Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2011
OR
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o |
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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)
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Delaware
(State or other jurisdiction of incorporation or organization)
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16-1445150
(I.R.S. Employer Identification No.) |
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3556 Lake Shore Road, P.O. Box 2028,
Buffalo, New York
(Address of principal executive offices)
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14219-0228
(Zip Code) |
Registrants 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 þ No o
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
þ No o
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):
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
Indicated 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
October 31, 2011, the number of common shares outstanding was:
30,419,220.
GIBRALTAR INDUSTRIES, INC.
INDEX
2
PART I. FINANCIAL INFORMATION
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Item 1. |
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Financial Statements |
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2011 |
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2010 |
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2011 |
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2010 |
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Net sales |
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$ |
220,096 |
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$ |
169,741 |
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$ |
592,466 |
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$ |
493,339 |
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Cost of sales |
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177,133 |
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142,243 |
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474,030 |
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405,403 |
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Gross profit |
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42,963 |
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27,498 |
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118,436 |
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87,936 |
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Selling, general, and administrative expense |
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24,602 |
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23,262 |
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75,463 |
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72,078 |
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Income from operations |
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18,361 |
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4,236 |
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42,973 |
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15,858 |
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Interest expense |
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(4,869 |
) |
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(4,429 |
) |
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(14,321 |
) |
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(15,351 |
) |
Other (expense) income |
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(15 |
) |
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30 |
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46 |
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161 |
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Income (loss) before taxes |
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13,477 |
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(163 |
) |
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28,698 |
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|
668 |
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Provision for (benefit of) income taxes |
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6,094 |
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(944 |
) |
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12,628 |
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(314 |
) |
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Income from continuing operations |
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7,383 |
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781 |
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16,070 |
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982 |
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Discontinued operations: |
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(Loss) income before taxes |
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(276 |
) |
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677 |
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13,621 |
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(27,949 |
) |
Provision for (benefit of) income taxes |
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193 |
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261 |
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6,563 |
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(10,414 |
) |
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(Loss) income from discontinued
operations |
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(469 |
) |
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416 |
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7,058 |
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(17,535 |
) |
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Net income (loss) |
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$ |
6,914 |
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$ |
1,197 |
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$ |
23,128 |
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$ |
(16,553 |
) |
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Net income (loss) per share Basic: |
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Income from continuing operations |
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$ |
0.24 |
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$ |
0.03 |
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$ |
0.53 |
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$ |
0.03 |
|
(Loss) income from discontinued
operations |
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(0.01 |
) |
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0.01 |
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0.23 |
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(0.58 |
) |
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Net income (loss) |
|
$ |
0.23 |
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$ |
0.04 |
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$ |
0.76 |
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$ |
(0.55 |
) |
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Weighted average shares outstanding Basic |
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30,554 |
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30,325 |
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30,474 |
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30,295 |
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Net income (loss) per share Diluted: |
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Income from continuing operations |
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$ |
0.24 |
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$ |
0.03 |
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$ |
0.52 |
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$ |
0.03 |
|
(Loss) income from discontinued
operations |
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(0.01 |
) |
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|
0.01 |
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0.24 |
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(0.57 |
) |
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Net income (loss) |
|
$ |
0.23 |
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$ |
0.04 |
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$ |
0.76 |
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$ |
(0.54 |
) |
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Weighted average shares outstanding Diluted |
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30,639 |
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30,442 |
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30,620 |
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30,442 |
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See accompanying notes to consolidated financial statements
..
3
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME
(in thousands)
(unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
|
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|
2011 |
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|
2010 |
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2011 |
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2010 |
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|
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Net income (loss) |
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$ |
6,914 |
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$ |
1,197 |
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$ |
23,128 |
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$ |
(16,553 |
) |
Other comprehensive income (loss): |
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|
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Foreign currency translation adjustment |
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(4,662 |
) |
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4,151 |
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(1,451 |
) |
|
|
(1,064 |
) |
Adjustment to retirement benefit
liability,
net of tax |
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(31 |
) |
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19 |
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(93 |
) |
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50 |
|
Adjustment to post-retirement health
care
liability, net of tax |
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19 |
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(1 |
) |
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57 |
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|
1 |
|
Reclassification of unrealized loss on
interest rate swap, net of tax |
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1,206 |
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Other comprehensive (loss) income |
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(4,674 |
) |
|
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4,169 |
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(1,487 |
) |
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193 |
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|
Total comprehensive income (loss) |
|
$ |
2,240 |
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$ |
5,366 |
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$ |
21,641 |
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$ |
(16,360 |
) |
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|
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See accompanying notes to consolidated financial statements.
4
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
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September 30, |
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December 31, |
|
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2011 |
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2010 |
|
Assets |
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Current assets: |
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Cash and cash equivalents |
|
$ |
33,055 |
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$ |
60,866 |
|
Accounts receivable, net of reserve of $4,298 and $3,504 in 2011 and 2010 |
|
|
118,325 |
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|
70,371 |
|
Inventories |
|
|
110,967 |
|
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|
77,848 |
|
Other current assets |
|
|
24,352 |
|
|
|
20,229 |
|
Assets of discontinued operations |
|
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|
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|
13,063 |
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Total current assets |
|
|
286,699 |
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|
242,377 |
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Property, plant, and equipment, net |
|
|
154,483 |
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|
145,783 |
|
Goodwill |
|
|
348,551 |
|
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|
298,346 |
|
Acquired intangibles |
|
|
96,991 |
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|
66,301 |
|
Other assets |
|
|
6,915 |
|
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|
16,766 |
|
Equity method investment |
|
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|
|
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|
1,345 |
|
Assets of discontinued operations |
|
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|
|
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|
39,972 |
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|
|
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$ |
893,639 |
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$ |
810,890 |
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Liabilities and Shareholders Equity |
|
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Current liabilities: |
|
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|
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Accounts payable |
|
$ |
80,533 |
|
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$ |
56,775 |
|
Accrued expenses |
|
|
66,774 |
|
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|
36,785 |
|
Current maturities of long-term debt |
|
|
408 |
|
|
|
408 |
|
Liabilities of discontinued operations |
|
|
|
|
|
|
6,150 |
|
|
|
|
|
|
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|
Total current liabilities |
|
|
147,715 |
|
|
|
100,118 |
|
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|
|
|
|
|
|
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Long-term debt |
|
|
206,667 |
|
|
|
206,789 |
|
Deferred income taxes |
|
|
51,370 |
|
|
|
37,119 |
|
Other non-current liabilities |
|
|
22,314 |
|
|
|
23,221 |
|
Liabilities of discontinued operations |
|
|
|
|
|
|
2,790 |
|
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|
|
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Shareholders equity: |
|
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Preferred stock, $0.01 par value; authorized 10,000 shares; none
outstanding |
|
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Common stock, $0.01 par value; authorized 50,000 shares; 30,700 and
30,516
shares issued in 2011 and 2010 |
|
|
307 |
|
|
|
305 |
|
Additional paid-in capital |
|
|
235,902 |
|
|
|
231,999 |
|
Retained earnings |
|
|
236,042 |
|
|
|
212,914 |
|
Accumulated other comprehensive loss |
|
|
(3,547 |
) |
|
|
(2,060 |
) |
Cost of 281 and 219 common shares held in treasury in 2011 and 2010 |
|
|
(3,131 |
) |
|
|
(2,305 |
) |
|
|
|
|
|
|
|
Total shareholders equity |
|
|
465,573 |
|
|
|
440,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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$ |
893,639 |
|
|
$ |
810,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
See accompanying notes to consolidated financial statements.
5
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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|
|
|
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|
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
23,128 |
|
|
$ |
(16,553 |
) |
Income (loss) from discontinued operations |
|
|
7,058 |
|
|
|
(17,535 |
) |
|
|
|
|
|
|
|
Income from continuing operations |
|
|
16,070 |
|
|
|
982 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
19,515 |
|
|
|
18,049 |
|
Stock compensation expense |
|
|
3,895 |
|
|
|
3,599 |
|
Non-cash charges to interest expense |
|
|
1,689 |
|
|
|
3,762 |
|
Other non-cash adjustments |
|
|
1,437 |
|
|
|
1,167 |
|
Increase (decrease) in cash resulting from changes in the following (excluding
the effects of acquisitions): |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(35,041 |
) |
|
|
(23,419 |
) |
Inventories |
|
|
(11,449 |
) |
|
|
(1,030 |
) |
Other current assets and other assets |
|
|
9,606 |
|
|
|
7,348 |
|
Accounts payable |
|
|
13,485 |
|
|
|
18,575 |
|
Accrued expenses and other non-current liabilities |
|
|
11,331 |
|
|
|
3,670 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities of continuing operations |
|
|
30,538 |
|
|
|
32,703 |
|
Net cash (used in) provided by operating activities of discontinued operations |
|
|
(3,491 |
) |
|
|
21,725 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
27,047 |
|
|
|
54,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired |
|
|
(107,605 |
) |
|
|
|
|
Purchases of property, plant, and equipment |
|
|
(7,838 |
) |
|
|
(6,264 |
) |
Purchase of equity method investment |
|
|
(250 |
) |
|
|
(1,000 |
) |
Net proceeds from sale of property and equipment |
|
|
978 |
|
|
|
179 |
|
Net proceeds from sale of businesses |
|
|
59,029 |
|
|
|
29,164 |
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities of continuing operations |
|
|
(55,686 |
) |
|
|
22,079 |
|
Net cash provided by (used in) investing activities of discontinued operations |
|
|
2,089 |
|
|
|
(427 |
) |
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
(53,597 |
) |
|
|
21,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Long-term debt payments |
|
|
(74,260 |
) |
|
|
(58,967 |
) |
Proceeds from long-term debt |
|
|
73,849 |
|
|
|
8,559 |
|
Purchase of treasury stock at market prices |
|
|
(826 |
) |
|
|
(1,114 |
) |
Payment of deferred financing fees |
|
|
(34 |
) |
|
|
(164 |
) |
Excess tax benefit from stock compensation |
|
|
|
|
|
|
55 |
|
Net proceeds from issuance of common stock |
|
|
10 |
|
|
|
270 |
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(1,261 |
) |
|
|
(51,361 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
(27,811 |
) |
|
|
24,719 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
|
60,866 |
|
|
|
23,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
33,055 |
|
|
$ |
48,315 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
6
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
Common Stock |
|
|
Paid-In |
|
|
Retained |
|
|
Comprehensive |
|
|
Treasury Stock |
|
|
Shareholders' |
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Earnings |
|
|
Loss |
|
|
Shares |
|
|
Amount |
|
|
Equity |
|
Balance at December 31, 2010 |
|
|
30,516 |
|
|
$ |
305 |
|
|
$ |
231,999 |
|
|
$ |
212,914 |
|
|
$ |
(2,060 |
) |
|
|
219 |
|
|
$ |
(2,305 |
) |
|
$ |
440,853 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,128 |
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,451 |
) |
|
|
|
|
|
|
|
|
|
|
(1,451 |
) |
Adjustment to pension benefit liability, net of taxes of $59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(93 |
) |
|
|
|
|
|
|
|
|
|
|
(93 |
) |
Adjustment to post-retirement healthcare benefit liability,
net of taxes of $35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57 |
|
|
|
|
|
|
|
|
|
|
|
57 |
|
Stock compensation expense |
|
|
|
|
|
|
|
|
|
|
3,895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,895 |
|
Net settlement of restricted stock units |
|
|
177 |
|
|
|
2 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
62 |
|
|
|
(826 |
) |
|
|
(826 |
) |
Issuance of restricted stock |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercised |
|
|
1 |
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2011 |
|
|
30,700 |
|
|
$ |
307 |
|
|
$ |
235,902 |
|
|
$ |
236,042 |
|
|
$ |
(3,547 |
) |
|
|
281 |
|
|
$ |
(3,131 |
) |
|
$ |
465,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
7
GIBRALTAR INDUSTRIES, INC.
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 results of operations and other
comprehensive income for the three and nine months ended September 30, 2011 and 2010, the financial
position at September 30, 2011 and December 31, 2010, the statements of cash flow for the nine
months ended September 30, 2011 and 2010, and the statement of shareholders equity for the nine
months ended September 30, 2011 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 (GAAP), 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 Companys
Annual Report for the year ended December 31, 2010 as filed on Form 10-K.
