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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
______________________________
FORM 10-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES ACT OF 1934
For The Fiscal Year Ended December 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ___________ to ____________
Commission File Number 0-22462
GIBRALTAR STEEL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 16-1445150
(State or other jurisdiction of (I.R.S. Employer
incorporation organization) Identification No.)
3556 Lake Shore Road, P.O. Box 2028,
Buffalo, New York 14219-0228
(address of principal executive offices) (Zip Code)
(716) 826-6500
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $.01 par value NASDAQ National Market System
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of the Form 10-K or any amendment to this Form 10-K. ( )
As of December 31, 2000, the aggregate market value of the voting
stock held by nonaffiliates of the Registrant amounted to
$111,451,000.
As of December 31, 2000, the number of common shares outstanding was:
12,567,147.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for the
Annual Meeting of Shareholders to be held May 15, 2001, are
incorporated by reference into Part III of this report.
Exhibit Index is on Page 37
1
PART I
Item 1. Description of Business
General
The Company is a processor of a broad array of high value-
added, technically sophisticated steel and other metal
products. The Company utilizes any one or a combination of
several different processes at each of its operating
facilities to add substantial margin and value to raw
material acquired from primary steel and other metal
producers. Underlying each of these processes is a common
set of steel and metal processing core competencies. These
core competencies are the foundation upon which all the
Company's operations and customer offerings are based.
Industry Overview
Steel and metal processors occupy a market niche that exists
between the primary steel and metal producers and end-users
and others. Primary steel and metal producers typically
focus on the sale of standard size and tolerance steel and
other metals to large volume purchasers, including steel and
metal processors. At the same time, end-users require steel
with closer tolerances and with shorter lead times than the
primary steel and metal producers can provide efficiently.
Metal Processes, Products and Services
The Company processes, produces and delivers a variety of
products and services on a just-in-time basis for industrial
manufacturers, fabricators and other end-users in the
automotive, automotive supply, building and construction,
steel, machinery and fastener industries.
The following table sets forth certain information regarding
sales of products and services as a percentage
of net sales for the past three years:
Year ended December 31,
Processes, Products and Services 1998 1999 2000
Cold-rolled strip steel 30% 29% 28%
Building and construction products 32% 35% 36%
Precision metal products 31% 26% 23%
Heat treating and other services 7% 10% 13%
2
The following steel and metal products, processes and
services are provided by the Company:
Cold-Rolled Strip Steel
The Company produces a broad range of fully processed cold-
rolled strip steel products. The Company buys wide, open
tolerance sheet steel in coils from primary steel producers and
processes it to specific customer orders by performing such
computer-aided processes as cold reduction, annealing, temper
rolling, edge rolling and slitting. Cold reduction is the
rolling of steel to a specified thickness, tolerance and
finish. Annealing is a thermal process which changes hardness
and certain metallurgical characteristics of steel. Temper
rolling is the rolling of steel to a specific hardness. Edge
rolling involves conditioning edges of processed steel into
square, fully round or partially round shapes. Slitting is the
cutting of steel to specified widths. Depending on customer
specifications, one or more of these processes are utilized to
produce steel strip of a precise grade, temper, tolerance and
finish.
The Company operates 9 rolling mills at its facilities in
Cleveland, Ohio and Buffalo, New York, all of which are QS9000
certified. The Company has the capability to process coils up
to a maximum of 72 inch outside diameter and roll widths of up
to 50 inches. The Company's rolling mills include automatic
gauge control systems with hydraulic screwdowns allowing for
microsecond adjustments during processing. The Company
operates a 56 inch reversing mill which the Company believes is
the widest of its type in the industry.
The Company's computerized mills produce products meeting the
most stringent statistical quality control standards, enabling
it to satisfy a growing industry demand for a range of steel
from thicker to thinner, low carbons to alloy grades, all with
precision gauge tolerances as close as +/- .0002 inches.
The Company's rolling facilities are further complemented by 15
high convection annealing furnaces, which shorten annealing times
over conventional annealers. The Company's newest furnaces
incorporate the use of a hydrogen atmosphere for the production of
cleaner and more uniform steel. As a result of its annealing
capabilities, the Company is able to produce cold-rolled strip
steel with improved consistency in terms of hardness, molecular
grain structure and surface.
3
The Company can produce certain of its strip steel products on
oscillated coils which wind the steel strip in a manner similar
to the way thread is wound on a spool. Oscillating the steel
enables the Company to put at least six times greater volume of
finished product on a coil than standard ribbon winding,
allowing customers to achieve longer production runs by reducing
the number of equipment shut-downs to change coils. Customers
are thus able to increase productivity, reduce downtime, improve
yield and lengthen die life.
Building and Construction Products
The Company processes steel and other metal to manufacture a
wide array of products for the building and construction
industry. Building and construction industry products are
manufactured primarily from galvanized steel, as well as from
aluminum, copper and other metals. Building and construction
products manufactured include metal trims, utility sheds,
steel lumber connectors, metal roofing, drywall products,
gutters and down spouts, ventilation products and storm panel
systems for residential and commercial properties, registers,
vents, bath cabinets, access doors, roof hatches and
telescoping doors.
The Company's existing building and construction products
operations - comprised of Southeastern Metals Manufacturing
Company, Inc. (SEMCO), with facilities located in Florida,
Tennessee, Texas and Mississippi, The Solar Group (Solar),
with three facilities located in Mississippi, Appleton Supply
Co., Inc. (Appleton), with facilities located in Wisconsin
and Missouri, United Steel Products Company (USP), with
facilities located in Minnesota, California, North Carolina,
New Jersey, Florida, Texas and Colorado, and K & W Metal
Fabricators, Inc., d/b/a Weather Guard Building Products
(Weather Guard), with operations based in Colorado - expanded
during 2000 with the acquisition of Milcor, Inc. in July
2000. Milcor has operations located in Ohio and Michigan,
which manufacture a complete line of metal building products,
including registers, vents, bath cabinets, access doors, and
telescoping doors.
Precision Metal Products
The Company's precision metal products are comprised primarily of
higher value-added flat-rolled sheet steel, as well as steel
strapping and other products.
4
Precision Metal Processing. The Company operates a precision metals
facility in New York that primarily processes flat-rolled sheet
steel. In addition to slitting and cutting to length, this
precision metals facility can produce higher value-added products
which are held to close tolerances and tight specifications through
cold-rolling, annealing, blanking, oscillating and edge rolling.
The Company also operates precision metals facilities in
Illinois and Alabama which process galvanized, Galvalume and
prepainted steel and can slit and cut to length material
based upon customer specifications.
Steel Strapping. Steel strapping is banding and packaging
material that is used to close and reinforce shipping units such
as bales, boxes, cartons, coils, crates and skids. The Company
manufactures high tensile strapping that is subject to strength
requirements imposed by the American Society for Testing and
Materials for packaging of different products for common carrier
transport. This high tensile steel strapping is essential to
producers of large, heavy products such as steel, paper and lumber
where reliability of the packaging material is critical to the
safe transport of the product.
The Company's QS9000 certified strapping facility manufactures
high tensile steel strapping by slitting, oscillating, heat
treating, painting and packaging cold-rolled coils.
Steel strapping is cold-rolled to precise gauge on one of the
Company's rolling mills, which incorporates hydraulic screwdowns
and automatic gauge controls with statistical charting. This
process ensures strapping product of the most uniform gauge
available and produces the maximum amount of strapping per pound
of steel. All products are tested by on-site laboratory personnel
for width, thickness and other physical and metallurgical
properties.
To meet the differing needs of its customers, the Company offers
its strapping products in various thicknesses, widths and coil
sizes. The Company also manufactures custom color and printed
strapping. In addition, the Company offers related strapping
products, such as seals and tools, and is able to manufacture
tensional strapping for lighter duty applications.
