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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, 1997
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:
Title of each class Name of each exchange 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, 1997, the aggregate market value of the voting stock
held by nonaffiliates of the Registrant amounted to $121,763,000.
As of December 31, 1997, the number of common shares outstanding was:
12,409,619.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held May 19, 1998, are incorporated by
reference into Part III of this report.
Exhibit Index is on Page 36
PART I
Item 1. Description of Business
General
The Company is an intermediate processor of value-added steel products,
consisting primarily of a broad range of fully processed cold-rolled strip
steel products. Cold-rolled strip steel products comprise a segment of the
cold-rolled sheet steel market that is defined by narrower widths, improved
surface conditions and tighter gauge tolerances and are used by customers
that demand critical specifications in their raw material needs. The
Company manufactures high quality steel strapping for industrial
applications and operates a precision metals facility for flat-rolled sheet
steel and other processed metals products. The Company is a supplier of
galvanized, Galvalume and prepainted steel to the commercial and
residential metal building industry. Southeastern Metals Manufacturing,
Inc. (SEMCO), acquired in January 1997, manufactures a wide array of metal
products for the residential and commercial construction markets. The
Company provides metallurgical heat treating services for customers in a
wide variety of industries. The Company operates materials management
facilities that link steel producers and end-user manufacturers by
integrating the inventory purchasing, receiving, inspection, billing,
storage and shipping functions resulting in true just-in-time delivery of
materials, thereby enabling both the steel producers and the end-user
manufacturers to manage inventory more efficiently.
Industry Overview
Intermediate steel processors occupy a market niche that exists between
primary steel producers and end-user manufacturers. Primary steel
producers typically focus on the sale of standard size and tolerance steel
to large volume purchasers, including intermediate steel processors. At
the same time, end-user manufacturers require steel with closer tolerances
and on shorter lead times than the primary steel producers can provide
efficiently.
Metal Processes, Products and Services
The Company utilizes any one or a combination of more than 20 different
processes and services to produce and deliver a variety of products on a
just-in-time basis to industrial manufacturers and fabricators in the
automotive, automotive supply, appliance, metal building and construction,
machinery, and steel industries.
-2-
The following metal processes, products 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, edge rolling, slitting, roller leveling and
cutting to length. Cold reduction is the rolling of steel to a specified
thickness, temper and finish. Annealing is a thermal process which changes
hardness and certain metallurgical characteristics of steel. Edge rolling
involves conditioning edges of processed steel into square, full round or
partially round shapes. Slitting is the cutting of steel to specified
widths. Roller leveling applies pressure across the width of the steel to
achieve precise flatness tolerances. 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 10 rolling mills at its facilities in Cleveland, Ohio,
Chattanooga, Tennessee and Buffalo, New York, and is capable of rolling
widths of up to 50 inches. The Company has the capability to process coils
up to a maximum of 72 inch outside diameter. The Company's rolling mills
include automatic gauge control systems with hydraulic screwdowns allowing
for microsecond adjustments during processing. The most current addition
is the 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
thickness, 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.
Precision Metals. The Company operates a precision metals facility for
flat-rolled sheet steel and other processed metal products. In addition to
slitting and cutting to length, the Company's precision metals facility can
produce higher value-added products that are held to close tolerances and
tight specifications through cold-rolling, annealing, blanking, oscillating
and edging rolling.
The Company also processes galvanized, Galvalume and prepainted steel at
another facility for the commercial and residential metal building
industries and can slit and cut to length material based upon customer
specifications.
Metal Products Manufacturing. The Company through its SEMCO acquisition
manufactures a wide array of galvanized steel, aluminum and copper products
for the construction industry including steel framing for residential and
commercial properties, metal trims, prefab homes and utility sheds, metal
connectors, metal roofing, drywall products, gutters and down spouts,
ventilation products and storm panel systems. With facilities located in
Florida, Georgia, Tennessee, Texas and Oklahoma, SEMCO uses precision
engineering combined with slitting, stamping, roll forming and other
processes to manufacture their various products.
Steel Strapping Manufacturing. 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 believes that it is
one of four major domestic manufacturers of high tensile steel strapping,
which is used in heavy duty applications. High tensile strapping is
subject to strength requirements imposed by the American Association of
Railroads 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 strapping facility manufactures high tensile steel strapping
by slitting, oscillating, heat treating, painting and packaging cold-rolled
coils.
-4-
Steel strapping is cold-rolled to precise gauge on the Company's rolling
mill, which incorporates hydraulic screw downs 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 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.
Metallurgical Heat Treating Services. In February 1996, the Company
acquired Carolina Commercial Heat Treating, Inc. (CCHT) which through its
facilities located in North Carolina, South Carolina, Tennessee, Georgia
and Alabama (acquired in May 1997) provides metallurgical heat treating
services for customer-owned parts. These services include case-hardening,
surface-hardening and through-hardening processes for customers in a wide
variety of industries. Using methods such as annealing, flame hardening,
vacuum hardening, carburizing and nitrating, as well as a host of other
services, these facilities can harden, soften or otherwise impart desired
properties on parts made of steel, copper and various alloys and other
metals. A variety of brazing services to join metallic objects together is
also provided. CCHT maintains a metallurgical laboratory at each facility,
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. Additionally, CCHT
maintains a fleet of trucks and trailers to provide rapid turnaround time
for its customers.
Materials Management. 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.
