Gibraltar Industries - 10-Q quarterly report FY

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark one)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

OR


o		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 Industries, Inc.

(Exact name of Registrant as specified in its charter)


Delaware		16-1445150
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer 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 þ. No o.

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o. No þ.

As of August 6, 2007, the number of common shares outstanding was: 29,949,229.

GIBRALTAR INDUSTRIES, INC.

INDEX


		PAGE
		NUMBER

PART 1.	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006		3

	Condensed Consolidated Statements of Income For the Three and Six Months Ended June 30, 2007 and 2006		4

	Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2007 and 2006		5

	Notes to Condensed Consolidated Financial Statements		6-23

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24-29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		29

Item 4.	Controls and Procedures		30

PART II.	OTHER INFORMATION		31-32
Exhibit 31.1
Exhibit 31.2
Exhibit 31.3
Exhibit 32.1
Exhibit 32.2
Exhibit 32.3

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

GIBRALTAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)


	June 30		December 31,
	2007		2006
	(unaudited)
Assets

Current assets:
Cash and cash equivalents	$	22,921	$	13,475
Accounts receivable, net		211,814		169,207
Inventories		254,019		254,991
Other current assets		20,151		18,107

Total current assets		508,905		455,780

Property, plant and equipment, net		261,724		243,138
Goodwill		408,201		374,821
Acquired intangibles		61,150		62,366
Investments in partnerships		2,522		2,440
Other assets		13,932		14,323

	$	1,256,434	$	1,152,868


Liabilities and Shareholders’ Equity

Current liabilities:
Accounts payable	$	100,829	$	71,308
Accrued expenses		48,606		50,771
Current maturities of long-term debt		2,555		2,336

Total current liabilities		151,990		124,415

Long-term debt		449,689		398,217
Deferred income taxes		71,790		70,981
Other non-current liabilities		13,039		9,027
Shareholders’ equity:
Preferred stock, $.01 par value; authorized: 10,000,000 shares; none outstanding		—		—
Common stock, $.01 par value; authorized 50,000,000 shares; issued 29,899,295 and 29,828,317 shares in 2007 and 2006, respectively		299		299
Additional paid-in capital		217,291		215,944
Retained earnings		345,787		332,920
Accumulated other comprehensive income		6,549		1,065

		569,926		550,228
Less: cost of 44,100 and 42,600 common shares held in treasury in 2007 and 2006		—		—

Total shareholders’ equity		569,926		550,228

	$	1,256,434	$	1,152,868

See accompanying notes to condensed consolidated financial statements

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GIBRALTAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2007			2006		2007			2006
Net sales	$	369,820		$	352,421	$	687,404		$	675,058

Cost of sales		304,146			275,156		570,079			534,562


Gross profit		65,674			77,265		117,325			140,496

Selling, general and administrative expense		38,281			38,950		73,491			76,790


Income from operations		27,393			38,315		43,834			63,706

Other (income) expense:
Equity in partnerships’ loss (income) and other income		(305	)		138		(667	)		(548	)
Interest expense		8,248			7,101		15,485			13,880

Total other expense		7,943			7,239		14,818			13,332


Income before taxes		19,450			31,076		29,016			50,374

Provision for income taxes		7,524			11,315		10,922			18,880

Income from continuing operations		11,926			19,761		18,094			31,494

Discontinued operations:
Income from discontinued operations before taxes		—			5,710		—			10,013
Income tax expense		—			2,158		—			3,797

Income from discontinued operations		—			3,552		—			6,216


Net income	$	11,926		$	23,313	$	18,094		$	37,710


Net income per share — Basic:
Income from continuing operations	$	.40		$	.67	$	.61		$	1.06
Income from discontinued operations		—			.12		—			.21

Net income	$	.40		$	.79	$	.61		$	1.27


Weighted average shares outstanding — Basic		29,863			29,689		29,850			29,659

Net income per share — Diluted:
Income from continuing operations		.40			.66		.60			1.05
Income from discontinued operations		—			.12		—			.21

Net income	$	.40		$	.78	$	.60		$	1.26


Weighted average shares outstanding — Diluted		30,144			30,012		30,096			29,966

See accompanying notes to condensed consolidated financial statements

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GIBRALTAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)


	Six Months Ended
	June 30,
	2007			2006
Cash flows from operating activities
Net income	$	18,094		$	37,710
Income from discontinued operations		—			6,216

Income from continuing operations		18,094			31,494
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		15,956			14,175
Provision for deferred income taxes		(229	)		—
Equity in partnerships’ loss (income) and other income		(576	)		174
Distributions from partnerships		493			589
Stock compensation expense		1,254			1,631
Other noncash adjustments		526			610
Increase (decrease) in cash resulting from changes in (net of acquisitions and dispositions):
Accounts receivable		(30,373	)		(49,345	)
Inventories		26,724			(37,793	)
Other current assets and other assets		1,223			1,353
Accounts payable		24,679			23,698
Accrued expenses and other non-current liabilities		(2,915	)		342


Net cash provided by (used in) continuing operations		54,856			(13,072	)
Net cash provided by discontinued operations		—			7,220

Net cash provided by (used in) provided by operating activities		54,856			(5,852	)


Cash flows from investing activities
Acquisitions, net of cash acquired		(84,424	)		(13,206	)
Purchases of property, plant and equipment		(9,292	)		(11,452	)
Net proceeds from sale of property and equipment		373			115
Net proceeds from sale of business		—			151,511


Net cash (used in) provided by investing activities from continuing operations		(93,343	)		126,968
Net cash used in investing activities for discontinued operations		—			(3,189	)

Net cash (used in) provided by investing activities		(93,343	)		123,779


Cash flows from financing activities
Long-term debt reduction		(1,654	)		(112,960	)
Proceeds from long-term debt		52,485			10,000
Payment of deferred financing costs		(8	)		(256	)
Payment of dividends		(2,983	)		(2,974	)
Net proceeds from issuance of common stock		93			764
Tax benefit from stock options		—			115


Net cash provided by (used in) financing activities		47,933			(105,311	)


Net increase in cash and cash equivalents		9,446			12,616

Cash and cash equivalents at beginning of year		13,475			28,529


Cash and cash equivalents at end of period	$	22,921		$	41,145

See accompanying notes to condensed consolidated financial statements

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GIBRALTAR INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying condensed consolidated financial statements as of and for the three and six months ended June 30, 2007 and 2006 have been prepared by Gibraltar Industries, Inc. (the Company) without audit. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the financial position, results of operations and cash flows for these respective periods have been included.

Certain information and footnote disclosures including significant accounting policies normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements included in the Company’s Annual Report to Shareholders for the year ended December 31, 2006, as filed on Form 10-K.

The consolidated balance sheet at December 31, 2006 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

Certain 2006 amounts have been reclassified to conform with 2007 presentation.

The results of operations for the three and six month periods ended June 30, 2007 are not necessarily indicative of the results to be expected for the full year.

