Item 1. Business.
Elcor Corporation (Registrant), incorporated in 1965 as a Delaware corporation, is a publicly held corporation headquartered in Dallas, Texas. Shares of the Registrant's common stock are traded on the New York Stock Exchange with the ticker symbol -- ELK.
Lines of Business.
Roofing Products
The Registrant, through Elk Corporation of Dallas and its subsidiaries (Elk), is engaged in the manufacture and sale of premium laminated fiberglass asphalt residential roofing products. Elk also manufactures and sells nonwoven fiberglass mats for use as a substrate material in manufacturing asphalt roofing products, and nonwoven mats for use in other industrial applications. Elk is spending about $80 million over a three-year period to significantly increase its manufacturing capacity for premium laminated fiberglass asphalt shingles and nonwoven fiberglass mats. As of June 30, 1995, cumulative capital expenditures for this expansion program have been approximately $54 million.
Elk's premium laminated fiberglass asphalt shingle manufacturing plants are located in Tuscaloosa, Alabama, Ennis, Texas and a new plant in Shafter, California was in start-up operations at the end of fiscal 1995. Capital expenditures for the new plant are expected to be about $45 million. The new plant has the potential to increase Elk's present capacity for manufacturing premium laminated fiberglass asphalt shingles by more than 65%.
The major products manufactured at Elk's roofing plants are premium laminated fiberglass asphalt shingles sold under its brand names: Prestique(R) Plus, Prestique(R) I, Prestique(R) II and Capstone(R). Late in the first quarter of fiscal 1995, Elk introduced Prestique premium laminated fiberglass asphalt shingle product lines with the patented new enhanced High Definition(R) and Raised Profile(TM) look. In addition, Elk also manufactures premium fiberglass asphalt hip and ridge products: Seal-a-Ridge(R) and Z(R) ridge brands.
Elk's roofing products are sold by employee sales personnel primarily to non-owned distributors, delivery being made by common carrier or by customer vehicles from the manufacturing plants. Elk's products are distributed in about 40 states with Texas, California and Florida representing the largest market areas. The Roofing Products segment accounted for approximately 87% of consolidated sales of the Registrant's in fiscal 1995. One customer, ABC Supply Co. Inc., accounted for 11% of consolidated sales in fiscal 1995.
Elk is constructing a major new fiberglass mat manufacturing facility, which will be installed in parallel to its existing fiberglass mat manufacturing facility at its Ennis, Texas plant. It will manufacture nonwoven fiberglass mats for use as a roofing substrate material and for industrial facer products. The new plant will have the potential to more than triple present manufacturing capacity for nonwoven fiberglass mats. Capital expenditures for the new plant addition are estimated to be about $35 million. The new plant is scheduled to begin operations in the spring of 1996.
Elk's nonwoven fiberglass mats are used in the production of its premium roofing products and are sold by employee sales personnel to other asphalt roofing products manufacturers, manufacturers of construction and industrial products which use such mats in their products, and to distributors of industrial filtration products. Elk's nonwoven mats are shipped by common carrier to its other roofing plants and to its customers' locations.
Industrial Products
The Registrant, through Chromium Corporation (Chromium), is engaged in the remanufacture of diesel engine cylinder liners and tin plating of pistons, including hard chrome plating of cylinder bores, primarily for the railroad, marine, and stationary power industries; and hard chrome plating of original equipment cylinder liners and tin plating of pistons for major domestic locomotive manufacturers and stationary power equipment manufacturers. Chromium is also engaged in electroless shielding of telecommunications, medical electronic and other electronic equipment which is designed to control the level of electromagnetic and radio frequency interference (EMI/RFI) emissions generated by electronic components. Sales are generated by employee sales personnel, with delivery made primarily by common carrier. Chromium's sales accounted for 11% of consolidated sales of the Registrant in fiscal 1995.
Another unit of the Registrant, OEL, LTD., d/b/a Ortloff Engineers, Ltd. (Ortloff), is engaged in providing patent licensing and engineering support services and providing consulting engineering services to the oil and gas production, gas processing and sulfur recovery industries. Ortloff licenses patents owned by the Registrant for use in new or redesigned natural gas and refinery gas processing facilities and utilizes technology licenses from others and its own expertise in the performance of consulting engineering assignments. Ortloff continues to develop and patent improved processes for natural gas processing. Three new patent applications were filed in fiscal 1995 and work is continuing on additional applications to be filed in fiscal 1996. These efforts reflect Ortloff's commitment to continually update and advance its technological position.
Patent license fees are calculated by standard formulas that take into account both specific project criteria and market conditions, adjusted for special conditions that exist in a project. Consulting engineering assignments are performed under consulting services agreements at negotiated rates.
Competitive Conditions.
Roofing Products
Even though the asphalt roofing products manufacturing business is highly competitive, the Registrant believes that Elk is a leading manufacturer of premium laminated fiberglass asphalt shingles. Elk has been able to compete successfully with its competitors, some of which are larger in size and have greater financial resources.
There are a number of major national and regional manufacturers marketing their products in a portion or all of the market areas served by the Registrant's plants. The Registrant competes primarily on the basis of product quality, design, service and price.
Industrial Products
The Registrant believes that Chromium is the 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 diesel engine cylinder liners to all of the major domestic locomotive manufacturers. The Registrant believes it has smaller competitors in the locomotive diesel engine cylinder liner remanufacturing market. The Registrant also believes that Chromium is one of the leading hard chrome platers of recycled and original equipment large bore cylinder liners for stationary power applications. Chromium has achieved a leading position in these markets through competition on the basis of product performance, quality, service and price. The Registrant, through the Conductive Coatings Division of Chromium, is engaged in electroless shielding of plastic enclosures for telecommunications, medical electronic and other electronic equipment. The Registrant believes the success of Chromium's Conductive Coatings Division in becoming a qualified supplier for and obtaining orders from major telecommunications, medical electronic and other electronic equipment manufacturers will enable it to successfully compete in this market niche with the potential of becoming a leader in the future.
The Registrant believes that it holds significant state-of-the-art patents covering some of the most competitive processes for the separation of ethane and heavier hydrocarbon liquids from refinery and natural gas streams. The Registrant believes it has widely recognized expertise in the design and operation of facilities for natural gas liquids recovery, sulfur recovery and field processing of sour crude oil and natural gas production.
Backlog.
Backlog was not significant, nor is it material, in the Registrant's operations.
Raw Materials.
Roofing Products
In the asphalt roofing products manufacturing business, the significant raw materials are ceramic coated granules, asphalt, glass fibers, resins and mineral filler. All of these materials are presently available from several sources and are in adequate supply. Historically, the Registrant has been able to pass some of the higher raw material and transportation costs through to the customer. Costs of asphalt and glass fibers increased during the latter half of fiscal 1995 resulting in reduced margins. The Company implemented three modest price increases during the March through July 1995 period to offset the impact of higher raw material costs.
Industrial Products
In the Registrant's business of hard chrome plating and remanufacturing diesel engine cylinder liners and large bore cylinder liners, chromic acid is a significant raw material which is presently available from a number of domestic suppliers. The Registrant believes these domestic suppliers obtain the ore for manufacturing chromic acid principally from sources outside the United States, some of which are subject to political uncertainty. The Registrant has been advised by its suppliers that they maintain substantial inventories of chromic acid in order to minimize the potential effects of foreign interruption in ore supply.
No raw materials are utilized in the Registrant's consulting engineering and technology licensing business.
Patents, Licenses, Franchises and Concessions.
The Registrant holds certain patents, particularly in its consulting engineering and licensing business, which are significant to its operations. However, the Registrant does not believe that the loss of any one of these patents or of any license, franchise or concession would have a material adverse effect on the Registrant's overall business operations. The Registrant, through its subsidiary, Elk Corporation of Dallas, is involved in litigation against GAF Building Materials Corporation concerning design and utility patents covering aspects of Elk's High Definition shingles. Refer to Item 3 "Legal Proceedings" for a more detailed discussion of this matter.
Environmental Matters.
The Registrant 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). 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 to enforce compliance and to require remediation of contamination.
The Registrant and its 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, the Registrant or its subsidiaries may incur such remediation and related costs at the company owned plants and at certain offsite locations.
The Registrant anticipates that its subsidiaries will incur costs to comply with Environmental Laws, including correcting 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. Neither these expenditures nor other activities initiated in compliance with Environmental Laws is expected to have a material impact on the consolidated financial position, net earnings or liquidity of the Company.
Persons Employed.
At June 30, 1995, the Registrant and its subsidiaries had 704 employees.
Extended Payment Terms.
In some years, the Registrant's roofing products business grants extended payment terms to certain customers for some product shipments during the late winter and early spring months, with payment due during the summer months. As of June 30, 1995, $884,000 in receivables relating to such shipments were outstanding, with payments due primarily in July 1995.
Seasonal Business.
The Registrant's industrial products businesses are substantially nonseasonal. However, the Registrant's roofing products manufacturing business is seasonal to the extent that cold, wet or icy weather conditions during the late fall and winter months in its marketing area typically cause sales to decrease during such periods. Working capital requirements and related borrowings fluctuate during the year because of seasonality. Generally, working capital requirements and borrowings are higher in the spring and summer months, and lower in the fall and winter months.
Information as to Lines of Business and Industry Segments.
For Lines of Business Information and Financial Information by Company Segments, see the tables under such captions on pages 13 and 24, respectively, in the Registrant's 1995 Annual Report to Shareholders. The information in such tables is incorporated herein by reference.
Executive Officers of the Registrant.
Certain information concerning the Registrant's executive officers is set forth below:
All of the executive officers except Mr. Dow and Mr. Sisler have been employed by the Registrant or its subsidiaries in responsible management positions for more than the past five years. In October 1993, Mr. Rosebery and Mr. Work were elected as Executive Vice Presidents of the Registrant. Previously Mr. Rosebery was Vice President, Treasurer and Chief Financial Officer. Mr. Work was Vice President. Also in October 1993, Mr. Harral and Mr. Waibel were elected as Vice Presidents. Previously Mr. Harral was Chief Accounting Officer and Mr. Waibel was Assistant Vice President Administration.
Mr. Dow was previously employed by Kaneb Services, Inc. as Counsel and Assistant Secretary. He served in that capacity from 1990 until he joined the Registrant on February 1, 1992. Mr. Dow resigned from all positions effective July 16, 1995.
On August 14, 1995, Mr. Sisler was appointed by the Board of Directors as Vice President, General Counsel and Secretary of the Registrant. Mr. Sisler was employed by Central and South West Corporation as a Senior Attorney from 1993 to 1995 and as an Attorney from 1991 to 1993. From 1989 to 1991, Mr. Sisler was employed by Johnson & Gibbs, a private law firm. Mr. Sisler's responsibilities included corporate, securities and other business legal matters in several industries.
Officers are elected annually by the Board of Directors.
Item 2.

