Item 9 and Exhibit 23.2 for further information.

- 58 -

ELKCORP AND SUBSIDIARIES
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 2003, 2002, AND 2001

(Dollars in thousands)

Column A Column B Column C Column D Column E
-------- -------- ---------------------- -------- --------
Additions Deductions
---------------------- ----------
Charged For Purposes
Balance at to Costs For Which Balance at
Beginning of and Reserves Were End of
Description Period Expenses Other Created Period
----------- ------ ------- ------- ------- ------

Year Ended June 30, 2003

CONSOLIDATED:
Allowance for
doubtful accounts $ 734 $ 349 $--- $ (54) $1,029
====== ======= ======= ======= ======
Allowance for
inventory
obsolescence $ 492 $ 217 $--- $ (408) $ 301
====== ======= ======= ======= ======
Year Ended June 30, 2002

CONSOLIDATED:
Allowance for
doubtful accounts $ 985 $ 439 $--- $ (690) $ 734
====== ======= ======= ======= ======
Allowance for
inventory
obsolescence $ 126 $ 366 $--- $ -- $ 492
====== ======= ======= ======= ======
Year Ended June 30, 2001

CONSOLIDATED:
Allowance for
doubtful accounts $ 963 $ 200 $--- $ (178) $ 985
====== ======= ======= ======= ======
Allowance for
inventory
obsolescence $ 126 $ -- $--- $ -- $ 126
====== ======= ======= ======= ======

- 59 -

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

The company determined, for itself and on behalf of its subsidiaries, to
dismiss its independent auditors, Arthur Andersen LLP (Andersen) and to engage
the services of PricewaterhouseCoopers LLP (PwC) as its new independent
auditors. The change in auditors was approved by the audit committee of the
Board of Directors and the Board of Directors of the company and was effective
as of May 2, 2002. As a result, PwC audited the consolidated financial
statements of the company and its subsidiaries for the fiscal years ended June
30, 2002 and 2003.

Andersen's report on the company's consolidated financial statements for
the fiscal year ended June 30, 2001, did not contain an adverse opinion or
disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit
scope or accounting principles. During the fiscal year ended June 30, 2001, and
through May 2, 2002 (the Relevant Period), (1) there were no disagreements with
Andersen on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
Andersen's satisfaction, would have caused Andersen to make reference to the
subject matter of the disagreement(s) in connection with the company's
consolidated financial statements for such years; and (2) there were no
reportable events as described in Item 304(a)(1)(v) (Reportable Events) of the
Commission's Regulation S-K. The company provided a copy of the foregoing
statements to Andersen.

During the Relevant Period, neither the company nor anyone acting on its
behalf consulted with PwC regarding (1) the application of accounting principles
to a specified transaction, completed or proposed, or the type of audit opinion
that might be rendered on the company's consolidated financial statements, or
(2) any matters or reportable events as set forth in Items 304(a)(2)(i) and (ii)
of Regulation S-K.

The company has been unable to obtain, after reasonable efforts, Arthur
Andersen's written consent to the company's incorporation by reference into its
registration statements of Arthur Andersen's audit report with respect to the
company's financial statements as of June 30, 2001 and for the year then ended.
Under these circumstances, Rule 437a under the Securities Act of 1933 permits
the company to file this Form 10-K without a written consent from Arthur
Andersen. As a result, however, Arthur Andersen will not have any liability
under Section 11(a) of the Securities Act for any untrue statements of a
material fact contained in the financial statements audited by Arthur Andersen
or any omissions of a material fact required to be stated therein. Accordingly,
you would be unable to assert a claim against Arthur Andersen under Section
11(a) of the Securities Act for any purchases of securities under the company's
registration statements made on or after the date of this Form 10-K. To the
extent provided in Section 11(b)(3)(C) of the Securities Act, however, other
persons who are liable under Section 11(a) of the Securities Act, including the
company's officers and directors, may still rely on Arthur Andersen's original
audit reports as being made by an expert for purposes of establishing a due
diligence defense under Section 11(b) of the Securities Act.