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2. SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

The changes in shareholders’ equity and comprehensive income consist of (in thousands):


												Accumulated
							Additional					Other						Total
	Comprehensive		Common Stock				Paid-In		Retained			Comprehensive		Treasury Stock				Shareholders’
	Income		Shares		Amount		Capital		Earnings			Income		Shares		Amount		Equity

Balance at January 1, 2007				29,841	$	299	$	215,944	$	332,920		$	1,065		43	$	—	$	550,228

Cumulative effect of adoption of FIN 48		—		—						(750	)		—		—		—		(750	)

Comprehensive income:
Net income	$	18,094		—		—		—		18,094			—		—		—		18,094
Other comprehensive income (loss):
Foreign currency translation adjustment		5,127
Amortization of other post retirement health care costs, net of tax of $20		32
Unrealized gain on interest rate swaps, net of tax of $236		325

Other comprehensive income		5,484		—		—		—		—			5,484		—		—		5,484

Total comprehensive income	$	23,578


Issuance of restricted shares				6		—		—		—			—		—		—		—
Equity based compensation expense				—		—		1,254		—			—		—		—		1,254
Stock options exercised				8		—		93		—			—		—		—		93
Forfeiture of restricted stock awards				—		—		—		—			—		1		—		—
Cash dividends — $.15 per share				—		—		—		(4,477	)		—		—		—		(4,477	)


Balance at June 30, 2007				29,855	$	299	$	217,291	$	345,787		$	6,549		44	$	—	$	569,926

The cumulative balance of each component of accumulated other comprehensive loss, net of tax, is as follows (in thousands):


	Foreign		Minimum		Unamortized			Unrealized		Accumulated
	currency		pension		post retirement			gain/(loss) on		other
	translation		liability		health care			interest		comprehensive
	adjustment		adjustment		costs			rate swaps		loss

Balance at January 1, 2007	$	1,977	$	3	$	(969	)	$	54	$	1,065
Current period change		5,127		—		32			325		5,484

Balance at June 30, 2007	$	7,104	$	3	$	(937	)	$	379	$	6,549

Total comprehensive income for the three and six months ended June 30, 2007, was $16,509,000 and $23,578,000, respectively and for the three and six months ended June 30, 2006 was $23,221,000 and $38,427,000, respectively.

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3. INCOME TAXES

The Company and its U. S. subsidiaries file a U.S. federal consolidated income tax return. The Internal Revenue Service has concluded its examination of the Company’s income tax returns for the years prior to 2003. The U.S. federal statute of limitations remains open for the 2003 tax year and beyond. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 4 to 6 years. Several of our tax returns are currently under examination in various U.S. state jurisdictions.

We adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (FIN 48) effective January 1, 2007. As a result of the implementation of FIN 48, the Company recognized a $750,000 increase in tax liabilities, with a corresponding reduction in retained earnings. The recognition was caused by uncertain tax positions of $408,000 and the provision for related interest and penalties of $342,000.

During the three and six months ended June 30, 2007, the Company incurred an additional $25,000 and $50,000 to account for uncertain tax positions. The Company does not anticipate significant increases or decreases in our uncertain tax positions within the next twelve months.

The Company recognizes penalties and interest relating to uncertain tax positions in the provision for income taxes.

4. EQUITY-BASED COMPENSATION

On May 19, 2005, the Gibraltar Industries, Inc. 2005 Equity Incentive Plan (the “2005 Equity Incentive Plan”) was approved by the Company’s stockholders. The 2005 Equity Incentive Plan is an incentive compensation plan that allows the Company to grant equity-based incentive compensation awards to eligible participants to provide them an additional incentive to promote the business of the Company, to increase their proprietary interest in the success of the Company and to encourage them to remain in the Company’s employ. Awards under the plan may be in the form of options, restricted shares, restricted units, performance shares, performance units and rights. The 2005 Equity Incentive Plan provides for the issuance of up to 2,250,000 shares of common stock. Of the total number of shares of common stock issuable under the 2005 Equity Incentive Plan, the aggregate number of shares that may be issued in connection with grants of restricted stock or restricted units cannot exceed 1,350,000 shares, and the aggregate number of shares which may be issued in connection with grants of incentive stock options and rights cannot exceed 900,000 shares. Vesting terms and award life are governed by the award document.

The Management Stock Purchase Plan (“MSPP”) was approved by the shareholders in conjunction with the adoption of the 2005 Equity Incentive Plan. The MSPP provides participants the ability to defer up to 50% of their annual bonus under the Management Incentive Compensation Plan. The deferral is converted to restricted stock units and credited to an account along with a match equal to the deferral amount. The account is converted to cash at the current value of the Company’s stock and payable to the participants upon their termination from employment with the Company. The matching portion is payable only if the participant has reached their sixtieth birthday. If a participant terminates prior to age 60, the match is forfeited. Upon termination, the account is converted to a cash account that accrues interest at 2% over the then current 10 year U. S. Treasury note. The account is then paid out in five equal annual cash installments.

During the six months ended June 30, 2007 and 2006, the Company issued 6,000 and 6,000 restricted shares, 164,248 and 167,125 restricted stock units, and granted 15,800 and 18,625 non-qualified stock options, respectively.

The fair value of restricted stock units held in the MSPP equals the trailing 200 day average of the closing market price of our common stock as of the last day of the period. As of June 30, 2007, 120,206 restricted

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stock units were credited to participant accounts. At June 30, 2007, the trailing 200 day average of the closing market price of our common stock was $22.67 per share.

5. INVENTORIES

Inventories consist of the following (in thousands):


	June 30,		December 31,
	2007		2006

Raw material	$	114,792	$	122,181
Work-in process		40,257	$	41,164
Finished goods		98,970		91,646


Total inventories	$	254,019	$	254,991

6. NET INCOME PER SHARE

Basic net income per share is based on the weighted average number of common shares outstanding. Diluted net income per share is based on the weighted average number of common shares outstanding, as well as dilutive potential common shares which, in the Company’s case, comprise shares issuable under the 2005 Equity Incentive Plan, the stock option and restricted stock plans. The treasury stock method is used to calculate dilutive shares, which reduces the gross number of dilutive shares by the number of shares purchasable from the proceeds and applicable tax benefits of the options assumed to be exercised.

The following table sets forth the computation of basic and diluted earnings per share as of:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
Numerator:
Income available to common stockholders from continuing operations	$	11,926,000	$	19,761,000	$	18,094,000	$	31,494,000


Weighted average shares outstanding		29,863,030		29,689,402		29,849,977		29,658,841


Denominator for diluted income per share:
Weighted average shares outstanding		29,863,030		29,689,402		29,849,977		29,658,841

Common stock options and restricted stock		281,205		323,069		246,248		307,472


Weighted average shares and conversions		30,144,235		30,012,471		30,096,225		29,966,313

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7. ACQUISITIONS

On June 8, 2006 the Company acquired all of the outstanding stock of Home Impressions, Inc. (Home Impressions). Home Impressions is based in Hickory, North Carolina and markets and distributes mail boxes and postal accessories. The acquisition of Home Impressions served to strengthen the Company’s position in the mail box and storage systems markets, and is expected to provide marketing, manufacturing and distribution synergies with our existing operations. The results of Home Impressions (included in the Company’s Building Products segment) are included in the Company’s consolidated financial results from the date of acquisition. The acquisition of Home Impressions is not considered significant to the Company’s consolidated results of operations.

