UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
For the quarterly period ended March 31, 2013
OR
For the transition period from to
Commission file number 0-22462
GIBRALTAR INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
(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
(Address of principal executive offices)
14219-0228
(Zip Code)
Registrant’s telephone number, including area code: (716) 826-6500
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 checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.). Yes ¨ No x
As of April 29, 2013, the number of common shares outstanding was: 30,680,649
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Statements of Operations for the Three Months Ended March 31, 2013 and 2012
Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2013 and 2012
Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2013 and 2012
Consolidated Statement of Shareholders’ Equity for the Three Months Ended March 31, 2013
Notes to Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
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Item 1. Financial Statements
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Net sales
Cost of sales
Gross profit
Selling, general, and administrative expense
Income from operations
Interest expense
Other income
(Loss) income before taxes
(Benefit of) provision for income taxes
(Loss) income from continuing operations
Discontinued operations:
Loss before taxes
Benefit of income taxes
Loss from discontinued operations
Net (loss) income
Net earnings per share – Basic:
Weighted average shares outstanding – Basic
Net earnings per share – Diluted:
Weighted average shares outstanding – Diluted
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Other comprehensive (loss) income:
Foreign currency translation adjustment
Adjustment to retirement benefit liability, net of tax
Adjustment to post-retirement health care liability, net of tax
Other comprehensive (loss) income
Total comprehensive (loss) income
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CONSOLIDATED BALANCE SHEETS
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net of reserve of $4,581 and $4,481 in 2013 and 2012
Inventories
Other current assets
Total current assets
Property, plant, and equipment, net
Goodwill
Acquired intangibles
Other assets
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses
Current maturities of long-term debt
Total current liabilities
Long-term debt
Deferred income taxes
Other non-current liabilities
Shareholders’ equity:
Preferred stock, $0.01 par value; authorized 10,000 shares; none outstanding
Common stock, $0.01 par value; authorized 50,000 shares; 31,071 and 30,938 shares issued in 2013 and 2012
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Cost of 389 and 350 common shares held in treasury in 2013 and 2012
Total shareholders’ equity
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash Flows from Operating Activities
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Loss on early note redemption
Depreciation and amortization
Stock compensation expense
Non-cash charges to interest expense
Other non-cash adjustments
Increase (decrease) in cash resulting from changes in the following (excluding the effects of acquisitions):
Accounts receivable
Other current assets and other assets
Accrued expenses and other non-current liabilities
Net cash used in operating activities of continuing operations
Net cash used in operating activities of discontinued operations
Net cash used in operating activities
Cash Flows from Investing Activities
Purchases of property, plant, and equipment
Cash paid for acquisitions, net of cash acquired
Net proceeds from sale of property and equipment
Net cash used in investing activities
Cash Flows from Financing Activities
Proceeds from long-term debt
Long-term debt payments
Payment of deferred financing costs
Payment of note redemption fees
Purchase of treasury stock at market prices
Net proceeds from issuance of common stock
Excess tax benefit from stock compensation
Net cash used in financing activities
Effect of exchange rate changes on cash
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of period
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CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
Balance at December 31, 2012
Net loss
Adjustment to pension benefit liability, net of taxes of $2
Adjustment to post-retirement healthcare benefit liability, net of taxes of $25
Stock options exercised
Net settlement of restricted stock units
Balance at March 31, 2013
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements 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 at March 31, 2013 and December 31, 2012, the results of operations, comprehensive income, and cash flows for the three months ended March 31, 2013 and 2012, and the statement of shareholders’ equity for the three months ended March 31, 2013 have been included therein in accordance with U.S. Securities and Exchange Commission (SEC) rules and regulations and prepared using the same accounting principles as are used for our annual audited financial statements.
Certain information and footnote disclosures, including significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted in accordance with the prescribed SEC rules. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and footnotes included in the Company’s Annual Report for the year ended December 31, 2012 as filed on Form 10-K.
The consolidated balance sheet at December 31, 2012 has been derived from the audited consolidated financial statements at that date, restated for discontinued operations, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
The results of operations for the three month period ended March 31, 2013 are not necessarily indicative of the results to be expected for the full year.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2013-02, “Comprehensive Income (Topic 220) – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (Topic 220 Update). The amendments in Topic 220 Update require a company to report the effect of significant reclassifications out of accumulated other comprehensive income (AOCI) on the respective line items in net income if the amount is required by U.S. GAAP to be reclassified in its entirety to net income. For amounts not required under U.S. GAAP to be reclassified in their entirety, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2012 and are to be applied prospectively. The Company adopted Topic 220 Update 2013-02 prospectively in 2013 and its adoption does not have a material impact on the Company’s consolidated financial statements.
In March 2013, the FASB issued Accounting Standards Update 2013-05, “Foreign Currency Matters (Topic 830) – Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity” (Topic 830 Update). The amendments in Topic 830 Update require a company to release the cumulative translation adjustment into net income upon the loss of a controlling financial interest in a foreign subsidiary or group of assets. The amendments are effective prospectively beginning after December 15, 2013, and early adoption is permitted. The Company does not expect the adoption of Topic 830 Update 2013-05 to have a material impact of the Company’s consolidated financial results.