Item 2. Properties.
All significant facilities are owned and unencumbered except as discussed herein and under the caption "Notes to Consolidated Financial Statements" under the heading "Long-Term Debt" on page 22 of the Registrant's 1995 Annual Report to Shareholders.
Roofing Products
Asphalt roofing products are manufactured at plants located at Tuscaloosa, Alabama and Ennis, Texas with a new plant at Shafter, California in start-up operations. Fiberglass mat, industrial nonwoven and reinforcement products are manufactured at a plant located at Ennis, Texas. A new plant at the Ennis, Texas facility to manufacture nonwoven fiberglass substrate materials and
industrial facer products for the construction industry is under construction. This plant is scheduled to begin operations in the spring of 1996.
Administrative offices for the asphalt roofing products operations are located in the same leased facility as the Registrant's corporate offices in Dallas, Texas.
Industrial Products
Plants for the hard chrome plating of original equipment and remanufactured diesel engine cylinder liners and related equipment are located in Cleveland, Ohio and Lufkin, Texas. The Conductive Coatings Division's EMI/RFI shielding facility is located at the Lufkin, Texas plant. Administrative offices are located in the same leased facility as the Registrant's corporate offices in Dallas, Texas.
The engineering and licensing group is located in leased offices in Midland, Texas.
Corporate Offices
The Registrant's corporate headquarters are located in leased offices in Dallas, Texas.
In addition, the Registrant or its subsidiaries owns the following properties which are being held for sale or lease:
(a) Former concrete roof tile plants in North Miami, Boca Raton and Pompano Beach, Florida. The Boca Raton and Pompano Beach plants have been leased for a term of 50 years with an option to purchase through July 10, 1996. The North Miami facility is being held for sale.
(b) Land and buildings in Waco, Texas, formerly used in the solid waste baler manufacturing business.
(c) Land in Tulsa, Oklahoma, purchased for use by the former engineering and construction business.
(d) Land and buildings in Midland, Texas, formerly used in the engineering and construction business.
Item 3.

Item 3. Legal Proceedings.
GAF Patent Litigation
In February 1994, Elk Corporation of Dallas (Elk of Dallas) was granted a design patent covering the ornamental aspects of its High Definition(R) and Raised Profile(TM) shingles. In December 1994, Elk of Dallas was granted a utility patent on the functional aspects of the High Definition and Raised Profile shingles. Elk of Dallas filed lawsuits in federal court in Dallas, Texas, against GAF Building Materials Corporation and related entities (collectively, GAF) for infringement of these patents. Elk of Dallas contends that the GAF Timberline(R) Natural Shadow(TM) and Timberline Ultra(R) Natural Shadow(TM) shingles infringe the patents. In the design patent case, Elk of Dallas seeks to recover as damages the total profit that GAF has made from the infringing shingles. In the utility patent case, Elk of Dallas seeks to recover as damages a reasonable royalty on GAF's sales of infringing shingles and certain lost profits. Elk of Dallas in its actions has also sought to enjoin GAF from making or selling infringing shingles. In the design patent case, GAF filed a motion to bifurcate the issue of liability from that of damages. On August 21, 1995, the court denied GAF's motion.
GAF seeks a declaratory judgement that the Elk patents are not infringed and are either invalid or unenforceable. GAF has also asserted claims for alleged unfair competition, Lanham Act violations based on alleged false advertising, and common law fraud, generally praying for damages of not less than $25 million, including actual and punitive damages, plus interest, costs, and reasonable attorneys' fees. Elk of Dallas disputes GAF's claims, and management intends vigorously to defend them.
The parties are engaged in discovery and pretrial motion practice. The design patent case is set for trial on May 6, 1996. The utility patent case is set for trial on September 16, 1996. Management believes Elk's position is meritorious and intends vigorously to enforce its intellectual property rights. No assurances regarding the outcome of these cases may be given, but their outcome is not expected to have a material adverse effect on the Registrant's results of operations, financial position, or liquidity.
Frontier Chemical Site
Certain facilities of the Registrant's subsidiaries ship waste products to various waste disposal facilities for disposal. In May 1993, Chromium received a Notification Letter from the United States Environmental Protection Agency (USEPA) informing Chromium that USEPA had reason to believe that Chromium was a Potentially Responsible Party (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) at the Frontier Chemical Royal Avenue Site (Site), a state-permitted waste processing and management facility located on 9.7 acres in Niagara Falls, New York. After receiving shipments from PRP's, the facility was closed by state regulators leaving all products shipped there on-site. USEPA identified 438 generators, including Chromium,
as being responsible for Phase I of the response action. Phase I involved primarily the removal of 4,086 drums from the Site. Chromium is alleged to have sent 96 drums of waste to the Site.
In September 1993, Chromium entered into an Administrative Order on Consent with USEPA without admitting any liability or USEPA findings or determinations. Chromium agreed along with the other parties to the order to perform Phase I response activities at the Site and to reimburse USEPA for response costs incurred by USEPA at the Site. All of the PRP drums were removed from the Frontier Chemical Royal Avenue Site. The work was concluded in May 1994 and the PRP group of which Chromium was a part filed its final report on May 30, 1995. Chromium was assessed a total of $109,250 under the final assessment dated July 7, 1995, an additional amount of approximately $21,000 above what it had already paid. The assessment was based on an estimated total cost of approximately $4 million. Chromium's total obligation cannot be calculated until its PRP group can determine what portion of its assessments are uncollectible.
Phase II of the response action involves the removal of waste from process tanks at the Site. USEPA has issued Notice Letters to additional PRPs for Phase II. To date, the Company has not been named as a PRP in Phase II. Estimated costs have been provided for Phase II but have not been provided for any additional phases of cleanup.
Management of the Company believes that the final disposition of this matter will not have a material adverse effect on the consolidated results of operations, financial position, or liquidity of the Registrant.
Chromium/TWC Settlement
In October 1991, the Texas Water Commission ("TWC") sent Chromium a Notice of Executive Director's Preliminary Report and Petition for a TWC Order Assessing administrative Penalties and Requiring Certain Actions of Chromium (the "Petition"). This Petition alleged several violations of TWC rules and recommended that Chromium be assessed $134,800 in penalties and ordered to perform technical, procedural, assessment and remedial activities at Chromium's Lufkin, Texas facility only ("Technical Recommendations"). Chromium timely answered this notice and negotiated an Agreed Order in settlement of this case, which the Commission executed on May 19, 1993. Under the Agreed Order, $74,800 of Chromium's penalties will be deferred and forgiven contingent on completion of the Technical Recommendations. The remaining $60,000 penalty is being paid in installments over a three year period. Chromium already has complied with many of the Technical Recommendations, and, working with the Texas Natural Resource Conservation Commission ("TNRCC"), TWC's successor, will implement the remainder on a schedule set forth in the Agreed Order.
Management believes that this settlement will not have a material adverse effect on the consolidated results of operations, financial position, or liquidity of the Registrant.
Other
There are various other lawsuits and claims pending against the Registrant and its subsidiaries arising in the ordinary course of their business. In the opinion of the Registrant's management based in part on advice of counsel, none of these actions should have a material adverse effect on the Registrant's consolidated results of operations, financial position, or liquidity.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
PART II
Item 5.

Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters.
The principal market on which the Registrant's Common Stock is traded is the New York Stock Exchange. The Boston, Midwest, Philadelphia and Toronto Stock Exchanges have granted unlisted trading privileges for the Registrant's Common Stock. There were 1,204 holders of record of the Registrant's Common Stock at September 5, 1995.
The remaining information required by this item is incorporated by reference to the information under the caption "Stock Prices" on page 1 of the Registrant's 1995 Annual Report to Shareholders. No cash dividends were paid in fiscal 1995 or 1994. The limitations affecting the future payment of dividends by Registrant, imposed as a part of the Registrant's revolving credit agreement, are discussed under the caption "Notes to Consolidated Financial Statements" under the heading "Long-Term Debt" on page 22 of the Registrant's 1995 Annual Report to Shareholders.
Item 6.

Item 6. Selected Financial Data.
The information required by this item is incorporated herein by reference to the information under the caption "Five-Year Summary of Selected Financial Data" on page 16 of the Registrant's 1995 Annual Report to Shareholders.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The information required by this item is incorporated herein by reference to the information under the caption "Management's Discussion and Analysis of the Results of Operations and Financial Condition" on pages 14 and 15 of the Registrant's 1995 Annual Report to Shareholders.
Item 8.

Item 8. Financial Statements and Supplementary Data.
The information required by this item is incorporated herein by reference to the information under the caption "Quarterly Summary of Operations" and the financial statements and notes thereto on page 13 and pages 18 through 24, respectively, of Registrant's 1995 Annual Report to Shareholders.
Item 9.

Item 9. Disagreements on Accounting and Financial Disclosure.
The Registrant has retained its independent public accountants for over 25 years. There have been no disagreements with the independent public accountants on accounting or financial disclosure matters.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant.
Information concerning the Directors of the Registrant required by this item is incorporated herein by reference to the material under the caption "Election of Directors" on page 4 of the Registrant's Proxy Statement dated September 19, 1995. Information concerning the Executive Officers of the Registrant is contained in Item 1 of this report under the caption "Executive Officers of the Registrant."
Item 11.

Item 11. Executive Compensation.
The information required by this item is incorporated herein by reference to the information under the caption "Executive Compensation" on pages 6 through 13 of the Registrant's Proxy Statement dated September 19, 1995.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is incorporated herein by reference to the information under the caption "Stock Ownership" on pages 2 and 3 of the Registrant's Proxy Statement dated September 19, 1995. The referenced information was provided as of September 5, 1995. Registrant is aware of no material change since such date in the beneficial ownership of any officer, director or beneficial owner of five percent of any class of its voting stock.
Item 13.

Item 13. Certain Relationships and Related Transactions.
There are no reportable transactions, business relationships or indebtedness between the Registrant and any covered party.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a)1. Financial Statements
The financial statements and notes thereto, together with the report of independent public accountants dated August 14, 1995, appearing on pages 17 through 24 of the Registrant's 1995 Annual Report to Shareholders, are incorporated herein by reference. With the exception of such information and other information incorporated herein by reference, the 1995 Annual Report to Shareholders is furnished for the information of the Commission and is not to be deemed filed as part of this report. Such financial statements include:
-- Report of Independent Public Accountants; -- Consolidated Statement of Operations, years ended June 30, 1995, 1994, and 1993; -- Consolidated Balance Sheet, years ended June 30, 1995 and 1994; -- Consolidated Statement of Cash Flows, years ended June 30, 1995, 1994, and 1993; -- Consolidated Statement of Shareholders' Equity, years ended June 30, 1995, 1994, and 1993; -- Summary of Significant Accounting Policies; and -- Notes to Consolidated Financial Statements.
2. Financial Statement Schedule for the Years Ended June 30, 1995, 1994, and
All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto.
(b) Reports on Form 8-K
There were no Form 8-K's filed by the Registrant during the fourth quarter of the fiscal year ended June 30, 1995.
(c) Exhibits
- ---------------
* Filed herewith.
** Incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 1O-K for the year ended June 30, 1994.
*** Incorporated by reference to Exhibit 3 to the Registrant's Annual Report on Form 1O-K for the year ended June 30, 1981 and to Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1988 originally filed with the Securities and Exchange Commission on February 11, 1989.
**** Incorporated by reference to the Registrant's Quarterly Report on Form 1O-Q for the quarter ended September 30, 1993.
***** Incorporated by reference to the Registrant's Quarterly Report on Form 1O-Q for the quarter ended September 30, 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ELCOR CORPORATION
By /s/ Richard J. Rosebery Richard J. Rosebery Executive Vice President, Treasurer, Chief Administrative and Financial Officer
By /s/ Leonard R. Harral Leonard R. Harral Vice President and Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below in multiple counterparts by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANT ON SUPPLEMENTAL SCHEDULE
To the Shareholders and Board of Directors of Elcor Corporation:
We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in Elcor Corporation's annual report to shareholders incorporated by reference in this Form 10-K and have issued our report thereon dated August 14, 1995. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The Supplemental Schedule II is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP Arthur Andersen LLP
Dallas, Texas August 14, 1995
SCHEDULE II (in thousands)
ELCOR CORPORATION AND SUBSIDIARIES
SCHEDULE II -- CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED JUNE 30, 1995, 1994, AND 1993
Index to Exhibits
- ---------------
* Filed herewith.
** Incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 1O-K for the year ended June 30, 1994.
*** Incorporated by reference to Exhibit 3 to the Registrant's Annual Report on Form 1O-K for the year ended June 30, 1981 and to Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1988 originally filed with the Securities and Exchange Commission on February 11, 1989.
**** Incorporated by reference to the Registrant's Quarterly Report on Form 1O-Q for the quarter ended September 30, 1993.
***** Incorporated by reference to the Registrant's Quarterly Report on Form 1O-Q for the quarter ended September 30, 1994.


Item 2.		Properties
	The Issuer has no physical properties. The EquiVantage Home Equity Loan Trust 1995-2 securities represent in the aggregate the entire beneficial ownership interest in a trust consisting fixed rate, closed-end mortgage loans secured by first or junior mortgages or deeds of trust on one-to-four family residential properties. We will furnish an Annual Statement of Compliance delivered by the Mortgage Servicer to the Trustee with respect to each Mortgage Servicer in the series.
Annual Statement of Compliance........................................... ..............Not available currently. 						Will be subsequently filed on Form 10K/A.
Item 3.

Item 3.		Legal Proceedings
	NONE.
Item 4.

Item 4.		Submission of Matters to a Vote of Security Holders
	No matters were submitted to a vote of holders of equity interest during the period covered by this report through the solicitation of proxies or otherwise.
PART II
Item 5.

Item 5.		Market for the Registrant's Common Equity and Related Stockholder Matters.
	The Issuer does not issue stock. Presently, there is no established trading market for the Trust's securities. The holders of the EquiVantage Home Equity Loan Trust 1995-2 will be subsequently filed on Form 10K/A.
Item 8.

