XNAS:ROCK Gibraltar Industries Inc Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

ROCK Fair Value Estimate
Premium
ROCK Consider Buying
Premium
ROCK Consider Selling
Premium
ROCK Fair Value Uncertainty
Premium
ROCK Economic Moat
Premium
ROCK Stewardship
Premium
 
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

LOGO

 

 

FORM 10-Q

 

 

(Mark one)

 

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

For the quarterly period ended March 31, 2012

OR

 

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

For the transition period from              to             

Commission file number 0-22462

 

 

GIBRALTAR INDUSTRIES, INC.

(Exact name of Registrant as specified in its charter)

 

 

 

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

3556 Lake Shore Road, P.O. Box 2028,

Buffalo, New York

  14219-0228
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (716) 826-6500

 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨    Smaller reporting company   ¨

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.).    Yes  ¨    No  x

As of April 30, 2012, the number of common shares outstanding was: 30,537,177

 

 

 


Table of Contents

GIBRALTAR INDUSTRIES, INC.

INDEX

 

     PAGE NUMBER

PART I.

 

FINANCIAL INFORMATION

  

Item 1.

 

Financial Statements (unaudited)

  
 

Consolidated Statements of Operations for the Three Months Ended March 31, 2012 and 2011

   3
 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2012 and 2011

   4
 

Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011

   5
 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011

   6
 

Consolidated Statement of Shareholders’ Equity for the Three Months Ended March 31, 2012

   7
 

Notes to Consolidated Financial Statements

   8-25

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   26-32

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

   32

Item 4.

 

Controls and Procedures

   33

PART II.

 

OTHER INFORMATION

  

Item 1.

 

Legal Proceedings

   34

Item 1A.

 

Risk Factors

   34

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

   34

Item 3.

 

Defaults Upon Senior Securities

   34

Item 4.

 

Mine Safety Disclosures

   34

Item 5.

 

Other Information

   34

Item 6.

 

Exhibits

   35

 

2


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

    

Three Months Ended

March 31,

 
     2012     2011  

Net sales

   $ 192,171      $ 163,563   

Cost of sales

     156,690        133,518   
  

 

 

   

 

 

 

Gross profit

     35,481        30,045   

Selling, general, and administrative expense

     28,458        22,823   
  

 

 

   

 

 

 

Income from operations

     7,023        7,222   

Interest expense

     4,674        4,454   

Other income

     (31     (23
  

 

 

   

 

 

 

Income before taxes

     2,380        2,791   

Provision for income taxes

     931        1,350   
  

 

 

   

 

 

 

Income from continuing operations

     1,449        1,441   

Discontinued operations:

    

(Loss) income before taxes

     (137     12,946   

(Benefit of) provision for income taxes

     (50     5,978   
  

 

 

   

 

 

 

(Loss) income from discontinued operations

     (87     6,968   
  

 

 

   

 

 

 

Net income

   $ 1,362      $ 8,409   
  

 

 

   

 

 

 

Net income per share – Basic:

    

Income from continuing operations

   $ 0.05      $ 0.05   

(Loss) income from discontinued operations

     (0.01     0.23   
  

 

 

   

 

 

 

Net income

   $ 0.04      $ 0.28   
  

 

 

   

 

 

 

Weighted average shares outstanding – Basic

     30,718        30,425   
  

 

 

   

 

 

 

Net income per share – Diluted:

    

Income from continuing operations

   $ 0.05      $ 0.05   

(Loss) income from discontinued operations

     (0.01     0.22   
  

 

 

   

 

 

 

Net income

   $ 0.04      $ 0.27   
  

 

 

   

 

 

 

Weighted average shares outstanding – Diluted

     30,851        30,594   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

3


Table of Contents

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

 

     Three Months Ended
March 31,
 
     2012      2011  

Net income

   $ 1,362       $ 8,409   

Other comprehensive income:

     

Foreign currency translation adjustment

     1,935         2,634   

Adjustment to retirement benefit liability, net of tax

     2         (31

Adjustment to post-retirement health care liability, net of tax

     16         19   
  

 

 

    

 

 

 

Other comprehensive income

     1,953         2,622   
  

 

 

    

 

 

 

Total comprehensive income

   $ 3,315       $ 11,031   
  

 

 

    

 

 

 

See accompanying notes to consolidated financial statements.

 

4


Table of Contents

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

 

     March 31,
2012
    December 31,
2011
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 35,327      $ 54,117   

Accounts receivable, net of reserve of $4,529 and $4,614 in 2012 and 2011

     105,783        90,595   

Inventories

     119,656        109,270   

Other current assets

     12,627        14,872   
  

 

 

   

 

 

 

Total current assets

     273,393        268,854   

Property, plant, and equipment, net

     150,185        151,974   

Goodwill

     349,136        348,326   

Acquired intangibles

     94,174        95,265   

Other assets

     7,290        7,636   
  

 

 

   

 

 

 
   $ 874,178      $ 872,055   
  

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

    

Current liabilities:

    

Accounts payable

   $ 79,124      $ 67,320   

Accrued expenses

     43,624        60,687   

Current maturities of long-term debt

     416        417   
  

 

 

   

 

 

 

Total current liabilities

     123,164        128,424   

Long-term debt

     206,837        206,746   

Deferred income taxes

     55,914        55,801   

Other non-current liabilities

     24,472        21,148   

Shareholders’ equity:

    

Preferred stock, $0.01 par value; authorized 10,000 shares; none outstanding

     —          —     

Common stock, $0.01 par value; authorized 50,000 shares; 30,879 and 30,702 shares issued in 2012 and 2011

     309        307   

Additional paid-in capital

     238,099        236,673   

Retained earnings

     230,799        229,437   

Accumulated other comprehensive loss

     (1,397     (3,350

Cost of 343 and 281 common shares held in treasury in 2012 and 2011

     (4,019     (3,131
  

 

 

   

 

 

 

Total shareholders’ equity

     463,791        459,936   
  

 

 

   

 

 

 
   $ 874,178      $ 872,055   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

5


Table of Contents

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

     Three Months Ended
March 31,
 
     2012     2011  

Cash Flows from Operating Activities

    

Net income

   $ 1,362      $ 8,409   

(Loss) income from discontinued operations

     (87     6,968   
  

 

 

   

 

 

 

Income from continuing operations

     1,449        1,441   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     6,563        5,891   

Stock compensation expense

     1,330        2,276   

Non-cash charges to interest expense

     393        564   

Other non-cash adjustments

     277        537   

Increase (decrease) in cash resulting from changes in the following

(excluding the effects of acquisitions):

    

Accounts receivable

     (15,131     (24,132

Inventories

     (7,964     (13,847

Other current assets and other assets

     2,057        7,714   

Accounts payable

     12,014        14,577   

Accrued expenses and other non-current liabilities

     (14,037     (4,445
  

 

 

   

 

 

 

Net cash used in operating activities of continuing operations

     (13,049     (9,424

Net cash used in operating activities of discontinued operations

     (31     (3,086
  

 

 

   

 

 

 

Net cash used in operating activities

     (13,080     (12,510
  

 

 

   

 

 

 

Cash Flows from Investing Activities

    

Purchases of property, plant, and equipment

     (2,743     (1,785

Cash paid for acquisitions, net of cash received

     (2,705     —     

Purchase of other investments

     —          (250

Net proceeds from sale of businesses

     —          58,000   

Net proceeds from sale of property and equipment

     8        463   
  

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (5,440     56,428   
  

 

