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, 1997
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 (I.R.S. Employer
of 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, 1997, the number of common shares
outstanding was:12,401,869.
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GIBRALTAR STEEL CORPORATION
INDEX
PAGE NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
September 30, 1997 (unaudited) and
December 31, 1996 (audited) 3
Condensed Consolidated Statements of Income
Three months and Nine months ended
September 30, 1997 and 1996 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 1997 and 1996
(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
PART II. OTHER INFORMATION 11
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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,
1997 1996
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 2,922 $ 5,545
Accounts receivable 57,824 40,106
Inventories 72,698 62,351
Other current assets 3,240 1,524
-------- --------
Total current assets 136,684 109,526
Property, plant and equipment, net 114,341 88,670
Other assets 35,263 24,311
-------- --------
$ 286,288 $ 222,507
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 37,304 $ 35,397
Accrued expenses 4,836 4,238
Current maturities of long-term debt 1,223 1,218
-------- --------
Total current liabilities 43,363 40,853
-------- --------
Long-term debt 90,652 48,623
Deferred income taxes 14,680 10,364
Other non-current liabilities 1,221 923
Shareholders' equity
Preferred shares - -
Common shares 124 123
Additional paid-in capital 66,004 64,307
Retained earnings 70,244 57,314
-------- --------
Total shareholders' equity 136,372 121,744
-------- --------
$ 286,288 $ 222,507
======== ========
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,
1997 1996 1997 1996
(unaudited) (unaudited)
Net sales $ 114,249 $ 87,994 $ 341,739 $ 256,504
Cost of sales 96,102 72,015 284,977 210,629
-------- -------- -------- --------
Gross profit 18,147 15,979 56,762 45,875
Selling, general and
administrative expense 10,525 7,708 31,177 22,676
-------- -------- -------- --------
Income from operations 7,622 8,271 25,585 23,199
Interest expense 1,310 852 3,907 3,195
-------- -------- -------- --------
Income before taxes 6,312 7,419 21,678 20,004
Provision for income taxes 2,525 3,005 8,748 8,101
-------- -------- -------- --------
Net income $ 3,787 $ 4,414 $ 12,930 $ 11,903
========= ========= ========= =========
Net income per share $ .31 $ .36 $ 1.05 $ 1.09
========= ========= ========= =========
Weighted average number
of shares outstanding 12,371,680 12,239,607 12,340,900 10,904,904
========== ========== ========== ==========
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,
1997 1996
(unaudited)
Cash flows from operating activities
Net income $ 12,930 $ 11,903
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 6,216 4,579
Provision for deferred income taxes 1,230 556
Undistributed equity investment income (383) (481)
(Gain) loss on disposition of property
and equipment (8) 7
Increase (decrease) in cash resulting from
changes in (net of acquisitions):
Accounts receivable (8,849) (7,844)
Inventories 5,610 (9,411)
Other current assets (1,099) 86
Accounts payable and accrued expenses (2,160) 6,686
Other assets (390) (201)
-------- --------
Net cash provided by operating activities 13,097 5,880
-------- --------
Cash flows from investing activities
Acquisitions, net of cash acquired (26,475) (23,715)
Purchases of property, plant and equipment (17,677) (11,909)
Proceeds from sale of property and equipment 95 137
-------- --------
Net cash used in investing activities (44,057) (35,487)
-------- --------
Cash flows from financing activities
Long-term debt reduction (62,059) (65,891)
Proceeds from long-term debt 89,365 60,906
Proceeds from issuance of common stock 1,031 35,494
-------- --------
Net cash provided by financing activities 28,337 30,509
-------- --------
Net (decrease) increase in cash and cash
equivalents (2,623) 902
Cash and cash equivalents at beginning
of year 5,545 4,123
------- -------
Cash and cash equivalents at end of period $ 2,922 $ 5,025
======= =======
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, 1997 and 1996 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, 1997 and 1996 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, 1996.
The results of operations for the nine month period ended
September 30, 1997 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,
1997 1996
(unaudited) (audited)
Raw material $ 51,776 $ 45,258
Finished goods and work-in-process 20,922 17,093
------- -------
Total inventories $ 72,698 $ 62,351
======= =======
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3. STOCKHOLDERS' EQUITY
The changes in stockholders' equity consist of:
(in thousands, except share data)
Additional
Common Shares Paid-in Retained
Shares Amount Capital Earnings
December 31, 1996 12,322,400 $ 123 $ 64,307 $ 57,314
Net income - - - 12,930
Stock options exercised
and related tax benefit 68,469 1 1,458 -
Profit sharing plan
contribution 11,000 - 239 -
---------- ------ ------- --------
September 30, 1997 12,401,869 $ 124 $ 66,004 $ 70,244
========== ====== ======= =======
Additional paid-in capital increased approximately $791,000
through the exercise of stock options and approximately
$667,000 through a realized tax benefit from the
disposition of certain stock options. This benefit also
resulted in a corresponding decrease in current income
taxes payable.