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3. INVENTORIES
Inventories consist of the following (in thousands):
Raw material
Work-in-process
Finished goods
Total inventories
4. ACQUISITIONS
During 2012, Gibraltar purchased the assets of four businesses in separate transactions, one of which occurred during the first quarter of 2012. The acquired product lines complement and expand the Company’s product portfolio and customer base in four key U.S. and Canadian markets:
Gibraltar funded the aggregate investment of $43,117,000 from existing cash on hand. The purchase price for each acquisition was allocated to the assets acquired and liabilities assumed based upon their respective fair values. The excess consideration was recorded as goodwill and totaled $15,240,000, all of which is deductible for tax purposes. Goodwill represents future economic benefits arising from other assets acquired that could not be individually identified including growth opportunities and increased presence in the building products markets.
The allocation of purchase consideration to the assets acquired and liabilities assumed during 2012 are as follows (in thousands):
Working capital
Property, plant, and equipment
Acquired intangible assets
Other liabilities
Fair value of purchase consideration
The acquired intangible assets consisted of the following for the four acquisitions completed during the year ended December 31, 2012 (in thousands):
Customer relationships
Unpatented technology and patents
Trademarks
Amortizable trademarks
Non-compete agreements
Backlog
Total
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The Company incurred certain acquisition-related costs, primarily composed of legal and consulting fees of $117,000, and $80,000 for the three months ended March 31, 2013 and 2012, respectively. All acquisition related costs were recognized as a component of selling, general and administrative expenses on the consolidated statement of operations. The Company also recognized additional cost of sales of $203,000 and $60,000 for the three months ended March 31, 2013 and 2012, respectively, related to the recognition of inventory at fair value when allocating the purchase price of the acquisitions.
5. GOODWILL AND RELATED INTANGIBLE ASSETS
The changes in the carrying amount of goodwill for the three months ended March 31, 2013 are as follows (in thousands):
Balance as of December 31, 2012
Acquisition adjustment
Foreign currency translation
Balance as of March 31, 2013
The goodwill balances as of March 31, 2013 and December 31, 2012 are net of accumulated impairment losses of $129,925,000.
Acquired Intangible Assets
Acquired intangible assets consist of the following (in thousands):
Indefinite-lived intangible assets:
Finite-lived intangible assets:
Unpatented technology
Total acquired intangible assets
The Company incurred $1,719,000 and $1,631,000 of acquired intangible asset amortization expense for the three months ended March 31, 2013 and 2012, respectively.
Amortization expense related to acquired intangible assets for the remainder of fiscal 2013 and the next five years thereafter is estimated as follows (in thousands):
2013
2014
2015
2016
2017
2018
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6. RELATED PARTY TRANSACTIONS
A member of the Company’s Board of Directors, Gerald S. Lippes, is a partner in a law firm that provides legal services to the Company. For the three months ended March 31, 2013 and 2012, the Company incurred expense of $512,000 and $299,000, respectively, for legal services from this firm. All amounts incurred during the 2013 and 2012 periods were expensed as a component of selling, general, and administrative expenses. At March 31, 2013 and December 31, 2012, the Company had $591,000 and $530,000, respectively, recorded in accounts payable for amounts due to this law firm.
7. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
Senior Subordinated 6.25% Notes
Senior Subordinated 8% Notes recorded net of unamortized discount of $1,298
Other debt
Total debt
Less current maturities
Total long-term debt
Borrowings under the Senior Credit Agreement are secured by the trade receivables, inventory, personal property, equipment, and certain real property of the Company’s significant domestic subsidiaries. The Senior Credit Agreement is also guaranteed by each of the Company’s significant domestic subsidiaries. The Senior Credit Agreement provides for a revolving credit facility and letters of credit in an aggregate amount that does not exceed the lesser of (i) $200 million and (ii) a borrowing base determined by reference to the trade receivables, inventories, and property, plant, and equipment of the Company’s significant domestic subsidiaries. The Company can request additional financing from the banks to increase the revolving credit facility to $250 million under the terms of the Senior Credit Agreement.
The terms of the Senior Credit Agreement provide that the revolving credit facility will terminate on October 10, 2016. Interest rates on the revolving credit facility are based on the London Interbank Offering Rate (LIBOR) plus an additional margin of 2.0% to 2.5%. In addition, the revolving credit facility is subject to an annual commitment fee calculated as 0.375% of the daily average undrawn balance.
Standby letters of credit of $13,592,000 have been issued under the Senior Credit Agreement to third parties on behalf of the Company as of March 31, 2013. These letters of credit reduce the amount otherwise available under the revolving credit facility. As of March 31, 2013, the Company had $135,227,000 of availability under the revolving credit facility.
On a trailing four-quarter basis, the Senior Credit Agreement includes a single financial covenant that requires the Company to maintain a minimum fixed charge coverage ratio of 1.25 to 1.00 at the end of each quarter. As of March 31, 2013, the Company was in compliance with this financial covenant. The Senior Credit Agreement contains other provisions and events of default that are customary for similar agreements and may limit the Company’s ability to take various actions.
On January 31, 2013, the Company issued $210.0 million of 6.25% Senior Subordinated Notes (6.25% Notes) due February 1, 2021. In connection with the issuance of the 6.25% Notes, the Company initiated a tender offer for the purchase of the outstanding $204.0 million of 8% Senior Subordinated Notes (8% Notes). Simultaneously with the closing of the sale of the 6.25% Notes, the Company purchased tendered notes or called for redemption of all of the remaining 8% Notes that were not purchased. In connection with the redemption and tender offer, the Company satisfied and discharged its obligations under the 8% Notes during the three months ended March 31, 2013. The Company recorded a charge of approximately $7.2 million in the first quarter of 2013, including $3.7 million for the prepayment premium paid to holders of the 8% Notes, $2.2 million to write-off deferred financing fees and $1.3 million for the unamortized original issue discount related to the 8% Notes.
