ElkCorp and Subsidiaries

Annual Report on Form 10-K

For Fiscal Year Ended June 30, 2004

TABLE OF CONTENTS

PART I

Item 1. Business

General

     ElkCorp, which is referred to as “we,” “our,” “the registrant,” and “the company” in this report, is a Delaware corporation incorporated in 1965, having its principal executive offices in Dallas, Texas. Shares of ElkCorp’s common stock are traded on the New York Stock Exchange under the ticker symbol – ELK.

     We maintain an Internet website at http://www.elkcorp.com. In the Investor Relations section of the web site, we post 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 Relations 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. Additionally, our key committee charters, corporate governance guidelines and code of business conduct and ethics are available on our website and in print upon request. 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.

Financial Information About Industry Segments

     Financial information by industry segment is presented in Part II. Financial Statements and Supplemental Data on page 43 of this report.

Building Products

     Through Elk Premium Building Products, Inc. and its subsidiaries (collectively Elk), we are engaged in the manufacture of premium roofing products, performance nonwoven fabrics and composite building products. The Building Products segment is our primary business, accounting for 97%, 96% and 97% of consolidated sales in fiscal 2004, 2003 and 2002, respectively.

     Premium Roofing Products

     Roofing products are premium laminated fiberglass asphalt shingles and accessory roofing products for steep slope applications. We manufacture these products at plants located in (1) Ennis, Texas, (2) Shafter, California, (3) Myerstown, Pennsylvania, and (4) Tuscaloosa, Alabama. In early fiscal 2003, we began construction of a second roofing plant at the Tuscaloosa, Alabama facility. Construction also included the installation of certain infrastructure and material handling improvements designed to enhance the efficiency of the overall Tuscaloosa facility. This new plant was completed ahead of schedule and under budget. Construction and testing of the new facility was completed in the quarter ended June 30, 2004 and placed in service on July 1, 2004. This new plant will increase company-wide capacity by approximately 25%.

     During fiscal 2004 we also completed significant production enhancements at the other roofing plants. The most significant of these improvements was the installation of additional packaging lines at the Shafter and Myerstown plants.

     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® Gallery Collection™, Prestique Plus High Definition®, Prestique I High Definition, Prestique High Definition, Prestique Raised Profile®, Capstone®, Domain® Winslow™, and Prestique Grandé 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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     Elk also offers starter-strip products, Seal-a-Ridge®, Z® Ridge, RidgeCrest™, Elk Highpoint™ hip and ridge products, a built-in Stainguard® treatment in some areas of the country, roof accessory paint for vent 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. 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 50% of annual consolidated sales. One customer, ABC Supply Co., Inc., the largest roofing wholesale distributor in the United States, accounted for 19% of our consolidated sales in fiscal 2004, 18% of consolidated sales in fiscal 2003, and 18% of consolidated sales in fiscal 2002.

     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 effort 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 the Peak Performance Contractor Program™ to reward top performing contractors for their brand loyalty and quality of service and has developed Elk Edge® seminars to educate contractors and build their affinity for our products.

     Even though the premium roofing products manufacturing business is highly competitive, we believe that Elk is a leading manufacturer of premium laminated fiberglass asphalt shingles. 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 laminated segment which accounts for 60% of all asphalt shingles sales. We believe we are the only major roofing manufacturer that entirely focuses on this segment of the sloped roof market. Elk’s plants generally are among the most modern and efficient plants in the industry. Accordingly, we believe this provides us with a competitive advantage in developing and maintaining manufacturing efficiencies. We believe that many of our 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.

     Performance Nonwoven Fabrics

     Elk’s performance nonwoven fabrics subsidiary is a leading manufacturer of nonwoven fiberglass shingle substrates and other products utilizing 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 Elk’s coated nonwoven products utilize our proprietary Versashield® fire barrier coatings.

     Performance nonwoven fabrics products are manufactured on two nonwoven fabric (or mat) lines that run in parallel at Elk’s Ennis, Texas facility.

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     During fiscal 2004, the majority of nonwoven fabrics produced by Elk were used in the manufacture of residential and commercial roofing and accessory products, and, of those, approximately two-thirds were consumed internally in the manufacture of Elk’s asphalt shingle and accessory roofing products. A smaller amount of nonwoven fabrics produced by Elk were used for other direct applications in building and construction, filtration, floor coverings and other industries. We continually conduct ongoing research and development activities targeted at expanding the market for our nonwoven fabrics manufacturing capability.