Other Products. The Company's Solar operation produces a
complete line of mailboxes manufactured primarily with
galvanized steel.
5
Heat Treating and Other Services
Metallurgical Heat Treating Services. The Company provides a
wide range of metallurgical heat treating services in which
customer-owned parts are exposed to precise temperatures,
atmospheres and quenchants and other conditions to improve their
mechanical properties, durability and wear resistance. These
services include case-hardening, neutral-hardening and through-
hardening processes for customers in a wide variety of industries.
Using methods such as annealing, normalizing, vacuum hardening,
carburizing, nitriding and brazing, as well as a host of other
services, these heat treating processes can harden, soften or
otherwise impart desired properties on parts made of steel,
aluminum, copper and various alloys and other metals.
The Company operates fifteen heat treating facilities in
North Carolina, South Carolina, Tennessee, Georgia, Alabama,
Michigan, Indiana and Illinois. The Company maintains a
metallurgical laboratory at each facility with trained
metallurgists providing a range of testing capabilities to
add value to treated parts and enhance quality control.
Consistent quality control is maintained by application of a
statistical process control system and QS/ISO 9002
registration. Additionally, the Company maintains a fleet of
trucks and trailers to provide rapid turnaround time for its
customers.
Due to time and costs associated with transporting materials
and customers' need for just-in-time delivery of heat treated
products, the commercial heat treating industry has developed
as a regional industry concentrated in major industrial areas
of the country. In addition, the commercial heat treating
industry has realized significant growth in recent years as
many companies involved in the manufacture of metal
components outsource their heat treating requirements. The
Company believes that its heat treating facilities are
strategically located to meet the needs of customers from a
geographically diverse base of operations and to capitalize
on the growing trend in outsourcing of heat treating
operations.
Materials Management Services. The Company operates two materials
management facilities that link primary steel producers and end-
user manufacturers by integrating the inventory purchasing,
receiving, inspection, billing, storage and shipping functions and
producing true just-in-time delivery of materials. These
facilities receive shipments of steel by rail and truck from steel
producers, which retain ownership of the steel until it is
delivered to the end-user manufacturer. The Company inspects the
steel and stores it in a climate-controlled environment through
the use of a specialized stacker crane and racking system. When
an order is placed, the Company often delivers the steel to the
end-user manufacturer within one hour using Company-owned trucks
that have been custom designed to facilitate the loading and
unloading process.
6
Steel Pickling Joint Venture. The Company is a minority partner
with a 31% interest in two steel pickling operations in Ohio.
After the hot-rolling process, the surface of sheet steel is left
with a residue known as scale, which must be removed prior to
further processing by a cleaning process known as pickling. This
joint venture pickles steel on a toll basis, receiving fees for
its pickling services without acquiring ownership of the steel.
Quality Control
The Company carefully selects its raw material vendors and uses
computerized inspection and analysis to assure that the steel and
other metals which it processes will be able to meet the most
critical specifications of its customers. The Company uses
documented procedures during the production process, along with
statistical process control computers linked directly to
processing equipment, to monitor that such specifications are met.
Physical, chemical and metallographic analyses are performed
during the production process to verify that mechanical and
dimensional properties, cleanliness, surface characteristics and
chemical content are within specification.
Suppliers and Raw Materials
Steel and metal processing companies are required to maintain
substantial inventories of raw materials in order to accommodate
the short lead times and just-in-time delivery requirements of
their customers. Accordingly, the Company generally maintains its
inventory of raw materials at levels that it believes are
sufficient to satisfy the anticipated needs of the customers based
upon historic buying practices and market conditions. The primary
raw material processed by the Company is flat rolled steel
purchased at regular intervals primarily from approximately 20
major North American suppliers and a limited number of foreign
steel companies. The Company has no long-term commitments with
any of its suppliers.
Technical Services
The Company employs a staff of engineers and other technical
personnel and maintains fully-equipped, modern laboratories to
support its operations. These laboratories enable the Company to
verify, analyze and document the
physical, chemical, metallurgical and mechanical properties of its
raw materials and products. Technical service personnel also work
in conjunction with the sales force to determine the types of steel
required for the particular needs of the Company's customers.
7
Sales and Marketing
The Company's products and services are sold primarily by Company
sales personnel and outside sales representatives located
throughout the United States and Mexico.
Customers and Distribution
The Company has approximately 10,000 customers located throughout
the United States, Canada and Mexico principally in the
automotive, automotive supply, building and construction, steel,
machinery and fastener industries. Major customers include
automobile manufacturers and suppliers, building and construction
product distributors, and commercial and residential contractors.
No customer of the Company represented 10% or more of the
Company's net sales for 1998, 1999 or 2000.
The Company manufactures its products exclusively to customer
order rather than for inventory, except for building and
construction products. Although the Company negotiates annual
sales orders with a majority of its customers, these orders are
subject to customer confirmation as to product amounts and
delivery dates.
Competition
The steel processing market is highly competitive. The Company
competes with a small number of other steel processors, some of
which also focus on fully processed, high value-added steel
products. The Company competes on the basis of the precision and
range of achievable tolerances, quality, price and the ability to
meet delivery schedules dictated by customers.
The Company also competes with a small number of other steel
strapping manufacturers on the basis of quality, price, products,
range of sizes offered and the ability to meet delivery schedules
dictated by customers.
The Company competes with numerous suppliers of building and
construction products in its market based on the broad range of
products offered, quality, price and delivery.
The Company competes with a small number of suppliers of heat
treating services in its market areas on the basis of processes
offered, quality, price, and delivery.
8
Employees
At December 31, 2000, the Company employed approximately 3,500
people, of which approximately 570 are represented by collective
bargaining agreements.
Backlog
Because of the nature of the Company's products and the short lead
time order cycle, backlog is not a significant factor in the
Company's business. The Company believes that substantially all
of its firm orders existing on December 31, 2000 will be shipped
prior to the end of 2001.
Governmental Regulation
The Company's processing centers and manufacturing facilities are
subject to many federal, state and local requirements relating to
the protection of the environment. The Company believes that it
is in material compliance with all environmental laws, does not
anticipate any material expenditures in order to meet environmental
requirements and does not believe that future compliance with such
laws and regulations will have a material adverse effect on its
results of operations or financial condition.
The Company's operations are also governed by many other laws and
regulations. The Company believes that it is in material
compliance with these laws and regulations and does not believe
that future compliance with such laws and regulations will have a
material adverse effect on its results of operations or financial
condition.
9
Item 2. Description of Properties
The Company maintains its corporate headquarters in Buffalo, New
York and conducts its business operations in facilities located
throughout the United States.
The Company believes that its primary existing facilities, listed
below, and their equipment are effectively utilized, well
maintained, in good condition and will be able to accommodate its
capacity needs through 2001.
