ELKCORP - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


		For the quarterly period ended March 31, 2005


o		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

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 þ. No o.

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

As of the close of business on April 29, 2005, the Registrant had outstanding 20,162,741 shares of Common Stock, par value $1 per share.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ELKCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Unaudited, $ in thousands, except share and per share data)


	March 31,			June 30,
	2005			2004
Assets
Current Assets
Cash and cash equivalents	$	39,157		$	273
Trade receivables, less allowance of $695 and $605		162,358			121,091
Inventories –
Finished goods		55,206			49,800
Work-in-process		159			160
Raw materials		15,290			12,169

Total inventories		70,655			62,129

Prepaid expenses and other assets		10,045			8,587
Deferred income taxes		3,721			7,359
Discontinued operations		404			5,096

Total current assets		286,340			204,535

Property, Plant and Equipment, at Cost		436,964			404,743
Less — accumulated depreciation		(151,081	)		(133,635	)

Property, plant and equipment, net		285,883			271,108

Other Assets		12,046			5,065

	$	584,269		$	480,708

Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	48,769		$	37,247
Accrued liabilities		32,241			25,419
Current maturities on long-term debt		385			—
Discontinued operations		159			531

Total current liabilities		81,554			63,197

Long-Term Debt		198,000			156,858
Deferred Income Taxes		49,908			45,611
Shareholders’ Equity -
Common stock ($1 par, 20,023,161 and 19,988,078 shares issued, respectively)		20,023			19,988
Additional paid-in capital		65,230			57,852
Unearned compensation – unvested restricted stock and performance stock awards		(7,308	)		(628	)
Retained earnings		176,965			143,540

		254,910			220,752
Less — Treasury stock (2,484 and 288,220 shares, respectively, at cost)		(103	)		(5,710	)

Total shareholders’ equity		254,807			215,042

	$	584,269		$	480,708

See accompanying notes to consolidated financial statements.

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ELKCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, $ in thousands
except per share data)


	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2005			2004			2005			2004
Sales	$	204,976		$	131,947		$	563,519		$	414,894


Cost and Expenses
Cost of sales		158,010			105,401			444,462			327,873
Selling, general and administrative		20,109			15,435			52,801			45,515


Income from Operations		26,857			11,111			66,256			41,506


Interest Expense, Net		2,614			1,185			7,090			3,899


Income From Continuing Operations Before Income Taxes		24,243			9,926			59,166			37,607
Provision for income taxes		8,916			3,724			22,187			14,289

Income From Continuing Operations		15,327			6,202			36,979			23,318

Loss From Discontinued Operations, Net of Income Taxes		(30	)		(2,144	)		(547	)		(10,966	)


Net Income	$	15,297		$	4,058		$	36,432		$	12,352


Income (Loss) Per Share – Basic
Income from continuing operations	$	.77		$	.32		$	1.88		$	1.19
Discontinued operations		—			(.11	)		(.03	)		(.56	)

Net income	$	.77		$	.21		$	1.85		$	.63


Income (Loss) Per Share – Diluted
Income from continuing operations	$	.75		$	.31		$	1.83		$	1.17
Discontinued operations		—			(.11	)		(.03	)		(.55	)

Net income	$	.75		$	.20		$	1.80		$	.62


Dividends Per Common Share	$	.05		$	.05		$	.15		$	.15


Average Common Shares Outstanding (000’s)
Basic		19,784			19,633			19,718			19,588

Diluted		20,482			20,009			20,184			19,914

See accompanying notes to consolidated financial statements.

- 2 -

ELKCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, $ in thousands)


	Nine Months Ended
	March 31,
	2005			2004
Cash Flows From Operating Activities

Income from continuing operations	$	36,979		$	23,318
Adjustments to reconcile income from continuing operations to net cash provided by continuing operations:

Depreciation and amortization		17,451			13,332
Deferred income taxes		7,934			2,288
Stock based compensation		2,272			75
Changes in assets and liabilities, net of acquisition:
Trade receivables		(44,914	)		5,652
Inventories		(8,476	)		(7,430	)
Prepaid expenses and other		(1,458	)		(2,182	)
Accounts payable and accrued liabilities		18,344			(9,815	)


Net cash provided by continuing operations		28,132			25,238
Net cash provided by discontinued operations		3,773			2,706

Net cash provided by operating activities		31,905			27,944


Cash Flows From Investing Activities

Additions to property, plant and equipment		(32,157	)		(47,449	)
Acquisition of company		(471	)		—
Other, net		(1,154	)		(357	)

Net cash used for investing activities		(33,782	)		(47,806	)


Cash Flows From Financing Activities

Proceeds from sale of Senior Notes		50,000			—
Borrowings (repayments) on Revolving Credit Facility, net		(10,300	)		16,200
Dividends on common stock		(3,007	)		(2,950	)
Proceeds from stock option exercises and other, net		4,068			1,877

Net cash provided by financing activities		40,761			15,127


Net Increase (Decrease) in Cash and Cash Equivalents		38,884			(4,735	)

Cash and Cash Equivalents at Beginning of Year		273			5,056


Cash and Cash Equivalents at End of Period	$	39,157		$	321

See accompanying notes to consolidated financial statements.

