##### Table of Contents



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 December 31, 2006
 OR
 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
  DELAWARE
    
    75-1217920(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
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
 þ o
  o þ o
 o þ




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##### Table of Contents



ElkCorp and Subsidiaries
 For the Quarter Ended December 31, 2006
 Table of Contents
 PagePart I. FINANCIAL INFORMATION (unaudited)Item 1. Financial StatementsConsolidated Balance Sheets as of December 31, 2006 and June 30, 2006
    
    
    1Consolidated Statements of Operations for the Three Months and Six Months
Ended December 31, 2006 and 2005
    
    
    2Consolidated Statements of Cash Flows for the Six Months Ended
December 31, 2006 and 2005
    
    
    3Consolidated Statements of Shareholders Equity for the Six Months Ended
December 31, 2006 and 2005
    
    
    4Notes to Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    21Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 4. Submission of Matters to a Vote of Security Holders
    
    
    24Item 6. Exhibits
    
    
    25SIGNATURES
    
    
    26Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 ELKCORP AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
  December 31,
    
    
    June 30,2006
    
    
    2006AssetsCurrent AssetsCash and cash equivalents
    
    $
    1,762
    
    
    $
    4,056Short-term investments
    
    
    27,200
    
    
    
    32,960Trade receivables, less allowance of $716 and $639
    
    
    130,164
    
    
    
    181,123Inventories
    
    
    132,772
    
    
    
    107,929Prepaid expenses and other
    
    
    9,770
    
    
    
    10,209Deferred income taxes
    
    
    9,334
    
    
    
    9,317Discontinued operations
    
    
    2,844
    
    
    
    2,675Total current assets
    
    
    313,846
    
    
    
    348,269Property, Plant and Equipment, at cost
    
    
    500,640
    
    
    
    488,308Less  Accumulated depreciation
    
    
    (199,246
    )
    
    
    (186,168
    )Property, plant and equipment, net
    
    
    301,394
    
    
    
    302,140Goodwill
    
    
    17,009
    
    
    
    14,530Intangible Assets
    
    
    13,390
    
    
    
    10,609Other Assets
    
    
    6,063
    
    
    
    4,373Discontinued Operations  Noncurrent
    
    
    1,770
    
    
    
    1,939$
    653,472
    
    
    $
    681,860Liabilities and Shareholders EquityCurrent LiabilitiesAccounts payable
    
    $
    27,109
    
    
    $
    71,585Accrued liabilities
    
    
    32,847
    
    
    
    34,230Current maturities on long-term debt
    
    
    25,972
    
    
    
    1,088Discontinued operations
    
    
    560
    
    
    
    560Total current liabilities
    
    
    86,488
    
    
    
    107,463Long-Term Debt, net of current maturities
    
    
    176,246
    
    
    
    199,689Deferred Income Taxes
    
    
    51,024
    
    
    
    52,282Commitments and ContingenciesShareholders EquityCommon stock ($1 par, 20,620,756 and 20,503,855 shares
issued)
    
    
    20,621
    
    
    
    20,504Paid-in capital
    
    
    81,777
    
    
    
    75,724Accumulated other comprehensive income
    
    
    
    
    
    
    (64
    )Retained earnings
    
    
    237,373
    
    
    
    227,713339,771
    
    
    
    323,877Less  Treasury stock (1,878 and 43,964 shares, at cost)
    
    
    (57
    )
    
    
    (1,451
    )Total shareholders equity
    
    
    339,714
    
    
    
    322,426$
    653,472
    
    
    $
    681,860
  - 1 -




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##### Table of Contents



ELKCORP AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Sales
    
    $
    193,114
    
    
    $
    228,949
    
    
    $
    411,222
    
    
    $
    444,806Cost of goods sold
    
    
    164,220
    
    
    
    186,812
    
    
    
    341,429
    
    
    
    362,941Gross profit
    
    
    28,894
    
    
    
    42,137
    
    
    
    69,793
    
    
    
    81,865Selling, general and administrative
    
    
    18,993
    
    
    
    21,521
    
    
    
    41,810
    
    
    
    41,627Merger related expenses
    
    
    3,000
    
    
    
    
    
    
    
    3,000
    
    
    
    Operating income
    
    
    6,901
    
    
    
    20,616
    
    
    
    24,983
    
    
    
    40,238Interest expense and other, net
    
    
    3,300
    
    
    
