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, 2000
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, 2000, the number of common shares
outstanding was: 12,579,719.
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GIBRALTAR STEEL CORPORATION
INDEX
PAGE NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 2000 (unaudited) and
December 31, 1999 (audited) 3
Condensed Consolidated Statements of Income
Three and Six months ended
June 30, 2000 and 1999 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 2000 and 1999
(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)
June 30, December 31,
2000 1999
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 5,952 $ 4,687
Accounts receivable 96,591 78,418
Inventories 96,307 94,994
Other current assets 5,398 4,492
Total current assets 204,248 182,591
Property, plant and equipment, net 209,747 216,030
Goodwill 115,372 115,350
Other assets 9,549 8,109
$ 538,916 $ 522,080
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 61,561 $ 48,857
Accrued expenses 18,816 19,492
Current maturities of
long-term debt 202 1,319
Total current liabilities 80,579 69,668
Long-term debt 226,467 235,302
Deferred income taxes 30,604 29,328
Other non-current liabilities 2,537 2,323
Shareholders' equity
Preferred shares - -
Common shares 126 126
Additional paid-in capital 68,416 68,323
Retained earnings 130,187 117,010
Total shareholders' equity 198,729 185,459
$ 538,916 $ 522,080
======== ========
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,
2000 1999 2000 1999
(unaudited) (unaudited)
Net sales $ 181,523 $ 160,241 $ 349,157 $ 304,045
Cost of sales 144,907 127,240 277,993 242,626
Gross profit 36,616 33,001 71,164 61,419
Selling, general and
administrative expense 19,200 17,648 39,430 34,383
Income from operations 17,416 15,353 31,734 27,036
Interest expense 4,217 3,103 8,425 6,422
Income before taxes 13,199 12,250 23,309 20,614
Provision for income taxes 5,345 4,962 9,440 8,349
Net income $ 7,854 $ 7,288 $ 13,869 $ 12,265
========= ========= ========= =========
Net income per
share-Basic $ .62 $ .58 $ 1.10 $ .98
========= ========= ========= =========
Weighted average number of
shares outstanding-Basic 12,580 12,530 12,580 12,513
========= ========= ========= =========
Net income per
share-Diluted $ .62 $ .57 $ 1.09 $ .96
========= ========= ========= =========
Weighted average number
of shares outstanding
-Diluted 12,674 12,796 12,696 12,754
======== ========= ========= =========
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,
2000 1999
(unaudited)
Cash flows from operating activities
Net income $ 13,869 $ 12,265
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 10,291 8,162
Provision for deferred income taxes 1,050 1,088
Undistributed equity investment income (232) (173)
Other noncash adjustments 58 364
Increase (decrease) in cash resulting from
changes in (net of acquisitions):
Accounts receivable (18,173) (15,962)
Inventories (1,313) 9,816
Other current assets (681) (256)
Accounts payable and accrued expenses 12,244 16,530
Other assets (3,150) (1,473)
Net cash provided by
operating activities 13,963 30,361
Cash flows from investing activities
Purchases of property, plant and equipment (9,338) (12,641)
Net proceeds from sale of
property and equipment 7,249 2,407
Net cash used in investing activities (2,089) (10,234)
Cash flows from financing activities
Long-term debt reduction (32,363) (42,660)
Proceeds from long-term debt 22,411 26,953
Payment of dividends (692) (939)
Net proceeds from issuance of common stock 35 707
Net cash used in financing activities (10,609) (15,939)
Net increase in cash and
cash equivalents 1,265 4,188
Cash and cash equivalents
at beginning of year 4,687 1,877
Cash and cash equivalents
at end of period $ 5,952 $ 6,065
======= =======
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, 2000 and 1999 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, 2000 and 1999 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, 1999.
The results of operations for the six month period ended
June 30, 2000 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,
2000 1999
(unaudited) (audited)
Raw material $ 59,782 $ 59,899
Finished goods and work-in-process 36,525 35,095
Total inventories $ 96,307 $ 94,994
======= =======
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3. SHAREHOLDERS' EQUITY
The changes in shareholders' equity consist of:
(in thousands)
Additional
Common Shares Paid-in Retained
Shares Amount Capital Earnings
December 31, 1999 12,577 $ 126 $ 68,323 $117,010
Net Income - - - 13,869
Stock options exercised 3 - 35 -
Earned portion of
restricted stock - - 58 -
Cash dividends -
$.055 per share - - - (692)
June 30, 2000 12,580 $ 126 $ 68,416 $130,187
==================================
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, 2000 and 1999. The computation of diluted
net income per share includes all dilutive common stock
equivalents in the weighted average shares outstanding. The
reconciliation between basic and diluted earnings per share
is as follows:
Basic Basic Diluted Diluted
Income Shares EPS Shares EPS
2000 $13,869,000 12,579,569 $1.10 12,695,586 $1.09
1999 $12,265,000 12,513,101 $ .98 12,754,377 $ .96
Included in diluted shares are common stock equivalents
relating to options of 116,017 and 241,276 for 2000 and
1999, respectively.
5. ACQUISITIONS
On December 1, 1999, the Company purchased all the
outstanding capital stock of Hughes Manufacturing,
Inc.(Hughes) for approximately $11.5 million in cash.
Hughes manufactures a broad line of fully engineered, code-
approved steel lumber connectors and other metal hardware
products.
On November 1, 1999, the Company purchased all the
outstanding capital stock of Brazing Concepts Company
(Brazing Concepts) for approximately $25 million in cash.