The consolidated balance sheet at December 31, 2010 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 and nine month periods ended September 30, 2011 are not
necessarily indicative of the results to be expected for the full year.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(Update) 2011-04, Fair Value Measurement (Topic 820) Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. Update 2011-04 generally
clarifies the requirements for measuring fair value and for disclosing information about fair value
measurements. This Update results in common principles and requirements regarding fair value
measurements for U.S. GAAP and International Financial Reporting Standards. The amendments are
effective for interim and annual periods beginning after December 15, 2011 and are to be applied
prospectively. The Company does not expect the adoption of Update 2011-04 will have a material
impact on the Companys consolidated financial statements.
In June 2011, the FASB issued Update 2011-05, Comprehensive Income (Topic 220) Presentation of
Comprehensive Income. Under the amendments included in Update 2011-05, an entity has the option
to present the total of comprehensive income, the components of net income, and the components of
other comprehensive income either in a single continuous statement of comprehensive income or in
two separate but consecutive statements. Regardless of the option selected, an entity is required
to present on the face of the financial statements reclassification adjustments for items that are
reclassified from other comprehensive income to net income in the statements where the components
of net income and the components of other comprehensive income are presented. The amendments are
effective for fiscal years, and interim periods within those years, beginning after December 15,
2011 and are to be applied retrospectively. The Company does not expect the adoption of Update
2011-05 will have a material impact on the Companys consolidated results from operations,
financial position, or cash flows.
8
In September 2011, the FASB issued Update 2011-08, Intangibles Goodwill and Other (Topic 350)
Testing Goodwill for Impairment. Under the amendments included in Update 2011-08, an entity
has the option to first assess qualitative factors to determine whether the existence of events or
circumstances leads to a determination that it is more likely than not that the fair value of a
reporting unit is less than its carrying amount. If, after assessing the totality of events or
circumstances, an entity determines it is not more likely than not that the fair value of a
reporting unit is less than its carrying amount, then performing the two-step impairment test is
unnecessary. However, if an entity concludes otherwise, the two-step impairment test is required.
The amendments are effective for fiscal years beginning after December 15, 2011 although early
adoption is permitted. Although the amendments may change how goodwill is tested for impairment,
the Company does not expect the adoption of Update 2011-08 will have a material impact on the
timing or measurement of any goodwill impairments.
In September 2011, the FASB issued Update 2011-09, Compensation Retirement Benefits
Multiemployer Plans (Subtopic 715-80) Disclosures about an Employers Participation in a
Multiemployer Plan. The amendments included in Update 2011-09 require employers to provide
additional separate disclosures for multiemployer pension plans and multiemployer other
postretirement benefit plans. The amended disclosures provide users with more detailed information
about an employers involvement in these plans. The Company participates in various multiemployer
pension plans and will be required to disclose additional information about these plans in the
consolidated financial statements for the year ended December 31, 2011, the date that the Update
will be effective for public entities.
3. INVENTORIES
Inventories consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2011 |
|
|
2010 |
|
Raw material |
|
$ |
47,594 |
|
|
$ |
31,358 |
|
Work-in-process |
|
|
11,213 |
|
|
|
4,838 |
|
Finished goods |
|
|
52,160 |
|
|
|
41,652 |
|
|
|
|
|
|
|
|
Total inventories |
|
$ |
110,967 |
|
|
$ |
77,848 |
|
|
|
|
|
|
|
|
4. ACQUISITIONS
On April 1, 2011, the Company acquired all of the outstanding stock of The D.S. Brown Company (D.S.
Brown). D.S. Brown is located in North Baltimore, Ohio and is the largest U.S. manufacturer of
components for the bridge and highway transportation infrastructure industry including expansion
joint systems, bearing assemblies, pavement sealing systems, and other specialty components. The
acquisition of D.S. Brown provides the Company with a diversified product offering to the
infrastructure market. The results of D.S. Brown have been included in the Companys consolidated
financial results since the date of acquisition. The aggregate purchase consideration for the
acquisition of D.S. Brown was $97,643,000, net of a working capital adjustment.
9
On June 3, 2011, the Company acquired all of the outstanding stock of Pacific Award Metals, Inc.
(Award Metals). Award Metals operates six facilities in Arizona, California, Colorado, and
Washington and is a leading regional manufacturer of roof ventilation, roof trims, flashing and
rain ware, drywall trims, and specialized clips and connectors for concrete forms used in the new
construction and repair and remodel markets. The acquisition of Award Metals expands the breadth
of the Companys product offerings and allows the Company access to new customers. The results of
Award Metals have been included in the Companys consolidated financial results since the date of
acquisition. The fair value of the aggregate purchase consideration for the acquisition of Award
Metals was $13,369,000, net of a working capital adjustment. A portion of the purchase
consideration is payable in November 2012. The Company recorded a payable of $1,791,000 as of
September 30, 2011 to reflect this obligation. The acquisitions of D. S. Brown and Award Metals
are not considered significant to the Companys results of operations.
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 approximated $50,598,000, of which $5,241,000 is deductible for tax purposes. Goodwill
represents future economic benefits arising from other assets acquired that could not be
individually identified including workforce additions, growth opportunities, and increased presence
in the building products markets. The allocation of purchase consideration to the assets acquired
and liabilities assumed is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Award |
|
|
|
D.S. Brown |
|
|
Metals |
|
Working capital |
|
$ |
16,803 |
|
|
$ |
4,177 |
|
Property, plant, and equipment |
|
|
14,481 |
|
|
|
2,794 |
|
Intangible assets |
|
|
33,300 |
|
|
|
2,101 |
|
Other assets |
|
|
230 |
|
|
|
75 |
|
Other liabilities |
|
|
(13,441 |
) |
|
|
(106 |
) |
Goodwill |
|
|
46,270 |
|
|
|
4,328 |
|
|
|
|
|
|
|
|
Fair value of purchase consideration |
|
$ |
97,643 |
|
|
$ |
13,369 |
|
|
|
|
|
|
|
|
The acquired intangible assets consisted of unpatented technology and patents with a fair value of
$16,560,000 (15 year estimated useful life), trademarks with a fair value of $11,470,000
(indefinite useful life), customer relationships with a fair value of $5,970,000 (16 year useful
life), backlog with a fair value of $1,200,000 (1.5 year useful life), and non-compete agreements
with a fair value of $201,000 (4 year useful life).
The acquisitions of D.S. Brown and Award Metals were financed through cash on hand and debt
available under the Companys revolving credit facility. The Company incurred certain
acquisition-related costs, primarily composed of legal and consulting fees of $156,000 and $770,000
for the three and nine months ended September 30, 2011, 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
$2,467,000 for the nine months ended September 30, 2011 related to the recognition of inventory at
fair value when allocating the purchase price of the acquisitions.
5. GOODWILL AND RELATED INTANGIBLE ASSETS
Goodwill
The changes in the carrying amount of goodwill for the nine months ended September 30, 2011 are as
follows (in thousands):
|
|
|
|
|
Balance as of December 31, 2010 |
|
$ |
298,346 |
|
Acquired goodwill |
|
|
50,598 |
|
Foreign currency translation |
|
|
(393 |
) |
|
|
|
|
Balance at September 30, 2011 |
|
$ |
348,551 |
|
|
|
|
|
10
The goodwill balances as of September 30, 2011 and December 31, 2010 are net of accumulated
impairment losses of $125,597,000.
The Company recorded intangible asset impairment charges of $76,964,000 during the year ended
December 31, 2010. The Company concluded no new indicators of goodwill impairment existed as of
September 30, 2011 and an interim test was not performed. The Company will continue to monitor
impairment indicators and financial results in future periods. If cash flows change or if the
market value of the Companys stock does not increase, there may be additional impairment charges.
Impairment charges could be based on factors such as the Companys stock price, forecasted cash
flows, assumptions used, control premiums, or other variables.
Acquired Intangible Assets
Acquired intangible assets consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
|
December 31, 2010 |
|
|
|
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Estimated |
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Amortization |
|
|
Life |
Indefinite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks |
|
$ |
46,763 |
|
|
$ |
|
|
|
$ |
35,403 |
|
|
$ |
|
|
|
Indefinite |
Finite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks |
|
|
1,968 |
|
|
|
881 |
|
|
|
1,968 |
|
|
|
760 |
|
|
2 to 15 Years |
Unpatented technology |
|
|
22,117 |
|
|
|
3,173 |
|
|
|
5,557 |
|
|
|
2,239 |
|
|
5 to 20 Years |
Customer relationships |
|
|
48,336 |
|
|
|
19,594 |
|
|
|
42,469 |
|
|
|
16,832 |
|
|
5 to 16 Years |
Non-compete agreements |
|
|
2,857 |
|
|
|
2,202 |
|
|
|
2,656 |
|
|
|
1,921 |
|
|
5 to 10 Years |
Backlog |
|
|
1,200 |
|
|
|
400 |
|
|
|
|
|
|
|
|
|
|
1 to 2 Years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,478 |
|
|
|
26,250 |
|
|
|
52,650 |
|
|
|
21,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total acquired intangible assets |
|
$ |
123,241 |
|
|
$ |
26,250 |
|
|
$ |
88,053 |
|
|
$ |
21,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the acquired intangible asset amortization expense for the
three and nine months ended September 30 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Amortization expense |
|
$ |
1,706 |
|
|
$ |
1,292 |
|
|
$ |
4,579 |
|
|
$ |
3,878 |
|
Amortization expense related to acquired intangible assets for the remainder of fiscal 2011 and the
next five years thereafter is estimated as follows (in thousands):
|
|
|
|
|
2011 |
|
$ |
1,731 |
|
2012 |
|
$ |
6,602 |
|
2013 |
|
$ |
5,701 |
|
2014 |
|
$ |
4,773 |
|
2015 |
|
$ |
4,637 |
|
2016 |
|
$ |
4,302 |
|
11
6. EQUITY METHOD INVESTMENT
On May 24, 2010, the Company entered into a membership interest purchase agreement to acquire a 10%
membership interest in Structural Soft, LLC (Structural Soft) for $1,500,000. Structural Soft is a
developer of software used in the design of residential construction projects. The investment was
accounted for using the equity method of accounting, under which the Companys share of the
earnings of the investee was recognized in income as earned and distributions are credited against
the investment when received. The Companys proportionate share in the net assets of Structural
Soft and an equity-method intangible asset aggregated $1,345,000 at December 31, 2010.
The Company sold the membership interest in Structural Soft on March 10, 2011 as a part of the
transaction to sell the stock of the United Steel Products business as disclosed in Note 15.
7. NOTES RECEIVABLE
The Company holds three notes receivable from various divestitures and real estate transactions.
As of September 30, 2011 and December 31, 2010, the notes receivable aggregated $9,601,000 and
$9,659,000, respectively. The current portion of the notes receivable is included in other current
assets and the long-term portion of the notes receivable are included in other assets. Each note
receivable is evaluated for collectability each reporting period on an individual basis.
Collectability is primarily evaluated on the financial condition of the debtor and whether and to
what extent the debtor has complied with the terms of the underlying note agreements. No
allowances for credit losses were established for the notes receivable during the three and nine
months ended September 30, 2011 and 2010. Interest income is recognized on an accrual basis based
upon fixed rates as defined in each note receivable agreement and classified as a reduction to
interest expense on the consolidated statement of operations.
8. RELATED PARTY TRANSACTIONS
A member of the Companys Board of Directors, Gerald S. Lippes, is a partner in a law firm that
provides legal services to the Company. At September 30, 2011 and December 31, 2010, the Company
had $342,000 and $266,000, respectively, recorded in accounts payable for amounts due to this law
firm. For the three and nine months ended September 30, the Company incurred the following
expenses for legal service from this firm, including services provided in connection with the sale
of businesses and recognized as a component of discontinued operations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Selling, general, and administrative expense |
|
$ |
287 |
|
|
$ |
118 |
|
|
$ |
1,341 |
|
|
$ |
509 |
|
Discontinued operations |
|
|
6 |
|
|
|
|
|
|
|
176 |
|
|
|
154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total related-party legal expense |
|
$ |
293 |
|
|
$ |
118 |
|
|
$ |
1,517 |
|
|
$ |
663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A member of the Companys Board of Directors, Robert E. Sadler, Jr., is a member of the Board of
Directors of M&T Bank Corporation, one of the eleven participating lenders which have committed
capital under the Companys Third Amended and Restated Credit Agreement dated July 24, 2009 (the
2009 Senior Credit Agreement). As of September 30, 2011, the 2009 Senior Credit Agreement provided
the Company with a revolving credit facility with availability up to $200 million. See Note 9 to
the consolidated financial statements for the amounts outstanding on the revolving credit facility
as of September 30, 2011 and December 31, 2010.
