SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ______________________________ FORM 10-K (Mark One) ( X ) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES ACT OF 1934 For The Fiscal Year Ended December 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 organization) Identification No.) 3556 Lake Shore Road, P.O. Box 2028, Buffalo, New York 14219-0228 (address of principal executive offices) (Zip Code) (716) 826-6500 Registrant's telephone number, including area code Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $.01 par value NASDAQ National Market System Securities registered pursuant to Section 12(g) of the Act: NONE 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10- K or any amendment to this Form 10-K. ( ) As of December 31, 1997, the aggregate market value of the voting stock held by nonaffiliates of the Registrant amounted to $121,763,000. As of December 31, 1997, the number of common shares outstanding was: 12,409,619. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 19, 1998, are incorporated by reference into Part III of this report. Exhibit Index is on Page 36
PART I Item 1. Description of Business General The Company is an intermediate processor of value-added steel products, consisting primarily of a broad range of fully processed cold-rolled strip steel products. Cold-rolled strip steel products comprise a segment of the cold-rolled sheet steel market that is defined by narrower widths, improved surface conditions and tighter gauge tolerances and are used by customers that demand critical specifications in their raw material needs. The Company manufactures high quality steel strapping for industrial applications and operates a precision metals facility for flat-rolled sheet steel and other processed metals products. The Company is a supplier of galvanized, Galvalume and prepainted steel to the commercial and residential metal building industry. Southeastern Metals Manufacturing, Inc. (SEMCO), acquired in January 1997, manufactures a wide array of metal products for the residential and commercial construction markets. The Company provides metallurgical heat treating services for customers in a wide variety of industries. The Company operates materials management facilities that link steel producers and end-user manufacturers by integrating the inventory purchasing, receiving, inspection, billing, storage and shipping functions resulting in true just-in-time delivery of materials, thereby enabling both the steel producers and the end-user manufacturers to manage inventory more efficiently. Industry Overview Intermediate steel processors occupy a market niche that exists between primary steel producers and end-user manufacturers. Primary steel producers typically focus on the sale of standard size and tolerance steel to large volume purchasers, including intermediate steel processors. At the same time, end-user manufacturers require steel with closer tolerances and on shorter lead times than the primary steel producers can provide efficiently. Metal Processes, Products and Services The Company utilizes any one or a combination of more than 20 different processes and services to produce and deliver a variety of products on a just-in-time basis to industrial manufacturers and fabricators in the automotive, automotive supply, appliance, metal building and construction, machinery, and steel industries. -2-
The following metal processes, products and services are provided by the Company: Cold-Rolled Strip Steel. The Company produces a broad range of fully processed cold-rolled strip steel products. The Company buys wide, open tolerance sheet steel in coils from primary steel producers and processes it to specific customer orders by performing such computer-aided processes as cold reduction, annealing, edge rolling, slitting, roller leveling and cutting to length. Cold reduction is the rolling of steel to a specified thickness, temper and finish. Annealing is a thermal process which changes hardness and certain metallurgical characteristics of steel. Edge rolling involves conditioning edges of processed steel into square, full round or partially round shapes. Slitting is the cutting of steel to specified widths. Roller leveling applies pressure across the width of the steel to achieve precise flatness tolerances. Depending on customer specifications, one or more of these processes are utilized to produce steel strip of a precise grade, temper, tolerance and finish. The Company operates 10 rolling mills at its facilities in Cleveland, Ohio, Chattanooga, Tennessee and Buffalo, New York, and is capable of rolling widths of up to 50 inches. The Company has the capability to process coils up to a maximum of 72 inch outside diameter. The Company's rolling mills include automatic gauge control systems with hydraulic screwdowns allowing for microsecond adjustments during processing. The most current addition is the 56 inch reversing mill which the Company believes is the widest of its type in the industry. The Company's computerized mills produce products meeting the most stringent statistical quality control standards, enabling it to satisfy a growing industry demand for a range of steel from thicker to thinner, low carbons to alloy grades, all with precision gauge tolerances as close as +/- .0002 inches. The Company's rolling facilities are further complemented by 15 high convection annealing furnaces, which shorten annealing times over conventional annealers. The Company's newest furnaces incorporate the use of a hydrogen atmosphere for the production of cleaner and more uniform steel. As a result of its annealing capabilities, the Company is able to produce cold-rolled strip steel with improved consistency in terms of thickness, hardness, molecular grain structure and surface. -3-
The Company can produce certain of its strip steel products on oscillated coils which wind the steel strip in a manner similar to the way thread is wound on a spool. Oscillating the steel enables the Company to put at least six times greater volume of finished product on a coil than standard ribbon winding, allowing customers to achieve longer production runs by reducing the number of equipment shut-downs to change coils. Customers are thus able to increase productivity, reduce downtime, improve yield and lengthen die life. Precision Metals. The Company operates a precision metals facility for flat-rolled sheet steel and other processed metal products. In addition to slitting and cutting to length, the Company's precision metals facility can produce higher value-added products that are held to close tolerances and tight specifications through cold-rolling, annealing, blanking, oscillating and edging rolling. The Company also processes galvanized, Galvalume and prepainted steel at another facility for the commercial and residential metal building industries and can slit and cut to length material based upon customer specifications. Metal Products Manufacturing. The Company through its SEMCO acquisition manufactures a wide array of galvanized steel, aluminum and copper products for the construction industry including steel framing for residential and commercial properties, metal trims, prefab homes and utility sheds, metal connectors, metal roofing, drywall products, gutters and down spouts, ventilation products and storm panel systems. With facilities located in Florida, Georgia, Tennessee, Texas and Oklahoma, SEMCO uses precision engineering combined with slitting, stamping, roll forming and other processes to manufacture their various products. Steel Strapping Manufacturing. Steel strapping is banding and packaging material that is used to close and reinforce shipping units such as bales, boxes, cartons, coils, crates and skids. The Company believes that it is one of four major domestic manufacturers of high tensile steel strapping, which is used in heavy duty applications. High tensile strapping is subject to strength requirements imposed by the American Association of Railroads for packaging of different products for common carrier transport. This high tensile steel strapping is essential to producers of large, heavy products such as steel, paper and lumber where reliability of the packaging material is critical to the safe transport of the product. The Company's strapping facility manufactures high tensile steel strapping by slitting, oscillating, heat treating, painting and packaging cold-rolled coils. -4-