-5-
Joint Venture. The Company is a minority partner in two steel pickling
operations. 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 that enters
its production 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
Intermediate steel 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 utilized by the Company in its
processing operations is flat-rolled steel. The Company purchases flat-
rolled steel at regular intervals from a number of suppliers, however, a
majority of its steel requirements is purchased from 18 major North
American suppliers. 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 is operations.
The facilities 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 flat rolled
steel required for the particular needs of the Company's customers.
-6-
Sales and Marketing
The Company's products and services are sold primarily by Company sales
personnel located throughout the midwest, northeast and southeast United
States and Mexico. This marketing staff is supported by a vice president
of sales for each of the Company's principal product lines.
Customers and Distribution
The Company services approximately 6,000 industrial customers located
primarily in the midwest, northeast and southeast United States, Canada and
Mexico. In 1997, net sales to automotive and automotive supply
manufacturers accounted for approximately 17% and 19%, respectively. The
Company also sells its products to customers in the appliance, metal
building and construction, and steel industries.
The Company primarily manufactures its products exclusively to customer
order rather than for inventory. 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.
In 1995 General Motors Corporation, through its various subsidiaries and
affiliates, accounted for approximately 11% of net sales. In 1996 and
1997, no customer of the Company represented 10% or more of the Company's
net sales.
Competition
The steel processing market is highly competitive. The Company competes
with a small number of other intermediate 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.
-7-
The Company also competes with a small number of other steel strapping
manufacturers on the basis of quality, price, product variety and the
ability to meet delivery schedules dictated by customers.
The Company competes with a small number of suppliers of heat treating
services in its market areas on the basis of quality, price, and delivery.
The Company competes with a number of other metal products manufacturers in
its market areas on the basis of quality, price, and delivery.
Employees
At December 31, 1997, the Company employed approximately 1,450 people.
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 backlog of firm orders
existing on December 31, 1997 will be shipped prior to the end of 1998.
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.
-8-
Item 2. Description of Properties
The Company maintains its corporate headquarters in Buffalo, New York and
conducts its business operations in facilities located in New York,
Michigan, Illinois, Ohio, Tennessee, Texas, South Carolina, North Carolina,
Georgia, Alabama, Florida, and Oklahoma.
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 1998.
Square Owned or
Location Utilization Footage Leased
Buffalo, New York Headquarters 23,000 Leased
Buffalo, New York Precision metals processing;
warehouse 207,000 Owned
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
Lackawanna, New York Materials management facility 65,000 Leased
Dearborn, Michigan Strapping tool products 3,000 Owned
Woodhaven, Michigan Materials management facility 100,000 Owned
Franklin Park, Illinois Coated sheet steel and precision
metals processing 99,000 Owned
Cleveland, Ohio Cold-rolled strip steel
processing 259,000 Leased
Chattanooga, Tennessee Steel processing 65,000 Owned
Brownsville, Texas Distribution warehouse 15,000 Leased
Fountain Inn, S. Carolina Heat treating services 77,400 Leased
Reidsville, N. Carolina Heat treating services 53,500 Leased
Morristown, Tennessee Heat treating services 24,200 Owned
Conyers, Georgia Heat treating services 18,700 Leased
Athens, Alabama Heat treating services 20,000 Leased
-9-
Square Owned or
Location Utilization Footage Leased
Charlotte, N. Carolina Administrative office 3,400 Leased
Jacksonville, Florida Administrative office and
metal products manufacturing 261,400 Leased
Miami, Florida Metal products manufacturing 77,000 Leased
Tampa, Florida Metal products manufacturing 50,000 Leased
Nashville, Tennessee Metal products manufacturing 52,500 Leased
San Antonio, Texas Metal products manufacturing 70,000 Leased
Houston, Texas Metal products manufacturing 48,200 Leased
Vidalia, Georgia Metal products manufacturing 34,000 Leased
Miami, Oklahoma Metal products warehouse 15,000 Leased
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.
-10-
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
As of December 31, 1997, there were 147 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 1997 and 1996:
1997 High Low
Fourth Quarter $ 25 1/2 $ 17 3/4
Third Quarter 28 20 3/4
Second Quarter 25 1/2 18 7/8
First Quarter 26 3/4 18 1/4
1996
Fourth Quarter $ 26 1/4 $ 21
Third Quarter 23 1/4 16 1/2
Second Quarter 22 15
First Quarter 15 3/4 12 1/8
The Company has never paid cash dividends on its common stock and it is
currently the Company's policy to invest earnings in the future development
and growth of the Company.