    2,968
    
    
    
    6,612
    
    
    
    5,825Income from continuing operations before income
taxes
    
    
    3,601
    
    
    
    17,648
    
    
    
    18,371
    
    
    
    34,413Provision for income taxes
    
    
    1,279
    
    
    
    6,567
    
    
    
    6,649
    
    
    
    12,805Income from continuing operations
    
    
    2,322
    
    
    
    11,081
    
    
    
    11,722
    
    
    
    21,608Loss From discontinued operations, net of income taxes
    
    
    
    
    
    
    (66
    )
    
    
    
    
    
    
    (66
    )Net income
    
    $
    2,322
    
    
    $
    11,015
    
    
    $
    11,722
    
    
    $
    21,542Income per share  basicIncome from continuing operations
    
    $
    .11
    
    
    $
    .54
    
    
    $
    .57
    
    
    $
    1.07Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income per common share
    
    $
    .11
    
    
    $
    .54
    
    
    $
    .57
    
    
    $
    1.07Income per share  dilutedIncome from continuing operations
    
    $
    .11
    
    
    $
    .54
    
    
    $
    .57
    
    
    $
    1.05Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income per common share
    
    $
    .11
    
    
    $
    .54
    
    
    $
    .57
    
    
    $
    1.05Dividends per common share
    
    $
    .05
    
    
    $
    .05
    
    
    $
    .10
    
    
    $
    .10Average common shares outstanding (000s)Basic
    
    
    20,498
    
    
    
    20,270
    
    
    
    20,450
    
    
    
    20,227Diluted
    
    
    20,736
    
    
    
    20,595
    
    
    
    20,615
    
    
    
    20,586
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ELKCORP AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  Six Months EndedDecember 31,2006
    
    
    2005Cash Flows From Operating ActivitiesNet income
    
    $
    11,722
    
    
    $
    21,542Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    13,497
    
    
    
    12,766Deferred income taxes
    
    
    (1,275
    )
    
    
    (842
    )Stock-based compensation
    
    
    4,805
    
    
    
    4,040Changes in assets and liabilities, net of acquisitions:Trade receivables
    
    
    50,959
    
    
    
    16,911Inventories
    
    
    (24,522
    )
    
    
    (11,428
    )Prepaid expenses and other
    
    
    439
    
    
    
    517Accounts payable and accrued liabilities
    
    
    (45,112
    )
    
    
    (14,904
    )Changes in assets and liabilities
of discontinued operations
    
    
    
    
    
    
    (2
    )Net cash provided by operating activities
    
    
    10,513
    
    
    
    28,600Cash Flows From Investing ActivitiesAdditions to property, plant and equipment
    
    
    (12,332
    )
    
    
    (9,538
    )Purchases of short-term investments
    
    
    (142,725
    )
    
    
    (191,500
    )Sales and redemptions of short-term investments
    
    
    148,485
    
    
    
    198,960Acquisitions, net of cash acquired
    
    
    (6,000
    )
    
    
    (24,285
    )Other, net
    
    
    (395
    )
    
    
    (1,974
    )Net cash used for investing activities
    
    
    (12,967
    )
    
    
    (28,337
    )Cash Flows From Financing ActivitiesPayments on long-term debt
    
    
    (537
    )
    
    
    (4,542
    )Dividends paid on common stock
    
    
    (2,062
    )
    
    
    (2,044
    )Purchases of common stock
    
    
    (517
    )
    
    
    (1,444
    )Exercises of stock options
    
    
    3,044
    
    
    
    3,474Excess tax benefits of stock option exercises
    
    
    232
    
    
    
    417Net cash provided by (used for) financing activities
    
    
    160
    
    
    
    (4,139
    )Net Decrease in Cash and Cash Equivalents
    
    
    (2,294
    )
    
    
    (3,876
    )Cash and Cash Equivalents at Beginning of Year
    
    
    4,056
    
    
    
    9,261Cash and Cash Equivalents at End of Period
    
    $
    1,762
    
    
    $
    5,385Supplemental Cash FlowsInterest paid
    
    $
    7,342
    
    
    $
    6,713Income taxes paid
    
    $
    14,646
    
    
    $
    11,989
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ELKCORP AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
  AccumulatedOther
    
    
    
    
    
    
    
    
    