Steel strapping is cold-rolled to precise gauge on the Company's rolling mill, which incorporates hydraulic screw downs and automatic gauge controls with statistical charting. This process ensures strapping product of the most uniform gauge available and produces the maximum amount of strapping per pound of steel. All products are tested by on-site laboratory personnel for width, thickness and other metallurgical properties. To meet the differing needs of its customers, the Company offers its strapping products in various thicknesses, widths and coil sizes. The Company also manufactures custom color and printed strapping. In addition, the Company offers related strapping products, such as seals and tools, and is able to manufacture tensional strapping for lighter duty applications. Metallurgical Heat Treating Services. In February 1996, the Company acquired Carolina Commercial Heat Treating, Inc. (CCHT) which through its facilities located in North Carolina, South Carolina, Tennessee, Georgia and Alabama (acquired in May 1997) provides metallurgical heat treating services for customer-owned parts. These services include case-hardening, surface-hardening and through-hardening processes for customers in a wide variety of industries. Using methods such as annealing, flame hardening, vacuum hardening, carburizing and nitrating, as well as a host of other services, these facilities can harden, soften or otherwise impart desired properties on parts made of steel, copper and various alloys and other metals. A variety of brazing services to join metallic objects together is also provided. CCHT maintains a metallurgical laboratory at each facility, providing a range of testing capabilities to add value to treated parts and enhance quality control. Consistent quality control is maintained by application of a statistical process control system. Additionally, CCHT maintains a fleet of trucks and trailers to provide rapid turnaround time for its customers. Materials Management. The Company operates two materials management facilities that link primary steel producers and end-user manufacturers by integrating the inventory purchasing, receiving, inspection, billing, storage and shipping functions and producing true just-in-time delivery of materials. These facilities receive shipments of steel by rail and truck from steel producers, which retain ownership of the steel until it is delivered to the end-user manufacturer. The Company inspects the steel and stores it in a climate-controlled environment through the use of a specialized stacker crane and racking system. When an order is placed, the Company often delivers the steel to the end-user manufacturer within one hour using Company-owned trucks that have been custom designed to facilitate the loading and unloading process. -5-
Joint Venture. The Company is a minority partner in two steel pickling operations. After the hot-rolling process, the surface of sheet steel is left with a residue known as scale, which must be removed prior to further processing by a cleaning process known as pickling. This joint venture pickles steel on a toll basis, receiving fees for its pickling services without acquiring ownership of the steel. Quality Control The Company carefully selects its raw material vendors and uses computerized inspection and analysis to assure that the steel that enters its production processes will be able to meet the most critical specifications of its customers. The Company uses documented procedures during the production process, along with statistical process control computers linked directly to processing equipment, to monitor that such specifications are met. Physical, chemical and metallographic analyses are performed during the production process to verify that mechanical and dimensional properties, cleanliness, surface characteristics and chemical content are within specification. Suppliers and Raw Materials Intermediate steel processing companies are required to maintain substantial inventories of raw materials in order to accommodate the short lead times and just-in-time delivery requirements of their customers. Accordingly, the Company generally maintains its inventory of raw materials at levels that it believes are sufficient to satisfy the anticipated needs of the customers based upon historic buying practices and market conditions. The primary raw material utilized by the Company in its processing operations is flat-rolled steel. The Company purchases flat- rolled steel at regular intervals from a number of suppliers, however, a majority of its steel requirements is purchased from 18 major North American suppliers. The Company has no long-term commitments with any of its suppliers. Technical Services The Company employs a staff of engineers and other technical personnel and maintains fully-equipped, modern laboratories to support is operations. The facilities enable the Company to verify, analyze and document the physical, chemical, metallurgical and mechanical properties of its raw materials and products. Technical service personnel also work in conjunction with the sales force to determine the types of flat rolled steel required for the particular needs of the Company's customers. -6-
Sales and Marketing The Company's products and services are sold primarily by Company sales personnel located throughout the midwest, northeast and southeast United States and Mexico. This marketing staff is supported by a vice president of sales for each of the Company's principal product lines. Customers and Distribution The Company services approximately 6,000 industrial customers located primarily in the midwest, northeast and southeast United States, Canada and Mexico. In 1997, net sales to automotive and automotive supply manufacturers accounted for approximately 17% and 19%, respectively. The Company also sells its products to customers in the appliance, metal building and construction, and steel industries. The Company primarily manufactures its products exclusively to customer order rather than for inventory. Although the Company negotiates annual sales orders with a majority of its customers, these orders are subject to customer confirmation as to product amounts and delivery dates. In 1995 General Motors Corporation, through its various subsidiaries and affiliates, accounted for approximately 11% of net sales. In 1996 and 1997, no customer of the Company represented 10% or more of the Company's net sales. Competition The steel processing market is highly competitive. The Company competes with a small number of other intermediate steel processors, some of which also focus on fully processed high value-added steel products. The Company competes on the basis of the precision and range of achievable tolerances, quality, price and the ability to meet delivery schedules dictated by customers. -7-