- 60 -

ITEM 9A. CONTROLS AND PROCEDURES

a) Evaluation of Disclosure Controls and Procedures

The company completed an evaluation, under the supervision and with
the participation of management, including the Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the company's disclosure controls and
procedures pursuant to Exchange Act Rules 13a-14 and 15d-14 as of
the end of the period covered by this report. Based upon that
evaluation, the Chief Executive Officer and the Chief Financial
Officer concluded that the company's disclosure controls and
procedures are effective to timely alert them to any material
information relating to the company (including its consolidated
subsidiaries) that must be included in the company's periodic SEC
filings.

b) Changes in Internal Controls

There have been no significant changes in the company's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.

- 61 -

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

Information concerning the Directors of the company required by this item
is incorporated herein by reference to the material under the caption "Election
of Directors" on pages 7 and 8 of the company's Proxy Statement dated September
19, 2003 (Proxy Statement). Information concerning compliance with Section 16(a)
of the Securities and Exchange Act is incorporated herein by reference to the
material under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" on page 20 of the Proxy Statement. Information concerning the
Executive Officers of the company is contained in Item 1 of this report in Item
4A, under the caption "Executive Officers of the Company" on pages 11 and 12 of
this Annual Report on Form 10-K. Information concerning the company's code of
ethics is incorporated herein by reference to the material under the caption
"Code of Financial Ethics" on page 20 of the Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference
to the information under the caption "Executive Compensation" on pages 11
through 20 of the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated herein by reference
to the information under the caption "ElkCorp Stock Ownership" and "Equity
Compensation Plan Information" on pages 3 through 4 and page 19, respectively,
of the Proxy Statement. The company is aware of no material change in the
beneficial ownership of any officer, director or beneficial owner of five
percent or more of any class of its voting stock since the date such information
was provided for the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this item is incorporated herein by reference to
the material under the captions "Compensation Committee Interlocks and Insider
Participation" and "Stock/Loan Balances" on pages 5 through 6 and on page 17 of
the Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated herein by reference
to the information under the caption "Audit Fees" on page 10 of the Proxy
Statement.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

(A) 1.Financial Statements

The following financial statements of the company are set forth in Item 8
of this Annual Report on Form 10-K:

Report of Independent Auditors
Independent Auditors' Report
Consolidated Balance Sheets at June 30, 2003, and 2002
Consolidated Statements of Operations for the years ended
June 30, 2003, 2002 and 2001
Consolidated Statements of Cash Flows for the years ended
June 30, 2003, 2002, and 2001
Consolidated Statements of Shareholders' Equity for the years
ended June 30, 2003, 2002, and 2001
Summary of Significant Accounting Policies
Notes to Consolidated Financial Statements

2.Financial Statement Schedules

Report of Independent Auditors
Independent Auditors' Report
Schedule II - Consolidated Valuation and Qualifying Accounts

All other schedules are omitted because they are not required, are not
applicable, or the information is included in the financial statements or notes
thereto.

3.Executive Compensation Plans and Arrangements

The following is a list of all executive compensation plans and
arrangements required to be filed as an exhibit to this report:

1. Amended and Restated Elcor Corporation Employee Stock/Loan Plan
filed as Exhibit 10.2 hereto and incorporated by reference to
Exhibit 10.2 in the Registrant's Annual Report on Form 10-K for the
year ended June 30, 1998 (File No. 1-5341).

2. 2002 ElkCorp Equity Incentive Compensation Plan filed as Exhibit
10.3 hereto and incorporated by reference to Appendix A in the
Registrant's Proxy Statement dated September 20, 2002 (File 1-5341).

3. Deferred Compensation Plan filed as Exhibit 10.4 hereto and
incorporated by reference to Exhibit 10.4 in the Registrant's Annual
Report on Form 10-K for the year ended June 30, 2000 (File No.
1-5341).