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The provisions of the 6.25% Notes include, without limitation, restrictions on indebtedness, liens, and distributions from restricted subsidiaries, asset sales, affiliate transactions, dividends, and other restricted payments. Dividend payments are subject to annual limits of the greater of $0.25 per share or $25 million. The 6.25% Notes are redeemable at the option of the Company, in whole or in part, at any time on or after February 1, 2017, at the redemption price (as defined in the Senior Subordinated 6.25% Notes Indenture). The redemption prices are 103.13%, and 101.56% of the principal amount thereof if the redemption occurs during the 12-month periods beginning February 1, of the years 2017 and 2018, respectively, and 100% of the principal amount thereof on and after February 1, 2019, in each case plus accrued and unpaid interest to the applicable redemption date. In addition, prior to February 1, 2016, the Company may redeem up to 35% of the aggregate principal amount of the Notes with the net cash proceeds of certain equity offerings by the Company at a redemption price of 106.25% of the principal amount thereof, plus accrued and unpaid interest to the redemption date. In the event of a Change in Control, each holder of the 6.25% Notes may require the Company to repurchase all or a portion of such holder’s 6.25% Notes at a purchase price equal to 101% of the principal amount thereof.
8. ACCUMULATED OTHER COMPREHENSIVE INCOME
The cumulative balance of each component of accumulated other comprehensive loss, net of tax, is as follows (in thousands):
Current period change
9. EQUITY-BASED COMPENSATION
Equity-based payments to employees and directors, including grants of stock options, restricted stock units, and restricted stock, are recognized in the statements of operations based on the grant-date fair value of the award. The Company uses the straight-line method of attributing the value of stock-based compensation expense over the vesting periods. Stock compensation expense recognized during the period is based on the value of the portion of equity-based awards that is ultimately expected to vest during the period. Vesting requirements vary for directors, executives, and key employees with a vesting period that typically equals four years with graded vesting.
The Gibraltar Industries, Inc. 2005 Equity Incentive Plan (the 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 stock units, and rights. The Plan provides for the issuance of up to 3,000,000 shares of common stock. Of the total number of shares of common stock issuable under the Plan, 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 following table provides the number of restricted stock units (that will convert to shares upon vesting), that were issued during the three months ended March 31 along with the weighted average grant date fair value of each award:
Awards
Restricted stock units
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In January 2012, the Company awarded 295,000 performance stock units with grant date fair value of $4,152,000. As of March 31, 2013, 280,000 of the originally awarded performance stock units remained outstanding after forfeitures. The final number of performance stock units earned was based on the Company’s total stockholder returns relative to the S&P Small Cap 600 Index for the calendar year of 2012. During the performance period, the participants earned 58.3% of target, aggregating 163,200 performance stock units compared to the target of 280,000 awards.
In January 2013, the Company awarded 303,917 performance stock units with grant date fair value of $4,123,000, all of which remain outstanding as of March 31, 2013. The final number of performance stock units earned will be determined based on the Company’s actual return on invested capital (ROIC) for 2013.
The cost of the 2012 and 2013 performance stock awards will be recognized over the requisite service period, which ranges between one year and three years, depending on the date a participant turns 60 and completes 5 years of service. After the vesting period, any performance stock units earned will convert to cash based on the trailing 90-day closing price of the Company’s common stock as of December 31, 2014 and 2015 and be payable to participants in January 2015 and 2016, respectively.
The following table summarizes the compensation expense recognized for the performance stock units for the three months ended March 31 (in thousands):
Performance stock unit compensation expense
The Management Stock Purchase Plan (MSPP) is an integral component of the Plan and provides participants the ability to defer a portion of their salary, their annual bonus under the Management Incentive Compensation Plan, and Directors’ fees. The deferral is converted to restricted stock units and credited to an account together with a company-match in restricted stock units equal to a percentage of the deferral amount. The account is converted to cash at the trailing 200-day average closing price of the Company’s stock and payable to the participants upon a termination of their service to the Company. The matching portion vests only if the participant has reached their sixtieth (60th) birthday. If a participant terminates their service to the Company prior to age sixty (60), the match is forfeited. Upon termination, the account is converted to a cash account that accrues interest at 2% over the then current ten-year U.S. Treasury note rate. The account is then paid out in either one lump sum, or in five or ten equal annual cash installments at the participant’s election.
The fair value of restricted stock units held in the MSPP equals the trailing 200-day average closing price of the Company’s common stock as of the last day of the period. During the three months ended March 31, 2013 and 2012, 183,178 and 222,551 restricted stock units, respectively, including the company-match, were credited to participant accounts. At March 31, 2013 and December 31, 2012, the value of the restricted stock units in the MSPP was $13.64 and $12.30 per unit, respectively. At March 31, 2013 and December 31, 2012, 960,357 and 777,159 restricted stock units, including the company-match, were credited to participant accounts including 93,490 and 71,992, respectively, of unvested restricted stock units. The Company made disbursements of $531,000 and $542,000 out of the MSPP during the three months ended March 31, 2013 and 2012, respectively.