The Company also competes with a small number of other steel strapping manufacturers on the basis of quality, price, product variety and the ability to meet delivery schedules dictated by customers. The Company competes with a small number of suppliers of heat treating services in its market areas on the basis of quality, price, and delivery. The Company competes with a number of other metal products manufacturers in its market areas on the basis of quality, price, and delivery. Employees At December 31, 1997, the Company employed approximately 1,450 people. Backlog Because of the nature of the Company's products and the short lead time order cycle, backlog is not a significant factor in the Company's business. The Company believes that substantially all of its backlog of firm orders existing on December 31, 1997 will be shipped prior to the end of 1998. Governmental Regulation The Company's processing centers and manufacturing facilities are subject to many federal, state and local requirements relating to the protection of the environment. The Company believes that it is in material compliance with all environmental laws, does not anticipate any material expenditures in order to meet environmental requirements and does not believe that future compliance with such laws and regulations will have a material adverse effect on its results of operations or financial condition. The Company's operations are also governed by many other laws and regulations. The Company believes that it is in material compliance with these laws and regulations and does not believe that future compliance with such laws and regulations will have a material adverse effect on its results of operations or financial condition. -8-
Item 2. Description of Properties The Company maintains its corporate headquarters in Buffalo, New York and conducts its business operations in facilities located in New York, Michigan, Illinois, Ohio, Tennessee, Texas, South Carolina, North Carolina, Georgia, Alabama, Florida, and Oklahoma. The Company believes that its primary existing facilities, listed below, and their equipment are effectively utilized, well maintained, in good condition and will be able to accommodate its capacity needs through 1998. Square Owned or Location Utilization Footage Leased Buffalo, New York Headquarters 23,000 Leased Buffalo, New York Precision metals processing; warehouse 207,000 Owned Cheektowaga, New York Cold-rolled strip steel processing and strapping products 148,000 Owned Tonawanda, New York Cold-rolled strip steel and precision metals processing 128,000 Owned Lackawanna, New York Materials management facility 65,000 Leased Dearborn, Michigan Strapping tool products 3,000 Owned Woodhaven, Michigan Materials management facility 100,000 Owned Franklin Park, Illinois Coated sheet steel and precision metals processing 99,000 Owned Cleveland, Ohio Cold-rolled strip steel processing 259,000 Leased Chattanooga, Tennessee Steel processing 65,000 Owned Brownsville, Texas Distribution warehouse 15,000 Leased Fountain Inn, S. Carolina Heat treating services 77,400 Leased Reidsville, N. Carolina Heat treating services 53,500 Leased Morristown, Tennessee Heat treating services 24,200 Owned Conyers, Georgia Heat treating services 18,700 Leased Athens, Alabama Heat treating services 20,000 Leased -9-
Square Owned or Location Utilization Footage Leased Charlotte, N. Carolina Administrative office 3,400 Leased Jacksonville, Florida Administrative office and metal products manufacturing 261,400 Leased Miami, Florida Metal products manufacturing 77,000 Leased Tampa, Florida Metal products manufacturing 50,000 Leased Nashville, Tennessee Metal products manufacturing 52,500 Leased San Antonio, Texas Metal products manufacturing 70,000 Leased Houston, Texas Metal products manufacturing 48,200 Leased Vidalia, Georgia Metal products manufacturing 34,000 Leased Miami, Oklahoma Metal products warehouse 15,000 Leased Item 3. Legal Proceedings From time to time, the Company is named a defendant in legal actions arising out of the normal course of business. The Company is not a party to any pending legal proceeding the resolution of which the management of the Company believes will have a material adverse effect on the Company's results of operations or financial condition or to any other pending legal proceedings other than ordinary, routine litigation incidental to its business. The Company maintains liability insurance against risks arising out of the normal course of business. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. -10-
PART II Item 5. Market for Common Equity and Related Stockholder Matters As of December 31, 1997, there were 147 shareholders of record of the Company's common stock. However, the Company believes that it has a significantly higher number of shareholders because of the number of shares that are held by nominees. The Company's common stock is traded in the over-the-counter market and quoted on the National Association of Securities Dealers Automated Quotation System - National Market System ("Nasdaq"). Its trading symbol is "ROCK". The following table sets forth the high and low sales prices per share for the Company's common stock for each quarter of 1997 and 1996: 1997 High Low Fourth Quarter $ 25 1/2 $ 17 3/4 Third Quarter 28 20 3/4 Second Quarter 25 1/2 18 7/8 First Quarter 26 3/4 18 1/4 1996 Fourth Quarter $ 26 1/4 $ 21 Third Quarter 23 1/4 16 1/2 Second Quarter 22 15 First Quarter 15 3/4 12 1/8 The Company has never paid cash dividends on its common stock and it is currently the Company's policy to invest earnings in the future development and growth of the Company. -11-
Item 6. Selected Financial Data <TABLE> (in thousands, except per share data) Year Ended December 31, <S> <C> <C> <C> <C> <C> 1997 1996 1995 1994 1993 Net Sales $ 449,700 $ 342,974 $ 282,833 $ 200,142 $ 167,883 Income from operations 32,603 30,617 20,368 16,179 12,934 Interest expense 5,115 3,827 3,984 1,374 1,621 Income before income taxes 27,488 26,790 16,384 14,805 11,513 Income taxes 11,072 10,815 6,662 5,996 6,300 Net income 16,416 15,975 9,722 8,809 5,213 Net income per share-Basic $ 1.33 $ 1.42 $ .96 $ .87 Weighted average shares outstanding 12,357 11,261 10,164 10,163 Net income per share-Diluted $ 1.30 $ 1.39 $ .95 $ .86 Pro forma net income (a) $ 7,337 Pro forma net income per share- Basic & Diluted $ .72 Pro forma weighted average shares outstanding (b) 10,163 Current assets $ 130,746 $ 109,526 $ 86,995 $ 70,552 $ 50,502 Current liabilities 43,101 40,853 29,480 22,028 21,905 Total assets 281,336 222,507 167,423 126,380 92,868 Total debt 83,024 49,841 59,054 38,658 14,179 Shareholders' equity 140,044 121,744 70,244 60,396 51,587 Capital expenditures $ 21,784 $ 15,477 $ 14,504 $ 16,171 $ 10,468 Depreciation and amortization 8,478 6,246 4,538 3,445 3,399 <FN> (a) Pro forma net income assumes that all of the Company's subsidiaries had been subject to income taxation as C Corporations during the period prior to the Company's initial public offering in November 1993. (b) Pro forma weighted average number of common shares was computed assuming the Company's initial public offering occurred at the beginning of the year. </TABLE> -12-
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Year Ended 1997 Compared to Year Ended 1996 Net sales increased by $106.7 million, or 31%, to a record $449.7 million in 1997 from $343.0 million in 1996. This increase primarily resulted from the inclusion of net sales of SEMCO (acquired January 1997) and sales growth at existing operations. Cost of sales increased $93.8 million, or 33%, to $375.5 million in 1997 from $281.7 million in 1996. Cost of sales increased to 83.5% of net sales in 1997 from 82.1% of net sales in 1996. This increase was due to higher raw material costs which were not fully passed through to customers, partially offset by higher margins on SEMCO sales. Selling, general and administrative expense increased by $10.9 million, or 36%, to $41.6 million in 1997 from $30.6 million in 1996. As a percentage of net sales, selling, general and administrative expenses increased from 8.9% in 1996 to 9.2% in 1997. This increase was primarily due to higher costs as a percentage of sales attributable to SEMCO. Interest expense increased by $1.3 million from 1996 to 1997 primarily due to higher average borrowings as a result of the SEMCO acquisition and capital expenditures. As a result of the above, income before taxes increased by $.7 million, or 3%, to a record $27.5 million in 1997 from $26.8 million in 1996. Income taxes approximated $11.1 million in 1997, an effective rate of 40.3% in comparison with 40.4% in 1996. Year Ended 1996 Compared to Year Ended 1995 Net sales increased by $60.1 million, or 21%, to $343.0 million in 1996 from $282.8 million in 1995. This increase primarily resulted from including twelve months of net sales of Hubbell Steel (acquired April 1995) for 1996 compared to nine months in 1995, including net sales of CCHT (acquired February 14, 1996) and sales growth at existing operations. Cost of sales increased by $41.3 million, or 17%, to $281.7 million in 1996 from $240.3 million in 1995. As a percentage of net sales, cost of sales decreased to 82% of net sales from 85%. This decrease was primarily due to higher margins attributable to CCHT sales and lower raw material costs at other operations. Selling, general and administrative expense increased by $8.5 million, or 39%, to $30.6 million in 1996 from $22.1 million in 1995. As a percentage of net sales, selling, general and administrative expense increased to 8.9% from 7.8% in 1995 primarily due to higher costs as a percentage of sales attributable to CCHT and performance based compensation linked to the Company's sales and profitability. -13-