- 63 -

B. Reports on Form 8-K

The company filed two Forms 8-K in the fourth quarter of fiscal 2003 as
follows: On April 22, 2003, the company filed a Form 8-K relating to a press
release containing "forward-looking statements" about its prospects for the
future and certain other information concerning the company's disclosures under
Regulation F-D. On May 19, 2003, the company filed a Form 8-K regarding
adjusting previously reported revenue and earnings for reporting periods ended
March 31, 2003.

C. Exhibits

**3.1 The Restated Certificate of Incorporation of the company,
filed as Exhibit 3.1 to the company's Annual Report on Form
10-K for the year ended June 30, 1994 (File No. 1-5341).

**3.11 Certificate of Amendment to Certificate of Incorporation
dated December 2, 1998 (file No. 1-531).

*3.2 Bylaws of the company, as amended, filed herewith.

**4.1 Form of Rights Agreement dated as of July 7, 1998,
between the company and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent, which includes as
Exhibits A and B thereto the Forms of Certificate of
Designation, Preferences and Rights of Series A
Participating Preferred Stock, Rights Certificate, filed
as Exhibit 4.1 to the company's current Report on Form
8-K dated May 26, 1998 (File No. 1-5341).

**4.12 Credit Agreement dated as of November 30, 2000 among the
company, Bank of America, N.A., as Administrative Agent,
Swing Line Lender and L/C Issuer, Bank One, Texas, N.A., as
Documentation Agent, First Union National Bank, as
Syndication Agent, The Other Lenders Party Hereto, and Bank
of America Securties LLC, as Sole Lead Arranger and Sole
Book Manager, filed as Exhibit 4.12 in the company's
Quarterly Report on Form 10-Q for the quarter ended December
31, 2000 (File No. 1-5341).

**4.13 First Amendment to Credit Agreement dated as of March 31,
2001 among the company, Bank One, N.A., as Documentation
Agent, First Union National Bank, as Syndication Agent, and
Bank of America, N.A., as Administrative Agent, Swing Line
Lender and L/C Issuer, filed as Exhibit 4.13 in the
company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2001 (File No. 1-5341).

- 64 -

**4.14 Note Purchase Agreement dated as of June 1, 2002 for the
sale of $120,000,000 Aggregate Principal Amount of Senior
Notes as filed as Exhibit 4.14 in the company's Form 8-K
dated June 10, 2002 (File No. 1-5341).

**4.15 Note Purchase Agreement dated as of March 1, 2003 for the
sale of $25,000,000 Aggregate Principal Amount of Senior
Notes, filed as Exhibit 4.15 to the company's current Report
on Form 8-K dated March 18, 2003 (File No. 1-5341).

**4.16 Second Amendment to Credit Agreement dated as of June 5,
2002 among the company, Bank One, N.A., as Documentation
Agent, First Union National Bank, as Syndication Agent, and
Bank of America, N.A., as Administrative Agent, Swing Line
Lender and L/C Issuer filed as Exhibit 4.16 in to the
company's Quarterly Report on Form 10-Q in the quarter ended
March 31, 2003 (File No. 1-5341).

**4.17 Third Amendment to Credit Agreement dated as of February
20, 2003 among the company, Bank One, N.A., as
Documentation Agent, Wachovia Bank, N.A., as Syndication
Agent, and Bank of America, N.A., as Administrative
Agent, Swing Line Lender and L/C Issuer filed as Exhibit
4.17 in the company's Quarterly Report on Form 10-Q in
the quarter ended March 31, 2003 (File No. 1-5341).

**4.18 Fourth Amendment to Credit Agreement dated as of March 7,
2003 among the company, Bank One, N.A., as Documentation
Agent, and Bank of America, N.A., as Administrative Agent,
Swing Line Lender and L/C Issuer filed as Exhibit 4.18 in
the company's Quarterly Report on Form 10-Q in the quarter
ended March 31, 2003 (File No. 1-5341).