     Elk’s nonwoven fiberglass roofing mat facilities have the capacity to supply all of our 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. These arrangements are generally not affected by changing market conditions. Nonwoven fabrics are sold by Elk sales personnel and shipped by contract carrier to its other roofing plants and to its customers’ locations.

     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 2004, most 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.

     Composite Building Products

     Composite building products is a newly formed platform designed for rapidly growing traditional markets for advanced composite technology (decking, fencing, railing, building product structural components and accessories) and the development of new high-end non-asphaltic roofing products. Composite wood products are sold under the CrossTimbers™ 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.

     We are currently expanding and consolidating our capacity at the current Lenexa facility. Additional capacity from this $22,000,000 investment in the composite building products business is expected to be completed in December 2004.

     We believe that industry-wide sales of composite wood products currently account for approximately 7% of the estimated potential market for wood used in decking, fencing and railing applications. We anticipate 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 we do, but the market currently is generally fragmented without dominant competitors. We believe that our established building products distribution channels will enhance our ability to compete successfully in this market.

     Raw Materials

     In the Building Products segment, the significant raw materials are ceramic coated granules, asphalt, glass fibers, resins, mineral filler, polypropylene and wood particles. 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. Asphalt costs can be significantly affected by trends in oil prices and our cost of sales can vary as a result of changes in the price and availability of asphalt. Historically, we have been able to pass some of the higher raw material costs through to the customer.

     Transportation

     The majority of our building products are shipped by common carrier or by customer vehicles from our manufacturing plants or warehouses. Shipping costs are a significant component of cost of sales. Agreements with our common carriers typically allow for surcharges as a result of increasing oil prices. Further, carriers are subject to final rules issued in April 2003 by the U.S. Department of Transportation which govern truck drivers’ hours of service and have and will continue to impact our shipping costs. Historically, we have been able to pass along some of our higher transportation costs through to the customer, but there is no assurance of being able to do so in the future.

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     Backlog

     Backlog is not significant, nor is it material to our Building Products businesses.

     Strategies

     We strive to be the brand of choice in every aspect of our Building Products businesses. To accomplish this goal, we strive to develop and manufacture premium products with consistent quality and provide excellent service to our customers.

     The key objectives of the Building Products segment are summarized as follows:

	•		Utilize all existing roofing manufacturing capacity to fully leverage the capital investments in place.
	•		Develop an overall strategy and positioning of our “Brand” that further extends the Elk brand with our supply chain and extend it to reach the consumer.
	•		Improve our shingle operational effectiveness and further improve our raw material supply chain to achieve optimum cost.
	•		Utilize Elk’s existing nonwoven fabric capacity and develop applications into the potential Specialty Fabrics platform in fire retardants.
	•		Expand the composite lumber business as well as develop a 2nd generation superior product.
	•		Acquire new building product platforms that can leverage the Elk brand, complement the existing distribution channel or reinforce and expand existing technology.

     Extended Payment Terms

     Our Building Products businesses typically provide 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, 2004, $5,662,000 in receivables relating to such shipments were outstanding, all of which are due in the first quarter of fiscal 2005.

     Seasonal Business

     Our Building Products businesses are seasonal to the extent that cold, wet or icy weather conditions during the late fall and winter months in some of our marketing areas typically limit the installation of residential building products. This seasonality 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.

Other, Technologies

     Other, Technologies consists of our other operations. These dissimilar operations are combined, as none individually meets the materiality criteria for separate segment reporting. The businesses aggregated together as Other, Technologies accounted for 3%, 4% and 3% of consolidated sales in fiscal 2004, 2003 and 2002, respectively. The operations included as Other, Technologies are: (1) Ortloff Engineers, LTD (Ortloff), which provides proprietary technologies and related engineering services to the natural gas processing industry, (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. (Elk Technologies), which 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. Elk Technologies has produced nominal commercial sales to date.

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     Ortloff

     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 are used in a very significant number of turbo expander plant projects. Ortloff licenses technology covered by and related to patents owned by ElkCorp 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. In addition, 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 markets, and has entered into a Cooperative Marketing Agreement with UOP LLC and a global technology license agreement with a major international energy company to further leverage Ortloff’s worldwide coverage. Ortloff has initiated the first stages of a potential joint venture in China to allow further international exposure to its technology in key Asian markets.

     ElkCorp holds certain patents, which are significant to Ortloff’s operations. We believe that ElkCorp 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 LNG which it believes will provide considerable efficiency improvements in and cost savings for the design and construction of those facilities. However, we do 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 our overall business operations. We also believe that Ortloff has widely recognized expertise in the design 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.