 

   

 

 

 

Cash Flows from Financing Activities

    

Purchase of treasury stock at market prices

     (888     (730

Long-term debt payments

     (2     —     

Net proceeds from issuance of common stock

     —          10   

Excess tax benefit from stock compensation

     98        —     
  

 

 

   

 

 

 

Net cash used in financing activities

     (792     (720
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     522        440   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (18,790     43,638   

Cash and cash equivalents at beginning of year

     54,117        60,866   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 35,327      $ 104,504   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

6


Table of Contents

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(in thousands)

(unaudited)

 

    

 

Common Stock

     Additional
Paid-In

Capital
    Retained
Earnings
     Accumulated
Other
Comprehensive

Loss
    Treasury Stock     Total
Shareholders’

Equity
 
     Shares      Amount             Shares      Amount    

Balance at December 31, 2011

     30,702       $ 307       $ 236,673      $ 229,437       $ (3,350     281       $ (3,131   $ 459,936   

Net income

     —           —           —          1,362         —          —           —          1,362   

Foreign currency translation adjustment

     —           —           —          —           1,935        —           —          1,935   

Adjustment to pension benefit liability, net of taxes of $2

     —           —           —          —           2        —           —          2   

Adjustment to post-retirement healthcare benefit liability, net of taxes of $11

     —           —           —          —           16        —           —          16   

Stock compensation expense

     —           —           1,330        —           —          —           —          1,330   

Excess tax benefit from stock compensation

     —           —           98        —           —          —           —          98   

Net settlement of restricted stock units

     177         2         (2     —           —          62         (888     (888
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Balance at March 31, 2012

     30,879       $ 309       $ 238,099      $ 230,799       $ (1,397     343       $ (4,019   $ 463,791   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

7


Table of Contents

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 financial position at March 31, 2012 and December 31, 2011, the results of operations, comprehensive income, and cash flows for the three months ended March 31, 2012 and 2011, and the statement of shareholders’ equity for the three months ended March 31, 2012 have been included therein in accordance with U.S. Securities and Exchange Commission (SEC) rules and regulations and prepared using the same accounting principles as are used for our annual audited financial statements.

Certain information and footnote disclosures, including significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted in accordance with the prescribed SEC rules. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and footnotes included in the Company’s Annual Report for the year ended December 31, 2011 as filed on Form 10-K.

The consolidated balance sheet at December 31, 2011 has been derived from the audited consolidated financial statements at that date, restated for discontinued operations, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

The results of operations for the three month period ended March 31, 2012 are not necessarily indicative of the results to be expected for the full year.

Certain prior year amounts in the consolidated statement of cash flows have been reclassified to conform with the current year’s presentation. The reclassification adjustments have been made to reflect the effects of exchange rate changes on cash equivalents as a separate line item.

2. RECENT ACCOUNTING PRONOUNCEMENTS

In June 2011, the FASB issued Accounting Standards 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. 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 adopted Update 2011-05 retrospectively in 2011 which did not have a material impact on the Company’s consolidated results from operations, financial position, or cash flows.

3. INVENTORIES

Inventories consist of the following (in thousands):

 

     March 31,
2012
     December 31,
2011
 

Raw material

   $ 44,752       $ 43,911   

Work-in-process

     14,830         12,003   

Finished goods

     60,074         53,356   
  

 

 

    

 

 

 

Total inventories

   $ 119,656       $ 109,270   
  

 

 

    

 

 

 

4. ACQUISITIONS

On February 8, 2012, the Company acquired the assets of the metal grating fabrication and distribution business of Edvan Industries Inc. (Edvan), based near Edmonton, Alberta, Canada. The results of Edvan have been included in the Company’s consolidated financial results since the date of acquisition. The aggregate purchase consideration for the acquisition of Edvan was $2,705,000.

 

8


Table of Contents

On June 3, 2011, the Company acquired all of the outstanding stock of Pacific Award Metals, Inc. (Award Metals). Award Metals operated 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 Company’s product offerings and allows the Company access to new customers. The results of Award Metals have been included in the Company’s 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. A payable of $1,861,000 is included in accrued expenses in the consolidated balance sheet as of March 31, 2012 to reflect this obligation.

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 Company’s 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. The acquisitions of D. S. Brown, Award Metals and Edvan were not considered significant to the Company’s 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 $50,526,000, 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):

 

     D.S. Brown     Award Metals  

Working capital

   $ 16,735      $ 4,177   

Property, plant, and equipment

     14,481        2,794   

Intangible assets

     33,300        2,101   

Other assets

     230        75   

Other liabilities

     (13,301     (106

Goodwill

     46,198        4,328   
  

 

 

   

 

 

 

Fair value of purchase consideration

   $ 97,643      $ 13,369   
  

 

 

   

 

 

 

The acquired intangible assets consisted of the following for the two acquisitions completed during the year ended December 31, 2011 (in thousands):

 

     Fair Value      Estimated
Useful Life
 

Unpatented technology and patents

   $ 16,560         15 Years   

Trademarks

     11,470         Indefinite   

Customer relationships

     5,970         16 Years   

Backlog

     1,200         1.5 Years   

Non-compete agreements

     201         4 Years   
  

 

 

    

Total

   $ 35,401      
  

 

 

    

 

9


Table of Contents

The acquisitions of Edvan, D.S. Brown, and Award Metals were financed through cash on hand and debt available under the Company’s revolving credit facility. The Company incurred certain acquisition-related costs, primarily composed of legal and consulting fees of $80,000 in the three months ended March 31, 2012. All acquisition-related costs were recognized as a component of selling, general, and administrative expenses in the consolidated statement of operations. The Company also recognized additional cost of sales of $60,000 in the three months ended March 31, 2012 related to the sale of inventory at fair value as a result of allocating the purchase price of the Edvan acquisition.

5. GOODWILL AND RELATED INTANGIBLE ASSETS

Goodwill

The changes in the carrying amount of goodwill for the three months ended March 31, 2012 are as follows (in thousands):

 

Balance as of December 31, 2011

   $ 348,326   

Acquired goodwill

     50   

Foreign currency translation

     760   
  

 

 

 

Balance as of March 31, 2012

   $ 349,136   
  

 

 

 

The goodwill balances as of March 31, 2012 and December 31, 2011 are net of accumulated impairment losses of $125,597,000.

Acquired Intangible Assets

Acquired intangible assets consist of the following (in thousands):

 

     March 31, 2012      December 31, 2011         
     Gross
Carrying
Amount
     Accumulated
Amortization
     Gross
Carrying
Amount
     Accumulated
Amortization
     Estimated Life  

Indefinite-lived intangible assets:

              

Trademarks

   $ 46,930       $ —         $ 46,760       $ —           Indefinite   

Finite-lived intangible assets:

              

Trademarks

     1,970         941         1,968         921         2 to 15 Years   

Unpatented technology

     22,117         3,974         22,117         3,577         5 to 20 Years   

Customer relationships

     48,820         21,619         48,276         20,512         5 to 16 Years   

Non-compete agreements

     2,857         2,386         2,857         2,303         5 to 10 Years   

Backlog

     1,200         800         1,200         600         1 to 2 Years   
  

 

 

    

 

 

    

 

 

    

 

 

    
     76,964         29,720         76,418         27,913      
  

 

 

    

 

 

    

 

 

    

 

 

    

Total acquired intangible assets

   $ 123,894       $ 29,720       $ 123,178       $ 27,913      
  

 

 

    

 

 

    

 

 

    

 

 

    

The Company incurred $1,631,000 and $1,148,000 of acquired intangible asset amortization expense for the three months ended March 31, 2012 and 2011, respectively.

