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, 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 September 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
September 30, 2000 (unaudited) and
December 31, 1999 (audited) 3
Condensed Consolidated Statements of Income
Three and Nine months ended
September 30, 2000 and 1999 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Nine months ended September 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)
September 30, December 31,
2000 1999
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 3,529 $ 4,687
Accounts receivable 98,719 78,418
Inventories 102,758 94,994
Other current assets 4,768 4,492
Total current assets 209,774 182,591
Property, plant and equipment, net 228,197 216,030
Goodwill 131,290 115,350
Other assets 9,678 8,109
$ 578,939 $ 522,080
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 48,648 $ 48,857
Accrued expenses 22,884 19,492
Current maturities of
long-term debt 314 1,319
Total current liabilities 71,846 69,668
Long-term debt 266,289 235,302
Deferred income taxes 32,565 29,328
Other non-current liabilities 2,610 2,323
Shareholders' equity
Preferred shares - -
Common shares 126 126
Additional paid-in capital 68,445 68,323
Retained earnings 137,058 117,010
Total shareholders' equity 205,629 185,459
$ 578,939 $ 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 Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
(unaudited) (unaudited)
Net sales $ 178,326 $ 162,909 $ 527,483 $ 466,954
Cost of sales 142,463 128,664 420,456 371,290
Gross profit 35,863 34,245 107,027 95,664
Selling, general and
administrative expense 18,595 18,819 58,025 53,202
Income from operations 17,268 15,426 49,002 42,462
Interest expense 5,086 3,318 13,511 9,740
Income before taxes 12,182 12,108 35,491 32,722
Provision for income taxes 4,934 4,903 14,374 13,252
Net income $ 7,248 $ 7,205 $ 21,117 $ 19,470
========= ========= ========= =========
Net income per
share-Basic $ .58 $ .57 $ 1.68 $ 1.55
========= ========= ========= =========
Weighted average number of
shares outstanding-Basic 12,580 12,563 12,580 12,530
========= ========= ========= =========
Net income per
share-Diluted $ .57 $ .56 $ 1.66 $ 1.52
========= ========= ========= =========
Weighted average number
of shares
outstanding-Diluted 12,708 12,862 12,700 12,790
========= ========= ========= =========
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,
2000 1999
(unaudited)
Cash flows from operating activities
Net income $ 21,117 $ 19,470
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 15,763 12,699
Provision for deferred income taxes 3,358 1,921
Undistributed equity investment income (461) (293)
Other noncash adjustments 87 587
Increase (decrease) in cash resulting from
changes in (net of acquisitions):
Accounts receivable (14,481) (15,912)
Inventories (1,977) 6,286
Other current assets (460) (597)
Accounts payable and accrued expenses (96) 21,849
Other assets (3,175) (955)
Net cash provided by
operating activities 19,675 45,055
Cash flows from investing activities
Acquisitions, net of cash acquired (43,267) (31,484)
Purchases of property, plant and equipment (13,849) (17,917)
Net proceeds from sale of
property and equipment 7,335 2,425
Net cash used in investing activities (49,781) (46,976)
Cash flows from financing activities
Long-term debt reduction (43,929) (62,727)
Proceeds from long-term debt 73,911 66,953
Payment of dividends (1,069) (1,253)
Net proceeds from issuance of common stock 35 890
Net cash provided by
financing activities 28,948 3,863
Net (decrease)increase in cash and
cash equivalents (1,158) 1,942
Cash and cash equivalents at
beginning of year 4,687 1,877
Cash and cash equivalents at
end of period $ 3,529 $ 3,819
======= =======
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, 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
September 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 nine month period ended
September 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)
September 30, December 31,
2000 1999
(unaudited) (audited)
Raw material $ 62,817 $ 59,899
Finished goods and work-in-process 39,941 35,095
Total inventories $102,758 $ 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 - - - 21,117
Stock options exercised 3 - 35 -
Earned portion of
restricted stock - - 87 -
Cash dividends -
$.085 per share - - - (1,069)
September 30, 2000 12,580 $ 126 $ 68,445 $137,058
====================================
4. EARNINGS PER SHARE
Basic net income per share equals net income divided by the
weighted average shares outstanding for the nine months
ended September 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 $21,117,000 12,579,619 $1.68 12,699,683 $1.66
1999 $19,470,000 12,529,765 $1.55 12,790,462 $1.52
Options to purchase 1,163,594 shares of the Company's
common stock are outstanding as of September 30, 2000,
which 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 120,064 and
260,697 for 2000 and 1999, respectively.