     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 may exist in a project. Engineering consulting assignments are performed under consulting services agreements at negotiated rates.

     No raw materials are utilized in Ortloff’s consulting and technology licensing business.

     Chromium

     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 also manufactures wear plate products utilizing its proprietary CRODON® hard chrome finish. These wear plate 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.

     We believe 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. We believe it has smaller competitors in the locomotive diesel engine cylinder liner market, but competes with larger, 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.

     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. We believe 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. We have been advised by our suppliers that they maintain substantial inventories of chromic acid in order to minimize the potential effects of foreign interruption in ore supply.

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     Elk Technologies

     Elk Technologies, Inc.’s current areas of emphasis include fire retardant fabrics for mattresses, upholstered furniture, curtains and bed clothing. While these activities have produced nominal commercial sales to date, we believe that potentially significant demand for products utilizing this technology could result from trends toward more stringent flammability safety laws and regulations for mattresses and upholstered furniture.

     Strategies

     Our objectives for each of the Other, Technologies companies are listed below. While we intend to continue to position these companies for long-term profitability, we also intend to explore the potential sale of Ortloff and Chromium in fiscal 2005 to third parties whose operations are more synergistic, so that we can focus on our Building Products platforms.

     Ortloff

	•		Increase penetration of international markets through the UOP Cooperative Marketing Agreement, and other global licensing agreements in the cryogenic gas processing and sulfur recovery technologies.
	•		Further penetrate the LNG markets.
	•		Continue to generate patent licensing and consulting revenue and policing potential infringement of our patents.

Chromium

	•		Continue to offer plating and finishing services for pistons, valves and cylinder liners in existing locomotive and marine markets.
	•		Market locomotive products through the extensive sales network of the Electro-Motive Division of General Motors in international and specific domestic markets.
	•		Grow sales of hard-chrome wear plates designed for use in other industrial markets to 30% of Chromium's monthly sales.

     Elk Technologies

	•		Penetrate the mattress, bedding and upholstered furniture markets with fire retardant products. We believe the potential market for mattresses is 40 million mattresses per year. Up to three linear yards per mattress will likely be required.
	•		Continue to develop fire retardant technology for other markets.

Discontinued Operations

     Cybershield, Inc., through subsidiaries (collectively Cybershield) has been engaged in shielding plastic enclosures from electromagnetic and radio frequency interference. Products include EMI/RFI shielding, conductive gaskets, decorative paints, metal coatings and EXACT™ 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.

     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 Cybershield has no production facilities. Cybershield attempted to implement strategies to diversify its customer base among a wide spectrum of electronic device manufacturers serving the cellular, consumer, military, automotive, medical equipment, aerospace and other industries and to utilize a proprietary process (EXACT™) to metalize complex patterns of electroless conductive metals with great precision in three-dimensional plastic parts.

     In December 2003, we concluded that the risk and prospects for future success of Cybershield did not justify the additional investment of capital and other resources required to continue Cybershield’s operations. Progress towards replacing lost cellular revenue with revenue from other sources was progressing slower than anticipated, and the profit contribution from new commercial production of EXACT business was lower than contemplated. Accordingly, the decision was made to discontinue Cybershield and to sell its operations or its assets. We had previously decided to sell Cybershield’s Canton, Georgia facility. Therefore, the Canton, Georgia facility is included as a component of discontinued operations. As a result of these actions, Cybershield is classified as a discontinued operation in the Consolidated Financial Statements.

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     On August 10, 2004, we sold substantially all assets of Cybershield, excluding the Canton, Georgia facility, to the Cybershield management group for $1,293,000 in cash. The sale price approximated the book value of assets, net of assumed liabilities, at the date of sale.

Environmental Matters

     ElkCorp 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 our 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, our subsidiaries are subject to potential liability.

     We and our 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 clean up of property it owns or operates even if it did not contribute to the contamination of such property. From time to time, we or our 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, which is 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.

     Chromium completed a supplemental groundwater and soil assessment at the facility. The plan further defined the horizontal and vertical extent of metals in soils, assessed the horizontal extent of metals in groundwater, and estimated the direction of groundwater movement. Chromium submitted its Affected Property Assessment Report (“APAR”) to the TCEQ. In June 2004, the TCEQ issued a letter accepting Chromium’s APAR in substantially all respects, indicating that no further assessment of the extent of contamination was necessary. Chromium will now submit a proposed Remedial Action Plan (“RAP”) to the TCEQ in which it will propose activities and engineering controls to clean up the site under the VCP to a site specific risk-based cleanup standard as prescribed by the Texas Risk Reduction Program.