Item 8.		Financial Statements and Supplementary Data.
Annual Statement of Compliance............................................. ...........Not available currently. 						Will be subsequently filed on Form 10K/A.
Independent Accountant's Report on Servicer's 	Servicing Activities.................................................... ............Not available currently. 						Will be subsequently filed on Form 10K/A.
Item 9.

Item 9.	 	Changes In and Disagreement with Accountants on Accounting and Financial 				Disclosure.
		NONE
PART III
Item 12.

Item 12.	Security Ownership of Certain Beneficial Owners and Management.
Security Ownership of Certain Beneficial Owners........................... ................ Will be filed subsequently on 									 Form 10K/A.
PART IV
Item 14.

Item 14.	Exhibits, Financial Statement Schedules and Reports on Form 8K
	(a) (1)	Financial Statements...............Annual Statement of Compliance and Independent 						Accountant's Report on Servicer's Servicing Activities are						not currrently available. Will be filed subsequently on 						Form 10K/A.
	(a) (2)	Financial Statement Schedules
		NOT APPLICABLE
	(a) (3)	Exhibits 	 		*	Filed with the SEC on the indicated dates.


Item 1. Business
General Development of Business
Piccadilly Cafeterias, Inc. was incorporated under the laws of Louisiana in 1965 and is the successor to various predecessor corporations and partnerships which operated "Piccadilly" cafeterias beginning with the acquisition of the first unit in 1944. Except where the context otherwise indicates, the terms "Company", "Piccadilly", and "Registrant" as used herein refer to Piccadilly Cafeterias, Inc.
At June 30, 1995, the Company operated 132 cafeterias in 17 states. Of these, 60 were in suburban malls, 22 were in suburban strip centers, and 50 were free-standing suburban locations. One new cafeteria is expected to be opened during the year ending June 30, 1996. The following table sets forth certain information regarding development of the Company's cafeteria chain during the five years ended June 30, 1995:
_______________________________________________________________________________ Year Ended June 30 1995 1994 1993 1992 1991 _______________________________________________________________________________ Net sales per unit (in thousands)(A) $1,990 $1,916 $1,868 $1,880 $1,903
Units opened 5 3 1 3 2
Units closed 3 4 11 5 0
Units open at year-end 132 130 131 141 143
Total customer volume (in thousands) 48,274 48,098 50,564 54,298 56,441 __________________
(A) Excludes cafeterias opened or closed during period. ___________________________________
At June 30, 1995 the Company operated eight "Ralph and Kacoo's" seafood restaurants in Louisiana, Alabama, Mississippi, and Texas. No additional Ralph & Kacoo's seafood restaurants are expected to be opened in the year ending June 30, 1996. The following table sets forth certain information regarding the Company's "Ralph and Kacoo's" seafood restaurant chain during the five years ended June 30, 1995:
_______________________________________________________________________________ Year Ended June 30 1995 1994 1993 1992 1991 _______________________________________________________________________________ Net sales per unit (in thousands)(A) $3,394 $3,343 $3,362 $3,151 $3,995
Units opened 1 0 0 1 3
Units closed 0 0 2 1 0
Units open at year-end 8 7 7 9 9 _________________
(A) Excludes restaurants opened or closed during period. ___________________________________
Although the Company's operations are primarily in the southern, southwestern, and western regions of the United States, the Company does not consider its growth to be limited to such areas. During the year ended June 30, 1995, the Company opened its first cafeterias in Louisville, Kentucky and Chicago, Illinois. Although, as disclosed above, the Company has no immediate plans for additional expansion in 1996, Piccadilly continues to evaluate numerous potential expansion locations, focusing on demographic data such as population densities, population profiles, income levels, traffic counts, as well as the extent of competition.
Cafeteria and Restaurant Operations
The Company's cafeterias seat from 250 to 450 customers each. Each cafeteria unit offers a wide variety of food, at reasonable prices, and with the convenience of cafeteria service, to a diverse luncheon and dinner clientele. Cafeteria personnel cook and prepare from scratch substantially all food served. All items are prepared from standardized recipes. Menus are varied at the discretion of unit management in response to local and seasonal food preferences.
Like most industry participants, the Company purchases foodstuffs in small quantities from local and regional suppliers in order to better assure freshness. As a result, inventory is kept relatively low; average per-cafeteria-inventory at June 30, 1995 was $16,100. Foodstuffs are typically purchased on 30-day credit terms and sold for cash within such 30-day period, thereby favorably affecting cash flow.
Ralph & Kacoo's restaurants seat from 250 to 600 customers each. These restaurants are full-service menu facilities. All of the food served is cooked and prepared by the restaurant staff from standardized recipes. Substantially all of the food, supplies, and other materials required for the preparation of meals are supplied by the Company-owned commissary.
The commissary, located in Baton Rouge, Louisiana, contains approximately 26,500 square feet of restaurant food and supplies storage. Seafood accounts for approximately 50% of inventory at the commissary. In order to provide consistent quality, selection, and price throughout the year, the commissary purchases in-season seafood in quantities sufficient to supply the restaurants during periods when such products would otherwise not be available at reasonable prices in the marketplace. On the average, seafood inventory turns approximately once every four months. Inventory maintained at the commissary at June 30, 1995, was approximately $2,656,000 while the average "Ralph and Kacoo's" restaurant inventory level at year-end was approximately $48,000. The commissary is not dependent upon a single supplier nor a small group of suppliers.
Each cafeteria and restaurant is operated as a separate unit under the control of a manager and associate manager who have responsibility for virtually all aspects of the unit's business, including purchasing, food preparation, and employee matters. Thirteen district managers, under the supervision of one general manager, and the chief executive officer oversee and regularly inspect cafeteria operations. Two district managers, under the supervision of a region manager and the chief executive officer, oversee restaurant operations. The Company employed approximately 7,600 persons at June 30, 1995, of whom all but 69 corporate headquarters employees worked at Piccadilly's 140 cafeteria and restaurant locations and its commissary.
The food service industry is highly competitive. Competitive factors include food quality and variety, price, customer service, location, the number and proximity of competitors, decor, and public reputation. The Company considers its principal competitors to be other cafeterias, casual dining venues, and fast-food operations. Like other food service operations, the Company is attuned to changes in both consumer preferences for food and habits in patronizing eating establishments.
Customer volume at established cafeterias and sales volume at established restaurants are generally higher in the Company's second fiscal quarter and lower in the third quarter. These patterns reflect the general seasonal fluctuations of the retail industry.
Cost of sales is affected by statutory minimum wage rates. The Company's operations are subject to federal, state, and local laws and regulations relating to environmental protection, including regulation of discharges into the air and water, and relating to safety and labor, including the Federal Occupational Safety and Health Act and wage and hour laws. Additionally, the Company's operations are regulated pursuant to state and local sanitation and public health laws. Operating units utilize electricity and natural gas, which are subject to various federal and state regulations concerning the allocation of energy. The Company's operating costs have been and will continue to be affected by increases in the cost of energy. Item 2.

Item 2. Properties
All but 24 of the cafeterias and restaurants operated by the Company at June 30, 1995, were operated on premises held under long- term leases with differing provisions and expiration dates. The 24 cafeterias and restaurants not operated on premises held under long- term leases are owned. Leases provide for monthly rentals, typically computed on the basis of a fixed amount plus a percentage of sales. Most leases contain provisions permitting the Company to renew for one or more specified terms. These leases are scheduled to expire, exclusive of renewal provisions, as follows:
__________________________________________ Five-year periods Units Units ending June 30 Operating Closed __________________________________________ 2000 37 2
2005 37 2
2010 34 11
2015 8 2 =========================================== Total 116 17 ___________________________________________
Reference is made to Note C of the Notes to Consolidated Financial Statements for certain additional information regarding the Company's leases.
All cafeterias and restaurants have been constructed or remodeled since 1984 and all cafeteria equipment is maintained and modernized as necessary to maintain appearance and utility. For a discussion of the Company's current remodeling program see Management's Discussion and Analysis of Financial Condition and Results of Operations on pages four and five of the Annual Shareholders Report for the year ended June 30, 1995. The list below provides a general geographic review of the locations of the Company's cafeterias and restaurants at June 30, 1995:
________________________________________ State Cafeterias Restaurants ________________________________________ Alabama 6 1
Arizona 4
California 1
Florida 22
Georgia 18
Illinois 1
Kansas 1
Kentucky 1
Louisiana 26 5
Mississippi 3 1
Missouri 3
North Carolina 5
Oklahoma 4
South Carolina 2
Tennessee 11
Texas 17 1
Virginia 7 __________________________
The Company utilizes generally standardized building configurations for its new cafeterias and restaurants in terms of seating, food display, preparation areas, and other factors and attempts to build out floor space to maximize efficient use of available space.
The Company continues to pursue strategies to increase the capacity and utilization of its cafeterias. Although most of the Company's cafeterias are single-line, 33 of the Company's cafeterias are double-line which provide increased capacity at peak hours. The Company does not currently intend to convert any of its single-line cafeterias to double-line.
Piccadilly's corporate headquarters occupy approximately two- thirds of a Company-owned 45,000 square foot office building completed in 1974 and located on a Company-owned tract comprising approximately five acres in Baton Rouge, Louisiana. The remainder of the building is leased to commercial tenants.
Item 3.