The aggregate initial consideration was $12,473,000 which consisted of $9,612,000 in cash, including acquisition costs, and the assumption of $2,861,000 notes payable, with the final purchase price subject to adjustment for operating results through May 2009. The initial purchase price has been allocated to the assets acquired and liabilities assumed based upon respective fair market values. The fair market values of the property, plant and equipment, and identifiable intangible assets were determined with the assistance of an independent valuation. The identifiable intangible assets consisted of a non-compete agreement with a value of $530,000 (8 year estimated useful life), trademarks with a value of $1,340,000 (15 year estimated useful life), patents with a value of $535,000 (20 year estimated useful life), and customer relationships with a value of $1,570,000 (10 year estimated useful life). The excess consideration over fair value was recorded as goodwill and aggregated approximately $6,930,000, none of which is deductible for tax purposes. The allocation of purchase consideration to the assets acquired and liabilities assumed is as follows (in thousands):


Working capital	$	1,826
Property, plant and equipment		1,660
Other long term liabilities		(1,918	)
Intangibles		3,975
Goodwill		6,930

	$	12,473

As part of the purchase agreement with the former owners of Home Impressions, the Company is required to pay additional consideration through May 2009 based upon the operating results of Home Impressions. The Company paid $402,000 of such additional consideration during the six months ended June 30, 2007. These payments were recorded as additional goodwill.

On June 30, 2006, the Company acquired certain assets of Steel City Hardware, LLC (“Steel City”). The assets the Company acquired from Steel City are used to manufacture mailboxes and postal accessories. The acquisition of the assets of Steel City served to vertically integrate Home Impression’s major domestic supplier and expanded our manufacturing competency in the storage market. The results of Steel City (included in the Company’s Building Products segment) are included in the Company’s consolidated financial results from the date of acquisition. The acquisition of Steel City is not considered significant to the Company’s consolidated results of operations.

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The aggregate consideration was approximately $4,879,000, in cash and acquisition costs. The purchase price has been allocated to the assets acquired based upon respective fair market values. The fair market value of the property, plant and equipment was determined with the assistance of an independent valuation. The excess consideration over fair value was recorded as goodwill and aggregated approximately $2,566,000, which is deductible for tax purposes. The allocation of purchase consideration to the assets and liabilities assumed is as follows (in thousands):


Working capital	$	1,736
Property, plant and equipment		577
Goodwill		2,566

	$	4,879

On November 1, 2006, the Company acquired all of the outstanding stock of The Expanded Metal Company Limited and Sorst Streckmetall GmbH (“EMC”). EMC has locations in England, Germany and Poland and manufactures, markets and distributes a diverse line of products used in the commercial and industrial sectors of the building products market. The acquisition of EMC is expected to strengthen the Company’s position in the expanded metal market and provide expanded market exposure for both EMC products and certain products currently manufactured by the Company. The results of operations of EMC (included in the Company’s Building Products segment) have been included in the Company’s consolidated results of operations from the date of acquisition.

The aggregate purchase consideration for the acquisition of EMC was approximately $44,722,000 in cash and acquisition costs. The purchase price was allocated to the assets acquired and liabilities assumed based upon a preliminary valuation of respective fair values. The identifiable intangible assets consisted of a trademark with a value of $4,771,000 (indefinite useful life) and customer relationships with a value of $7,443,000 (7 year estimated useful life). A final valuation is expected to be completed during the third quarter of 2007. The excess consideration over fair value was recorded as goodwill and aggregated approximately $20,819, 000, none of which is deductible for tax purposes. The allocation of purchase consideration to the assets acquired and liabilities assumed is as follows (in thousands):


Working capital	$	5,405
Property, plant and equipment		11,338
Other long term liabilities, net		(5,054	)
Intangible assets		12,214
Goodwill		20,819

	$	44,722

On March 9, 2007 the Company acquired all of the outstanding stock of Dramex Corporation (“Dramex”). Dramex has locations in Ohio, Canada and England and manufactures, markets and distributes a diverse line of expanded metal products used in the commercial and industrial sectors of the building products market. The acquisition of Dramex is expected to strengthen the Company’s position in the expanded metal market and provide additional exposure for both Dramex’s products and certain products currently manufactured by the Company. The results of Dramex (included in the Company’s Building Products segment) are included in the Company’s consolidated financial results from the date of acquisition. The acquisition of Dramex is not considered significant to the Company’s consolidated results of operations.

The aggregate purchase consideration for the acquisition of Dramex was $22,492,000 in cash and acquisition costs. The purchase price was allocated to the assets acquired and liabilities assumed based upon a preliminary valuation of respective fair values. A final valuation is expected to be completed prior to the end of the Company’s fiscal year. The excess consideration over fair value was recorded as goodwill and aggregated approximately $13,570,000, none of which is deductible for tax purposes. The allocation of purchase consideration to the assets acquired and liabilities assumed is as follows (in thousands):

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Working capital	$	5,571
Property, plant and equipment		4,652
Other long term liabilities, net		(1,301	)
Goodwill		13,570

	$	22,492

On April 10, 2007 the Company acquired certain assets and liabilities of Noll Manufacturing Company, NorWesCo, and M&N Plastics (Noll). The assets the Company acquired from Noll are used to manufacture, market and distribute products for the building, HVAC, and lawn and garden components of the building products market. The acquisition of Noll will serve to strengthen our manufacturing, marketing and distribution capabilities and is expected to provide manufacturing and distribution synergies with our existing businesses. The results of Noll (included in the Company’s Building Products segment) have been included in the Company’s consolidated financial results from the date of acquisition. The acquisition of Noll is not considered significant to the Company’s consolidated results of operations.

The aggregate initial consideration was approximately $61,530,000 in cash and direct acquisition costs. The purchase price has been allocated to the assets acquired and liabilities assumed based upon a preliminary valuation of respective fair values. A final valuation is expected to be completed prior to the end of the Company’s fiscal year. The excess consideration over fair value was recorded as goodwill and aggregated approximately $16,600,000, which is deductible for tax purposes. The allocation of the purchase consideration to the assets acquired and liabilities assumed is as follows (in thousands):


Working capital	$	24,399
Property, plant and equipment		20,531
Goodwill		16,600

	$	61,530

8. DISCONTINUED OPERATIONS

As part of its continuing evaluation of its businesses, the Company determined that its thermal processing and strapping businesses no longer provided a strategic fit with its long-term growth and operational objectives. On June 16, 2006 and June 30, 2006, in separate transactions, the Company sold certain assets and liabilities of both its strapping and thermal processing businesses, respectively. The strapping business was previously included in the processed metals products segment and the thermal processing business previously was reported as a segment.

In accordance with the provisions of Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144), the results of operations for the thermal processing business and strapping business have been classified as discontinued operations in the condensed consolidated financial statements for all periods presented.

