EX-99.1 3 d02553exv99w1.txt PRESS RELEASE EXHIBIT 99.1 Press Release dated January 16, 2003 of ElkCorp PRESS RELEASE TRADED: NYSE FOR IMMEDIATE RELEASE SYMBOL: ELK FOR FURTHER INFORMATION: Harold R. Beattie, Jr. Sr. Vice President, Chief Financial Officer and Treasurer (972) 851-0523 ELKCORP REPORTS SECOND QUARTER FISCAL 2003 RESULTS DALLAS, TEXAS, January 16, 2003 . . . . ElkCorp today reported net income of $2.8 million, or $0.14 per diluted share, for its seasonally slower second fiscal quarter ending December 31, 2002, compared to net income of $1.3 million, or $0.06 per share, during the same quarter last year. Sales during the quarter were $109.1 million, compared to $113.1 million during the same quarter last year. Effective August 13, 2002, ElkCorp changed its method of accounting for employee stock options from the variable to fixed method. This change resulted from ElkCorp's termination of a cashless relinquishment alternative, previously available under its 1998 Incentive Stock Option Plan. The use of variable stock option accounting during the year-ago December 2001 quarter resulted in $4.0 million of pre-tax, noncash stock option compensation expense that would have not been present under fixed stock option accounting. If ElkCorp had used fixed stock option accounting during the year-ago December 2001 quarter, pro forma income would have been $3.9 million, or $0.20 per share. Thomas D. Karol, ElkCorp's Chairman of the Board and Chief Executive Officer, said, "Stronger than expected shingle shipments during the second half of December, and lower than previously anticipated expenses and customer rebates, enabled us to exceed our more conservative earnings outlook of just several weeks ago. We are very pleased to end an otherwise very challenging quarter on a positive note," he said. SEGMENT OPERATING RESULTS Second quarter Building Products sales increased 1.7% to $98.6 million, compared to $97.0 million in the year-ago quarter. Operating profit was $7.5 million, compared to $9.7 million in the same quarter last year. Compared to the same quarter last year, higher sales reflected a 10.4% increased in unit shingle shipments, a 2.6% decline in average selling prices, a sales mix containing a higher proportion of lower value products, and /more PRESS RELEASE ElkCorp January 16, 2003 Page 2 lower external nonwoven mat sales. Lower external nonwoven volumes were largely offset by higher internal consumption of nonwoven mat utilized in the manufacture of roofing products. Comparable profit contributions are derived from both external and internal nonwoven consumption. Significantly higher asphalt costs ($2.5 million), unusually high litigation costs ($0.5 million), limited production of a new "beta" shingle product ($0.5 million), and start-up losses at Elk Composite Building Products ($0.5 million), reduced operating profit by a total of $4.0 million. Good expense control during the quarter resulted in lower controllable expenses. Second quarter sales for the Other, Technologies segment totaled $10.4 million, compared to $16.2 million in the year-ago quarter. Operating profit was $1.2 million, compared to $1.1 million in the same quarter last year. Seasonal increases in cellular handset related sales and growing sales momentum in other product categories resulted in a $0.2 million operating profit at Cybershield during the quarter. Ortloff recorded operating profit of $1.1 million and Chromium experienced an operating loss of $0.1 million during the quarter. FINANCIAL CONDITION At December 31, 2002, the principal amount of ElkCorp's long-term debt was $120.0 million. In June 2002, the company entered into an interest rate swap that effectively converted the interest rate from fixed to floating on $60.0 million of its long-term debt through 2012. At December 31, 2002, the fair market value of this interest rate hedge was approximately $5.4 million. Accounting rules require that this amount be recorded on the balance sheet as an increase in "other assets", offset by a corresponding increase in the carrying value of "long-term debt". Therefore, ElkCorp's balance sheet at December 31, 2002 reflects long-term debt of $125.4 million. ElkCorp has no off-balance sheet arrangements or transactions with unconsolidated, special purpose entities. At December 31, 2002, ElkCorp's liquidity consisted of $17.8 million of cash and cash equivalents and $97.4 million of available borrowings under a $100 million committed revolving credit facility. ElkCorp's debt to capital ratio (after deducting cash and marketable securities from ElkCorp's $120.0 million of principal debt) was 35.4%. OUTLOOK Mr. Karol said, "Surprising strength in our roofing shipments during the month of December was likely the result of a higher incidence of storm activity in some regions, and inventory purchases by distributors in advance of scheduled price increases and to hedge against potential asphalt shortages. Demand was particularly strong in West Coast markets and was probably related to the series of El Nino storms, containing heavy rain and strong winds, that affected the