-11-
Item 6. Selected Financial Data
(in thousands, except per share data)
Year Ended December 31,
1997 1996 1995 1994 1993
Net Sales $ 449,700 $ 342,974 $ 282,833 $ 200,142 $ 167,883
Income from operations 32,603 30,617 20,368 16,179 12,934
Interest expense 5,115 3,827 3,984 1,374 1,621
Income before income taxes 27,488 26,790 16,384 14,805 11,513
Income taxes 11,072 10,815 6,662 5,996 6,300
Net income 16,416 15,975 9,722 8,809 5,213
Net income per share-Basic $ 1.33 $ 1.42 $ .96 $ .87
Weighted average shares
outstanding 12,357 11,261 10,164 10,163
Net income per share-Diluted $ 1.30 $ 1.39 $ .95 $ .86
Pro forma net income (a) $ 7,337
Pro forma net income per share-
Basic & Diluted $ .72
Pro forma weighted average
shares outstanding (b) 10,163
Current assets $ 130,746 $ 109,526 $ 86,995 $ 70,552 $ 50,502
Current liabilities 43,101 40,853 29,480 22,028 21,905
Total assets 281,336 222,507 167,423 126,380 92,868
Total debt 83,024 49,841 59,054 38,658 14,179
Shareholders' equity 140,044 121,744 70,244 60,396 51,587
Capital expenditures $ 21,784 $ 15,477 $ 14,504 $ 16,171 $ 10,468
Depreciation and amortization 8,478 6,246 4,538 3,445 3,399
(a) Pro forma net income assumes that all of the Company's subsidiaries had
been subject to income taxation as C Corporations during the period
prior to the Company's initial public offering in November 1993.
(b) Pro forma weighted average number of common shares was computed assuming
the Company's initial public offering occurred at the beginning of the
year.
-12-
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Year Ended 1997 Compared to Year Ended 1996
Net sales increased by $106.7 million, or 31%, to a record $449.7 million
in 1997 from $343.0 million in 1996. This increase primarily resulted from
the inclusion of net sales of SEMCO (acquired January 1997) and sales
growth at existing operations.
Cost of sales increased $93.8 million, or 33%, to $375.5 million in 1997
from $281.7 million in 1996. Cost of sales increased to 83.5% of net sales
in 1997 from 82.1% of net sales in 1996. This increase was due to higher
raw material costs which were not fully passed through to customers,
partially offset by higher margins on SEMCO sales.
Selling, general and administrative expense increased by $10.9 million, or
36%, to $41.6 million in 1997 from $30.6 million in 1996. As a percentage
of net sales, selling, general and administrative expenses increased from
8.9% in 1996 to 9.2% in 1997. This increase was primarily due to higher
costs as a percentage of sales attributable to SEMCO.
Interest expense increased by $1.3 million from 1996 to 1997 primarily due
to higher average borrowings as a result of the SEMCO acquisition and
capital expenditures.
As a result of the above, income before taxes increased by $.7 million, or
3%, to a record $27.5 million in 1997 from $26.8 million in 1996.
Income taxes approximated $11.1 million in 1997, an effective rate of 40.3%
in comparison with 40.4% in 1996.
Year Ended 1996 Compared to Year Ended 1995
Net sales increased by $60.1 million, or 21%, to $343.0 million in 1996
from $282.8 million in 1995. This increase primarily resulted from
including twelve months of net sales of Hubbell Steel (acquired April 1995)
for 1996 compared to nine months in 1995, including net sales of CCHT
(acquired February 14, 1996) and sales growth at existing operations.
Cost of sales increased by $41.3 million, or 17%, to $281.7 million in 1996
from $240.3 million in 1995. As a percentage of net sales, cost of sales
decreased to 82% of net sales from 85%. This decrease was primarily due to
higher margins attributable to CCHT sales and lower raw material costs at
other operations.
Selling, general and administrative expense increased by $8.5 million, or
39%, to $30.6 million in 1996 from $22.1 million in 1995. As a percentage
of net sales, selling, general and administrative expense increased to 8.9%
from 7.8% in 1995 primarily due to higher costs as a percentage of sales
attributable to CCHT and performance based compensation linked to the
Company's sales and profitability.
-13-
Interest expense decreased by $.2 million primarily due to lower interest
rates in 1996 compared to 1995 which were partially offset by higher
average borrowings resulting from higher inventory levels to service
increased sales and capital expenditures.
As a result of the above, income before taxes increased by $10.4 million,
or 64%, to $26.8 million in 1996 from $16.4 million in 1995.
Income taxes approximated $10.8 million in 1996, an effective rate of 40.4%
in comparison with 40.7% for 1995.
Liquidity and Capital Resources
During 1997, the Company increased working capital by $19 million to $87.6
million and the current ratio improved to 3.0 to 1 versus 2.7 to 1 at
December 31, 1996. Long term debt increased by $33.2 million to $81.8
million and to 37% of total capitalization. Additionally, shareholders'
equity increased by 15% to $140 million at December 31, 1997.
The Company's principal capital requirements are to fund its operations
including working capital requirements, the purchase and funding of
improvements to its facilities, machinery and equipment and to fund
acquisitions.
Net cash provided by operations of $24.4 million resulted primarily from
net income of $16.4 million, depreciation and amortization of $8.5 million
and provision for deferred income taxes of $2.2 million offset by the
decrease in accounts payable and accrued expenses of $2.6 million.
Net cash provided by operations of $24.4 million combined with net proceeds
from long-term debt of $18.5 million and $3.1 million of cash on hand were
used for the acquisition of SEMCO and capital expenditures. The most
significant capital expenditure included the construction and installation
of a new cold rolling mill at the Cleveland, Ohio facility.
During 1997, the Company amended its revolving credit agreement with its
bank group to increase the capacity of the revolver to $185 million and
borrow on an unsecured basis. At December 31, 1997, $107.6 million of the
revolver was unused.
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.
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; and changes in interest or
tax rates.