10. FAIR VALUE MEASUREMENTS
FASB Accounting Standards Codification (ASC) Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, sets out a framework for measuring fair value, and requires certain disclosures about fair value measurements. A fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability. Fair value is defined based upon an exit price model.
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FASB ASC Topic 820 establishes a valuation hierarchy for disclosure of the inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
As described in Note 4 of the consolidated financial statements, the Company completed four acquisitions during the year ended December 31, 2012. The estimated fair values allocated to the assets acquired and liabilities assumed relied upon fair value measurements based in part on Level 3 inputs. The valuation techniques used to assign fair values to inventory, property, plant and equipment, and intangible assets included the cost approach, market approach, relief-from-royalty approach, and other income approaches. The valuation techniques relied on a number of inputs which included the cost and condition of the property, plant and equipment, forecasted net sales and incomes, and royalty rates.
The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, accounts payable, and long-term debt. The carrying values for our financial instruments approximate fair value with the exception, at times, of long-term debt. At March 31, 2013, the fair value of outstanding debt was $227,286,000 compared to its carrying value of $214,423,000. The fair value of the Company’s Senior Subordinated 6.25% Notes was estimated based on quoted market prices, a Level 1 input.
11. DISCONTINUED OPERATIONS
For certain sale transactions, the Company has agreed to indemnify the buyer for various liabilities that may arise after the disposal date, subject to limits of time and amount. As of March 31, 2013, the Company has a contingent liability recorded for environmental remediation related to a discontinued operation. Management does not believe that the outcome of this claim, or other claims, would significantly affect the Company’s financial condition or results of operation.
12. EXIT ACTIVITY COSTS AND ASSET IMPAIRMENTS
The Company focuses on being the low-cost provider of its products by reducing operating costs and implementing lean manufacturing initiatives, which have in part led to the consolidation of facilities and product lines. The Company consolidated two facilities during 2012 in this effort. During this process, the Company has incurred exit activity costs, including contract termination costs, severance costs, and other moving and closing costs. These restructuring activities also resulted in $1,037,000 of asset impairment charges related to the facility consolidations during the three months ended March 31, 2012.
The following table provides a summary of where the exit activity costs and asset impairments were recorded in the statement of operations for the three months ended March 31 (in thousands):
Total exit activity costs and asset impairments
The following table reconciles the beginning and ending liability for exit activity costs relating to the Company’s facility consolidation efforts (in thousands):
Balance as of January 1
Exit activity costs recognized
Cash payments
Balance as of March 31
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13. INCOME TAXES
The Company’s provision for income taxes in interim periods is computed by applying forecasted annual effective tax rates to income or loss before income taxes for the interim period. In addition, non-recurring or discrete items, including interest on prior year tax liabilities, are recorded during the period in which they occur. To the extent that actual income or loss before taxes for the full year differs from the forecast estimates applied at the end of the most recent interim period, the actual tax rate recognized for the year ending December 31, 2013 could be materially different from the forecasted rate used for the three months ended March 31, 2013.
We recognized a benefit for income taxes of $2.3 million for the three months ended March 31, 2013, an effective tax rate of 38.2%. The effective tax rate for the first quarter of 2013 exceeded U.S. federal statutory rate of 35% by the net of discrete benefits partially offset by state taxes and non-deductible permanent differences. During the first quarter of 2012, we recognized a provision for income taxes of $0.9 million, an effective tax rate of 39.1%. The effective tax rate for the first quarter of 2013 and 2012 exceeded the U.S. federal statutory rate of 35% due to state taxes, discrete items, and non-deductible permanent differences.
14. NET EARNINGS PER SHARE
Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings 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 its equity compensation plans described in Note 9 of the consolidated financial statements. 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 of the options assumed to be exercised and the unrecognized expense related to the restricted stock and restricted stock unit awards assumed to have vested.
The following table sets forth the computation of basic and diluted loss (income) per share for the three months ended March 31 (in thousands):
Numerator:
Net (loss) income available to common shareholders
Denominator for basic earnings per share:
Weighted average shares outstanding
Denominator for diluted earnings per share:
Common stock options and restricted stock
Weighted average shares and conversions
For the three months ended March 31, 2013, all stock options, unvested restricted stock, and unvested restricted stock units were anti-dilutive and, therefore, not included in the dilutive loss per share calculation. The number of weighted average stock options, unvested restricted stock, and unvested restricted stock units that were not included in the dilutive loss per share calculation because the effect would have been anti-dilutive was 181,925 shares for the three months ended March 31, 2013.
15. SUPPLEMENTAL FINANCIAL INFORMATION
The following information sets forth the consolidating summary financial statements of the issuer (Gibraltar Industries, Inc.) and guarantors, which guarantee the Senior Subordinated 6.25% Notes due February 1, 2021, and the non-guarantors. The guarantors are wholly owned subsidiaries of the issuer and the guarantees are full, unconditional, joint and several.
