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, 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 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, 1997, the number of common shares outstanding
was: 12,329,899.
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<PAGE>
GIBRALTAR STEEL CORPORATION
INDEX
PAGE NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1997 (unaudited) and
December 31, 1996 (audited) 3
Condensed Consolidated Statements of Income
Three months and six months ended
June 30, 1997 and 1996 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Six months ended June 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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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
(unaudited) (audited)
<S> <S><S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 4,638 $ 5,545
Accounts receivable 57,088 40,106
Inventories 79,779 62,351
Other current assets 2,876 1,524
--------- ---------
Total current assets 144,381 109,526
Property, plant and equipment, net 110,566 88,670
Other assets 34,968 24,311
--------- ---------
$ 289,915 $ 222,507
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 38,466 $ 35,397
Accrued expenses 5,418 4,238
Current maturities of long-term debt 1,222 1,218
--------- ---------
Total current liabilities 45,106 40,853
Long-term debt 98,011 48,623
Deferred income taxes 14,328 10,364
Other non-current liabilities 1,136 923
Shareholders' equity
Preferred shares - -
Common shares 123 123
Additional paid-in capital 64,754 64,307
Retained earnings 66,457 57,314
--------- ---------
Total shareholders' equity 131,334 121,744
--------- ---------
$ 289,915 $ 222,507
======== ========
</TABLE>
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)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 119,213 $ 86,476 $ 227,490 $ 168,510
Cost of sales 99,296 70,609 188,875 138,614
--------- --------- --------- ---------
Gross profit 19,917 15,867 38,615 29,896
Selling, general and
administrative expense 10,576 7,614 20,652 14,968
--------- --------- --------- ---------
Income from operations 9,341 8,253 17,963 14,928
Interest expense 1,448 1,270 2,597 2,343
--------- --------- --------- ---------
Income before taxes 7,893 6,983 15,366 12,585
Provision for income taxes 3,196 2,828 6,223 5,096
--------- --------- --------- ---------
Net income $ 4,697 $ 4,155 $ 9,143 $ 7,489
========= ========= ========= =========
Net income per share $ .38 $ .40 $ .74 $ .73
========= ========= ========= =========
Weighted average number
of shares outstanding 12,325,909 10,286,537 12,325,255 10,230,219
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
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<PAGE>
GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
(unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $ 9,143 $ 7,489
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,053 2,973
Provision for deferred income taxes 766 406
Undistributed equity investment income (220) (307)
(Gain) loss on disposition of property
and equipment (11) 8
Increase (decrease) in cash resulting from
changes in (net of acquisitions):
Accounts receivable (8,113) (7,128)
Inventories (1,471) (7,771)
Other current assets (561) (228)
Accounts payable and accrued expenses (799) 7,670
Other assets (257) (51)
--------- ---------
Net cash provided by operating activities 2,530 3,061
--------- ---------
Cash flows from investing activities
Acquisitions, net of cash acquired (26,475) (23,715)
Purchases of property, plant and equipment (11,776) (8,544)
Proceeds from sale of property and equipment 73 107
--------- ---------
Net cash used in investing activities (38,178) (32,152)
--------- ---------
Cash flows from financing activities
Long-term debt reduction (43,701) (56,587)
Proceeds from long-term debt 78,365 49,906
Proceeds from issuance of common stock 77 34,455
--------- ---------
Net cash provided by financing activities 34,741 27,774
--------- ---------
Net decrease in cash and cash equivalents (907) (1,317)
Cash and cash equivalents at beginning of year 5,545 4,123
--------- ---------
Cash and cash equivalents at end of period $ 4,638 $ 2,806
========= =========
</TABLE>
See accompanying notes to financial statements
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<PAGE>
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, 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 June 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 six month period ended June
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)
June 30, December 31,
1997 1996
(unaudited) (audited)
Raw material $ 57,427 $ 45,258
Finished goods and work-in-process 22,352 17,093
-------- --------
Total inventories $ 79,779 $ 62,351
======== ========
