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 September 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 September 30, 1996, the number of common shares outstanding was:
12,319,900.
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GIBRALTAR STEEL CORPORATION
INDEX
PAGE NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
September 30, 1996 (unaudited) and
December 31, 1995 (audited) 3
Condensed Consolidated Statements of Income
Three months and Nine months ended
September 30, 1996 and 1995 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 1996 and 1995
(unaudited) 5
Notes to Condensed Consolidated Financial
Statements (unaudited) 6 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 10
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
September 30, December 31,
1996 1995
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 5,025 $ 4,123
Accounts receivable 46,725 35,634
Inventories 54,685 45,274
Other current assets 1,763 1,964
Total current assets 108,198 86,995
Property, plant and equipment, net 87,243 67,275
Other assets 25,616 13,153
$ 221,057 $ 167,423
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 30,141 $ 25,845
Accrued expenses 5,356 2,367
Current maturities of long-term deb 1,218 1,214
Deferred income taxes - 54
Total current liabilities 36,715 29,480
Long-term debt 52,927 57,840
Deferred income taxes 12,907 9,251
Other non-current liabilities 867 608
Shareholders' equity
Preferred shares - -
Common shares 123 102
Additional paid-in capital 64,276 28,803
Retained earnings 53,242 41,339
Total shareholders' equity 117,641 70,244
$ 221,057 $ 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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(unaudited) (unaudited)
Net sales $ 87,994 $ 74,691 $ 256,504 $ 209,793
Cost of sales 72,015 64,672 210,629 178,348
Gross profit 15,979 10,019 45,875 31,445
Selling, general and
administrative expense 7,708 5,474 22,676 15,812
Income from operations 8,271 4,545 23,199 15,633
Interest expense 852 1,181 3,195 2,980
Income before taxes 7,419 3,364 20,004 12,653
Provision for income taxes 3,005 1,362 8,101 5,170
Net income $ 4,414 $ 2,002 $ 11,903 $ 7,483
========= ======== ======== ========
Net income per share $ .36 $ .20 $ 1.09 $ .74
========= ========= ========= =========
Weighted average number
of shares outstanding 12,239,607 10,162,900 10,904,904 10,162,900
========== ========== ========== ==========
See accompanying notes to financial statements
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GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended
September 30,
1996 1995
(unaudited)
Cash flows from operating activities
Net income $ 11,903 $ 7,483
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,579 3,247
Provision for deferred income taxes 556 568
Equity investment income (486) (531)
Dividends from equity investments 5 275
(Gain) loss on disposition of property
and equipment 7 (161)
Increase (decrease) in cash resulting from
changes in (net of effects from
acquisitions):
Accounts receivable (7,844) (3,865)
Inventories (9,411) 16,799
Other current assets 86 (228)
Accounts payable and accrued expenses 6,686 686
Other assets (201) 90
Net cash provided by operating activities 5,880 24,363
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 (11,909) (11,670)
Proceeds from sale of property and equipment 137 260
Net cash used in investing activities (35,487) (32,269)
Cash flows from financing activities
Payment of Hubbell bank debt at acquisition - (17,779)
Long-term debt reduction (65,891) (36,443)
Proceeds from long-term debt 60,906 63,832
Proceeds from issuance of common stock 35,494 -
Net cash provided by financing activities 30,509 9,610
Net increase in cash and cash equivalents 902 1,704
Cash and cash equivalents at beginning
of year 4,123 1,124
Cash and cash equivalents at end of period $ 5,025 $ 2,828
======= =======
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 September
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 September 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 nine month period ended September 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)
September 30, December 31,
1996 1995
(unaudited) (audited)
Raw material $ 38,514 $ 28,307
Finished goods and work-in-process 16,171 16,967
Total inventories $ 54,685 $ 45,274
======= =======
3. STOCKHOLDERS' EQUITY
During June 1996, the Company sold 2,050,000 common shares, in a public
offering, at $18.00 per share. The net proceeds were approximately $34.4
million and were used to repay existing bank debt. In July 1996, the
Company issued 11,000 of its common shares at $16.75 per share as a
contribution to one of its profit sharing plans. In September 1996, 85,000
of previously issued stock options were exercised at $10 and $11 per share.
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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 - - - 11,903
Public offering 2,050,000 20 34,365 -
Profit sharing plan
contribution 11,000 - 184 -
Stock options exercised 85,000 1 924 -
Balance at
September 30,1996 12,319,900 $ 123 $ 64,276 $ 53,242
========== ======= ======= =======
4. EARNINGS PER SHARE
Net income per share for the three and nine months ended September 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.
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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)
Nine Months Ended
September 30,
1996 1995
(unaudited)
Net sales $ 258,749 $ 243,751
======== ========
Income before taxes $ 19,735 $ 14,914
======== ========
Net income $ 11,725 $ 8,736
======== ========
Net income per share $ 1.08 $ .86
======== ========
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Net sales of $88.0 million for the third quarter ended September 30, 1996
increased 18% from sales of $74.7 million for the prior year's third quarter.
Net sales of $256.5 million for the nine months ended September 30, 1996
increased 22% from sales of $209.8 million in the first nine months of 1995.
These increases primarily resulted from including nine months of net sales of
Hubbell Steel (acquired April 1995) for 1996 compared to six months in 1995,
including net sales of CCHT (acquired February 1996) and sales growth at
existing operations.
Cost of sales decreased to 81.8% of net sales for the third quarter and to
82.1% of net sales for the first nine months of 1996. Gross profit increased
to 18.2% in the third quarter and increased to 17.9% for the nine months from
13.4% and 15.0% 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% for the third quarter and the nine months ended September
30, 1996 from 7.3% and 7.5% 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 decreased by $.3 million for the quarter and increased by
approximately $.2 million for the nine months ended September 30, 1996.
These changes were primarily due to higher borrowings in the first half of
the year as a result of the CCHT acquisition in February 1996 offset by a
decrease in borrowings resulting from the repayment of debt in June 1996
with the net proceeds from the public offering.
As a result of the above, income before taxes increased by $4.1 million and
$7.4 million for the quarter and the nine months ended September 30, 1996 to
$7.4 million and $20.0 million.
Income taxes for the nine months ended September 30, 1996 approximated $8.1
million and were based on a 40.5% effective tax rate in 1996.
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Liquidity and Capital Resources
During the first nine months of 1996, the Company increased its working capital
to $71.5 million. Long term debt was reduced to $52.9 million.
Additionally, shareholders' equity increased to $117.6 million at September
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 $5.9 million resulted primarily from net
income of $11.9 million and depreciation and amortization of $4.6 million.
Additionally accounts receivable and inventory increased by $7.8 million and
$9.4 million (net of the effect from the acquisition of CCHT) primarily due
to increased sales levels and were offset by an increase of $6.7 million in
accounts payable and accrued expenses. The $5.9 million provided by
operations and an additional $30.5 million in net cash provided by long term
financing activities were primarily used for the $23.7 million acquisition of
CCHT and $11.9 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 September 30, 1996, the Company's aggregate credit facilities available
totaled approximately $132 million. The Company had borrowings of
approximately $54 million under these credit facilities and an additional
availability of approximately $78 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 October 28, 1996
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