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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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CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2013
(Loss) income from operations
Interest expense (income)
Loss from discontinued operations before taxes
Equity in earnings from subsidiaries
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THREE MONTHS ENDED MARCH 31, 2012
Net income
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Other comprehensive income (loss)
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Other comprehensive income:
Other comprehensive income
Total comprehensive income
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CONSOLIDATING BALANCE SHEETS
MARCH 31, 2013
Accounts receivable, net
Intercompany balances
Investment in subsidiaries
Shareholders’ equity
21
DECEMBER 31, 2012
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CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Net cash provided by (used in) operating activities of continuing operations
Net cash provided by (used in) operating activities
Intercompany financing
Net cash (used in) provided by financing activities
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Certain information set forth herein includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and, therefore are, or may be deemed to be, “forward-looking statements.” These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “estimates,” “seeks,” “projects,” “intends,” “plans,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, competition, strategies and the industry in which we operate. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those described in the “Risk Factors” disclosed in our Annual Report on Form 10-K. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained herein. In addition, even if our results of operations, financial condition and liquidity and the development of the industry in which we operate are consistent with the forward-looking statements contained in this quarterly report, those results or developments may not be indicative of results or developments in subsequent periods. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statements that we make herein speak only as of the date of those statements, and we undertake no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.
Overview
Gibraltar is a leading manufacturer and distributor of products for building and industrial markets. Our products provide structural and architectural enhancements for residential homes, low-rise retail, other commercial and professional buildings, industrial plants, bridges and a wide-variety of other structures. These products include ventilation products, mail storage solutions including mailboxes and package delivery products, rain dispersion products and accessories, bar grating, expanded metal, metal lath, and expansion joints and structural bearings. We serve customers throughout North America, Europe, Asia, and Central and South America including major home improvement retailers, distributors and contractors. As of March 31, 2013, we operated 44 facilities in 21 states, Canada, England, and Germany, giving us a broad platform for just-in-time delivery and support to our customers.
Our strategy is to position Gibraltar as a low-cost provider and market share leader in product areas that offer the opportunity for sales growth and margin enhancement over the long-term. We focus on operational excellence including lean initiatives throughout the Company to position Gibraltar as our customers’ low-cost provider of the products we offer. We continuously seek to improve our on-time delivery, quality, and service to position Gibraltar as a preferred supplier to our customers. We also strive to develop new products, enter new markets, expand market share in the residential markets, and further penetrate domestic and international building and industrial markets to strengthen our product leadership positions.
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The end markets served by our business are subject to economic conditions that are influenced by interest rates, commodity costs, demand for residential construction, and the level of non-residential construction and infrastructure projects. The United States construction markets continue an uneven recovery from an unprecedented recession that began in 2008, which led to reduced demand for the products we manufacture and distribute. In addition, tightened credit markets over the same period may have limited the ability of end customers to obtain financing for construction projects. While the economy has grown since the recession, the construction markets continue to face significant challenges. Construction markets have only recovered modestly and many economic indicators, such as new housing starts, which are rising, continue to remain at levels well below long-term averages.
Gibraltar continues to position the Company as a market share leader and low-cost provider of our products. Our focus has been to grow the business through acquisitions, introduction of new products, and programs to expand our market share. In addition, we strive for operational excellence through lean initiatives which has included closing or consolidating multiple facilities since January 2009, as well as, aggressively reducing operating costs throughout the Company to maximize cash flows generated from operating activities. As a result, we believe our break-even point has decreased significantly since 2008.
Recent Developments
On January 31, 2013, the Company issued $210.0 million of 6.25% Senior Subordinated Notes (6.25% Notes) due February 1, 2021. In connection with the issuance of the 6.25% Notes, the Company initiated a tender offer for the purchase of the outstanding $204.0 million of 8% Senior Subordinated Notes (8% Notes). Simultaneously with the closing of the sale of the 6.25% Notes, the Company purchased the 8% Notes that were tendered notes or called for redemption of all the remaining 8% Notes that were not purchased. In connection with the tender offer and redemption, the Company satisfied and discharged its obligations under the 8% Notes.
Regarding the growth of our business through acquisitions, Gibraltar purchased the assets of four businesses in separate transactions during 2012, one of which was acquired in the first quarter of 2012. The acquired product lines complement and expand the Company’s product portfolio and customer base in four key U.S. and Canadian markets:
Metal grating products for the oil sands region of Western Canada;
Function-critical components for public infrastructure construction and maintenance;
Perforated metal products for industrial applications; and
Exterior, retractable awnings and sun protection accessory products for new residential construction and home remodeling.
Gibraltar funded the aggregate investment of $43 million from existing cash on hand. Gibraltar’s results from operations include acquisitions from their respective dates of acquisition.
We have maintained a strong liquidity position in spite of significant investment to consolidate facilities, acquire businesses, introduce new products, and expand market share. We had no debt outstanding against our revolving credit facility throughout all of 2012 and the three months ended March 31, 2013. At March 31, 2013, our liquidity was $165 million including $30 million of cash and $135 million of availability under our revolving credit facility.
For the quarter ended March 31, 2013 our net sales improved 2.4% compared to the prior year. The improvement was the net result of the acquisitions noted above, offset by a decrease in sales for business units operating in both periods. While volume remained relatively flat, our selling prices decreased from prior year as a result of declining commodity costs for steel and aluminum. As such, our gross margins were compressed due to the less favorable alignment of material costs to customer selling prices. Furthermore, operating margins were impacted by expenses incurred from our recent acquisitions and their continued integration, along with a significant increase in our stock price which resulted in higher equity compensation costs. As a result, our operating margin declined to 2.6% for the first quarter of 2013 from 3.7% in the first quarter of 2012.