-14-
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 generally accepted accounting principles 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 Price Waterhouse LLP,
independent accountants. As part of their audit of the Company's 1997
financial statements, Price Waterhouse 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
Executive Vice President
and Chief Financial Officer
-15-
Item 8. Financial Statements and Supplementary Data Page Number
Index to Financial Statements:
Financial Statements:
Report of Independent Accountants 17
Consolidated Balance Sheet at December 31, 1997 and 1996 18
Consolidated Statement of Income for the three years
ended December 31, 1997 19
Consolidated Statement of Cash Flows for the three
years ended December 31, 1997 20
Consolidated Statement of Shareholders' Equity for
the three years ended December 31, 1997 21
Notes to Consolidated Financial Statements 22
Supplementary Data:
Quarterly Unaudited Financial Data 32
-16-
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, 1997 and 1996, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles. 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 generally accepted auditing standards 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.
Price Waterhouse LLP
Buffalo, New York
January 19, 1998
-17-
GIBRALTAR STEEL CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except share and per share data)
December 31,
ASSETS 1997 1996
Current assets:
Cash and cash equivalents $ 2,437 $ 5,545
Accounts receivable 49,151 40,106
Inventories 76,701 62,351
Other current assets 2,457 1,524
------- -------
Total current assets 130,746 109,526
Property, plant and equipment, net 115,402 88,670
Other assets 35,188 24,311
------- -------
$ 281,336 $ 222,507
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 38,233 $ 35,397
Accrued expenses 3,644 4,238
Current maturities of long-term debt 1,224 1,218
------- -------
Total current liabilities 43,101 40,853
Long-term debt 81,800 48,623
Deferred income taxes 15,094 10,364
Other non-current liabilities 1,297 923
Shareholders' equity
Preferred shares, $.01 par value;
authorized: 10,000,000 shares;
none outstanding - -
Common shares, $.01 par value;
authorized: 50,000,000 shares;
issued and outstanding: 12,409,619
shares in 1997 and 12,322,400 in 1996 124 123
Additional paid-in capital 66,190 64,307
Retained earnings 73,730 57,314
------- -------
Total shareholders' equity 140,044 121,744
------- -------
$ 281,336 $ 222,507
======= =======
The accompanying notes are an integral part of these financial statements.
-18-
GIBRALTAR STEEL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
Year Ended December 31,
1997 1996 1995
Net sales $ 449,700 $ 342,974 $ 282,833
Cost of sales 375,537 281,717 240,370
------- ------- -------
Gross profit 74,163 61,257 42,463
Selling, general and
administrative expense 41,560 30,640 22,095
------- ------- -------
Income from operations 32,603 30,617 20,368
Interest expense 5,115 3,827 3,984
------- ------- -------
Income before taxes 27,488 26,790 16,384
Provision for income taxes 11,072 10,815 6,662
------- ------- -------
Net income $ 16,416 $ 15,975 $ 9,722
======= ======= =======
Net income per share - Basic $ 1.33 $ 1.42 $ .96
======= ======= =======
Weighted average shares
outstanding - Basic 12,357 11,261 10,164
======= ======= =======
Net income per share - Diluted $ 1.30 $ 1.39 $ .95
======= ======= =======
Weighted average shares
outstanding - Diluted 12,591 11,464 10,213
======= ======= =======
The accompanying notes are an integral part of these financial statements.
-19-
GIBRALTAR STEEL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Year Ended December 31,
1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 16,416 $ 15,975 $ 9,722
Adjustments to reconcile net income
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 8,478 6,246 4,538
Provision for deferred income taxes 2,227 774 218
Undistributed equity investment income (444) (528) (366)
Gain on disposition of property
and equipment (68) (4) (146)
Increase (decrease) in cash resulting
from changes in (net of effects
from acquisitions):
Accounts receivable (176) (1,225) 838
Inventories 1,607 (17,077) 17,979
Other current assets (726) 411 (503)
Accounts payable and accrued expenses (2,597) 9,275 3,390
Other assets (289) (244) 70
-------- -------- --------
Net cash provided by operating activities 24,428 13,603 35,740
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired (26,475) (23,715) (20,859)
Investments in property, plant and equipment (21,784) (15,477) (14,504)
Proceeds from sale of property and equipment 1,118 775 317
-------- -------- --------
Net cash used in investing activities (47,141) (38,417) (35,046)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term debt reduction (79,962) (78,195) (64,527)
Proceeds from long-term debt 98,417 68,906 66,832
Net proceeds from issuance of common stock 1,150 35,525 -
-------- -------- --------
Net cash provided by financing activities 19,605 26,236 2,305
-------- -------- --------
Net (decrease) increase in cash and
and cash equivalents (3,108) 1,422 2,999
Cash and cash equivalents at beginning of year 5,545 4,123 1,124
-------- -------- --------
Cash and cash equivalents at end of year $ 2,437 $ 5,545 $ 4,123
======== ======== ========
The accompanying notes are an integral part of these financial statements.
-20-
GIBRALTAR STEEL CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands)
Additional
Common Shares Paid-in Retained
Shares Amount Capital Earnings
Balance at December 31, 1994 10,163 $ 102 $ 28,677 $ 31,617
Net income - - - 9,722
Profit sharing plan contribution 11 - 126 -
------ ------ ------- -------
Balance at December 31, 1995 10,174 102 28,803 41,339
Net income - - - 15,975
Public offering 2,050 20 34,370 -
Profit sharing plan contribution 11 - 184 -
Stock options exercised 87 1 950 -
------ ------ ------- -------
Balance at December 31, 1996 12,322 123 64,307 57,314
Net income - - - 16,416
Stock options exercised and
related tax benefit 73 1 1,562 -
Stock awards 4 - 82 -
Profit sharing plan contribution 11 - 239
------ ------ ------- -------
Balance at December 31, 1997 12,410 $ 124 $ 66,190 $ 73,730
====== ====== ======= =======
The accompanying notes are an integral part of these financial statements.
