##### 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 quarterly period ended September 30, 2005
 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
    
    (I.R.S. Employerincorporation 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
 þ o
 þ o
 o þ




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ElkCorp and Subsidiaries
 For The Quarter Ended September 30, 2005
 Table of Contents
 PagePart I. FINANCIAL INFORMATION (unaudited)Item 1. Consolidated Financial StatementsConsolidated Balance Sheets as of September 30, 2005 and June 30, 2005
    
    
    1Consolidated Statements of Operations for the Three Months
Ended September 30, 2005 and 2004
    
    
    2Consolidated Statements of Cash Flows for the Three Months
Ended September 30, 2005 and 2004
    
    
    3Notes to Consolidated Financial Statements
    
    
    4-12Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    13-18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    19Part II. OTHER INFORMATIONItem 2. Issuer Purchases of Equity Securities
    
    
    20Item 6. Exhibits
    
    
    20SIGNATURES
    
    
    21Certification 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
  September 30,
    
    
    June 30,Assets
    
    2005
    
    
    2005Current AssetsCash and cash equivalents
    
    $
    9,934
    
    
    $
    9,261Short-term investments
    
    
    54,887
    
    
    
    69,160Trade receivables, less allowance of $631 and $695
    
    
    150,241
    
    
    
    148,928Inventories
    
    
    75,515
    
    
    
    71,467Prepaid expenses and other
    
    
    8,838
    
    
    
    8,223Deferred income taxes
    
    
    8,281
    
    
    
    7,849Discontinued operations
    
    
    2,434
    
    
    
    1,193Total current assets
    
    
    310,130
    
    
    
    316,081Property, Plant and Equipment, at cost
    
    
    463,026
    
    
    
    440,989Less  Accumulated depreciation
    
    
    (166,543
    )
    
    
    (156,901
    )Property, plant and equipment, net
    
    
    296,483
    
    
    
    284,088Goodwill and Intangible Assets
    
    
    21,939
    
    
    
    2,186Other Assets
    
    
    6,358
    
    
    
    7,496Discontinued Operations  Noncurrent
    
    
    2,423
    
    
    
    3,718$
    637,333
    
    
    $
    613,569Liabilities and Shareholders EquityCurrent LiabilitiesAccounts payable
    
    $
    54,979
    
    
    $
    56,742Accrued liabilities
    
    
    38,706
    
    
    
    31,171Current maturities on long-term debt
    
    
    963
    
    
    
    381Discontinued operations
    
    
    937
    
    
    
    937Total current liabilities
    
    
    95,585
    
    
    
    89,231Long-Term Debt
    
    
    204,853
    
    
    
    200,146Deferred Income Taxes
    
    
    53,598
    
    
    
    53,382Commitments and ContingenciesShareholders EquityCommon stock ($1 par, 20,394,826 and 20,297,905 shares
issued)
    
    
    20,395
    
    
    
    20,298Paid-in capital
    
    
    80,477
    
    
    
    70,412Unearned compensation  stock-based compensation
    
    
    (12,757
    )
    
    
    (5,620
    )Retained earnings
    
    
    195,895
    
    
    
    186,388284,010
    
    
    
    271,478Less  Treasury stock (20,415 and 22,761 shares, at cost)
    
    
    (713
    )
    
    
    (668
    )Total shareholders equity
    
    
    283,297
    
    
    
    270,810$
    637,333
    
    
    $
    613,569
  -1-




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ELKCORP AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
   Three Months EndedSeptember 30,2005
    
    
    2004Sales
    
    $
    215,857
    
    
    $
    163,012Cost and ExpensesCost of sales
    
    
    176,129
    
    
    
    133,422Selling, general and administrative
    
    
    20,106
    
    
    
    15,181Operating Income from Continuing Operations
    
    
    19,622
    
    
    
    14,409Interest Expense and Other, Net
    
    
    2,857
    
    
    