Amortization expense related to acquired intangible assets for the remainder of fiscal 2012 and the next five years thereafter is estimated as follows (in thousands):

 

2012

   $ 4,879   

2013

   $ 5,716   

2014

   $ 4,828   

2015

   $ 4,692   

2016

   $ 4,357   

2017

   $ 3,988   

 

10


Table of Contents

6. RELATED PARTY TRANSACTIONS

A member of the Company’s Board of Directors, Gerald S. Lippes, is a partner in a law firm that provides legal services to the Company. For the three months ended March 31, 2012 and 2011, the Company incurred expense of $299,000 and $552,000, respectively, for legal services from this firm. Of the amounts incurred during the three months ended March 31, 2011, $170,000 related to the sale of businesses and was recognized as a component of discontinued operations. All other amounts incurred during the 2012 and 2011 periods were expensed as a component of selling, general, and administrative expenses. At March 31, 2012 and December 31, 2011, the Company had $312,000 and $277,000, respectively, recorded in accounts payable for amounts due to this law firm.

A member of the Company’s Board of Directors, Robert E. Sadler, Jr., is a member of the Board of Directors of M&T Bank Corporation, one of the ten participating lenders which have committed capital under the Company’s Fourth Amended and Restated Credit Agreement dated October 11, 2011 (the Senior Credit Agreement). As of March 31, 2012 and December 31, 2011, the Senior Credit Agreement provided the Company with a revolving credit facility with availability up to $200 million. See Note 7 to the consolidated financial statements for the amounts outstanding on the revolving credit facility as of March 31, 2012 and December 31, 2011.

7. LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

 

     March 31,
2012
     December 31,
2011
 

Senior Subordinated 8% Notes recorded net of unamortized discount of $1,585 and $1,677 in 2012 and 2011

   $ 202,415       $ 202,323   

Other debt

     4,838         4,840   
  

 

 

    

 

 

 

Total debt

     207,253         207,163   

Less current maturities

     416         417   
  

 

 

    

 

 

 

Total long-term debt

   $ 206,837       $ 206,746   
  

 

 

    

 

 

 

Borrowings under the Senior Credit Agreement are secured by the trade receivables, inventory, personal property, equipment, and certain real property of the Company’s significant domestic subsidiaries. The Senior Credit Agreement is also guaranteed by each of the Company’s significant domestic subsidiaries. The Senior Credit Agreement provides for a revolving credit facility and letters of credit in an aggregate amount that does not exceed the lesser of (i) $200 million and (ii) a borrowing base determined by reference to the trade receivables, inventories, and property, plant, and equipment of the Company’s significant domestic subsidiaries. The Company can request additional financing from the banks to increase the revolving credit facility to $250 million under the terms of the Senior Credit Agreement.

The terms of the Senior Credit Agreement provide that the revolving credit facility will terminate on the earlier of October 10, 2016 or six months prior to the maturity date of the Company’s 8% Notes, which are due December 1, 2015. All revolving credit borrowings must be repaid on or before the maturity date. Interest rates on the revolving credit facility continue to be based on the London Interbank Offering Rate (LIBOR) plus an additional margin of 2.0% to 2.5%. In addition, the revolving credit facility is subject to an annual commitment fee calculated as 0.375% of the daily average undrawn balance.

Standby letters of credit of $13,995,000 have been issued under the Senior Credit Agreement to third parties on behalf of the Company as of March 31, 2012. These letters of credit reduce the amount otherwise available under the revolving credit facility. As of March 31, 2012, the Company had $140,337,000 of availability under the revolving credit facility.

On a trailing four-quarter basis, the Senior Credit Agreement includes a single financial covenant that requires the Company to maintain a minimum fixed charge coverage ratio of 1.25 to 1.00 at the end of each quarter. As of March 31, 2012, the Company was in compliance with this financial covenant. The Senior Credit Agreement contains other provisions and events of default that are customary for similar agreements and may limit the Company’s ability to take various actions.

 

11


Table of Contents

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.

8. 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 months ended March 31 (in thousands):

 

     Pension Benefit  
     2012      2011  

Interest cost

   $ 27       $ 35   

Amortization of unrecognized prior service cost

     4         4   

Service cost

     —           11   

Gain amortization

     —           (55
  

 

 

    

 

 

 

Net periodic benefit cost

   $ 31       $ (5
  

 

 

    

 

 

 

 

     Other Post-
Retirement Benefits
 
     2012      2011  

Service cost

   $ 4       $ 3   

Interest cost

     56         70   

Loss amortization

     27         31   
  

 

 

    

 

 

 

Net periodic benefit cost

   $ 87       $ 104   
  

 

 

    

 

 

 

9. ACCUMULATED OTHER COMPREHENSIVE INCOME

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

 

     Foreign Currency
Translation
Adjustment
    Minimum Pension
Liability
Adjustment
     Unamortized Post-
Retirement Health
Care Costs
    Accumulated Other
Comprehensive
(Loss) Income
 

Balance as of December 31, 2011

   $ (2,446   $ 71       $ (975   $ (3,350

Current period change

     1,935        2         16        1,953   
  

 

 

   

 

 

    

 

 

   

 

 

 

Balance as of March 31, 2012

   $ (511   $ 73       $ (959   $ (1,397
  

 

 

   

 

 

    

 

 

   

 

 

 

10. EQUITY-BASED COMPENSATION

The Company awards equity-based compensation to employees and directors that are both settled in cash and stock. Cash settled equity-based compensation includes performance stock units and restricted stock units granted under the Management Stock Purchase Plan. These awards are recognized as liabilities on the consolidated balance sheet and the related compensation expense is recognized as the awards vest and fair value fluctuates each reporting period. Stock settled equity awards include stock options, restricted stock units, and restricted stock. Compensation expense related to these awards is recognized over the vesting period based on the grant date fair value of the award. The Company uses the straight-line method of attributing the value of stock-based compensation expense over the vesting periods. Stock compensation expense recognized during the period is based on the value of the portion of equity-based awards that is ultimately expected to vest during the period. Vesting requirements vary for directors, executives, and key employees with a vesting period that typically equals four years with graded vesting.

 

12


Table of Contents

The Gibraltar Industries, Inc. 2005 Equity Incentive Plan (the Plan) is an incentive compensation plan that allows the Company to grant equity-based incentive compensation awards to eligible participants to provide them an additional incentive to promote the business of the Company, to increase their proprietary interest in the success of the Company, and to encourage them to remain in the Company’s employ. Awards under the plan may be in the form of options, restricted shares, restricted units, performance shares, performance stock units, and rights. The Plan provides for the issuance of up to 3,000,000 shares of common stock. Of the total number of shares of common stock issuable under the Plan, the aggregate number of shares which may be issued in connection with grants of incentive stock options and rights cannot exceed 900,000 shares. Vesting terms and award life are governed by the award document.

The following table provides the number of restricted stock units (that will convert to shares upon vesting), shares of restricted stock, and non-qualified stock options that were issued during the three months ended March 31 along with the weighted average grant date fair value of each award:

 

     2012      2011  

Awards

   Number of
Awards
     Weighted
Average
Grant Date
Fair Value
     Number of
Awards
     Weighted
Average
Grant Date
Fair Value
 

Restricted stock units

     74,532       $ 14.36         163,834       $ 13.95   

On March 24, 2011, the Company’s 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 three months ended March 31, 2011.

