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, 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 April 30, 1996, the number of common shares outstanding
was: 12,325,212.
1 of 11
GIBRALTAR STEEL CORPORATION
INDEX
PAGE NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31,1997 (unaudited) and
December 31, 1996 (audited) 3
Condensed Consolidated Statements of Income
Three months ended March 31, 1997 and
1996 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 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
2 of 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
March 31, December 31,
1997 1996
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 3,923 $ 5,545
Accounts receivable 59,911 40,106
Inventories 82,654 62,351
Other current assets 3,455 1,524
Total current assets 149,943 109,526
Property, plant and equipment, net 103,808 88,670
Other assets 34,847 24,311
$ 288,598 $ 222,507
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 41,254 $ 35,397
Accrued expenses 6,836 4,238
Current maturities of long-term debt 1,220 1,218
Total current liabilities 49,310 40,853
Long-term debt 97,695 48,623
Deferred income taxes 13,977 10,364
Other non-current liabilities 1,030 923
Shareholders' equity
Preferred shares - -
Common shares 123 123
Additional paid-in capital 64,703 64,307
Retained earnings 61,760 57,314
Total shareholders' equity 126,586 121,744
$ 288,598 $ 222,507
See accompanying notes to financial statements
3 of 11
GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except share and per share data)
Three Months Ended
March 31,
1997 1996
(unaudited)
Net sales $ 108,277 $ 82,034
Cost of sales 89,579 68,005
Gross profit 18,698 14,029
Selling, general and administrative expense 10,076 7,354
Income from operations 8,622 6,675
Interest expense 1,149 1,073
Income before taxes 7,473 5,602
Provision for income taxes 3,027 2,268
Net income $ 4,446 $ 3,334
Net income per share $ .36 $ .33
Weighted average number of
shares outstanding 12,324,594 10,173,900
See accompanying notes to financial statements
4 of 11
GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Three Months Ended
March 31,
1997 1996
(unaudited)
Cash flows from operating activities
Net income $ 4,446 $ 3,334
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation and amortization 1,932 1,395
Provision for deferred income taxes 304 424
Equity investment income (216) (136)
Gain (loss) on disposition of property
and equipment 2 (25)
Increase (decrease) in cash resulting from
changes in (net of effects from
acquisitions):
Accounts receivable (10,936) (6,758)
Inventories (4,346) (5,827)
Other current assets (1,019) (848)
Accounts payable and accrued expenses 3,304 9,814
Other assets (193) (47)
Net cash (used in) provided by
operating activities (6,722) 1,326
Cash flows from investing activities
Acquisitions, net of cash acquired (24,907) (23,715)
Purchases of property, plant and equipment (4,421) (3,262)
Proceeds from sale of property and equipment 56 26
Net cash used in investing activities (29,272) (26,951)
Cash flows from financing activities
Long-term debt reduction (27,397) (12,283)
Proceeds from long-term debt 61,743 36,000
Proceeds from issuance of common stock 26 -
Net cash provided by financing activities 34,372 23,717
Net decrease in cash and cash equivalents (1,622) (1,908)
Cash and cash equivalents at beginning
of year 5,545 4,123
Cash and cash equivalents at end of period $ 3,923 $ 2,215
See accompanying notes to financial statements
5 of 11
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, 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 March 31, 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 three month period ended March
31, 1997 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,
1997 1996
(unaudited) (audited)
Raw material $ 63,029 $ 45,258
Finished goods and work-in-process 19,625 17,093
Total inventories $ 82,654 $ 62,351
6 of 11
3. STOCKHOLDERS' EQUITY
The changes in stockholders' equity consists of:
(in thousands, except share data)
Additional
Common Shares Paid-in Retained
Shares Amount Capital Earnings
December 31, 1996 balance 12,322,400 $ 123 $ 64,307 $ 57,314
Net income - - - 4,446
Stock options exercised
and related tax benefit 2,500 - 396 -
March 31, 1997 balance 12,324,900 $ 123 $ 64,703 $ 61,760
The Company realizes an income tax benefit from the disposition
of certain stock options. This benefit results in a decrease in
current income taxes payable and an increase in additional paid-
in capital of approximately $370,000.
4. EARNINGS PER SHARE
Net income per share for the three months ended March 31, 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 provides the
construction industry with galvanized steel, aluminum and copper
products.
7 of 11
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)
Three Months Ended
March 31,
1997 1996
(unaudited)
Net sales $ 114,801 $ 103,671
Income before taxes $ 7,183 $ 5,413
Net income $ 4,264 $ 3,175
Net income per share $ .35 $ .31
8 of 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales of $108.3 million for the first quarter ended March
31, 1997 increased 32% from sales of $82.0 million for the prior
year's first quarter. This increase primarily resulted from
including two months of net sales of SEMCO (acquired January 31,
1997), including net sales of CCHT (acquired February 14, 1996)
for the entire quarter and sales growth at existing operations.
Cost of sales decreased slightly to 82.7% of net sales for the
first three months of 1997 from 82.9% for the prior year's first
quarter. The increase in gross profit margin to 17.3% for the
first quarter in 1997 was primarily due to including SEMCO
results. SEMCO's products and services 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 9.3% for the first quarter from 9.0% the
prior year comparable period 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 approximated $1.1 million for both quarters
ended March 31, 1997 and 1996.
As a result of the above, income before taxes increased by $1.9
million for the quarter ended March 31, 1997 to $7.5 million.
Income taxes for the three months ended March 31, 1997
approximated $3.0 million and were based on a 40.5% effective
tax rate for both quarters ended March 31, 1997 and 1996.
9 of 11
Liquidity and Capital Resources
During the first three months of 1997, the Company increased its
working capital to $100.6 million. Additionally, shareholders'
equity increased to $126.6 million at March 31, 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 $4.4 million and depreciation and amortization of
$1.9 million combined with increases in accounts payable and
accrued expenses (net of the SEMCO acquisition) totaling $3.3
million provided cash of $9.6 million. This was offset by
increases in accounts receivable and inventory of $10.9 and $4.3
million respectively, which together with the acquisition of
SEMCO for approximately $25 million and $4.4 million of capital
expenditures required $34.4 in net financing activities.
At March 31, 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.
10 of 11
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 /s/ Brian J. Lipke
Brian J. Lipke
President, Chief Executive Officer
and Chairman of the Board
By /s/ Walter T. Erazmus
Walter T. Erazmus
Treasurer and Chief Financial Officer
(Principal Financial and Chief
Accounting Officer)
Date May 7, 1997
11 of 11
5
1000
US DOLLARS
3-MOS
DEC-31-1997
JAN-01-1997
MAR-31-1997
1
3,923
0
61,180
1,269
82,654
149,943
134,816
31,008
288,598
49,310
97,965
0
0
123
126,463
288,598
108,277
108,277
89,579
89,579
10,076
0
1,149
7,473
3,027
4,446
0
0
0
4,446
.36
.36