Item 3. Legal Proceedings
The Company is not a party to and does not have any property that is the subject of any legal proceedings pending or, to the knowledge of management, threatened, other than ordinary routine litigation incidental to its business and proceedings which are not material or as to which management believes the Company has adequate insurance.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 4(a). Executive Officers of the Registrant
Executive officers are elected annually by the Board of Directors and hold office until a successor is duly elected. The names and positions of executive officers of the Registrant, together with a brief description of the business experience of each such person during the past five years, is set forth below.
W. Scott Bozzell, Vice President and Assistant Controller, age 32, has held such positions since May 1992. He joined the Company in December 1988 as Assistant Controller.
Frederick E. Fuchs Jr., Executive Vice President and Director of Real Estate, age 48, has held such positions since June 1986.
Jere W. Goldsmith Jr., Executive Vice President and Director of Training, age 49, has held such positions since July 1995. Mr. Goldsmith previously served in this capacity from May 1987 to February 1992. From February 1992 to July 1995 he was Executive Vice President and Region Manager.
Ronald A. LaBorde, age 39, President and Chief Executive Officer, has held such positions since June 1995. From January 1992 to May 1995 he was Executive Vice President, Treasurer and Chief Financial Officer. Prior to that he was Executive Vice President, Secretary, and Controller.
D. Thomas Landry, Executive Vice President and Director of Maintenance, Construction and Design, age 43, has held such positions since May 1992. From July 1990 to May 1992 he was Vice President and Director of Maintenance.
Robert P. Listen, Executive Vice President and Director of Technical Services, age 47, has held such positions since December 1992. From July 1987 to November 1992 he was Executive Vice President and District Manager.
Mark L. Mestayer, Executive Vice President, Secretary, and Controller, age 37, has held such positions since May 1992. From January 1992 to May 1992, he was Vice President and Controller. Prior to that, he was Vice President and Controller, Ralph & Kacoo's.
Joseph S. Polito, Executive Vice President and General Manager, age 53, has held such positions since July 1995. From October 1992 to July 1995, he was Executive Vice President and Director of Training. From 1987 to October 1992 he was Executive Vice President and District Manager.
Patrick R. Prudhomme, Executive Vice President and Region Manager, age 45, has held such positions since February 1992. From January 1989 to February 1992 he was Vice President and District Manager, Ralph & Kacoo's.
C. Warriner Siddle, Executive Vice President and Director of Development, age 44, has held such positions since July 1995. From February 1992 to July 1995 he was Executive Vice President and Region Manager. From October 1984 to February 1992 he was Executive Vice President and District Manager.
Donovan B. Touchet, Executive Vice President and Director of Data Processing, age 46, has held such positions since June 1988.
Brian G. Von Gruben, Executive Vice President and Director of Administrative Services, age 47, has held such positions since May 1987. PART II
Item 5.

Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters
Information regarding Common Stock market prices and dividends, on page one of the Annual Shareholders Report for the year ended June 30, 1995, is incorporated herein by reference.
Item 6.

Item 6. Selected Financial Data
"Selected Financial Data", on page one of the Annual Shareholders Report for the year ended June 30, 1995, is incorporated herein by reference.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of Operations, on pages four and five of the Annual Shareholders Report for the year ended June 30, 1995, is incorporated herein by reference.
Item 8.

Item 8. Financial Statements and Supplementary Data
The following consolidated financial statements and supplementary data, included on pages six through 14 of the Annual Shareholders Report for the year ended June 30, 1995, are incorporated herein by reference:
Consolidated balance sheets as of June 30, 1995 and 1994 Consolidated statements of income for the fiscal years ended June 30, 1995, 1994 and 1993 Consolidated statements of changes in shareholders' equity for the fiscal years ended June 30, 1995, 1994 and 1993 Consolidated statements of cash flows for the fiscal years ended June 30, 1995, 1994 and 1993 Notes to consolidated financial statements for the fiscal years ended June 30, 1995, 1994 and 1993
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
In accordance with General Instruction G (3) to Form 10-K, Items 10, 11, 12, and 13 have been omitted since the Company will file with the Commission a definitive proxy statement complying with Regulation 14A relating to its 1995 annual meeting and involving the election of directors not later than 120 days after the close of its fiscal year. The Company incorporates by reference the information in response to such items set forth in its definitive proxy statement.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) (1) Financial Statements--The following are incorporated herein by reference in this Annual Report on Form 10-K from the indicated pages of the Registrant's Annual Shareholders Report for the year ended June 30, 1995:
Annual Shareholders Description Report Page ___________ ___________ Consolidated balance sheets as of June 30, 1995 and 1994 6
Consolidated statements of income for the fiscal years ended June 30, 1995, 1994 and 1993 7
Consolidated statements of changes in shareholders' equity for the fiscal years ended June 30, 1995, 1994 and 1993 7
Consolidated statements of cash flows for the fiscal years ended June 30, 1995, 1994 and 1993 8
Notes to consolidated financial statements for the fiscal years ended June 30, 1995, 1994 and 1993 9 - 13
Report of independent auditors 14
(2) Schedules--The following consolidated schedules and information are included in this annual report on Form 10-K on the pages indicated. All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
Annual Report on Form 10-K Description Page ___________ ____ Schedule VIII--Valuation and qualifying accounts 10
(3) Listing of Exhibits -- See sub-section (c) below.
(b) No reports on Form 8-K were filed during the last quarter of the year covered by this report.
EXHIBITS
(3) (a) Articles of Incorporation of the Company , as amended on September 14, 1987 as amended on September 27, 1988 , and as amended on September 28, 1989 .
(b) By-laws of the Company, as amended through June 19, 1995.
(4) (a) Piccadilly Cafeterias, Inc. Stockholder Rights Agreement .
(b) Note Agreement, dated as of January 31, 1989, relating to $30 million principal amount of 10.15% Senior Notes due January 31, 1999 .
(10) (a) Piccadilly Cafeteria, Inc. Pension Plan, as amended, dated May 3, 1993 .
(b) Piccadilly Cafeterias, Inc. Employee Stock Purchase Plan , as amended on September 27, 1991 .
(c) Piccadilly Cafeterias, Inc. 1988 Stock Option Plan , as amended on August 2, 1993.
(d) Agreement between Piccadilly Cafeterias, Inc. and James W. Bennett, effective September 28, 1994 .
(e) Form of Management Continuity Agreement, effective March 27, 1995, between Piccadilly Cafeterias, Inc. and each of Messrs. LaBorde, Bozzell, Fuchs, Goldsmith, Landry, Listen, Mestayer, Polito, Prudhomme, Siddle, Touchet, von Dameck and Von Gruben.
(f) Form of Director Indemnity Agreement, effective April 27, 1995, between Piccadilly Cafeterias, Inc. and each of Messrs. LaBorde, Durham, Murrill, Quick, Ross, Simmons, Smith and Stein and Ms. Hamilton.
(g) Agreement between Piccadilly Cafeterias, Inc. and Ronald A. LaBorde, effective June 26, 1995.
(h) Form of Agreement, effective August 1, 1995, between Piccadilly Cafeterias, Inc. and each of Malcolm T. Stein, Jr. and James E. Durham, Jr.
(13) The Registrant's Annual Report to Shareholders for the fiscal year ended June 30, 1995.
(21) List of Subsidiaries of the Registrant
(23) Consent of Independent Auditors
(27) Financial Data Schedule
Incorporated by reference from the Registrant's Registration Statement on Form S-1 (Registration No. 2-63249) filed with the Commission on December 19, 1978.
Incorporated by reference from the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1987.
Incorporated by reference from the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1988.
Incorporated by reference from the Registrant's Annual Report on Form 10-K, as amended, for the fiscal year ended June 30, 1989.
Incorporated by reference from the Company's Current Report on Form 8-K filed with the Commission on August 22, 1988.
Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1988.
Incorporated by reference from the Company's Annual Report on Form 10-K, as amended, for the fiscal year ended June 30, 1993.
Incorporated by reference from the Registrant's Registration Statement on Form S-8 (Registration No. 33-17737) filed with the Commission on October 7, 1989.
Incorporated by reference from the Registrant's Annual Report on Form 10-K, as amended, for the fiscal year ended June 30, 1991.
Incorporated by reference from the Registrant's Registration Statement on Form S-8 (Registration No. 33-27793) filed with the Commission on March 29, 1989.
Incorporated by reference from the Registrant's Annual Report on Form 10-K, as amended, for the fiscal year ended June 30, 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Piccadilly Cafeterias, Inc. _____________________________________ (Registrant)
By:/s/ Ronald A. LaBorde _____________________________________ Ronald A. LaBorde President & CEO
Date: 9/25/95 ______________________
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ James E. Durham, Jr. 9/25/95 /s/ Dale E. Redman 9/25/95 __________________________ _______ ________________________ _______ James E. Durham, Jr., Date Dale E. Redman, Director Date
/s/ Norman D. Francis 9/25/95 /s/ William D. Ross, Jr. 9/25/95 ___________________________ _______ ________________________ _______ Norman D. Francis, Director Date William D. Ross, Jr., Date Director
/s/ Julia H. R. Hamilton 9/25/95 /s/ Edward M. Simmons, Sr. 9/25/95 ___________________________ _______ ________________________ _______ Julia H. R. Hamilton, Date Edward M. Simmons, Sr., Date Director Director
/s/ Ronald A. LaBorde 9/25/95 /s/ C. Ray Smith 9/25/95 ___________________________ _______ ________________________ _______ Ronald A. LaBorde, President, Date C. Ray Smith, Director Date Chief Executive Officer and Director (Principal Financial Officer)
/s/ Paul W. Murrill 9/25/95 /s/ Malcolm T. Stein, Jr. 9/25/95 ___________________________ _______ ________________________ _______ Paul W. Murrill, Chairman of Date Malcolm T. Stein, Jr., Date the Board Director
/s/ O.Q. Quick, Director 9/25/95 /s/ Mark L. Mestayer 9/25/95 ___________________________ _______ ________________________ _______ O.Q. Quick, Director Date Mark L. Mestayer, Secretary Date and Controller (Principal Accounting Officer)
(A) Deductions are for the write-off of certain property, plant and equipment relating to units closed and for the payment of other obligations (primarily rent) for those units closed and for those units for which a provision for unit closing was recorded during the year ended June 30, 1992 but were operating during the year ended June 30, 1993.


