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, 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 March 31, 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
March 31, 2000 (unaudited) and
December 31, 1999 (audited) 3
Condensed Consolidated Statements of Income
Three months ended
March 31, 2000 and 1999 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 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 - 12
PART II. OTHER INFORMATION 13
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
March 31, December 31,
2000 1999
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 3,022 $ 4,687
Accounts receivable 93,392 78,418
Inventories 98,179 94,994
Other current assets 4,723 4,492
Total current assets 199,316 182,591
Property, plant and equipment, net 210,061 216,030
Goodwill 114,489 115,350
Other assets 8,657 8,109
$ 532,523 $ 522,080
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 53,726 $ 48,857
Accrued expenses 19,957 19,492
Current maturities of
long-term debt 175 1,319
Total current liabilities 73,858 69,668
Long-term debt 235,547 235,302
Deferred income taxes 29,476 29,328
Other non-current liabilities 2,418 2,323
Shareholders' equity
Preferred shares - -
Common shares 126 126
Additional paid-in capital 68,387 68,323
Retained earnings 122,711 117,010
Total shareholders' equity 191,224 185,459
$ 532,523 $ 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
March 31,
2000 1999
(unaudited)
Net sales $ 167,634 $ 143,804
Cost of sales 133,086 115,386
Gross profit 34,548 28,418
Selling, general and administrative expense 20,230 16,735
Income from operations 14,318 11,683
Interest expense 4,208 3,319
Income before taxes 10,110 8,364
Provision for income taxes 4,095 3,387
Net income $ 6,015 $ 4,977
======== =========
Net income per share-Basic $ .48 $ .40
======== ========
Weighted average shares outstanding-Basic 12,579 12,496
======== ========
Net income per share-Diluted $ .47 $ .39
======== ========
Weighted average shares outstanding-Diluted 12,717 12,712
======== ========
See accompanying notes to financial statements
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GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Three Months Ended
March 31,
2000 1999
(unaudited)
Cash flows from operating activities
Net income $ 6,015 $ 4,977
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation and amortization 5,116 4,021
Provision for deferred income taxes 81 731
Undistributed equity investment income (318) (210)
Other noncash adjustments 29 29
Increase (decrease) in cash resulting from
changes in (net of acquisitions):
Accounts receivable (14,974) (9,738)
Inventories (3,185) 8,380
Other current assets (165) (595)
Accounts payable and accrued expenses 5,431 7,226
Other assets (329) (250)
Net cash (used in) provided by
operating activities (2,299) 14,571
Cash flows from investing activities
Purchases of property, plant and equipment (5,302) (4,878)
Net proceeds from sale of property
and equipment 7,114 147
Net cash provided by (used in)
investing activities 1,812 (4,731)
Cash flows from financing activities
Long-term debt reduction (14,771) (19,808)
Proceeds from long-term debt 13,872 13,953
Payment of dividends (314) (626)
Net proceeds from issuance of common stock 35 342
Net cash used in financing activities (1,178) (6,139)
Net (decrease)increase in cash and
cash equivalents (1,665) 3,701
Cash and cash equivalents at
beginning of year 4,687 1,877
Cash and cash equivalents at end of period $ 3,022 $ 5,578
====== =======
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 March 31, 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
March 31, 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 three month period ended
March 31, 2000 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,
2000
1999
(unaudited)
(audited)
Raw material $ 61,610 $ 59,899
Finished goods and work-in-process 36,569 35,095
Total inventories $ 98,179 $ 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 - - - 6,015
Stock options exercised 3 - 35 -
Earned portion of
restricted stock - - 29 -
Cash dividends -
$.025 per share - - - (314)
March 31, 2000 12,580 $ 126 $ 68,387 $122,711
==================================
4. EARNINGS PER SHARE
Basic net income per share equals net income divided by the
weighted average shares outstanding for the three months
ended March 31, 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 $ 6,015,000 12,579,418 $ .48 12,717,137 $ .47
1999 $ 4,977,000 12,495,969 $ .40 12,712,487 $ .39
Included in diluted shares are common stock equivalents
relating to options of 137,719 and 216,518 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)
Three Months Ended
March 31, 1999
(unaudited)
Net sales $ 158,438
=========
Income before taxes $ 8,876
=========
Net income $ 5,264
=========
Net income per share-Basic $ .42
=========
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales increased $23.8 million, or 16.6%, to $167.6
million for the first quarter ended March 31, 2000 from
$143.8 million for the prior year's first quarter. This
increase 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 decreased to
79.4% for the first quarter of 2000 from 80.2% in 1999.
This improvement was primarily due to the Acquisitions,
which have historically generated higher margins than the
Company's existing operations.
Selling, general and administrative expenses as a
percentage of net sales increased to 12.1% for the first
quarter of 2000 from 11.6% for the same period of 1999.
This increase was primarily due to higher costs as a
percentage of sales attributable to the Acquisitions and
performance based compensation linked to the Company's
sales and profitability.
Interest expense increased $.9 million from 1999 to 2000
primarily due to higher borrowings in 2000 related to the
four acquisitions completed during the second half of 1999,
and a higher effective borrowing rate in 2000.
As a result of the above, income before taxes increased by
$1.7 million for the first quarter ended March 31, 2000
compared to 1999.
Income taxes approximated $4.1 million and $3.4 million for
the first quarter of 2000 and 1999, respectively, based on
an effective tax rate of 40.5% in both periods.
Liquidity and Capital Resources
During the first three months of 2000, the Company's
working capital increased by $12.5 million to $125.5
million. Additionally, shareholders' equity increased by
$5.8 million at March 31, 2000 to $191.2 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.
Net income of $6.0 million and depreciation and
amortization of $5.1 million combined with an increase in
accounts payable and accrued expenses of $5.4 million to
provide cash of $16.5 million. This was primarily offset
by $18.2 million used for working capital purposes to
service increased sales levels.
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During the first three months of 2000, $7.1 million of net
proceeds from the sale of property and equipment and $1.7
million of cash on hand at the beginning of the period were
used to fund operations, capital expenditures of $5.3
million and cash dividends of $.3 million, and to reduce
long-term debt by $1.1 million.
At March 31, 2000 the Company's aggregate credit facilities
available approximated $280 million, with borrowings of
approximately $230 million and an additional availability
of approximately $50 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 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 27 - Financial Data Schedule
2. Reports on Form 8-K. There were no reports on Form 8-K
during the three months ended March 31, 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 May 2, 2000
12 of 12
5
1000
US DOLLARS
3-MOS
DEC-31-2000
JAN-01-2000
MAR-31-2000
1
3,022
0
94,929
1,537
98,179
199,316
275,026
64,965
532,523
73,858
235,547
0
0
126
191,098
532,523
167,634
167,634
133,086
133,086
20,230
0
4,208
10,110
4,095
6,015
0
0
0
6,015
.48
.47