Interest expense decreased by $.2 million primarily due to lower interest rates in 1996 compared to 1995 which were partially offset by higher average borrowings resulting from higher inventory levels to service increased sales and capital expenditures. As a result of the above, income before taxes increased by $10.4 million, or 64%, to $26.8 million in 1996 from $16.4 million in 1995. Income taxes approximated $10.8 million in 1996, an effective rate of 40.4% in comparison with 40.7% for 1995. Liquidity and Capital Resources During 1997, the Company increased working capital by $19 million to $87.6 million and the current ratio improved to 3.0 to 1 versus 2.7 to 1 at December 31, 1996. Long term debt increased by $33.2 million to $81.8 million and to 37% of total capitalization. Additionally, shareholders' equity increased by 15% to $140 million at December 31, 1997. The Company's principal capital requirements are to fund its operations including working capital requirements, the purchase and funding of improvements to its facilities, machinery and equipment and to fund acquisitions. Net cash provided by operations of $24.4 million resulted primarily from net income of $16.4 million, depreciation and amortization of $8.5 million and provision for deferred income taxes of $2.2 million offset by the decrease in accounts payable and accrued expenses of $2.6 million. Net cash provided by operations of $24.4 million combined with net proceeds from long-term debt of $18.5 million and $3.1 million of cash on hand were used for the acquisition of SEMCO and capital expenditures. The most significant capital expenditure included the construction and installation of a new cold rolling mill at the Cleveland, Ohio facility. During 1997, the Company amended its revolving credit agreement with its bank group to increase the capacity of the revolver to $185 million and borrow on an unsecured basis. At December 31, 1997, $107.6 million of the revolver was unused. The Company believes that availability under its credit facility, together with funds generated from operations, will be more than sufficient to provide the Company with the liquidity and capital resources necessary to fund its anticipated working capital requirements, acquisitions and capital expenditure commitments for the next twelve months. The Company believes that environmental issues will not require the expenditure of material amounts for environmental compliance in the future. 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. -14-
Company Responsibility For Financial Statements The accompanying consolidated financial statements of Gibraltar Steel Corporation have been prepared by management, which is responsible for their integrity and objectivity. The statements have been prepared in conformity with generally accepted accounting principles and include amounts based on management's best estimates and judgments. Financial information elsewhere in this Annual Report is consistent with that in the consolidated financial statements. The Company has established and maintains a system of internal control designed to provide reasonable assurance that assets are safeguarded and that the financial records reflect the authorized transactions of the Company. The financial statements have been audited by Price Waterhouse LLP, independent accountants. As part of their audit of the Company's 1997 financial statements, Price Waterhouse LLP considered the Company's system of internal control to the extent they deemed necessary to determine the nature, timing and extent of their audit tests. The Board of Directors pursues its responsibility for the Company's financial reporting through its Audit Committee, which is composed entirely of outside directors. The independent accountants have direct access to the Audit Committee, with and without the presence of management representatives, to discuss the results of their audit work and their comments on the adequacy of internal accounting controls and the quality of financial reporting. Brian J. Lipke Chairman of the Board and Chief Executive Officer Walter T. Erazmus Executive Vice President and Chief Financial Officer -15-
Item 8. Financial Statements and Supplementary Data Page Number Index to Financial Statements: Financial Statements: Report of Independent Accountants 17 Consolidated Balance Sheet at December 31, 1997 and 1996 18 Consolidated Statement of Income for the three years ended December 31, 1997 19 Consolidated Statement of Cash Flows for the three years ended December 31, 1997 20 Consolidated Statement of Shareholders' Equity for the three years ended December 31, 1997 21 Notes to Consolidated Financial Statements 22 Supplementary Data: Quarterly Unaudited Financial Data 32 -16-
Report of Independent Accountants To the Board of Directors and Shareholders of Gibraltar Steel Corporation In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Gibraltar Steel Corporation and its subsidiaries at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Buffalo, New York January 19, 1998 -17-
GIBRALTAR STEEL CORPORATION CONSOLIDATED BALANCE SHEET (in thousands, except share and per share data) <TABLE> <CAPTION> December 31, ASSETS 1997 1996 <S><S> <S> <C> <C> Current assets: Cash and cash equivalents $ 2,437 $ 5,545 Accounts receivable 49,151 40,106 Inventories 76,701 62,351 Other current assets 2,457 1,524 ------- ------- Total current assets 130,746 109,526 Property, plant and equipment, net 115,402 88,670 Other assets 35,188 24,311 ------- ------- $ 281,336 $ 222,507 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 38,233 $ 35,397 Accrued expenses 3,644 4,238 Current maturities of long-term debt 1,224 1,218 ------- ------- Total current liabilities 43,101 40,853 Long-term debt 81,800 48,623 Deferred income taxes 15,094 10,364 Other non-current liabilities 1,297 923 Shareholders' equity Preferred shares, $.01 par value; authorized: 10,000,000 shares; none outstanding - - Common shares, $.01 par value; authorized: 50,000,000 shares; issued and outstanding: 12,409,619 shares in 1997 and 12,322,400 in 1996 124 123 Additional paid-in capital 66,190 64,307 Retained earnings 73,730 57,314 ------- ------- Total shareholders' equity 140,044 121,744 ------- ------- $ 281,336 $ 222,507 ======= ======= </TABLE> The accompanying notes are an integral part of these financial statements. -18-
GIBRALTAR STEEL CORPORATION CONSOLIDATED STATEMENT OF INCOME (in thousands, except per share data) <TABLE> <CAPTION> Year Ended December 31, 1997 1996 1995 <S><C> <C> <C> <C> Net sales $ 449,700 $ 342,974 $ 282,833 Cost of sales 375,537 281,717 240,370 ------- ------- ------- Gross profit 74,163 61,257 42,463 Selling, general and administrative expense 41,560 30,640 22,095 ------- ------- ------- Income from operations 32,603 30,617 20,368 Interest expense 5,115 3,827 3,984 ------- ------- ------- Income before taxes 27,488 26,790 16,384 Provision for income taxes 11,072 10,815 6,662 ------- ------- ------- Net income $ 16,416 $ 15,975 $ 9,722 ======= ======= ======= Net income per share - Basic $ 1.33 $ 1.42 $ .96 ======= ======= ======= Weighted average shares outstanding - Basic 12,357 11,261 10,164 ======= ======= ======= Net income per share - Diluted $ 1.30 $ 1.39 $ .95 ======= ======= ======= Weighted average shares outstanding - Diluted 12,591 11,464 10,213 ======= ======= ======= </TABLE> The accompanying notes are an integral part of these financial statements. -19-