     Until the significant actions that will be included in the RAP are identified, the estimate of costs to remediate the site are not determinable, nor can we determine at this point in time if it is reasonably possible that we will incur material additional costs at the site. If a RAP similar to a plan successfully used at another Chromium plant is approved by TCEQ, remediation costs will be immaterial to our 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 us. We believe that sufficient information for establishing a reserve for this environmental exposure in accordance with SFAS No. 5, “Accounting for Contingencies,” may be available by the end of the first half of fiscal 2005, and further anticipate that we may be in a position at that time to determine if it is reasonably possible that we will incur material additional costs with regard to this site.

     Our 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, we

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do not believe we will be required to expend amounts which will have a material adverse effect on our consolidated results of operations, financial position or liquidity by reason of environmental laws and regulations. Such laws and regulations are frequently changed and could result in significantly increased cost of compliance. We anticipate that our 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. Further, certain of our manufacturing operations utilize hazardous materials in their production processes. As a result, we incur costs for recycling or disposal of such materials and may incur costs for remediation activities at our facilities and off-site from time to time. We establish and maintain reserves for such known or probable remediation activities in accordance with SFAS No. 5.

Persons Employed

     At June 30, 2004, we and our subsidiaries had 1,148 employees. Of this total, 859 were employed in the Building Products business segment, 101 were employed in Other, Technologies, 15 were employed by Cybershield (which was sold in August 2004), and 173 (including most sales personnel) were employed by the corporate office. Included in these totals are 144 employees in Building Products and 49 employees in Other, Technologies who were represented by labor unions. We believe that we have good relations with our employees and the labor unions.

Risks Relating To The Company

     Competitive Conditions

     Our building products businesses are 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 our 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.

     Higher Raw Materials, Energy and Transportation Costs

     In our building products businesses, the significant raw materials are ceramic-coated granules, asphalt, glass fibers, resins, mineral filler, polypropylene and wood particles. Increased costs of raw materials can result in reduced margins, as can higher energy, trucking and rail costs. Historically, we have been able to pass some of the higher raw material, energy and transportation costs through to the customer. Should we be unable to recover higher raw material, energy and/or transportation costs, including higher trucking costs resulting from recent regulatory changes in the trucking industry, from price increases of our products, operating results could be adversely affected and/or lower than projected.

     Temporary Shortages or Disruptions

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

     Productivity of New Facilities

     We have been involved in a significant expansion plan over the past several years, including the construction of new facilities and the expansion of existing facilities. Construction of the new Tuscaloosa, Alabama facility was completed in the fourth quarter of fiscal 2004. We expect that fixed operating costs will increase approximately $14,000,000 annually as a result of this new facility. However, we also believe that during fiscal 2005, higher asphalt shingle sales resulting from growth in market demand and expanded manufacturing capacity will offset these higher operating costs. Progress in achieving anticipated operating efficiencies and financial results

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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.

     Utilization of Hazardous Materials

     Certain facilities of our subsidiaries must utilize hazardous materials in their production process. As a result, we could incur costs for remediation activities at our facilities or off-site, and other related exposures from time to time in excess of established reserves for such activities.

     Litigation

     Our 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.

     Higher Interest Rates

     We currently anticipate that most of our needs for new capital in the near future will be met with internally generated funds, borrowings under our available credit facilities, and funding from the sale of $50,000,000 in Senior Notes scheduled to be closed in November 2004. Significant increases in interest rates could substantially affect our borrowing costs or our cost of alternative sources of capital.

     Technological Changes or Loss of Key Customers

     Each of our businesses 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 our technology, products and services, or the method and profitability of the method of distribution or delivery of such technology, products and services. In addition, our businesses each could suffer significant setbacks in revenues and operating income if we lost one or more of our largest customers, or if our customers’ plans and/or markets should change significantly.

     Physical Loss to Manufacturing Facilities

     Although we insure ourselves against physical loss to our 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 our 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.