    2,094Income From Continuing Operations Before Income Taxes
    
    
    16,765
    
    
    
    12,315Provision for income taxes
    
    
    6,238
    
    
    
    4,655Income From Continuing Operations
    
    
    10,527
    
    
    
    7,660Loss From Discontinued Operations, Net of Income Taxes
    
    
    
    
    
    
    (851
    )Net Income
    
    $
    10,527
    
    
    $
    6,809Income (Loss) Per Share  BasicContinuing operations
    
    $
    .52
    
    
    $
    .39Discontinued operations
    
    
    
    
    
    
    (.04
    )Net income
    
    $
    .52
    
    
    $
    .35Income (Loss) Per Share  DilutedContinuing operations
    
    $
    .51
    
    
    $
    .38Discontinued operations
    
    
    
    
    
    
    (.04
    )Net income
    
    $
    .51
    
    
    $
    .34Dividends Per Common Share
    
    $
    .05
    
    
    $
    .05Average Common Shares Outstanding (000s)Basic
    
    
    20,185
    
    
    
    19,671Diluted
    
    
    20,576
    
    
    
    19,915
  -2-




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ELKCORP AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  Three Months EndedSeptember 30,2005
    
    
    2004Cash Flows From Operating ActivitiesIncome from continuing operations
    
    $
    10,527
    
    
    $
    7,660Adjustments to reconcile income from continuing
operations to net cash provided by continuing operations:Depreciation and amortization
    
    
    5,900
    
    
    
    5,619Deferred income taxes
    
    
    (388
    )
    
    
    4,939Stock-based compensation
    
    
    1,936
    
    
    
    273Changes in assets and liabilities, net of acquisition:Trade receivables
    
    
    5,883
    
    
    
    2,583Inventories
    
    
    2,861
    
    
    
    (1,993
    )Prepaid expenses and other
    
    
    (286
    )
    
    
    Accounts payable and accrued liabilities
    
    
    (7,390
    )
    
    
    (4,210
    )Net cash provided by continuing operations
    
    
    19,043
    
    
    
    14,871Net cash provided by discontinued operations
    
    
    54
    
    
    
    1,480Net cash provided by operating activities
    
    
    19,097
    
    
    
    16,351Cash Flows From Investing ActivitiesAdditions to property, plant and equipment
    
    
    (3,941
    )
    
    
    (9,840
    )Purchases of short-term investments
    
    
    (114,230
    )
    
    
    Sales and redemptions of short-term investments
    
    
    128,503
    
    
    
    Acquisition, net of cash acquired
    
    
    (24,285
    )
    
    
    Other, net
    
    
    (895
    )
    
    
    (764
    )Net cash used for investing activities
    
    
    (14,848
    )
    
    
    (10,604
    )Cash Flows From Financing ActivitiesRepayments on Revolving Credit Facility, net
    
    
    
    
    
    
    (5,300
    )Payments on other borrowings
    
    
    (3,601
    )
    
    
    Dividends paid on common stock
    
    
    (1,020
    )
    
    
    (999
    )Purchases of common stock
    
    
    (1,431
    )
    
    
    Exercises of stock options
    
    
    2,476
    
    
    
    573Net cash used for financing activities
    
    
    (3,576
    )
    
    
    (5,726
    )Net Increase in Cash and Cash Equivalents
    
    
    673
    
    
    
    21Cash and Cash Equivalents at Beginning of Year
    
    
    9,261
    
    
    
    273Cash and Cash Equivalents at End of Period
    
    $
    9,934
    
    
    $
    294
  -3-




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ELKCORP AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 1  General
  Note 2  Company Segments
    (In thousands)Three Months EndedSeptember 30,2005
    
    
    2004Sales from Continuing OperationsPremium Roofing Products
    
    $
    194,717
    
    
    $
    147,593Composite Building Products
    
    
    5,080
    
    
    
    2,983Specialty Fabric Technologies
    
    
    13,744
    
    
    