12
9. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2011 |
|
|
2010 |
|
Senior Subordinated 8% Notes recorded net
of unamortized discount of $1,767 and
$2,027 in 2011 and 2010 |
|
$ |
202,233 |
|
|
$ |
201,973 |
|
Other debt |
|
|
4,842 |
|
|
|
5,224 |
|
|
|
|
|
|
|
|
Total debt |
|
|
207,075 |
|
|
|
207,197 |
|
Less current maturities |
|
|
408 |
|
|
|
408 |
|
|
|
|
|
|
|
|
Total long-term debt |
|
$ |
206,667 |
|
|
$ |
206,789 |
|
|
|
|
|
|
|
|
Standby letters of credit of $14,342,000 have been issued under the 2009 Senior Credit Agreement to
third parties on behalf of the Company as of September 30, 2011. These letters of credit reduce
the amount otherwise available under the revolving credit facility. As of September 30, 2011, the
Company had $125,360,000 of availability under the revolving credit facility.
Borrowings under the 2009 Senior Credit Agreement are secured by the trade receivables, inventory,
personal property and equipment, and certain real property of the Companys significant domestic
subsidiaries. The 2009 Senior Credit Agreement provides for a revolving credit facility and
letters of credit in an aggregate amount that do 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 Companys significant domestic subsidiaries. The revolving credit
facility is committed through August 30, 2012. The Company amended the 2009 Senior Credit
Agreement on October 11, 2011 to significantly extend the maturity date of the debt at competitive
interest rates in the current capital market. See Note 19 of the consolidated financial statements
for more information regarding this subsequent event.
Borrowings under the revolving credit facility bear interest at a variable rate based upon the
London Interbank Offered Rate (LIBOR), with a LIBOR floor of 1.50%, plus 3.25% or, at the Companys
option, an alternate base rate. The revolving credit facility also carries an annual facility fee
of 0.50% on the entire facility, whether drawn or undrawn, and fees on outstanding letters of
credit which are payable quarterly.
On a trailing four-quarter basis, the 2009 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 September 30, 2011, the Company was in compliance with this
financial covenant. The 2009 Senior Credit Agreement contains other provisions and events of
default that are customary for similar agreements and may limit the Companys ability to take
various actions. The Companys significant domestic subsidiaries have guaranteed the obligations
under the Senior Credit Agreement.
On December 8, 2005, the Company issued $204,000,000 of Senior Subordinated 8% Notes (8% Notes),
due December 1, 2015, at a discount to yield 8.25%. The 8% Notes are guaranteed by certain
existing and future domestic subsidiaries and are not subject to any sinking fund requirements.
10. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company is exposed to certain risks relating to its ongoing business operations. From time to
time, the Company may use derivative instruments to manage interest rate risk. Interest rate swaps
have been entered into in prior periods to manage interest rate risk associated with the Companys
variable-rate borrowings. The Company had an interest rate swap outstanding with a notional amount
of $57,500,000, which expired on December 22, 2010. The Company designated this interest rate swap
as a cash flow hedge at inception.
13
On February 1, 2010, the Company sold the majority of the assets of the Processed Metal Products
business as disclosed in Note 15 of the consolidated financial statements. The Company used the
proceeds from the sale together with cash generated from operations to repay all remaining
variable-rate debt during the three months ended March 31, 2010. Accordingly, all losses
previously deferred in accumulated other comprehensive loss related to the interest rate swap were
reclassified to interest expense during the three months ended March 31, 2010. Changes in the fair
value of the swap continued to be recorded in earnings until the swap expired.
As noted above, all losses reported as a component of accumulated other comprehensive loss related
to the interest rate swap were reclassified into earnings as interest expense during the three
months ended March 31, 2010. Additionally, changes in the fair value of the interest rate swap
were recorded in current earnings as interest expense or income during the three and nine months
ended September 30, 2010.
The following table summarizes the gains and losses recorded in interest expense and other
comprehensive income as a result of the interest rate swap for the three and nine months ended
September 30 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Adjustments to interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss reclassified from accumulated other comprehensive income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,899 |
|
Loss from changes in the fair value of the ineffective
portion of the interest rate swap |
|
|
|
|
|
|
54 |
|
|
|
|
|
|
|
170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loss included in interest expense |
|
$ |
|
|
|
$ |
54 |
|
|
$ |
|
|
|
$ |
2,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized loss reclassified to interest expense, net of taxes |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
302 |
|
Unrealized loss reclassified to interest expense, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain included in other comprehensive income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
11. EMPLOYEE RETIREMENT AND OTHER POST-RETIREMENT BENEFIT PLANS
The following tables present the components of net periodic pension and other post-retirement
benefit costs charged to expense for the three and nine months ended September 30 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefit |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Service cost |
|
$ |
11 |
|
|
$ |
20 |
|
|
$ |
31 |
|
|
$ |
60 |
|
Interest cost |
|
|
35 |
|
|
|
42 |
|
|
|
105 |
|
|
|
128 |
|
Amortization of unrecognized prior service cost |
|
|
4 |
|
|
|
29 |
|
|
|
11 |
|
|
|
83 |
|
Gain amortization |
|
|
(55 |
) |
|
|
|
|
|
|
(163 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
(5 |
) |
|
$ |
91 |
|
|
$ |
(16 |
) |
|
$ |
271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-retirement Benefits |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Service cost |
|
$ |
3 |
|
|
$ |
3 |
|
|
$ |
10 |
|
|
$ |
10 |
|
Interest cost |
|
|
70 |
|
|
|
57 |
|
|
|
209 |
|
|
|
170 |
|
Amortization of unrecognized prior service cost |
|
|
|
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(3 |
) |
Loss amortization |
|
|
31 |
|
|
|
4 |
|
|
|
93 |
|
|
|
12 |
|
Curtailment benefit |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
104 |
|
|
$ |
60 |
|
|
$ |
311 |
|
|
$ |
181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12. ACCUMULATED OTHER COMPREHENSIVE INCOME
The cumulative balance of each component of accumulated other comprehensive (loss) income, net of
tax, is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized |
|
|
|
|
|
|
Foreign |
|
|
Minimum |
|
|
Post- |
|
|
Accumulated |
|
|
|
Currency |
|
|
Pension |
|
|
Retirement |
|
|
Other |
|
|
|
Translation |
|
|
Liability |
|
|
Health Care |
|
|
Comprehensive |
|
|
|
Adjustment |
|
|
Adjustment |
|
|
Costs |
|
|
(Loss) Income |
|
Balance as of December 31, 2010 |
|
$ |
(1,214 |
) |
|
$ |
258 |
|
|
$ |
(1,104 |
) |
|
$ |
(2,060 |
) |
Current period change |
|
|
(1,451 |
) |
|
|
(93 |
) |
|
|
57 |
|
|
|
(1,487 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2011 |
|
$ |
(2,665 |
) |
|
$ |
165 |
|
|
$ |
(1,047 |
) |
|
$ |
(3,547 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
13. 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 range that typically equals three to four years.
15
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 Companys 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), shares of restricted stock, and non-qualified stock options that were issued during the
nine months ended September 30 along with the weighted average grant date fair value of each award:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
Number of |
|
|
Grant Date |
|
|
Number of |
|
|
Grant Date |
|
Awards |
|
Awards |
|
|
Fair Value |
|
|
Awards |
|
|
Fair Value |
|
Restricted stock units |
|
|
315,834 |
|
|
$ |
11.05 |
|
|
|
169,867 |
|
|
$ |
16.80 |
|
Restricted shares |
|
|
6,000 |
|
|
$ |
13.63 |
|
|
|
6,000 |
|
|
$ |
12.74 |
|
Non-qualified stock options |
|
|
239,000 |
|
|
$ |
5.19 |
|
|
|
131,000 |
|
|
$ |
4.62 |
|
On March 24, 2011, the Companys Chairman and Chief Executive Officer surrendered a portion of his
2010 restricted stock unit grant. The unamortized portion of compensation expense related to these
awards, totaling $885,000, was accelerated and recognized as compensation included in selling,
general, and administrative expense for the nine months ended September 30, 2011.
In September 2009, the Company awarded 905,000 performance stock units. As of September 30, 2011,
868,000 of the originally awarded performance stock units remain outstanding after forfeitures and
re-issuances. The final number of performance stock units earned will be determined based on the
Companys total stockholder returns relative to a peer group for three separate performance
periods, consisting of the years ending December 31, 2009, 2010, and 2011. The performance stock
units earned will be converted to cash based on the trailing 90-day closing price of the Companys
common stock as of the last day of the third performance period and will be paid in January 2012.
During the first two performance periods consisting of the years ended December 31, 2010 and 2009,
participants earned 0% and 34% of target respectively, aggregating 100,300 performance stock units
compared to the target of 589,834 awards.
The cost of the performance stock awards will be accrued over the vesting period which ends
December 31, 2011. As of September 30, 2011 and December 31, 2010, the value of the performance
stock units accrued was based on a weighted average fair value of $2.43 and $7.92 per unit awarded,
respectively. The fair value per unit awarded was estimated using the actual performance stock
units earned during the first two performance periods ended December 31, 2010 and 2009, an estimate
of the number of units expected to be earned during the remaining performance period ending
December 31, 2011, and the estimated trailing 90-day closing price of the Companys stock as of
December 31, 2011 discounted to present value. The following table summarizes the compensation
expense recognized from the change in fair value and vesting of performance stock units awarded for
the three and nine months ended September 30 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Performance stock unit compensation expense |
|
$ |
(1,026 |
) |
|
$ |
59 |
|
|
$ |
(1,974 |
) |
|
$ |
42 |
|
16
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 Companys 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 his or her
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 five equal annual cash installments.
The fair value of restricted stock units held in the MSPP equals the trailing 200-day closing price
of the Companys common stock as of the last day of the period. During the nine months ended
September 30, 2011 and 2010, 155,882 and 144,536 restricted stock units, respectively, including
the company-match, were credited to participant accounts. At September 30, 2011 and December 31,
2010, the value of the restricted stock units in the MSPP was $11.07 and $11.03 per unit,
respectively. At September 30, 2011 and December 31, 2010, 524,844 and 457,343 restricted stock
units, including the company-match, were credited to participant accounts including 65,010 and
84,635, respectively, of unvested restricted stock units.
14. FAIR VALUE MEASUREMENTS
FASB 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 or, in the absence of a principal market,
the most advantageous market for the asset or liability. Fair value is defined based upon an exit
price model.
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 our own assumptions used to measure assets and liabilities at fair value. A
financial asset or liabilitys classification within the hierarchy is determined based on the
lowest level input that is significant to the fair value measurement.
As disclosed in Note 10, an interest rate swap expired in 2010 and the Company does not hold any
derivatives as of September 30, 2011. The Company does not have any other material assets or
liabilities carried at fair value and measured on a recurring basis as of September 30, 2011.
The Companys financial instruments primarily consist of cash and cash equivalents, accounts
receivable, notes 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
September 30, 2011, the fair value of outstanding debt was $203,743,000 compared to its carrying
value of $207,075,000. The fair value of the Companys Senior Subordinated 8% Notes was estimated
based on quoted market prices.
As described in Note 4, the Company completed two acquisitions during the nine months ended
September 30, 2011. 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 allocate fair values to inventory; property, plant, and equipment; and
intangible assets included the cost approach, market approach, relief-from-royalty income approach,
and other income approaches. The valuation techniques relied on a number of inputs which included
the cost and condition of property, plant, and equipment, forecasted net sales and income, and
royalty rates.
17
15. DISCONTINUED OPERATIONS
On March 10, 2011, the Company sold the stock of the United Steel Products business (USP) for cash
proceeds of $59,029,000 including a working capital adjustment. The divestiture of USP allowed the
Company to allocate capital resources to businesses with strong market leadership positions and
growth potential. The Company recognized a pre-tax gain of $14,022,000 from the transaction.
On February 1, 2010, the Company sold the majority of the assets of the Processed Metal Products
business. The assets were sold for $29,164,000, including a working capital adjustment. This
transaction finalized the Companys exit from the steel processing business and established the
Company solely as a manufacturer and distributor of products for building and industrial markets.