In September 2009, the Company awarded 905,000 performance stock units with a grant-date fair value of $12,643,000 with a vesting period of three years. The final number of performance stock units earned was determined based on the Company’s total stockholder returns relative to a peer group for three separate performance periods, consisting of the years ended December 31, 2009, 2010, and 2011. The performance stock units earned were converted to cash based on the trailing 90-day closing price of the Company’s common stock as of the last day of the third performance period and totaled $8,319,000 which was paid in January 2012.

In January 2012, the Company awarded 295,000 performance stock units with grant date fair value of $4,152,000. As of March 31, 2012, 280,000 of the originally awarded performance stock units remained outstanding after forfeitures. The final number of performance stock units earned will be determined based on the Company’s total stockholder returns relative to the S&P Small Cap 600 Index during the calendar year of 2012. The cost of the January 2012 performance stock awards will be recognized over the performance period of 2012, plus an additional two years of vesting. After the three-year period, any performance stock units earned will convert to cash based on the trailing 90-day closing price of the Company’s common stock as of December 31, 2014 and be payable in January 2015.

The following table summarizes the compensation expense recognized from the change in fair value and vesting of performance stock units for the three months ended March 31 (in thousands):

 

     2012      2011  

Performance stock unit compensation expense (recovery)

   $ 679       $ (1,166

 

13


Table of Contents

The Management Stock Purchase Plan (MSPP) is an integral component of the Plan and provides participants the ability to defer a portion of their salary, their annual bonus under the Management Incentive Compensation Plan, and Directors’ fees. The deferral is converted to restricted stock units and credited to an account together with a company-match in restricted stock units equal to a percentage of the deferral amount. The account is converted to cash at the trailing 200-day average closing price of the Company’s stock and payable to the participants upon a termination of their service to the Company. The matching portion vests only if the participant has reached their sixtieth (60th) birthday. If a participant terminates their service to the Company prior to age sixty (60), the match is forfeited. Upon termination, the account is converted to a cash account that accrues interest at 2% over the then current ten-year U.S. Treasury note rate. The account is then paid out in five equal annual cash installments.

The fair value of restricted stock units held in the MSPP equals the trailing 200-day average closing price of the Company’s common stock as of the last day of the period. During the three months ended March 31, 2012 and 2011, 222,551 and 153,144 restricted stock units, respectively, including the company-match, were credited to participant accounts. At March 31, 2012 and December 31, 2011, the value of the restricted stock units in the MSPP was $12.12 and $11.15 per unit, respectively. At March 31, 2012 and December 31, 2011, 746,142 and 533,548 restricted stock units, including the company-match, were credited to participant accounts including 90,488 and 65,374, respectively, of unvested restricted stock units. The Company made disbursements of $542,000 and $518,000 out of the MSPP during the three months ended March 31, 2012 and 2011, respectively.

11. 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.

FASB ASC Topic 820 establishes a valuation hierarchy for disclosure of the inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The Company’s 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 March 31, 2012, the fair value of outstanding debt was $237,333,000 compared to its carrying value of $207,253,000. The fair value of the Company’s Senior Subordinated 8% Notes was estimated based on quoted market prices, a level one input.

As described in Note 4 of the consolidated financial statements, the Company completed an acquisition during the three months ended March 31, 2012 and two acquisitions during the year ended December 31, 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 incomes, and royalty rates.

 

14


Table of Contents

12. 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, inclusive of $1,029,000 related to a working capital adjustment received in June 2011. 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. This transaction finalized the Company’s exit from the steel processing business and established the Company solely as a manufacturer and distributor of products for building and industrial markets. The transactions to dispose of the remaining assets of this business were completed during the year ended December 31, 2011 which resulted in the recognition of additional gains and losses classified in discontinued operations.

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 income (loss) from discontinued operations, including the interest allocated to discontinued operations, for the three months ended March 31 are as follows (in thousands):

 

     2012     2011  

Net sales

   $ —        $ 9,057   

Operating expenses

     (137     (8,842

Gain on sale of business

     —          12,993   

Interest expense allocation

     —          (262
  

 

 

   

 

 

 

(Loss) income from discontinued operations before taxes

   $ (137   $ 12,946   
  

 

 

   

 

 

 

For certain transactions, the Company has agreed to indemnify the buyer for various liabilities that may arise after the disposal date, subject to limits of time and amount. The Company is a party to certain claims made under these indemnification provisions. For the quarter ended March 31, 2012, management recorded a contingent liability for an environmental remediation related to a discontinued operation. Management does not believe that the outcome of this claim, or other claims, would significantly affect the Company’s financial condition or results of operation.

13. 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 three months ended March 31, 2012 and three facilities during 2011 in this effort. During this process, the Company has incurred exit activity costs, including contract termination costs, severance costs, and other moving and closing costs. These restructuring activities also resulted in $1,037,000 and $196,000 of asset impairment charges related to the facility consolidations during the three months ended March 31, 2012 and 2011, respectively.

As of March 31, 2012, the Company expects to incur approximately $1,000,000 of additional moving and severance costs related to a facility to be closed during 2012. Other than this facility, the Company has not specifically identified any other facilities to close or consolidate and, therefore does not expect to incur any other material exit activity costs for future restructuring activities. However, if future opportunities for cost savings are identified, other facility consolidations will be considered.

 

15


Table of Contents

The following table provides a summary of where the exit activity costs and asset impairments were recorded in the statement of operations for the three months ended March 31 (in thousands):

 

     2012      2011  

Cost of sales

   $ 1,766       $ 858   

Selling, general, and administrative expense

     14         10   
  

 

 

    

 

 

 

Total exit activity costs and asset impairments

   $ 1,780       $ 868   
  

 

 

    

 

 

 

The following table reconciles the beginning and ending liability for exit activity costs relating to the Company’s facility consolidation efforts (in thousands):

 

     2012     2011  

Balance as of December 31

   $ 2,315      $ 2,069   

Exit activity costs recognized

     743        672   

Cash payments

     (1,294     (593
  

 

 

   

 

 

 

Balance as of March 31

   $ 1,764      $ 2,148   
  

 

 

   

 

 

 

14. INCOME TAXES

The following table summarizes the provision for income taxes for continuing operations for the three months ended March 31 and the applicable effective tax rates (in thousands):

 

     2012     2011  

Provision for income taxes

   $ 931      $ 1,350   

Effective tax rate

     39.1     48.4

The Company’s provision for income taxes in interim periods is computed by applying forecasted annual effective tax rates to income or loss before income taxes for the interim period. In addition, non-recurring or discrete items, including interest on prior year tax liabilities, are recorded during the period in which they occur. To the extent that actual income or loss before taxes for the full year differs from the forecast estimates applied at the end of the most recent interim period, the actual tax rate recognized for the year ending December 31, 2012 could be materially different from the forecasted rate used for the three months ended March 31, 2012.

The provision of income taxes resulted in an effective tax rate of 39.1% and 48.4% for the three months ended March 31, 2012 and 2011, respectively, which exceeded the U.S. federal statutory tax rate of 35%. These rates exceeded 35% due to the recognition of non-deductible permanent items and state taxes.

The effective tax rate was higher during the three months ended March 31, 2011 due to the recognition of the $885,000 charge related to surrendered equity compensation described in Note 10. As this was a permanent difference, no tax benefit was recognized to offset the charge.