-21-
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
$963,000, $522,000 and $683,000 was capitalized in 1997, 1996 and 1995,
respectively.
Other Assets
Goodwill is amortized over 35 years. Amortization expense was $880,000,
$557,000 and $218,000 in 1997, 1996, and 1995, respectively.
-22-
Shareholders' Equity
In both July 1997 and 1996, the Company issued 11,000 of its common shares
as a contribution to one of its profit sharing plans.
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 January 31, 1997, the Company acquired the stock of Southeastern Metals
Manufacturing Company, Inc. (SEMCO) for approximately $25 million in cash.
In addition, the Company repaid approximately $15 million of SEMCO's bank
indebtedness. SEMCO manufactures a wide array of metal products for the
residential and commercial construction markets.
On February 14, 1996, the Company acquired the stock of Carolina Commercial
Heat Treating, Inc. (CCHT) for approximately $25 million in cash. CCHT,
headquartered in Charlotte, North Carolina, provides heat treating, brazing
and related metal-processing services to a broad range of industries,
including the automotive, hand tools, construction equipment and industrial
machinery industries.
These acquisitions have been accounted for using purchase accounting with
SEMCO's and CCHT's results of operations included from the respective
acquisition dates. The purchase price exceeded the fair market value of the
net assets by approximately $11 million each for both SEMCO and CCHT.
-23-
The following pro forma information presents the condensed results of
operations of the Company as if the acquisitions had occurred at the
beginning of each period presented. The pro forma amounts may not be
indicative of the results that would have actually been achieved and are
not necessarily indicative of future results.
(in thousands, except per share data)
Year Ended December 31,
1997 1996
(unaudited)
Net sales $ 456,224 $ 434,928
======= =======
Income before taxes $ 27,198 $ 28,067
====== ======
Net income $ 16,234 $ 16,600
====== ======
Net income per share $ 1.31 $ 1.47
====== ======
3. ACCOUNTS RECEIVABLE
Accounts receivable are expected to be collected within one year and are
net of reserves for doubtful accounts of $990,000 and $698,000 at December
31, 1997 and 1996, respectively.
4. INVENTORIES
Inventories at December 31 consist of the following:
(in thousands)
1997 1996
Raw material $ 51,804 $ 45,258
Finished goods and work-in-process 24,897 17,093
------ ------
Total inventories $ 76,701 $ 62,351
====== ======
-24-
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost less accumulated depreciation, at
December 31 consists of the following:
(in thousands)
1997 1996
Land and land improvements $ 2,984 $ 2,978
Building and improvements 32,420 29,145
Machinery and equipment 99,737 78,018
Construction in progress 16,503 7,894
-------- --------
151,644 118,035
Less accumulated depreciation and amortization 36,242 29,365
-------- --------
Property, plant and equipment, net $ 115,402 $ 88,670
======== ========
6. OTHER ASSETS
Other assets at December 31 consist of the following:
(in thousands)
1997 1996
Goodwill, net $ 30,275 $ 20,199
Equity interest in partnership 3,736 3,292
Other 1,177 820
------ ------
Total other assets $ 35,188 $ 24,311
====== ======
The Company's 26% 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.
-25-
7. DEBT
Long-term debt at December 31 consists of the following:
(in thousands)
1997 1996
Revolving credit notes payable $ 77,400 $ 43,000
Industrial Development Revenue Bond 5,048 6,190
Other debt 576 651
------ ------
83,024 49,841
Less current maturities 1,224 1,218
------ ------
Total long-term debt $ 81,800 $ 48,623
====== ======
In September 1997, the Company amended its debt agreement increasing its
revolving credit facility to $185,000,000. The facility is unsecured and
is committed through September 2002. 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, 1997 the Company had three interest rate swap agreements
outstanding that effectively converted $55,000,000 of floating rate debt to
fixed rates ranging from 6.39% to 6.78% which terminate at different dates
beginning November 2000. At December 31, 1997, additional borrowings
consisted of $22,400,000 with an interest rate of LIBOR plus a fixed rate.
The weighted average interest rate of these borrowings was 6.78% at
December 31, 1997.
In addition, the Company has an Industrial Development Revenue Bond payable
in equal installments through May 2002, with an interest rate of LIBOR plus
a fixed rate (6.57% at December 31, 1997), which financed the cost of its
Tennessee expansion under a capital lease agreement. The cost of the
facility and equipment equal the amount of the bond and includes
accumulated amortization of $1,015,000. The agreement provides for the
purchase of the facility and equipment at any time during the term of the
lease 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, 1997 are as follows:
1998, $1,224,000; 1999, $1,306,000; 2000, $1,158,000; 2001, $1,159,000 and
2002, $78,177,000.
The Company had no amounts outstanding under short-term borrowing for the
years ended December 31, 1997 and 1996.
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.
-26-
Total cash paid for interest in the years ended December 31, 1997, 1996 and
1995 was $6,155,000, $4,701,000 and $4,715,000, respectively.