    
    TotalCommon
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Retained
    
    
    Treasury
    
    
    ShareholdersStock
    
    
    Capital
    
    
    Income
    
    
    Earnings
    
    
    Stock
    
    
    EquityBalance, June 30, 2005
    
    $
    20,298
    
    
    $
    64,792
    
    
    $
    
    
    
    $
    186,388
    
    
    $
    (668
    )
    
    $
    270,810Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,542
    
    
    
    
    
    
    
    21,542Exercises of stock options
    
    
    113
    
    
    
    1,621
    
    
    
    
    
    
    
    
    
    
    
    1,740
    
    
    
    3,474Excess tax benefit of
stock option exercises
    
    
    
    
    
    
    417
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    417Stock option vesting
    
    
    
    
    
    
    2,288
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,288Restricted stock grants
    
    
    21
    
    
    
    (229
    )
    
    
    
    
    
    
    
    
    
    
    208
    
    
    
    Restricted stock vesting
    
    
    
    
    
    
    700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    700Performance stock
amortization
    
    
    
    
    
    
    1,053
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,053Purchases of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,444
    )
    
    
    (1,444
    )Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,044
    )
    
    
    
    
    
    
    (2,044
    )Balance, December 31, 2005
    
    $
    20,432
    
    
    $
    70,642
    
    
    $
    
    
    
    $
    205,886
    
    
    $
    (164
    )
    
    $
    296,796
 AccumulatedOther
    
    
    
    
    
    
    
    
    
    
    TotalCommon
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Retained
    
    
    Treasury
    
    
    ShareholdersStock
    
    
    Capital
    
    
    Income
    
    
    Earnings
    
    
    Stock
    
    
    EquityBalance, June 30, 2006
    
    $
    20,504
    
    
    $
    75,724
    
    
    $
    (64
    )
    
    $
    227,713
    
    
    $
    (1,451
    )
    
    $
    322,426Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,722
    
    
    
    
    
    
    
    11,722Derivative transactions,
net of tax
    
    
    
    
    
    
    
    
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    64Exercises of stock options
    
    
    117
    
    
    
    1,883
    
    
    
    
    
    
    
    
    
    
    
    1,044
    
    
    
    3,044Stock option vesting
    
    
    
    
    
    
    1,453
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,453Excess tax benefit of
stock option exercises
    
    
    
    
    
    
    232
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    232Restricted stock grants
    
    
    
    
    
    
    (867
    )
    
    
    
    
    
    
    
    
    
    
    867
    
    
    
    Restricted stock vesting
    
    
    
    
    
    
    914
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    914Performance stock
amortization
    
    
    
    
    
    
    2,438
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,438Purchases of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (517
    )
    
    
    (517
    )Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,062
    )
    
    
    
    
    
    
    (2,062
    )Balance, December 31, 2006
    
    $
    20,621
    
    
    $
    81,777
    
    
    $
    
    
    
    $
    237,373
    
    
    $
    (57
    )
    
    $
    339,714
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##### Table of Contents



ELKCORP AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 1  General
  Note 2  Company Segments
  (In thousands)
    
    
    (In thousands)Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Sales to External CustomersPremium Roofing Products
    
    $
    174,757
    
    
    $
    205,642
    
    
    $
    372,997
    
    
    $
    400,359Composite Building Products
    
    
    7,033
    
    
    
    8,678
    
    
    
    12,441
    
    
    
    13,758Specialty Fabric Technologies
    
    
    8,989
    
    
    
    12,336
    
    
    
    21,174
    
    
    
    26,080Surface Finishes
    
    
    2,335
    
    
    
    2,293
    
    
    
    4,610
    
    
    
    4,609$
    193,114
    
    
    $
    228,949
    
    
    $
    411,222
    
    
    $
    444,806Operating Profit (Loss) from
Continuing OperationsPremium Roofing Products
    
    $
    14,728
    
    
    $
    26,160
    
    
    $
    39,902
    
    
    $
    53,719Composite Building Products
    
    
    (2,455
    )
    
    
    (1,398
    )
    
    
    (4,689
    )
    
    
    (5,518
    )Specialty Fabric Technologies
    
    
    1,527
    
    
    
    1,373
    
    
    
    3,215
    
    
    
    2,883Surface Finishes
    
    
    467
    
    
    
    171
    
    
    
    972
    
    
    
    444Corporate and Other
    
    
    (7,366
    )
    
    
    (5,690
    )
    