area. We expect to see continued strengthening in the roofing market during the coming spring and summer months. /more PRESS RELEASE ElkCorp January 16, 2003 Page 3 "It has become apparent that the extended paralysis of Venezuela's oil industry will result in asphalt shortages to the U.S. roofing industry. Asphalt in is in short supply in certain eastern markets and suppliers have begun to allocate available supplies to contractual customers based upon historical usage. As a result of our strong current inventory position, we do not expect that the current asphalt allocations will significantly impair our future sales. We do, however, expect that our near term asphalt costs could increase by $30-$40 per ton over December levels. Effective January 6, 2003, we implemented a 3% price increase intended to recover prior increases in our asphalt costs. We intend to implement another larger price increase in February 2003 to recover the latest round of asphalt cost escalation. We believe that current market conditions are conducive to our realization of both price increases. "During the quarter, we completed the assimilation of our new composite building products acquisition, and expanded and improved its product line for decking, transportation and other applications. We also purchased additional equipment to bring its manufacturing capacity up to a critical mass. By the end of March 2003, this entity will have the manufacturing capacity to generate $15-$20 million of annual sales and should begin contributing to profitability at that time. "We are very pleased with the progress made by Cybershield during the quarter, and believe we are on the right track to successfully reposition this business for sustained profitability. Ortloff's activity backlog is strong and we expect it will generate good, to potentially excellent, results over the remainder of fiscal 2003. We expect that Chromium's operating profits will improve during the second half the year as a result of increasing sales from new wear tile and abrasion plate products. "California has not yet announced its definitive new fire standard for mattress products. We currently expect a decision by the end of January 2003, with compliance being required by January 2004. We are hopeful that meaningful sales opportunities will begin to develop during the second half of calendar 2003. We continue to be very excited about the future market potential of our VersaShield TB 129 fire-barrier fabric. "Our earnings outlook for full fiscal year 2003 remains unchanged at $1.23 to $1.33 per diluted share ($1.05 to $1.15 per diluted share excluding first quarter income from variable stock option accounting), and we remain comfortable with the current analysts' consensus estimate of $0.23 per diluted share for our third fiscal quarter ending March 31, 2003," he concluded. /more PRESS RELEASE ElkCorp January 16, 2003 Page 4 CONFERENCE CALL ElkCorp will host a conference call tomorrow, Friday, January 17, 2003, at 11:00 a.m. Eastern time (10:00 a.m. Central time). The conference call will be broadcast live over the Internet. Interested parties can access the conference call through the ElkCorp website at www.elkcorp.com (Investor Relations / Calls & Presentations) or by visiting www.prnewswire.com. SAFE HARBOR PROVISIONS In accordance with the safe harbor provisions of the securities law regarding forward-looking statements, in addition to the historical information contained herein, the above discussion contains forward-looking statements that involve risks and uncertainties. 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, acts of God, war or terrorism, as well as the other risks detailed herein, and in the company's reports filed with the Securities and Exchange Commission, including but not limited to, its Form 10-K for the fiscal year ending June 30, 2002, and subsequent Forms 8-K and 10-Q. ---------- ElkCorp, through its subsidiaries, manufactures Elk brand premium roofing and building products (over 90% of consolidated sales) and provides technologically advanced products and services to other industries. Each of ElkCorp's principal operating subsidiaries is the leader or one of the leaders within its particular market. Its common stock is listed on the New York Stock Exchange (ticker symbol: ELK). /more PRESS RELEASE ElkCorp January 16, 2003 Page 5 CONDENSED RESULTS OF OPERATIONS (Unaudited, $ in thousands)