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Results of Operations
Three Months Ended March 31, 2013 Compared to the Three Months Ended March 31, 2012
The following table sets forth selected data from our statement of operations and the related percentage of net sales for the three months ended March 31 (in thousands):
Net sales increased by $4.6 million, or 2.4%, to $196.8 million for the three months ended March 31, 2013 from net sales of $192.2 million for the three months ended March 31, 2012. The following table sets forth the impact of the Company’s acquisitions on net sales for the three months ended March 31 (in thousands):
The increase in net sales from the prior year was primarily the result of the incremental sales generated by four acquisitions completed during 2012 which contributed to a sales growth of $12.4 million, or 6.4%, for the first quarter of 2013. Net sales from business units operating in both periods decreased 4.0% or $7.8 million, primarily the result of a 4.1% decrease in pricing to customers offset by a slight increase of 0.1% in volume. While overall volume was nearly unchanged from the first quarter of 2012, there was a modest volume increase for our products sold into multi-family building markets and domestic industrial markets. These increases were offset by declines in volume sold in residential markets and European markets, resulting from the unseasonably cold weather in several areas of the U.S. and the continued depressed economy in Europe, respectively. The lower selling prices were primarily the result of a decline in commodity costs for steel and aluminum and meeting selective competitive situations.
Our gross margin remained relatively flat at 18.4% for the three months ended March 31, 2013 compared to 18.5% for the three months ended March 31, 2012. Gross margin modestly improved in our infrastructure markets and the majority of our residential markets, including improvements resulting from the completion of the restructuring initiatives for our West Coast locations. However, these improvements were offset by the impact of a less favorable alignment of material costs to customer selling prices in our industrial markets, the result of declining raw material costs for the current quarter compared to the prior year and competitive pressures on pricing.
Selling, general, and administrative expenses (SG&A) increased by $2.5 million, or 8.9%, to $31.0 million for the three months ended March 31, 2013 from $28.5 million for the three months ended March 31, 2012. The $2.5 million increase was largely the result of a $2.0 million increase in equity compensation expense as compared to the first quarter of 2012 and $1.4 million of SG&A expense from acquired businesses. SG&A expenses as a percentage of net sales increased to 15.8% in the first quarter of 2013 compared to 14.8% in 2012.
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Interest expense increased by $6.5 million to $11.2 million for the three months ended March 31, 2013 compared to $4.7 million for the three months ended March 31, 2012. The significant increase in expense resulted from the tender and redemption of the $204 million of 8% Senior Subordinated Notes (8% Notes) on January 31, 2013. In connection with this transaction, the Company recorded a charge of approximately $7.2 million, which included $3.7 million for the prepayment premium paid to holders of the 8% Notes, $2.2 million to write-off deferred financing fees and $1.3 million for the unamortized original issue discount related to the 8% Notes. The $7.2 million charge was partially offset by lower interest expense of approximately $0.6 million resulting from the lower coupon rate on the 6.25% Notes as compared to the 8% Notes. During the three months ended March 31, 2013 and 2012, no amounts were outstanding under our revolving credit facility.
We recognized a benefit for income taxes of $2.3 million for the three months ended March 31, 2013, an effective tax rate of 38.2%. The effective tax rate for the first quarter of 2013 exceeded U.S. federal statutory rate of 35% by the net of discrete benefits partially offset by state taxes and non-deductible permanent differences. During the first quarter of 2012, we recognized a provision for income taxes of $0.9 million, an effective tax rate of 39.1%. The effective tax rate for the first quarters of 2012 and 2013 exceeded the U.S. federal statutory rate of 35% due to state taxes, discrete tax benefits, and non-deductible permanent differences.
Outlook
We expect 2013 to be an improvement over 2012. While the year is off to a slower than expected start, we expect revenue growth from acquisitions plus low to mid single digit organic growth. We believe that our earnings will benefit from contributions from our recent acquisitions, lower interest expense, improved West Coast operational performance and overall end market demand improvement. We also expect that our improved 2013 earnings will be partially offset by continued weakness in demand for and pricing of our industrial products into the third quarter, as well as, higher equity compensation expense that is valued on our rising stock price.
Liquidity and Capital Resources
General
Our principal capital requirements are to fund our operations with working capital, the purchase of capital improvements for our business and facilities, and to fund acquisitions. We will continue to invest in growth opportunities as appropriate while continuing to focus on working capital efficiency and profit improvement opportunities to minimize the cash invested to grow our business. During the first quarter of 2013, we invested cash in our working capital to meet the upcoming higher seasonal demand from our customers as noted below in the “Cash Flows” section of Item 2 of this Quarterly Report on Form 10-Q.
As of March 31, 2013, our liquidity of $165 million consisted of $30 million of cash and $135 million of availability under our revolving credit facility. We believe this liquidity, together with the cash expected to be generated from operations, should be sufficient to fund working capital needs and future growth. We continue to search for strategic acquisitions; and a larger acquisition may require additional borrowings and/or the issuance of our common stock.
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Our Senior Credit Agreement provides the Company with liquidity and capital resources for use by our U.S. operations. Historically, our foreign operations have generated cash flow from operations sufficient to invest in working capital and fund their capital improvements. As of March 31, 2013, our foreign subsidiaries held $20.9 million of cash. We believe cash held by our foreign subsidiaries provides our foreign operations with the necessary liquidity to meet future obligations and allows the foreign business units to reinvest in their operations. These cash resources could eventually be used to grow our business internationally through transactions similar to our acquisition of Edvan Industries, Inc. based near Edmonton, Alberta, Canada in 2012.
