Home
Jump to Risk Factors
Jump to Industries
Jump to Exposures
Jump to Event Codes
Jump to Wiki Summary

Industries
Oil and Gas Storage and Transportation
Oil and Gas Refining and Marketing and Transportation
Transportation
Information Technology
Automobiles and Components
Electrical Components and Equipment
Food Distributors
Trading Companies and Distributors
Construction and Engineering
Construction Materials
Construction and Farm Machinery and Heavy Trucks
Application Software
Health Care Facilities
Automobile Manufacturers
Motorcycle Manufacturers
Technology Hardware Storage and Peripherals
Technology Hardware and Equipment
Building Products
Asset Management and Custody Banks
Home Improvement Retail
Health Care Distribution and Services

Exposures
Military
Intelligence
Regime
Express intent
Rights
Cooperate
Provide
Political reform
Ease
Judicial

Event Codes
Yield to order
Solicit support
Complain
Release or return
Accident
Promise
Adjust
Request
Warn
Host meeting
Riot
Agree
Vote
Yield
Demand
Grant
Reduce routine activity
Consult
Bombings
Sports contest

Wiki	Wiki Summary
Operation Mincemeat	Operation Mincemeat was a successful British deception operation of the Second World War to disguise the 1943 Allied invasion of Sicily. Two members of British intelligence obtained the body of Glyndwr Michael, a tramp who died from eating rat poison, dressed him as an officer of the Royal Marines and placed personal items on him identifying him as the fictitious Captain (Acting Major) William Martin.
Arithmetic	Arithmetic (from Ancient Greek ἀριθμός (arithmós) 'number', and τική [τέχνη] (tikḗ [tékhnē]) 'art, craft') is an elementary part of mathematics that consists of the study of the properties of the traditional operations on numbers—addition, subtraction, multiplication, division, exponentiation, and extraction of roots. In the 19th century, Italian mathematician Giuseppe Peano formalized arithmetic with his Peano axioms, which are highly important to the field of mathematical logic today.
Bitwise operation	In computer programming, a bitwise operation operates on a bit string, a bit array or a binary numeral (considered as a bit string) at the level of its individual bits. It is a fast and simple action, basic to the higher-level arithmetic operations and directly supported by the processor.
Special Activities Center	The Special Activities Center (SAC) is a division of the Central Intelligence Agency responsible for covert operations and paramilitary operations. The unit was named Special Activities Division (SAD) prior to 2015.
Operations management	Operations management is an area of management concerned with designing and controlling the process of production and redesigning business operations in the production of goods or services. It involves the responsibility of ensuring that business operations are efficient in terms of using as few resources as needed and effective in meeting customer requirements.
Operations research	Operations research (British English: operational research), often shortened to the initialism OR, is a discipline that deals with the development and application of advanced analytical methods to improve decision-making. It is sometimes considered to be a subfield of mathematical sciences.
Emergency operations center	An emergency operations center (EOC) is a central command and control facility responsible for carrying out the principles of emergency preparedness and emergency management, or disaster management functions at a strategic level during an emergency, and ensuring the continuity of operation of a company, political subdivision or other organization.\nAn EOC is responsible for strategic direction and operational decisions and does not normally directly control field assets, instead leaving tactical decisions to lower commands.
Met Operations	Met Operations, also known as Met Ops, is one of the four business groups which forms the Metropolitan Police Service. It was created during the 2018-19 restructuring of the service, amalgamating many of its functions from the Operations side of the Specialist Crime & Operations Directorate formed in 2012, with the Specialist Crime side of that Directorate placed under the new Frontline Policing Directorate.
Surgery	Surgery is a medical or dental specialty that uses operative manual and instrumental techniques on a person to investigate or treat a pathological condition such as a disease or injury, to help improve bodily function, appearance, or to repair unwanted ruptured areas.\nThe act of performing surgery may be called a surgical procedure, operation, or simply "surgery".
Competition	Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, individuals, economic and social groups, etc.
Automotive industry	The automotive industry comprises a wide range of companies and organizations involved in the design, development, manufacturing, marketing, and selling of motor vehicles. It is one of the world's largest industries by revenue (from 16 % such as in France up to 40 % to countries like Slovakia).
Competitor analysis	Competitive analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context to identify opportunities and threats.
Competitors for the Crown of Scotland	When the crown of Scotland became vacant in September 1290 on the death of the seven-year-old child Queen Margaret, 13 claimants to the throne came forward. Those with the most credible claims were John Balliol, Robert Bruce, John Hastings and Floris V, Count of Holland.
Competitor backlinking	Competitor backlinking is a search engine optimization strategy that involves analyzing the backlinks of competing websites within a vertical search. The outcome of this activity is designed to increase organic search engine rankings and to gain an understanding of the link building strategies used by business competitors.By analyzing the backlinks to competitor websites, it is possible to gain a benchmark on the number of links and the quality of links that is required for high search engine rankings.
Sport of athletics	Athletics is a group of sporting events that involves competitive running, jumping, throwing, and walking. The most common types of athletics competitions are track and field, road running, cross country running, and racewalking.
List of Dancing with the Stars (American TV series) competitors	Dancing with the Stars is an American reality television show in which celebrity contestants and professional dance partners compete to be the best dancers, as determined by the show's judges and public voting. The series first broadcast in 2005, and thirty complete seasons have aired on ABC. During each season, competitors are progressively eliminated on the basis of public voting and scores received from the judges until only a few contestants remain.