Square Owned or
Location Utilization Footage Leased
Buffalo, New York Headquarters 23,000 Leased
Cheektowaga, New York Cold-rolled strip steel
processing and
strapping products 148,000 Owned
Tonawanda, New York Cold-rolled strip steel
and precision
metals processing 128,000 Owned
Cleveland, Ohio Cold-rolled strip steel
processing 259,000 Owned
Ithaca, New York Warehouse 14,300 Leased
Dearborn, Michigan Strapping tool products 3,000 Owned
Lackawanna, New York Materials management
facility 65,000 Leased
Woodhaven, Michigan Materials management
facility 100,000 Owned
Franklin Park,
Illinois Precision metals
processing 99,000 Owned
Birmingham, Alabama Precision metals
processing 97,900 Leased
Brownsville, Texas Distribution warehouse 15,000 Leased
Troy, Michigan Sales office 800 Leased
Fountain Inn,
S. Carolina Heat treating 82,400 Owned
Reidsville,
N. Carolina Heat treating 53,500 Owned
Arden, N. Carolina Heat treating 20,400 Leased
Charlotte,
N. Carolina Administrative office 3,400 Leased
Morristown, Tennessee Heat treating 24,200 Owned
Conyers, Georgia Heat treating 18,700 Leased
Athens, Alabama Heat treating 20,000 Owned
Coldwater, Michigan Administrative office
and heat treating 89,000 Owned
Benton Harbor,
Michigan Administrative office
and heat treating 56,700 Owned
Benton Harbor,
Michigan Warehouse 25,000 Leased
Greensburg, Indiana Heat treating 30,000 Leased
South Bend, Indiana Heat treating 33,900 Owned
Rockford, Illinois Heat treating 15,600 Owned
Rockford, Illinois Heat treating 54,400 Owned
Northlake, Illinois Administrative office
and heat treating 200,000 Leased
Jacksonville, Florida Administrative office
and construction
products manufacturing 261,400 Leased
Miami, Florida Construction products
manufacturing 77,000 Leased
Tampa, Florida Construction products
manufacturing 50,000 Leased
Nashville, Tennessee Construction products
manufacturing 52,500 Leased
San Antonio, Texas Construction products
manufacturing 120,000 Leased
Houston, Texas Construction products
manufacturing 42,000 Leased
Vidalia, Georgia Warehouse 34,000 Leased
Taylorsville,
Mississippi Construction products
manufacturing 54,000 Owned
Taylorsville,
Mississippi Construction products
manufacturing 238,700 Owned
Port Gibson,
Mississippi Warehouse 40,000 Leased
10
Enterprise,
Mississippi Construction products
manufacturing 194,300 Owned
Appleton, Wisconsin Construction products
manufacturing 100,300 Owned
Appleton, Wisconsin Construction products
manufacturing 42,600 Owned
Joplin, Missouri Construction products
manufacturing 45,400 Owned
Montgomery, Minnesota Administrative office
and construction
products manufacturing 115,600 Owned
Montgomery, Minnesota Construction products
manufacturing 22,000 Leased
LeCenter, Minnesota Construction products
manufacturing 15,000 Leased
Livermore, California Construction products
manufacturing 103,500 Leased
Rancho Cucamonga,
California Warehouse 20,600 Leased
North Wilkesboro,
N. Carolina Construction products
manufacturing 23,000 Leased
North Wilkesboro,
N. Carolina Administrative office 900 Leased
Hainesport,
New Jersey Warehouse 15,000 Leased
Denver, Colorado Administrative office
and construction
products manufacturing 90,000 Leased
Denver, Colorado Construction products
manufacturing 30,000 Leased
Largo, Florida Administrative office
and construction
products manufacturing 100,000 Owned
Holland, Ohio Administrative office 3,500 Leased
Lima, Ohio Construction products
manufacturing 203,000 Owned
Coopersville,
Michigan Construction products
Manufacturing 246,000 Owned
Item 3. Legal Proceedings
From time to time, the Company is named a defendant in legal
actions arising out of the normal course of business. The Company
is not a party to any pending legal proceeding the resolution of
which the management of the Company believes will have a material
adverse effect on the Company's results of operations or financial
condition or to any other pending legal proceedings other than
ordinary, routine litigation incidental to its business. The
Company maintains liability insurance against risks arising out of
the normal course of business.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
11
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
As of December 31, 2000, there were 129 shareholders of record of
the Company's common stock. However, the Company believes that it
has a significantly higher number of shareholders because of the
number of shares that are held by nominees.
The Company's common stock is traded in the over-the-counter
market and quoted on the National Association of Securities
Dealers Automated Quotation System - National Market System
("Nasdaq"). Its trading symbol is "ROCK". The following table
sets forth the high and low sales prices per share for the
Company's common stock for each quarter of 2000 and 1999:
2000 1999
High Low High Low
Fourth Quarter $ 18 $ 11 1/2 $ 26 $ 21 3/4
Third Quarter 19 3/8 14 25 3/4 20 1/8
Second Quarter 18 13/16 12 13/16 25 1/4 19 3/4
First Quarter 24 14 3/4 23 1/2 17
The Company declared dividends of $.025 per share in the first
quarter of 2000 and $.03 per share in each of the second, third
and fourth quarters of 2000. The Company declared dividends of
$.05 per share in the first quarter of 1999 and $.025 per share in
each of the second, third and fourth quarters of 1999.
12
Item 6. Selected Financial Data
(in thousands, except per share data)
Year Ended December 31,
2000 1999 1998 1997 1996
Net Sales $ 677,540 $ 621,918 $ 557,944 $449,700 $ 342,974
EBITDA 81,080 72,921 57,788 41,081 36,863
Income from
operations 59,892 55,469 44,455 32,603 30,617
Interest expense 18,942 13,439 11,389 5,115 3,827
Income before income
taxes 40,950 42,030 33,066 27,488 26,790
Income taxes 16,585 17,022 13,226 11,072 10,815
Net income 24,365 25,008 19,840 16,416 15,975
Net income per
share-Basic $ 1.94 $ 1.99 $ 1.59 $ 1.33 $ 1.42
Weighted average
shares
outstanding-Basic 12,577 12,540 12,456 12,357 11,261
Net income per
share-Diluted $ 1.92 $ 1.95 $ 1.57 $ 1.30 $ 1.39
Weighted average
shares
outstanding-Diluted 12,685 12,806 12,651 12,591 11,464
Cash dividends per
common share $ 0.115 $ 0.125 $ - $ - $ -
Current assets $ 187,594 $ 182,591 $ 175,834 $130,746 $ 109,526
Current liabilities 55,187 69,668 51,598 43,101 40,853
Total assets 556,046 522,080 438,435 281,336 222,507
Total debt 255,853 236,621 200,746 83,024 49,841
Shareholders' equity 208,348 185,459 160,308 140,044 121,744
Capital expenditures $ 19,619 $ 21,999 $ 22,062 $ 21,784 $ 15,477
Depreciation 17,212 14,613 11,221 7,475 5,581
Amortization 3,976 2,839 2,112 1,003 665
13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Year Ended 2000 Compared to Year Ended 1999
Net sales increased $55.6 million, or 8.9%, to a record
$677.5 million in 2000 from $621.9 million in 1999, despite
the elimination of $19.4 million in sales from disposed of
operations that were included in 1999 sales and a slowdown in
the automotive and building products markets in the fourth
quarter of 2000. This increase primarily resulted from
including the net sales of Milcor (acquired July 17, 2000)
(the 2000 acquisition) from its acquisition date, and a full
year of net sales of Southeastern Heat Treating (acquired
April 1, 1999), Weather Guard (acquired July 1, 1999), Hi-
Temp (acquired August 1, 1999), Brazing Concepts (acquired
November 1, 1999) and Hughes (acquired December 1, 1999) (the
1999 acquisitions), together with sales growth at existing
operations.
Cost of sales increased $47.8 million, or 9.7%, to $541.7
million in 2000 from $493.9 million in 1999. Cost of sales
as a percentage of net sales increased to 80.0% in 2000 from
79.4% in 1999 primarily due to the impact of the slowdown in
the automotive and construction products markets in the
fourth quarter of 2000.
Selling, general and administrative expenses increased $3.4
million, or 4.7%, to $75.9 million in 2000 from $72.5 million
in 1999. Selling, general and administrative expenses as a
percentage of net sales decreased to 11.2% in 2000 from 11.7%
in 1999 primarily due to the elimination of expenses from
disposed of operations and decreases in performance based
compensation, partially offset by higher costs attributable
to the 1999 and 2000 acquisitions.
Interest expense increased $5.5 million from 1999 to 2000 due
to higher borrowings as a result of the acquisitions, current
year capital expenditures and due to a higher effective
interest rate in 2000 than in 1999.
As a result of the above, income before taxes decreased $1.1
million, or 2.6%, to $40.9 million in 2000 from $42.0 million
in 1999.