15. EARNINGS PER SHARE

Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding, as well as dilutive potential common shares which, in the Company’s case, comprise shares issuable under its equity compensation plans described in Note 10 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.

 

16


Table of Contents

The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31 (in thousands):

 

     2012     2011  

Numerator:

    

Income from continuing operations

   $ 1,449      $ 1,441   

(Loss) income from discontinued operations

     (87     6,968   
  

 

 

   

 

 

 

Net income available to common shareholders

   $ 1,362      $ 8,409   
  

 

 

   

 

 

 

Denominator for basic earnings per share:

    

Weighted average shares outstanding

     30,718        30,425   

Denominator for diluted earnings per share:

    

Weighted average shares outstanding

     30,718        30,425   

Common stock options and restricted stock

     133        169   
  

 

 

   

 

 

 

Weighted average shares and conversions

     30,851        30,594   
  

 

 

   

 

 

 

16. 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.

 

17


Table of Contents

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2012

(in thousands)

 

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

Net sales

   $ —        $ 169,900      $ 27,614      $ (5,343   $ 192,171   

Cost of sales

     —          137,798        23,877        (4,985     156,690   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     —          32,102        3,737        (358     35,481   

Selling, general, and administrative expense

     (30     26,220        2,268        —          28,458   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     30        5,882        1,469        (358     7,023   

Interest expense (income)

     4,235        472        (33     —          4,674   

Other income

     —          (30     (1     —          (31
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before taxes

     (4,205     5,440        1,503        (358     2,380   

(Benefit of) provision for income taxes

     (1,575     2,098        408        —          931   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations

     (2,630     3,342        1,095        (358     1,449   

Discontinued operations:

          

Loss from discontinued operations before taxes

     —          (137     —          —          (137

Benefit of income taxes

     —          (50     —          —          (50
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from discontinued operations

     —          (87     —          —          (87

Equity in earnings from subsidiaries

     4,350        1,095        —          (5,445     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 1,720      $ 4,350      $ 1,095      $ (5,803   $ 1,362   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

18


Table of Contents

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2011

(in thousands)

 

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

Net sales

   $ —        $ 142,272      $ 27,725      $ (6,434   $ 163,563   

Cost of sales

     —          115,219        24,115        (5,816     133,518   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     —          27,053        3,610        (618     30,045   

Selling, general, and administrative expense

     (130     20,778        2,175        —          22,823   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     130        6,275        1,435        (618     7,222   

Interest expense (income)

     4,345        111        (2     —          4,454   

Other income

     —          (16     (7     —          (23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before taxes

     (4,215     6,180        1,444        (618     2,791   

(Benefit of) provision for income taxes

     (1,644     2,433        561        —          1,350   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations

     (2,571     3,747        883        (618     1,441   

Discontinued operations:

          

Income from discontinued operations before taxes

     —          12,727        219        —          12,946   

Provision for income taxes

     —          5,877        101        —          5,978   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from discontinued operations

     —          6,850        118        —          6,968   

Equity in earnings from subsidiaries

     11,598        1,001        —          (12,599     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 9,027      $ 11,598      $ 1,001      $ (13,217   $ 8,409   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

19


Table of Contents

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

THREE MONTHS ENDED MARCH 31, 2012

(in thousands)

 

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

Net income

   $ 1,720       $ 4,350       $ 1,095       $ (5,803   $ 1,362   

Other comprehensive income:

             

Foreign currency translation adjustment

     —           —           1,935         —          1,935   

Adjustment to retirement benefit liability, net of tax

     —           2         —           —          2   

Adjustment to post-retirement health care liability, net of tax

     —           16         —           —          16   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Other comprehensive income

     —           18         1,935         —          1,953   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total comprehensive income

   $ 1,720       $ 4,368       $ 3,030       $ (5,803   $ 3,315   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

20


Table of Contents

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

THREE MONTHS ENDED MARCH 31, 2011

(in thousands)

 

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

Net income

   $ 9,027       $ 11,598      $ 1,001       $ (13,217   $ 8,409   

Other comprehensive income:

            

Foreign currency translation adjustment

     —           —          2,634         —          2,634   

Adjustment to retirement benefit liability, net of tax

     —           (31     —           —          (31

Adjustment to post-retirement health care liability, net of tax

     —           19        —           —          19   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Other comprehensive (loss) income

     —           (12     2,634         —          2,622   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total comprehensive income

   $ 9,027       $ 11,586      $ 3,635       $ (13,217   $ 11,031   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

21


Table of Contents

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATING BALANCE SHEETS

MARCH 31, 2012

(in thousands)

 

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

Assets

          

Current assets:

          

Cash and cash equivalents

  $ —         $ 18,491      $ 16,836      $ —        $ 35,327   

Accounts receivable, net

    —           90,022        15,761        —          105,783   

Intercompany balances

    24,301         (2,152     (22,149     —          —     

Inventories

    —           109,955        9,701        —          119,656   

Other current assets

    1,574         9,052        2,001        —          12,627   
 

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    25,875         225,368        22,150        —          273,393   

Property, plant, and equipment, net

    —           138,168        12,017        —          150,185   

Goodwill

    —           320,772        28,364        —          349,136   

Acquired intangibles

    —           84,843        9,331        —          94,174   

Other assets

    2,709         4,580        1        —          7,290   

Investment in subsidiaries

    642,765         54,264        —          (697,029     —     
 

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
  $ 671,349       $ 827,995      $ 71,863      $ (697,029   $ 874,178   
 

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

          

Current liabilities:

          

Accounts payable

  $ —         $ 69,329      $ 9,795      $ —        $ 79,124   

Accrued expenses

    5,143         35,139        3,342        —          43,624   

Current maturities of long-term debt

    —           416        —          —          416   
 

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

    5,143         104,884        13,137        —          123,164   

Long-term debt

    202,415         4,422        —          —          206,837   

Deferred income taxes

    —           52,079        3,835        —          55,914   

Other non-current liabilities

    —           23,845        627        —          24,472   

Shareholders’ equity

    463,791         642,765        54,264        (697,029     463,791   
 

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
  $ 671,349       $ 827,995      $ 71,863      $ (697,029   $ 874,178   
 

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

22


Table of Contents

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATING BALANCE SHEETS

DECEMBER 31, 2011

(in thousands)

 

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

Assets

            

Current assets:

            

Cash and cash equivalents

   $ —         $ 34,691       $ 19,426      $ —        $ 54,117   

Accounts receivable, net

     —           77,395         13,200        —          90,595   

Intercompany balances

     16,762         4,811         (21,573     —          —     

Inventories

     —           101,637         7,633        —          109,270   

Other current assets

     6,339         7,676         857        —          14,872   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total current assets

     23,101         226,210         19,543        —          268,854   

Property, plant, and equipment, net

     —           140,343         11,631        —          151,974   

Goodwill

     —           320,771         27,555        —          348,326   

Acquired intangibles

     —           86,160         9,105        —          95,265   

Other assets

     2,890         4,745         1        —          7,636   

Investment in subsidiaries

     637,628         52,173         —          (689,801     —     
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   $ 663,619       $ 830,402       $ 67,835      $ (689,801   $ 872,055   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

            

Current liabilities:

            

Accounts payable

   $ —         $ 59,600       $ 7,720      $ —        $ 67,320   

Accrued expenses

     1,360         55,670         3,657        —          60,687   

Current maturities of long-term debt

     —           417         —          —          417   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total current liabilities