List of female fitness and figure competitors	This is a list of female fitness and figure competitors.\n\n\n== A ==\nJelena Abbou\n\n\n== B ==\nLauren Beckham\nAlexandra Béres\nSharon Bruneau\n\n\n== C ==\nNatalie Montgomery-Carroll\nJen Cassetty\nKim Chizevsky\nSusie Curry\n\n\n== D ==\nDebbie Dobbins\nNicole Duncan\n\n\n== E ==\nJamie Eason\nAlexis Ellis\n\n\n== F ==\nAmy Fadhli\nJaime Franklin\n\n\n== G ==\nAdela García \nConnie Garner\nElaine Goodlad\nTracey Greenwood\nOksana Grishina\n\n\n== H ==\nMallory Haldeman\nVanda Hădărean\nJen Hendershott\nSoleivi Hernandez\nApril Hunter\n\n\n== I ==\n\n\n== J ==\nTsianina Joelson\n\n\n== K ==\nAdria Montgomery-Klein\nAshley Kaltwasser\n\n\n== L ==\nLauren Lillo\nMary Elizabeth Lado\nTammie Leady\nJennifer Nicole Lee\nAmber Littlejohn\nJulie Lohre\nJenny Lynn\n\n\n== M ==\nTimea Majorová\nLinda Maxwell\nDavana Medina\nJodi Leigh Miller\nChisato Mishima\n\n\n== N ==\nKim Nielsen\n\n\n== O ==\n\n\n== P ==\nVicky Pratt\nElena Panova\nChristine Pomponio-Pate\nCathy Priest\n\n\n== Q ==\n\n\n== R ==\nMaite Richert\nCharlene Rink\nKelly Ryan\n\n\n== S ==\nErin Stern\nCarol Semple-Marzetta\nKrisztina Sereny\nTrish Stratus (Patricia Anne Stratigias)\n\n\n== T ==\nKristi Tauti\nJennifer Thomas\n\n\n== U ==\n\n\n== V ==\nLisa Marie Varon\n\n\n== W ==\nLatisha Wilder\nTorrie Wilson\nLyen Wong\nJenny Worth\nNicole Wilkins\n\n\n== Y ==\n\n\n== Z ==\nMarietta Žigalová\nMalika Zitouni\n\n\n== See also ==\nList of female bodybuilders\n\n\n== References ==\nThere has been a rise in the number of women wanting to compete as fitness models.
Competitor Group	Competitor Group, Inc. (CGI) is a privately held, for-profit, sports marketing and management company based in Mira Mesa, San Diego, California.
Round-robin tournament	A round-robin tournament (or all-play-all tournament) is a competition in which each contestant meets every other participant, usually in turn. A round-robin contrasts with an elimination tournament, in which participants are eliminated after a certain number of losses.
Flight Facilities	Flight Facilities is an Australian electronic producer duo that also performs as Hugo & Jimmy. In 2009, they began mixing songs by other artists before crafting their own original material.
NASA facilities	There are NASA facilities across the United States and around the world. NASA Headquarters in Washington, DC provides overall guidance and political leadership to the agency.
Pedestrian facilities	Pedestrian facilities include retail shops, museums, mass events (such as festivals or concert halls), hospitals, transport hubs (such as train stations or airports), sports infrastructure (such as stadiums) and religious infrastructures. The transport mode in such infrastructures is mostly walking, with rare exceptions.
Essential facilities doctrine	The essential facilities doctrine (sometimes also referred to as the essential facility doctrine) is a legal doctrine which describes a particular type of claim of monopolization made under competition laws. In general, it refers to a type of anti-competitive behavior in which a firm with market power uses a "bottleneck" in a market to deny competitors entry into the market.
Attacks on U.S. diplomatic facilities	The United States maintains numerous embassies and consulates around the world, many of which are in war-torn countries or other dangerous areas.\n\n\n== Diplomatic Security ==\nThe Regional Security Office is staffed by Special Agents of the Diplomatic Security Service (DSS), and is responsible for all security, protection, and law enforcement operations in the embassy or consulate.
Zubieta Facilities	The Zubieta Facilities (Basque: Zubietako Kirol-instalakuntzak, Spanish: Instalaciones de Zubieta), is the training ground of the Primera Division club Real Sociedad. Located in Zubieta, an enclave of San Sebastian (adjacent to the San Sebastián Hippodrome), it was opened in 2004 in its modernised form, although was originally inaugurated in 1981.
The Facilities Society	The Facilities Society was founded in the UK on 9 December 2008 as a not-for-profit company limited by guarantee (registered in England nr. 6769050).
Medical facilities of Seattle	The city of Seattle, Washington, United States is served by numerous respected medical institutions. The University of Washington is consistently ranked among the country's dozen leading institutions in medical research, while Group Health Cooperative was one of the pioneers of managed care in the United States.
Business	Business is the activity of making one's living or making money by producing or buying and selling products (such as goods and services). It is also "any activity or enterprise entered into for profit."Having a business name does not separate the business entity from the owner, which means that the owner of the business is responsible and liable for debts incurred by the business.
Business administration	Business administration (also known as business management) is the administration of a commercial enterprise. It includes all aspects of overseeing and supervising business operations.
Business Insider	Insider – previously named Business Insider (BI) – is an American financial and business news website founded in 2007. Since 2015, a majority stake in Business Insider's parent company Insider Inc.
Small business	Small businesses are corporations, partnerships, or sole proprietorships which have fewer employees and/or less annual revenue than a regular-sized business or corporation. Businesses are defined as "small" in terms of being able to apply for government support and qualify for preferential tax policy varies depending on the country and industry.
Family business	A family business is a commercial organization in which decision-making is influenced by multiple generations of a family, related by blood or marriage or adoption, who has both the ability to influence the vision of the business and the willingness to use this ability to pursue distinctive goals. They are closely identified with the firm through leadership or ownership.
Business Proposal	Business Proposal (Korean: 사내 맞선; Hanja: 社內맞선; RR: Sanae Matseon; lit. The Office Blind Date) is a South Korean romantic comedy television series based on the webtoon of the same title written by HaeHwa and illustrated by Narak.