Income taxes approximated $16.6 million in 2000, based on a
40.5% effective rate.
Year Ended 1999 Compared to Year Ended 1998
Net sales increased $64.0 million, or 11.5%, to $621.9
million in 1999 from $557.9 million in 1998. This increase
primarily resulted from including the net sales of
Southeastern Heat Treating (acquired April 1, 1999), Weather
Guard (acquired July 1, 1999), Hi-Temp (acquired August 1,
1999), Brazing Concepts (acquired November 1, 1999) and
Hughes (acquired December 1, 1999) (the 1999 acquisitions)
from their respective acquisition dates, and a full year of
net sales of Solar (acquired March 1, 1998), Appleton
(acquired April 1, 1998), USP (acquired June 1, 1998) and
Harbor (acquired October 1, 1998) (the 1998 acquisitions),
together with sales growth at existing operations.
Cost of sales increased $37.5 million, or 8.2%, to $493.9
million in 1999 from $456.4 million in 1998. Cost of sales
as a percentage of net sales decreased to 79.4% in 1999 from
81.8% in 1998. This improvement was due to the 1999 and 1998
acquisitions, which have historically generated higher
margins than the Company's existing operations, and due to
lower raw material costs at existing operations.
14
Selling, general and administrative expenses increased $15.5
million, or 27.1%, to $72.5 million in 1999 from $57.0 in
1998. Selling, general and administrative expenses as a
percentage of net sales increased to 11.7% in 1999 from 10.2%
in 1998. This increase was due to higher costs as a
percentage of net sales attributable to the 1999 and 1998
acquisitions, and due to performance based compensation
linked to the Company's sales and profitability.
Interest expense increased by $2.0 million from 1998 to 1999
primarily due to higher borrowings in 1999 as a result of the
Company's current year acquisitions and capital expenditures
and due to a higher effective interest rate in 1999 than in
1998.
As a result of the above, income before taxes increased $9.0
million, or 27.1%, to $42.0 million in 1999 from $33.1
million in 1998.
Income taxes approximated $17.0 million in 1999, based on a
40.5% effective rate compared with a 40.0% effective rate in
1998.
Liquidity and Capital Resources
During 2000, the Company's working capital increased by $19.5
million to $132.4 million at December 31, 2000 from $112.9
million at December 31, 1999 primarily from the inclusion of
inventories of the 2000 acquisition, and a decrease in
accounts payable and accrued expenses resulting from
decreased purchases during the fourth quarter of 2000 in
response to the slowdown in the automotive and construction
products markets. Long-term debt decreased to 55% of total
capitalization, despite increasing by $20.2 million to $255.5
million, at December 31, 2000. Additionally, shareholders'
equity increased by 12.3% to $208.3 million.
The Company's principal capital requirements are to fund its
operations, including working capital requirements, the
purchase and funding of improvements to its property and
equipment, and to fund acquisitions.
The Company's primary sources of liquidity are from cash
provided by operating activities and the Company's revolving
credit facility. Net cash provided by operations of $34.1
million resulted primarily from net income of $24.4 million,
depreciation and amortization of $21.2 million, the provision
for deferred income taxes of $5.3 million and a decrease in
accounts receivable of $5.7 million, offset by decreases in
accounts payable and accrued expenses of $16.6 million and
increases in other current assets of $2.8 million and other
assets of $2.6 million.
During 2000, the Company amended its revolving credit
agreement with its bank group to increase the capacity of its
revolver to $310 million. Borrowings thereunder are secured
with its accounts receivable, inventories and property and
equipment. At December 31, 2000, the Company had interest
rate swap agreements outstanding which effectively converted
$50 million of borrowings under the revolving credit
agreement to fixed rates ranging from 7.47% to 8.18%. The
Company accounts for interest rate swap agreements on an
accrual basis. Additional borrowings under the revolving
credit facility carry interest at LIBOR plus a fixed rate.
The weighted average interest rate of these borrowings was
8.70% at December 31, 2000.
Net cash provided by operations of $34.1 million, $7.8
million net proceeds from the sale of property and equipment
and the net proceeds from long-term debt of $19.2 million
were primarily used for the acquisition of Milcor, capital
expenditures and payment of cash dividends.
15
The Company believes that availability under its credit
facility, together with funds generated from operations, will
be more than sufficient to provide the Company with the
liquidity and capital resources necessary to fund its
anticipated working capital requirements, acquisitions and
capital expenditure commitments for the next twelve months.
The Company believes that environmental issues will not
require the expenditure of material amounts for environmental
compliance in the future.
Recent Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133
Accounting for Derivative Instruments and Hedging Activities
(FAS No. 133) which requires recognition of the fair value
of derivatives in the statement of financial position, with
changes in the fair value recognized either in earnings or
as a component of other comprehensive income dependent upon
the hedging nature of the derivative. Implementation of FAS
No. 133 is required for fiscal 2001. FAS No. 133 will not
have a material impact on the Company's earnings or other
comprehensive income.
Safe Harbor Statement
The Company wishes to take advantage of the Safe Harbor
provisions included in the Private Securities Litigation
Reform Act of 1995 (the "Act"). Statements by the Company,
other than historical information, constitute "forward
looking statements" within the meaning of the Act and may be
subject to a number of risk factors. Factors that could
affect these statements include, but are not limited to, the
following: the impact of changing steel prices on the
Company's results of operations; changing demand for the
company's products and services; the impact of the Year 2000
matter; and changes in interest or tax rates.
16
Company Responsibility For Financial Statements
The accompanying consolidated financial statements of
Gibraltar Steel Corporation have been prepared by management,
which is responsible for their integrity and objectivity.
The statements have been prepared in conformity with
accounting principles generally accepted in the United States
and include amounts based on management's best estimates and
judgments. Financial information elsewhere in this Annual
Report is consistent with that in the consolidated financial
statements.
The Company has established and maintains a system of
internal control designed to provide reasonable assurance
that assets are safeguarded and that the financial records
reflect the authorized transactions of the Company.
The financial statements have been audited by
PricewaterhouseCoopers LLP, independent accountants. As part
of their audit of the Company's 2000 financial statements,
PricewaterhouseCoopers LLP considered the Company's system of
internal control to the extent they deemed necessary to
determine the nature, timing and extent of their audit tests.
The Board of Directors pursues its responsibility for the
Company's financial reporting through its Audit Committee,
which is composed entirely of outside directors. The
independent accountants have direct access to the Audit
Committee, with and without the presence of management
representatives, to discuss the results of their audit work
and their comments on the adequacy of internal accounting
controls and the quality of financial reporting.