    
    (14,417
    )
    
    
    (11,290
    )6,901
    
    
    
    20,616
    
    
    
    24,983
    
    
    
    40,238Interest expense and other, net
    
    
    (3,300
    )
    
    
    (2,968
    )
    
    
    (6,612
    )
    
    
    (5,825
    )Income from continuing
operations before income taxes
    
    $
    3,601
    
    
    $
    17,648
    
    
    $
    18,371
    
    
    $
    34,413
 - 5 -




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Note 3  Cash, Cash Equivalents and Short-Term Investments
   Note 4  Earnings Per Share
  (In thousands, except per share data)Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Income from continuing operations
    
    $
    2,322
    
    
    $
    11,081
    
    
    $
    11,722
    
    
    $
    21,608Denominator for basic earnings
per share  weighted average
shares outstanding
    
    
    20,498
    
    
    
    20,270
    
    
    
    20,450
    
    
    
    20,227Effect of dilutive securities:Unvested restricted stock and
outstanding stock options
    
    
    238
    
    
    
    325
    
    
    
    165
    
    
    
    359Denominator for diluted earnings
per share  adjusted weighted
average shares and assumed
issuance of shares purchased
under stock option plans and
vesting of restricted stock
using the treasury stock method
    
    
    20,736
    
    
    
    20,595
    
    
    
    20,615
    
    
    
    20,586Basic earnings per share from
continuing operations
    
    $
    .11
    
    
    $
    .54
    
    
    $
    .57
    
    
    $
    1.07Diluted earnings per share from
continuing operations
    
    $
    .11
    
    
    $
    .54
    
    
    $
    .57
    
    
    $
    1.05Stock options excluded from
computation of diluted earnings
per share due to anti-dilutive
effect
    
    
    
    
    
    
    
    
    
    
    298
    
    
    
    Performance stock excluded from
computation of diluted earnings
per share due to conditions for
issuance having not been
satisfied
    
    
    401
    
    
    
    262
    
    
    
    405
    
    
    
    263
 - 6 -




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##### Table of Contents



Note 5  Inventories
  (In thousands )December 31,
    
    
    June 30,2006
    
    
    2006Raw materials
    
    $
    19,516
    
    
    $
    19,426Work-in-process
    
    
    237
    
    
    
    206Finished goods
    
    
    113,019
    
    
    
    88,297$
    132,772
    
    
    $
    107,929
 Note 6  Long-Term Debt
  (In thousands)December 31,
    
    
    June 30,2006
    
    
    2006Senior Notes
    
    $
    195,000
    
    
    $
    195,000Revolving Credit Facility
    
    
    
    
    
    
    Other debt
    
    
    6,256
    
    
    
    6,793Fair value of interest rate swaps
    
    
    962
    
    
    
    (1,016
    )202,218
    
    
    
    200,777Less: Current maturities
    
    
    (25,972
    )
    
    
    (1,088
    )$
    176,246
    
    
    $
    199,689
  PrincipalAmount
    
    Maturity
    
    Interest Rate$  25,000
    
    July 2007
    
    
    4.69
    %$  60,000
    
    June 2009
    
    
    6.99
    %$  60,000
    
    June 2012
    
    
    7.49
    %$  50,000
    
    November 2014
    
    
    6.28
    %$195,000
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##### Table of Contents



Note 7  Comprehensive Income
  (In thousands)
    
    
    (In thousands)Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income
    
    $
    2,322
    
    
    $
    11,015
    
    
    $
    11,722
    
    
    $
    21,542Derivative transactions, net of tax
    
    
    
    
    
    
    
    
    
    
    64
    
    
    
    Total comprehensive income
    
    $
    2,322
    
    
    $
    11,015
    
    
    $
    11,786
    
    
    $
    21,542
  Note 8  Stock-Based Compensation
     Six Months EndedDecember 31,2006
    
    2005Dividend yield:
    
    
    0.62
    %
    
    
    0.85
    %Risk-free interest rate:
    
    
    4.99
    %
    
    
    4.15
    %Expected market price volatility:
    
    
    .42
    
    
    
    .39Expected life of options:
    
    8 years
    
    8 yearsFair value of grants:
    
    $
    14.12
    
    
    $
    13.37
  - 8 -




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##### Table of Contents



Performance Period
    
    Probable Shares
    
    Maximum SharesThree-Year Period Ending
    
    To Be Issued
    
    To Be IssuedJune 30, 2007
    
    
    150,959
    
    
    
