FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 0-22462
Gibraltar Steel Corporation
(Exact name of Registrant as specified in its charter)
Delaware 16-1445150
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3556 Lake Shore Road, P.O. Box 2028, Buffalo, New York 14219-0228
(Address of principal executive offices)
(716) 826-6500
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No .
As of June 30, 1996, the number of common shares outstanding was:
12,223,900.
GIBRALTAR STEEL CORPORATION
INDEX
PAGE NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1996 (unaudited) and
December 31, 1995 (audited) 3
Condensed Consolidated Statements of Income
Three months and Six months ended June 30, 1996
and 1995 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1996 and 1995
(unaudited) 5
Notes to Condensed Consolidated Financial
Statements (unaudited) 6 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule 11
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
June 30, December 31,
1996 1995
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 2,806 $ 4 123
Accounts receivable 46,009 35,634
Inventories 53,045 45,274
Other current assets 1,897 1,964
Total current assets 103,757 86,995
Property, plant and equipment, net 85,323 67,275
Other assets 25,375 13,153
$ 214,455 $ 167,423
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 31,275 $ 25,845
Accrued expenses 5,185 2,367
Current maturities of long-term debt 1,216 1,214
Deferred income taxes - 54
Total current liabilities 37,676 29,480
Long-term debt 51,233 57,840
Deferred income taxes 12,577 9,251
Other non-current liabilities 781 608
Shareholders' equity
Preferred shares - -
Common shares 122 102
Additional paid-in capital 63,238 28,803
Retained earnings 48,828 41,339
Total shareholders' equity 112,188 70,244
$ 214,455 $ 167,423
See accompanying notes to financial statements
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GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except share and per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(unaudited) (unaudited)
Net sales $ 86,476 $ 76,337 $ 168,510 $ 135,102
Cost of sales 70,609 65,097 138,614 113,676
Gross profit 15,867 11,240 29,896 21,426
Selling, general and
administrative expense 7,614 5,248 14,968 10,338
Income from operations 8,253 5,992 14,928 11,088
Interest expense 1,270 1,240 2,343 1,799
Income before taxes 6,983 4,752 12,585 9,289
Provision for income taxes 2,828 1,948 5,096 3,808
Net income $ 4,155 $ 2,804 $ 7,489 $ 5,481
Net income per share $ .40 $ .28 $ .73 $ .54
Weighted average number
of shares outstanding 10,286,537 10,162,900 10,230,219 10,162,900
See accompanying notes to financial statements
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GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Six Months Ended
June 30,
1996 1995
(unaudited)
Cash flows from operating activities
Net income $ 7,489 $ 5,481
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,973 2,040
Provision for deferred income taxes 406 (113)
Equity investment income (307) (404)
Dividends from equity investments - 202
(Gain) loss on disposition of property
and equipment 8 (41)
Increase (decrease) in cash resulting from
changes in (net of effects from
acquisitions):
Accounts receivable (7,128) (736)
Inventories (7,771) 5,007
Other current assets (228) (515)
Accounts payable and accrued expenses 7,670 (1,108)
Other assets (51) 73
Net cash provided by operating activities 3,061 9,886
Cash flows from investing activities
Acquisition of CCHT, net of cash acquired (23,715) -
Acquisition of Hubbell, net of cash acquired - (20,859)
Purchases of property, plant and equipment (8,544) (8,667)
Proceeds from sale of property and equipment 107 94
Net cash used in investing activities (32,152) (29,432)
Cash flows from financing activities
Payment of Hubbell bank debt at acquisition - (17,779)
Long-term debt reduction (56,587) (20,141)
Proceeds from long-term debt 49,906 56,932
Proceeds from issuance of common stock 34,455 -
Net cash provided by financing activities 27,774 19,012
Net decrease in cash and cash equivalents (1,317) (534)
Cash and cash equivalents at beginning
of year 4,123 1,124
Cash and cash equivalents at end of period $ 2,806 $ 590
See accompanying notes to financial statements
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GIBRALTAR STEEL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements as of June 30,
1996 and 1995 have been prepared by the Company without audit. In the
opinion of management, all adjustments necessary to present fairly the
financial position, results of operations and cash flows at June 30, 1996
and 1995 have been included.
Certain information and footnote disclosures including significant accounting
policies normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
It is suggested that these condensed financial statements be read in
conjunction with the financial statements included in the Company's Annual
Report to Shareholders for the year ended December 31, 1995.
The results of operations for the six month period ended June 30, 1996 are
not necessarily indicative of the results to be expected for the full year.
2. INVENTORIES
Inventories consist of the following:
(in thousands)
June 30, December 31,
1996 1995
(unaudited) (audited)
Raw material $ 36,576 $ 28,307
Finished goods and work-in-process 16,469 16,967
Total inventories $ 53,045 $ 45,274
3. STOCKHOLDERS' EQUITY
During June 1996 the Company sold, through an underwritten secondary offering,
2,050,000 common shares at $18.00 per share. The net proceeds were
approximately $34,455,000 and were used to repay existing bank debt.
The change in stockholders' equity consists of:
(in thousands, except share data)
Additional
Common Shares Paid-in Retained
Shares Amount Capital Earnings
Balance at
December 31, 1995 10,173,900 $ 102 $ 28,803 $ 41,339
Net income - - - 7,489
Secondary Offering 2,050,000 20 34,435 -
Balance at June 30, 1996 12,223,900 $ 122 $ 63,238 $ 48,828
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4. EARNINGS PER SHARE
Net income per share for the six months ended June 30, 1996 and 1995 was
computed by dividing net income by the weighted average number of
common shares outstanding.