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The Company allocates interest to its discontinued operations in accordance with the provisions of the Financial Accounting Standards Board’s Emerging Issues Task Force item 87-24, Allocation of Interest to Discontinued Operations. Interest expense of $1,384,000 and $2,652,000 was allocated to discontinued operations during the three and six months ended June 30, 2006, respectively.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006

Net sales	$	—	$	37,913	$	—	$	75,631
Expenses		—		32,203		—		65,618


Income from discontinued operations before taxes	$	—	$	5,710	$	—	$	10,013

9. GOODWILL AND RELATED INTANGIBLE ASSETS

Goodwill

The changes in the carrying amount of goodwill by reportable segment for the six months ended June 30, 2007 is as follows (in thousands):


	Building		Processed Metal
	Products		Products
	Segment		Segment		Total

Balance as of January 1, 2007	$	358,856	$	15,965	$	374,821
Goodwill acquired		30,572		—		30,572
Additional acquisition costs, net		549		—		549
Foreign currency translation		2,173		86		2,259

Balance as of June 30, 2007	$	392,150	$	16,051	$	408,201

Intangible Assets

Acquired intangible assets subject to amortization at June 30, 2007 are as follows (in thousands):


	Gross Carrying		Accumulated			Estimated
	Amount		Amortization			Life
Trademark / Trade Name	$	1,993	$	(298	)		2 to 15 years
Unpatented Technology		5,135		(1,050	)		5 to 20 years
Customer Relationships		26,723		(3,762	)		5 to 15 years
Non-Competition Agreements		3,578		(1,619	)		5 to 10 years

Balance as of June 30, 2007	$	37,429	$	(6,729	)

Acquired intangible assets with indefinite useful lives not subject to amortization consist of trademarks and trade names valued at $30,450,000.

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Acquired intangible asset amortization expense for the three and six month periods ended June 30, 2007 and 2006 aggregated approximately $874,000 and $609,000, and $1,815,000 and $1,113,000, respectively.

Amortization expense related to acquired intangible assets for the remainder of fiscal 2007 and the next five years thereafter is as follows (in thousands)


Year Ended December 31,
2007	$	1,820
2008	$	3,511
2009	$	3,431
2010	$	3,363
2011	$	3,196
2012	$	3,171

10. RELATED PARTY TRANSACTIONS

In connection with the acquisition of Construction Metals, the Company entered into two unsecured subordinated notes each in the amount of $8,750,000 (aggregate total of $17,500,000). These notes were payable to the two former owners of Construction Metals and were considered related party in nature due to the former owners’ continuing employment relationship with the Company. These notes were payable in annual principal installments of $2,917,000 per note on April 1, and were satisfied on April 1, 2006. These notes required quarterly interest payments at an interest rate of 5.0% per annum. Interest expense related to these notes was approximately $72,000 for the six months ended June 30, 2006.

The Company has certain operating lease agreements related to operating locations and facilities with the former owners of Construction Metals or companies controlled by these parties. These operating leases are considered to be related party in nature. Rental expense associated with these related party operating leases aggregated approximately $678,000 and $676,000 for the six months ended June 30, 2007 and 2006, respectively.

Two members of our Board of Directors are partners in law firms that provide legal services to the Company. For the six months ended June 30, 2007 and 2006, the Company incurred $989,000 and $1,070,000, respectively, for legal services from these firms. Of the amount incurred, $714,000 and $822,000, was expensed during the six months ended June 30, 2007 and 2006, respectively. $275,000 and $188,000 were capitalized as acquisition costs and deferred debt issuance costs during the six months ended June 30, 2007 and 2006, respectively.

At June 30, 2007, the Company had $48,000 recorded in accounts payable for these law firms.

11. BORROWINGS UNDER REVOLVING CREDIT FACILITY

The aggregate borrowing limit under the Company’s revolving credit facility is $300,000,000. At June 30, 2007, the Company had $151,704,000 of availability under the revolving credit facility.

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12. NET PERIODIC BENEFIT COSTS

The following tables present the components of net periodic pension and other postretirement benefit costs charged to expense (in thousands):


	Pension Benefit
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006

Service cost	$	42	$	40	$	82	$	80
Interest cost		39		30		70		61

Net periodic benefit costs	$	81	$	70	$	152	$	141


	Other Post Retirement Benefits
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

Service cost	$	32		$	26		$	58		$	52
Interest cost		60			56			116			112
Amortization of unrecognized prior service cost		(5	)		(6	)		(10	)		(12	)
Loss amortization		34			28			62			56

Net periodic benefit costs	$	121		$	104		$	226		$	208

13. SEGMENT INFORMATION

The Company is organized into two reportable segments on the basis of the production process and products and services provided by each segment, identified as follows:

	(i)		Building Products, which primarily includes the processing of sheet steel, aluminum and other materials to produce a wide variety of building and construction products.

	(ii)		Processed Metal Products, which primarily includes the intermediate processing of wide, open tolerance flat-rolled sheet steel and other metals through the application of several different processes to produce high-quality, value-added coiled steel and other metal products to be further processed by customers.

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The following table illustrates certain measurements used by management to assess the performance of the segments described above (in thousands):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

Net sales
Building products	$	260,224		$	239,056		$	467,450		$	453,800
Processed metal products		109,596			113,365			219,954			221,258

	$	369,820		$	352,421		$	687,404		$	675,058


Income (loss) from operations
Building products	$	31,218		$	40,519		$	49,949		$	71,792
Processed metal products		3,610			7,945			8,037			13,763
Corporate		(7,435	)		(10,149	)		(14,152	)		(21,849	)

	$	27,393		$	38,315		$	43,834		$	63,706


Depreciation and amortization
Building products	$	5,972		$	4,292		$	10,867		$	8,504
Processed metal products		1,846			2,302			3,735			4,127
Corporate		677			765			1,354			1,544

	$	8,495		$	7,359		$	15,956		$	14,175


Capital expenditures (excluding acquisitions)
Building products	$	2,428		$	4,998		$	6,379		$	8,454
Processed metal products		1,155			723			2,073			1,654
Corporate		340			428			840			1,344

	$	3,923		$	6,149		$	9,292		$	11,452


	June 30, 2007		December 31, 2006
	(unaudited)
Total identifiable assets
Building products	$	930,304	$	828,797
Processed metal products		276,664		283,546
Corporate		49,466		40,525

	$	1,256,434	$	1,152,868

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14. SUPPLEMENTAL FINANCIAL INFORMATION

The following information sets forth the consolidating summary financial statements of the issuer (Gibraltar Industries, Inc.) and guarantors, which guarantee the 8% senior subordinated notes due December 1, 2015, and the non-guarantors. The guarantors are wholly owned subsidiaries of the issuer and the guarantees are full, unconditional, joint and several.

Investments in subsidiaries are accounted for by the parent using the equity method of accounting. The guarantor subsidiaries and non-guarantor subsidiaries are presented on a combined basis. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.