Trailing Three Months Ended Six Months Ended Twelve Months Ended December 31, December 31, December 31, 2002 2001 2002 2001 2002 2001 ---------- ---------- ---------- ---------- ---------- ---------- SALES $ 109,063 $ 113,128 $ 229,145 $ 256,347 $ 479,324 $ 453,215 ---------- ---------- ---------- ---------- ---------- ---------- COSTS AND EXPENSES: Cost of sales 89,131 90,107 184,559 206,611 388,225 372,505 Selling, general & administrative 13,970 15,421 28,072 30,461 57,002 54,671 Noncash stock option compensation 0 4,040 (5,378) 5,477 (4,821) 5,954 Interest expense, net 1,373 1,337 3,053 3,617 5,523 5,880 ---------- ---------- ---------- ---------- ---------- ---------- Total Costs and Expenses 104,474 110,905 210,306 246,166 445,929 439,010 ---------- ---------- ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 4,589 2,223 18,839 10,181 33,395 14,205 Provision for income taxes 1,773 960 7,027 4,018 12,653 5,539 ---------- ---------- ---------- ---------- ---------- ---------- NET INCOME $ 2,816 $ 1,263 $ 11,812 $ 6,163 $ 20,742 $ 8,666 ========== ========== ========== ========== ========== ========== INCOME PER COMMON SHARE-BASIC $ 0.14 $ 0.07 $ 0.61 $ 0.32 $ 1.07 $ 0.45 ========== ========== ========== ========== ========== ========== INCOME PER COMMON SHARE-DILUTED $ 0.14 $ 0.06 $ 0.60 $ 0.32 $ 1.05 $ 0.45 ========== ========== ========== ========== ========== ========== PRO FORMA INFORMATION: EXCLUDING NONCASH STOCK OPTION COMPENSATION - NET INCOME $ 2,816 $ 3,889 $ 8,316 $ 9,723 $ 17,608 $ 12,536 ========== ========== ========== ========== ========== ========== INCOME PER COMMON SHARE-BASIC $ 0.14 $ 0.20 $ 0.43 $ 0.51 $ 0.91 $ 0.65 ========== ========== ========== ========== ========== ========== INCOME PER COMMON SHARE-DILUTED $ 0.14 $ 0.20 $ 0.42 $ 0.50 $ 0.90 $ 0.64 ========== ========== ========== ========== ========== ========== AVERAGE COMMON SHARES OUTSTANDING Basic 19,484 19,244 19,473 19,238 19,429 19,231 ========== ========== ========== ========== ========== ========== Diluted 19,580 19,648 19,587 19,556 19,672 19,473 ========== ========== ========== ========== ========== ==========
PRESS RELEASE ElkCorp January 16, 2003 Page 6 FINANCIAL INFORMATION BY COMPANY SEGMENTS (Unaudited, $ in thousands)
Trailing Three Months Ended Six Months Ended Twelve Months Ended December 31, December 31, December 31, 2002 2001 2002 2001 2002 2001 ---------- ---------- ---------- ---------- ---------- ---------- SALES Building Products $ 98,622 $ 96,964 $ 211,938 $ 227,989 $ 443,622 $ 404,652 Other, Technologies 10,441 16,164 17,207 28,358 35,702 48,526 Corporate & Eliminations 0 0 0 0 0 37 ---------- ---------- ---------- ---------- ---------- ---------- $ 109,063 $ 113,128 $ 229,145 $ 256,347 $ 479,324 $ 453,215 ========== ========== ========== ========== ========== ========== OPERATING PROFIT (LOSS) Building Products $ 7,491 $ 9,672 $ 21,989 $ 24,297 $ 51,017 $ 35,474 Other, Technologies 1,189 1,073 100 1,166 (5,420) 1,155 Corporate & Eliminations Before noncash stock option compensation (2,718) (3,145) (5,575) (6,188) (11,500) (10,590) Noncash stock option compensation 0 (4,040) 5,378 (5,477) 4,821 (5,954) ---------- ---------- ---------- ---------- ---------- ---------- Total Corporate & Eliminations (2,718) (7,185) (197) (11,665) (6,679) (16,544) ---------- ---------- ---------- ---------- ---------- ---------- $ 5,962 $ 3,560 $ 21,892 $ 13,798 $ 38,918 $ 20,085 ========== ========== ========== ========== ========== ==========
PRESS RELEASE ElkCorp January 16, 2003 Page 7 CONDENSED BALANCE SHEET (Unaudited, $ in thousands)
December 31, ASSETS 2002 2001 ------ ---------- ---------- Cash and cash equivalents $ 17,804 $ 179 Receivables, net 67,309 59,168 Inventories 61,846 47,445 Deferred income taxes 3,920 5,987 Prepaid expenses and other 9,537 9,367 ---------- ---------- Total Current Assets 160,416 122,146 Property, plant and equipment, net 217,848 216,087 Other assets 12,231 2,418 ---------- ---------- Total Assets $ 390,495 $ 340,651 ========== ==========
December 31, LIABILITIES AND SHAREHOLDERS' EQUITY 2002 2001 ------------------------------------ ---------- ---------- Accounts payable and accrued liabilities $ 43,913 $ 57,068 Current maturities on long-term debt 0 0 ---------- ---------- Total Current Liabilities 43,913 57,068 Long-term debt, net 125,421 84,000 Deferred income taxes 35,096 32,878 Shareholders' equity 186,065 166,705 ---------- ---------- Total Liabilities and Shareholders' Equity $ 390,495 $ 340,651 ========== ==========
PRESS RELEASE ElkCorp January 16, 2003 Page 8 CONDENSED STATEMENT OF CASH FLOWS (Unaudited, $ in thousands)
Six Months Ended December 31, 2002 2001 ---------- ---------- CASH FLOWS FROM: OPERATING ACTIVITIES Net income $ 11,812 $ 6,163 Adjustments to net income Depreciation and amortization 9,101 8,977 Deferred income taxes 3,358 4,256 Changes in assets and liabilities: Trade receivables 27,635 14,492 Inventories (14,708) 3,571 Prepaid expenses and other 16 (880) Accounts payable and accrued liabilities (8,160) 9,034 ---------- ---------- Net cash from operations 29,054 45,613 ---------- ---------- INVESTING ACTIVITIES Additions to property, plant and equipment (19,354) (4,989) Acquisition of business (2,224) 0 Other, net (301) 287 ---------- ---------- Net cash from investing activities (21,879) (4,702) ---------- ---------- FINANCING ACTIVITIES Long-term borrowings (repayments), net 0 (39,300) Dividends on common stock (1,948) (1,931) Treasury stock transactions and other, net 141 371 ---------- ---------- Net cash from financing activities (1,807) (40,860) ---------- ---------- NET INCREASE IN CASH AND CASH EQUIVALENTS 5,368 51 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 12,436 128 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 17,804 $ 179 ========== ==========