The Company incurred an after-tax loss of $19,451,000 from the transaction, net of an $11,424,000
tax benefit for the nine months ended September 30, 2010. The Company did not sell certain real
estate held by the Processed Metal Products business and the receivables generated from the
operation of the business prior to its sale. Subsequent to February 1, 2010, the Company sold the
real estate and collected these receivables net of uncollectible amounts. The transactions to
dispose of the remaining assets of this business were completed during the three and nine month
periods ended September 30, 2011 which resulted in the recognition of gains and losses. As of
December 31, 2010, the remaining property, plant, and equipment were classified as assets of
discontinued operations on the consolidated balance sheet. These assets were held for sale as of
December 31, 2010 and reflected at the lesser of their carrying values or fair values less cost to
sell.
The results of operations for USP and the Processed Metal Products business have been classified as
discontinued operations in the consolidated financial statements for all periods presented. The
Company allocates interest to its discontinued operations in accordance with FASB ASC Subtopic
205-20, Presentation of Financial Statements Discontinued Operations.
Components of the (loss) income from discontinued operations before taxes, including the interest
allocated to discontinued operations, for the three and nine months ended September 30 are as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Net sales |
|
$ |
|
|
|
$ |
12,320 |
|
|
$ |
9,057 |
|
|
$ |
54,596 |
|
Operating expenses |
|
|
(276 |
) |
|
|
(11,326 |
) |
|
|
(9,196 |
) |
|
|
(50,330 |
) |
Gain (loss) on sale of business |
|
|
|
|
|
|
|
|
|
|
14,022 |
|
|
|
(30,875 |
) |
Interest expense allocation |
|
|
|
|
|
|
(317 |
) |
|
|
(262 |
) |
|
|
(1,340 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from
discontinued operations before
taxes |
|
$ |
(276 |
) |
|
$ |
677 |
|
|
$ |
13,621 |
|
|
$ |
(27,949 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
16. EXIT ACTIVITY COSTS AND ASSET IMPAIRMENTS
The Company has focused 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 its
facilities and production lines. The Company consolidated two facilities in the nine months ended
September 30, 2011 and six facilities during 2010 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. During 2011, the Company continued to incur exit activity costs for the
facilities consolidated in previous years and some other ongoing restructuring activities. These
restructuring activities resulted in $448,000 and $753,000 of asset impairment charges related to
the facility consolidations during the nine months ended September 30, 2011 and 2010, respectively.
18
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 and nine months ended September 30 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Cost of sales |
|
$ |
522 |
|
|
$ |
438 |
|
|
$ |
1,697 |
|
|
$ |
902 |
|
Selling, general, and administrative expense |
|
|
(7 |
) |
|
|
|
|
|
|
476 |
|
|
|
77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total exit activity and costs and asset
impairments |
|
$ |
515 |
|
|
$ |
438 |
|
|
$ |
2,173 |
|
|
$ |
979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles the beginning and ending liability for exit activity costs relating
to the Companys facility consolidation efforts (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
Balance as of December 31 |
|
$ |
2,069 |
|
|
$ |
1,781 |
|
Exit activity costs recognized |
|
|
1,725 |
|
|
|
226 |
|
Cash payments |
|
|
(1,896 |
) |
|
|
(1,059 |
) |
|
|
|
|
|
|
|
Balance as of September 30 |
|
$ |
1,898 |
|
|
$ |
948 |
|
|
|
|
|
|
|
|
17. INCOME TAXES
The following table summarizes the provision for income taxes for continuing operations for the
three and nine months ended September 30 and the applicable effective tax rates (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Provision for (benefit of) income taxes |
|
$ |
6,094 |
|
|
$ |
(944 |
) |
|
$ |
12,628 |
|
|
$ |
(314 |
) |
Effective tax rate |
|
|
45.2 |
% |
|
|
579.1 |
% |
|
|
44.0 |
% |
|
|
-47.0 |
% |
The Companys 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, 2011 could be
materially different from the forecasted rate used for the nine months ended September 30, 2011.
The provision of income taxes resulted in an effective tax rate of 45.2% and 44.0% for the three
and nine months ended September 30, 2011, respectively. The effective tax rate for the interim
periods of 2011 exceeded the U.S. federal statutory tax rate of 35% due to the recognition of
non-deductible permanent differences and state taxes.
A change in forecasted earnings caused a significant change in the forecasted annual effective tax
rate during the three months ended September 30, 2010. As a result, the Company recognized a tax
benefit for continuing operations during the three months ended September 30, 2010 due to the
change in the year-to-date provision for income taxes. The provision for income taxes for
continuing operations for the nine months ended September 30, 2010 was based on the most recent
estimate of the income tax provision forecasted for the full year. Small changes in the Companys
forecasted earnings had a significant impact on the Companys effective tax rate for the full year
as a result of pre-tax earnings approximating break-even, non-deductible permanent items, and
certain state taxes.
19
18. 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 Companys case, comprise shares issuable
under its equity compensation plans described in Note 13 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 earnings per share for the
three and nine months ended September 30 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
7,383 |
|
|
$ |
781 |
|
|
$ |
16,070 |
|
|
$ |
982 |
|
(Loss) income from discontinued operations |
|
|
(469 |
) |
|
|
416 |
|
|
|
7,058 |
|
|
|
(17,535 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders |
|
$ |
6,914 |
|
|
$ |
1,197 |
|
|
$ |
23,128 |
|
|
$ |
(16,553 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
30,554 |
|
|
|
30,325 |
|
|
|
30,474 |
|
|
|
30,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
30,554 |
|
|
|
30,325 |
|
|
|
30,474 |
|
|
|
30,295 |
|
Common stock options and restricted stock |
|
|
85 |
|
|
|
117 |
|
|
|
146 |
|
|
|
147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares and conversions |
|
|
30,639 |
|
|
|
30,442 |
|
|
|
30,620 |
|
|
|
30,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19. SUBSEQUENT EVENT
On October 11, 2011, the Company entered into the Fourth Amended and Restated Credit Agreement with
a syndicate of ten banks (2011 Senior Credit Agreement). The 2011 Senior Credit Agreement amends
and restates the 2009 Senior Credit Agreement as identified in Notes 8 and 9 of the consolidated
financial statements.
The 2011 Senior Credit Agreement provides for a revolving credit facility and letters of credit not
to 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 Companys 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 2011 Senior Credit Agreement. The
Company also has the opportunity to enter into a term loan in the principal amount of $35 million
subject to conditions set forth in the 2011 Senior Credit Agreement.
The terms of the 2011 Senior Credit Agreement provide that the revolving credit facility will
terminate on the earlier of October 10, 2016 or six months prior to the maturity date of the
Companys 8% Notes, which are due December 1, 2015. All revolving credit borrowings must be repaid
on or before the maturity date. The term loan would be payable in quarterly installments and
mature three years after the term loan funding date on which date the outstanding balance of the
term loan is payable in full.
20
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. Interest rates on the revolving credit facility and term loan will continue to be based on
the London Interbank Offering Rate (LIBOR) plus an additional margin of 200 to 250 basis points on
the revolving credit facility and 300 to 350 basis points on the term loan. In addition, the
revolving credit facility is subject to an annual commitment fee calculated at 0.375% of the daily
average undrawn balance of the revolving credit facility.
20. 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 8% 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.
21
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2011
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Industries, |
|
|
Guarantor |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
Net sales |
|
$ |
|
|
|
$ |
198,469 |
|
|
$ |
26,134 |
|
|
$ |
(4,507 |
) |
|
$ |
220,096 |
|
Cost of sales |
|
|
|
|
|
|
159,372 |
|
|
|
22,204 |
|
|
|
(4,443 |
) |
|
|
177,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
39,097 |
|
|
|
3,930 |
|
|
|
(64 |
) |
|
|
42,963 |
|
Selling, general, and administrative expense |
|
|
183 |
|
|
|
21,915 |
|
|
|
2,504 |
|
|
|
|
|
|
|
24,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations |
|
|
(183 |
) |
|
|
17,182 |
|
|
|
1,426 |
|
|
|
(64 |
) |
|
|
18,361 |
|
Interest (expense) income |
|
|
(4,349 |
) |
|
|
(568 |
) |
|
|
48 |
|
|
|
|
|
|
|
(4,869 |
) |
Other income (expense) |
|
|
|
|
|
|
8 |
|
|
|
(23 |
) |
|
|
|
|
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before taxes |
|
|
(4,532 |
) |
|
|
16,622 |
|
|
|
1,451 |
|
|
|
(64 |
) |
|
|
13,477 |
|
(Benefit of) provision for income taxes |
|
|
(1,768 |
) |
|
|
7,398 |
|
|
|
464 |
|
|
|
|
|
|
|
6,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(2,764 |
) |
|
|
9,224 |
|
|
|
987 |
|
|
|
(64 |
) |
|
|
7,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before taxes |
|
|
|
|
|
|
(276 |
) |
|
|
|
|
|
|
|
|
|
|
(276 |
) |
Provision for income taxes |
|
|
|
|
|
|
193 |
|
|
|
|
|
|
|
|
|
|
|
193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations |
|
|
|
|
|
|
(469 |
) |
|
|
|
|
|
|
|
|
|
|
(469 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings from subsidiaries |
|
|
9,742 |
|
|
|
987 |
|
|
|
|
|
|
|
(10,729 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
6,978 |
|
|
$ |
9,742 |
|
|
$ |
987 |
|
|
$ |
(10,793 |
) |
|
$ |
6,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2010
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Industries, |
|
|
Guarantor |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
Net sales |
|
$ |
|
|
|
$ |
151,456 |
|
|
$ |
22,389 |
|
|
$ |
(4,104 |
) |
|
$ |
169,741 |
|
Cost of sales |
|
|
|
|
|
|
126,910 |
|
|
|
19,844 |
|
|
|
(4,511 |
) |
|
|
142,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
24,546 |
|
|
|
2,545 |
|
|
|
407 |
|
|
|
27,498 |
|
Selling, general, and administrative expense |
|
|
(312 |
) |
|
|
21,513 |
|
|
|
2,061 |
|
|
|
|
|
|
|
23,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
312 |
|
|
|
3,033 |
|
|
|
484 |
|
|
|
407 |
|
|
|
4,236 |
|
Interest (expense) income |
|
|
(4,343 |
) |
|
|
(89 |
) |
|
|
3 |
|
|
|
|
|
|
|
(4,429 |
) |
Other income |
|
|
|
|
|
|
21 |
|
|
|
9 |
|
|
|
|
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before taxes |
|
|
(4,031 |
) |
|
|
2,965 |
|
|
|
496 |
|
|
|
407 |
|
|
|
(163 |
) |
(Benefit of) provision for income taxes |
|
|
(1,702 |
) |
|
|
581 |
|
|
|
177 |
|
|
|
|
|
|
|
(944 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(2,329 |
) |
|
|
2,384 |
|
|
|
319 |
|
|
|
407 |
|
|
|
781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes |
|
|
|
|
|
|
575 |
|
|
|
102 |
|
|
|
|
|
|
|
677 |
|
Provision for income taxes |
|
|
|
|
|
|
242 |
|
|
|
19 |
|
|
|
|
|
|
|
261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations |
|
|
|
|
|
|
333 |
|
|
|
83 |
|
|
|
|
|
|
|
416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings from subsidiaries |
|
|
3,119 |
|
|
|
402 |
|
|
|
|
|
|
|
(3,521 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