    10,003Surface Finishes
    
    
    2,316
    
    
    
    2,433$
    215,857
    
    
    $
    163,012Operating Profit (Loss) from Continuing OperationsPremium Roofing Products
    
    $
    27,559
    
    
    $
    17,779Composite Building Products
    
    
    (4,120
    )
    
    
    (717
    )Specialty Fabric Technologies
    
    
    1,510
    
    
    
    698Surface Finishes
    
    
    273
    
    
    
    327Corporate and Other
    
    
    (5,600
    )
    
    
    (3,678
    )19,622
    
    
    
    14,409Interest expense and other, net
    
    
    2,857
    
    
    
    2,094Income from continuing operations before income taxes
    
    $
    16,765
    
    
    $
    12,315
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Note 3  Cash Equivalents and Short-Term Investments
  Note 4  Earnings Per Share
  (In thousands,except per share data)Three Months EndedSeptember 30,2005
    
    
    2004Income from continuing operations
    
    $
    10,527
    
    
    $
    7,660Denominator for basic earnings per share  weighted
average shares outstanding
    
    
    20,185
    
    
    
    19,671Effect of dilutive securities:Unvested restricted shares and outstanding stock options
    
    
    391
    
    
    
    244Denominator 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
    
    
    20,576
    
    
    
    19,915Basic earnings per share from continuing operations
    
    $
    .52
    
    
    $
    .39Diluted earnings per share from continuing operations
    
    $
    .51
    
    
    $
    .38Stock options excluded from computation of diluted
earnings per share due to anti-dilutive effect
    
    
    
    
    
    
    730
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Note 5  Inventories
  (In thousands )September 30,
    
    
    June 30,2005
    
    
    2005Raw materials
    
    $
    15,525
    
    
    $
    15,380Work-in-process
    
    
    164
    
    
    
    219Finished goods
    
    
    59,826
    
    
    
    55,868$
    75,515
    
    
    $
    71,467
 Note 6  Long-Term Debt
  (In thousands)September 30,
    
    
    June 30,2005
    
    
    2005Senior Notes
    
    $
    195,000
    
    
    $
    195,000Revolving Credit Facility
    
    
    
    
    
    
    Fair value of interest rate swaps
    
    
    2,575
    
    
    
    4,463Other debt
    
    
    8,241
    
    
    
    1,064205,816
    
    
    
    200,527Less: Current maturities
    
    
    963
    
    
    
    381$
    204,853
    
    
    $
    200,146
  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
    -6-




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Note 7  Stock-Based Compensation
     Dividend yield:
    
    
    0.85
    %Risk-free interest rate:
    
    
    4.07
    %Expected market price volatility:
    
    
    .41Expected life of options:
    
    8 yearsFair value of grants:
    
    $
    13.49
     -7-




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(In thousands,except per share data)Three Months EndedSeptember 30, 2004Net income as reported
    
    $
    6,809Add: Stock-based employee compensation expense included in
reported net income under APB No. 25, net of related tax effects
    
    
    Deduct: Total stock-based compensation expense determined under fair
value based method, net of related tax effects
    
    
    (608
    )Pro forma earnings
    
    $
    6,201Earnings per common share:Basic  as reported
    
    $
    .35Basic  pro forma
    
    $
    .32Diluted  as reported
    
    $
    .34Diluted  pro forma
    
    $
    .31
 -8-




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Note 8  Shareholders Equity
  Additional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalCommon
    
    
    Paid-in
    
    
    Unearned
    
    
    Retained
    
    
    Treasury
    
    
    Shareholders($ in thousands)
    
    Stock
    
    
    Capital
    
    
    Compensation
    
    
    Earnings
    
    
    Stock
    
    
    EquityBalance, June 30, 2005
    
    $
    20,298
    
    
    $
    70,412
    
    
    $
    (5,620
    )
    
    $
    186,388
    
    
    $
    (668
    )
    
    $
    270,810Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,527
    
    
    