Brian J. Lipke
Chairman of the Board
and Chief Executive Officer
Walter T. Erazmus
President
John E. Flint
Vice President
and Chief Financial Officer
17
Item 8. Financial Statements and Supplementary Data
Page Number
Index to Financial Statements:
Financial Statements:
Report of Independent Accountants 19
Consolidated Balance Sheet at
December 31, 2000 and 1999 20
Consolidated Statement of Income for
the three years ended December 31, 2000 21
Consolidated Statement of Cash Flows for
the three years ended December 31, 2000 22
Consolidated Statement of Shareholders' Equity
for the three years ended December 31, 2000 23
Notes to Consolidated Financial Statements 24
Supplementary Data:
Quarterly Unaudited Financial Data 33
18
Report of Independent Accountants
To the Board of Directors and
Shareholders of Gibraltar Steel Corporation
In our opinion, the consolidated financial statements
listed in the accompanying index present fairly, in all
material respects, the financial position of Gibraltar
Steel Corporation and its subsidiaries at December 31,
2000 and 1999, and the results of their operations and
their cash flows for each of the three years in the
period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United
States. These financial statements are the
responsibility of the Company's management; our
responsibility is to express an opinion on these
financial statements based on our audits. We conducted
our audits of these statements in accordance with
auditing standards generally accepted in the United
States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the
financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating
the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Buffalo, New York
January 24, 2001
19
GIBRALTAR STEEL CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except share and per share data)
December 31,
ASSETS 2000 1999
Current assets:
Cash and cash equivalents $ 1,701 $ 4,687
Accounts receivable 78,358 78,418
Inventories 100,987 94,994
Other current assets 6,548 4,492
Total current assets 187,594 182,591
Property, plant and equipment, net 229,159 216,030
Goodwill 130,368 115,350
Other assets 8,925 8,109
$ 556,046 $ 522,080
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 39,285 $ 48,857
Accrued expenses 15,575 19,492
Current maturities
of long-term 327 1,319
Total current liabilities 55,187 69,668
Long-term debt 255,526 235,302
Deferred income taxes 34,325 29,328
Other non-current liabilities 2,660 2,323
Shareholders' equity
Preferred shares, $.01 par value;
authorized: 10,000,000 shares;
none outstanding - -
Common shares, $.01 par value;
authorized: 50,000,000 shares;
outstanding: 12,567,147 shares
in 2000 and 12,577,464 shares
in 1999 126 126
Additional paid-in capital 68,475 68,323
Retained earnings 139,747 117,010
Total shareholders' equity 208,348 185,459
$ 556,046 $ 522,080
The accompanying notes are an integral
part of these financial statements.
20
GIBRALTAR STEEL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
Year Ended December 31,
2000 1999 1998
Net sales $ 677,540 $ 621,918 $ 557,944
Cost of sales 541,743 493,945 456,449
Gross profit 135,797 127,973 101,495
Selling, general and 75,905 72,504 57,040
administrative expense
Income from operations 59,892 55,469 44,455
Interest expense 18,942 13,439 11,389
Income before taxes 40,950 42,030 33,066
Provision for income taxes 16,585 17,022 13,226
Net income $ 24,365 $ 25,008 $ 19,840
Net income per share - Basic $ 1.94 $ 1.99 $ 1.59
Weighted average shares 12,577 12,540 12,456
outstanding - Basic
Net income per share - Diluted $ 1.92 $ 1.95 $ 1.57
Weighted average shares 12,685 12,806 12,651
outstanding - Diluted
The accompanying notes are an integral
part of these financial statements.
21
GIBRALTAR STEEL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Year Ended December 31,
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 24,365 $ 25,008 $ 19,840
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 21,188 17,452 13,333
Provision for deferred
income taxes 5,252 2,383 1,693
Undistributed equity
investment income (253) (466) (284)
Other noncash adjustments 116 697 304
Increase (decrease) in cash
resulting from changes in (net of
effects from acquisitions):
Accounts receivable 5,660 (118) (5,363)
Inventories (206) 6,873 (6,309)
Other current assets (2,829) (272) (1,430)
Accounts payable and
accrued expenses (16,551) 10,242 (7,572)
Other assets (2,622) (1,130) (899)
Net cash provided by
operating activities 34,120 60,669 13,313
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired (42,880) (65,380) (99,415)
Investments in property, plant
and equipment (19,619) (21,999) (22,062)
Net proceeds from sale of
property and equipment 7,753 2,838 187
Net cash used in
in investing activities (54,746) (84,541) (121,290)
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term debt reduction (63,157) (67,160) (61,508)
Proceeds from long-term debt 82,389 94,081 168,825
Repurchase of common stock (181) - -
Net proceeds from issuance of
common stock 36 1,014 100
Payment of dividends (1,447) (1,253) -
Net cash provided by
financing activities 17,640 26,682 107,417
Net (decrease) increase in cash
and cash equivalents (2,986) 2,810 (560)
Cash and cash equivalents at
beginning of year 4,687 1,877 2,437
Cash and cash equivalents at
end of year $ 1,701 $ 4,687 $ 1,877
The accompanying notes are an integral
part of these financial statements.
22
GIBRALTAR STEEL CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands)
Additional
Common Shares Paid-in Retained
Shares Amount Capital Earnings
Balance at December 31, 1997 12,410 $ 124 $ 66,190 $ 73,730
Net income - - - 19,840
Stock options exercised
and tax benefit 8 - 119 -
Restricted stock
granted 55 1 - -
Earned portion of
restricted stock - - 87 -
Profit sharing plan
contribution 11 - 217 -
Balance at December 31, 1998 12,484 125 66,613 93,570
Net income - - - 25,008
Stock options exercised
and tax benefit 72 1 1,124 -
Cash dividend - $.125
per share - - - (1,568)
Earned portion of
restricted stock - - 116 -
Profit sharing plan
contributions 21 - 470 -
Balance at December 31, 1999 12,577 126 68,323 117,010
Net income - - - 24,365
Stock options exercised
and tax benefit 3 - 36 -
Cash dividend - $.115
per share - - - (1,447)
Earned portion of
restricted stock - - 116 -
Repurchase of common
stock (13) - - (181)
Balance at December 31, 2000 12,567 $ 126 $ 68,475 $ 139,747
The accompanying notes are an integral
part of these financial statements
23
GIBRALTAR STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of
Gibraltar Steel Corporation and subsidiaries (the Company).
Significant intercompany accounts and transactions have been
eliminated.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, checking
accounts and all highly liquid investments with a maturity of
three months or less.
Inventories
Inventories are valued at the lower of cost or market. Cost is
determined using the first-in, first-out method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and
depreciated over their estimated useful lives using the
straight-line method. Accelerated methods are used for income
tax purposes. Interest is capitalized in connection with
construction of qualified assets. Under this policy, interest
of $552,000, $357,000 and $404,000 was capitalized in 2000,
1999 and 1998, respectively.
Goodwill
Goodwill is amortized over 35 years. Amortization expense
related to goodwill was $3,710,000, $2,647,000 and $1,949,000
in 2000, 1999, and 1998, respectively. Accumulated
amortization was $9,961,000 and $6,251,000 at December 31, 2000
and 1999.
Shareholders' Equity
In 1999 and 1998, the Company issued 20,572 and 11,000,
respectively, of its common shares as contributions to its
profit sharing plans. The Company did not contribute any of
its shares to its profit sharing plans during 2000.
During 2000 and 1999, the Company declared dividends of
$1,447,000 and $1,568,000, respectively, of which $377,000 and
$315,000 are accrued at December 31, 2000 and 1999,
respectively.
During 2000, the Company purchased 12,572 shares of its
outstanding common stock at a cost of $14.38 per share. The
Company did not repurchase any shares of its common stock in
prior years.
24
Interest Rate Exchange Agreements
Interest rate swap agreements, which are used by the Company in
the management of interest rate risk, are accounted for on an
accrual basis. Amounts to be paid or received under interest rate
swap agreements are recognized as interest expense or income in
the periods in which they accrue. Swaps are not used for trading
purposes.
Income Taxes
The financial statements of the Company have been prepared
using the asset and liability approach in accounting for income
taxes which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of
temporary differences between the carrying amounts and the tax
bases of other assets and liabilities.
Earnings Per Share
Basic net income per share equals net income divided by the
weighted average shares outstanding during the year. The
computation of diluted net income per share includes all
dilutive common stock equivalents in the weighted average
shares outstanding.
2. ACQUISITIONS
On July 17, 2000, the Company purchased all the outstanding
capital stock of Milcor Limited Partnership (Milcor) for
approximately $43 million in cash. Milcor manufactures a
complete line of metal building products, including
registers, vents, bath cabinets, access doors, roof hatches
and telescoping doors.
On December 1, 1999, the Company purchased all the outstanding
capital stock of Hughes Manufacturing, Inc. (Hughes) for
approximately $11.5 million in cash. Hughes manufactures a
broad line of fully engineered, code-approved steel lumber
connectors and other metal hardware products.
