ElkCorp (NYSE:ELK) announced today financial results for its third
fiscal quarter, ended March 31, 2006. Earnings from continuing
operations for the third quarter were $10.1 million, or $0.49 per
diluted share, exceeding the company's revised guidance of $0.40 to
$0.43 per diluted share. The company anticipates earnings per
diluted share for the fourth quarter to be in the range of $0.64 to
$0.68 and has revised its estimates for fiscal 2006 to be in the
range of $2.18 to $2.22. Third Quarter Overview ElkCorp
Consolidated -- For the quarter, ElkCorp recorded revenue of $243.2
million, compared to the $ 201.9 million reported for the third
quarter of fiscal 2005. The increase over the third quarter of
fiscal 2005 was due to volume and pricing in Elk's roofing business
including new sales from the recently acquired RGM Products Inc.
and incremental sales from Elk Composite Building Products and
Specialty Fabric Technologies. -- Income from continuing operations
for the third fiscal quarter was $10.1 million, or $0.49 per
diluted share, compared to $14.1 million, or $0.69 per diluted
share reported for the third quarter of fiscal 2005. The decline in
net income was primarily attributable to higher raw material and
transportation costs, partially offset by price and volume gains.
-- Third quarter results include $2.0 million, or $0.06 per diluted
share, of stock-based compensation expense compared to $0.8
million, or $0.02 per diluted share, in the prior year quarter.
Premium Roofing Products -- Revenue for Premium Roofing Products
was $ 220.1 million, a 19% increase over the $185.5 million
reported in the third quarter of fiscal 2005. This increase was due
to increased shingle volumes and improved pricing in the third
quarter of fiscal 2006 as well as sales from RGM, which was
acquired in August 2005. -- Operating income was $25 million,
compared to $32.7 million for the third quarter of fiscal 2005. --
Operating margin for the quarter was 11.4% compared to 17.6 % for
the same quarter last year. The margin decline in the quarter was
due to higher raw materials, primarily asphalt, and freight costs
and significantly lower shipment volume into the Florida storm
areas, which is a relatively higher margin market. Composite
Building Products -- Sales for the third quarter were $7.5 million,
compared to $4.7 million reported in the same quarter of fiscal
year 2005. -- The operating loss for the third quarter was $2.1
million compared to a loss of $2.4 million in the third quarter of
fiscal 2005. Improvements in volume and contribution margin were
partially offset by increased expansion costs of the new plant
which had not fully ramped-up until the fourth quarter of fiscal
year 2005. Specialty Fabric Technologies -- Sales for the quarter
were $13.6 million, a 45% increase over the $9.4 million in the
same quarter last year. The significant growth is due to volume and
pricing for roofing related fabric sales. Additionally, sales of
the non-roofing fabrics increased approximately 58% over the third
quarter of fiscal 2005. -- Operating income was $1.4 million in the
third quarter compared to $177,000 for the prior-year period. --
Operating margin improved to 10% compared to the 1.9% recorded in
the third quarter of fiscal 2005. The improved margins in this
product platform are attributable to higher volumes and an
increased mix of higher- margin products, such as carpet tile,
facer and air filtration. Financial Condition At March 31, 2006,
the contractual principal amount of ElkCorp's long-term debt,
including $6.0 million of debt related to acquisitions, was $201.0
million. Net debt (contractual principal debt minus cash and
short-term investments) was $156.5 million, and the net debt to
capital ratio was 33.7%. Liquidity consisted of $44.5 million of
cash, cash equivalents and short-term investments and $121.1
million of borrowing availability under a $125 million committed
revolving credit facility expiring November 30, 2008. Long-term
debt of $201.2 million included $0.2 million representing the net
fair market value for two interest rate swap agreements. Business
Outlook "We are pleased that the actual results for the quarter
exceeded our revised expectations. The increase was primarily due
to better than anticipated shingle shipments in the last week of
the quarter and improved pricing in March," said Thomas Karol,
chairman and chief executive officer of ElkCorp. "During the
quarter we were able to attain substantial productivity
improvements to achieve record shingle volumes, which assisted us
in recording more positive results. Shingle volumes increased
despite slower than anticipated shipments into the Florida market
due to longer lead times for insurance claim settlements following
Hurricane Wilma. This change in regional mix, combined with higher
raw material, transportation and energy costs has also created
near-term pressure on our margins. In the fourth quarter we
anticipate improved results in composites, expense reductions,
improved pricing and better efficiencies at our plants will assist
us in easing this pressure. Mr. Karol continued, "Sales in our
composite lumber platform were approximately 60% higher than the
third quarter of last year but lower than expected, which was
largely due to slower than anticipated inventory build at the
dealer level. We believe that dealers are somewhat reluctant to
place large initial seasonal orders due to slower growth in the
2005 decking season which caused a general industry overstocking
last season. Based on industry data, we anticipate the decking
market to return to a more normalized growth rate later in the
season. We believe that we have the cost structure, yields,
products and market acceptance to reach profitability in this
business. With the addition of our recently introduced CrossTimbers
Signature Rail System we have a full line of exceptional railing
products that accentuates our decking materials, which we believe
will assist us in increasing our position in the decking market."