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Gibraltar Industries, Inc.
Condensed Consolidating Balance Sheets
June 30, 2007
(in thousands)


	Gibraltar		Guarantor			Non-Guarantor
	Industries, Inc.		Subsidiaries			Subsidiaries			Eliminations			Total

Assets
Current assets:
Cash and cash equivalents	$	—	$	4,579		$	18,342		$	—		$	22,921
Accounts receivable, net		—		186,696			25,118			—			211,814
Intercompany balances		330,019		(313,485	)		(16,534	)		—			—
Inventories		—		240,065			13,954			—			254,019
Other current assets		—		19,305			846			—			20,151

Total current assets		330,019		137,160			41,726			—			508,905


Property, plant and equipment, net		—		239,825			21,899			—			261,724
Goodwill		—		363,082			45,119			—			408,201
Acquired intangibles		—		47,719			13,431			—			61,150
Investments in partnerships		—		2,522			—			—			2,522
Other assets		6,142		7,563			227			—			13,932
Investment in subsidiaries		436,351		93,530			—			(529,881	)		—

		772,512		891,401			122,402			(529,881	)		1,256,434


Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		—		86,678			14,151			—			100,829
Accrued expenses		1,637		39,763			7,206			—			48,606
Current maturities of long-term debt		—		2,555			—			—			2,555

Total current liabilities		1,637		128,996			21,357			—			151,990


Long-term debt		200,949		247,858			882			—			449,689
Deferred income taxes		—		65,578			6,212			—			71,790
Other non-current liabilities		—		12,618			421			—			13,039
Shareholders’ equity		569,926		436,351			93,530			(529,881	)		569,926

	$	772,512	$	891,401		$	122,402		$	(529,881	)	$	1,256,434

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Gibraltar Industries, Inc.
Consolidating Balance Sheets
December 31, 2006
(in thousands)


	Gibraltar		Guarantor			Non-Guarantor
	Industries, Inc.		Subsidiaries			Subsidiaries			Eliminations			Total

Assets
Current assets:
Cash and cash equivalents	$	—	$	4,982		$	8,493		$	—		$	13,475
Accounts receivable		—		152,335			16,872			—			169,207
Intercompany balances		335,496		(313,514	)		(21,982	)		—			—
Inventories		—		243,036			11,955			—			254,991
Other current assets		—		17,297			810			—			18,107

Total current assets		335,496		104,136			16,148			—			455,780

Property, plant and equipment, net		—		223,535			19,603			—			243,138
Goodwill		—		346,108			28,713			—			374,821
Acquired intangibles		—		49,200			13,136			—			62,366
Investments in partnerships		—		2,440			—			—			2,440
Other assets		6,492		7,001			860			—			14,323
Investment in subsidiaries		410,578		56,823			—			(467,401	)		—

	$	752,566	$	789,243		$	78,460		$	(467,401	)	$	1,152,868


Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	—	$	60,737		$	10,571		$	—		$	71,308
Accrued expenses		1,513		45,782			3,476			—			50,771
Current maturities of long-term debt		—		2,336			—			—			2,336

Total current liabilities		1,513		108,855			14,047			—			124,415


Long-term debt		200,825		196,152			1,240			—			398,217
Deferred income taxes		—		64,935			6,046			—			70,981
Other non-current liabilities		—		8,723			304			—			9,027
Shareholders’ equity		550,228		410,578			56,823			(467,401	)		550,228

	$	752,566	$	789,243		$	78,460		$	(467,401	)	$	1,152,868

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Gibraltar Industries, Inc.
Condensed Consolidating Statements of Income
Six Months Ended June 30, 2007
(in thousands)


	Gibraltar			Guarantor			Non-Guarantor
	Industries, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total

Net sales	$	—		$	627,287		$	66,395		$	(6,278	)	$	687,404

Cost of sales		—			522,403			53,954			(6,278	)		570,079


Gross profit		—			104,884			12,441			—			117,325

Selling, general and administrative expense		195			67,066			6,230			—			73,491


Income from operations		(195	)		37,818			6,211			—			43,834

Other (income) expense
Equity in partnerships’ (income) loss and other (income)		—			(670	)		3			—			(667	)
Interest expense		8,408			7,159			(82	)		—			15,485


Total other expense		8,408			6,489			(79	)		—			14,818

Income before taxes		(8,603	)		31,329			6,290			—			29,016

Provision for income taxes		(3,183	)		11,733			2,372			—			10,922


Income from continuing operations		(5,420	)		19,596			3,918			—			18,094

Discontinued operations
Income discontinued operations before taxes		—			—			—			—			—
Income tax expense		—			—			—			—			—


Income from discontinued operations		—			—			—			—			—

Equity in earnings from subsidiaries		23,514			3,918			—			(27,432	)		—


Net income	$	18,094		$	23,514		$	3,918		$	(27,432	)	$	18,094

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Gibraltar Industries, Inc.
Condensed Consolidating Statements of Income
Six Months Ended June 30, 2006
(in thousands)


	Gibraltar			Guarantor			Non-Guarantor
	Industries, Inc.			Subsidiaries			Subsidiaries		Eliminations			Total

Net sales	$	—		$	649,252		$	26,703	$	(897	)	$	675,058

Cost of sales		—			513,698			21,761		(897	)		534,562


Gross profit		—			135,554			4,942		—			140,496

Selling, general and administrative expense		332			74,456			2,002		—			76,790


Income from operations		(332	)		61,098			2,940		—			63,706

Other (income) expense
Interest expense (income)		8,398			5,426			56		—			13,880
Equity in partnerships’ (income) loss and other (income)		—			(548	)		—		—			(548	)


Total other expense		8,398			4,878			56		—			13,332

Income before taxes		(8,730	)		56,220			2,884		—			50,374

Provision for income taxes		(3,405	)		21,141			1,144		—			18,880


Income from continuing operations		(5,325	)		35,079			1,740		—			31,494

Discontinued operations
Income discontinued operations before taxes		—			9,954			59		—			10,013
Income tax expense		—			3,774			23		—			3,797


Income from discontinued operations		—			6,180			36		—			6,216

Equity in earnings from subsidiaries		43,035			1,776			—		(44,811	)		—


Net income	$	37,710		$	43,035		$	1,776	$	(44,811	)	$	37,710

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Gibraltar Industries, Inc.
Condensed Consolidating Statements of Cash Flows
Six Months Ended June 30, 2007
(in thousands)


	Gibraltar			Guarantor			Non-Guarantor
	Industries, Inc.			Subsidiaries			Subsidiaries			Eliminations		Total
CASH FLOWS FROM OPERATING ACTIVITIES

Net cash provided by (used in) continuing operations	$	(3,568	)	$	50,546		$	7,878		$	—	$	54,856
Net cash provided by (used in) discontinued operations		—			—			—			—		—

Net cash provided by (used in) operating activities		(3,568	)		50,546			7,878			—		54,856


CASH FLOWS FROM INVESTING ACTIVITIES

Acquisitions, net of cash acquired		—			(63,942	)		(20,482	)		—		(84,424	)
Net proceeds from sale of business		—			—			—			—		—
Purchases of property, plant and equipment		—			(8,451	)		(841	)		—		(9,292	)
Net proceeds from sale of property and equipment		—			373			—			—		373


Net cash used in investing activities from continuing operations		—			(72,020	)		(21,323	)		—		(93,343	)
Net cash used in investing activities for discontinued operations		—			—			—			—		—