On November 1, 1999, the Company purchased all the outstanding
capital stock of Brazing Concepts Company (Brazing Concepts)
for approximately $25 million in cash. Brazing Concepts
provides a wide variety of value-added brazing (i.e., metal
joining), assembly and other metallurgical heat treating
services on customer-owned materials.
On August 1, 1999, the Company purchased the assets and
business of Hi-Temp Incorporated (Hi-Temp) for approximately
$24 million in cash. Hi-Temp provides metallurgical heat
treating services in which customer-owned parts are exposed to
precise temperature and other conditions to improve their
material properties, strength and durability.
On July 1, 1999, the Company purchased all the outstanding
capital stock of K & W Metal Fabricators, Inc. d/b/a Weather
Guard Building Products (Weather Guard) for approximately $7
million in cash. Weather Guard manufactures a full line of
metal building products, including rain-carrying systems, metal
roofing and roofing accessories, for industrial, commercial and
residential applications.
25
These acquisitions have been accounted for under the
purchase method with the results of their operations
consolidated with the Company's results of operations from
the respective acquisition dates. The aggregate excess of
the purchase prices of these acquisitions over the fair
market values of the net assets of the acquired companies
is being amortized over 35 years from the acquisition dates
using the straight-line method.
The following information presents the pro forma
consolidated condensed results of operations as if the
acquisitions had occurred on January 1, 1999. The pro
forma amounts may not be indicative of the results that
actually would have been achieved had the acquisitions
occurred as of January 1, 1999 and are not necessarily
indicative of future results of the combined companies.
(in thousands, except per share data)
Year Ended December 31,
2000 1999
(unaudited)
Net sales $704,349 $712,383
====== ======
Income before taxes $ 41,449 $ 44,891
====== ======
Net income $ 24,662 $ 26,647
====== ======
Net income per share - Basic $ 1.96 $ 2.12
====== ======
3. ACCOUNTS RECEIVABLE
Accounts receivable are expected to be collected within one
year and are net of reserves for doubtful accounts of
$1,643,000 and $1,511,000 at December 31, 2000 and 1999,
respectively.
4. INVENTORIES
Inventories at December 31 consist of the following:
(in thousands)
2000 1999
Raw material $ 54,640 $ 59,899
Finished goods and work-in-process 46,347 35,095
Total inventories $100,987 $ 94,994
====== ======
26
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost less accumulated
depreciation, at December 31 consists of the following:
(in thousands)
2000 1999
Land and land improvements $ 7,507 $ 6,961
Building and improvements 61,968 54,782
Machinery and equipment 222,811 204,012
Construction in progress 10,101 8,758
302,387 274,513
Less accumulated depreciation
and amortization 73,228 58,483
Property, plant and equipment, net $229,159 $216,030
====== ======
6. OTHER ASSETS
Other assets at December 31 consist of the following:
(in thousands)
2000 1999
Equity interest in partnership $ 4,738 $ 4,485
Other 4,187 3,624
Total other assets $ 8,925 $ 8,109
====== =====
The Company's 31% partnership interest is accounted for using
the equity method of accounting. The partnership provides a
steel cleaning process called pickling to steel mills and steel
processors, including the Company.
7. DEBT
Long-term debt at December 31 consists of the following:
(in thousands)
2000 1999
Revolving credit notes payable $250,251 $228,128
Industrial Development Revenue Bonds 3,500 6,362
Other debt 2,102 2,131
255,853 236,621
Less current maturities 327 1,319
Total long-term debt $255,526 $235,302
====== ======
27
In 2000, the Company amended its debt agreement increasing its
revolving credit facility to $310,000,000. The facility is
secured by the Company's accounts receivable, inventories, and
property and equipment and is committed through April 2003.
This facility has various interest rate options which are no
greater than the bank's prime rate. In addition, the Company
may enter into interest rate exchange agreements (swaps) to
manage interest costs and exposure to changing interest rates.
At December 31, 2000 the Company had interest rate swap
agreements outstanding which effectively converted $50,000,000
of floating rate debt to fixed rates ranging from 7.47% to
8.18%. At December 31, 2000, additional credit facility
borrowings consisted of $200,251,000 with an interest rate of
LIBOR plus a fixed rate. The weighted average interest rate of
these borrowings was 8.70% at December 31, 2000.
In addition, the Company has Industrial Development Revenue
Bonds payable in installments through September 2018, with
interest rates ranging from a fixed rate of 4.22% to variable
rates of up to 5.20% at December 31, 2000, which financed the
cost of the expansion of its Coldwater, Michigan heat treating
facility, under a capital lease agreement. The cost of the
facility and equipment equals the amount of the bonds and
includes accumulated amortization of $186,000. The agreement
provide for the purchase of the facility and equipment at any
time during the lease term at scheduled amounts or at the end
of the lease for a nominal amount.
The aggregate maturities on long-term debt including lease
purchase obligations for the five years following December 31,
2000 as follows: 2001, $327,000; 2002, $813,000; 2003,
$250,875,000; 2004, $629,000: and 2005, $480,000. The Company
had no amounts outstanding under short-term borrowing for the
years ended December 31, 2000 and 1999.
The various loan agreements, which do not require compensating
balances, contain provisions that limit additional borrowings
and require maintenance of minimum net worth and financial
ratios. The Company is in compliance with the terms and
provisions of all its financing agreements.
Total cash paid for interest in the years ended December 31,
2000, 1999 and 1998 was $19,935,000, $13,357,000 and
$11,257,000, respectively.
8. LEASES
The Company leases certain facilities and equipment under
operating leases. Rent expense under operating leases for the
years ended December 31, 2000, 1999 and 1998 was $5,187,000,
$4,899,000 and $3,554,000, respectively. Future minimum lease
payments under these operating leases are $5,067,000,
$3,980,000, $2,969,000, $1,867,000 and $1,244,000 for the years
2001, 2002, 2003, 2004 and 2005, respectively, and $7,470,000
thereafter through 2038.
9. EMPLOYEE RETIREMENT PLANS
Certain subsidiaries participate in the Company's 40l(k) Plan.
In addition, certain subsidiaries have multi-employer non-
contributory retirement plans providing for defined
contributions to union retirement funds.
A supplemental pension plan provides defined pension benefits
to certain salaried employees upon retirement. Net unfunded
periodic pension costs of $171,000 and $199,000 were accrued
under this plan in 2000 and 1999, respectively, and consisted
primarily of service cost using a discount rate of 8.0% in each
year.
28
Total expense for all retirement plans was $2,204,000,
$1,957,000 and $1,774,000 for the years ended December 31,
2000, 1999 and 1998, respectively.
During 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 132 Employers'
Disclosures about Pensions and Other Post-Retirement Benefits
(FAS No. 132). Adoption of FAS No. 132 did not affect the
Company's results of operations or financial position.
10. OTHER POST-RETIREMENT BENEFITS
Certain subsidiaries of the Company provide health and life
insurance to substantially all of their employees and to a
number of retirees and their spouses. The net periodic post-
retirement benefit cost charged to expense consisting of
service cost, interest cost and amortization of transition
obligations was $261,000, $291,000 and $255,000 for the years
ended December 31, 2000, 1999 and 1998, respectively.
The approximate unfunded accumulated post-retirement benefit
obligation at December 31, consists of the following (in
thousands):
Benefit Benefit
Obligation Service Interest Actuarial Benefit Obligation
at January 1 Cost Cost (Gain)/Loss Payments at December 31
2000 $1,844 71 145 (1) (76) $1,983
1999 $2,105 90 135 (445) (41) $1,844
The accumulated post-retirement benefit obligation was
determined using a weighted average discount rate of 8.0% in
2000 and 1999. The medical inflation rate was assumed to be
5.0% in 2000 and thereafter. The effect of a 1% increase or
decrease in the annual medical inflation rate would increase or
decrease the accumulated post-retirement benefit obligation at
December 31, 2000 by approximately $312,000 and $266,000,
respectively, and increase or decrease the annual service and
interest costs by approximately $38,000.