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3. STOCKHOLDERS' EQUITY
The changes in stockholders' equity consist of:
<TABLE>
<CAPTION>
(in thousands, except share data)
Additional
Common Shares Paid-in Retained
Shares Amount Capital Earnings
<S> <C> <C> <C> <C>
December 31, 1996 12,322,400 $ 123 $ 64,307 $ 57,314
Net income - - - 9,143
Stock options exercised
and related tax benefit 7,499 - 447 -
---------- ------- --------- ---------
June 30, 1997 12,329,899 $ 123 $ 64,754 $ 66,457
========== ======= ========= =========
</TABLE>
Additional paid-in capital increased approximately $77,000
through the exercise of stock options and approximately $370,000
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 six months ended June 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)
Six Months Ended
June 30,
1997 1996
(unaudited)
Net sales $ 234,014 $ 213,602
========= =========
Income before taxes $ 15,076 $ 12,886
========= =========
Net income $ 8,961 $ 7,592
========= =========
Net income per share $ .73 $ .74
========= =========
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales of $119.2 million for the second quarter ended June
30, 1997 increased 38% from sales of $86.5 million for the prior
year's second quarter. Net sales of $227.5 million for the six
months ended June 30, 1997 increased 35% from net sales of
$168.5 million in the first half 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 83.3% of net sales for the second
quarter and to 83.0% for the first six months of 1997. Gross
profit decreased to 16.7% and 17.0% for the second quarter and
the six months ended June 30, 1997 from 18.3% and 17.7% 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 8.9% and 9.1% for the second quarter and
six months ended June 30, 1997, respectively, from 8.8% and 8.9%
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 compensation linked to the Company's
sales and profitability.
Interest expense increased by $.2 million for the quarter and
$.3 million for the six months ended June 30, 1997 primarily due
to higher average borrowings as a result of the SEMCO
acquisition.
As a result of the above, income before taxes increased by $.9
million and $2.8 million for the quarter and six months ended
June 30, 1997.
Income taxes for the six months ended June 30, 1997 approximated
$3.2 million and were based on a 40.5% effective tax rate for
both 1997 and 1996.
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<PAGE>
Liquidity and Capital Resources
During the first six months of 1997, the Company increased its
working capital to $99.3 million. Additionally, shareholders'
equity increased to $131.3 million at June 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 $9.1 million and depreciation and amortization of
$4.1 million provided cash of $13.2 million. This was offset by
increases in accounts receivable and inventory (net of
acquisitions) of $8.1 million and $1.5 million, respectively, to
service increased sales levels and by a decrease in accounts
payable and accrued expenses of $.8 million. The resulting net
cash provided by operations of $2.5 million combined with an
additional $34.7 million in net cash provided by financing
activities funded the $26.5 million used for acquisitions and
$11.8 million for capital expenditures.
At June 30, 1997, the Company's aggregate credit facilities
available totaled approximately $131 million. The Company had
total borrowings of approximately $99 million under these
credit facilities and an additional availability of
approximately $32 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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<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
1. Exhibits - Exhibit 27 Financial Data Schedule
2. Reports on Form 8-K. There were no reports on Form 8-K
during the three months ended June 30, 1997.
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<PAGE>
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)
July 25, 1997
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ON FORM 10-Q AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 4,638
<SECURITIES> 0
<RECEIVABLES> 58,359
<ALLOWANCES> 1,271
<INVENTORY> 79,779
<CURRENT-ASSETS> 144,381
<PP&E> 143,378
<DEPRECIATION> 32,812
<TOTAL-ASSETS> 289,915
<CURRENT-LIABILITIES> 45,106
<BONDS> 98,011
0
0
<COMMON> 123
<OTHER-SE> 131,211
<TOTAL-LIABILITY-AND-EQUITY> 289,915
<SALES> 227,490
<TOTAL-REVENUES> 227,490
<CGS> 188,875
<TOTAL-COSTS> 188,875
<OTHER-EXPENSES> 20,652
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,597
<INCOME-PRETAX> 15,366
<INCOME-TAX> 6,223
<INCOME-CONTINUING> 9,143
<DISCONTINUED> 0
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<NET-INCOME> 9,143
<EPS-PRIMARY> .74
<EPS-DILUTED> .74
</TABLE>