Net cash used in investing activities		—			(72,020	)		(21,323	)		—		(93,343	)


CASH FLOWS FROM FINANCING ACTIVITIES

Long-term debt reduction		—			(1,221	)		(433	)		—		(1,654	)
Proceeds from long-term debt		—			52,485			—			—		52,485
Intercompany financing		6,458			(30,185	)		23,727			—		—
Payment of deferred financing costs		—			(8	)		—			—		(8	)
Net proceeds from issuance of common stock		93			—			—			—		93
Payment of dividends		(2,983	)		—			—			—		(2,983	)


Net cash provided by financing activities		3,568			21,071			23,294			—		47,933


Net increase (decrease) in cash and cash equivalents		—			(403	)		9,849			—		9,446

Cash and cash equivalents at beginning of year		—			4,982			8,493			—		13,475


Cash and cash equivalents at end of year	$	—		$	4,579		$	18,342		$	—	$	22,921

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Gibraltar Industries, Inc.
Condensed Consolidating Statements of Cash Flows
Six Months Ended June 30, 2006
(in thousands)


	Gibraltar			Guarantor			Non-Guarantor
	Industries, Inc.			Subsidiaries			Subsidiaries			Eliminations		Total
CASH FLOWS FROM OPERATING ACTIVITIES

Net cash used in continuing operations	$	(2,828	)	$	(9,039	)	$	(1,205	)	$	—	$	(13,072	)
Net cash provided by discontinued operations		—			7,220			—			—		7,220

Net cash used in operating activities		(2,828	)		(1,819	)		(1,205	)		—		(5,852	)


CASH FLOWS FROM INVESTING ACTIVITIES

Acquisitions, net of cash acquired		—			(13,206	)		—					(13,206	)
Purchases of property, plant and equipment		—			(11,357	)		(95	)		—		(11,452	)
Net proceeds from sale of property and equipment		—			115			—			—		115
Net proceeds from sale of businesses		—			151,511			—			—		151,511


Net cash provided by (used in) investing activities from continuing operations		—			127,063			(95	)		—		126,968
Net cash used in investing activities for discontinued operations		—			(3,189	)		—			—		(3,189	)

Net cash provided by (used in) investing activities		—			123,874			(95	)		—		123,779


CASH FLOWS FROM FINANCING ACTIVITIES

Long-term debt reduction		—			(112,960	)		—			—		(112,960	)
Proceeds from long-term debt		—			10,000			—					10,000
Intercompany financing		5,160			(6,082	)		922			—		—
Payment of deferred financing costs		(237	)		(19	)		—			—		(256	)
Net proceeds from issuance of common stock		764			—			—			—		764
Payment of dividends		(2,974	)		—			—			—		(2,974	)
Tax benefit from stock options		115			—			—			—		115


Net cash (used in) provided by financing activities		2,828			(109,061	)		922			—		(105,311	)


Net increase (decrease) in cash and cash equivalents		—			12,994			(378	)		—		12,616

Cash and cash equivalents at beginning of year		—			24,759			3,770			—		28,529


Cash and cash equivalents at end of year	$	—		$	37,753		$	3,392		$	—	$	41,145

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Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s condensed consolidated financial statements and notes thereto included in Item 1 of this Form 10-Q.

Executive Summary

The condensed consolidated financial statements present the financial condition of the Company as of June 30, 2007 and December 31, 2006, and the condensed consolidated results of operations for the three and six months ended June 30, 2007 and 2006 and cash flows of the Company for the six months ended June 30, 2007 and 2006.

We are a leading manufacturer, processor and distributor of residential and commercial building products and processed metal products for industrial applications. We serve customers in a variety of industries in all 50 states, Canada, Mexico, Europe, Asia and Central and South America. We operate 86 facilities in 27 states, Canada, England, Germany, Poland and China.

Segments

We operate in two reportable segments — Building Products and Processed Metal Products.

	•		Building Products. Through acquisitions and organic growth, we have created a building products business that now offers more than 5,000 products, many of which are market leaders. Our building products segment operates 73 facilities in 26 states, Canada, England, Germany and Poland.

	•		Processed Metal Products. Our processed metal products segment focuses on value-added precision sizing and treating of steel for a variety of uses, the manufacture of non-ferrous metal powders for use in several industries, and other activities. Our processed metal product segment operates 13 facilities in 7 states and China.

The following table sets forth the Company’s net sales by reportable segment for the three and six months ending June 30, (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
Net sales
Building products	$	260,224	$	239,056	$	467,450	$	453,800
Processed metal products		109,596		113,365		219,954		221,258

Total consolidated net sales	$	369,820	$	352,421	$	687,404	$	675,058

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Results of Operations

Consolidated

Net sales increased by approximately $17.4 million, or 4.9% to $369.8 million for the quarter ended June 30, 2007, from net sales of $352.4 million for the quarter ended June 30, 2006. Net sales increased by approximately $12.3 million, or 1.8% to $687.4 million for the six months ended June 30, 2007, from net sales of $675.1 million for the six months ended June 30, 2006. The increase in net sales for the quarter was due to the addition of net sales of EMC (acquired November 1, 2006), Noll (acquired April 10, 2007), Dramex (Acquired March 9, 2007) and Home Impressions (acquired June 8, 2006) which contributed an aggregate of $42.7 million in additional net sales. Net sales from our organic business decreased $25.3 million, or 7.2%, due to the slowdown in the residential housing market. The increase in the net sales for the six months ended June 30, 2007 was due to the addition of net sales of EMC, Noll, Dramex and Home Impressions which contributed $65.7 million in additional net sales. Net sales from our organic business declined $53.4 million, or 7.9%, due to the slowdown in the residential housing market.

Gross profit as a percentage of net sales decreased to 17.8 % for the quarter ended June 30, 2007, from 21.9% for the quarter ended June 30, 2006. Gross profit margins decreased to 17.1% for the six months ended June 30, 2007, from 20.8% for the same period in 2006. These decreases were the result of an increase of 4.1% in material costs as a percentage of sales, a result of unfavorable product mix.

Selling, general and administrative expenses decreased to $38.3 million during the second quarter of 2006 from $39.0 million in the same quarter of 2006, a decrease of approximately $0.7 million, or 1.7%. Selling, general and administrative expenses for the six months ended June 30, 2007 decreased to $73.5 million from $76.8 million for the same period in 2006, a decrease of $3.3 million or approximately 4.3%. The decrease in the three month period was the result of an approximately $2.3 million lower bonus accrual, a function of our decreased operating results, approximately $0.9 million of reduced spending on data communications and $1.2 million of reductions in other administrative costs, a function of our continued focus on reducing costs, which caused a reduction of $4.8 million in our organic business. The acquisitions discussed above resulted in an increase in selling, general and administrative costs of $4.1 million during the second quarter. The decrease in the six month period was caused by a reduction of bonus expense of approximately $5.8 million, reductions in data communications costs of $1.5 million and $1.9 million in other administrative costs, and a reduction in bad debt expense of $2.3 million, partially offset by a $6.4 million increase due to the acquisitions noted above. As a result, selling, general and administrative expenses as a percentage of net sales decreased to 10.4% from 11.1% and to 10.7% from 11.4% for the three and six month periods, respectively.