5. ACQUISITIONS
On July 17, 2000, the Company purchased all the outstanding
capital stock of Milcor Limited Partnership (Milcor) for
approximately $43 million in cash. Milcor manfactures a
complete line of metal building products, including
registers, vents, bath cabinets, access doors, roof hatches
and telescoping doors.
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.
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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.
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)
Nine Months Ended
September 30
2000 1999
(unaudited)
Net sales $ 554,292 $ 523,192
========= =========
Income before taxes $ 35,990 $ 34,985
========= =========
Net income $ 21,414 $ 20,816
========= =========
Net income per share-Basic $ 1.70 $ 1.66
========= =========
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales of $178.3 million for the third quarter ended
September 30, 2000 increased 9.5% from net sales of $162.9
million for the prior year's third quarter despite the
elimination of approximately $4.0 million in sales from
disposed of operations that were included in the prior
year's third quarter sales. Net sales of $527.5 million for
the nine months ended September 30, 2000 increased 13.0%
from net sales of $467.0 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),Hughes (acquired December 1, 1999)and Milcor
(acquired July 17, 2000) (collectively, the Acquisitions)
together with sales growth at existing operations.
Cost of sales as a percentage of net sales increased to
79.9% for the third quarter ended September 30, 2000 from
79.0% for the prior year's third quarter, and to 79.7% for
the nine months ended September 30, 2000 from 79.5% for the
same period in 1999, primarily due to higher raw material
costs at existing operations.
Selling, general and administrative expenses as a
percentage of net sales decreased to 10.4% for the third
quarter ended September 30, 2000 from 11.6% for the same
period of 1999 and decreased to 11.0% for the nine month
period ended September 30, 2000 from 11.4% for the same
nine month period in 1999. These decreases were primarily
due to the elimination of expenses from disposed of
operations and decreases in performance based compensation,
offset by higher costs attributable to the Acquisitions.
Interest expense for the third quarter and nine months
ended September 30, 2000 increased by $1.8 million and $3.8
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
$.1 million and $2.8 million for the third quarter and
nine months ended September 30, 2000 from the same periods
of 1999.
Income taxes for the third quarter and nine months ended
September 30, 2000 approximated $4.9 million and $14.4
million, respectively, and were based on a 40.5% effective
tax rate in both periods.
Liquidity and Capital Resources
During the first nine months of 2000, the Company's working
capital increased to $137.9 million. Additionally,
shareholders' equity increased by $20.2 million at
September 30, 2000 to $205.6 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 $19.7 million resulted
primarily from net income of $21.1 million, depreciation
and amortization of $15.8 million and the provision for
deferred income taxes of $3.4 million, offset by increases
in accounts receivable of $14.5 million and inventories of
$2.0 million, necessary to service increased sales levels,
and an increase in other assets of $3.2 million.
The $19.7 million of net cash provided by operations, $7.3
million in net proceeds from the sale of property and
equipment and $30.0 million in net borrowings under the
Company's revolving credit facility were used to fund the
acquisition of Milcor, capital expenditures of $13.8
million and cash dividends of $1.1 million.
At September 30, 2000 the Company's revolving credit
facility available approximated $310 million, with
borrowings of approximately $261 million and an additional
availability of approximately $49 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 - Third Amended and Restated
Credit Agreement Dated
September 29, 2000
among Gibraltar Steel
Corporation, Gibraltar Steel
Corporation of New York, Chase
Manhattan Bank, N.A., 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 nine months ended September 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 November 10, 2000
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