One of the Company's subsidiaries also provides post-retirement
health care benefits to its unionized employees through
contributions to a multi-employer health care plan.
11. INCOME TAXES
The provision for income taxes consists of the following:
(in thousands)
2000 1999 1998
Current tax expense
Federal $ 9,507 $ 12,332 $ 9,749
State 1,826 2,307 1,784
Total current 11,333 14,639 11,533
Deferred tax expense
Federal 4,593 2,040 1,628
State 659 343 65
Total deferred 5,252 2,383 1,693
Total provision $ 16,585 $ 17,022 $ 13,226
===== ===== =====
29
Deferred tax liabilities (assets) at December 31, consist of
the following:
(in thousands)
2000 1999
Depreciation $ 33,773 $ 29,460
Goodwill 3,167 1,770
Other 1,002 1,685
Gross deferred tax liabilities 37,942 32,915
State taxes (1,652) (1,382)
Other (4,504) (4,999)
Gross deferred tax assets (6,156) (6,381)
Net deferred tax liabilities $ 31,786 $ 26,534
===== =====
The provision for income taxes differs from the amount of
income tax determined by applying the applicable U.S. statutory
federal income tax rate to income before taxes as a result of
the following differences:
(in thousands)
2000 1999 1998
Statutory U.S. tax rates $14,333 $14,711 $11,573
Increase in rates
resulting from:
State and local taxes, net 1,615 1,723 1,202
Other 637 588 451
$16,585 $17,022 $13,226
===== ===== =====
Cash paid for income taxes, net of tax refunds, in the years
ended December 31, 2000, 1999 and 1998 was $16,189,000,
$11,857,000 and $9,180,000, respectively.
12. EARNINGS PER SHARE
Statement of Financial Accounting Standards No. 128 Earnings
Per Share requires dual presentation of basic and diluted
earnings per share on the face of the income statement. The
reconciliation between the computations is as follows:
Basic Diluted Diluted
Income Shares Basic EPS Shares EPS
2000 $24,365,000 12,577,240 $1.94 12,685,072 $1.92
1999 $25,008,000 12,540,105 $1.99 12,806,338 $1.95
1998 $19,840,000 12,455,554 $1.59 12,651,119 $1.57
Included in diluted shares are common stock equivalents of
107,832, 266,233, and 195,565 relating to options for the years
ended December 31, 2000, 1999 and 1998, respectively.
30
13. STOCK OPTIONS
The Company may grant non-qualified stock options to officers,
employees, non-employee directors and advisers at an exercise
price equal to 100% of market price, and incentive stock
options to officers and other key employees at an exercise
price not less than 100% of market price, up to an aggregate of
400,000 and 1,475,000 shares, respectively. The options may be
exercised over a four year period from the grant date and
expire ten years after the date of grant.
The following table summarizes information about stock option
transactions:
Weighted Weighted
Average Average
Options Exercise Options Exercise
Outstanding Price Exercisable Price
Balance at December 31, 1997 693,231 $15.68 282,781 $11.55
Granted 336,650 17.36
Exercised (8,749) 11.12
Forfeited (24,502) 17.48
Balance at December 31, 1998 996,630 $16.24 406,993 $13.30
Granted 10,000 20.56
Exercised (72,474) 13.99
Forfeited (11,450) 18.54
Balance at December 31, 1999 922,706 $16.44 528,819 $14.88
Granted 270,250 14.07
Exercised ( 2,255) 15.52
Forfeited (30,107) 17.68
Balance at December 31, 2000 1,160,594 $15.86 686,582 $15.72
=========
Tax benefits of $111,000 realized in the year ended December
31, 1999 associated with the exercise of certain stock options
have been credited to additional paid-in-capital. The Company
did not realize any related tax benefit during 2000.
Options outstanding at December 31, 2000 consisted of:
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Options Contractual Exercise Options Exercise
Prices Outstanding Life Price Exercisable Price
$10.00 - $14.07 528,127 6.5 years $12.46 260,127 $10.80
$15.63 - $22.50 632,467 6.9 years $18.70 426,455 $18.72
1,160,594 6.7 years $15.86 686,582 $15.72
========= =======
31
The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123 Accounting
for Stock-Based Compensation (FAS No. 123). Accordingly, no
compensation cost has been recognized for the option plans as
stock options granted under these plans have an exercise price
equal to 100% of the market price on the date of grant. If the
compensation cost for these plans had been determined based on
the fair value at the grant dates for awards consistent with
the method of FAS No. 123, the unaudited pro forma effect on
the years ended December 31, 2000 and 1999 is as follows:
As Reported Pro forma As Reported Pro forma
2000 2000 1999 1999
Net Income $24,365,000 $23,073,000 $25,008,000 $23,566,000
Net Income per
Share-Basic $1.94 $1.83 $1.99 $1.88
The Black-Scholes option-pricing model was used to estimate the
fair value of the options granted on the date of grant. The
fair values and assumptions used in the model, assuming no
dividends, are as follows:
Expected Stock Risk-Free Dividend
Fair Value Life Volatility Interest Rate Yield
2000 Grant $6.31 5 years 43.7% 6.3% .7%
1999 Grant $9.18 5 years 45.1% 4.4% .2%
1998 Grant $7.74 5 years 43.7% 4.4% -
The Company also has a Restricted Stock Plan reserved for
issuance of 100,000 common shares for the grant of restricted
stock awards to employees and non-employee directors at a
purchase price of $.01 per share. Since the inception of this
plan, 59,000 common shares have been awarded.
14. COMMITMENTS AND CONTINGENCIES
The Company is a party to certain claims and legal actions
generally incidental to its business. Management does not
believe that the outcome of these actions, which is not clearly
determinable at the present time, would significantly affect
the Company's financial condition or results of operations.
15. SUBSEQUENT EVENT
In February 2001, the Company purchased all the outstanding
capital stock of Pennsylvania Industrial Heat Treaters, Inc.
(PIHT) for approximately $11 million, net of cash. PIHT
provides metallurgical heat treating services and specializes
in heat treating powdered metal parts. The results of
operations of PIHT will be consolidated with the Company's
results of operations from the acquisition date for the quarter
ending March 31, 2001.
32
QUARTERLY UNAUDITED FINANCIAL DATA
(in thousands, except per share data)
2000 Quarter Ended March 31 June 30 Sept. 30 Dec. 31 Total
Net Sales $167,634 $181,523 $178,326 $150,057 $677,540
Gross Profit 34,548 36,616 35,863 28,770 135,797
Income From
Operations 14,318 17,416 17,268 10,890 59,892
Net Income 6,015 7,854 7,248 3,248 24,365
Net Income Per
Share-Basic $ .48 $ .62 $ .58 $ .26 $ 1.94
Net Income Per
Share-Diluted $ .47 $ .62 $ .57 $ .26 $ 1.92
1999 Quarter Ended March 31 June 30 Sept. 30 Dec. 31 Total
Net Sales $143,804 $160,241 $162,909 $154,964 $621,918
Gross Profit 28,418 33,001 34,245 32,309 127,973
Income From
Operations 11,683 15,353 15,426 13,007 55,469
Net Income 4,977 7,288 7,205 5,538 25,008
Net Income Per
Share-Basic $ .40 $ .58 $ .57 $ .44 $ 1.99
Net Income Per
Share-Diluted $ .39 $ .57 $ .56 $ .43 $ 1.95
33
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding directors and executive officers of the
Company is incorporated herein by reference to the information
included in the Company's definitive proxy statement which will be
filed with the Commission within 120 days after the end of the
Company's 2000 fiscal year.