GIBRALTAR STEEL CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) <TABLE> <CAPTION> Year Ended December 31, 1997 1996 1995 <S> <C> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 16,416 $ 15,975 $ 9,722 Adjustments to reconcile net income income to net cash provided by (used in) operating activities: Depreciation and amortization 8,478 6,246 4,538 Provision for deferred income taxes 2,227 774 218 Undistributed equity investment income (444) (528) (366) Gain on disposition of property and equipment (68) (4) (146) Increase (decrease) in cash resulting from changes in (net of effects from acquisitions): Accounts receivable (176) (1,225) 838 Inventories 1,607 (17,077) 17,979 Other current assets (726) 411 (503) Accounts payable and accrued expenses (2,597) 9,275 3,390 Other assets (289) (244) 70 -------- -------- -------- Net cash provided by operating activities 24,428 13,603 35,740 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions, net of cash acquired (26,475) (23,715) (20,859) Investments in property, plant and equipment (21,784) (15,477) (14,504) Proceeds from sale of property and equipment 1,118 775 317 -------- -------- -------- Net cash used in investing activities (47,141) (38,417) (35,046) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Long-term debt reduction (79,962) (78,195) (64,527) Proceeds from long-term debt 98,417 68,906 66,832 Net proceeds from issuance of common stock 1,150 35,525 - -------- -------- -------- Net cash provided by financing activities 19,605 26,236 2,305 -------- -------- -------- Net (decrease) increase in cash and and cash equivalents (3,108) 1,422 2,999 Cash and cash equivalents at beginning of year 5,545 4,123 1,124 -------- -------- -------- Cash and cash equivalents at end of year $ 2,437 $ 5,545 $ 4,123 ======== ======== ======== </TABLE> The accompanying notes are an integral part of these financial statements. -20-
GIBRALTAR STEEL CORPORATION CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (in thousands) <TABLE> <CAPTION> Additional Common Shares Paid-in Retained Shares Amount Capital Earnings <S><C> <C> <C> <C> <C> Balance at December 31, 1994 10,163 $ 102 $ 28,677 $ 31,617 Net income - - - 9,722 Profit sharing plan contribution 11 - 126 - ------ ------ ------- ------- Balance at December 31, 1995 10,174 102 28,803 41,339 Net income - - - 15,975 Public offering 2,050 20 34,370 - Profit sharing plan contribution 11 - 184 - Stock options exercised 87 1 950 - ------ ------ ------- ------- Balance at December 31, 1996 12,322 123 64,307 57,314 Net income - - - 16,416 Stock options exercised and related tax benefit 73 1 1,562 - Stock awards 4 - 82 - Profit sharing plan contribution 11 - 239 ------ ------ ------- ------- Balance at December 31, 1997 12,410 $ 124 $ 66,190 $ 73,730 ====== ====== ======= ======= </TABLE> The accompanying notes are an integral part of these financial statements. -21-
GIBRALTAR STEEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of Gibraltar Steel Corporation and subsidiaries (the Company). Significant intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, checking accounts and all highly liquid investments with a maturity of three months or less. Inventories Inventories are valued at the lower of cost or market. Cost is determined using the first-in, first-out method. Property, Plant and Equipment Property, plant and equipment are stated at cost and depreciated over their estimated useful lives using the straight-line method. Accelerated methods are used for income tax purposes. Interest is capitalized in connection with construction of qualified assets. Under this policy, interest of $963,000, $522,000 and $683,000 was capitalized in 1997, 1996 and 1995, respectively. Other Assets Goodwill is amortized over 35 years. Amortization expense was $880,000, $557,000 and $218,000 in 1997, 1996, and 1995, respectively. -22-
Shareholders' Equity In both July 1997 and 1996, the Company issued 11,000 of its common shares as a contribution to one of its profit sharing plans. Interest Rate Exchange Agreements Interest rate swap agreements, which are used by the Company in the management of interest rate risk, are accounted for on an accrual basis. Amounts to be paid or received under interest rate swap agreements are recognized as interest expense or income in the periods in which they accrue. Swaps are not used for trading purposes. Income Taxes The financial statements of the Company have been prepared using the asset and liability approach in accounting for income taxes which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of other assets and liabilities. Earnings Per Share Basic net income per share equals net income divided by the weighted average shares outstanding during the year. The computation of diluted net income per share includes all dilutive common stock equivalents in the weighted average shares outstanding. 2. ACQUISITIONS On January 31, 1997, the Company acquired the stock of Southeastern Metals Manufacturing Company, Inc. (SEMCO) for approximately $25 million in cash. In addition, the Company repaid approximately $15 million of SEMCO's bank indebtedness. SEMCO manufactures a wide array of metal products for the residential and commercial construction markets. On February 14, 1996, the Company acquired the 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. These acquisitions have been accounted for using purchase accounting with SEMCO's and CCHT's results of operations included from the respective acquisition dates. The purchase price exceeded the fair market value of the net assets by approximately $11 million each for both SEMCO and CCHT. -23-
The following pro forma information presents the condensed results of operations of the Company as if the acquisitions had occurred at the beginning of each period presented. The pro forma amounts may not be indicative of the results that would have actually been achieved and are not necessarily indicative of future results. (in thousands, except per share data) Year Ended December 31, 1997 1996 (unaudited) Net sales $ 456,224 $ 434,928 ======= ======= Income before taxes $ 27,198 $ 28,067 ====== ====== Net income $ 16,234 $ 16,600 ====== ====== Net income per share $ 1.31 $ 1.47 ====== ====== 3. ACCOUNTS RECEIVABLE Accounts receivable are expected to be collected within one year and are net of reserves for doubtful accounts of $990,000 and $698,000 at December 31, 1997 and 1996, respectively. 4. INVENTORIES Inventories at December 31 consist of the following: (in thousands) 1997 1996 Raw material $ 51,804 $ 45,258 Finished goods and work-in-process 24,897 17,093 ------ ------ Total inventories $ 76,701 $ 62,351 ====== ====== -24-
5. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, at cost less accumulated depreciation, at December 31 consists of the following: (in thousands) 1997 1996 Land and land improvements $ 2,984 $ 2,978 Building and improvements 32,420 29,145 Machinery and equipment 99,737 78,018 Construction in progress 16,503 7,894 -------- -------- 151,644 118,035 Less accumulated depreciation and amortization 36,242 29,365 -------- -------- Property, plant and equipment, net $ 115,402 $ 88,670 ======== ======== 6. OTHER ASSETS Other assets at December 31 consist of the following: (in thousands) 1997 1996 Goodwill, net $ 30,275 $ 20,199 Equity interest in partnership 3,736 3,292 Other 1,177 820 ------ ------ Total other assets $ 35,188 $ 24,311 ====== ====== The Company's 26% partnership interest is accounted for using the equity method of accounting. The partnership provides a steel cleaning process called pickling to steel mills and steel processors, including the Company. -25-