8. LEASES
The Company leases certain facilities and equipment under operating leases.
Rent expense under operating leases for the years ended December 31, 1997,
1996 and 1995 was $3,771,000, $2,358,000 and $1,693,000, respectively.
Future minimum lease payments under these operating leases are $2,509,000,
$1,668,000, $1,464,000, $1,404,000 and $1,308,000 for the years 1998, 1999,
2000, 2001 and 2002, respectively, and $6,167,000 thereafter through 2038.
9. EMPLOYEE RETIREMENT PLANS
Non-union employees participate in various profit sharing plans.
Contributions to these plans are funded annually and are based on a
percentage of pretax income or amounts determined by the Board of
Directors.
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
$154,000 and $106,000 were accrued under this plan in 1997 and 1996,
respectively, and consisted primarily of service cost using a discount rate
of 7.0% and 7.5%, respectively.
Total expense for all plans was $1,258,000, $1,066,000 and $637,000 for the
years ended December 31, 1997, 1996 and 1995, respectively.
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 $223,000, $237,000 and $207,000 for 1997, 1996 and 1995,
respectively.
-27-
The approximate unfunded accumulated post-retirement benefit obligation at
December 31, consists of the following:
(in thousands)
1997 1996
Retirees $ 482 $ 468
Other fully eligible participants 308 200
Other active participants 1,018 943
----- -----
$ 1,808 $ 1,611
===== =====
The accumulated post-retirement benefit obligation was determined using a
weighted average discount rate of 7.0% in 1997 and 7.5% in 1996. The
medical inflation rate was assumed to be 8% in 1997, with a gradual
reduction to 5% over three years. The effect of a 1% annual increase in
the medical inflation rate would increase the accumulated post-retirement
benefit obligation by approximately $305,000 and $286,000 and the annual
service and interest costs by approximately $35,000 and $37,000 for 1997
and 1996, respectively.
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)
1997 1996 1995
Current tax expense
Federal $ 7,514 $ 8,774 $ 5,611
State 1,331 1,267 833
------ ------ ------
Total current 8,845 10,041 6,444
------ ------ ------
Deferred tax expense
Federal 2,036 670 198
State 191 104 20
Total deferred 2,227 774 218
------ ----- -----
Total provision $ 11,072 $ 10,815 $ 6,662
====== ====== =====
-28-
Deferred tax liabilities (assets) at December 31, consist of the following:
(in thousands)
1997 1996
Depreciation $ 14,129 $ 9,026
Inventory method change 1,588 1,752
Other 1,371 1,034
------- -------
Gross deferred tax liabilities 17,088 11,812
------- -------
State taxes (656) (528)
Other (2,074) (1,187)
------- -------
Gross deferred tax assets (2,730) (1,715)
------- -------
Net deferred tax liabilities $ 14,358 $ 10,097
======= =======
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 pretax income from continuing operations as a result of the
following differences:
(in thousands)
1997 1996 1995
Statutory U.S. tax rates $ 9,621 $ 9,376 $ 5,734
Increase in rates resulting from:
State and local taxes, net 989 891 554
Other 462 548 374
------ ------ ------
$ 11,072 $ 10,815 $ 6,662
====== ====== ======
Total cash paid for income taxes in the years ended December 31, 1997, 1996
and 1995 was $9,100,000, $9,639,000 and $6,250,000, respectively.
-29-
12. EARNINGS PER SHARE
Financial Accounting Standards Board (FASB) Statement 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
1997 $ 16,416,000 12,357,186 $ 1.33 12,591,019 $ 1.30
1996 $ 15,975,000 11,260,956 $ 1.42 11,463,508 $ 1.39
1995 $ 9,722,000 10,163,187 $ .96 10,213,329 $ .95
Included in diluted shares are common stock equivalents relating to options
of 233,833, 202,552, and 49,512 for 1997, 1996 and 1995, respectively.
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 share 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 850,000 shares, respectively. The options may be
exercised in cumulative annual increments of 25% commencing one year from
the date of grant and expire ten years from the date of grant.
The following table summarizes the option plans' activity for the years
ended December 31:
Options Weighted-Average Options Weighted-Average
Outstanding Exercise Price Exercisable Exercise Price
Balance at January 1, 1995 397,500 $ 10.74
Granted 75,000 11.00
Forfeited (2,500) 10.00
---------
Balance at December 31, 1995 470,000 $ 10.78 171,875 $ 10.85
Granted 173,750 16.75
Exercised (87,500) 10.87
---------
Balance at December 31, 1996 556,250 $ 12.63 201,875 $ 10.80
Granted 220,450 21.75
Exercised (72,219) 11.49
Forfeited (11,250) 10.75
---------
Balance at December 31, 1997 693,231 $ 15.68 282,781 $ 11.55
=========
The Company realized tax benefits of $733,000 associated with the exercise
of certain stock options which has been credited to paid in capital.