790 |
|
|
$ |
3,119 |
|
|
$ |
402 |
|
|
$ |
(3,114 |
) |
|
$ |
1,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2011
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Industries, |
|
|
Guarantor |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
Net sales |
|
$ |
|
|
|
$ |
526,963 |
|
|
$ |
81,416 |
|
|
$ |
(15,913 |
) |
|
$ |
592,466 |
|
Cost of sales |
|
|
|
|
|
|
419,545 |
|
|
|
69,222 |
|
|
|
(14,737 |
) |
|
|
474,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
107,418 |
|
|
|
12,194 |
|
|
|
(1,176 |
) |
|
|
118,436 |
|
Selling, general, and administrative expense |
|
|
|
|
|
|
68,432 |
|
|
|
7,031 |
|
|
|
|
|
|
|
75,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
|
|
|
|
38,986 |
|
|
|
5,163 |
|
|
|
(1,176 |
) |
|
|
42,973 |
|
Interest (expense) income |
|
|
(13,042 |
) |
|
|
(1,330 |
) |
|
|
51 |
|
|
|
|
|
|
|
(14,321 |
) |
Other income |
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before taxes |
|
|
(13,042 |
) |
|
|
37,702 |
|
|
|
5,214 |
|
|
|
(1,176 |
) |
|
|
28,698 |
|
(Benefit of) provision for income taxes |
|
|
(5,087 |
) |
|
|
15,990 |
|
|
|
1,725 |
|
|
|
|
|
|
|
12,628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(7,955 |
) |
|
|
21,712 |
|
|
|
3,489 |
|
|
|
(1,176 |
) |
|
|
16,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes |
|
|
|
|
|
|
13,402 |
|
|
|
219 |
|
|
|
|
|
|
|
13,621 |
|
Provision for income taxes |
|
|
|
|
|
|
6,462 |
|
|
|
101 |
|
|
|
|
|
|
|
6,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations |
|
|
|
|
|
|
6,940 |
|
|
|
118 |
|
|
|
|
|
|
|
7,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings from subsidiaries |
|
|
32,259 |
|
|
|
3,607 |
|
|
|
|
|
|
|
(35,866 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
24,304 |
|
|
$ |
32,259 |
|
|
$ |
3,607 |
|
|
$ |
(37,042 |
) |
|
$ |
23,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2010
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Industries, |
|
|
Guarantor |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
Net sales |
|
$ |
|
|
|
$ |
437,656 |
|
|
$ |
68,964 |
|
|
$ |
(13,281 |
) |
|
$ |
493,339 |
|
Cost of sales |
|
|
|
|
|
|
358,642 |
|
|
|
59,527 |
|
|
|
(12,766 |
) |
|
|
405,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
79,014 |
|
|
|
9,437 |
|
|
|
(515 |
) |
|
|
87,936 |
|
Selling, general, and administrative expense |
|
|
201 |
|
|
|
65,263 |
|
|
|
6,614 |
|
|
|
|
|
|
|
72,078 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations |
|
|
(201 |
) |
|
|
13,751 |
|
|
|
2,823 |
|
|
|
(515 |
) |
|
|
15,858 |
|
Interest (expense) income |
|
|
(13,022 |
) |
|
|
(2,339 |
) |
|
|
10 |
|
|
|
|
|
|
|
(15,351 |
) |
Other income |
|
|
|
|
|
|
146 |
|
|
|
15 |
|
|
|
|
|
|
|
161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before taxes |
|
|
(13,223 |
) |
|
|
11,558 |
|
|
|
2,848 |
|
|
|
(515 |
) |
|
|
668 |
|
(Benefit of) provision for income taxes |
|
|
(5,335 |
) |
|
|
4,076 |
|
|
|
945 |
|
|
|
|
|
|
|
(314 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(7,888 |
) |
|
|
7,482 |
|
|
|
1,903 |
|
|
|
(515 |
) |
|
|
982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before taxes |
|
|
|
|
|
|
(28,505 |
) |
|
|
556 |
|
|
|
|
|
|
|
(27,949 |
) |
(Benefit of) provision for income taxes |
|
|
|
|
|
|
(10,555 |
) |
|
|
141 |
|
|
|
|
|
|
|
(10,414 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations |
|
|
|
|
|
|
(17,950 |
) |
|
|
415 |
|
|
|
|
|
|
|
(17,535 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings from subsidiaries |
|
|
(8,150 |
) |
|
|
2,318 |
|
|
|
|
|
|
|
5,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(16,038 |
) |
|
$ |
(8,150 |
) |
|
$ |
2,318 |
|
|
$ |
5,317 |
|
|
$ |
(16,553 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 2011
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Industries, |
|
|
Guarantor |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
13,655 |
|
|
$ |
19,400 |
|
|
$ |
|
|
|
$ |
33,055 |
|
Accounts receivable, net |
|
|
|
|
|
|
102,720 |
|
|
|
15,605 |
|
|
|
|
|
|
|
118,325 |
|
Intercompany balances |
|
|
(86,808 |
) |
|
|
109,400 |
|
|
|
(22,592 |
) |
|
|
|
|
|
|
|
|
Inventories |
|
|
|
|
|
|
103,033 |
|
|
|
7,934 |
|
|
|
|
|
|
|
110,967 |
|
Other current assets |
|
|
5,087 |
|
|
|
18,553 |
|
|
|
712 |
|
|
|
|
|
|
|
24,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
(81,721 |
) |
|
|
347,361 |
|
|
|
21,059 |
|
|
|
|
|
|
|
286,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant, and equipment, net |
|
|
|
|
|
|
142,570 |
|
|
|
11,913 |
|
|
|
|
|
|
|
154,483 |
|
Goodwill |
|
|
|
|
|
|
320,843 |
|
|
|
27,708 |
|
|
|
|
|
|
|
348,551 |
|
Acquired intangibles |
|
|
|
|
|
|
87,587 |
|
|
|
9,404 |
|
|
|
|
|
|
|
96,991 |
|
Other assets |
|
|
3,071 |
|
|
|
3,811 |
|
|
|
33 |
|
|
|
|
|
|
|
6,915 |
|
Investment in subsidiaries |
|
|
751,896 |
|
|
|
53,095 |
|
|
|
|
|
|
|
(804,991 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
673,246 |
|
|
$ |
955,267 |
|
|
$ |
70,117 |
|
|
$ |
(804,991 |
) |
|
$ |
893,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
|
|
|
$ |
72,323 |
|
|
$ |
8,210 |
|
|
$ |
|
|
|
$ |
80,533 |
|
Accrued expenses |
|
|
5,440 |
|
|
|
57,522 |
|
|
|
3,812 |
|
|
|
|
|
|
|
66,774 |
|
Current maturities of long-term debt |
|
|
|
|
|
|
408 |
|
|
|
|
|
|
|
|
|
|
|
408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
5,440 |
|
|
|
130,253 |
|
|
|
12,022 |
|
|
|
|
|
|
|
147,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
202,233 |
|
|
|
4,434 |
|
|
|
|
|
|
|
|
|
|
|
206,667 |
|
Deferred income taxes |
|
|
|
|
|
|
46,992 |
|
|
|
4,378 |
|
|
|
|
|
|
|
51,370 |
|
Other non-current liabilities |
|
|
|
|
|
|
21,692 |
|
|
|
622 |
|
|
|
|
|
|
|
22,314 |
|
Shareholders equity |
|
|
465,573 |
|
|
|
751,896 |
|
|
|
53,095 |
|
|
|
(804,991 |
) |
|
|
465,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
673,246 |
|
|
$ |
955,267 |
|
|
$ |
70,117 |
|
|
$ |
(804,991 |
) |
|
$ |
893,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2010
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Industries, |
|
|
Guarantor |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
46,349 |
|
|
$ |
14,517 |
|
|
$ |
|
|
|
$ |
60,866 |
|
Accounts receivable, net |
|
|
|
|
|
|
57,268 |
|
|
|
13,103 |
|
|
|
|
|
|
|
70,371 |
|
Intercompany balances |
|
|
17,194 |
|
|
|
5,657 |
|
|
|
(22,851 |
) |
|
|
|
|
|
|
|
|
Inventories |
|
|
|
|
|
|
71,355 |
|
|
|
6,493 |
|
|
|
|
|
|
|
77,848 |
|
Other current assets |
|
|
6,592 |
|
|
|
12,750 |
|
|
|
887 |
|
|
|
|
|
|
|
20,229 |
|
Assets of discontinued operations |
|
|
|
|
|
|
10,501 |
|
|
|
2,562 |
|
|
|
|
|
|
|
13,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
23,786 |
|
|
|
203,880 |
|
|
|
14,711 |
|
|
|
|
|
|
|
242,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant, and equipment, net |
|
|
|
|
|
|
132,355 |
|
|
|
13,428 |
|
|
|
|
|
|
|
145,783 |
|
Goodwill |
|
|
|
|
|
|
270,245 |
|
|
|
28,101 |
|
|
|
|
|
|
|
298,346 |
|
Acquired intangibles |
|
|
|
|
|
|
55,827 |
|
|
|
10,474 |
|
|
|
|
|
|
|
66,301 |
|
Other assets |
|
|
3,613 |
|
|
|
13,152 |
|
|
|
1 |
|
|
|
|
|
|
|
16,766 |
|
Equity method investments |
|
|
|
|
|
|
1,345 |
|
|
|
|
|
|
|
|
|
|
|
1,345 |
|
Assets of discontinued operations |
|
|
|
|
|
|
34,503 |
|
|
|
5,469 |
|
|
|
|
|
|
|
39,972 |
|
Investment in subsidiaries |
|
|
616,787 |
|
|
|
55,172 |
|
|
|
|
|
|
|
(671,959 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
644,186 |
|
|
$ |
766,479 |
|
|
$ |
72,184 |
|
|
$ |
(671,959 |
) |
|
$ |
810,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
|
|
|
$ |
48,739 |
|
|
$ |
8,036 |
|
|
$ |
|
|
|
$ |
56,775 |
|
Accrued expenses |
|
|
1,360 |
|
|
|
33,053 |
|
|
|
2,372 |
|
|
|
|
|
|
|
36,785 |
|
Current maturities of long-term debt |
|
|
|
|
|
|
408 |
|
|
|
|
|
|
|
|
|
|
|
408 |
|
Liabilities of discontinued operations |
|
|
|
|
|
|
4,576 |
|
|
|
1,574 |
|
|
|
|
|
|
|
6,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
1,360 |
|
|
|
86,776 |
|
|
|
11,982 |
|
|
|
|
|
|
|
100,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
201,973 |
|
|
|
4,816 |
|
|
|
|
|
|
|
|
|
|
|
206,789 |
|
Deferred income taxes |
|
|
|
|
|
|
35,176 |
|
|
|
1,943 |
|
|
|
|
|
|
|
37,119 |
|
Other non-current liabilities |
|
|
|
|
|
|
22,763 |
|
|
|
458 |
|
|
|
|
|
|
|
23,221 |
|
Liabilities of discontinued operations |
|
|
|
|
|
|
161 |
|
|
|
2,629 |
|
|
|
|
|
|
|
2,790 |
|
Shareholders equity |
|
|
440,853 |
|
|
|
616,787 |
|
|
|
55,172 |
|
|
|
(671,959 |
) |
|
|
440,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
644,186 |
|
|
$ |
766,479 |
|
|
$ |
72,184 |
|
|
$ |
(671,959 |
) |
|
$ |
810,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
GIBRALTAR INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2011
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Industries, |
|
|
Guarantor |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
Net cash (used in) provided by operating activities of continuing operations |
|
$ |
(8,159 |
) |
|
$ |
32,917 |
|
|
$ |
5,780 |
|
|
$ |
|
|
|
$ |
30,538 |
|
Net cash (used in) provided by operating activities of discontinued operations |
|
|
|
|
|
|
(3,539 |
) |
|
|
48 |
|
|
|
|
|
|
|
(3,491 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
|
(8,159 |
) |
|
|
29,378 |
|
|
|
5,828 |
|
|
|
|
|
|
|
27,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired |
|
|
|
|
|
|
(107,605 |
) |
|
|
|
|
|
|
|
|
|
|
(107,605 |
) |
Purchases of property, plant, and equipment |
|
|
|
|
|
|
(7,487 |
) |
|
|
(351 |
) |
|
|
|
|
|
|
(7,838 |
) |
Purchase of equity method investment |
|
|
|
|
|
|
(250 |
) |
|
|
|
|
|
|
|
|
|
|
(250 |
) |
Net proceeds from sale of property and equipment |
|
|
|
|
|
|
978 |
|
|
|
|
|
|
|
|
|
|
|
978 |
|
Net proceeds from sale of businesses |
|
|
|
|
|
|
59,029 |
|
|
|
|
|
|
|
|
|
|
|
59,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities of continuing operations |
|
|
|
|
|
|
(55,335 |
) |
|
|
(351 |
) |
|
|
|
|
|
|
(55,686 |
) |
Net cash provided by investing activities of discontinued operations |
|
|
|
|
|
|
2,089 |
|
|
|
|
|
|
|
|
|
|
|
2,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
|
|
|
|
(53,246 |
) |
|
|
(351 |
) |
|
|
|
|
|
|
(53,597 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt payments |
|
|
|
|
|
|
(74,260 |
) |
|
|
|
|
|
|
|
|
|
|
(74,260 |
) |
Proceeds from long-term debt |
|
|
|
|
|
|
73,849 |
|
|
|
|
|
|
|
|
|
|
|
73,849 |
|
Purchase of treasury stock at market prices |
|
|
(826 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(826 |
) |
Payment of deferred financing fees |
|
|
|
|
|
|
(34 |
) |
|
|
|
|
|
|
|
|
|
|
(34 |
) |
Intercompany financing |
|
|
8,975 |
|
|
|
(8,381 |
) |
|
|
(594 |
) |
|
|
|
|
|
|
|
|
Net proceeds from issuance of common stock |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
8,159 |
|
|
|
(8,826 |
) |
|
|
(594 |
) |
|
|
|
|
|
|
(1,261 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
|
|
|
|
(32,694 |
) |
|
|
4,883 |
|
|
|
|
|
|
|
(27,811 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
|
|
|
|
|
46,349 |
|
|
|
14,517 |
|
|
|
|
|
|
|
60,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
|
|
|
$ |
13,655 |
|
|
$ |
19,400 |
|
|
$ |
|
|
|
$ |
33,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
GIBRALTAR INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2010
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibraltar |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Industries, |
|
|
Guarantor |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
Net cash (used in) provided by operating activities of continuing operations |
|
$ |
(8,353 |
) |
|
$ |
37,088 |
|
|
$ |
3,968 |
|
|
$ |
|
|
|
$ |
32,703 |
|
Net cash provided by operating activities of discontinued operations |
|
|
|
|
|
|
21,701 |
|
|
|
24 |
|
|
|
|
|
|
|
21,725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
|
(8,353 |
) |
|
|
58,789 |
|
|
|
3,992 |
|
|
|
|
|
|
|
54,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from sale of businesses |
|
|
|
|
|
|
29,164 |