As a result of the above, income from operations as a percentage of net sales for the quarter ended June 30, 2007 decreased to 7.4% from 10.9% for the same period in 2006. Income from operations for the six months ended June 30, 2007 decreased to 6.4% from 9.4% for the comparable period last year.

Interest expense increased by approximately $1.1 million for the quarter ended June 30, 2007 to $8.2 million from $7.1 million for the quarter ended June 30, 2006. Interest expense increased by approximately $1.6 million for the six months ended June 30, 2007 to $15.5 million from $13.9 million for the six months ended June 30, 2006. This increase was due primarily to the higher average borrowings in 2007 caused by the acquisitions of EMC, Home Impressions, Dramex and Noll, and higher overall interest rates compared to the same periods in the prior year, primarily the result of higher market interest rates.

As a result of the above, income from continuing operations before taxes decreased by $11.6 million to $19.5 million for the quarter ended June 30, 2007 and $21.4 million to $29.0 million for the six months ended June 30, 2007, compared to the same periods in 2006.

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Income taxes for continuing operations for the quarter and six months ended June 30, 2007 approximated $7.5 million and $11.3 million, respectively and were based on an expected annual tax rate of 37.9%, the same rate as in 2006. The income tax rate during the second quarter of 2007 was impacted by a change in New York law which resulted in an increase in tax expense of $0.1 million.

The following provides further information by segment:

Building Products

Net sales in the quarter ended June 30, 2007 increased to $260.2 million, or 8.9%, from net sales of $239.1 million in the second quarter of 2006. Net sales increased to $467.5 million for the six months ended June 30, 2007 from net sales of $453.8 million for the same period in 2006, an increase of $13.7 million or 3.0%. Excluding the impact of the acquisition of EMC, Noll, Dramex and Home Impressions, sales decreased 9.0% and 11.5% for the three and six months ended June 30, 2007, respectively, when compared to the same period in 2006. The decrease in net sales during both periods, excluding the effect of the acquisitions, was due to reduced volumes as a result of the housing market downturn.

Income from operations as a percentage of net sales decreased to 12.0% for the quarter ended June 30, 2007 from 16.9% a year ago. For the six months ended June 30, 2007, income from operations as a percentage of net sales decreased to 10.7% from 15.8% for the same period in 2006. The decrease in operating margin in the quarter was primarily caused by a 2.6% increase in material costs and a 1.4% increase in direct labor costs. The decrease in operating margin for the six months was primarily the result of a 2.3% increase in material costs and a 1.4% increase in direct labor costs as a percentage of sales.

Processed Metal Products

Net sales decreased by approximately $3.8 million, or 3.3%, to $109.6 million for the quarter ended June 30, 2007, from net sales of $113.4 million for the quarter ended June 30, 2006. Net sales decreased by approximately $1.3 million, or 0.6%, to $220.0 million for the six months ended June 30, 2007 from net sales of $221.3 million for the same period in 2006. The decreases in net sales for the quarter and six months were driven by decreased net sales in our coated metal products business, driven by reduced demand from our customers, many of whom serve the housing market.

Income from operations as a percentage of net sales decreased to 3.3% of net sales for the quarter ended June 30, 2007 compared to 7.0% in the second quarter a year ago. For the six months ended June 30, 2007, income from operations as a percentage of net sales decreased to 3.7% from 6.2% for the comparable 2006 period. The decrease in operating margin in the quarter and six months was due primarily to $1.2 million and $1.7 million, respectively, of costs incurred in connection with the consolidation of our flat rolled processing plants in Buffalo, NY.

Outlook

The Company expects results from the quarter ended September 30, 2007 will be lower than those realized in the quarter ended September 30, 2006. The housing and automotive markets have caused a reduction in results and we expect that softness in these markets will continue during the third quarter, which has historically been one of the seasonally strongest periods of the Company’s fiscal cycle. The Company believes it is positioned to benefit from its cost reduction programs and internal growth initiatives, as well as continuing operational improvements as the markets we serve return to more normal levels.

In 2007, the Company will realize a full year’s worth of sales and earnings from the 2006 acquisitions of EMC and Home Impressions along with the sales and earnings from the March 2007 acquisition of Dramex and the April 2007 acquisition of Noll, which will help to offset anticipated declines from our organic business.

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Liquidity and Capital Resources

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.

The Company’s shareholders’ equity increased by approximately $19.7 million or 3.6%, to $569.9 million, at June 30, 2007. This increase in shareholder’s equity was primarily due to net income of $18.1 million, a $5.1 million increase in the foreign currency translation adjustment, equity compensation of $1.3 million, partially offset by the declaration of approximately $4.5 million in shareholder dividends, and a $0.8 million reduction due to the cumulative effect of the adoption of FASB Interpretation No. 48.

During the first six months of 2007, the Company’s working capital (inclusive of the impact of working capital acquired with Dramex and Noll) increased by approximately $25.6 million, or 7.7%, to approximately $356.9 million. This increase in working capital was primarily the result of increases in cash and accounts receivable of $9.4 million, and $42.6 million, respectively. These increases in current assets were offset by increases in accounts payable of $29.5 million.

Net cash provided by continuing operating activities for the six months ended June 30, 2007 was approximately $54.9 million and was primarily the result of income from continuing operations of $18.1 million combined with depreciation and amortization of $16.0 million, increases in accounts receivable and accounts payable of $30.4 million and $24.7, respectively and decreases in inventories of $26.7 million. The increases in accounts receivable and accounts payable are a result of the second quarter being a traditionally strong selling season of the Company, while the reduction in inventories reflects the Company’s focus on improving inventory turnover.

During 2007, the Company’s net borrowings from its credit facility of approximately $50.9 million, along with the $54.9 million in cash generated from operations were used to purchase the outstanding stock of Dramex and acquire certain assets from Noll for approximately $84.0 million, fund capital expenditures of $9.3 million, and pay dividends of $3.0 million.

Senior credit facility and senior subordinated notes

The Company’s credit agreement provides a revolving credit facility, which expires in December 2010, and a term loan, which is due in December 2012. The revolving credit facility of up to $300.0 million and the term loan of $230.0 million are secured with the Company’s accounts receivable, inventories and personal property and equipment. At June 30, 2007, the Company had used approximately $127.1 million of the revolving credit facility and had letters of credit outstanding of $21.2 million, resulting in $151.7 million in availability. Borrowings under the revolving credit facility carry interest at LIBOR plus a fixed rate. The weighted average interest rate of these borrowings was 6.46% at June 30, 2007. At June 30, 2007, the term loan balance was $122.7 million. Borrowings under the term loan carry interest at LIBOR plus a fixed rate. The rate in effect on June 30, 2007 was 7.13%.