Business intelligence	Business intelligence (BI) comprises the strategies and technologies used by enterprises for the data analysis and management of business information. Common functions of business intelligence technologies include reporting, online analytical processing, analytics, dashboard development, data mining, process mining, complex event processing, business performance management, benchmarking, text mining, predictive analytics, and prescriptive analytics.

Risk Factors
ELKCORP identified in Part 1
Item 1A Risk Factors of this report, and 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
ElkCorp undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise
Business General ElkCorp, which is referred to as “we,” “our,” “the registrant,” “the company” and “Elk” in this report, is a Delaware corporation originally incorporated in 1965, having its principal executive offices in Dallas, Texas
Shares of ElkCorp’s common stock are traded on the New York Stock Exchange under the ticker symbol “ELK”
We maintain an Internet website at http://www
In the Investor Relations section of the web site, we post the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission: Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
All such filings on the Investor Relations web page, which also includes Forms 3, 4 and 5 filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, are available to be viewed on the web page free of charge
Additionally, our key committee charters, corporate governance guidelines and code of business conduct and ethics are available on our website and in print free of charge upon request
Information contained on the web site is not part of this Annual Report on Form 10-K or our other filings with the Securities and Exchange Commission
A copy of this Form 10-K is available without charge upon written request to Investor Relations, ElkCorp, 14911 Quorum Drive, Suite 600, Dallas, Texas 75254
Vision Our vision is to be the “Brand of Choice” to our customers for every aspect of our business
Our mission is to utilize our strengths in technology, manufacturing and marketing to produce innovative products that enhance profitability
Our primary strategy is to enter and maintain a leadership position in selected high growth, high margin markets where our technology brings true innovation to the building products industry
Key aspects of this strategy in the coming year include: - Developing additional innovative roofing and composite products to serve our changing markets - Seeking innovative ways to make our roofing and composite products lighter and stronger - Diversifying and strengthening our asphalt supply chain to improve our options and competitiveness for this key raw material - Further identifying alternatives and new ideas to reduce freight costs - Commercializing and profitably growing in the fire barrier and flooring underlayment industries - Continuing to integrate RGM products into our national distribution channels - Pursuing add-on acquisitions and a new building product platform that will leverage the Elk brand and our investments in technology, distribution, marketing and manufacturing - 1 - _________________________________________________________________ [36]Table of Contents Financial Information About Industry Segments Financial information by industry segment is presented in Part II Item 8
Financial Statements and Supplementary Data in this report
We maintain one additional segment, Surface Finishes, which includes hard chrome and other finishes designed to extend the life of steel machinery components operating in abrasive environments
This business does not fit into our focus on building products and is currently offered for sale
However, our current plan is for this business to remain as one of our business platforms if it is not sold
In fiscal 2006, we changed our reporting for industry segments to better reflect our operating structure
External sales of coated and uncoated nonwoven fabrics were previously included in the Premium Roofing Products segment, but are now included in Specialty Fabric Technologies
In addition, fire barrier technologies are included in Specialty Fabric Technologies
In prior years, fire barrier technologies and the Surface Finishes segment were combined and shown as Other, Technologies
Premium Roofing Products Products and Warranties The Premium Roofing Products platform is our largest segment, accounting for 90prca of sales in fiscal 2006
The primary products manufactured at Elk’s roofing plants are premium architectural roofing shingles and certain accessory products
Our key products have either a wood-shake or slate-like look
Elk’s shingle product line includes: the Prestique® Gallery Collection®, Prestique Plus High Definition®, Prestique I High Definition, Prestique High Definition, Raised Profile®, Capstone®, Domain® Winslowâ, Domain Ashford®, Prestique Grande® High Definition, Elk Cool Color Series shingles, and Prestique Xtra™
In addition to Elk’s traditional product line of architectural shingles, in recent years we have strengthened and expanded our brand by introducing a wider variety of products
It features an interply headlap technology that reduces the use of asphalt and granules, creating a more environmentally friendly product that is lighter in weight without sacrificing performance
The Elk Cool Color Series features “cool” asphalt shingles that slow heat build-up using highly reflective granules that reflect the sun’s rays and more effectively release absorbed heat
The Domain line of super shingles are premium landscape shingles, which add a new visual dimension to roofing
As a result of the acquisition of RGM in August 2005, we began offering Ridglass® high-profile hip and ridge shingles, a premium accessory product, to complement our existing Seal-A-Ridge® with Formula FLX®, Z® Ridge, Vented RidgeCrest hip and ridge products and HighPoint™ line of ridge vents
We offer other accessory products, including various starter-strip products sold as 9” Starter, 7dtta2” StartRite and 7dtta2” KwikStart™, TG-2™ SBS-modified underlayment, ShieldGard™ and HT ShieldGard self-adhering underlayments for low-slope roof systems and under tile and asphalt roofing, IceGard™ MS and IceGard PST all-climate membranes for superior protection against water penetration from wind-driven rain, RainCap™ SA Cap P and RoofGard™ SA Cap P-FR cap sheets, KwikWrap™, a weather resistant barrier, accessory paint for vent flashings and a built-in StainGuard® treatment
The following table summarizes limited product warranty and limited wind warranty for the first five years for each product in our shingle line
Product Limited Warranty Limited Wind Coverage Domain Winslow 50 years 110 mph Domain Cool Color Series 50 years 110 mph Prestique Gallery Collection 50 years 110 mph Prestique Plus High Definition 50 years 110 mph Prestique Xtra 40 years 130 mph Capstone 40 years 110 mph Prestique Grande High Definition 40 years 90 mph Prestique I High Definition 40 years 90 mph Prestique Cool Color Series 40 years 90 mph Domain Ashford 40 years 80 mph Prestique High Definition 30 years 80 mph Raised Profile 30 years 70 mph - 2 - _________________________________________________________________ [37]Table of Contents Sales and Marketing Our customer base for roofing products includes approximately 180 wholesale distributors, many of which have multiple nationwide locations
Elk’s roofing products are distributed nationwide and in Canada and are sold by employee sales personnel primarily to these wholesale distributors, with delivery being made by rail, contract carrier, or by customer vehicles from our manufacturing plants or warehouses