Item 11. Executive Compensation
Information regarding executive compensation is incorporated
herein by reference to the information included in the Company's
definitive proxy statement which will be filed with the Commission
within 120 days after the end of the Company's 2000 fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information regarding security ownership of certain beneficial
owners and management is incorporated herein by reference to the
information included in the Company's definitive proxy statement
which will be filed with the Commission within 120 days after the
end of the Company's 2000 fiscal year.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related
transactions is incorporated herein by reference to the
information included in the Company's definitive proxy statement
which will be filed with the Commission within 120 days after the
end of the Company's 2000 fiscal year.
34
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K Page Number
(a) (1) Financial Statements:
Report of Independent Accountants 19
Consolidated Balance Sheet at
December 31, 2000 and 1999 20
Consolidated Statement of Income for
the three years ended December 31, 2000 21
Consolidated Statement of Cash Flows for
the three years ended December 31, 2000 22
Consolidated Statement of Shareholders'
Equity for the three years ended
December 31, 2000 23
Notes to Consolidated Financial Statements 24
(2) Supplementary Data
Quarterly Unaudited Financial Data 33
(3) Exhibits
The exhibits to this Annual Report on Form 10-K
included herein are set forth on the
attached Exhibit Index beginning on page 37.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during
the three month period ended December 31, 2000.
35
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GIBRALTAR STEEL CORPORATION
By /s/Brian J. Lipke
Brian J. Lipke
Chief Executive Officer
and Chairman of the Board
In accordance with the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
/s/ Brian J. Lipke Chief Executive Officer February 21, 2001
Brian J. Lipke and Chairman of the Board
(principal executive officer)
/s/ Walter T. Erazmus President February 21, 2001
Walter T. Erazmus
/s/ John E. Flint Vice President and February 21, 2001
John E. Flint Chief Financial Officer
(principal financial and
accounting officer)
/s/ Neil E. Lipke Director February 21, 2001
Neil E. Lipke
/s/ Gerald S. Lippes Director February 21, 2001
Gerald S. Lippes
/s/ Arthur A. Russ, Jr. Director February 21, 2001
Arthur A. Russ, Jr.
/s/ David N. Campbell Director February 21, 2001
David N. Campbell
/s/ William P. Montague Director February 21, 2001
William P. Montague
36
Exhibit Index
Exhibit Sequentially
Number Exhibit Numbered Page
3.1 Certificate of Incorporation of Registrant
(incorporated by reference to the same exhibit
number to the Company's Registration Statement
on Form S-1 (Registration No. 33-69304))
3.2 Amended and Restated By-Laws of the Registrant
Effective August 11, 1998 (incorporated by reference
to Exhibit 3(ii) to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998)
4.1 Specimen Common Share Certificate (incorporated by
reference to the same exhibit number to the Company's
Registration Statement on Form S-1 (Registration
No. 33-69304))
10.1 Partnership Agreement of Samuel Pickling Management
Company dated June 1, 1988 between Cleveland Pickling,
Inc. and Samuel Manu-Tech, Inc. (incorporated by
reference to Exhibit 10.7 to the Company's Registration
Statement on Form S-1
(Registration No. 33-69304))
10.2 Partnership Agreement dated May 1988 among Samuel
Pickling Management Company, Universal Steel Co. and
Ruscon Steel Corp., creating Samuel Steel Pickling
Company, a general partnership (incorporated by
reference to Exhibit 10.8 to the Company's Registration
Statement on Form S-1
(Registration No. 33-69304))
10.3 Lease dated September 1, 1990 between Erie County
Industrial Development Agency and Integrated
Technologies International, Ltd. (incorporated by
reference to Exhibit 10.13 to the Company's Registration
Statement on Form S-1
(Registration No. 33-69304))
10.4 Lease dated June 4, 1993 between Buffalo Crushed
Stone, Inc. and Gibraltar Steel Corporation
(incorporated by reference to Exhibit 10.14 to the
Company's Registration Statement on
Form S-1 (Registration No. 33-69304))
37
Exhibit Sequentially
Number Exhibit Numbered Page
10.5* Employment Agreement dated as of July 9, 1998
between the Registrant and Brian J. Lipke
(incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998)
10.6 Gibraltar Steel Corporation Executive Incentive Bonus
Plan (incorporated by reference to Exhibit 10.16 to the
Company's Registration Statement on Form S-1
(Registration No. 33-69304))
10.7 Agreement dated June 29, 1992 for Adoption by
Gibraltar Steel Corporation of Chase Lincoln First
Bank, N.A. (now Chase Manhattan Bank, N.A.)
Non-Standardized Prototype 401(k) Retirement Savings
Plan (incorporated by reference to Exhibit 10.17 to
the Company's Registration Statement on Form S-1
(Registration No. 33-69304))
10.8* Gibraltar Steel Corporation Incentive Stock Option
Plan, Fifth Amendment and Restatement (incorporated
by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000)
10.9* Gibraltar Steel Corporation Restricted Stock Plan
(incorporated by reference to Exhibit 10.19 to the
Company's Registration Statement on Form S-1
(Registration No. 33-69304))
10.10* Gibraltar Steel Corporation Restricted Stock Plan,
First Amendment and Restatement (incorporated by
reference to Exhibit 10.13 of the Company's Annual
Report on Form 10-K for the year ended December 31,
1997)
10.11* Gibraltar Steel Corporation Non-Qualified Stock Option
Plan (incorporated by reference to Exhibit 10.20 to
the Company's Registration Statement on Form S-1
(Registration No. 33-69304))
10.12* Gibraltar Steel Corporation Non-Qualified Stock Option
Plan, First Amendment and Restatement (incorporated by
reference to Exhibit 10.17 to the Company's
Registration Statement on Form S-1 (Registration No.
333-03979))
10.13* Gibraltar Steel Corporation Profit Sharing Plan dated
August 1, 1984, as Amended April 14, 1986 and May 1,
1987 (incorporated by reference to Exhibit 10.21 to
the Company's Registration Statement on Form S-1
(Registration No. 33-69304))
10.14* Change in Control Agreement dated July 9, 1998 between
Registrant and Brian J. Lipke (incorporated by
reference to Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1998)
38
Exhibit Sequentially
Number Exhibit Numbered Page
10.15* Gibraltar Steel Corporation Profit Sharing
Plan, Twelfth Amendment 40
10.16* Form of Change in Control Agreement dated
July 9, 1998 between Registrant and each
of Neil E. Lipke, Eric R. Lipke,
Walter T. Erazmus, Joseph A. Rosenecker,
Carl P. Spezio and Andrew S. Tsakos
(incorporated by reference to Exhibit 10.3
to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30,
1998)
10.17* Form of Stay Bonus Agreement dated
October 1, 2000 between Registrant and
certain named executives. 51
10.18 Third Amended and Restated Credit Agreement
dated September 29, 2000 among Gibraltar
Steel Corporation, Gibraltar Steel
Corporation of New York, Chase Manhattan
Bank, N.A., as Administrative Agent, and
various financial institutions that
are signatories thereto (incorporated by
reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000)
10.19 First Amendment, dated May 28, 1999, to the Partnership
Agreement dated May 1988 among
Samuel Pickling Management Company,
Universal Steel Co., and Ruscon Steel Corp.,
creating Samuel Steel Pickling Company, a
general partnership (incorporated by
reference to Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the
year ended December 31, 1999)
10.20* Gibraltar Steel Corporation 401(k) Plan
(incorporated by reference to Exhibit 4.1
to the Company's Registration Statement
on Form S-8 (No. 33-87034))
10.21* First Amendment, dated January 20, 1995,
to Gibraltar Steel Corporation 40l(k) Plan
(incorporated by reference to Exhibit 10.28
to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994)
21 Subsidiaries of the Registrant 55
27 Financial Data Schedule 56
________________________________
* Document is a management contract or compensatory
plan or arrangement
39