     1,360         115,687         11,377        —          128,424   

Long-term debt

     202,323         4,423         —          —          206,746   

Deferred income taxes

     —           52,065         3,736        —          55,801   

Other non-current liabilities

     —           20,599         549        —          21,148   

Shareholders’ equity

     459,936         637,628         52,173        (689,801     459,936   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   $ 663,619       $ 830,402       $ 67,835      $ (689,801   $ 872,055   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

23


Table of Contents

GIBRALTAR INDUSTRIES, INC.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2012

(in thousands)

 

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

Cash Flows from Operating Activities

           

Net cash provided by (used in) operating activities of continuing operations

   $ 148      $ (13,582   $ 385      $ —         $ (13,049

Net cash used in operating activities of discontinued operations

     —          (31     —          —           (31
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net cash provided by (used in) operating activities

     148        (13,613     385        —           (13,080
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Cash Flows from Investing Activities

           

Cash paid for acquisitions, net of cash acquired

     —          —          (2,705     —           (2,705

Purchases of property, plant, and equipment

     —          (2,315     (428     —           (2,743

Net proceeds from sale of property and equipment

     —          8        —          —           8   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net cash used in investing activities

     —          (2,307     (3,133     —           (5,440
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Cash Flows from Financing Activities

           

Long-term debt payments

     —          (2     —          —           (2

Purchase of treasury stock at market prices

     (888     —          —          —           (888

Intercompany financing

     642        (278     (364     —           —     

Excess tax benefit from stock compensation

     98        —          —          —           98   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net cash used in financing activities

     (148     (280     (364     —           (792
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Effect of exchange rate changes on cash

     —          —          522        —           522   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net decrease in cash and cash equivalents

     —          (16,200     (2,590     —           (18,790

Cash and cash equivalents at beginning of year

     —          34,691        19,426        —           54,117   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Cash and cash equivalents at end of period

   $ —        $ 18,491      $ 16,836      $ —         $ 35,327   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

24


Table of Contents

GIBRALTAR INDUSTRIES, INC.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2011

(in thousands)

 

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

Cash Flows from Operating Activities

           

Net cash provided by (used in) operating activities of continuing operations

   $ 130      $ (11,610   $ 2,056      $ —         $ (9,424

Net cash (used in) provided by operating activities of discontinued operations

     —          (3,134     48        —           (3,086
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net cash provided by (used in) operating activities

     130        (14,744     2,104        —           (12,510
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Cash Flows from Investing Activities

           

Net proceeds from sale of businesses

     —          58,000        —          —           58,000   

Net proceeds from sale of property and equipment

     —          463        —          —           463   

Purchase of other investments

     —          (250     —          —           (250

Purchases of property, plant, and equipment

     —          (1,654     (131     —           (1,785
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net cash provided by (used in) investing activities

     —          56,559        (131     —           56,428   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Cash Flows from Financing Activities

           

Purchase of treasury stock at market prices

     (730     —          —          —           (730

Intercompany financing

     590        (2,281     1,691        —           —     

Net proceeds from issuance of common stock

     10        —          —          —           10   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net cash (used in) provided by financing activities

     (130     (2,281     1,691        —           (720
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Effect of exchange rate changes on cash

     —          —          440        —           440   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net increase in cash and cash equivalents

     —          39,534        4,104        —           43,638   

Cash and cash equivalents at beginning of year

     —          46,349        14,517        —           60,866   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Cash and cash equivalents at end of period

   $ —        $ 85,883      $ 18,621      $ —         $ 104,504   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

25


Table of Contents

Item 2. Management’s 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 Company’s business, and management’s 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 Company’s results of operations; energy prices and usage; changing demand for the Company’s 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, 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 March 31, 2012, we operated 40 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, and the level of non-residential construction and infrastructure projects. The United States construction markets continue an uneven recovery from an unprecedented recession that began in 2008, which led to reduced demand for the products we manufacture and distribute. In addition, tightened credit markets over the same period may have limited the ability of end customers to obtain financing for construction projects. While the economy has grown since the recession, the construction markets continue to face significant challenges. Construction markets have only recovered modestly and many economic indicators, such as housing starts, continue to remain at levels well below long-term averages.

During 2012, Gibraltar 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 which has included closing or consolidation of 17 facilities since January 2009, including two during the first quarter of 2012. 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.

 

26


Table of Contents

Regarding the growth of our business through acquisitions, on February 8, 2012, the Company acquired the assets of the metal grating fabrication and distribution business of Edvan Industries, Inc. (Edvan), based near Edmonton, Alberta, Canada. The acquisition of Edvan, which serves the oil sands region of Western Canada, was completed for approximately $3 million.

On June 3, 2011, the Company acquired Pacific Award Metals, Inc. (Award Metals) for $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 residential construction markets.

On April 1, 2011, the Company acquired The D.S. Brown Company (D.S. Brown) for $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.

Gibraltar’s results from operations included Edvan, Award Metals, and D.S. Brown from their respective dates of acquisition.

We have maintained a strong liquidity position as a result of our consolidation of facilities, acquisitions, introduction of new product and expansion of market share. Using cash generated from operations, we made significant repayments against our outstanding debt and have not had debt outstanding against our revolving credit facility for the six months ended March 31, 2012. At March 31, 2012, our liquidity was $176 million including $35 million of cash and $141 million of availability under our revolving credit facility.

For the quarter ended March 31, 2012 our net sales improved 17% compared to the prior year, principally the result of the acquisitions noted above. In addition, all of our businesses delivered solid organic sales growth except for those serving residential markets on the West Coast. The positive earnings impact of this growth was more than offset, however, by a favorable equity compensation adjustment in the first quarter of 2011, as well as the impact from lower order volume from residential markets on the West Coast and costs for the continuing integration of the Award Metals acquisition. As a result, our operating margin declined to 3.7% for the first quarter of 2012 from 4.4% in the first quarter of 2011.

 

27


Table of Contents

Results of Operations

Three Months Ended March 31, 2012 Compared to the Three Months Ended March 31, 2011

The following table sets forth selected data from our statement of operations and the related percentage of net sales for the three months ended March 31 (in thousands):

 

     2012     2011  

Net sales

   $ 192,171        100.0   $ 163,563        100.0

Cost of sales

     156,690        81.5     133,518        81.6
  

 

 

     

 

 

   

Gross profit

     35,481        18.5     30,045        18.4

Selling, general, and administrative expense

     28,458        14.8     22,823        14.0
  

 

 

     

 

 

   

Income from operations

     7,023        3.7     7,222        4.4

Interest expense

     4,674        2.4     4,454        2.7

Other income

     (31     0.0     (23     0.0
  

 

 

     

 

 

   

Income before taxes

     2,380        1.3     2,791        1.7

Provision for income taxes

     931        0.5     1,350        0.8
  

 

 

     

 

 

   

Income from continuing operations

     1,449        0.8     1,441        0.9

(Loss) income from discontinued operations

     (87     (0.1 )%      6,968        4.2
  

 

 

     

 

 

   

Net income

   $ 1,362        0.7   $ 8,409        5.1
  

 

 

     

 

 

   

Net sales increased by $28.6 million, or 17.4%, to $192.2 million for the three months ended March 31, 2012 from net sales of $163.6 million for the three months ended March 31, 2011. The following table sets forth the impact of the Company’s acquisitions on net sales for the three months ended March 31 (in thousands):

 

                   Total      Change Due To  
     2012      2011      Change      Acquisitions      Operations  

Net sales

   $ 192,171       $ 163,563       $ 28,608       $ 22,193       $ 6,415   

The increase in net sales from the prior year was primarily the result of the incremental sales generated by three acquisitions completed during the past twelve months which contributed $22.2 million of net sales for the first quarter of 2012. Net sales from operations increased 3.9% to $6.4 million, primarily the result of a 4.4% increase in pricing offered to customers to help cover raw material inflation as overall volume remained relatively flat. While overall volume was equivalent to the first quarter of 2011, there was a modest volume increase for our products sold into residential markets in the Midwest and Eastern regions of the U.S. that was offset by the modest decline in volume in the West Coast residential market.