Brazing Concepts provides a wide variety of value-added
brazing (i.e., metal joining), assembly and other
metallurgical heat treating services on customer-owned
materials.
On August 1, 1999, the Company purchased the assets and
business of Hi-Temp Incorporated (Hi-Temp) for
approximately $24 million in cash.
Hi-Temp provides metallurgical heat treating services in
which customer-owned parts are exposed to precise
temperature and other conditions to improve their material
properties, strength and durability.
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On July 1, 1999, the Company purchased all the outstanding
capital stock of K & W Metal Fabricators, Inc. d/b/a
Weather Guard Building Products (Weather Guard) for
approximately $7 million in cash. Weather Guard
manufactures a full line of metal building products,
including rain-carrying systems, metal roofing and roofing
accessories, for industrial, commercial and residential
applications.
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, 1999. 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,
1999 and are not necessarily indicative of future results
of the combined companies.
(in thousands, except per share data)
Six Months Ended
June 30, 1999
(unaudited)
Net sales $ 334,785
=========
Income before taxes $ 22,004
=========
Net income $ 13,057
=========
Net income per share-Basic $ 1.04
=========
6. SUBSEQUENT EVENT
On July 17, 2000, the Company purchased all the outstanding
capital stock of Milcor Limited Partnership (Milcor) for
approximately $42.5 million in cash. The results of
operations of Milcor will be consolidated with the
Company's results of operations from the acquisition date
for the quarter ending September 30, 2000.
Also on July 17, 2000, the Company increased the
availability under its revolving credit facility to $290
million.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations Results of Operations
Net sales of $181.5 million for the second quarter ended
June 30, 2000 increased 13.3% from net sales of $160.2
million for the prior year's second quarter despite the
elimination of approximately $5 million in sales from
disposed of operations that were included in the prior
year's second quarter sales. Net sales of $349.2 million
for the six months ended June 30, 2000 increased 14.8% from
net sales of $304.0 million for the same period of 1999.
These increases resulted from including net sales of
Weather Guard (acquired July 1, 1999), Hi-Temp (acquired
August 1, 1999), Brazing Concepts (acquired November 1,
1999) and Hughes (acquired December 1, 1999) (collectively,
the Acquisitions) together with sales growth at existing
operations.
Cost of sales as a percentage of net sales increased to
79.8% for the second quarter ended June 30, 2000 from 79.4%
for the prior year's second quarter. Cost of sales
decreased to 79.6% for the six months ended June 30, 2000
from 79.8% for the same period in 1999. The improvement
for the six months ended June 30, 2000 was primarily due to
the Acquisitions, which have historically generated higher
margins than the Company's existing operations, partially
offset by product mix and higher raw material costs at
existing operations during the second quarter of 2000.
Selling, general and administrative expenses as a
percentage of net sales decreased to 10.6% for the second
quarter ended June 30, 2000 from 11.0% for the same period
of 1999 and were 11.3% for the six month periods ended June
30, 2000 and June 30, 1999. The decrease for the second
quarter was primarily due to decreases in expenses of
existing operations as a percentage of net sales, slightly
offset by higher costs attributable to the Acquisitions.
Interest expense for the second quarter and six months
ended June 30, 2000 increased by $1.1 million and $2.0
million, respectively, from the same periods in 1999
primarily due to higher interest rates in effect and higher
average borrowings during 2000 to finance the Acquisitions
and capital expenditures.
As a result of the above, income before taxes increased by
$.9 million and $2.7 million for the second quarter and six
months ended June 30, 2000 from the same periods of 1999.
Income taxes for the second quarter and six months ended
June 30, 2000 approximated $5.3 million and $9.4 million,
respectively, and were based on a 40.5% effective tax rate
in both periods.
Liquidity and Capital Resources
During the first six months of 2000, the Company's working
capital increased to $123.7 million. Additionally,
shareholders' equity increased by $13.3 million at June 30,
2000 to $198.7 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 $14.0 million resulted
primarily from net income of $13.9 million, depreciation
and amortization of $10.3 million, and an increase in
accounts payable and accrued expenses of $12.2 million,
offset by increases in accounts receivable of $18.2 million
and inventory of $1.3 million, necessary to service
increased sales levels, and an increase in other assets of
$3.2 million.
The $14.0 million of net cash provided by operations and
$7.2 million in net proceeds from the sale of property and
equipment were used to fund capital expenditures of $9.3
million and cash dividends of $.7 million and to pay down
$10.0 million of the Company's credit facility.
At June 30, 2000 the Company's revolving credit facility
available approximated $280 million, with borrowings of
approximately $221 million and an additional availability
of approximately $59 million. On July 17, 2000, the Company
increased the availability under its revolving credit
facility to $290 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 Pronouncement
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.
Implementation of FAS No. 133 is required for the first
quarter of fiscal 2001. The Company does not believe that
FAS No. 133 will have a material impact on its earnings or
other comprehensive income.
Safe Harbor Statement
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 - Gibraltar Steel Corporation
Incentive Stock Option Plan
Fifth Amendment and Restatement
b. Exhibit 27 - Financial Data Schedule
2. Reports on Form 8-K. There were no reports on
Form 8-K during the six months ended June 30, 2000.
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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
Chief Executive Officer and
Chairman of the Board
By /x/ Walter T. Erazmus
Walter T. Erazmus
President
By /x/ John E. Flint
Vice President
Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
Date August 11, 2000
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