Our warehouse locations and the master distribution center in Edgerton, Wisconsin provide us the capability to combine multiple products on the same trucks
Even without unusual weather events, longer-term industry growth rates have been strong
The laminated asphalt shingle market is expected to continue to grow 6prca to 10prca annually for the remainder of the decade
Approximately 80prca of all asphalt shingles are used in reroofing and remodeling and about 20prca are used in new construction
Approximately 70prca of housing in the United States is over 20 years old, with the median age being approximately 32 years old
Approximately 89prca of roof replacements are nondiscretionary and result from roof deterioration, age, leaks, or weather damage
Appearance upgrades account for the remaining 11prca of roof replacements
Our ten largest customers account generally for 50prca of consolidated sales
One customer, ABC Supply Co, Inc, the largest roofing wholesale distributor in the United States, accounted for 19prca of consolidated sales in each of the past three fiscal years
Elk’s sales personnel devote considerable time and effort to the education of roofing installation contractors regarding the superior appearance, quality and ease of application of Elk’s roofing products
Elk believes that our effort to develop brand loyalty among roofing installation contractors is a significant marketing strategy, since the product recommendations of roofing installation contractors often have a significant influence upon the roofing product brand selections of homeowners
Elk maintains a Peak Performance^SM Contractor Program to reward top performing contractors for their brand loyalty and quality of service
Contractors in the Peak Performance program can also become shareholders of Elk
Competition Even though the premium shingle manufacturing business is highly competitive, we believe that Elk is one of the top five producers of premium architectural roofing shingles
Elk has been able to compete successfully with our competitors, some of which are larger in size and have greater financial resources
Elk’s target market for roofing shingle sales is the laminated segment which accounts for over 65prca of all asphalt shingle sales
We believe we are the only major roofing manufacturer that focuses on this segment of the sloped roof market
Elk’s plants generally are among the most modern and efficient plants in the industry
We believe that many of our competitors have elective manufacturing capacity, allowing them to manufacture either commodity shingles or premium laminated shingles
Such elective capacity can affect the supply/demand balance in the premium roofing sector, which can influence the prices Elk charges its customers
Manufacturing and Raw Materials We manufacture premium architectural roofing shingles and accessory products at plants located in (1) Ennis, Texas, (2) Shafter, California, (3) Myerstown, Pennsylvania, and (4) from two adjacent manufacturing facilities in Tuscaloosa, Alabama
On August 25, 2005, we acquired RGM Products, Inc, a privately-held manufacturer of high-profile hip and ridge and other roofing related products based in Fresno, California
Our roofing plants ordinarily operate twenty-four hours a day, seven days a week, year-round, except as required for planned maintenance
The significant raw materials used in manufacturing shingle and accessory products are asphalt, ceramic coated granules, mineral filler and roofing mat
Temporary shortages or disruption in supply of raw materials do result from time to time for a variety of reasons
Asphalt costs, which are a significant cost component of our roofing products, can be materially affected by trends in crude oil prices and our cost of sales can vary substantially as a result of changes in the price and availability of asphalt
With the surge in the price of crude oil in the past two years, asphalt costs have reached record levels
We have historically been able to pass some of the higher raw material costs through to the customer, but there is no assurance of being able to do so in the future
In addition to premium architectural shingles and accessory products, nonwoven fabrics are manufactured on two nonwoven mat lines that run in parallel at our Ennis, Texas facility
Elk’s nonwoven fabrics subsidiary is a leading - 3 - _________________________________________________________________ [38]Table of Contents manufacturer of nonwoven fiberglass shingle substrates and other products utilizing coated and uncoated nonwoven fabrics formed from fiberglass, polyester, cellulose and blended base fibers
Uncoated nonwoven fabrics form the core substrate of most residential asphalt shingles and commercial roofing membranes
During fiscal 2006, the majority of nonwoven fabrics produced by Elk were used in the manufacture of residential and commercial roofing and accessory products, with more than one-half of production consumed internally in the manufacture of Elk’s asphalt shingle and accessory roofing products
Nonwoven fabrics sold to outside customers are sold by sales personnel of Specialty Fabric Technologies
At the time of sale the products are transferred to Specialty Fabric Technologies and reported as sales for that business segment
Our nonwoven fiberglass roofing mat facilities have the capacity to supply all of our internal fiberglass roofing mat needs
However, certain of our roofing plants may purchase nonwoven fiberglass roofing mat from other manufacturers, as such purchases may reduce freight costs to the manufacturing plants
The significant raw materials for the production of nonwoven fabrics are glass fibers and resins, all of which are available from several sources and are in adequate supply
Composite Building Products Products and Warranties Composite Building Products is a relatively new business platform which accounted for 3prca of sales in fiscal 2006
Our composite building products are designed for rapidly growing markets using advanced composite technology, including composite wood decking and railing
Composite wood products are sold under the CrossTimbers^® name and marketed as an alternative to treated or untreated wood
Unlike the products offered by many of our competitors, our CrossTimbers products contain no recycled polyethylene products, but consist of a combination of recycled wood and polypropylene, which we believe provides performance advantages including strength, longevity and dimensional stability, as compared to most other composite building products in the marketplace
Our current decking products are primarily voided deck board products with either a smooth or embossed wood grain finish
Our composite building products generally have limited product warranties for a twenty-year period
We also manufacture composite railing products under the RailWays™ brand name
Our railing products are designed to complement our CrossTimbers decking products
Our RailWays product line includes the Traditional Series, available in white with a classic painted wood look, and the Old World Series, available in five colors and a decorative, wrought iron look
Both product series are available with a patent pending Uni-Ball™ connector that requires no drilling
Our railing products can be used not only with our products but with the decking products of our competitors
These complementary products allow us to provide our distributors a more diverse decking and railing product line that improves the speed of installation
In July 2006, we began shipping a new CrossTimbers Signature Series railing kit
This new product is designed to match our existing decking colors for a wide range of homes and architectural styles, is easy to install, and utilizes the superior Uni-Ball hardware and fasteners
