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, 2001
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
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Gibraltar Steel Corporation
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(Exact name of Registrant as specified in its charter)
Delaware 16-1445150
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(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
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(Address of principal executive offices)
(716) 826-6500
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(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, 2001, the number of common shares outstanding was: 12,595,374.
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GIBRALTAR STEEL CORPORATION
INDEX
PAGE NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet
June 30, 2001 (unaudited) and
December 31, 2000 (audited) 3
Condensed Consolidated Statement of Income
Three and six months ended
June 30, 2001 and 2000 (unaudited) 4
Condensed Consolidated Statement of Cash Flows
Six months ended June 30, 2001 and 2000
(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 - 11
PART II. OTHER INFORMATION 12
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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,
2001 2000
---- ----
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 38 $ 1,701
Accounts receivable 97,983 78,358
Inventories 89,696 100,987
Other current assets 7,836 6,548
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Total current assets 195,553 187,594
Property, plant and equipment, net 231,885 229,159
Goodwill 134,814 130,368
Other assets 9,173 8,925
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$ 571,425 $ 556,046
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 59,367 $ 39,285
Accrued expenses 17,296 15,575
Current maturities of long-term debt 329 327
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Total current liabilities 76,992 55,187
Long-term debt 239,584 255,526
Deferred income taxes 36,148 34,325
Other non-current liabilities 3,929 2,660
Shareholders' equity
Preferred shares - -
Common shares 126 126
Additional paid-in capital 68,952 68,475
Retained earnings 146,333 139,747
Accumulated comprehensive loss (639) -
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Total shareholders' equity 214,772 208,348
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$ 571,425 $ 556,046
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See accompanying notes to financial statements
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GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
--------------- --------------- --------------- ---------------
(unaudited) (unaudited)
Net sales $ 163,550 $ 181,523 $ 314,100 $ 349,157
Cost of sales 131,469 144,907 253,534 277,993
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Gross profit 32,081 36,616 60,566 71,164
Selling, general and
administrative expense 20,027 19,200 38,770 39,430
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Income from operations 12,054 17,416 21,796 31,734
Interest expense 4,460 4,217 9,352 8,425
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Income before taxes 7,594 13,199 12,444 23,309
Provision for income taxes 3,076 5,345 5,040 9,440
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Net income $ 4,518 $ 7,854 $ 7,404 $ 13,869
=============== =============== =============== ===============
Net income per share - Basic $ .36 $ 0.62 $ .59 $ 1.10
=============== =============== =============== ===============
Weighted average number of
shares outstanding-Basic 12,588 12,580 12,583 12,580
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Net income per share-Diluted $ .35 $ 0.62 $ .58 $ 1.09
=============== =============== =============== ===============
Weighted average number of
shares outstanding-Diluted 12,802 12,674 12,741 12,696
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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,
2001 2000
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(unaudited)
Cash flows from operating activities
Net income $ 7,404 $ 13,869
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 11,582 10,291
Provision for deferred income taxes 2,351 1,050
Undistributed equity investment income 266 (232)
Other noncash adjustments 58 58
Increase (decrease) in cash resulting
from changes in (net of effects from acquisitions):
Accounts receivable (18,997) (18,173)
Inventories 11,291 (1,313)
Other current assets (1,690) (681)
Accounts payable and accrued expenses 20,612 12,244
Other assets (694) (3,150)
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Net cash provided by operating activities 32,183 13,963
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Cash flows from investing activities
Acquisitions, net of cash acquired (10,832) -
Purchases of property, plant and equipment (7,915) (9,338)
Net proceeds from sale of property and equipment 177 7,249
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Net cash used in investing activities (18,570) (2,089)
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Cash flows from financing activities
Long-term debt reduction (35,334) (32,363)
Proceeds from long-term debt 20,394 22,411
Payment of dividends (755) (692)
Net proceeds from issuance of common stock 419 35
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Net cash used in financing activities (15,276) (10,609)
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Net (decrease) increase in cash and cash equivalents (1,663) 1,265
Cash and cash equivalents at beginning of year 1,701 4,687
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Cash and cash equivalents at end of period $ 38 $ 5,952
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See accompanying notes to financial statements
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GIBRALTAR STEEL CORPORATION
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements as of June 30, 2001
and 2000 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, 2001 and 2000 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 consolidated 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, 2000.