"Our Specialty Fabric Technologies business again reported strong
results with sales growth of 45% over the prior year. The increased
sales in both roofing and non-roofing fabrics are attributable to
improved pricing and increased volume from new and existing
customers." "During the quarter we were able to increase
productivity in our shingle plants to achieve record volumes.
Although we have not reached profitability in the composites
platform, we are confident in our products and our potential to
become a leader in the composite lumber market. Our specialty
fabrics business continues to post impressive results. We continue
to expand our product offerings with new and innovative products,
such as our CrossTimbers(TM) Signature Rail System, which has a
similar look and assembly to the Railways railing product utilizing
the patent pending UniBall(TM) Technology and is available in
colors complementary to our CrossTimbers decking. We believe
innovation is a key component of maintaining growth in maturing
markets." Earnings Outlook Due to the recent ramp-up and continued
volatility in oil and natural gas prices, the company now expects
earnings for the fourth quarter of fiscal 2006 to be in the range
of $0.64 to $0.68 per diluted share, and in the range of $2.18 to
$2.22 per diluted share for fiscal 2006. Conference Call The
ElkCorp management team will host a conference call on April 26,
2006, at 11:00 a.m. EDT to further discuss its earnings and
operations for the third quarter as well as expectations for its
fourth quarter and fiscal year end. Investors and other interested
parties may listen to the live webcast by visiting the investor
relations section of the ElkCorp website at www.elkcorp.com. A
replay of the conference call will be available for 24 hours
beginning at 1:00 p.m. ET. and may be accessed by dialing
1-800-642-1687 and entering passcode 8232597. The webcast replay
also will be available on the investor relations section of
Company's website. 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," "vision," "outlook," "believe,"
"estimate," "potential," "forecast," "goal," "project," "expect,"
"anticipate," "plan," "predict," "could," "should," "may,"
"likely," or similar words that convey the uncertainty of future
events or outcomes and include the earnings outlook for the fourth
quarter and fiscal year 2006. 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, failure to
achieve expected efficiencies in new operations, 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 ended June 30, 2005. ElkCorp undertakes no obligation
to update or revise publicly any forward-looking statements,
whether as a result of new information, future events or otherwise.
ElkCorp, through its subsidiaries, manufactures Elk brand premium
roofing and building products (90% of consolidated revenue) and
provides technologically advanced products and services to other
industries. Its common stock is listed on the New York Stock
Exchange (NYSE:ELK). See www.elkcorp.com for more information. -0-
*T Condensed Results of Operations ($ in thousands) Three Months
Ended Nine Months Ended March 31, March 31, 2006 2005 2006 2005
--------- --------- --------- --------- Sales $243,194 $201,871
$688,000 $558,982 --------- --------- --------- --------- Costs and
Expenses: Cost of sales 200,917 157,939 563,858 444,258 Selling,
general & administrative 23,476 19,004 65,103 50,065 ---------
--------- --------- --------- Operating Income from Continuing
Operations 18,801 24,928 59,039 64,659 Interest expense, net 2,700
2,614 8,525 7,090 --------- --------- --------- --------- Income
from Continuing Operations Before Income Taxes 16,101 22,314 50,514
57,569 Provision for income taxes 5,955 8,191 18,760 21,588
--------- --------- --------- --------- Income from Continuing
Operations 10,146 14,123 31,754 35,981 Income (Loss) from
Discontinued Operations, Net 0 1,174 (66) 451 --------- ---------
--------- --------- Net Income $10,146 $15,297 $31,688 $36,432
========= ========= ========= ========= Income (Loss) Per Common
Share-Basic Continuing Operations $0.50 $0.71 $1.57 $1.83
Discontinued Operations 0.00 0.06 (0.01) 0.02 --------- ---------
--------- --------- $0.50 $0.77 $1.56 $1.85 ========= =========
========= ========= Income (Loss) Per Common Share-Diluted
Continuing Operations $0.49 $0.69 $1.54 $1.78 Discontinued
Operations 0.00 0.06 (0.00) 0.02 --------- --------- ---------
--------- $0.49 $0.75 $1.54 $1.80 ========= ========= =========
========= Average Common Shares Outstanding Basic 20,308 19,784
20,254 19,718 ========= ========= ========= ========= Diluted
20,697 20,482 20,627 20,184 ========= ========= ========= =========
Condensed Results of Operations ($ in thousands) Twelve Months
Ended March 31, 2006 2005 --------- --------- Sales $890,737
$714,826 --------- --------- Costs and Expenses: Cost of sales
733,525 570,021 Selling, general & administrative 84,984 66,624
--------- --------- Operating Income from Continuing Operations
72,228 78,181 Interest expense, net 11,800 8,502 ---------
--------- Income from Continuing Operations Before Income Taxes