Over the long-term, we expect that future obligations, including strategic business opportunities such as acquisitions, may be financed through a number of sources, including internally available cash, availability under our revolving credit facility, new debt financing, the issuance of equity securities, or any combination of the above. Any potential acquisitions are evaluated on the basis of our ability to enhance our existing products, operations, or capabilities, as well as provide access to new products, markets, and customers, and improve shareholder value.
These expectations are forward-looking statements based upon currently available information and may change if conditions in the credit and equity markets further deteriorate or other circumstances change. To the extent that operating cash flows are lower than current levels, or sources of financing are not available, or available at acceptable terms, our future liquidity may be adversely affected.
Cash Flows
The following table sets forth selected cash flow data for the three months ended March 31 (in thousands):
Cash (used in) provided by:
Operating activities of continuing operations
Investing activities of continuing operations
Financing activities of continuing operations
Discontinued operations
Effect of exchange rate changes
During the three months ended March 31, 2013, net cash used in continuing operations totaled $12.7 million, primarily driven by a $24.8 million investment in working capital and by a net loss from continuing operations of $3.6 million partially offset by $7.2 million loss on early note redemption and non-cash charges including depreciation, amortization, and stock compensation of $8.6 million. Net cash used in operating activities for the three months ended March 31, 2012 was $13.0 million primarily driven by a $23.1 million investment in working capital, partially offset by income from continuing operations of $1.4 million and non-cash charges including depreciation, amortization, and stock compensation of $8.6 million.
During the three months ended March 31, 2013, the Company invested $24.8 million in its working capital to fund growth in sales and inventory to meet demand in our seasonally strongest periods. Cash invested in working capital and other net assets included $22.8 million and $9.8 million increases in accounts receivable and inventory, respectively, partially offset by a $13.3 million increase in accounts payable. The increase in accounts receivable was a result of increased sales volume. Inventory and accounts payable increased due to increased manufacturing activity. The increased sales volume and manufacturing activity were a direct result of the seasonality of customer order levels that impact our business. The decrease in accrued expenses and other non-current liabilities of $5.7 million was the largely the result of performance-based incentive compensation awards earned in 2012 that were paid during the first quarter of 2013 and estimated income tax payments made during the first quarter. These decreases were partially offset by increases in equity compensation awards treated as liability awards which resulted from stock price increases.
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Net cash used in investing activities of continuing operations for the three months ended March 31, 2013 of $1.9 million was primarily due to capital expenditures. Net cash used in investing activities of continuing operations for the three months ended March 31, 2012 of $5.4 million consisted of $2.7 million each for an acquisition and capital expenditures.
Net cash used in financing activities from continuing operations for the three months ended March 31, 2013, of $2.3 million was the result of redemption of the $204 million 8% Senior Subordinated Notes (8% Notes) along with $3.7 million payment of note redemption fees and $3.5 million for payments of deferred financing fees. These cash outflows were offset by proceeds from the issuance of the 6.25% Notes. Net cash used in financing activities from continuing operations for the three months ended March 31, 2012, of $0.8 million, primarily consisted of tax withholdings paid for stock issued to employees from the vesting of restricted stock units.
Senior Credit Agreement and Senior Subordinated Notes
Borrowings under the Senior Credit Agreement are secured by the trade receivables, inventory, personal property and equipment, and certain real property of the Company’s significant domestic subsidiaries. The Senior Credit Agreement provides for a revolving credit facility and letters of credit in an aggregate amount that does not exceed the lesser of (i) $200 million or (ii) a borrowing base determined by reference to the trade receivables, inventories, and property, plant, and equipment of the Company’s significant domestic subsidiaries. The Senior Credit Agreement provides the Company with more flexibility by allowing for Gibraltar to request additional financing from the banks to increase the revolving credit facility to $250 million.
The Senior Credit Agreement is currently committed through October 10, 2016. Only one financial covenant is contained within the 2011 Senior Credit Agreement, which requires the Company to maintain a fixed charge ratio (as defined in the agreement) of 1.25 to 1.00 or higher on a trailing four-quarter basis.
Borrowings under the Senior Credit Agreement bear interest at a variable interest rate based upon the London Interbank Offered Rate (LIBOR) plus an additional margin of 2.0% to 2.5% on the revolving credit facility based on the amount of availability under the revolving credit facility. The revolving credit facility also carries an annual facility fee of 0.375% on the undrawn portion of the facility and fees on outstanding letters of credit which are payable quarterly. During the three months ended and as of March 31, 2013, no amounts were outstanding on the revolving credit facility. We had outstanding letters of credit of $13.6 million as of March 31, 2013.
On January 31, 2013, the Company issued $210.0 million of 6.25% Senior Subordinated Notes (6.25% Notes) due February 1, 2021. In connection with the issuance of the 6.25% Notes, the Company initiated a tender offer for the purchase of the outstanding $204.0 million of 8% Senior Subordinated Notes (8% Notes). Simultaneously with the closing of the sale of the 6.25% Notes, the Company purchased the 8% Notes that were tendered notes or called for redemption of all the remaining 8% Notes that were not purchased. In connection with the tender offer and redemption, the Company satisfied and fully discharged its obligations under the 8% Notes.