The results of operations for the six month period ended June 30, 2001 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,
2001 2000
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(unaudited) (audited)
Raw material $ 43,016 $ 54,640
Finished goods and work-in-process 46,680 46,347
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Total inventories $ 89,696 $100,987
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3. SHAREHOLDERS' EQUITY
The changes in shareholders' equity consist of:
(in thousands)
Additional Accumulated
Common Shares Paid-in Retained Comprehensive
Shares Amount Capital Earnings Loss
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December 31, 2000 12,567 $126 $68,475 $139,747 $ -
Implementation of
FAS 133 - - - - (191)
Net income - - - 7,404
Stock options
exercised 28 - 419 - -
Earned portion of
restricted stock - - 58 - -
Cash dividends-
$.065 per share - - - (818) -
Interest rate
swap adjustments - - - - (448)
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June 30, 2001 12,595 $126 $68,952 $146,333 $(639)
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On January 1, 2001, the Company implemented the provisions of Statement of
Financial Accounting Standards No. 133 Accounting for Derivative Instruments and
Hedging Activities (FAS 133) and recognized the fair value of its interest rate
swap agreements as other non-current liabilities. Gains or losses from changes
in the fair value of the swap agreements are recorded, net of taxes, as
components of Accumulated Comprehensive Loss.
4. EARNINGS PER SHARE
Basic net income per share equals net income divided by the weighted average
shares outstanding for the six months ended June 30, 2001 and 2000. The
computation of diluted net income per share includes all dilutive common stock
equivalents in the weighted average shares outstanding.
Options to purchase 1,096,517 shares of the Company's common stock are
outstanding as of June 30, 2001 and are exercisable at prices ranging from
$10.00 to $22.50 per share. Included in diluted shares are common stock
equivalents relating to options of 158,754 and 116,017 for the six month periods
ended June 30, 2001 and 2000, respectively.
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5. ACQUISITIONS
On February 13, 2001, the Company purchased all the outstanding capital stock of
Pennsylvania Industrial Heat Treaters, Inc. (PIHT) for approximately $11
million, net of cash acquired. PIHT provides metallurgical heat treating
services and specializes in heat treating powdered metal parts.
On July 17, 2000, the Company purchased all the outstanding capital stock of
Milcor Limited Partnership (Milcor) for approximately $43 million in cash.
Milcor manufactures a complete line of metal building products, including
registers, vents, bath cabinets, access doors, roof hatches and telescoping
doors.
These acquisitions have been accounted for under the purchase method with the
results of their operations consolidated with the Company's results of
operations from the respective acquisition dates. The aggregate excess of the
purchase prices of these acquisitions over the fair market values of the net
assets of the acquired companies 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, 2000. 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, 2000 and are not
necessarily indicative of future results of the combined companies.
(in thousands, except per share data)
Six Months Ended
June 30,
2001 2000
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(unaudited)
Net sales $314,760 $377,190
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Income before taxes $ 12,502 $ 24,426
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Net income $ 7,439 $ 14,532
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Net income per share-Basic $ .59 $ 1.16
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Item 2. Management's Discussion and Analysis of Financial Condition
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and Results of Operations
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Results of Operations
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Net sales of $163.6 million for the second quarter ended June 30, 2001,
decreased 9.9% from net sales of $181.5 million for the prior year's second
quarter. Net sales of $314.1 million for the six months ended June 30, 2001,
which included net sales of Milcor (acquired July 17, 2000) and PIHT (acquired
February 13, 2001) (collectively, the Acquisitions), decreased 10.0% from sales
of $349.2 million for the six months ended June 30, 2000. These decreases
resulted primarily from changes in the general economy, particularly in the
automotive industry.
Cost of sales increased to 80.4% of net sales for the second quarter ended June
30, 2001 from 79.8% for the prior year's second quarter. Cost of sales increased
to 80.7% of net sales for the first six months of 2001 from 79.6% for the six
months ended June 30, 2000. These increases were primarily due to higher health
care and utility costs.