-30-
Options outstanding at December 31, 1997 consisted of:
Range of Weighted-Average
Exercise Options Remaining Weighted-Average Options Weighted-Average
Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
$10 - $11 309,189 6.4 years $ 10.79 248,564 $ 10.83
$16.75 - $21.75 384,042 9.1 years $ 19.62 34,217 $ 16.75
------- -------
693,231 7.9 years $ 15.68 282,781 $ 11.55
======= =======
The Company has adopted the disclosure-only provisions of FASB No. 123
"Accounting for Stock-Based Compensation". 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 FASB No. 123, there would have been no effect on the
Company's net income and earnings per share in 1995. The pro forma effect
for 1996 and 1997 is as follows:
As Reported Pro forma As Reported Pro forma
1997 1997 1996 1996
Net Income $ 16,416,000 $ 16,108,000 $ 15,975,000 $ 15,890,000
Net Income per Share $ 1.33 $ 1.30 $ 1.42 $ 1.41
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 Risk-Free
Fair Value Life Volatility Interest Rate
1997 Grant $9.77 5 years 40.19% 6.14%
1996 Grant $7.44 5 years 38.07% 6.64%
1995 Grant $4.56 5 years 36.16% 5.70%
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. In
December 1997, 4,000 shares were awarded to non-employee directors under
this plan.
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.
-31-
QUARTERLY UNAUDITED FINANCIAL DATA
(in thousands, except per share data)
1997 Quarter Ended March 31 June 30 Sept. 30 Dec. 31
Net Sales $ 108,277 $ 119,213 $ 114,249 $ 107,961
Gross Profit 18,698 19,917 18,147 17,401
Net Income 4,446 4,697 3,787 3,486
Net Income Per Share-Basic $ .36 $ .38 $ .31 $ .28
Net Income Per Share-Diluted $ .35 $ .37 $ .30 $ .28
1996 Quarter Ended March 31 June 30 Sept. 30 Dec. 31
Net Sales $ 82,034 $ 86,476 $ 87,994 $ 86,470
Gross Profit 14,029 15,867 15,979 15,382
Net Income 3,334 4,155 4,414 4,072
Net Income Per Share-Basic $ .33 $ .40 $ .36 $ .33
Net Income Per Share-Diluted $ .32 $ .40 $ .35 $ .32
-32-
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 1997 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 1997 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 1997 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 1997 fiscal year.
-33-
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K Page Number
(a) (1) Financial Statements:
Report of Independent Accountants 17
Consolidated Balance Sheet at December
31, 1997 and 1996 18
Consolidated Statement of Income for the
three years ended December 31, 1997 19
Consolidated Statement of Cash Flows for
the three years ended December 31, 1997 20
Consolidated Statement of Shareholders' Equity
for the three years ended December 31, 1997 21
Notes to Consolidated Financial Statements 22
(2) Supplementary Data
Quarterly Unaudited Financial Data 32
(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 36.
(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, 1997.
-34-
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
President, 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 February 3, 1998
Brian J. Lipke President, Chief Executive Officer
and Chairman of the Board
(principal executive officer)
/s/ Walter T. Erazmus February 3, 1998
Walter T. Erazmus Treasurer and Chief Financial Officer
(principal financial and accounting officer)
/s/ Neil E. Lipke February 3, 1998
Neil E. Lipke Director
/s/ Gerald S. Lippes February 3, 1998
Gerald S. Lippes Director
/s/ Arthur A. Russ, Jr. February 3, 1998
Arthur A. Russ, Jr. Director
/s/ David N. Campbell February 3, 1998
David N. Campbell Director
/s/ William P. Montague February 3, 1998
William P. Montague Director
-35-
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 By-Laws of the Registrant (incorporated by
reference to the same exhibit number to the
Company's Registration Statement on Form S-1
(Registration No. 33-69304))
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 December 1, 1987 between American Steel
and Wire Corporation as Lessor and Gibraltar Strip
Steel, Inc., as Lessee, and related Service Agreement
as amended by an Amendment to Lease and Amendment to
Service Agreement dated February 1, 1992 (incorporated
by reference to Exhibit 10.11 to the Company's
Registration Statement on Form S-1 (Registration
No. 33-69304))
10.4 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))
10.5 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))
-36-
Exhibit Sequentially
Number Exhibit Numbered Page
10.6* Employment Agreement dated as of November 1, 1993
between the Registrant and Brian J. Lipke
(incorporated by reference to Exhibit 10.15 to
the Company's Registration Statement on Form S-1
(Registration No. 33-69304))
10.7 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))
10.8 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))
10.9* Gibraltar Steel Corporation Incentive Stock Option
Plan (incorporated by reference to Exhibit 10.18 to
the Company's Registration Statement on Form S-1
(Registration No. 33-69304))
10.10* Gibraltar Steel Corporation Incentive Stock Option
Plan, Second Amendment and Restatement (incorporated
by reference to Exhibit 10.16 to the Company's
Registration Statement on Form S-1 (Registration
No. 333-03979))
10.11* Gibraltar Steel Corporation Incentive Stock Option
Plan, Third Amendment and Restatement 41
10.12* 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))
10.13* Gibraltar Steel Corporation Restricted Stock Plan,
First Amendment and Restatement 55
10.14* 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))
10.15* 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))
10.16* 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))
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Exhibit Sequentially
Number Exhibit Numbered Page
10.17 Tax Indemnification Agreement dated as of
November 5, 1993 among the Registrant, Brian J.
Lipke, Curtis W. Lipke, Neil E. Lipke, Eric R.
Lipke, Meredith A. Lipke, Bonneville Trust of
December 31, 1987 f/b/o Brian J. Lipke, Corvette
Trust of December 31, 1987 f/b/o Curtis W. Lipke,
Nova Trust of December 31, 1987 f/b/o Neil E. Lipke,
Electra Trust of December 31, 1987 f/b/o/ Eric R.