Item 1. Business. --------
(a) General Development of Business. Alfa Corporation is a holding ------------------------------- company for Alfa Life Insurance Corporation (Life), Alfa Insurance Corporation (AIC), Alfa General Insurance Corporation (AGI), Alfa Financial Corporation (AFC), Alfa Investment Corporation, Alfa Realty, Inc. (ARI), and Alfa Agency Mississippi, Inc. The Registrant's property and casualty insurance subsidiaries are rated "A++ Superior" and its life subsidiary is rated "A+ Superior" by A. M. Best Company, the leading rating organization in the insurance industry. The Registrant's commercial paper ratings are A-1+ by Standard & Poors and P-1 by Moody's Investors Service. The commercial paper is guaranteed by an affiliate, Alfa Mutual Insurance Company.
Until August 1, 1987, Registrant's life insurance subsidiary was its principal source of revenue. Effective that date Registrant's property and casualty subsidiaries entered into a pooling agreement with Alfa Mutual Insurance Company (Mutual), Alfa Mutual Fire Insurance Company (Fire) and Alfa Mutual General Insurance Company (General) (collectively referred to as Mutual Group) pursuant to which premiums, losses, loss adjustment expenses and other underwriting expenses attributable to the direct property and casualty insurance business of each party are pooled and reallocated among the parties. Under the pooling agreement, sixty five percent of the pooled business is allocated to Registrant's subsidiaries, Alfa Insurance Corporation and Alfa General Insurance Corporation.
The majority of the Company's Property Casualty Premiums are derived from the Company's participation in the Pooling Agreement.
(b) Information as to Industry Segments. Prior to August 1, 1987, ----------------------------------- Registrant considered it operated in one main reportable segment, that being the life insurance industry which is operated through its subsidiary, Life. Effective August 1, 1987, Registrant entered into a property and casualty Pooling Agreement. Because of the Pooling Agreement, Registrant substantially increased its property and casualty insurance business. As a result Registrant is now engaged in two major industry segments, the life and property and casualty insurance industries. The Information as to Industry Segments contained in Note 13 to Financial Statements on page 37 of Registrant's Annual Report is incorporated herein by reference.
(c) Narrative Description of Business. Registrant is a holding company --------------------------------- organized and existing under the laws of the State of Delaware. Until August 1, 1987, Registrant's life insurance business was its principal source of revenue. Life directly writes individual life insurance policies consisting primarily of ordinary whole life, term life, interest sensitive whole life and universal life products. Life maintains an agency force in Alabama, Georgia and Mississippi.
(i) Life offers several different types of whole life and term insurance products. As of December 31, 1995, Life had in excess of $8.6 billion of life insurance in force. As of December 31, for each year indicated the Company had insurance in force as follows:
1995 1994 1993 ---------- ---------- ---------- (in thousands) [S] [C] [C] [C] Ordinary Life $8,313,698 $7,553,056 $6,782,539 Credit Life $ 14,382 $ 19,499 $ 9,326 Group Life $ 314,826 $ 295,254 $ 272,470
I-1
The following table shows Life's premiums and policy charges by type of policy and life insurance operating income for the years ended December 31, 1995, 1994, and 1993:
Years Ended December 31, ------------------------- 1995 1994 1993 ------- ------- ------- (in thousands) Premiums and Policy Charges Universal life $ 8,789 $ 7,876 $ 6,354 Interest sensitive life 7,991 7,705 7,361 Traditional life 18,320 17,224 17,141 ------------------------- Total $35,100 $32,805 $30,856 ========================= Operating income $13,205 $12,039 $14,520 =========================
Life generally reinsures all life insurance risks in excess of $200,000 on any one life. The purpose of this is to limit the liability of Life with respect to any one risk and afford it a greater diversification of its exposure. When Life reinsures a portion of its risk it must cede the premium income to the company who reinsures the risk, thereby decreasing the income of Registrant.
Life performs various underwriting procedures and blood testing for AIDS and other diseases before issuance of insurance.
In addition to the income from premiums of life insurance contracts, Life's income is directly affected by its investment income or loss from its investment portfolio. The capital and reserves of the Registrant are invested in assets comprising its investment portfolio. The insurance laws prescribe the nature and quality of investments that may be made, and included in its investment portfolio are qualified state, municipal and federal obligations, high quality corporate bonds and stocks, mortgage backed securities, mortgages and certain other assets.
Property and Casualty Insurance. Registrant's two property and -------------------------------- casualty subsidiaries, Alfa Insurance Corporation and Alfa General Insurance Corporation, are direct writers of preferred and standard risk property and casualty insurance in Georgia and Mississippi. Registrant's business is predominantly in personal, rather than commercial lines, including automobile, homeowner and fire insurance and similar policies. These companies also write limited commercial lines (church and business owner's insurance). Registrant also assumes property and liability insurance written in Alabama through the pooling agreement.
I-2
The following table sets forth the components of property and casualty insurance earned premiums, net underwriting income, underwriting margin and operating income for the years ended December 31, 1995, 1994 and 1993 including the business written through the property and casualty pooling agreement:
Years Ended December 31, ------------------------------- 1995 1994 1993 -------- ------- ------- (in thousands) Earned Premiums Personal lines $270,109 $208,358 $181,686 Commercial lines 10,606 8,524 8,920 Pools, associations and fees 3,709 2,920 2,541 Reinsurance ceded (11,435) (5,476) (4,090) ------------------------------- Total $272,989 $214,326 $189,057 =============================== Net Underwriting Income (Loss) $(10,598) $ 10,793 $ 17,217 =============================== Underwriting Margin (3.9%) 5.0% 9.1% =============================== Operating Income $ 8,182 $ 20,179 $ 24,144 ===============================
Pooling Agreement. Effective August 1, 1987, the Registrant's ----------------- property and casualty insurance subsidiaries entered into the Pooling Agreement with Mutual, Fire, and General. Under the terms of the Pooling Agreement, the Registrant ceded to Mutual all of its property and casualty insurance business in force and written on or after August 1, 1987, net of reinsurance ceded to others. All of the Mutual Group's direct property and casualty insurance business, net of such reinsurance, in force or written on or after such date, is also included in the pool. Mutual retrocedes 65% of the pooled premiums, losses, loss adjustment expenses and other underwriting expenses to Registrant. The Pooling Agreement enabled Registrant, in effect, to expand its property and casualty insurance revenues and to spread and stabilize the underwriting risks borne by each party through the creation of a larger and more diversified risk pool.
The Boards of Directors of Mutual, Fire and General and of the Registrant's property and casualty insurance subsidiaries have established the pool participation percentages and must approve any changes in such participation. The Alabama Insurance Department reviewed the Pooling Agreement and determined that its implementation did not require its approval.
A committee consisting of two members of the Boards of Directors of the Mutual Group, two members of the Board of Directors of the Registrant and Goodwin Myrick, as chairman of each such Board, has been established to review and approve any changes in the Pooling Agreement. The committee is responsible for matters involving actual or potential conflicts of interest between the Registrant and the Mutual Group and for attempting to ensure that, in operation, the Pooling Agreement is equitable to all parties. Conflicts in geographic markets are currently minimal because the Mutual Group writes property and casualty insurance only in Alabama and at present all of such insurance written by the Registrant is outside of Alabama. The Pooling Agreement is intended to reduce conflicts which could arise in the selection of risks to be insured by the participants by making the results of each participant's operations dependent on the results of all of the Pooled Business. Accordingly, the participants should have substantially identical direct underwriting ratios for the Pooled Business as long as the Pooling Agreement remains in effect.
I-3
The participation of Registrant in the Pooling Agreement may be changed or terminated without the consent or approval of the shareholders, and the Pooling Agreement may be terminated by any party thereto upon 90 days notice. Any such termination, or a change in Registrant's allocated share of the Pooled Business, inclusion of riskier business or certain types of reinsurance assumed in the pool, or other changes to the Pooling Agreement, could have a material adverse impact on Registrant's earnings. Participants' respective abilities to share in the Pooled Business are subject to regulatory capital requirements.
Relationship with Mutual Group. The Registrant's business and ------------------------------ operations are substantially integrated with and dependent upon the management, personnel and facilities of Mutual. Under a Management and Operating Agreement with Mutual all management personnel are provided by Mutual and Registrant reimburses Mutual for field office expenses and operations services rendered by Mutual in the areas of advertising, sales administration, underwriting, legal, sales, claims, management, accounting, securities and investment, and other services rendered by Mutual to Registrant.
Mutual periodically conducts time usage and related expense allocation studies. Mutual charges Registrant for its allocable and directly attributable salaries and other expenses, including office facilities in Montgomery, Alabama.
The Board of Directors of Registrant consisted at year end of eleven members, six of whom serve on the Executive Committee of the Boards of Mutual, Fire and General and two of whom are Executive Officers of Registrant.
Mutual owns 16,201,538 shares, or 39.72%, and Fire owns 4,515,286 shares, or 11.07%, of Registrant's Outstanding Common Stock.
Other Business - --------------
Registrant operates five other subsidiaries which are not considered to be significant by SEC Regulations. These subsidiaries are Alfa Financial Corporation (AFC), a lending institution, Alfa Investment Corporation, a real estate investment business and its wholly owned subsidiary, Alfa Builders, Inc., a construction company, Alfa Realty, Inc., a real estate sales agency, and Alfa Agency Mississippi, Inc.
AFC is a lending institution engaged principally in making consumer loans. These loans are available through substantially all agency offices of Registrant.
Alfa Investment Corporation is a Florida corporation engaged in the real estate investment business. Alfa Builders, Inc. is engaged in the construction business in Alabama and is also engaged in real estate investments.
Alfa Realty, Inc., is engaged in the business of listing and selling real estate in the Montgomery and Autauga County, Alabama, areas.
Alfa Agency Mississippi Inc. places substandard insurance risks with third party insurers for a commission.
(ii) - (ix). Not applicable.
I-4
(x) Both the life and property and casualty insurance businesses are highly competitive. There are numerous insurance companies in Registrant's area of operation and throughout the United States. Many of the companies which are in direct competition with the Registrant have been in business for a much longer period of time, have a larger volume of business, offer a more diversified line of insurance coverage, and have greater financial resources than Registrant. In its life and property and casualty insurance businesses, Registrant competes with other insurers in the sale of insurance products to consumers and the recruitment and retention of qualified agents. Registrant believes that the main competitive factors in its business are price, name recognition and service. Registrant believes that it competes effectively in these areas in Alabama. In Georgia and Mississippi, however, the Registrant's name is not as well recognized.
Registrant's insurance subsidiaries are subject to licensing and supervision by the governmental agencies in the jurisdictions in which they do business. The nature and extent of such regulation varies, but generally has its source in State Statutes which delegate regulatory, supervisory and administrative powers to State Insurance Commissioners. Such regulation, supervision and administration relate, among other things, to standards of solvency which must be met and maintained, licensing of the companies and the benefit of policyholders, periodic examination of the affairs and financial condition of the Registrant, annual and other reports required to be filed on the financial condition and operation of the Registrant. Life insurance rates are generally not subject to prior regulatory approval. Rates of property and casualty insurance are subject to regulation and approval of regulatory authorities.
The Mutual Group and Registrant's insurance subsidiaries are subject to the Alabama Insurance Holding Company Systems Regulatory Act and are subject to reporting to the Alabama Insurance Department and to periodic examination of their transactions and regulation under the Act with Mutual being considered the controlling party.
(xi-xii) Not applicable.
(xiii) The Registrant has no management or operational employees. Registrant and its subsidiaries have a Management and Operating Agreement with Mutual whereby Registrant and its subsidiaries reimburse Mutual for salaries and expenses of employees provided to Registrant under the Agreement. Involved are employees in the areas of Life Underwriting, Life Processing, Accounting, Sales, Administration, Legal, Files, Data Processing, Programming, Research, Policy Issuing, Claims, Investments, and Management. At December 31, 1995, Registrant was represented by 469 agents in Alabama who are employees of Mutual. Registrant's property and casualty subsidiaries had 116 independent exclusive agents in Georgia and Mississippi at December 31, 1995.
Item 2.