Our gross margin remained relatively flat at 18.5% for the three months ended March 31, 2012 compared to 18.4% for the three months ended March 31, 2011. Gross margin improved by the D.S. Brown acquisition plus improved gross margins from many of our core businesses. However, these improvements were offset by the effects of lower demand from the residential market in the West Coast and continued integration costs for our Award Metals acquisition.

Selling, general, and administrative expenses (SG&A) increased by $5.7 million, or 25%, to $28.5 million for the three months ended March 31, 2012 from $22.8 million for the three months ended March 31, 2011. The $5.7 million increase was the net result of $3.7 million of SG&A expense from acquired businesses and a $0.2 million benefit for equity compensation expense recorded in the first quarter for 2011 compared to a $2.8 million charge for the first quarter of 2012. These increases were partially offset by a $0.9 million charge recognized for time-based equity awards surrendered by Gibraltar’s Chief Executive Officer in the first quarter of 2011.

 

28


Table of Contents

Interest expense remained relatively flat at $4.7 million for the three months ended March 31, 2012 compared to $4.5 million for the three months ended March 31, 2011. During the three months ended March 31, 2012 and 2011, no amounts were outstanding under our revolving credit facility. The interest expense incurred in both periods primarily relates to our $204.0 million of Senior Subordinated 8% Notes. Net interest expense in the first quarter of 2011 included $0.2 million of interest income earned on the $8.5 million note held resulting from the sale of SCM Metal Products in 2008. This note receivable was fully paid in November 2011, prior to its maturity.

We recognized a provision for income taxes of $0.9 million for the three months ended March 31, 2012, an effective tax rate of 39.1%. During the first quarter of 2011, we recognized a provision for income taxes of $1.4 million, an effective tax rate of 48.4%. The effective tax rates for the first quarters of 2012 and 2011 both exceeded the U.S. federal statutory rate of 35% due to state taxes and non-deductible permanent differences. The effective tax rate for the three months ended March 31, 2011 was higher due to the $0.9 million charge for the equity compensation surrendered by Gibraltar’s Chief Executive Officer which was not deductible for tax purposes.

Outlook

We expect modest improvements in all markets we serve, including the industrial and infrastructure markets, as well as, the residential and non-residential construction markets, to continue during 2012. However, the extent of any sustained economic recovery in these markets is uncertain. For the second quarter of 2012, we expect seasonally higher revenues as compared to the first quarter of 2012, and to generate net sales levels favorable to the second quarter of 2011. Over the long-term, we believe that the fundamentals of the industrial and infrastructure markets are positive and 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. During the next twelve months, we will focus on investing in growth opportunities while also focusing on working capital efficiency and cost reduction efforts to minimize the cash invested to grow our business. During the first quarter of 2012, we invested cash in our working capital to meet the upcoming higher seasonal demand from our customers as noted below in the “Cash Flow” section of Item 2 of this Quarterly Report on Form 10-Q.

As of March 31, 2012, our liquidity of $175.6 million consisted of $35.3 million of cash and $140.3 million of availability under our revolving credit facility. We believe this liquidity together with the cash expected to be generated from operations should be sufficient to fund working capital needs and future growth. We continue to search for strategic acquisitions; and a larger acquisition may require additional borrowings and/or the issuance of our common stock.

Our 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 March 31, 2012, our foreign subsidiaries held $16.8 million of cash. We believe cash held by our foreign subsidiaries and their expected future ability to generate cash from operations provide our foreign operations with the necessary liquidity to meet their future obligations and allow the foreign business units to reinvest in their operations and could eventually be used to help grow our business internationally through transactions similar to our acquisition of Edvan.

 

29


Table of Contents

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. Any potential acquisitions are evaluated on the basis of our ability to enhance our existing products, operations, or capabilities, as well as provide access to new products, markets, and customers.

These expectations are forward-looking statements based upon currently available information and may change if conditions in the credit and equity markets further deteriorate or other circumstances change. To the extent that operating cash flows are lower than current levels or sources of financing are not available or available at acceptable terms, our future liquidity may be adversely affected.

Cash Flows

The following table sets forth selected cash flow data for the three months ended March 31 (in thousands):

 

     2012     2011  

Cash (used in) provided by:

    

Operating activities of continuing operations

   $ (13,049   $ (9,424

Investing activities of continuing operations

     (5,440     56,428   

Financing activities of continuing operations

     (792     (720

Discontinued operations

     (31     (3,086

Effect of exchange rate changes

     522        440   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

   $ (18,790   $ 43,638   
  

 

 

   

 

 

 

During the three months ended March 31, 2012, net cash used in continuing operations totaled $13.0 million, primarily driven by a $23.1 million investment in working capital partially offset by net income from continuing operations of $1.4 million and non-cash charges including depreciation, amortization, and stock compensation of $8.6 million. Net cash used in operating activities for the three months ended March 31, 2011 was $9.4 million primarily driven by a $20.1 million investment in working capital, partially offset by income from continuing operations of $1.4 million and non-cash charges including depreciation, amortization, and stock compensation of $9.3 million.

During the three months ended March 31, 2012, the Company invested $23.1 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 included $15.1 million and $8.0 million increases in accounts receivable and inventory, respectively, partially offset by a $12.0 million increase in accounts payable. The increase in accounts receivable was a result of increased sales volume. Inventory and accounts payable increased due to increased manufacturing activity. The increased sales volume and manufacturing activity were a direct result of the seasonality of customer order levels that impact our business. The decrease in accrued expenses and other non-current liabilities of $14.0 million were largely due to performance-based variable compensation awards earned in 2009 and 2011 that were paid during the first quarter of 2012.

Net cash used in investing activities of continuing operations for the three months ended March 31, 2012 of $5.4 million consisted of $2.7 million each for both the Edvan acquisition and capital expenditures. Cash provided by investing activities during the three months ended March 31, 2011 of $56.4 million consisted of $58.0 million of proceeds from the sale of our USP business offset by capital expenditures of $1.8 million.

Net cash used in financing activities from continuing operations for the three months ended March 31, 2012 and March 31, 2011, of $0.8 million and $0.7 million, respectively, primarily consisted of tax withholdings paid for stock issued to employees from the vesting of restricted stock units.

 

30


Table of Contents

Senior Credit Agreement and Senior Subordinated Notes

Borrowings under the Senior Credit Agreement are secured by the trade receivables, inventory, personal property and equipment, and certain real property of the Company’s significant domestic subsidiaries. The Senior Credit Agreement provides for a revolving credit facility and letters of credit in an aggregate amount that does not exceed the lesser of (i) $200 million or (ii) a borrowing base determined by reference to the trade receivables, inventories, and property, plant, and equipment of the Company’s significant domestic subsidiaries. The Senior Credit Agreement provides the Company with more flexibility by allowing for Gibraltar to request additional financing from the banks to increase the revolving credit facility to $250 million.