Lipke, Monza Trust of January 22, 1988 f/b/o Meredith
A. Lipke, Bonneville Trust No. 2 of August 15, 1988
f/b/o Brian J. Lipke, Corvette Trust No. 2 of August
15, 1988 f/b/o Curtis W. Lipke, Nova Trust No. 2 of
August 15, 1988 f/b/o Neil E. Lipke, Electra Trust
No. 2 of August 15, 1988 f/b/o Eric R. Lipke, Monza
Trust No. 2 of February 15, 1988 f/b/o Meredith A.
Lipke (incorporated by reference to Exhibit 10.22 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1993)
10.18 Agreement and Plan of Exchange and Reorganization
dated October 31, 1993 among the Registrant, Estate
of Kenneth E. Lipke, Bonneville Trust of December 31,
1987 f/b/o Brian J. Lipke, Corvette Trust of December
31, 1987 f/b/o Curtis W. Lipke, Nova Trust of December
31, 1987 f/b/o Neil E. Lipke, Electra Trust of December
31, 1987 f/b/o Eric R. Lipke, Monza Trust of January
22, 1988 f/b/o Meredith A. Lipke, Bonneville Trust No.
2 of August 15, 1988 f/b/o Brian J. Lipke, Corvette
Trust No. 2 of August 15, 1988 f/b/o Curtis W. Lipke,
Nova Trust No. 2 of August 15, 1988 f/b/o Neil E. Lipke,
Electra Trust No. 2 of August 15, 1988 f/b/o Eric R.
Lipke, Monza Trust No. 2 of February 15, 1988 f/b/o
Meredith A. Lipke (incorporated by reference to Exhibit
10.23 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993)
10.19 Credit Agreement dated as of September 15, 1997 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, 1997)
10.20 Bond Purchase Agreement dated June 16, 1994 among the
Industrial Development Board of the County of Hamilton,
Tennessee, Fleet Bank of New York and Gibraltar Steel
of Tennessee (incorporated by reference to Exhibit 10.10
to the Company's Registration Statement on Form S-1
(Registration No. 333-03979))
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Exhibit Sequentially
Number Exhibit Numbered Page
10.21* 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))
10.22* 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)
10.23 Stock Purchase Agreement dated as of April 3, 1995
among Gibraltar Steel Corporation of New York,
Albert Fruman, Marshall Fruman, Lee Fruman, Dale
Fruman and William R. Hubbell Trust U/A dated July
20, 1990 (incorporated by reference to Exhibit 10.1
to the Company's Current Report on Form 8-K dated
April 3, 1995)
10.24 Real Property Lease Agreement dated February 14,
1996 between Blacksmith Leasing and Carolina
Commercial Heat Treating, Inc. (incorporated by
reference to Exhibit 10.25 to the Company's
Registration Statement on Form S-1 (Registration
No. 333-03979))
10.25 Real Property Lease Agreement dated February 14,
1996 between Blacksmith Leasing and Carolina
Commercial Heat Treating, Inc. (incorporated by
reference to Exhibit 10.26 to the Company's
Registration Statement on Form S-1 (Registration
No. 333-03979))
10.26 Lease dated as of August 12, 1995 between John W.
Rex and Carolina Commercial Heat Treating, Inc.
(incorporated by reference to Exhibit 10.27 to the
Company's Registration Statement on Form S-1
(Registration No. 333-03979))
10.27 Purchase Agreement dated as of January 31, 1997
among Gibraltar Steel Corporation of New York, Nadine
W. Gramling; Nadine W. Gramling, as Trustee of the
Nadine W. Gramling Revocable Trust; D.G. Granger as
Trustee of the Donnie L. Gramling, Jr. GRAT; D.G.
Granger as Trustee of the Scott Ray Gramling GRAT; D.G.
Granger as Trustee of the Tonya Michelle Cogan GRAT;
D. G. Granger as Trustee of the Donnie L. Gramling, Jr.
GRAT No. 2; D.G. Granger as Trustee of the Scott Ray
Gramling GRAT No. 2; D.G. Granger as Trustee of the
Tonya Michelle Cogan GRAT No. 2; H. Leon Holbrook, as
Trustee of the Donnie L. Gramling, Jr.
-39-
Exhibit Sequentially
Number Exhibit Numbered Page
GRAT No. 3; H. Leon Holbrook, as Trustee of the
Donnie L. Gramling, Jr. GRAT No. 4; H. Leon Holbrook
as Trustee of the Tonya Michelle Cogan GRAT No. 3;
H. Leon Holbrook, as Trustee of the Tonya Michelle
Cogan GRAT No. 4; H. Leon Holbrook, as Trustee of
the Scott Ray Gramling GRAT No. 3; H. Leon Holbrook,
as Trustee of the Scott Ray Gramling GRAT No. 4;
Donnie L. Gramling, Sr. and Nadine W. Gramling as
Tenants by the Entirety; The Employee Stock Ownership
Plan and Trust of Southeastern Metals Manufacturing
Company, Inc.; Nadine W. Gramling; DNG (1997) Limited
Partnership; and DNG (1997) Limited Partnership
(incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K dated
January 31, 1997)
21 Subsidiaries of the Registrant 62
27 Financial Data Schedule 63
________________________________
* Document is a management contract or compensatory plan or arrangement
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