|
|
|
|
|
|
|
|
|
|
|
29,164 |
|
Net proceeds from sale of property and equipment |
|
|
|
|
|
|
175 |
|
|
|
4 |
|
|
|
|
|
|
|
179 |
|
Purchase of equity method investment |
|
|
|
|
|
|
(1,000 |
) |
|
|
|
|
|
|
|
|
|
|
(1,000 |
) |
Purchases of property, plant, and equipment |
|
|
|
|
|
|
(5,911 |
) |
|
|
(353 |
) |
|
|
|
|
|
|
(6,264 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities of continuing operations |
|
|
|
|
|
|
22,428 |
|
|
|
(349 |
) |
|
|
|
|
|
|
22,079 |
|
Net cash used in investing activities of discontinued operations |
|
|
|
|
|
|
(427 |
) |
|
|
|
|
|
|
|
|
|
|
(427 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
|
|
|
|
22,001 |
|
|
|
(349 |
) |
|
|
|
|
|
|
21,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt payments |
|
|
|
|
|
|
(58,967 |
) |
|
|
|
|
|
|
|
|
|
|
(58,967 |
) |
Proceeds from long-term debt |
|
|
|
|
|
|
8,559 |
|
|
|
|
|
|
|
|
|
|
|
8,559 |
|
Purchase of treasury stock at market prices |
|
|
(1,114 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,114 |
) |
Payment of deferred financing fees |
|
|
|
|
|
|
(164 |
) |
|
|
|
|
|
|
|
|
|
|
(164 |
) |
Intercompany financing |
|
|
9,197 |
|
|
|
(8,608 |
) |
|
|
(589 |
) |
|
|
|
|
|
|
|
|
Excess tax benefit from stock compensation |
|
|
|
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
55 |
|
Net proceeds from issuance of common stock |
|
|
270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
8,353 |
|
|
|
(59,125 |
) |
|
|
(589 |
) |
|
|
|
|
|
|
(51,361 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
|
|
|
|
21,665 |
|
|
|
3,054 |
|
|
|
|
|
|
|
24,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
|
|
|
|
|
10,105 |
|
|
|
13,491 |
|
|
|
|
|
|
|
23,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
|
|
|
$ |
31,770 |
|
|
$ |
16,545 |
|
|
$ |
|
|
|
$ |
48,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
Item 2. |
|
Managements Discussion and Analysis of Financial Condition and Results of
Operations |
Certain information set forth herein, other than historical statements, contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are
based, in whole or in part, on current expectations, estimates, forecasts, and projections about
the Companys business, and managements beliefs about future operations, results, and financial
position. These statements are not guarantees of future performance and are subject to a number of
risk factors, uncertainties, and assumptions. Risk factors that could affect these statements
include, but are not limited to, the following: the availability of raw materials and the effects
of changing raw material prices on the Companys results of operations; energy prices and usage;
changing demand for the Companys products and services; changes in the liquidity of the capital
and credit markets; risks associated with the integration of acquisitions; and changes in interest
and 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 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.
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 and Europe including major home improvement retailers
and distributors. As of September 30, 2011, we operated 42 facilities in 20 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 the 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.
The end markets served by our business are subject to economic conditions that are influenced by
interest rates, commodity costs, demand for residential construction, the level of non-residential
construction and infrastructure projects, and activity within the repair and remodel market. 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 our
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 from the recession and many economic indicators, such as housing
starts, continue to remain at levels well below long-term averages.
30
To respond to current economic conditions facing Gibraltar, including weakened end market
conditions and volatile commodity costs, we continued 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, introducing new products, and programs to expand our market share. In addition, we
strive for operational excellence through lean initiatives and the consolidation of facilities,
which resulted in the closing or consolidation of 14 facilities since January 2009, including two
during 2011. We have also aggressively reduced 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.
Regarding the growth of our business through acquisitions, Gibraltar acquired The D.S. Brown
Company (D.S. Brown) on April 1, 2011 for approximately $98 million. D.S. Brown is the largest
U.S. manufacturer of specialty components for the transportation infrastructure industry and has
established a leading market position for many of the products offered. Products manufactured and
distributed by D.S. Brown include expansion joint systems, structural bearing assemblies, pavement
sealing systems, and other specialty components for bridges, highways, and other infrastructure
projects.
On June 3, 2011, the Company acquired Pacific Award Metals, Inc. (Award Metals) for approximately
$13 million. Award Metals is a leading regional manufacturer of roof ventilation, roof trims,
flashing and rain ware, drywall trims, and specialized clips and connectors for concrete forms used
in the new construction and repair and remodel markets. Gibraltars results from operations
included D.S. Brown and Award Metals from the respective dates of acquisition. The acquisitions
were financed through cash on hand and debt available under our revolving credit facility.
Gibraltar sold its United Steel Products subsidiary (USP) in March 2011 for approximately $59
million. The sale of USP, along with the acquisitions of D.S. Brown and Award Metals, provide
Gibraltar with a broader product offering to construction markets and stronger potential for
revenue and earnings growth. These transactions are consistent with managements strategy to
position Gibraltar as a market leader in the product areas offered by our business and to expand
our offering of value-added products.
The divestiture of USP was recognized as a discontinued operation in the Companys consolidated
financial statements and notes thereto. See Note 15 of the Companys consolidated financial
statements for more information regarding the divestiture of USP in Item 1 of this Quarterly Report
on Form 10-Q.
As a result of the steps we have taken throughout the economic downturn, we have maintained a
strong liquidity position. Using cash generated from operations, we made significant repayments
against our outstanding debt and no longer have any debt outstanding against our revolving credit
facility at the end of the third quarter. At September 30, 2011, our liquidity was $158.4 million
including $33.1 million of cash and $125.3 million of availability under our revolving credit
facility. Subsequent to quarter end, we entered into the Fourth Amended and Restated Credit
Agreement dated October 11, 2011 to extend the due date of the $200 million revolving credit
agreement, reduce the cost of borrowings, and provide additional financial flexibility.
For the quarter ended September 30, 2011, our net sales improved compared to the prior year as a
result of the acquisitions noted above along with expanded market share and higher selling prices.
Our selling prices increased from the prior year as a result of rising commodity costs for steel,
aluminum, and resins which impact the selling prices offered to our customers. The enhanced
product portfolio of our business, improved net sales, and our cost reduction efforts led to
increased profitability during the third quarter of 2011 as compared to the prior year as evidenced
by an increase in our operating margin from 2.5% in the third quarter of 2010 to 8.3% in 2011.
31
Results of Operations
Three Months Ended September 30, 2011 Compared to the Three Months Ended September 30, 2010
The following table sets forth selected results of operations data and its percentage of net sales
for the three months ended September 30 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
220,096 |
|
|
|
100.0 |
% |
|
$ |
169,741 |
|
|
|
100.0 |
% |
Cost of sales |
|
|
177,133 |
|
|
|
80.5 |
% |
|
|
142,243 |
|
|
|
83.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
42,963 |
|
|
|
19.5 |
% |
|
|
27,498 |
|
|
|
16.2 |
% |
Selling, general, and administrative
expense |
|
|
24,602 |
|
|
|
11.2 |
% |
|
|
23,262 |
|
|
|
13.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
18,361 |
|
|
|
8.3 |
% |
|
|
4,236 |
|
|
|
2.5 |
% |
Interest expense |
|
|
(4,869 |
) |
|
|
-2.2 |
% |
|
|
(4,429 |
) |
|
|
-2.6 |
% |
Other (expense) income |
|
|
(15 |
) |
|
|
0.0 |
% |
|
|
30 |
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes |
|
|
13,477 |
|
|
|
6.1 |
% |
|
|
(163 |
) |
|
|
-0.1 |
% |
Provision for (benefit of) income taxes |
|
|
6,094 |
|
|
|
2.7 |
% |
|
|
(944 |
) |
|
|
-0.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
7,383 |
|
|
|
3.4 |
% |
|
|
781 |
|
|
|
0.5 |
% |
(Loss) income from discontinued
operations |
|
|
(469 |
) |
|
|
-0.3 |
% |
|
|
416 |
|
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
6,914 |
|
|
|
3.1 |
% |
|
$ |
1,197 |
|
|
|
0.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the impact of the Companys acquisitions on net sales and operating
income for the three months ended September 30 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Change Due To |
|
|
|
2011 |
|
|
2010 |
|
|
Change |
|
|
Acquisitions |
|
|
Operations |
|
Net sales |
|
$ |
220,096 |
|
|
$ |
169,741 |
|
|
$ |
50,355 |
|
|
$ |
28,902 |
|
|
$ |
21,453 |
|
Operating income |
|
$ |
18,361 |
|
|
$ |
4,236 |
|
|
$ |
14,125 |
|
|
$ |
3,685 |
|
|
$ |
10,440 |
|
Net sales increased by $50.4 million, or 29.7%, to $220.1 million for the three months ended
September 30, 2011 from net sales of $169.7 million for the three months ended September 30, 2010.
The increase in net sales from the prior year was primarily the result of two acquisitions in the
second quarter of 2011 which provided an additional $28.9 million of net sales for the third
quarter of 2011. The remaining increase in net sales was a result of a 7.8% increase in volume and
4.9% increase in pricing offered to customers. Sales volume increased from the prior year as a
result of the impact of spring storm damage and improving macroeconomic conditions in the
infrastructure and industrial construction markets which offset the uneven recovery in the new
build housing and commercial construction markets. Our selling prices increased from the prior
year as a result of rising commodity costs for steel, aluminum, and resins which impact the selling
prices offered to our customers.
Our gross margin increased to 19.5% for the three months ended September 30, 2011 compared to 16.2%
for the three months ended September 30, 2010. The improvement in gross margin was primarily due
to a better alignment of material costs with customer selling prices and the impact of our 2011
acquisitions which improved our product mix to include more sales of products with a higher
value-added component that yield better margins. Increased volume along with our efforts to reduce
costs and consolidate facilities also led to improved gross margins.
Selling, general, and administrative (SG&A) expenses increased by $1.3 million, or 5.6%, to $24.6 million
for the three months ended September 30, 2011 from $23.3 million for the three months ended
September 30, 2010. The $1.3 million increase was the net result of $3.3 million of additional
expense from acquired businesses and $0.2 million of transaction costs related to the acquisitions
partially offset by a $2.1 million reduction in variable incentive compensation. Although we
experienced an increase in expenses, SG&A expenses as a percentage
of net sales decreased to 11.2% in the third quarter of 2011 compared to 13.7% in 2010.