    
    
    
    
    10,527Stock option grants
    
    
    
    
    
    
    6,030
    
    
    
    (6,030
    )
    
    
    
    
    
    
    
    
    
    
    Exercises of stock options
    
    
    97
    
    
    
    1,001
    
    
    
    
    
    
    
    
    
    
    
    1,377
    
    
    
    2,475Stock option vesting
    
    
    
    
    
    
    
    
    
    
    1,076
    
    
    
    
    
    
    
    
    
    
    
    1,076Restricted stock grants
    
    
    
    
    
    
    513
    
    
    
    (513
    )
    
    
    
    
    
    
    
    
    
    
    Restricted stock vesting
    
    
    
    
    
    
    
    
    
    
    334
    
    
    
    
    
    
    
    
    
    
    
    334Performance stock grants
    
    
    
    
    
    
    2,331
    
    
    
    (2,331
    )
    
    
    
    
    
    
    
    
    
    
    Performance stock
amortization
    
    
    
    
    
    
    
    
    
    
    526
    
    
    
    
    
    
    
    
    
    
    
    526Purchases of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,431
    )
    
    
    (1,431
    )Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,020
    )
    
    
    
    
    
    
    (1,020
    )Other
    
    
    
    
    
    
    190
    
    
    
    (199
    )
    
    
    
    
    
    
    9
    
    
    
    Balance, September 30, 2005
    
    $
    20,395
    
    
    $
    80,477
    
    
    $
    (12,757
    )
    
    $
    195,895
    
    
    $
    (713
    )
    
    $
    283,297
 Note 9  Product Warranties
  (In thousands)
    
    Warranty LiabilityBalance, June 30, 2005
    
    $
    4,902Balance of acquired business
    
    
    167Accrued for new warranties
    
    
    483Changes in estimates for pre-existing warranties
    
    
    660Warranty settlements during the year
    
    
    (946
    )Balance, September 30, 2005
    
    $
    5,266
 Note 10  Environmental Risk
   -9-




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Note 11  Acquisitions
   -10-




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Note 12  Goodwill and Intangible Assets
  Balance, June 30, 2005
    
    $
    1,497Goodwill acquired
    
    
    9,147Goodwill adjusted
    
    
    Balance, September 30, 2005
    
    $
    10,644
  Intangible Assets, Gross
    
    
    Accumulated Amortization
    
    
    Net Book ValueJune 30,
    
    
    
    
    
    
    Sept. 30,
    
    
    June 30,
    
    
    
    
    
    
    Sept. 30,
    
    
    June 30,
    
    
    Sept. 30,(in thousands)
    
    2005
    
    
    Additions
    
    
    2005
    
    
    2005
    
    
    Expense
    
    
    2005
    
    
    2005
    
    
    2005Patents
    
    $
    724
    
    
    $
    5,400
    
    
    $
    6,124
    
    
    $
    35
    
    
    $
    42
    
    
    $
    77
    
    
    $
    689
    
    
    $
    6,047Customer
relationships
    
    
    
    
    
    
    3,700
    
    
    
    3,700
    
    
    
    
    
    
    
    31
    
    
    
    31
    
    
    
    
    
    
    
    3,669Trademarks
    
    
    
    
    
    
    600
    
    
    
    600
    
    
    
    
    
    
    
    4
    
    
    
    4
    
    
    
    
    
    
    
    596Noncompete agreement
    
    
    
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    
    
    
    
    17
    
    
    
    17
    
    
    
    
    
    
    
    983$
    724
    
    
    $
    10,700
    
    
    $
    11,424
    
    
    $
    35
    
    
    $
    94
    
    
    $
    129
    
    
    $
    689
    
    
    $
    11,295
 
 Note 13  Discontinued Operations
   -11-




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(In thousands)Three Months EndedSeptember 30,2005
    
    
    2004Sales
    
    $
    
    
    
    $
    1,016Cost of sales
    
    
    