Sales and Marketing Composite building products are sold by product dedicated sales personnel and by some of the same personnel that sell our premium roofing products, generally to many of the same wholesale distributors
Products are typically shipped by contract carrier to our customers from our manufacturing location or company warehouses
Manufacturing and Raw Materials Composite building products are manufactured in Lenexa, Kansas
The significant raw materials for this business are post-industrial recycled wood flour, polypropylene and additives for improved performance
Competition We believe that industry-wide sales of composite wood products currently account for approximately 22prca of the estimated potential market for wood used in decking and railing applications and that composite products’ current compound annual growth rate is in excess of 15prca per year
There are numerous competitors and we anticipate that the high growth potential of this emerging market may attract additional competitors
Current competitors include companies focusing on traditional wood products and companies offering wood alternative products
Some of these competitors are - 4 - _________________________________________________________________ [39]Table of Contents larger in size and have greater financial resources than we do
The current market is generally fragmented, although we believe one competitor may have more than a 30prca market share for wood composites
We believe that our established building products distribution channels enhance our ability to compete successfully in this market
Specialty Fabric Technologies was established as a marketing division and separate business segment to create brand awareness and promote increased sales of our nonwoven specialty fabrics products and VersaShield^® fire barrier technology
Nonwoven fabrics are sold to other roofing manufacturers and to other high-growth markets, such as air filtration and carpet tile
Included in the Specialty Fabric Technologies segment results are external sales of our nonwoven fabrics
Fabrics used internally by our roofing operation are not part of this business segment
Nonwoven fiberglass fabrics provide strength and fire-resistance
Coated nonwoven fabrics have been developed by Elk for use in various building product applications, including roofing underlayment, facer, filtration and carpet tiles
Many of Elk’s coated nonwoven products utilize our proprietary VersaShield fire barrier coatings
Also included in the Specialty Fabric Technologies segment are fire barrier products, including fire retardant fabrics for mattresses, bed clothes and upholstered furniture
While these activities are outside our focus on building products platforms, we believe that potentially significant demand for products utilizing this technology could result from trends toward more stringent flammability safety laws and regulations for mattresses, upholstered furniture and possible additional products
This new business has produced a limited amount of commercial sales to date
Sales and Marketing Nonwoven fabrics produced for external sale are sold by product dedicated personnel for use in building and construction, filtration, floor coverings and other industries
Products are generally shipped by contract carriers to our customers’ locations
Manufacturing and Raw Materials As Specialty Fabric Technologies is a marketing division, the segment has no internal manufacturing operations
Our fire barrier products are accounted for through our Elk Technologies, Inc
The manufacture of fire barrier products, primarily specialty products sold to customers outside the roofing industry, was outsourced to independent companies in fiscal 2006
Competition For products sold by this marketing division, Elk successfully competes with other manufacturers of specialty fabrics, some of which are larger in size and have greater financial resources
Elk believes that the quality and properties of its specialty fabrics make it a desirable supplier of such products to other manufacturers
In fiscal 2006, a significant amount of external shipments of nonwoven fabrics were delivered to other manufacturers of asphalt shingles and commercial roofing membranes
Many of these customers purchased nonwoven fabrics from Elk in order to supplement their own internal nonwoven fabrics production capacity
Surface Finishes Surface Finishes represents the operations of Chromium Corporation (Chromium) and accounted for 1prca of sales in fiscal 2006
Chromium does not fit into our focus on building products and has been positioned for sale
However, if it is not sold, it will continue as one of our business platforms
Chromium is a leader in plating proprietary finishes for use in remanufacturing large diesel engine cylinder liners, pistons and valves for the railroad and marine industries
Chromium also manufactures wear plate products utilizing its proprietary CRODON^® hard chrome finish
These wear plate products are designed to extend the service life of steel machinery components operating in abrasive environments for a number of industries, including roofing manufacturing, mining and public utility industries
We believe that Chromium is a leading remanufacturer of diesel engine cylinder liners and pistons for the railroad and marine transportation industries and is the primary supplier of hard chrome plated finishes for original equipment - 5 - _________________________________________________________________ [40]Table of Contents diesel engine cylinder liners to the major domestic locomotive manufacturers
We believe it has smaller competitors in the locomotive diesel engine cylinder liner market, but competes with larger, better capitalized manufacturers in certain markets
Chromium has achieved a leading position in remanufacturing markets through product performance, quality, service and price
In addition, technical innovations that enhance quality and performance are also increasing the value-added content per unit produced
The primary raw material used in this business is chromic acid, which is available in adequate supply
Discontinued Operations Cybershield, Inc, through subsidiaries (collectively Cybershield), was engaged in shielding plastic enclosures from electromagnetic and radio frequency interference
In fiscal 2005, we sold substantially all assets of Cybershield, excluding its Canton, Georgia facility, to the Cybershield management group
Later in fiscal 2005, we sold the Canton, Georgia facility and certain equipment to an unrelated party
The only remaining assets of the former Cybershield operation are immaterial amounts of equipment held for sale
Ortloff Engineers, LTD (Ortloff) was engaged in licensing proprietary technologies and providing related engineering services to the natural gas processing industries, with particular emphasis on the natural gas liquids recovery, sulfur recovery and liquefied natural gas segments
In fiscal 2005 we concluded that it did not fit into our focus on building products platforms and it was sold to a financial buyer for cash
We do not participate in Ortloff’s management or ongoing operation in any manner, although we continue to have dlra4cmam400cmam000 in long-term license receivables, which the purchaser is collecting on our behalf for a service fee
In addition, we retained a portion of contingent license fees on certain projects that were in process at the date of sale
The maximum future benefit of contingent license fees is approximately dlra2cmam100cmam000, although there is no assurance that any of these contingent fees will ultimately be realized
Transportation Our products are shipped by rail, contract carrier, or by customer vehicles from our manufacturing plants or warehouses
Shipping costs are a significant component of cost of sales