5. ACQUISITION
On April 3, 1995, the Company purchased all of the outstanding capital stock of
Wm. R. Hubbell Steel Company and its subsidiary and certain of its affiliates
(Hubbell) for an aggregate cash purchase price of $21 million. In addition,
the Company repaid approximately $18 million of Hubbell's existing bank
indebtedness.
On February 14, 1996, the Company purchased all of the outstanding capital
stock of Carolina Commercial Heat Treating, Inc. (CCHT) for an aggregate
cash purchase price of approximately $25 million. The funding for the
purchase was provided by borrowings under the Company's existing credit
facility. CCHT, headquartered in Charlotte, North Carolina, provides heat
treating, brazing and related metal-processing services to a broad range of
industries, including the automotive, hand tools, construction equipment, and
industrial machinery industries.
These acquisitions have been accounted for under the purchase method, and
Hubbell's and CCHT's results of operations have been consolidated with the
Company's results of operations from the respective acquisition dates. The
excess of the aggregate purchase price over the fair market value of net
assets of Hubbell and CCHT approximated $10 million and $12 million,
respectively, and is being amortized over 35 years from the respective
acquisition dates using the straight-line method.
The following information presents the pro forma consolidated condensed results
of operations as if the acquisitions had occurred on January 1, 1995. The
pro forma amounts may not be indicative of the results that actually would
have been achieved had the acquisitions occurred as of January 1, 1995 and
are not necessarily indicative of future results of the combined companies.
(in thousands, except per share data)
Six Months Ended
June 30,
1996 1995
(unaudited)
Net sales $ 170,755 $ 163,896
Income before taxes $ 12,316 $ 11,159
Net income $ 7,311 $ 6,537
Net income per share $ .71 $ .64
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Net sales of $86.5 million for the second quarter ended June 30, 1996 increased
13% from sales of $76.3 million for the prior year's second quarter. Net
sales of $168.5 million for the six months ended June 30, 1996 increased 25%
from sales of $135.1 million in the first half of 1995. These increases
primarily resulted from including six months of net sales of Hubbell Steel
(acquired April 1995) for 1996 compared to three months in 1995, including
net sales of CCHT (acquired February 1996) and sales growth at existing
operations.
Cost of sales decreased to 81.7% of net sales for the second quarter and to
82.3% of net sales for the first half of 1996. Gross profit increased to
18.3% in the second quarter and increased to 17.7 % for the six months from
14.7% and 15.9% in the comparable prior periods in 1995. This increase was
primarily due to higher margins attributable to sales from CCHT and
improvements in margins at our existing operations.
Selling, general and administrative expenses as a percentage of net sales
increased to 8.8% and 8.9% for the second quarter and the six months ended
June 30, 1996 from 6.9% and 7.7% for the prior year comparable periods
primarily due to higher costs as a percentage of sales attributable to CCHT
and performance based compensation linked to the Company's sales and
profitability.
Interest expense remained approximately the same for the quarter and
increased by approximately $.5 million for the six months ended June 30, 1996
primarily due to higher average borrowings as a result of the CCHT acquisition.
As a result of the above, income before taxes increased by $2.2 million and
$3.3 million for the quarter and the six months ended June 30, 1996 to $7.0
million and $12.6 million.
Income taxes for the six months ended June 30, 1996 approximated $5.1 million
and were based on a 40.5% effective tax rate in 1996.
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Liquidity and Capital Resources
During the first six months of 1996, the Company increased its working
capital to $66.1 million. Long term debt was reduced to $51.2 million.
Additionally, shareholders' equity increased to $112.2 million at June 30,
1996.
The Company's principal capital requirements are to fund its operations,
including working capital, the purchase and funding of improvements to its
facilities, machinery and equipment and to fund acquisitions.
Net cash provided by operations of $3.1 million resulted primarily from net
income of $7.5 million and depreciation and amortization of $3.0 million.
Additionally accounts receivable and inventory increased by $7.1 million and
$7.8 million (net of the effect from the acquisition of CCHT) primarily due
to increased sales levels and were offset by an increase of $7.7 million in
accounts payable and accrued expenses. The $3.1 million provided by
operations and an additional $27.8 million in net cash provided by long term
financing activities were primarily used for the $23.7 million acquisition
of CCHT and $8.5 million of capital expenditures.
In June 1996, the Company sold 2,050,000 shares of common shares in a public
offering. The net proceeds from the offering which approximated $34.4
million were used to repay outstanding indebtedness.
At June 30, 1996, the Company's aggregate credit facilities available totaled
approximately $132 million. The Company had borrowings of approximately $52
million under these credit facilities and an additional availability of
approximately $80 million.
The Company believes that availability under its credit facilities together
with funds generated from operations will be sufficient to provide the
Company with the liquidity and capital resources necessary to support its
operations and anticipated capital expenditures for the next twelve months.
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SIGNATURES
Pursuant to the requirements 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.
GIBRALTAR STEEL CORPORATION
(Registrant)
By /x/ Brian J. Lipke
Brian J. Lipke
President, Chief Executive Officer
and Chairman of the Board
By /x/ Walter T. Erazmus
Walter T. Erazmus
Treasurer and Chief Financial Officer
(Principal Financial and Chief
Accounting Officer)
Date July 25, 1996
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