7. DEBT Long-term debt at December 31 consists of the following: (in thousands) 1997 1996 Revolving credit notes payable $ 77,400 $ 43,000 Industrial Development Revenue Bond 5,048 6,190 Other debt 576 651 ------ ------ 83,024 49,841 Less current maturities 1,224 1,218 ------ ------ Total long-term debt $ 81,800 $ 48,623 ====== ====== In September 1997, the Company amended its debt agreement increasing its revolving credit facility to $185,000,000. The facility is unsecured and is committed through September 2002. This facility has various interest rate options which are no greater than the bank's prime rate. In addition, the Company may enter into interest rate exchange agreements (swaps) to manage interest costs and exposure to changing interest rates. At December 31, 1997 the Company had three interest rate swap agreements outstanding that effectively converted $55,000,000 of floating rate debt to fixed rates ranging from 6.39% to 6.78% which terminate at different dates beginning November 2000. At December 31, 1997, additional borrowings consisted of $22,400,000 with an interest rate of LIBOR plus a fixed rate. The weighted average interest rate of these borrowings was 6.78% at December 31, 1997. In addition, the Company has an Industrial Development Revenue Bond payable in equal installments through May 2002, with an interest rate of LIBOR plus a fixed rate (6.57% at December 31, 1997), which financed the cost of its Tennessee expansion under a capital lease agreement. The cost of the facility and equipment equal the amount of the bond and includes accumulated amortization of $1,015,000. The agreement provides for the purchase of the facility and equipment at any time during the term of the lease at scheduled amounts or at the end of the lease for a nominal amount. The aggregate maturities on long-term debt including lease purchase obligations for the five years following December 31, 1997 are as follows: 1998, $1,224,000; 1999, $1,306,000; 2000, $1,158,000; 2001, $1,159,000 and 2002, $78,177,000. The Company had no amounts outstanding under short-term borrowing for the years ended December 31, 1997 and 1996. The various loan agreements, which do not require compensating balances, contain provisions that limit additional borrowings and require maintenance of minimum net worth and financial ratios. The Company is in compliance with the terms and provisions of all its financing agreements. -26-
Total cash paid for interest in the years ended December 31, 1997, 1996 and 1995 was $6,155,000, $4,701,000 and $4,715,000, respectively. 8. LEASES The Company leases certain facilities and equipment under operating leases. Rent expense under operating leases for the years ended December 31, 1997, 1996 and 1995 was $3,771,000, $2,358,000 and $1,693,000, respectively. Future minimum lease payments under these operating leases are $2,509,000, $1,668,000, $1,464,000, $1,404,000 and $1,308,000 for the years 1998, 1999, 2000, 2001 and 2002, respectively, and $6,167,000 thereafter through 2038. 9. EMPLOYEE RETIREMENT PLANS Non-union employees participate in various profit sharing plans. Contributions to these plans are funded annually and are based on a percentage of pretax income or amounts determined by the Board of Directors. Certain subsidiaries have multi-employer non-contributory retirement plans providing for defined contributions to union retirement funds. A supplemental pension plan provides defined pension benefits to certain salaried employees upon retirement. Net unfunded periodic pension costs of $154,000 and $106,000 were accrued under this plan in 1997 and 1996, respectively, and consisted primarily of service cost using a discount rate of 7.0% and 7.5%, respectively. Total expense for all plans was $1,258,000, $1,066,000 and $637,000 for the years ended December 31, 1997, 1996 and 1995, respectively. 10. OTHER POST-RETIREMENT BENEFITS Certain subsidiaries of the Company provide health and life insurance to substantially all of their employees and to a number of retirees and their spouses. The net periodic post-retirement benefit cost charged to expense consisting of service cost, interest cost and amortization of transition obligations was $223,000, $237,000 and $207,000 for 1997, 1996 and 1995, respectively. -27-
The approximate unfunded accumulated post-retirement benefit obligation at December 31, consists of the following: (in thousands) 1997 1996 Retirees $ 482 $ 468 Other fully eligible participants 308 200 Other active participants 1,018 943 ----- ----- $ 1,808 $ 1,611 ===== ===== The accumulated post-retirement benefit obligation was determined using a weighted average discount rate of 7.0% in 1997 and 7.5% in 1996. The medical inflation rate was assumed to be 8% in 1997, with a gradual reduction to 5% over three years. The effect of a 1% annual increase in the medical inflation rate would increase the accumulated post-retirement benefit obligation by approximately $305,000 and $286,000 and the annual service and interest costs by approximately $35,000 and $37,000 for 1997 and 1996, respectively. One of the Company's subsidiaries also provides post-retirement health care benefits to its unionized employees through contributions to a multi- employer health care plan. 11. INCOME TAXES The provision for income taxes consists of the following: (in thousands) 1997 1996 1995 Current tax expense Federal $ 7,514 $ 8,774 $ 5,611 State 1,331 1,267 833 ------ ------ ------ Total current 8,845 10,041 6,444 ------ ------ ------ Deferred tax expense Federal 2,036 670 198 State 191 104 20 Total deferred 2,227 774 218 ------ ----- ----- Total provision $ 11,072 $ 10,815 $ 6,662 ====== ====== ===== -28-
Deferred tax liabilities (assets) at December 31, consist of the following: (in thousands) 1997 1996 Depreciation $ 14,129 $ 9,026 Inventory method change 1,588 1,752 Other 1,371 1,034 ------- ------- Gross deferred tax liabilities 17,088 11,812 ------- ------- State taxes (656) (528) Other (2,074) (1,187) ------- ------- Gross deferred tax assets (2,730) (1,715) ------- ------- Net deferred tax liabilities $ 14,358 $ 10,097 ======= ======= The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income from continuing operations as a result of the following differences: (in thousands) 1997 1996 1995 Statutory U.S. tax rates $ 9,621 $ 9,376 $ 5,734 Increase in rates resulting from: State and local taxes, net 989 891 554 Other 462 548 374 ------ ------ ------ $ 11,072 $ 10,815 $ 6,662 ====== ====== ====== Total cash paid for income taxes in the years ended December 31, 1997, 1996 and 1995 was $9,100,000, $9,639,000 and $6,250,000, respectively. -29-
12. EARNINGS PER SHARE Financial Accounting Standards Board (FASB) Statement No. 128 "Earnings Per Share" requires dual presentation of basic and diluted earnings per share on the face of the income statement. The reconciliation between the computations is as follows: Basic Diluted Diluted Income Shares Basic EPS Shares EPS 1997 $ 16,416,000 12,357,186 $ 1.33 12,591,019 $ 1.30 1996 $ 15,975,000 11,260,956 $ 1.42 11,463,508 $ 1.39 1995 $ 9,722,000 10,163,187 $ .96 10,213,329 $ .95 Included in diluted shares are common stock equivalents relating to options of 233,833, 202,552, and 49,512 for 1997, 1996 and 1995, respectively. 13. STOCK OPTIONS The Company may grant non-qualified stock options to officers, employees, non-employee directors and advisers at an exercise price equal to 100% of market price and incentive share options to officers and other key employees at an exercise price not less than 100% of market price up to an aggregate of 400,000 and 850,000 shares, respectively. The options may be exercised in cumulative annual increments of 25% commencing one year from the date of grant and expire ten years from the date of grant. The following table summarizes the option plans' activity for the years ended December 31: <TABLE> <CAPTION> Options Weighted-Average Options Weighted-Average Outstanding Exercise Price Exercisable Exercise Price <S> <C> <C> <C> <C> <C> Balance at January 1, 1995 397,500 $ 10.74 Granted 75,000 11.00 Forfeited (2,500) 10.00 --------- Balance at December 31, 1995 470,000 $ 10.78 171,875 $ 10.85 Granted 173,750 16.75 Exercised (87,500) 10.87 --------- Balance at December 31, 1996 556,250 $ 12.63 201,875 $ 10.80 Granted 220,450 21.75 Exercised (72,219) 11.49 Forfeited (11,250) 10.75 --------- Balance at December 31, 1997 693,231 $ 15.68 282,781 $ 11.55 ========= </TABLE> The Company realized tax benefits of $733,000 associated with the exercise of certain stock options which has been credited to paid in capital. -30-
