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 March 31, 1996
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 April 30, 1996, the number of common shares outstanding was: 10,173,900.
GIBRALTAR STEEL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 1996 (unaudited) and
December 31, 1995 (audited) 3
Condensed Consolidated Statements of Income
Three months ended March 31, 1996
and 1995 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995
(unaudited) 5
Notes to Condensed Consolidated Financial
Statements (unaudited) 6 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule 12
(b) Report on Form 8-K 10
-2-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
March 31, December 31,
1996 1995
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 2,215 $ 4,123
Accounts receivable 45,639 35,634
Inventories 51,101 45,274
Other current assets 2,517 1,964
Total current assets 101,472 86,995
Property, plant and equipment, net 81,465 67,275
Other assets 25,433 13,153
$ 208,370 $ 167,423
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 33,224 $ 25,845
Accrued expenses 5,467 2,367
Current maturities of long-term debt 1,215 1,214
Deferred income taxes 142 54
Total current liabilities 40,048 29,480
Long-term debt 81,632 57,840
Deferred income taxes 12,418 9,251
Other non-current liabilities 694 608
Shareholders' equity
Preferred shares - -
Common shares 102 102
Additional paid-in capital 28,803 28,803
Retained earnings 44,673 41,339
Total shareholders' equity 73,578 70,244
$ 208,370 $ 167,423
======== ========
See accompanying notes to financial statements
-3-
GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except share and per share data)
Three Months Ended
March 31,
1996 1995
(unaudited)
Net sales $ 82,034 $ 58,765
Cost of sales 68,005 48,579
Gross profit 14,029 10,186
Selling, general and administrative expense 7,354 5,090
Income from operations 6,675 5,096
Interest expense 1,073 559
Income before taxes 5,602 4,537
Provision for income taxes 2,268 1,860
Net income $ 3,334 $ 2,677
========= =========
Net income per share $ .33 $ .26
========= =========
Weighted average number of shares outstanding 10,173,900 10,162,900
========= ==========
See accompanying notes to financial statements
-4-
GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Three Months Ended March 31,
1996 1995
(unaudited)
Cash flows from operating activities
Net income $ 3,334 $ 2,677
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,395 924
Provision for deferred income taxes 424 (55)
Equity investment income (136) (209)
Gain on disposition of property and equipment (25) (27)
Increase (decrease) in cash resulting from
changes in (net of effects from
acquisition of CCHT):
Accounts receivable (6,758) (2,420)
Inventories (5,827) (2,232)
Other current assets (848) (52)
Accounts payable and accrued expenses 9,814 1,445
Other assets (47) 26
Net cash provided by operating activities 1,326 77
Cash flows from investing activities
Acquisition of CCHT, net of cash acquired (23,715) -
Purchases of property, plant and equipment (3,262) (5,527)
Proceeds from sale of property and equipment 26 60
Net cash used in investing activities (26,951) (5,467)
Cash flows from financing activities
Long-term debt reduction (12,283) (2,013)
Proceeds from long-term debt 36,000 7,332
Net cash provided by financing activities 23,717 5,319
Net decrease in cash and cash equivalents (1,908) (71)
Cash and cash equivalents at beginning
of year 4,123 1,124
Cash and cash equivalents at end of period $ 2,215 $ 1,053
======= =======
See accompanying notes to financial statements
-5-
GIBRALTAR STEEL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements as of
March 31, 1996 and 1995 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
March 31, 1996 and 1995 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, 1995.
The results of operations for the three month period ended March 31, 1996
are not necessarily indicative of the results to be expected for the
full year.
2. INVENTORIES
Inventories consist of the following:
(in thousands)
March 31, December 31,
1996 1995
(unaudited) (audited)
Raw material $ 34,739 $ 28,307
Finished goods and work-in-process 16,362 16,967
Total inventories $ 51,101 $ 45,274
======= =======
3. RETAINED EARNINGS
The change in retained earnings consists of:
(in thousands)
Three Months Ended
March 31, 1996
(unaudited)
Balance, beginning of year $ 41,339
Net income 3,334
Balance, end of period $ 44,673
=======
-6-
4. EARNINGS PER SHARE
Net income per share for the three months ended March 31, 1996 and 1995 was
computed by dividing net income by the weighted average number of common
shares outstanding.