    205,305June 30, 2008
    
    
    125,766
    
    
    
    183,255June 30, 2009
    
    
    124,053
    
    
    
    193,140
    - 9 -




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##### Table of Contents



Note 9  Product Warranties
  (In thousands)Six Months EndedDecember 31,2006Balance, at beginning of year
    
    $
    6,129Accrued for new warranties
    
    
    1,183Changes in estimates for pre-existing warranties
    
    
    1,646Warranty settlements during the period
    
    
    (2,686
    )Balance, at end of period
    
    $
    6,272
 Note 10  Environmental Risk
    - 10 -




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Note 11  Acquisitions
 SM
  - 11 -




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##### Table of Contents



Note 12  Goodwill and Intangible Assets
  Balance, June 30, 2006
    
    $
    14,530Goodwill acquired
    
    
    2,479Balance, December 31, 2006
    
    $
    17,009
   Intangible Assets, Gross
    
    
    Accumulated Amortization
    
    
    Net Book ValueJune 30,
    
    
    
    
    
    
    Dec. 31,
    
    
    June 30,
    
    
    
    
    
    
    Dec. 31,
    
    
    June 30,
    
    
    Dec. 31,2006
    
    
    Additions
    
    
    2006
    
    
    2006
    
    
    Expense
    
    
    2006
    
    
    2006
    
    
    2006Patents
    
    $
    6,215
    
    
    $
    3,300
    
    
    $
    9,515
    
    
    $
    395
    
    
    $
    213
    
    
    $
    608
    
    
    $
    5,820
    
    
    $
    8,907Customer
relationships
    
    
    3,700
    
    
    
    
    
    
    
    3,700
    
    
    
    308
    
    
    
    186
    
    
    
    494
    
    
    
    3,392
    
    
    
    3,206Trademarks
    
    
    600
    
    
    
    
    
    
    
    600
    
    
    
    36
    
    
    
    20
    
    
    
    56
    
    
    
    564
    
    
    
    544Noncompete agreement
    
    
    1,000
    
    
    
    
    
    
    
    1,000
    
    
    
    167
    
    
    
    100
    
    
    
    267
    
    
    
    833
    
    
    
    733$
    11,515
    
    
    $
    3,300
    
    
    $
    14,815
    
    
    $
    906
    
    
    $
    519
    
    
    $
    1,425
    
    
    $
    10,609
    
    
    $
    13,390
  
 Note 13  Contingent Future Earn-out Arrangement
  - 12 -




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Note 14  Income Taxes
  Note 15  Review of Strategic Alternatives and Merger Negotiations
      - 13 -




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Note 16  Shareholder Rights Plan
  Note 17  Recently Issued Accounting Standards
    - 14 -




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Executive Overview
        - 15 -




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##### Table of Contents



Performance Data
  Three Months Ended
    
    Six Months EndedDecember 31,
    
    December 31,2006
    
    2005
    
    2006
    
    2005Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    85.0
    
    
    
    81.6
    
    
    
    83.0
    
    
    
    81.6Gross profit
    
    
    15.0
    
    
    
    18.4
    
    
    
    17.0
    
    
    
    18.4Selling, general and administrative
    
    
    9.8
    
    
    
    9.4
    
    
    
    10.2
    
    
    
    9.3Merger related expenses
    
    
    1.6
    
    
    
    
    
    
    
    0.7
    
    
    
    Operating income
    
    
    3.6
    
    
    
    9.0
    
    
    
    6.1
    
    
    
    9.1Interest expense and other, net
    
    
    1.7
    
    
    
    1.3
    
    
    
    1.6
    
    
    
    1.3Income from continuing operations
before income taxes
    
    
    1.9
    
    
    
    7.7
    
    
    
    4.5
    
    
    
    7.8Provision for income taxes
    
    
    0.7
    
    
    
    2.9
    
    
    
    1.6
    
    
    
    2.9Income from continuing operations
    
    
    1.2
    %
    
    
    4.8
    %
    
    
    2.9
    %
    
    
    4.9
    %
 Changes in the Three-Month Period Ended December 31, 2006 Compared to the Three-Month Period Ended
December 31, 2005
 Overall Performance
  - 16 -




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Results of Business Segments
    - 17 -