Options outstanding at December 31, 1997 consisted of: <TABLE> <CAPTION> Range of Weighted-Average Exercise Options Remaining Weighted-Average Options Weighted-Average Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price <C> <C> <C> <S> <C> <C> <C> $10 - $11 309,189 6.4 years $ 10.79 248,564 $ 10.83 $16.75 - $21.75 384,042 9.1 years $ 19.62 34,217 $ 16.75 ------- ------- 693,231 7.9 years $ 15.68 282,781 $ 11.55 ======= ======= </TABLE> The Company has adopted the disclosure-only provisions of FASB No. 123 "Accounting for Stock-Based Compensation". Accordingly, no compensation cost has been recognized for the option plans as stock options granted under these plans have an exercise price equal to 100% of the market price on the date of grant. If the compensation cost for these plans had been determined based on the fair value at the grant dates for awards consistent with the method of FASB No. 123, there would have been no effect on the Company's net income and earnings per share in 1995. The pro forma effect for 1996 and 1997 is as follows: As Reported Pro forma As Reported Pro forma 1997 1997 1996 1996 Net Income $ 16,416,000 $ 16,108,000 $ 15,975,000 $ 15,890,000 Net Income per Share $ 1.33 $ 1.30 $ 1.42 $ 1.41 The Black-Scholes option-pricing model was used to estimate the fair value of the options granted on the date of grant. The fair values and assumptions used in the model, assuming no dividends, are as follows: Expected Risk-Free Fair Value Life Volatility Interest Rate 1997 Grant $9.77 5 years 40.19% 6.14% 1996 Grant $7.44 5 years 38.07% 6.64% 1995 Grant $4.56 5 years 36.16% 5.70% The Company also has a Restricted Stock Plan reserved for issuance of 100,000 common shares for the grant of restricted stock awards to employees and non-employee directors at a purchase price of $.01 per share. In December 1997, 4,000 shares were awarded to non-employee directors under this plan. 14. COMMITMENTS AND CONTINGENCIES The Company is a party to certain claims and legal actions generally incidental to its business. Management does not believe that the outcome of these actions, which is not clearly determinable at the present time, would significantly affect the Company's financial condition or results of operations. -31-
QUARTERLY UNAUDITED FINANCIAL DATA (in thousands, except per share data) 1997 Quarter Ended March 31 June 30 Sept. 30 Dec. 31 Net Sales $ 108,277 $ 119,213 $ 114,249 $ 107,961 Gross Profit 18,698 19,917 18,147 17,401 Net Income 4,446 4,697 3,787 3,486 Net Income Per Share-Basic $ .36 $ .38 $ .31 $ .28 Net Income Per Share-Diluted $ .35 $ .37 $ .30 $ .28 1996 Quarter Ended March 31 June 30 Sept. 30 Dec. 31 Net Sales $ 82,034 $ 86,476 $ 87,994 $ 86,470 Gross Profit 14,029 15,867 15,979 15,382 Net Income 3,334 4,155 4,414 4,072 Net Income Per Share-Basic $ .33 $ .40 $ .36 $ .33 Net Income Per Share-Diluted $ .32 $ .40 $ .35 $ .32 -32-
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant Information regarding directors and executive officers of the Company is incorporated herein by reference to the information included in the Company's definitive proxy statement which will be filed with the Commission within 120 days after the end of the Company's 1997 fiscal year. Item 11. Executive Compensation Information regarding executive compensation is incorporated herein by reference to the information included in the Company's definitive proxy statement which will be filed with the Commission within 120 days after the end of the Company's 1997 fiscal year. Item 12. Security Ownership of Certain Beneficial Owners and Management Information regarding security ownership of certain beneficial owners and management is incorporated herein by reference to the information included in the Company's definitive proxy statement which will be filed with the Commission within 120 days after the end of the Company's 1997 fiscal year. Item 13. Certain Relationships and Related Transactions Information regarding certain relationships and related transactions is incorporated herein by reference to the information included in the Company's definitive proxy statement which will be filed with the Commission within 120 days after the end of the company's 1997 fiscal year. -33-
PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K Page Number (a) (1) Financial Statements: Report of Independent Accountants 17 Consolidated Balance Sheet at December 31, 1997 and 1996 18 Consolidated Statement of Income for the three years ended December 31, 1997 19 Consolidated Statement of Cash Flows for the three years ended December 31, 1997 20 Consolidated Statement of Shareholders' Equity for the three years ended December 31, 1997 21 Notes to Consolidated Financial Statements 22 (2) Supplementary Data Quarterly Unaudited Financial Data 32 (3) Exhibits The exhibits to this Annual Report on Form 10-K included herein are set forth on the attached Exhibit Index beginning on page 36. (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the three month period ended December 31, 1997. -34-
SIGNATURES Pursuant to the requirement of Section 13 or 15(d) 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 By /s/Brian J. Lipke Brian J. Lipke President, Chief Executive Officer and Chairman of the Board In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Brian J. Lipke February 3, 1998 Brian J. Lipke President, Chief Executive Officer and Chairman of the Board (principal executive officer) /s/ Walter T. Erazmus February 3, 1998 Walter T. Erazmus Treasurer and Chief Financial Officer (principal financial and accounting officer) /s/ Neil E. Lipke February 3, 1998 Neil E. Lipke Director /s/ Gerald S. Lippes February 3, 1998 Gerald S. Lippes Director /s/ Arthur A. Russ, Jr. February 3, 1998 Arthur A. Russ, Jr. Director /s/ David N. Campbell February 3, 1998 David N. Campbell Director /s/ William P. Montague February 3, 1998 William P. Montague Director -35-
Exhibit Index Exhibit Sequentially Number Exhibit Numbered Page 3.1 Certificate of Incorporation of Registrant (incorporated by reference to the same exhibit number to the Company's Registration Statement on Form S-1 (Registration No. 33-69304)) 3.2 By-Laws of the Registrant (incorporated by reference to the same exhibit number to the Company's Registration Statement on Form S-1 (Registration No. 33-69304)) 4.1 Specimen Common Share Certificate (incorporated by reference to the same exhibit number to the Company's Registration Statement on Form S-1 (Registration No. 33-69304)) 10.1 Partnership Agreement of Samuel Pickling Management Company dated June 1, 1988 between Cleveland Pickling, Inc. and Samuel Manu-Tech, Inc. (incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on Form S-1 (Registration No. 33-69304)) 10.2 Partnership Agreement dated May 1988 among Samuel Pickling Management Company, Universal Steel Co. and Ruscon Steel Corp., creating Samuel Steel Pickling Company, a general partnership (incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-1 (Registration No. 33-69304)) 10.3 Lease dated December 1, 1987 between American Steel and Wire Corporation as Lessor and Gibraltar Strip Steel, Inc., as Lessee, and related Service Agreement as amended by an Amendment to Lease and Amendment to Service Agreement dated February 1, 1992 (incorporated by reference to Exhibit 10.11 to the Company's Registration Statement on Form S-1 (Registration No. 33-69304)) 10.4 Lease dated September 1, 1990 between Erie County Industrial Development Agency and Integrated Technologies International, Ltd.(incorporated by reference to Exhibit 10.13 to the Company's Registration Statement on Form S-1(Registration No. 33-69304)) 10.5 Lease dated June 4, 1993 between Buffalo Crushed Stone, Inc. and Gibraltar Steel Corporation (incorporated by reference to Exhibit 10.14 to the Company's Registration Statement on Form S-1 (Registration No. 33-69304)) -36-