4. EARNINGS PER SHARE
Net income per share for the three and nine months ended
September 30, 1997 and 1996 was computed by dividing net
income by the weighted average number of common shares
outstanding.
5. ACQUISITIONS
On February 14, 1996, the Company purchased all of the
outstanding capital stock of Carolina Commercial Heat
Treating, Inc. (CCHT) for approximately $25 million in cash.
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.
On January 31, 1997, the Company purchased all of the
outstanding capital stock of Southeastern Metals
Manufacturing Company, Inc. (SEMCO) for approximately $25
million in cash. SEMCO manufactures a wide array of metal
products for the residential and commercial construction
markets.
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These acquisitions have been accounted for under the
purchase method. Results of operations of CCHT and SEMCO
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 CCHT and SEMCO approximated $12
million and $10 million, respectively, and is being
amortized over 35 years from the 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, 1996. 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, 1996 and are not necessarily
indicative of future results of the combined companies.
(in thousands, except per share data)
Nine Months Ended
September 30,
1997 1996
(unaudited)
Net sales $ 348,263 $ 325,325
======== ========
Income before taxes $ 21,388 $ 20,924
======== ========
Net income $ 12,748 $ 12,345
======== ========
Net income per share $ 1.03 $ 1.13
======== ========
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales of $114.2 million for the third quarter ended
September 30, 1997 increased 30% from sales of $88.0
million for the prior year's third quarter. Net sales of
$341.7 million for the nine months ended September 30, 1997
increased 33% from net sales of $256.5 million for the same
period of 1996. These increases primarily resulted from
including net sales of SEMCO (acquired January 31, 1997)
and sales growth at existing operations.
Cost of sales increased to 84.1% of net sales for the third
quarter and to 83.4% for the first nine months of 1997.
Gross profit decreased to 15.9% and 16.6% for the third
quarter and the nine months ended September 30, 1997 from
18.2% and 17.9% for the comparable periods in 1996. This
decrease is primarily due to higher raw material costs
which were not fully passed through to customers, offset
partially by the inclusion of SEMCO's results. SEMCO's
sales historically have generated higher margins than the
Company's other products and services.
Selling, general and administrative expenses as a
percentage of net sales increased to 9.2% and 9.1% for the
third quarter and nine months ended September 30, 1997,
respectively, from 8.8% for the same periods of 1996.
These increases were primarily due to higher costs as a
percentage of sales attributable to SEMCO and performance
based compensationy.
Interest expense increased by $.5 million for the quarter
and $.7 million for the nine months ended September 30,
1997 primarily due to higher average borrowings as a result
of the SEMCO acquisition.
As a result of the above, income before taxes decreased by
$1.1 million and increased $1.7 million for the quarter
and nine months ended September 30, 1997.
Income taxes for the nine months ended September 30, 1997
approximated $8.8 million and were based on a 40.4%
effective tax rate for 1997 compared to an effective tax
rate of 40.5% for the same period in 1996.
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Liquidity and Capital Resources
During the first nine months of 1997, the Company increased
its working capital to $93.3 million. Additionally,
shareholders' equity increased to $136.4 million at
September 30, 1997.
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 income of $12.9 million and depreciation and
amortization of $6.2 million combined with a decrease in
inventory (net of acquisitions) of $5.6 million to provide
cash of $24.7 million. This was partially offset by an
increase in accounts receivable of $8.8 million, to service
increased sales levels, and a decrease in accounts payable
and accrued expenses of $2.2 million. The resulting net
cash provided by operations of $13.1 million combined with
an additional $28.3 million in net cash provided by
financing activities funded the $26.5 million used for
acquisitions and $17.7 million for capital expenditures.
During September 1997, the Company increased its bank
credit facility to $185 million which expires in November
2002. The facility was also changed to an unsecured basis.
At September 30, 1997, the Company's aggregate credit
facilities available approximated $190 million with
borrowings of approximately $91 million and an additional
availability of approximately $99 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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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
1. Exhibits -
a. Exhibit 10.1 - Credit Agreement dated as of
September 15, 1997 among Gibraltar Steel Corporation,
Gibraltar Steel Corporation of New York, Chase Manhattan
Bank, as Administrative Agent and various financial
institutions that are signatories thereto
b. Exhibit 27 - Financial Data Schedule
2. Reports on Form 8-K. There were no reports on Form 8-K
during the three months ended September 30, 1997.
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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 23, 1997
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