5. ACQUISITION
On April 3, 1995, the Company purchased all of the outstanding capital stock of
Wm. R. Hubbell Steel Company and its subsidiary and certain of its affiliates
(Hubbell) for an aggregate cash purchase price of $21 million. In addition,
the Company repaid approximately $18 million of Hubbell's existing bank
indebtedness.
On February 14, 1996, the Company purchased all of the outstanding capital
stock of Carolina Commercial Heat Treating, Inc. (CCHT) for an aggregate
cash purchase price of approximately $25 million. The funding for the
purchase was provided by borrowings under the Company's existing credit
facility. 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.
These acquisitions have been accounted for under the purchase method, and
Hubbell's and CCHT's results of operations 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 Hubbell and CCHT approximated $10 million and $12 million,
respectively, and is being amortized over 35 years from the respective
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,
1995. 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, 1995 and are not necessarily indicative of future results of
the combined companies.
(in thousands, except per share data)
Three Months Ended
March 31,
1996 1995
(unaudited)
Net sales $ 84,279 $ 81,964
======= =======
Income before taxes $ 5,333 $ 5,747
======= =======
Net income $ 3,156 $ 3,376
======= =======
Net income per share $ .31 $ .33
======= =======
-7-
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Net sales of $82.0 million for the first quarter ended March 31, 1996 increased
39.6% from sales of $58.8 million for the prior year's first quarter. This
increase resulted primarily from the net sales of Hubbell Steel (acquired in
April 1995) for the quarter and the net sales of CCHT since its acquisition
(February 1996) during the first quarter.
Cost of sales increased slightly to 82.9% of net sales for the first three
months of 1996 from 82.7% for the prior year's first quarter. The decrease
in gross profit margin to 17.1% for the first quarter in 1996 was primarily
due to including Hubbell Steel's results. Hubbell Steel's products and
services historically have generated slightly lower margins than the
Company's other products and services.
Selling, general and administrative expenses as a percentage of net sales
increased to 9.0% for the first quarter from 8.7% the prior year comparable
period primarily due to performance-based compensation linked to the
Company's sales and profitability.
Interest expense increased by $.5 million for the three months ended March
31, 1996 primarily due to higher average borrowings resulting from the
Hubbell and CCHT acquisitions.
As a result of the above, income before taxes increased by $1.1 million for
the three months ended March 31, 1996 to $5.6 million.
Income taxes for the three months ended March 31, 1996 approximated $2.3
million and was based on a 40.5% effective tax rate in 1996.
-8-
Liquidity and Capital Resources
During the first three months of 1996, the Company increased its working
capital to $61.4 million. Additionally, shareholders' equity increased to
$73.6 million at March 31, 1996.
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 $3.3 million and depreciation and amortization of $1.4 million
combined with increases in accounts payable and accrued expenses (net of the
CCHT acquisition) of $9.8 million to provide cash of $14.5 million. This was
primarily offset by increases in accounts receivable and inventory of $6.8
million and $5.8 million, respectively, to service increased sales, which
resulted in net cash provided by operations of $1.3 million.
Net cash provided by long term financing activities of $23.7 million in
addition to the $1.3 million in cash provided by operations and $1.9 million
in cash on hand at the beginning of the quarter were primarily used for the
acquisition of CCHT for $23.7 million (net of cash acquired) and $3.3 million
of capital expenditures for the quarter.
At March 31, 1996, the Company's aggregate credit facilities available
totaled $132 million. The Company had borrowings of $82.8 million under
these credit facilities and an additional availability of $49.2 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.
-9-
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated February 14, 1996
and a Form 8-K/A dated April 12, 1996 to report its purchase of all the
outstanding capital stock of Carolina Commercial Heat Treating, Inc.
-10-
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 May 14, 1996
-11-
5
1000
U.S. DOLLARS
3-MOS
DEC-31-1996
JAN-01-1996
MAR-31-1996
1
2,215
0
46,202
563
51,101
101,472
118,698
37,233
208,370
40,048
81,632
0
0
102
73,476
208,370
82,034
82,034
68,005
68,005
0
0
1,073
5,602
2,268
3,334
0
0
0
3,334
.33
.33
