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. 1 of 12
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 2 of 12
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 3 of 12
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 4 of 12
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 5 of 12
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 ======= ======= 6 of 12
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. 7 of 12
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 ========= 8 of 12
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. 9 of 12
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. 10 of 12
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. 11 of 12
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