     Development of New Products

     Each of our businesses is actively involved in the development of new products, processes and services which are expected to contribute to our ongoing long-term growth and earnings. Consumer products using VersaShield fire retardant coatings have produced nominal commercial sales to date. Its market potential may be dependent on the stringency of federal and state regulatory requirements, which are difficult to predict. Further, our composite decking and fencing products operation is producing and selling a new generation of voided embossed products. We believe that this new generation of products will allow this business to achieve sustained operating profitability. If such developmental activities are not successful, regulatory requirements are less stringent than currently predicted, market demand is less than expected, we experience unanticipated product performance issues, or we cannot provide the requisite financial and other resources to successfully commercialize such developments, the growth of future sales and earnings may be adversely affected.

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Item 2. Properties

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

     Building Products

     Asphalt building products are manufactured at plants located in Ennis, Texas; Shafter, California; Myerstown, Pennsylvania; and two adjacent plants in Tuscaloosa, Alabama. Fiberglass roofing mat, 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) Plant City, Florida, (3) Greenville, South Carolina, (4) Tacoma, Washington, and (5) 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 our corporate offices in Dallas, Texas.

     Other, Technologies

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

     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 our corporate offices in Dallas, Texas. Some administrative offices are located at the Cleveland, Ohio manufacturing facility. Elk Technologies operates out of administrative offices located at the same leased facility as our corporate offices in Dallas, Texas, and utilizes the services of the technology center located at our Ennis, Texas facility.

     Discontinued Operations

     Cybershield’s operating facility in Lufkin, Texas was sold on August 10, 2004. The Canton, Georgia facility was closed in fiscal 2002 and is held for sale.

     Corporate Offices

     In August 2003, our corporate headquarters was relocated to 14911 Quorum Drive, Suite 600, Dallas, Texas. The corporate headquarters is located in leased offices.

Item 3. Legal Proceedings

     There are various lawsuits and claims pending against ElkCorp and its subsidiaries arising in the ordinary course of their businesses. In the opinion of management, based in part on advice of counsel, none of these actions should have a material adverse effect on our 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, 2004.

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Item 4A. Executive Officers of the Registrant

     Certain information concerning our executive officers is set forth below:

     All of the executive officers except Mr. Karol have been employed by ElkCorp 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 ElkCorp 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 and flooring 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 ElkCorp’s Board of Directors since November 1998.

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

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PART II

Item 5. Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities

     The principal market on which our common stock is traded is the New York Stock Exchange. Our common stock is also traded on the Boston, Midwest and Philadelphia Stock Exchanges. There were 947 holders of record and approximately 4,600 beneficial owners of ElkCorp’s common stock on August 31, 2004.

     The quarterly dividend declared per share and the high and low sale prices per share of our common stock for each quarter during fiscal year 2004 and fiscal year 2003 are set forth in the following table:

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

     Limitations affecting the future payment of dividends are imposed as a part of our 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 our $125,000,000 Revolving Credit Facility, which extends through November 30, 2008. As of June 30, 2004, such limitation was $41,024,000 and actual cumulative expenditures for these items were $14,972,000.

     Equity Compensation Plan Information for ElkCorp is presented in Part III, Item 12 on page 47 of this Annual Report on Form 10-K.

     Issuer Purchase of Equity Securities for Quarter Ended June 30, 2004:

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	(1)		On September 28, 1998, the 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. On August 28, 2000, the Board of Directors authorized the repurchase of an additional $10,000,000 of common stock. No common stock was repurchased on the open market in fiscal 2004, as the most recent share repurchase under these authorizations was December 4, 2000. The authorizations did not specify an expiration date. Purchases may be increased, decreased or discontinued by the Board of Directors at any time without prior notice.
	(2)		As a result of participant diversification directives, the ElkCorp ESOP accumulated a surplus of unallocated shares. In June 2004, we purchased 25,009 shares from the ElkCorp ESOP. The dollar value of this repurchase transaction is reflected in the statement of shareholders’ equity but has no impact on previously announced repurchase programs outlined in (1) above.

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

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Executive Overview

     ElkCorp, through its subsidiaries, is a leading manufacturer of Elk premium roofing and other building products. In addition, our subsidiaries provide technologically advanced products and services to other industries. We strive to be the brand of choice in each of our businesses.

     Building Products is our dominant business, accounting for 97% of consolidated sales in fiscal 2004. Our 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) nontoxic composite wood decking, railing, marine dock and fencing products.

     The focus of these businesses is innovative product development, manufacturing excellence and superior customer service. We target our roofing products toward the steep-sloped roofing market. This market was favorable again in fiscal 2004 as Elk’s shingle shipments increased 14.2% compared to fiscal 2003 and average selling prices increased 2.8%. Higher raw material co