60,428 69,679 Provision for income taxes 21,959 25,907 ---------
--------- Income from Continuing Operations 38,469 43,772 Income
(Loss) from Discontinued Operations, Net 3,654 814 ---------
--------- Net Income $42,123 $44,586 ========= ========= Income
(Loss) Per Common Share-Basic Continuing Operations $1.91 $2.22
Discontinued Operations 0.18 0.04 --------- --------- $2.09 $2.26
========= ========= Income (Loss) Per Common Share-Diluted
Continuing Operations $1.87 $2.17 Discontinued Operations 0.18 0.04
--------- --------- $2.05 $2.21 ========= ========= Average Common
Shares Outstanding Basic 20,191 19,706 ========= ========= Diluted
20,586 20,128 ========= ========= Financial Information by Company
Segments ($ in thousands) Three Months Ended Nine Months Ended
March 31, March 31, 2006 2005 2006 2005 --------- ---------
--------- --------- Sales Premium Roofing Products $220,114
$185,549 $620,473 $512,965 Composite Building Products 7,545 4,726
21,303 10,968 Specialty Fabric Technologies 13,616 9,443 39,696
28,237 Surface Finishes 1,919 2,153 6,528 6,812 --------- ---------
--------- --------- $243,194 $201,871 $688,000 $558,982 =========
========= ========= ========= Operating Profit (Loss) Premium
Roofing Products $24,990 $32,671 $78,709 $82,484 Composite Building
Products (2,059) (2,441) (7,577) (6,341) Specialty Fabric
Technologies 1,383 177 4,266 1,523 Surface Finishes 212 (371) 656
(228) Corporate & Other (5,725) (5,108) (17,015) (12,779)
--------- --------- --------- --------- $18,801 $24,928 $59,039
$64,659 ========= ========= ========= ========= Financial
Information by Company Segments ($ in thousands) Twelve Months
Ended March 31, 2006 2005 ---------- ---------- Sales Premium
Roofing Products $801,142 $653,086 Composite Building Products
29,760 15,252 Specialty Fabric Technologies 50,910 37,277 Surface
Finishes 8,925 9,211 ---------- ---------- $890,737 $714,826
========== ========== Operating Profit (Loss) Premium Roofing
Products $100,457 $98,661 Composite Building Products (13,058)
(6,135) Specialty Fabric Technologies 4,826 1,617 Surface Finishes
1,028 62 Corporate & Other (21,025) (16,024) ----------
---------- $72,228 $78,181 ========== ========== Condensed Balance
Sheet ($ in thousands) March 31, Assets 2006 2005
------------------------------------------------ ----------
---------- Cash and cash equivalents $5,901 $11,657 Short-term
investments 38,600 27,500 Receivables, net 170,045 158,711
Inventories 96,121 70,655 Deferred income taxes 7,971 3,721 Prepaid
expenses and other 10,725 10,045 Discontinued operations 2,426 404
---------- ---------- Total Current Assets 331,789 282,693
Property, plant and equipment, net 294,388 285,883 Other assets
28,409 12,046 Discontinued operations - noncurrent 2,188 3,647
---------- ---------- Total Assets $656,774 $584,269 ==========
========== March 31, Liabilities and Shareholders' Equity 2006 2005
------------------------------------------------ ----------
---------- Accounts payable and accrued liabilities $93,399 $81,010
Discontinued operations 865 159 Current maturities on long-term
debt 977 385 ---------- ---------- Total Current Liabilities 95,241
81,554 Long-term debt, net 201,218 198,000 Deferred income taxes
53,004 49,908 Shareholders' equity 307,311 254,807 ----------
---------- Total Liabilities and Shareholders' Equity $656,774
$584,269 ========== ========== Condensed Statement of Cash Flows ($
in thousands) Nine Months Ended March 31, 2006 2005 ----------
--------- Cash Flows From Operating Activities: Net income $31,688
$36,432 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 19,653 17,424
Deferred income taxes (672) 7,934 Stock-based compensation 6,057
2,272 Changes in assets and liabilities: Trade receivables (15,409)
(43,892) Inventories (17,745) (8,526) Prepaid expenses and other
(2,173) (1,420) Accounts payable and accrued liabilities (7,831)
18,577 Changes in assets and liabilities of discontinued operations
225 337 ---------- --------- Net cash from operating activities
13,793 29,138 ---------- --------- Investing Activities Additions
to property, plant and equipment (14,997) (32,141) Short-term
investments, net 30,560 (27,500) Proceeds from sale of assets of
discontinued operations 0 3,093 Acquisition of business (24,285)
(471) Other, net (2,380) (1,496) ---------- --------- Net cash from
investing activities (11,102) (58,515) ---------- ---------
Financing Activities Proceeds from sale of Senior Notes 0 50,000
Long-term payments on Revolving Credit Facility, net 0 (10,300)
Payments on other borrowings (4,807) 0 Dividends on common stock
(3,065) (3,007) Purchases of common stock (5,681) (763) Exercises
of stock options 6,782 4,831 Excess tax benefit of stock option
exercises 720 0 ---------- --------- Net cash from financing
activities (6,051) 40,761 ---------- --------- Net Increase in Cash
and Cash Equivalents (3,360) 11,384 Cash and Cash Equivalents at
Beginning of Year 9,261 273 ---------- --------- Cash and Cash
Equivalents at End of Period $5,901 $11,657 ========== ========= *T
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