    
    
    
    735Selling, general and administrative
    
    
    
    
    
    
    964Impairment of assets
    
    
    
    
    
    
    651Operating loss
    
    
    
    
    
    
    (1,334
    )Credit for income taxes
    
    
    
    
    
    
    (483
    )Net loss from discontinued operations
    
    $
    
    
    
    
    ($851
    )
 Note 14  Income Taxes
  -12-




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Executive Overview
      Performance Data
  Three Months EndedSeptember 30,2005
    
    
    2004Sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    81.6
    
    
    
    81.8Gross margin
    
    
    18.4
    
    
    
    18.2Selling, general and administrative
    
    
    9.3
    
    
    
    9.3Income from
operations
    
    
    9.1
    
    
    
    8.9Interest expense, net
    
    
    1.3
    
    
    
    1.3Income from
continuing operations, before income taxes
    
    
    7.8
    
    
    
    7.6Provision for income taxes
    
    
    2.9
    
    
    
    2.9Income from continuing operations
    
    
    4.9
    %
    
    
    4.7
    %
 -13-




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Changes in the Three-Month Period Ended September 30, 2005 Compared to the Three-Month Period Ended
September 30, 2004
 Overall Performance
      Results of Business Segments
    -14-




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Financial Condition
 Overview
  Operating Activities
   -15-




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Investing Activities
  Financing Activities
    Off-Balance Sheet Arrangements
  Critical Accounting Policies
  
    
    Collectibility of Accounts Receivable
    
    Accruals for Loss Contingencies, including Warranties
    
    Inventories
    
    Revenue Recognition
    
    Impairment of Long-Lived Assets
    
    Stock-Based Compensation
  Business Risks and Forward-Looking Statements
  -16-




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Competitive Conditions
  Higher Raw Materials, Energy and Transportation Costs
  Temporary Shortages or Disruptions
  Productivity of New Facilities
  Utilization of Hazardous Materials
  Litigation and Claims
  Higher Interest Rates
  -17-




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Loss of Key Customers
  Physical Loss to Manufacturing Facilities
  Development of New Products
  Technological Changes
  -18-




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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.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 and material weaknesses.
 -19-




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PART II. OTHER INFORMATION
 
 Item 2. Issuer Purchases of Equity Securities
  Maximum Number (orApproximate DollarTotal Number of
    
    
    Value) of SharesShares Purchased as
    
    
    That May yet beTotal Number of
    
    
    
    
    
    
    Part of Publicly
    
    
    Purchased Under theShares Purchased
    
    
    Average Price Paid
    
    
    Announced Plans or
    
    
    Plans or ProgramsPeriod
    
    (Notes 1 and 2)
    
    
    per Share
    
    
    Programs
    
    
    (Note 3)July, 2005
    
    
    10,592
    
    
    $
    28.55
    
    
    $
    
    
    
    $
    10,600,000August, 2005
    
    
    8,732
    
    
    
    31.83
    
    
    $
    
    
    
    $
    10,600,000September, 2005
    
    
    24,503
    
    
    
    34.71
    
    
    $
    
    
    
    $
    10,600,000Total
    
    
    43,827
    
    
    $
    32.65
    
    
    $
    
 
 (1)
    
    Includes repurchases of 28,412 shares from officers and employees in connection with stock
option exercises and repurchased restricted shares for income tax withholding payments.(2)
    
    As a result of participant diversification directives, the ElkCorp ESOP Trust accumulates a
surplus of unallocated shares from time to time. In the quarter ended September 30, 2005, the
company purchased 15,415 shares from the ElkCorp ESOP Trust. The dollar value of such
repurchase transactions has no impact on previously announced repurchase programs outlined in
(3).(3)
    
    On September 28, 1998, the companys 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. 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. 
 Item 6. Exhibits
  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.
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##### Table of Contents



SIGNATURES
  ElkCorpDATE:
    
    November 8, 2005
    
    
    
    /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
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