32
As a result of higher net sales and improved gross margin, our operating margin increased to 8.3%
for the third quarter of 2011 compared to 2.5% in the prior year.
Interest expense increased $0.5 million to $4.9 million for the three months ended September 30,
2011 from $4.4 million for the three months ended September 30, 2010. In the first quarter of
2010, we repaid $50 million of debt, which constituted all outstanding debt under our revolving
credit facility. Subsequently, we borrowed funds under our revolving credit facility to finance
the acquisitions of D.S. Brown and Award Metals during the second quarter of 2011 which were repaid
during the third quarter of 2011. Therefore, we incurred more interest expense during the third
quarter of 2011 compared with the prior year due to having more debt outstanding during the period.
We recognized a provision for income taxes of $6.1 million for the three months ended September 30,
2011, an effective tax rate of 45.2%. The effective tax rate for the three months ended September
30, 2011 exceeded the U.S. federal statutory tax rate of 35% due to state taxes and the impact of
non-deductible permanent differences. During the third quarter of 2010, we recognized a benefit of
income taxes of $0.9 million. A change in forecasted earnings caused a significant change in the
forecasted annual effective tax rate during the three months ended September 30, 2010. As a
result, we recognized a tax benefit during the third quarter of 2010 to reflect the impact of the
estimated year-to-date effective tax rate. Small changes in forecasted earnings had a significant
impact on the effective tax rate in the prior year as a result of pre-tax income approximating
break-even.
Nine Months Ended September 30, 2011 Compared to the Nine Months Ended September 30, 2010
The following table sets forth selected results of operations data and its percentage of net sales
for the nine months ended September 30 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
Net sales |
|
$ |
592,466 |
|
|
|
100.0 |
% |
|
$ |
493,339 |
|
|
|
100.0 |
% |
Cost of sales |
|
|
474,030 |
|
|
|
80.0 |
% |
|
|
405,403 |
|
|
|
82.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
118,436 |
|
|
|
20.0 |
% |
|
|
87,936 |
|
|
|
17.8 |
% |
Selling, general, and administrative
expense |
|
|
75,463 |
|
|
|
12.7 |
% |
|
|
72,078 |
|
|
|
14.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
42,973 |
|
|
|
7.3 |
% |
|
|
15,858 |
|
|
|
3.2 |
% |
Interest expense |
|
|
(14,321 |
) |
|
|
-2.5 |
% |
|
|
(15,351 |
) |
|
|
-3.1 |
% |
Other income |
|
|
46 |
|
|
|
0.0 |
% |
|
|
161 |
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes |
|
|
28,698 |
|
|
|
4.8 |
% |
|
|
668 |
|
|
|
0.1 |
% |
Provision for (benefit of) income taxes |
|
|
12,628 |
|
|
|
2.1 |
% |
|
|
(314 |
) |
|
|
-0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
16,070 |
|
|
|
2.7 |
% |
|
|
982 |
|
|
|
0.2 |
% |
Income (loss) from discontinued
operations |
|
|
7,058 |
|
|
|
1.2 |
% |
|
|
(17,535 |
) |
|
|
-3.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
23,128 |
|
|
|
3.9 |
% |
|
$ |
(16,553 |
) |
|
|
-3.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the impact of the Companys acquisitions on net sales and operating
income for the nine months ended September 30 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Change Due To |
|
|
|
2011 |
|
|
2010 |
|
|
Change |
|
|
Acquisitions |
|
|
Operations |
|
Net sales |
|
$ |
592,466 |
|
|
$ |
493,339 |
|
|
$ |
99,127 |
|
|
$ |
51,367 |
|
|
$ |
47,760 |
|
Operating income |
|
$ |
42,973 |
|
|
$ |
15,858 |
|
|
$ |
27,115 |
|
|
$ |
4,647 |
|
|
$ |
22,468 |
|
33
Net sales increased by $99.2 million, or 20.1%, to $592.5 million for the nine months ended
September 30, 2011 from net sales of $493.3 million for the nine months ended September 30, 2010.
The increase in net sales from the prior year was impacted by two acquisitions in the second
quarter of 2011 which provided an additional $51.4 million of net sales for 2011. The remaining
increase in net sales was a result of a 5.9% increase in pricing offered to customers and a 3.8%
increase in volume. Our selling prices increased from the prior year as a result of rising
commodity costs for steel, aluminum, and resins which impact the selling prices offered to our
customers. Sales volume increased from the prior year as a result of the impact of spring storm
damage and improving macroeconomic conditions in the infrastructure and industrial construction
markets which offset the uneven recovery in the new build housing and commercial construction
markets.
Our gross margin increased to 20.0% for the nine months ended September 30, 2011 compared to 17.8%
for the nine months ended September 30, 2010. The improvement in gross margin was primarily due to
a better alignment of material costs with customer selling prices and the impact of our 2011
acquisitions which improved our product mix to include more sales of products with a higher
value-added component that yield better margins. Increased volume also led to improved gross
margins. Additionally, we successfully improved our gross margin through our cost reduction and
facility consolidation efforts.
Selling, general, and administrative (SG&A) expenses increased by $3.4 million, or 4.7%, to $75.5 million
for the nine months ended September 30, 2011 from $72.1 million for the nine months ended September
30, 2010. The $3.4 million increase was primarily the result of $6.3 million of additional expense
from acquired businesses, a $0.9 million charge recognized as a result of time-based equity awards
surrendered by Gibraltars Chief Executive Officer, and $0.8 million of transaction costs related
to the acquisitions. These increases were partially offset by a $2.3 million reduction in variable
incentive compensation and decreased spending on professional services, office leases, and other
costs. Although we experienced an increase in expenses, SG&A expenses as a percentage of net sales decreased to 12.7% in the first nine months of 2011 compared
to 14.6% in 2010.
As a result of higher net sales and improved gross margin, our operating margin increased to 7.3%
for the first nine months of 2011 compared to 3.2% in the prior year. We generated a higher
operating margin in 2011 despite incurring $3.2 million of acquisition-related expenses.
Interest expense decreased $1.0 million to $14.3 million for the nine months ended September 30,
2011 from $15.3 million for the nine months ended September 30, 2010. The decrease was a result of
$1.4 million of additional interest expense recognized in 2010 for unamortized losses related to an
interest rate swap as a result of repaying all variable-rate debt outstanding. In the first
quarter of 2010, we repaid $50 million of debt, which constituted all outstanding debt under our
revolving credit facility. Subsequently, we borrowed funds under our revolving credit facility to
finance the acquisitions of D.S. Brown and Award Metals during the second quarter of 2011 which
were repaid during the third quarter of 2011. Therefore, we incurred similar amounts of interest
during the first nine months of 2011 compared with the prior year due to having a similar level of
debt outstanding during the periods.
We recognized a provision for income taxes of $12.6 million for the nine months ended September 30,
2011, an effective tax rate of 44.0%. The effective tax rates for the nine months ended September
30, 2011 exceeded the U.S. federal statutory tax rate of 35% due to state taxes and the impact of
non-deductible permanent differences. During the nine months ended September 30, 2010, we
recognized a benefit of income taxes of $0.3 million. A change in forecasted earnings caused a
significant change in the forecasted annual effective tax rate during the three months ended
September 30, 2010. As a result, we recognized a tax benefit equal to the most recent estimate of
the income benefit forecasted for the full year. Small changes in forecasted earnings had a
significant impact on the effective tax rate in the prior year as a result of pre-tax income
approximating break-even, non-deductible permanent items, and certain state taxes.
34
Outlook
During 2011, we experienced strong top and bottom line growth as a result of our cost reduction
efforts and strategic acquisitions made in the second quarter despite the uneven recovery in the
new build housing, repair and remodel, and industrial construction markets. Gibraltar anticipates
that it will be able to further capitalize on any growth in these markets when they begin to
improve. Looking ahead to the fourth quarter, which is historically our slowest period, we
anticipate the normal seasonal slow-down in business. However, with the contributions of D.S.
Brown and Award Metals, benefits from our continued cost reductions, and increased stability within the markets we serve, we expect to generate net
sales and profitability favorable to the fourth quarter of 2010. Over the long-term, we believe
that the fundamentals of the building and industrial markets are positive. Furthermore, the
aggressive actions taken to streamline and improve the efficiency of our business have reduced our
break-even point and positioned Gibraltar to generate marked improvements in profitability when
economic and market conditions return toward historical levels.
Liquidity and Capital Resources
General
Our principal capital requirements are to fund our operations, including working capital, the
purchase and funding of capital improvements to our business and facilities, and to fund
acquisitions. We will continue to invest in growth opportunities when they are appropriate while
focusing on working capital efficiency and our cost reduction efforts to minimize the cash invested
to grow our business organically. During the first nine months of 2011, we invested cash in our
working capital to meet the demand from our customers and fund two acquisitions as noted below in
the Cash Flows section of Item 2 of this Quarterly Report on Form 10-Q.
As of September 30, 2011, our liquidity of $158.4 million consisted of $33.1 million of cash and
$125.3 million of availability under our revolving credit facility. We believe that the
availability of funds under the Fourth Amended and Restated Credit Agreement dated October 11, 2011
(2011 Senior Credit Agreement) together with the cash generated from operations should be
sufficient to provide the Company with the liquidity and capital resources necessary to support our
principal capital requirements during the next twelve months.
Our 2011 Senior Credit Agreement provides the Company with liquidity and capital resources for use
by our U.S. operations. Historically, our foreign operations generated cash flow from operations
sufficient to invest in working capital and to fund capital improvements to their businesses and
facilities. As of September 30, 2011, our foreign subsidiaries held $19.4 million of cash. We
believe cash held by our foreign subsidiaries provides our foreign operations with the necessary
liquidity to meet their 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 additional acquisitions.
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 resources, new debt financing, the issuance of equity securities, or any combination of the
above. 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. The acquisitions of D.S. Brown and Award Metals completed April 1, 2011 and June 3,
2011, respectively, were financed through the use of cash on hand and debt available under our
revolving credit facility.
Our expectations with respect to liquidity and capital resources are forward-looking statements
based upon currently available information and may change if conditions in the credit and equity
markets further deteriorate, demand for our products weakens, 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.
35
Cash Flows
The following table sets forth selected cash flow data for the nine months ended September 30 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
Cash provided by (used in): |
|
|
|
|
|
|
|
|
Operating activities of continuing operations |
|
$ |
30,538 |
|
|
$ |
32,703 |
|
Investing activities of continuing operations |
|
|
(55,686 |
) |
|
|
22,079 |
|
Financing activities of continuing operations |
|
|
(1,261 |
) |
|
|
(51,361 |
) |
Discontinued operations |
|
|
(1,402 |
) |
|
|
21,298 |
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
$ |
(27,811 |
) |
|
$ |
24,719 |
|
|
|
|
|
|
|
|
During the nine months ended September 30, 2011, net cash provided by continuing operations
totaled $30.5 million, primarily driven by income from continuing operations of $16.1 million and
non-cash charges including depreciation, amortization, and stock compensation of $26.5 million
partially offset by a $12.1 million investment in working capital. Net cash provided by operating
activities for the nine months ended September 30, 2010 was $32.7 million and was primarily the
result of income from continuing operations of $1.0 million and non-cash charges including
depreciation, amortization, and stock compensation of $26.6 million, and $5.1 million of cash
generated from a reduction of working capital.
During the nine months ended September 30, 2011, the Company invested $12.1 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 was primarily a result of $35.0 million and
$11.4 million increases in accounts receivable and inventory, respectively, partially offset by a
$13.5 million increase in accounts payable. The increase in accounts receivable was a result of
increased sales volume during the third quarter. Inventory and accounts payable increased due to
increased manufacturing activity. The increased sales volume and manufacturing activity were a
direct result of the seasonality that impacts our business. The accrued liabilities increased from
prior year end by $11.3 million primarily as a result of accruals for income taxes payable from
earning generated during 2011. Other assets decreased by $9.6 million primarily as a result of
collecting income taxes receivable from tax losses generated during 2010.
Net cash used in investing activities of continuing operations for the nine months ended September
30, 2011 of $55.7 million consisted primarily of $107.6 million of acquisitions and capital
expenditures of $7.8 million offset by $59.0 million of proceeds from the sale of our USP business.
Cash provided by investing activities during the nine months ended September 30, 2010 of $22.1
million consisted of $29.1 million of proceeds from the sale of our Processed Metal Products
business offset by capital expenditures of $6.3 million.