Selling, general and administrative expenses were relatively constant at 12.2%
and 12.3% of net sales for the second quarter and six months ended June 30,
2001, in comparison to 10.6% and 11.3% of net sales for the same periods of
2000. These increases were primarily due to costs from the Acquisitions, which
have higher costs as a percentage of net sales, offset by decreases in incentive
based compensation.
Interest expense increased by $.2 million and $.9 million for the second quarter
and six months ended June 30, 2001 over the prior year's comparable periods,
primarily due to higher average borrowings during 2001 to finance acquisitions
and capital expenditures, offset by decreases in interest rates.
As a result of the above, income before taxes decreased by $5.6 million and
$10.9 million for the second quarter and six months ended June 30, 2001 from the
same periods in 2000.
Income taxes for the second quarter and six months ended June 30, 2001
approximated $3.1 million and $5.0 million and were based on a 40.5% effective
tax rate in both periods.
Liquidity and Capital Resources
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Shareholders' equity increased by approximately $6.4 million at June 30, 2001 to
$214.8 million. During the first six months of 2001, the Company's working
capital decreased $13.8 million to approximately $118.6 million.
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.
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Net cash provided by operations of $32.2 million resulted primarily from net
income of $7.4 million, depreciation and amortization of $11.6 million,
decreases in inventories of $11.3 million and increases in accounts payable and
accrued expenses of $20.6 million. These sources of cash from operations were
offset by an increase in accounts receivable of $19.0 million due to increased
sales in the second quarter of 2001 compared to the fourth quarter of 2000.
The $32.2 million of net cash provided by operations was used to pay down $14.9
million of the Company's revolving credit facility and to fund the $10.8
million acquisition of PIHT, capital expenditures of $7.9 million and cash
dividends of $.8 million.
At June 30, 2001 the Company's revolving credit facility available approximated
$310 million, with borrowings of approximately $234 million and an additional
availability of approximately $76 million.
The Company believes that availability of funds under its credit facilities
together with cash generated from operations will be sufficient to provide the
Company with the liquidity and capital resources necessary to support its
existing operations.
Recent Accounting Pronouncements
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In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 Accounting for Derivative Instruments and
Hedging Activities (FAS No. 133) which requires recognition of the fair value of
derivatives in the statement of financial position, with changes in the fair
value recognized either in earnings or as a component of other comprehensive
income dependent upon the hedging nature of the derivative. FAS 133 was
implemented in 2001 and did not have a material impact on our earnings.
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 Business Combinations (FAS No. 141) and
Statement of Financial Accounting Standards No. 142 Goodwill and Other
Intangible Assets (FAS No. 142). FAS No. 141 requires that all business
combinations be accounted for under the purchase method only and that certain
acquired intangible assets in a business combination be recognized as assets
apart from goodwill. FAS No. 142 requires that ratable amortization of goodwill
be replaced with periodic tests of the goodwill's impairment and that intangible
assets other than goodwill be amortized over their useful lives. Implementation
of FAS No. 141 and FAS No. 142 is required for fiscal 2002. However, the
Financial Accounting Standards Board has not yet published FAS No. 141 or FAS
No. 142 that would allow management to calculate their effect on the Company.
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Safe Harbor Statement
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The Company wishes to take advantage of the Safe Harbor provisions included in
the Private Securities Litigation Reform Act of 1995 (the "Act"). Statements by
the Company, other than historical information, constitute "forward looking
statements" within the meaning of the Act and may be subject to a number of risk
factors. Factors that could affect these statements include, but are not limited
to, the following: the impact of changing steel prices on the Company's results
of operations; changing demand for the Company's products and services; and
changes in interest or tax rates.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
1. Exhibits
a. Exhibit 10.1 - Agreement dated December 22, 2000 for Adoption by
Gibraltar Steel Corporation of New York of the Dreyfus
Nonstandardized Prototype Profit Sharing Plan and Trust
2. Reports on Form 8-K. There were no reports on Form 8-K during the
three months ended June 30, 2001.
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SIGNATURES
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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
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(Registrant)
By /x/ Brian J. Lipke
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Brian J. Lipke
Chief Executive Officer and
Chairman of the Board
By /x/ Walter T. Erazmus
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Walter T. Erazmus
President
By /x/ John E. Flint
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Vice President
Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
Date July 20, 2001
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