Exhibit Sequentially Number Exhibit Numbered Page 10.6* Employment Agreement dated as of November 1, 1993 between the Registrant and Brian J. Lipke (incorporated by reference to Exhibit 10.15 to the Company's Registration Statement on Form S-1 (Registration No. 33-69304)) 10.7 Gibraltar Steel Corporation Executive Incentive Bonus Plan (incorporated by reference to Exhibit 10.16 to the Company's Registration Statement on Form S-1(Registration No. 33-69304)) 10.8 Agreement dated June 29, 1992 for Adoption by Gibraltar Steel Corporation of Chase Lincoln First Bank, N.A. (now Chase Manhattan Bank, N.A.) Non-Standardized Prototype 401(k) Retirement Savings Plan (incorporated by reference to Exhibit 10.17 to the Company's Registration Statement on Form S-1(Registration No. 33-69304)) 10.9* Gibraltar Steel Corporation Incentive Stock Option Plan (incorporated by reference to Exhibit 10.18 to the Company's Registration Statement on Form S-1 (Registration No. 33-69304)) 10.10* Gibraltar Steel Corporation Incentive Stock Option Plan, Second Amendment and Restatement (incorporated by reference to Exhibit 10.16 to the Company's Registration Statement on Form S-1 (Registration No. 333-03979)) 10.11* Gibraltar Steel Corporation Incentive Stock Option Plan, Third Amendment and Restatement 41 10.12* Gibraltar Steel Corporation Restricted Stock Plan (incorporated by reference to Exhibit 10.19 to the Company's Registration Statement on Form S-1 (Registration No. 33-69304)) 10.13* Gibraltar Steel Corporation Restricted Stock Plan, First Amendment and Restatement 55 10.14* Gibraltar Steel Corporation Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 10.20 to the Company's Registration Statement on Form S-1(Registration No. 33-69304)) 10.15* Gibraltar Steel Corporation Non-Qualified Stock Option Plan, First Amendment and Restatement (incorporated by reference to Exhibit 10.17 to the Company's Registration Statement on Form S-1 (Registration No. 333-03979)) 10.16* Gibraltar Steel Corporation Profit Sharing Plan dated August 1, 1984, as Amended April 14, 1986 and May 1, 1987 (incorporated by reference to Exhibit 10.21 to the Company's Registration Statement on Form S-1(Registration No. 33-69304)) -37-
Exhibit Sequentially Number Exhibit Numbered Page 10.17 Tax Indemnification Agreement dated as of November 5, 1993 among the Registrant, Brian J. Lipke, Curtis W. Lipke, Neil E. Lipke, Eric R. Lipke, Meredith A. Lipke, Bonneville Trust of December 31, 1987 f/b/o Brian J. Lipke, Corvette Trust of December 31, 1987 f/b/o Curtis W. Lipke, Nova Trust of December 31, 1987 f/b/o Neil E. Lipke, Electra Trust of December 31, 1987 f/b/o/ Eric R. Lipke, Monza Trust of January 22, 1988 f/b/o Meredith A. Lipke, Bonneville Trust No. 2 of August 15, 1988 f/b/o Brian J. Lipke, Corvette Trust No. 2 of August 15, 1988 f/b/o Curtis W. Lipke, Nova Trust No. 2 of August 15, 1988 f/b/o Neil E. Lipke, Electra Trust No. 2 of August 15, 1988 f/b/o Eric R. Lipke, Monza Trust No. 2 of February 15, 1988 f/b/o Meredith A. Lipke (incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993) 10.18 Agreement and Plan of Exchange and Reorganization dated October 31, 1993 among the Registrant, Estate of Kenneth E. Lipke, Bonneville Trust of December 31, 1987 f/b/o Brian J. Lipke, Corvette Trust of December 31, 1987 f/b/o Curtis W. Lipke, Nova Trust of December 31, 1987 f/b/o Neil E. Lipke, Electra Trust of December 31, 1987 f/b/o Eric R. Lipke, Monza Trust of January 22, 1988 f/b/o Meredith A. Lipke, Bonneville Trust No. 2 of August 15, 1988 f/b/o Brian J. Lipke, Corvette Trust No. 2 of August 15, 1988 f/b/o Curtis W. Lipke, Nova Trust No. 2 of August 15, 1988 f/b/o Neil E. Lipke, Electra Trust No. 2 of August 15, 1988 f/b/o Eric R. Lipke, Monza Trust No. 2 of February 15, 1988 f/b/o Meredith A. Lipke (incorporated by reference to Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993) 10.19 Credit Agreement dated as of September 15, 1997 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 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly report on Form 10-Q for the quarter ended September 30, 1997) 10.20 Bond Purchase Agreement dated June 16, 1994 among the Industrial Development Board of the County of Hamilton, Tennessee, Fleet Bank of New York and Gibraltar Steel of Tennessee (incorporated by reference to Exhibit 10.10 to the Company's Registration Statement on Form S-1 (Registration No. 333-03979)) -38-
Exhibit Sequentially Number Exhibit Numbered Page 10.21* Gibraltar Steel Corporation 401(k) Plan (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8 (No. 33-87034)) 10.22* First Amendment, dated January 20, 1995, to Gibraltar Steel Corporation 40l(k) Plan (incorporated by reference to Exhibit 10.28 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994) 10.23 Stock Purchase Agreement dated as of April 3, 1995 among Gibraltar Steel Corporation of New York, Albert Fruman, Marshall Fruman, Lee Fruman, Dale Fruman and William R. Hubbell Trust U/A dated July 20, 1990 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated April 3, 1995) 10.24 Real Property Lease Agreement dated February 14, 1996 between Blacksmith Leasing and Carolina Commercial Heat Treating, Inc. (incorporated by reference to Exhibit 10.25 to the Company's Registration Statement on Form S-1 (Registration No. 333-03979)) 10.25 Real Property Lease Agreement dated February 14, 1996 between Blacksmith Leasing and Carolina Commercial Heat Treating, Inc. (incorporated by reference to Exhibit 10.26 to the Company's Registration Statement on Form S-1 (Registration No. 333-03979)) 10.26 Lease dated as of August 12, 1995 between John W. Rex and Carolina Commercial Heat Treating, Inc. (incorporated by reference to Exhibit 10.27 to the Company's Registration Statement on Form S-1 (Registration No. 333-03979)) 10.27 Purchase Agreement dated as of January 31, 1997 among Gibraltar Steel Corporation of New York, Nadine W. Gramling; Nadine W. Gramling, as Trustee of the Nadine W. Gramling Revocable Trust; D.G. Granger as Trustee of the Donnie L. Gramling, Jr. GRAT; D.G. Granger as Trustee of the Scott Ray Gramling GRAT; D.G. Granger as Trustee of the Tonya Michelle Cogan GRAT; D. G. Granger as Trustee of the Donnie L. Gramling, Jr. GRAT No. 2; D.G. Granger as Trustee of the Scott Ray Gramling GRAT No. 2; D.G. Granger as Trustee of the Tonya Michelle Cogan GRAT No. 2; H. Leon Holbrook, as Trustee of the Donnie L. Gramling, Jr. -39-
Exhibit Sequentially Number Exhibit Numbered Page GRAT No. 3; H. Leon Holbrook, as Trustee of the Donnie L. Gramling, Jr. GRAT No. 4; H. Leon Holbrook as Trustee of the Tonya Michelle Cogan GRAT No. 3; H. Leon Holbrook, as Trustee of the Tonya Michelle Cogan GRAT No. 4; H. Leon Holbrook, as Trustee of the Scott Ray Gramling GRAT No. 3; H. Leon Holbrook, as Trustee of the Scott Ray Gramling GRAT No. 4; Donnie L. Gramling, Sr. and Nadine W. Gramling as Tenants by the Entirety; The Employee Stock Ownership Plan and Trust of Southeastern Metals Manufacturing Company, Inc.; Nadine W. Gramling; DNG (1997) Limited Partnership; and DNG (1997) Limited Partnership (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated January 31, 1997) 21 Subsidiaries of the Registrant 62 27 Financial Data Schedule 63 ________________________________ * Document is a management contract or compensatory plan or arrangement -40-