Cash used in financing activities for the nine months ended September 30, 2011 of $1.3 million
primarily consisted of net repayments of $0.4 million on long-term debt and $0.8 million of
treasury stock repurchases related to the net settlement of vested stock awards. Net cash used in
financing activities for the nine months ended September 30, 2010 of $51.4 million consisted
primarily of $50.4 million of net repayments on long-term debt.
Senior Credit Agreement and Senior Subordinated Notes
On October 11, 2011, we entered into the Fourth Amended and Restated Credit Agreement (the 2011
Senior Credit Agreement) to extend the due date of the $200 million revolving credit agreement,
reduce the cost of borrowings, and provide additional financial flexibility as compared to the
Third Amended and Restated Credit Agreement dated July 24, 2009 (the 2009 Senior Credit Agreement).
36
Borrowings under the 2011 Senior Credit Agreement are secured by the trade receivables, inventory,
personal property and equipment, and certain real property of the Companys significant domestic
subsidiaries. The 2011 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 Companys significant domestic subsidiaries. The 2011 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
2011 Senior Credit Agreement also provides the Company with the opportunity to enter into a term
loan in the principal amount of $35 million subject to conditions set forth in the agreement.
The revolving credit facility is committed through the earlier of (i) October 10, 2016 or (ii) six
months prior to the maturity of the Companys Senior Subordinated 8% Notes (8% Notes). As of
October 11, 2011, the maturity date of the revolving credit facility was June 8, 2015, six months
prior to the maturity date of the 8% Notes. The term loan would be payable in quarterly
installments and mature three years after the term loan funding date. 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 2011 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 and 3.0% to 3.5% on the term loan, 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.
Prior to the 2011 Senior Credit Agreement, the Companys 2009 Senior Credit Agreement also provided
for a $200 million revolving credit facility. As of September 30, 2011, we had $125.3 million of
availability under the revolving credit facility and outstanding letters of credit of $14.3
million. The 2009 Senior Credit Agreement also had the same financial covenant, as described
above, in the 2011 Senior Credit Agreement. As of September 30, 2011, the Company was in
compliance with the minimum fixed charge coverage ratio covenant. Management expects to be in
compliance with the fixed coverage ratio throughout the remainder of 2011 and 2012.
During 2010, we repaid all amounts outstanding on the revolving credit facility and did not have
any borrowings under the 2009 Senior Credit Agreement during the first quarter of 2011. To finance
the acquisitions of D.S. Brown and Award Metals in the second quarter of 2011, we borrowed amounts
under the revolving credit facility which were subsequently repaid during the third quarter of
2011. As of September 30, 2011, no amounts were outstanding on the revolving credit facility.
The Companys $204.0 million of 8% 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, and
distributions from restricted subsidiaries, asset sales, affiliate transactions, dividends, and
other restricted payments. Dividend payments are subject to annual limits of $0.25 per share and
$10 million. The 8% Notes are currently redeemable at the option of the Company, in whole or in
part, at the redemption price (as defined in the Senior Subordinated 8% Notes Indenture), which
declines annually from 104% to 100% on and after December 1, 2013. The 8% Notes are due December
1, 2015. In the event of a Change in Control (as defined in the Senior Subordinated 8% Notes
Indenture), each holder of the 8% Notes may require the Company to repurchase all or a portion of
such holders 8% Notes at a purchase price equal to 101% of the principal amount thereof. As of
September 30, 2011, we had $202.2 million, net of discount, of our 8% Notes outstanding.
Each of our significant domestic subsidiaries has guaranteed the obligations under the 2009 and
2011 Senior Credit Agreements. The 2009 and 2011 Senior Credit Agreements contain other
provisions and events of default that are customary for similar agreements and may limit the
Companys ability to take various actions. The Senior Subordinated 8% Notes Indenture also
contains provisions that limit additional borrowings based on the Companys consolidated coverage
ratio.
37
Off Balance Sheet Financing Arrangements
The Company does not have any off balance sheet financing arrangements.
Contractual Obligations
Our contractual obligations have not changed materially, other than the amendment and restatement
of our credit agreement as disclosed above, from the disclosures included in Item 7 of the
Companys Annual Report on Form 10-K for the year ended December 31, 2010.
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; assessment of recoverability of depreciable and amortizable long-term 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 Companys Annual Report on Form 10-K
for the year ended December 31, 2010.
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 and nine months ended September 30, 2011, the Company
incurred expense of $0.3 million and $1.5 million, respectively, for legal services from this firm.
The Company incurred $0.1 million and $0.7 million for legal services from this firm during the
three and nine months ended September 30, 2010, respectively. At September 30, 2011 and December
31, 2010, the Company had $0.3 million and $0.3 million, respectively, recorded in accounts payable
for amounts due to this law firm.
A member of the Companys Board of Directors, Robert E. Sadler, Jr., is a member of the Board of
Directors of M&T Bank Corporation, one of the eleven participating lenders which have committed
capital to our $200 million revolving credit facility in the Companys Third Amended and Restated
Credit Agreement dated July 24, 2009 (the 2009 Senior Credit Agreement). All amounts outstanding
under the revolving credit facility were repaid in full as of September 30, 2011 and December 31,
2010 and $74.3 million of principal and interest was paid to the lenders during the nine months
ended September 30, 2011.
Borrowings under the 2009 Senior Credit Agreement bore interest at a variable rate based upon the
London Interbank Offered Rate (LIBOR), with a LIBOR floor of 1.50% plus 3.25% for revolving credit
facility borrowings or, at the Companys option, an alternate base rate. The revolving credit
facility also carried an annual facility fee of 0.50% on the entire facility, whether drawn or
undrawn, and fees on outstanding letters of credit which are payable quarterly.
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Recent Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(Update) 2011-04, Fair Value Measurement (Topic 820) Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. Update 2011-04 generally
clarifies the requirements for measuring fair value and for disclosing information about fair value
measurements. This update results in common principles and requirements regarding fair value
measurements for U.S. GAAP and International Financial Reporting Standards. The amendments are
effective for interim and annual periods beginning after December 15, 2011 and are to be applied
prospectively. The Company does not expect the adoption of Update 2011-04 will have a material
impact on the Companys consolidated financial statements.
In June 2011, the FASB issued Update 2011-05, Comprehensive Income (Topic 220) Presentation of
Comprehensive Income. Under the amendments included in Update 2011-05, an entity has the option
to present the total of comprehensive income, the components of net income, and the components of
other comprehensive income either in a single continuous statement of comprehensive income or in
two separate but consecutive statements. Regardless of the option selected, an entity is required
to present on the face of the financial statements reclassification adjustments for items that are
reclassified from other comprehensive income to net income in the statements where the components
of net income and the components of other comprehensive income are presented. The amendments are
effective for fiscal years, and interim periods within those years, beginning after December 15,
2011 and are to be applied retrospectively. The Company does not expect the adoption of Update
2011-05 will have a material impact on the Companys consolidated results from operations,
financial position, or cash flows.
In September 2011, the FASB issued Update 2011-08, Intangibles Goodwill and Other (Topic 350)
Testing Goodwill for Impairment. Under the amendments included in Update 2011-08, an entity
has the option to first assess qualitative factors to determine whether the existence of events or
circumstances leads to a determination that it is more likely than not that the fair value of a
reporting unit is less than its carrying amount. If, after assessing the totality of events or
circumstances, an entity determines it is not more likely than not that the fair value of a
reporting unit is less than its carrying amount, then performing the two-step impairment test is
unnecessary. However, if an entity concludes otherwise, the two-step impairment test is required.
The amendments are effective for fiscal years beginning after December 15, 2011 although early
adoption is permitted. Although the amendments may change how goodwill is tested for impairment,
the Company does not expect the adoption of Update 2011-08 will have a material impact on the
timing or measurement of any goodwill impairments.
In September 2011, the FASB issued Update 2011-09, Compensation Retirement Benefits
Multiemployer Plans (Subtopic 715-80) Disclosures about an Employers Participation in a
Multiemployer Plan. The amendments included in Update 2011-09 require employers to provide
additional separate disclosures for multiemployer pension plans and multiemployer other
postretirement benefit plans. The amended disclosures provide users with more detailed information
about an employers involvement in these plans. The Company participates in various multiemployer
pension plans and will be required to disclose additional information about these plans in the
consolidated financial statements for the year ended December 31, 2011, the date that the Update
will be effective for public entities.
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Item 3. |
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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, primarily related to its
long-term debt. To manage interest rate risk, the Company uses both fixed and variable interest
rate debt. The Company also entered into an interest rate swap agreement that converted a portion
of its variable interest rate debt to fixed interest rate debt. At the time we entered into the
interest rate swap agreement, $57.5 million of variable interest rate borrowings had been
effectively converted to fixed interest rate debt pursuant to this agreement. In connection with
the subsequent repayment of all variable interest rate debt under the Senior Credit Agreement in
the first quarter of 2010, and based on the Companys prospective assessment of the effectiveness
of the interest rate swap, the Company deemed the swap to be ineffective in offsetting variability
in future interest payments on its variable interest rate borrowings. The interest rate swap
agreement expired December 22, 2010. There have been no material changes to the Companys exposure
to market risk since December 31, 2010.
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Item 4. |
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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). The Companys 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 Companys 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 Companys 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 Companys disclosure controls and procedures were effective.
(b) Changes in Internal Control over Financial Reporting
There have been no changes in the Companys 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 Companys internal control over financial reporting.
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PART II. OTHER INFORMATION
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Item 1. |
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Legal Proceedings |
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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, 2010. 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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Item 2. |
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Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 3. |
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Defaults Upon Senior Securities |
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Item 4. |
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(Removed and Reserved) |
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Item 5. |
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Other Information |
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6(a) Exhibits
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a.
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Exhibit 10.1 Gibraltar Industries, Inc. 2005 Equity Incentive Plan Form of Award
(Retirement) (incorporated by reference to Exhibit 10.1 of the Companys Current Report on
Form 8-K filed August 9, 2011). |
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b.
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Exhibit 10.2 Fourth Amended and Restated Credit Agreement dated October 11, 2011 among
Gibraltar Industries, Inc. and Gibraltar Steel Corporation of New York, as borrowers, the
lenders parties thereto, KeyBank National Association, as administrative agent, JPMorgan Chase
Bank, N.A., as co-syndication agent, Bank of America, N.A., as co-syndication agent, M&T Bank,
as co-documentation agent, RBS Citizens, National Association, as co-documentation agent, and
HSBC Bank USA, National Association, as co-documentation agent (incorporated by reference to
Exhibit 10.1 of the Companys current report on Form 8-K filed October 13, 2011). |
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c.
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Exhibit 31.1 Certification of Chairman of the Board and Chief Executive Officer pursuant
to Section 302 of the SarbanesOxley Act of 2002. |
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d.
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Exhibit 31.2 Certification of President and Chief Operating Officer pursuant to Section
302 of the SarbanesOxley Act of 2002. |
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e.
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Exhibit 31.3 Certification of Senior Vice President and Chief Financial Officer pursuant
to Section 302 of the SarbanesOxley Act of 2002. |
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f.
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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 SarbanesOxley Act of 2002. |
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g.
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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
SarbanesOxley Act of 2002. |
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h.
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Exhibit 32.3 Certification of the Senior Vice President and Chief Financial Officer,
pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of
the SarbanesOxley Act of 2002. |
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i.
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Exhibit 101.INS XBRL Instance Document * |
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j.
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Exhibit 101.SCH XBRL Taxonomy Extension Schema Document * |
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k.
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Exhibit 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document * |
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l.
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Exhibit 101.LAB XBRL Taxonomy Extension Label Linkbase Document * |
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m.
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Exhibit 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document * |
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n.
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Exhibit 101.DEF XBRL Taxonomy Extension Definition Linkbase Document * |
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* |
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Submitted electronically with this Quarterly Report on Form 10-Q. |
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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.
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GIBRALTAR INDUSTRIES, INC.
(Registrant) |
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/s/ Brian J. Lipke
Brian J. Lipke
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Chairman of the Board and |
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Chief Executive Officer |
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/s/ Henning N. Kornbrekke
Henning N. Kornbrekke
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President and Chief Operating Officer |
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/s/ Kenneth W. Smith
Kenneth W. Smith
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Senior Vice President and |
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Chief Financial Officer |
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Date:
November 4, 2011
43