Item 2. Properties. ----------
(a) Physical Properties of Registrant and Its Subsidiaries. The ------------------------------------------------------- Registrant leases it home office facilities in Montgomery, Alabama,from Mutual.
Registrant and its subsidiaries own several investment properties, none of which are material to Registrant's business.
(b) Oil and Gas Operations. Not applicable. ----------------------
I-5
Item 3.

Item 3. Legal Proceedings. -----------------
Various legal proceedings arising during the normal course of business with policyholders and agents are in process at December 31, 1995. Based upon information presently available, applicable law and the defenses available to Alfa Corporation and its subsidiaries, management does not consider that contingent liabilities which might arise from pending litigation are material in relation to the financial position, results of operations or cash flows of the Company. Management's opinion is based upon the Company's experience in dealing with such claims and the historical results of such claims against the Company. However, it should be noted that in Alabama, where Alfa Corporation has substantial business, the frequency of large punitive damage awards, bearing little or no relation to actual damages awarded by juries, continues to increase.
Item 4.

Item 4. Submission of Matters to Vote of Security Holders. -------------------------------------------------
Not applicable.
Executive Officers of the Registrant: - ------------------------------------
Pursuant to General Instruction G(3) of Form 10-K, the following is included as an unnumbered item in part I of this report in lieu of being included in the proxy statement for the annual meeting of stockholders to be held April 18, 1996.
The following is a list of name and ages of all of the executive officers of the Registrant indicating all positions and offices with the Registrant held by such person and each such person's principal occupation or employment during the past five years. No person other than those listed below has been chosen to become an executive officer of the Registrant.
I-6
I-7
Part II -------
Item 5.

Item 5. Market for Registrant's Common Stock and Related Security Holder ---------------------------------------------------------------- Matters. --------
The "Stockholder Information" section on the Inside Back Cover of Registrant's annual report to security holders for the fiscal year ended December 31, 1995, is incorporated herein by reference.
Item 6.