The Company’s $204.0 million of 8% senior subordinated notes were issued in December 2005 at a discount to yield 8.25%. Provisions of the 8% notes include, without limitation, restrictions on indebtedness liens, distributions from restricted subsidiaries, asset sales, affiliate transactions, dividends and other restricted payments. Prior to December 1, 2008, up to 35% of the 8% notes are redeemable at the option of the Company from the proceeds of an equity offering at a premium of 108% of the face value, plus accrued and unpaid interest. After December 1, 2010 the notes are redeemable at the option of the Company, in whole or in part, at the redemption price (as defined in the notes agreement), which declines annually from 104% to 100% on and after December 1, 2013. In the event of a Change of Control (as defined in the indenture for such notes), each holder of the 8% Notes may require the Company to repurchase all or a portion of such holder’s 8% Notes at a purchase price equal to 101% of the principal amount thereof. The 8% Notes are guaranteed by certain existing and future domestic subsidiaries and are not subject to any sinking fund requirements.

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The Company’s 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. At June 30, 2007 the Company was in compliance with terms and provisions of all of its financing agreements.

For the third quarter and remainder of 2007, the Company continues to focus on maximizing positive cash flow, working capital management and debt reduction. As of June 30, 2007, the Company believes that availability of funds under its existing credit facility together with the cash generated from operations will be sufficient to provide the Company with the liquidity and capital resources necessary to support its principal capital requirements, including operating activities, capital expenditures, and dividends.

The Company regularly considers various strategic business opportunities including acquisitions. The Company evaluates such potential acquisitions on the basis of their ability to enhance the Company’s existing products, operations, or capabilities, as well as provide access to new products, markets and customers. Although no assurances can be given that any acquisition will be consummated, the Company may finance such acquisitions through a number of sources including internally available cash resources, new debt financing, the issuance of equity securities or any combination of the above.

Contractual Obligations and Commercial Commitments

Our contractual obligations and commercial commitments have not changed materially, including the impact from FIN 48, from the disclosures in our 2006 Form 10-K.

Critical Accounting Policies

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make decisions based upon estimates, assumptions, and factors it considers relevant to the circumstances. Such decisions include the selection of applicable principles and the use of judgment in their application, the results of which could differ from those anticipated.

A summary of the Company’s significant accounting policies are described in Note 1 of the Company’s consolidated financial statements included in the Company’s Annual Report to Shareholders for the year ended December 31, 2006, as filed on Form 10-K.

There have been no other changes in critical accounting policies in the current year from those described in our 2006 Form 10-K.

The Company adopted the provisions of FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” as discussed in Note 3 to the consolidated financial statements included in Item 1, herein.

Related Party Transactions

In connection with the acquisition of Construction Metals, the Company entered into two unsecured subordinated notes each in the amount of $8,750,000 (aggregate total of $17,500,000). These notes were payable to the two former owners of Construction Metals and were considered related party in nature due to the former owners’ continuing employment relationship with the Company. These notes were payable in annual principal installments of $2,917,000 per note on April 1, and were satisfied on April 1, 2006. These notes required quarterly interest payments at an interest rate of 5.0% per annum. Interest expense related to these notes was approximately $72,000 for the six months ended June 30, 2006.

The Company has certain operating lease agreements related to operating locations and facilities with the former owners of Construction Metals or companies controlled by these parties. These operating leases are considered to be related party in nature. Rental expense associated with these related party operating leases

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aggregated approximately $678,000 and $676,000 for the six months ended June 30, 2007 and 2006, respectively.

Two members of our Board of Directors are partners in law firms that provide legal services to the Company. For the six months ended June 30, 2007 and 2006, the Company incurred $989,000 and $1,070,000, respectively, for legal services from these firms. Of the amount incurred, $714,000 and $822,000, was expensed during the six months ended June 30, 2007 and 2006, respectively. $275,000 and $188,000 were capitalized as acquisition costs and deferred debt issuance costs during the six months ended June 30, 2007 and 2006, respectively.

At June 30, 2007, the Company had $48,000 recorded in accounts payable for these law firms.

Forward-Looking Information — Safe Harbor Statement

Certain information set forth herein contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about the Company’s business, and management’s beliefs about future operating results and financial position. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions. Statements by the Company, other than historical information, constitute “forward looking statements” as defined within the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on forward-looking statements. Such statements are based on current expectations, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements. 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; changes in raw material pricing and availability; changing demand for the Company’s products and services; and changes in interest or tax rates. In addition, such forward-looking statements could also be affected by general industry and market conditions, as well as general economic and political conditions.

The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law or regulation.


Item 3.		Qualitative and Quantitative Disclosures About Market Risk

In the ordinary course of business, the Company is exposed to various market risk factors, including changes in general economic conditions, competition and raw materials pricing and availability. In addition, the Company is exposed to market risk and interest rate risk, primarily related to its long-term debt. To manage interest rate risk, the Company uses both fixed and variable interest rate debt. There have been no material changes to the Company’s exposure to market risk or interest rate risk since December 31, 2006.

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Item 4.		Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The Company maintains a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) designed to provide reasonable assurance as to the reliability of the financial statements and other disclosures contained in this report. The Company’s Chief Executive Officer and Chairman of the Board, President and Chief Operating Officer, and Executive Vice President, Chief Financial Officer, and Treasurer evaluated the effectiveness of the Company’s disclosure controls as of the end of the period covered in this report. Based upon that evaluation, the Company’s Chief Executive Officer and Chairman of the Board, President and Chief Operating Officer, Executive Vice President, Chief Financial Officer, and Treasurer, have concluded that the Company’s disclosure controls and procedures were designed and functioning effectively to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

(b) Changes in Internal Controls

There have been no changes in the Company’s internal control over financial reporting (as defined by Rule 13a-15(f) that occurred during the period covered by the report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Not applicable.

Item 1A. Risk Factors

There is no change to the risk factors disclosed in our 2006 annual report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.

6(a) Exhibits

	a.		Exhibit 31.1 — Certification of Chief Executive Officer and Chairman of the Board pursuant to Section 302 of the Sarbanes—Oxley Act of 2002.

	b.		Exhibit 31.2 — Certification of President pursuant to Section 302 of the Sarbanes—Oxley Act of 2002.

	c.		Exhibit 31.3 — Certification of Executive Vice President, Chief Financial Officer and Treasurer pursuant to Section 302 of the Sarbanes—Oxley Act of 2002.

	d.		Exhibit 32.1 — Certification of the Chairman of the Board and Chief Executive Officer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes—Oxley Act of 2002.

	e.		Exhibit 32.2 — Certification of the President and Chief Operating Officer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes—Oxley Act of 2002.

	f.		Exhibit 32.3 — Certification of the Executive Vice President, Chief Financial Officer, and Treasurer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes—Oxley Act of 2002.

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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 INDUSTRIES, INC. (Registrant)
	/s/ Brian J. Lipke
	Brian J. Lipke
	Chairman of the Board and Chief Executive Officer


	/s/ Henning Kornbrekke
	Henning Kornbrekke
	President and Chief Operating Officer


	/s/ David W. Kay
	David W. Kay
	Executive Vice President, Chief Financial Officer, and Treasurer

Date: August 8, 2007

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Gibraltar Industries - 10-Q quarterly report FY

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