**10.1 Form of Executive Agreement filed as Exhibit 10.1 in the
company's Annual Report on Form 10-K for the year ended June
30, 1998 (File No. 1-5341).

**10.2 Amended and Restated Elcor Corporation Employee Stock/Loan
Plan filed as Exhibit 10.2 in the company's Annual Report on
Form 10-K for the year ended June 30, 1998 (File No.
1-5341).

**10.3 2002 ElkCorp Equity Incentive Compensation Plan filed as
Appendix A in the company's Proxy Statement dated September
20, 2002 (File 1-5341).

**10.4 Deferred Compensation Plan filed as Exhibit 10.4 in the
company's Annual Report on Form 10-K for the year ended June
30, 2000 (File No. 1-5341).

* 21 Subsidiaries of the Company.

- 65 -

* 23.1 Consent of Independent Accountants.

* 23.2 Information Concerning Consent of Arthur Andersen LLP

* 31.1 Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.

* 31.2 Certification of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.

* 32.1 Certificate of the Chief Executive Officer of ElkCorp
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* 32.2 Certificate of the Chief Financial Officer of ElkCorp
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

- ----------
* Filed herewith.

** Incorporated by reference.

- 66 -

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

ElkCorp

Date September 26, 2003 By /s/ Harold R. Beattie, Jr.
--------------------------
Harold R. Beattie, Jr.
Senior Vice President,
Chief Financial Officer
and Treasurer

By /s/ Leonard R. Harral
--------------------------
Leonard R. Harral
Vice President and Chief
Accounting Officer

- 67 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below in multiple counterparts by the following persons
on behalf of the company and in the capacities and on the date indicated.

Signature Title Date
--------- ----- ----

/s/ Thomas D. Karol Chairman of the Board, September 26, 2003
- -------------------------- Chief Executive Officer
Thomas D. Karol and Director

/s/ Richard A. Nowak President, Chief Operating September 26, 2003
- -------------------------- Officer and Director
Richard A. Nowak

/s/ Harold R. Beattie, Jr. Senior Vice President, September 26, 2003
- -------------------------- Chief Financial Officer
Harold R. Beattie, Jr. and Treasurer

/s/ Leonard R. Harral Vice President and September 26, 2003
- -------------------------- Chief Accounting Officer
Leonard R. Harral

/s/ James E. Hall Director September 26, 2003
- --------------------------
James E. Hall

/s/ Dale V. Kesler Director September 26, 2003
- --------------------------
Dale V. Kesler

/s/ Michael L. McMahan Director September 26, 2003
- --------------------------
Michael L. McMahan

/s/ David W. Quinn Director September 26, 2003
- --------------------------
David W. Quinn

/s/ Harold K. Work Director September 26, 2003
- --------------------------
Harold K. Work

- 68 -

INDEX TO EXHIBITS

**10.1 Form of Executive Agreement filed as Exhibit 10.1 in the
company's Annual Report on Form 10-K for the year ended June
30, 1998 (File No. 1-5341).

**10.2 Amended and Restated Elcor Corporation Employee Stock/Loan
Plan filed as Exhibit 10.2 in the company's Annual Report on
Form 10-K for the year ended June 30, 1998 (File No.
1-5341).

**10.3 2002 ElkCorp Equity Incentive Compensation Plan filed as
Appendix A in the company's Proxy Statement dated September
20, 2002 (File 1-5341).

**10.4 Deferred Compensation Plan filed as Exhibit 10.4 in the
company's Annual Report on Form 10-K for the year ended June
30, 2000 (File No. 1-5341).

* 21 Subsidiaries of the Company.

* 23.1 Consent of Independent Accountants.

* 23.2 Information Concerning Consent of Arthur Andersen LLP

* 31.1 Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.

* 31.2 Certification of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.

* 32.1 Certificate of the Chief Executive Officer of ElkCorp
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* 32.2 Certificate of the Chief Financial Officer of ElkCorp
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

- ----------
* Filed herewith.

** Incorporated by reference.