Item 6. Selected Financial Data. ------------------------
The "Selected Financial Data" section on pages 6 and 7 of the Registrant's annual report to security holders for the year ended December 31, 1995, is incorporated herein by reference.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and ---------------------------------------------------------------- Results of Operations. ----------------------
The "Management's Discussion and Analysis" section on pages 14 through 20 of the Registrant's annual report to security holders for the fiscal year ended December 31, 1995, is incorporated herein by reference.
Item 8.

Item 8. Financial Statements and Supplementary Data. --------------------------------------------
The Financial Statements on pages 21 through 40 of the Registrant's annual report to security holders for the fiscal year ended December 31, 1995, are incorporated herein by reference.
Item 9.

Item 10. Directors and Executive Officers of the Registrant. --------------------------------------------------
For information with respect to the Executive Officers of the Registrant see Executive Officers of the Registrant at the end of Part I of this Report. For information with respect to the Directors of the Registrant, see Election of Directors on Page 2 of the Proxy statement for the annual meeting of stockholders to be held April 18, 1996, which is incorporated herein by reference.
Item 11.

Item 11. Executive Compensation. ----------------------
The information set forth under the caption "Executive Compensation" on Page 6 of the Proxy Statement for the annual meeting of stockholders to be held April 18, 1996, except for the report of the Compensation Committee and Performance Graph, is incorporated herein by reference.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management. --------------------------------------------------------------
The information appearing on Pages 1 through 3 of the Proxy Statement for the annual meeting of stockholders to be held April 18, 1996, relating to the security ownership of certain beneficial owners and management is incorporated herein by reference.
Item 13.

Item 13. Certain Relationships and Related Transactions. ----------------------------------------------
The information set forth under the caption "Executive Compensation" on Page 6 of the Proxy Statement for the annual meeting of stockholders to be held April 18, 1996, is incorporated herein by reference.
III-1
Part IV -------
Item 14.

Item 14. Exhibits, Financial Statement Schedules, Reports on Form 8-K. ------------------------------------------------------------
(a) The following documents are filed as part of this report:
1. Financial Statements. --------------------
Report of Independent Certified Public Accountants for 1995, 1994, and 1993.
Consolidated Balance Sheets as of December 31, 1995 and 1994.
Consolidated Statements of Income for the three years ended December 31, 1995, 1994 and 1993.
Consolidated Statements of Stockholders' Equity for the three years ended December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the three years ended December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
Selected Quarterly Financial Data.
2. Financial Statement Schedules. -----------------------------
Included in Part IV of this report:
Page ---- Reports on Financial Statements and Financial Statement Schedules of Independent Certified Public Accountants for 1995, 1994 and 1993. IV-3
Schedule I - Summary of Investments Other Than Investments in Related Parties for the year ended December 31, 1995 IV-4
Schedule II - Condensed Financial Information IV-5-7
Schedule III - Supplementary Insurance Information IV-8
Schedule IV - Reinsurance for the years ended December 31, 1995, 1994 and 1993 IV-9
Schedule V - Valuation and Qualifying Accounts IV-10
IV-1
Schedules other than those listed above have been omitted because the required information is contained in the financial statements and notes thereto, or because such schedules are not required or applicable.
3. Exhibits. --------
Exhibit (3) - Articles of Incorporation and By-Laws of the Registrant are incorporated by reference from Registrant's 10-K for the year ended December 31, 1987.
Exhibit (10(a)) - Amendment No. 2 to Management and Operating Agreement effective January 1, 1992 is incorporated by reference from Registrant's 10-K for the year ended December 31, 1992.
(10(b)) - Insurance Pooling Agreement is incorporated by reference from registrant's 10-K for the year ended December 31, 1987.
Exhibit (13) - Registrant's Annual Report to Security Holders for the fiscal year ended December 31, 1995. Such report, except for the portions incorporated herein by reference, is furnished to the Commission for information only and is not deemed filed as part of this report.
Exhibit (19) - Employee Stock Purchase Plan and 1993 Stock Incentive Plan are incorporated by reference from registrant's 10-K for the year ended December 31, 1993.
Exhibit (24) - Consents of Independent Accountants
(b) Reports on Form 8-K. -------------------
An 8-K report was filed on May 22, 1995 reporting a change in certifying accountants from Coopers & Lybrand L.L.P. to KPMG Peat Marwick LLP .
IV-2
INDEPENDENT AUDITOR'S REPORT
The Stockholders and Board of Directors Alfa Corporation Montgomery, Alabama:
We have audited the accompanying consolidated balance sheet of Alfa Corporation and subsidiaries (the Company) as of December 31, 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1995 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Alfa Corporation and subsidiaries as of December 31, 1995, and the results of their operations and their cash flows for the year ended December 31, 1995, in conformity with generally accepted accounting principles.
Our audit for the year ended December 31, 1995, was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information included in Schedules I through V for the year ended December 31, 1995, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole for the year ended December 31, 1995.
KPMG Peat Marwick LLP
Birmingham, Alabama January 31, 1996
IV-3(a)
Report of Independent Accountants
To the Stockholders and Board of Directors Alfa Corporation Montgomery, Alabama
We have audited the consolidated financial statements and the financial statement schedules of Alfa Corporation and subsidiaries (the Company) as of December 31, 1994 and for each of the years ended December 31, 1994 and 1993 as listed in the index on page IV-1 of this Form 10-K. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial statement schedules referred to above present fairly, in all material respects, the financial position of Alfa Corporation and its subsidiaries as of December 31, 1994 and the results of its operations and its cash flows for the years ended December 31, 1994 and 1993 in conformity with generally accepted accounting principles.
As discussed in Note 1 to the Consolidated Financial Statements, the Company changed its method of accounting for certain investments in debt and equity securities in 1994 and in 1993 the Company changed its methods of accounting for income taxes, postretirement benefits other than pensions, and for certain reinsurance contracts to comply with new Financial Accounting Standards Board pronouncements.
Coopers & Lybrand L.L.P.
Birmingham, Alabama February 2, 1995
IV-3(b)
ALFA CORPORATION AND SUBSIDIARIES SCHEDULE I - SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES FOR THE YEAR ENDED DECEMBER 31, 1995
------------
IV-4
ALFA CORPORATION (PARENT COMPANY) SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEETS DECEMBER 31, 1995 AND 1994
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
IV-5
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
-------------
IV-6
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
IV-7
ALFA CORPORATION SCHEDULE III - SUPPLEMENTAL INSURANCE INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
IV-8
ALFA CORPORATION AND SUBSIDIARIES SCHEDULE IV - REINSURANCE FOR YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- -------------- *These amounts are subject to the pooling agreement.
IV-9
ALFA CORPORATION AND SUBSIDIARIES SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
IV-10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ALFA CORPORATION
By /s/ Goodwin L. Myrick -------------------------------------- Goodwin L. Myrick President
Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Chairman of the Board /s/ Goodwin L. Myrick Director and Principal - -------------------------- Executive Officer --------- (Goodwin L. Myrick) (Date)
Senior Vice President, /s/ Donald Price Finance, (Principal - -------------------------- Financial Officer) --------- (Donald Price) (Date)
/s/ John D. Holley Vice President and - -------------------------- Controller -------- (John D. Holley) (Date)
/s/ Jerry A. Newby - -------------------------- Director -------- (Jerry A. Newby) (Date)
/s/ James E. Mobley - -------------------------- Director -------- (James E. Mobley) (Date)
/s/ James A. Tolar, Jr. - -------------------------- Director -------- (James A. Tolar, Jr.) (Date)
/s/ John W. Morris - -------------------------- Director -------- (John W. Morris) (Date)
/s/ Milborn N. Chesser - -------------------------- Director -------- (Milborn N. Chesser) (Date)
/s/ James I. Harrison, Jr. - -------------------------- Director -------- (James I. Harrison, Jr.) (Date)
/s/ Young J. Boozer - -------------------------- Director -------- (Young J. Boozer) (Date)
/s/ John R. Thomas - -------------------------- Director -------- (John R. Thomas) (Date)
/s/ B. Phil Richardson - -------------------------- Director -------- (B. Phil Richardson) (Date)
/s/ Boyd E. Christenberry - -------------------------- Director -------- (Boyd E. Christenberry) (Date)
/s/ Thomas H. Miller - -------------------------- Director -------- (Thomas H. Miller) (Date)