The revolving credit facility is currently committed through June 8, 2015, six months prior to the maturity date of the 8% Senior Subordinated Notes. Should the Company choose to refinance the Notes prior to June 8, 2015, the maturity date of the revolving credit facility extends to October 10, 2016. Only one financial covenant is contained within the 2011 Senior Credit Agreement, which requires the Company to maintain a fixed charge ratio (as defined in the agreement) of 1.25 to 1.00 or higher on a trailing four-quarter basis.

Borrowings under the Senior Credit Agreement bear interest at a variable interest rate based upon the London Interbank Offered Rate (LIBOR) plus an additional margin of 2.0% to 2.5% on the revolving credit facility based on the amount of availability under the revolving credit facility. The revolving credit facility also carries an annual facility fee of 0.375% on the undrawn portion of the facility and fees on outstanding letters of credit which are payable quarterly. As of March 31, 2012, no amounts were outstanding on the revolving credit facility. We had outstanding letters of credit of $14.0 million as of March 31, 2012.

The Company’s $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 declined to 103% on December 1, 2011 and will decline to 101% and 100% on and after December 1, 2012 and 2013, respectively. 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 holder’s 8% Notes at a purchase price equal to 101% of the principal amount thereof. As of March 31, 2012, we had $202.4 million, net of discount, of our 8% Notes outstanding.

Each of our significant domestic subsidiaries has guaranteed the obligations under the Senior Credit Agreement. The Senior Credit Agreement contains other provisions and events of default that are customary for similar agreements and may limit the Company’s ability to take various actions. The Senior Subordinated 8% Notes Indenture also contains provisions that limit additional borrowings based on the Company’s consolidated coverage ratio.

Off Balance Sheet Financing Arrangements

We have no off-balance sheet arrangements, other than operating leases, that have or are reasonable likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

Contractual Obligations

Our contractual obligations have not changed materially from the disclosures included in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

 

31


Table of Contents

Critical Accounting Policies

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

Our most critical accounting policies include the valuation of accounts receivable; valuation of inventory; allocation of purchase price of acquisitions; assessment of recoverability of depreciable and amortizable long-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 Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

There have been no changes in critical accounting policies in the current year.

Related Party Transactions

A member of our Board of Directors, Gerald S. Lippes, is a partner in a law firm that provides legal services to Gibraltar. For the three months ended March 31, 2012 and 2011, the Company incurred expense of $0.3 million and $0.6 million, respectively, for legal services from this firm. At March 31, 2012 and December 31, 2011, 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 Company’s Board of Directors, Robert E. Sadler, Jr., is a member of the Board of Directors of M&T Bank Corporation, one of the ten participating lenders which have committed capital to our $200 million revolving credit facility in the Company’s Senior Credit Agreement. All amounts outstanding under the revolving credit facility were repaid in full as of March 31, 2012 and December 31, 2011. Therefore, no principal or interest was paid to the lenders during the three months ended March 31, 2012.

Borrowings under the Senior Credit Agreement bear interest at a variable rate based upon the London Interbank Offered Rate (LIBOR) plus an additional margin of 2.0% to 2.5%, based on the amount of borrowings available to Gibraltar. 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.

Recent Accounting Pronouncements

The Financial Accounting Standards Board has not issued any Accounting Standards Updates that are applicable to Gibraltar since our Annual Report on Form 10-K was filed for the year ended December 31, 2011.

Item 3. Qualitative and Quantitative Disclosures About Market Risk

In the ordinary course of business, the Company is exposed to various market risk factors, including changes in general economic conditions, competition, and raw materials pricing and availability. In addition, the Company is exposed to other financial market risks, primarily related to its long-term debt and foreign operations. There have been no material changes to the Company’s exposure to market risk since December 31, 2011.

 

 

32


Table of Contents

Item 4. Controls and Procedures

 

(a) Evaluation of Disclosure Controls and Procedures

The Company maintains a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). The Company’s Chairman of the Board and Chief Executive Officer, President and Chief Operating Officer, and Senior Vice President and Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls as of the end of the period covered in this report. Based upon that evaluation and the definition of disclosure controls and procedures contained in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, the Company’s Chairman of the Board and Chief Executive Officer, President and Chief Operating Officer, and Senior Vice President and Chief Financial Officer have concluded that as of the end of such period the Company’s disclosure controls and procedures were effective.

 

(b) Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as defined by Rule 13a-15(f)) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected the Company’s internal control over financial reporting.

 

33


Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable.

Item 1A. Risk Factors

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, 2011. 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.

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

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

 

34


Table of Contents

Item 6. Exhibits

6(a) Exhibits

 

  a. Exhibit 3.1 – Amended and Restated Bylaws of Gibraltar Industries, Inc. effective March 9, 2012 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed March 13, 2012).

 

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

 

  c. Exhibit 31.2 – Certification of President and Chief Operating Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002.

 

  d. Exhibit 31.3 – Certification of Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002.

 

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

 

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

 

  g. 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 Sarbanes–Oxley Act of 2002.

 

  h. Exhibit 101.INS – XBRL Instance Document *

 

  i. Exhibit 101.SCH – XBRL Taxonomy Extension Schema Document *

 

  j. Exhibit 101.CAL – XBRL Taxonomy Extension Calculation Linkbase Document *

 

  k. Exhibit 101.LAB – XBRL Taxonomy Extension Label Linkbase Document *

 

  l. Exhibit 101.PRE – XBRL Taxonomy Extension Presentation Linkbase Document *

 

  m. Exhibit 101.DEF – XBRL Taxonomy Extension Definition Linkbase Document *

 

* Submitted electronically with this Quarterly Report on Form 10-Q.

 

35


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GIBRALTAR INDUSTRIES, INC.

(Registrant)

 

/s/ Brian J. Lipke                

Brian J. Lipke                      

Chairman of the Board and 

Chief Executive Officer      

/s/ Henning N. Kornbrekke

Henning N. Kornbrekke      
                President and Chief Operating Officer

/s/ Kenneth W. Smith          

Kenneth W. Smith                

Senior Vice President and   

Chief Financial Officer        

Date: May 3, 2012

 

36

XNAS:ROCK Gibraltar Industries Inc Quarterly Report 10-Q Filling

Gibraltar Industries Inc XNAS:ROCK Stock - Get Quarterly Report SEC Filing of Gibraltar Industries Inc XNAS:ROCK stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

Content Partners
XNAS:ROCK Gibraltar Industries Inc Quarterly Report 10-Q Filing - 3/31/2012
Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol |  Title Star Rating |  Category |  Total Assets |  Top Holdings |  Top Sectors |  Symbol |  Name Title |  Date |  Author |  Collection |  Interest |  Popularity Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol / Ticker |  Title Star Rating |  Category |  Total Assets |  Symbol / Ticker |  Name Title |  Date |  Author |  Collection |  Popularity |  Interest Title |  Date |  Company |  Symbol |  Interest |  Popularity Title |  Date |  Company |  Symbol |  Interest |  Popularity

Previous: XNAS:ROCK Gibraltar Industries Inc Insider Activity 4 Filing - 9/14/2012  |  Next: XNAS:ROCK Gibraltar Industries Inc Quarterly Report 10-Q Filing - 6/30/2012