Agreements with our contract carriers typically allow for surcharges as a result of increasing fuel prices
Further, carriers are subject to the rules issued by the US Department of Transportation which govern truck drivers’ hours of service that have and will continue to impact our shipping costs
Historically, we have been able to pass along some of our higher transportation costs through to the customer, but there is no assurance of being able to do so in the future
Backlog Our backlog is generally not significant, nor is it material to any of our operations
At June 30, 2006, the backlog for our roofing shingles was less than one month of sales, which is typical except in times of extreme weather events when backlog generally increases due to very high demand for products in storm-damaged regions
Patents We own a number of patents and trade secrets covering certain products and processes
We believe that the rights under our patents are important to our operations, but we do not consider any individual patent or group of patents related to a specific product or process to be material to our total business
Research and Development Our research activities are primarily conducted at a technology center in Ennis, Texas
Our product development activities are conducted at the Ennis technology center and at each of our plant locations
Research and development costs are expensed as incurred and included in cost of sales
Expenses for research activities at the Ennis technology center were dlra3cmam560cmam000, dlra3cmam348cmam000 and dlra2cmam300cmam000 in fiscal 2006, 2005 and 2004, respectively
Development costs at plant locations are not separately identified
Extended Payment Terms Our Premium Roofing Products and Composite Building Products businesses typically provide extended payment terms to certain customers for products shipped during the late winter and early spring months, with payment generally due during late spring or early summer
As of June 30, 2006, dlra4cmam130cmam000 in receivables relating to such shipments were outstanding
All such receivables are due in the first quarter of fiscal 2007
- 6 - _________________________________________________________________ [41]Table of Contents Seasonal Business Except in years when unusual weather events disrupt normal cyclicality, our Premium Roofing Products and Composite Building Products businesses are seasonal to the extent that cold, wet or icy weather conditions during the late fall and winter months in some of our marketing areas typically limit the installation of residential building products
This seasonality causes sales to be generally slower during such periods
Working capital requirements generally fluctuate during the year because of seasonality and sales with extended payment terms
Typically, working capital requirements and borrowings are higher in the spring and summer months, and lower in the fall and winter months
Related liquidity and/or borrowings increase or decrease during the year as a result of working capital fluctuations
Environmental Matters ElkCorp and its subsidiaries are subject to federal, state and local requirements regulating the discharge of materials into the environment, the handling and disposal of solid and hazardous wastes, and protection of the public health and the environment generally (collectively, Environmental Laws)
Certain facilities of our subsidiaries ship waste products to various waste management facilities for treatment or disposal
Governmental authorities have the power to require compliance with these Environmental Laws, and violators may be subject to civil or criminal penalties, injunctions or both
Third parties may also have the right to sue for damages and/or to enforce compliance and to require remediation of contamination
If there are releases or if these facilities do not operate in accordance with Environmental Laws, or their owners or operators become financially unstable or insolvent, our subsidiaries are subject to potential liability
We and our subsidiaries are also subject to Environmental Laws that impose liability for the costs of cleaning up contamination resulting from past spills, disposal, and other releases of hazardous substances
In particular, an entity may be subject to liability under the Federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund) and similar state laws that impose liability — without a showing of fault, negligence, or regulatory violations — for the generation, transportation or disposal of hazardous substances that have caused, or may cause, environmental contamination
In addition, an entity could be liable for cleanup of property it owns or operates even if it did not contribute to the contamination of such property
From time to time, we or our subsidiaries may incur such remediation and related costs at the company-owned plants and certain offsite locations maintained by other parties
Chromium has engaged in limited remediation activities at the site of its former plating operation in Lufkin, Texas
Soil sampling results from a pre-closing environmental evaluation of the site indicated the necessity of localized cleanup
Chromium has entered the property into the Texas Voluntary Cleanup Program (VCP)
Under this program, the Texas Commission on Environmental Quality (TCEQ) reviews the voluntary clean-up plan the applicant submits, and, when the work is complete, issues a certificate of completion, evidencing cleanup to levels protective of human health and the environment and releasing prospective purchasers and lenders from liability to the state
Properties entered into the VCP are protected from TCEQ enforcement actions
In fiscal 2004, Chromium completed a supplemental groundwater and soil assessment at the Lufkin facility
The assessment further defined the horizontal and vertical extent of metals in soils, assessed the horizontal extent of metals in groundwater, and estimated the direction of groundwater movement
Chromium submitted its Affected Property Assessment Report (APAR) to the TCEQ In June 2004, the TCEQ issued a letter accepting Chromium’s APAR in substantially all respects, indicating that no further assessment of the extent of contamination is necessary
In May 2005, Chromium proposed a Remedial Action Plan (RAP) to the TCEQ in which it proposed activities and engineering controls, including capping of affected soils and a pump-and-treat system for affected groundwater, to cleanup the site under the VCP to a site specific risk-based cleanup standard
The TCEQ approved the RAP, with some revisions, in October 2005
Chromium completed the soil capping portion of the RAP and submitted a Response Action Completion Report for the soil remediation to the TCEQ in August 2006 and is awaiting the agency’s approval
Chromium applied to the City of Lufkin for a permit to discharge its post-treatment effluent from the groundwater pump-and-treat system into the City’s sewer system
The availability of this disposal method would decrease the on-going costs of treating the groundwater as proposed under the RAP In June 2006 the City wrote Chromium a letter explaining that the City has applied to the TCEQ for a modification of its discharge permit which would allow the City to reallocate industrial waste loads
The City stated that if the TCEQ approves this permit modification it will be able to issue Chromium a discharge permit
The City believes that it will receive the desired permit modifications and, therefore, Chromium is optimistic that it will receive the desired discharge permit but can give no assurances that it will
- 7 - _________________________________________________________________ [42]Table of Contents In fiscal 2005, the company recorded an accrued liability of dlra700cmam000, which the company currently believes is adequate for costs relating to the matter