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Changes in the Six-Month Period Ended December 31, 2006 Compared to the Six-Month Period Ended
December 31, 2005
 Overall Performance
    Results of Business Segments
  - 18 -




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Financial Condition
 Overview
  Operating Activities
   - 19 -




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Investing Activities
  Financing Activities
   Off-Balance Sheet Arrangements
  Critical Accounting Policies
  
    
    Collectibility of Accounts Receivable
    
    Accruals for Loss Contingencies
    
    Inventories
    
    Revenue Recognition
    
    Impairment of Long-Lived Assets
    
    Impairment of Goodwill and Certain Other Intangible Assets
    
    Stock-Based Compensation
  - 20 -




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Business Risks and Forward-Looking Statements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
 Item 4. Controls and Procedures
 a)
    
    Evaluation of Disclosure Controls and ProceduresWe completed an evaluation, under the supervision and with the participation of management,
including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules
13a-15(e) and 15d-15(e) as of the end of the period covered by this report. Based upon that
evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our
disclosure controls and procedures are effective to ensure that information required to be
disclosed by the company in the reports that it files or submits under the Exchange Act is (1)
recorded, processed, summarized and reported within the time periods specified in applicable
rules and forms and (2) accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, to allow timely discussions regarding required
disclosures.
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##### Table of Contents



b)
    
    Changes in Internal Control Over Financial ReportingDuring the last fiscal quarter, there have been no changes in our internal controls over
financial reporting or in other factors that have materially affected, or are reasonably likely
to materially affect, these controls subsequent to the date of the evaluation, including any
corrective actions with regard to significant deficiencies or material weaknesses.
 
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
      
 Item 1A. Risk Factors
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##### Table of Contents



The review of strategic alternatives and related tender offers to purchase all of our outstanding
common stock are disruptive to our business.
     Litigation directly or indirectly resulting from our review of strategic alternatives may
negatively impact our business and our results of operations.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Total Numberof Shares
    
    
    
    
    
    
    Maximum NumberPurchased as
    
    
    
    
    
    
    (or ApproximateTotal
    
    
    
    
    
    
    Part of
    
    
    
    
    
    
    Dollar Value) ofNumber of
    
    
    
    
    
    
    Publicly
    
    
    
    
    
    
    Shares that may yetShares
    
    
    Average
    
    
    Announced
    
    
    Average
    
    
    be Purchased underPurchased
    
    
    Price Paid
    
    
    Plans or
    
    
    Price Paid
    
    
    the Plans orPeriod
    
    (Note 1)
    
    
    per Share
    
    
    Programs
    
    
    per Share
    
    
    Programs (Note 2)October 2006
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    6,600,000November 2006
    
    
    1,000
    
    
    
    32.24
    
    
    
    
    
    
    
    
    
    
    $
    6,600,000December 2006
    
    
    1,916
    
    
    
    30.95
    
    
    
    
    
    
    
    
    
    
    $
    6,600,000Total
    
    
    2,916
    
    
    $
    31.39
    
    
    
    
    
    
    $
    
 
 (1)
    
    All shares repurchased in the three month period ended December 31, 2006 were purchased from
officers and employees in connection with stock option exercises and repurchased restricted
shares for income tax withholding payments. The dollar value of share repurchases relating to
these transactions has no impact on the repurchase program outlined in (2).(2)
    
    On August 28, 2000, the Board of Directors authorized the repurchase of up to $10,000,000 of
common stock. The authorization did not specify an expiration date. The Board of Directors
reevaluated this outstanding authority in fiscal 2006 and concluded it is in the best
interests of the company and its shareholders to leave the authorization in place. Purchases
may be increased, decreased or discontinued by the Board of Directors at any time without
prior notice. - 23 -




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
 (a)
    
    The companys Annual Meeting of Shareholders was held on October 31, 2006 for the
purpose of electing two directors and ratifying the appointment of the companys
independent auditors.(b)
    
    Directors Elected
 NUMBER OF VOTESFOR
    
    AGAINST
    
    WITHHELDThomas D. Karol
    
    
    18,134,326
    
    
    
    347,912
    
    
    
    721,866Dale V. Kesler
    
    
    17,744,377
    
    
    
    737,861
    
    
    
    721,866
 (c)
    
    Other Directors whose term continued after the meeting:
 
 (d)
    
    Other matters voted upon at the meeting and the number of affirmative votes, negative
votes, and abstentions.
 NUMBER OF VOTESFOR
    
    AGAINST
    
    ABSENTIONSRatification of Grant Thornton LLP
as independent auditors of the
company for the fiscal year ending
June 30, 2007.
    