- 3 -

ELKCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 - General

The attached condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. As a result, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The company believes that the disclosures included herein are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2004. The unaudited financial information contained herein has been prepared in conformity with accounting principles generally accepted in the United States of America on a consistent basis and does reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the results of operations for the three-month and nine-month periods ended March 31, 2005 and 2004. Because of, among other things, seasonal, weather-related conditions in some of the company’s market areas, sales can vary at times, and results of any one quarter or other interim reporting period should not necessarily be considered as indicative of results for a full fiscal year.

Note 2 – Company Segments

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) composite wood decking, marine dock, fencing and railing products. Building Products accounted for 98% and 97% of consolidated sales in the nine-month periods ended March 31, 2005 and 2004, respectively.

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) 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, (2) Ortloff Engineers, LTD (Ortloff), which provides proprietary technologies and selected engineering services to the natural gas processing industry, and (3) Elk Technologies, Inc., 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.

- 4 -

Financial information by company segment is summarized as follows:


	(In thousands)						(In thousands)
	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2005			2004			2005			2004
Sales from Continuing Operations
Building Products	$	199,529		$	127,804		$	551,914		$	404,213
Other, Technologies		5,447			4,143			11,605			10,681

	$	204,976		$	131,947		$	563,519		$	414,894


Operating Profit from Continuing Operations
Building Products	$	31,044		$	13,517		$	78,693		$	50,329
Other, Technologies		921			814			342			1,516
Corporate		(5,108	)		(3,220	)		(12,779	)		(10,339	)

		26,857			11,111			66,256			41,506
Interest expense, net		2,614			1,185			7,090			3,899

Income from continuing operations before income taxes	$	24,243		$	9,926		$	59,166		$	37,607


Depreciation and Amortization
Building Products	$	4,791		$	3,654		$	14,306		$	10,826
Other, Technologies		184			195			539			520
Corporate		1,001			686			2,606			1,986

	$	5,976		$	4,535		$	17,451		$	13,332


Capital Expenditures
Building Products	$	10,185		$	12,679		$	30,281		$	43,253
Other, Technologies		32			46			274			186
Corporate		743			1,346			1,602			4,010

	$	10,960		$	14,071		$	32,157		$	47,449


	March 31,		June 30,
	2005		2004
Identifiable Assets
Building Products	$	497,189	$	428,246
Other, Technologies		22,490		19,860
Corporate		64,186		27,506
Discontinued Operations		404		5,096

	$	584,269	$	480,708

- 5 -

Note 3 – Product Sales

The following table summarizes sales from continuing operations by product category, excluding intercompany sales, for the three-month and nine-month periods ended March 31, 2005 and 2004:


	(In thousands)				(In thousands)
	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2005		2004		2005		2004
Premium roofing	$	185,309	$	117,700	$	511,749	$	376,499
Performance nonwoven fabrics		9,494		8,007		29,197		23,474
Composite building lumber		4,726		2,097		10,968		4,240
Technology licensing and consulting fees		3,105		1,811		4,537		4,698
Hard chrome and other surface finishes		2,153		2,289		6,813		5,938
Fire retardant coatings		189		43		255		45

	$	204,976	$	131,947	$	563,519	$	414,894

Note 4 – Earnings Per Share

Basic earnings per share is computed based on the average number of common shares outstanding. Diluted earnings per share includes outstanding stock options and unvested restricted shares. In accordance with SFAS No. 128, “Earnings Per Share,” diluted earnings per share from discontinued operations presented on the Consolidated Statements of Operations was computed utilizing the same number of potential common shares used in computing the diluted per share amount for income from continuing operations, regardless of whether those amounts were antidilutive to their respective basic per share amounts. The following table sets forth the computation of basic and diluted earnings per share from continuing operations:


	(In thousands except per share amounts)
	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2005		2004		2005		2004
Income from continuing operations	$	15,327	$	6,202	$	36,979	$	23,318

Denominator for basic earnings per share – weighted average shares outstanding		19,784		19,633		19,718		19,588
Effect of dilutive securities:
Unvested restricted shares and employee stock options		698		376		466		326

Denominator for dilutive earnings per share – adjusted weighted average shares and assumed issuance of shares purchased under incentive stock option plan and vesting of restricted shares using the treasury stock method		20,482		20,009		20,184		19,914

Basic earnings per share from continuing operations	$	.77	$	.32	$	1.88	$	1.19

Diluted earnings per share from continuing operations	$	.75	$	.31	$	1.83


		Page
Part I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of March 31, 2005 and June 30, 2004		1
	Consolidated Statements of Operations for the Three Months and Nine Months Ended March 31, 2005 and 2004		2
	Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2005 and 2004		3
	Notes to Consolidated Financial Statements		4-13

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14-25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		26

Item 4.	Controls and Procedures		26

Part II. OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		27

Item 6.	Exhibits		28

SIGNATURES			29
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

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