However, the cost of remediation could vary significantly depending on Chromium’s success in obtaining the requested City permit, and the success of the designed pump-and-treat system in attaining the groundwater response objective for Chromium established in the final RAP Our operations are subject to extensive Environmental Laws
Other than the possible costs associated with the previously described Chromium matter, we do not believe we will be required to expend amounts which will have a material adverse effect on our consolidated results of operations, financial position or liquidity
We establish and maintain reserves for such known or probable remediation activities in accordance with SFAS Nodtta 5 and AICPA Statement of Position 96-1
Such environmental laws are frequently changed and could result in significantly increased cost of compliance
We anticipate that our subsidiaries will incur costs to comply with Environmental Laws, including remediating any existing non-compliance with such laws and achieving compliance with anticipated future standards for air emissions and reduction of waste streams
Such subsidiaries expend funds to minimize the discharge of materials into the environment and to comply with governmental regulations relating to the protection of the environment
Further, certain of our manufacturing operations utilize hazardous materials in their production processes
As a result, we incur costs for recycling or disposal of such materials and may incur costs for remediation activities at our facilities and off-site from time to time
Persons Employed At June 30, 2006, we and our subsidiaries had 1cmam496 employees
Of this total, 1cmam100 were employed in the Premium Roofing Products segment, 108 were employed in the Composite Building Products segment, 4 were employed in the Specialty Fabric Technologies segment, 64 were employed in the Surface Finishes segment, and 220 (including most sales personnel) were employed by the corporate office
We believe that we have good relations with our employees and the labor unions
Statement Regarding NYSE Mandated Disclosures In November 2005, our Chief Executive Officer executed the annual Section 303A12(a) CEO Certification required by the New York Stock Exchange (NYSE), certifying that he was not aware of any violation of the NYSE’s corporate governance listing standards by ElkCorp
Our Chief Executive Officer and Chief Financial Officer have executed the required Sarbanes-Oxley Act of 2002 Section 302 and 906 certifications on all fiscal 2006 Forms 10-Q, and the current certifications are filed as exhibits to this Annual Report on Form 10-K Item 1A Risks Factors There are many factors that may affect our business and the results of our operations, many of which are beyond our control
Factors that might cause the actual results of our business and operations in future periods to differ materially from those currently expected or desired include, but are not limited to: Changes in economic conditions and the actions of our competitors may adversely affect our results of operations
Our businesses can be affected by the availability of customer and/or end-user financing, interest rates, insurance claims-paying practices, and general economic conditions
Although the large majority of our market is not in new construction and the current housing slowdown has not had a material effect on our business, a substantial and prolonged housing downturn could have significant direct and indirect impacts on our results
In addition, all of our businesses are in highly competitive industries
Actions of competitors, including changes in pricing, or slowing demand for asphalt roofing products due to general or industry economic conditions could result in decreased demand for our products, lower prices received or reduced utilization of plant facilities
Competitors have recently added capacity in key market areas and may continue to do so
Further, changes in building and insurance codes and other standards from time to time can cause changes in demand, challenges in meeting refined product specifications, or increases in costs that may not be passed through to customers
- 8 - _________________________________________________________________ [43]Table of Contents Higher raw material, energy and transportation costs may adversely affect our operating results
Increased costs of raw materials can result in reduced margins, as can higher energy, trucking and rail costs
Further, our largest long-term contracts for asphalt and certain other raw materials expired at the end of calendar year 2005 and in early calendar year 2006
Negotiations of several new contracts are in process, but there is no assurance that new contracts will be agreed upon
As we initiate new multisourcing strategies, certain raw materials are currently being purchased on a purchase order basis
Either alternative (new contracts or purchases using purchase orders) may result in higher or lower raw material costs
Historically, we have been able to pass some of the higher raw material, energy and transportation costs through to the customer
Should we be unable to recover higher raw material, energy and/or transportation costs, including higher trucking costs resulting from fuel surcharges and regulatory changes in the trucking industry, through price increases of our products, operating results could be adversely affected and/or lower than projected
Shortages or disruptions in the supply of raw materials or the availability of transportation may decrease the efficiency in our plants and negatively impact our operating results
Shortages or temporary disruptions in the supply of raw materials or the availability of transportation do result from time to time from a variety of causes
Our manufacturing facilities are highly dependent on adequate supplies of raw materials to operate without unscheduled shutdowns, slowdowns or other production disruptions
Of particular importance is maintaining an adequate supply of asphalt at each of our roofing plants
In many cases oil, from which asphalt is derived, is produced in countries that are politically unstable
In addition, supplies of asphalt can be affected by refiners’ decisions to process alternative products from the residuals in the refining of crude oil
If we experience temporary shortages or disruptions in the supply of raw materials or the availability of transportation, our plants may not be able to operate as planned and operating results could be lower than projected
Delays in achieving anticipated efficiencies at our new facilities could cause our operating results to be lower than projected
We have been involved in a significant expansion plan over the past several years, including the construction of new facilities and the expansion of existing facilities
Progress in achieving anticipated operating efficiencies and financial results is difficult to predict for new and expanded plant facilities
If such progress is slower than anticipated, or if demand for products produced at new or expanded plants does not meet current expectations, operating results could be lower than projected
Extreme weather conditions can delay or accelerate demand for our products and affect our results of operations
With some exceptions, our sales and income have historically been higher in the first and fourth quarter than in the second and third quarters of a fiscal year
Extreme weather conditions, such as wet weather, hail, ice storms and hurricanes may sometimes delay or accelerate the demand for our products between periods and significantly affect our results of operations