    
    18,936,646
    
    
    
    60,432
    
    
    
    207,026
 - 24 -




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##### Table of Contents



Item 6. Exhibits
 2.1
    
    Agreement and Plan of Merger by and among CGEA Holdings, Inc.,
CGEA Investor, Inc. and ElkCorp dated as of December 18, 2006 (incorporated by
reference to Exhibit 2.1 to the companys Current Report on Form 8-K dated
December 19, 2006).2.2
    
    Amended and Restated Agreement and Plan of Merger by and among
CGEA Holdings, Inc., CGEA Investor, Inc. and ElkCorp dated as of January 15,
2007 (incorporated by reference to the companys Current Report on Form 8-K
dated January 17, 2007).2.3
    
    First Amendment, dated as of January 21, 2007 to the Amended
and Restated Agreement and Plan of Merger, dated as of January 15, 2007
(incorporated by reference to Exhibit (e)(8) to Amendment No. 2 to the
companys Solicitation/Recommendation Statement on Schedule 14D-9 filed with
the Securities and Exchange Commission on January 22, 2007).4.1
    
    Amendment to Rights Agreement, dated as of November 5, 2006 by
and between ElkCorp and Mellon Investor Services, LLC (formerly known as
ChaseMellon Shareholder Services, L.L.C.), as Rights Agent (incorporated by
reference to Exhibit 4.2 to the companys Current Report on Form 8-K dated
November 6, 2006).4.2
    
    Second Amendment to Rights Agreement, dated as of December 18,
2006 by and between ElkCorp and Mellon Investor Services, LLC (formerly known
as ChaseMellon Shareholder Services, L.L.C.), as Rights Agent (incorporated by
reference to Exhibit 4.2 to the companys Current Report on Form 8-K dated
December 19, 2006).31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.32.1
    
    Certificate of the Chief Executive Officer of ElkCorp Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certificate of the Chief Financial Officer of ElkCorp Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 - 25 -




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##### Table of Contents



SIGNATURES
  ElkCorpDATE: February 8, 2007
    
    /s/ Gregory J. FisherGregory J. FisherSenior Vice President,

Chief Financial Officer and Controller/s/ Leonard R. HarralLeonard R. HarralVice President,

Chief Accounting Officer and Treasurer - 26 -




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##### Table of Contents



INDEX TO EXHIBITS
 2.1
    
    Agreement and Plan of Merger by and among CGEA Holdings, Inc.,
CGEA Investor, Inc. and ElkCorp dated as of December 18, 2006 (incorporated by
reference to Exhibit 2.1 to the companys Current Report on Form 8-K dated
December 19, 2006).2.2
    
    Amended and Restated Agreement and Plan of Merger by and among
CGEA Holdings, Inc., CGEA Investor, Inc. and ElkCorp dated as of January 15,
2007 (incorporated by reference to the companys Current Report on Form 8-K
dated January 17, 2007).2.3
    
    First Amendment, dated as of January 21, 2007 to the Amended
and Restated Agreement and Plan of Merger, dated as of January 15, 2007
(incorporated by reference to Exhibit (e)(8) to Amendment No. 2 to the
companys Solicitation/Recommendation Statement on Schedule 14D-9 filed with
the Securities and Exchange Commission on January 22, 2007).4.1
    
    Amendment to Rights Agreement, dated as of November 5, 2006 by
and between ElkCorp and Mellon Investor Services, LLC (formerly known as
ChaseMellon Shareholder Services, L.L.C.), as Rights Agent (incorporated by
reference to Exhibit 4.2 to the companys Current Report on Form 8-K dated
November 6, 2006).4.2
    
    Second Amendment to Rights Agreement, dated as of December 18,
2006 by and between ElkCorp and Mellon Investor Services, LLC (formerly known
as ChaseMellon Shareholder Services, L.L.C.), as Rights Agent (incorporated by
reference to Exhibit 4.2 to the companys Current Report on Form 8-K dated
December 19, 2006).31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.32.1
    
    Certificate of the Chief Executive Officer of ElkCorp Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certificate of the Chief Financial Officer of ElkCorp Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.