The provisions of the 6.25% Notes include, without limitation, restrictions on indebtedness, liens, and distributions from restricted subsidiaries, asset sales, affiliate transactions, dividends, and other restricted payments. Dividend payments are subject to annual limits of the greater of $0.25 per share or $25 million. The 6.25% Notes are redeemable at the option of the Company, in whole or in part, at any time on or after February 1, 2017, at the redemption price (as defined in the Senior Subordinated 6.25% Notes Indenture). The redemption prices are 103.13%, and 101.56% of the principal amount thereof if the redemption occurs during the 12-month periods beginning February 1, of the years 2017 and 2018, respectively, and 100% of the principal amount thereof on and after February 1, 2019, in each case plus accrued and unpaid interest to the applicable redemption date. In addition, prior to February 1, 2016, the Company may redeem up to 35% of the aggregate principal amount of the Notes with the net cash proceeds of certain equity offerings by the Company at a redemption price of 106.25% of the principal amount thereof, plus accrued and unpaid interest to the redemption date. In the event of a Change in Control (as defined in the Senior Subordinated 6.25% Notes Indenture), each holder of the 6.25% Notes may require the Company to repurchase all or a portion of such holder’s 6.25% Notes at a purchase price equal to 101% of the principal amount thereof.
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Each of our significant domestic subsidiaries has guaranteed the obligations under the Senior Credit Agreement. The Senior Credit Agreement contains other provisions and events of default that are customary for similar agreements and may limit our ability to take various actions. The Senior Subordinated 6.25% Notes Indenture also contains provisions that limit additional borrowings based on the Company’s consolidated interest coverage ratio.
Off Balance Sheet Financing Arrangements
We have no off-balance sheet arrangements, other than operating leases, that have or are reasonable likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
Contractual Obligations
The Company incurred material changes in the “fixed rate debt” and “interest on fixed rate debt” categories of contractual obligations from those disclosed in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. During the quarter ended March 31, 2013, the Company issued $210 million of 6.25% Senior Subordinated Notes (6.25% Notes). In connection with the issuance of the 6.25% Notes, the Company purchased all of the outstanding $204 million 8% Senior Subordinated Notes that were tendered, and redeemed all of the remaining 8% Senior Subordinated Notes that were not tendered. The 6.25% Notes are fixed at 6.25% and are contractually due on February 1, 2021. The interest on the 6.25% Notes is due semi-annually each year until the due date on February 1, 2021.
All other contractual obligations have not changed materially from the disclosures included in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
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.
Our most critical accounting policies include the valuation of accounts receivable; valuation of inventory; allocation of purchase price of acquisitions; assessment of recoverability of depreciable and amortizable long-lived assets, goodwill, and other indefinite-lived intangible assets; and accounting for income taxes and deferred tax assets and liabilities, which are described in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
There have been no changes in critical accounting policies in the current year.
Related Party Transactions
A member of our Board of Directors, Gerald S. Lippes, is a partner in a law firm that provides legal services to Gibraltar. For the three months ended March 31, 2013 and 2012, the Company incurred expense of $0.5 million and $0.3 million, respectively, for legal services from this firm. At March 31, 2013 and December 31, 2012, the Company had $0.6 million and $0.5 million, respectively, recorded in accounts payable for amounts due to this law firm.
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Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2013-02, “Comprehensive Income (Topic 220) – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” The amendments in Topic 220 Update require a company to report the effect of significant reclassifications out of accumulated other comprehensive income (AOCI) on the respective line items in net income if the amount is required by U.S. GAAP to be reclassified in its entirety to net income. For amounts not required under U.S. GAAP to be reclassified in their entirety, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2012 and are to be applied prospectively. The Company adopted Topic 220 Update 2013-02 prospectively in 2013 and its adoption does not have a material impact on the Company’s consolidated financial statements.
In March 2013, the FASB issued Accounting Standards Update 2013-05, “Foreign Currency Matters (Topic 830) – Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity.” The amendments in Topic 830 Update require a company to release the cumulative translation adjustment into net income upon the loss of a controlling financial interest in a foreign subsidiary or group of assets. The amendments are effective prospectively beginning after December 15, 2013, and early adoption is permitted. The Company does not expect the adoption of Topic 830 Update 2013-05 to have a material impact of the Company’s consolidated financial results.
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 other financial market risks, primarily related to its long-term debt and foreign operations. There have been no material changes to the Company’s exposure to market risk since December 31, 2012.
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). The Company’s Chairman of the Board and Chief Executive Officer, President and Chief Operating Officer, and Senior Vice President and Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls as of the end of the period covered in this report. Based upon that evaluation and the definition of disclosure controls and procedures contained in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, the Company’s Chairman of the Board and Chief Executive Officer, President and Chief Operating Officer, and Senior Vice President and Chief Financial Officer have concluded that as of the end of such period the Company’s disclosure controls and procedures were effective.
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 this Quarterly Report on Form 10-Q that have materially affected the Company’s internal control over financial reporting.
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Not applicable.
In addition to the other information set forth in this report, you should carefully consider the risks discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operation, cash flows, and future prospects. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may materially adversely impact our business, financial condition, or operating results.
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6(a) Exhibits
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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.
(Registrant)
/s/ Brian J. Lipke
Chairman of the Board and
Chief Executive Officer
/s/ Henning N. Kornbrekke
/s/ Kenneth W. Smith
Senior Vice President and
Chief Financial Officer
Date: May 2, 2013
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