The utilization of hazardous materials causes us to incur costs for remediation and could materially affect our results of operations
Certain facilities of our subsidiaries must utilize hazardous materials in their production process
As a result, we could incur costs for remediation activities at our facilities or off-site and other related exposures from time to time in excess of established reserves for such activities
We are involved in ongoing litigation that may adversely affect our operating results
We are involved in various legal proceedings and claims, including claims arising in the ordinary course of business
Our litigation and claims are subject to inherent and case-specific uncertainty
The outcome of such litigation and claims depends on numerous interrelated factors, many of which cannot be predicted
Higher interest rates could substantially affect our borrowing costs
We currently anticipate that most of our needs for capital in the near future will be met with current amounts of cash, cash equivalents and short-term investments, internally generated funds and borrowings under our available credit - 9 - _________________________________________________________________ [44]Table of Contents facility
However, should we make a material acquisition or engage in further significant facilities expansion activities, we may seek additional financing, including but not limited to increasing our revolving credit line or issuing additional senior debt
Significant increases in interest rates could substantially affect our borrowing costs or our cost of alternative sources of capital
The failure to attract and retain skilled personnel could impede our operations
We depend on certain key management and technical personnel to achieve our business strategies and productivity initiatives
The loss of one or more key employees could materially and adversely affect us
Our success also depends on our ability to attract and retain additional highly qualified technical, marketing and management personnel necessary for the maintenance and expansion of our activities
We face strong competition for such personnel
We might not be able to attract or retain such personnel
The loss of one or more of our largest customers could adversely affect our business
The majority of our sales relate to our building products platforms, and our primary customers are building products distributors
The ten largest customers account for approximately 50prca of annual consolidated sales and one customer accounts for approximately 19prca of consolidated sales
Our businesses each could suffer significant setbacks in revenues and operating income if we lost one or more of our largest customers, or if our customers’ plans and/or markets should change significantly
Our manufacturing facilities are subject to numerous hazards and we are not fully insured against all of these hazards
Although we insure ourselves against physical loss to our manufacturing facilities, including business interruption losses, natural or other disasters and accidents, including but not limited to fire, earthquake, damaging winds, floods, explosions and other casualties, operating results could be adversely affected if any of our manufacturing facilities became inoperable for an extended period of time due to these insured events or other non-insured events, including but not limited to acts of God, war or terrorism
The failure to successfully commercialize our product developments could adversely affect our future operating results
Each of our businesses is actively involved in the development of new products, processes and services which are expected to contribute to our ongoing long-term growth and earnings
Consumer products using VersaShield fire retardant coatings have produced a limited amount of commercial sales to date
VersaShield’s fire retardant coatings market potential may be dependent on the stringency of federal and state regulatory requirements, which are difficult to predict
Further, our composite building products operation is producing and selling a new generation of decking products
Our composite building products operation is also developing products for use in various industrial applications
Our premium roofing products and specialty fabric technologies businesses are actively involved in developing and marketing new shingle, accessory and nonwoven specialty fabric products
If our developmental activities are not successful, regulatory requirements for fire retardant products are less stringent than currently predicted, market demand, or acceptance is less than expected, we experience unanticipated product performance issues or delays in achieving target product specifications, or we cannot provide the requisite financial and other resources to successfully commercialize such developments, the growth of future sales and earnings may be adversely affected
The failure to keep up with technological changes in our business may cause our products to become less desirable, resulting in an adverse effect on our business
A key aspect of our business strategy is to seek innovative ways to make our roofing and composite products lighter and stronger
Additionally, we continually seek to improve the performance characteristics of our product offerings and our competitors seek to improve their products
Product improvements and measures to gain production efficiencies can reduce the overall cost of the product
If we fail to achieve our strategy of making products lighter and stronger, do not improve the performance characteristics of our products, or are unsuccessful at developing production improvement and efficiencies, but our competitors are successful in such endeavors, our products may become less desirable and our revenues could be negatively affected
Each of our businesses is subject to the risks of technological changes and competition that is based on technology improvement or labor savings
These factors could affect the demand for or the relative cost of our technology, products and services, or the method and profitability of distribution or delivery of such technology, products and services
- 10 - _________________________________________________________________ [45]Table of Contents Significant product performance issues and warranty claims could negatively affect our reputation, sales and operating results
We develop and manufacture most of our products and expect to continue to do so, although we buy raw materials and some manufactured products from others
We have on occasion found manufacturing defects in our products
Some flaws or deficiencies have not been apparent until after the products were utilized by customers
If any flaws or deficiencies exist in our products and if such flaws or deficiencies are not discovered and corrected before they are utilized by the ultimate customers, claims could negatively affect our reputation, sales and operating results
Although we maintain reserves for warranty costs, in the event of a significant product performance issue, actual claims could materially exceed such reserves
We may not be able to successfully integrate and operate businesses that we acquire
From time to time, we may expand our business or product lines through strategic acquisitions
The success of these acquisitions will depend, in part, on our ability to integrate and operate the acquired businesses
If we are unable to successfully integrate acquisitions with our operations, we may not be able to realize the anticipated benefits of such transactions
In addition, acquisitions may cause us to issue additional securities that dilute the value of our existing equity securities or increase our debt
These actions could adversely affect our business and results of operations