FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark one)

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

For the quarterly period ended June 30, 2007

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

For the transition period from                      to                     

Gibraltar Industries, Inc.

(Exact name of Registrant as specified in its charter)

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

3556 Lake Shore Road, P.O. Box 2028, Buffalo, New York 14219-0228 (Address of principal executive offices)

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

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ                    Accelerated filer o                    Non-accelerated filer o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o. No þ.

As of August 6, 2007, the number of common shares outstanding was: 29,949,229.

 

 

GIBRALTAR INDUSTRIES, INC.

INDEX

				PAGE
				NUMBER
PART 1.		FINANCIAL INFORMATION
Item 1.		Financial Statements (unaudited)
		Condensed Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006			3
		Condensed Consolidated Statements of Income For the Three and Six Months Ended June 30, 2007 and 2006			4
		Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2007 and 2006			5
		Notes to Condensed Consolidated Financial Statements			6-23
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			24-29
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			29
Item 4.		Controls and Procedures			30
PART II.		OTHER INFORMATION			31-32
Exhibit 31.1
Exhibit 31.2
Exhibit 31.3
Exhibit 32.1
Exhibit 32.2
Exhibit 32.3

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

GIBRALTAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

		June 30				December 31,
		2007				2006
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	22,921			$	13,475
Accounts receivable, net			211,814				169,207
Inventories			254,019				254,991
Other current assets			20,151				18,107
Total current assets			508,905				455,780
Property, plant and equipment, net			261,724				243,138
Goodwill			408,201				374,821
Acquired intangibles			61,150				62,366
Investments in partnerships			2,522				2,440
Other assets			13,932				14,323
		$	1,256,434			$	1,152,868
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	100,829			$	71,308
Accrued expenses			48,606				50,771
Current maturities of long-term debt			2,555				2,336
Total current liabilities			151,990				124,415
Long-term debt			449,689				398,217
Deferred income taxes			71,790				70,981
Other non-current liabilities			13,039				9,027
Shareholders’ equity:
Preferred stock, $.01 par value; authorized: 10,000,000 shares; none outstanding			—				—
Common stock, $.01 par value; authorized 50,000,000 shares; issued 29,899,295 and 29,828,317 shares in 2007 and 2006, respectively			299				299
Additional paid-in capital			217,291				215,944
Retained earnings			345,787				332,920
Accumulated other comprehensive income			6,549				1,065
			569,926				550,228
Less: cost of 44,100 and 42,600 common shares held in treasury in 2007 and 2006			—				—
Total shareholders’ equity			569,926				550,228
		$	1,256,434			$	1,152,868

See accompanying notes to condensed consolidated financial statements

GIBRALTAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2007				2006				2007				2006
Net sales		$	369,820			$	352,421			$	687,404			$	675,058
Cost of sales			304,146				275,156				570,079				534,562
Gross profit			65,674				77,265				117,325				140,496
Selling, general and administrative expense			38,281				38,950				73,491				76,790
Income from operations			27,393				38,315				43,834				63,706
Other (income) expense:
Equity in partnerships’ loss (income) and other income			(305	)			138				(667	)			(548	)
Interest expense			8,248				7,101				15,485				13,880
Total other expense			7,943				7,239				14,818				13,332
Income before taxes			19,450				31,076				29,016				50,374
Provision for income taxes			7,524				11,315				10,922				18,880
Income from continuing operations			11,926				19,761				18,094				31,494
Discontinued operations:
Income from discontinued operations before taxes			—				5,710				—				10,013
Income tax expense			—				2,158				—				3,797
Income from discontinued operations			—				3,552				—				6,216
Net income		$	11,926			$	23,313			$	18,094			$	37,710
Net income per share — Basic:
Income from continuing operations		$	.40			$	.67			$	.61			$	1.06
Income from discontinued operations			—				.12				—				.21
Net income		$	.40			$	.79			$	.61			$	1.27
Weighted average shares outstanding — Basic			29,863				29,689				29,850				29,659
Net income per share — Diluted:
Income from continuing operations			.40				.66				.60				1.05
Income from discontinued operations			—				.12				—				.21
Net income		$	.40			$	.78			$	.60			$	1.26
Weighted average shares outstanding — Diluted			30,144				30,012				30,096				29,966

See accompanying notes to condensed consolidated financial statements

GIBRALTAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

		Six Months Ended
		June 30,
		2007				2006
Cash flows from operating activities
Net income		$	18,094			$	37,710
Income from discontinued operations			—				6,216
Income from continuing operations			18,094				31,494
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			15,956				14,175
Provision for deferred income taxes			(229	)			—
Equity in partnerships’ loss (income) and other income			(576	)			174
Distributions from partnerships			493				589
Stock compensation expense			1,254				1,631
Other noncash adjustments			526				610
Increase (decrease) in cash resulting from changes in (net of acquisitions and dispositions):
Accounts receivable			(30,373	)			(49,345	)
Inventories			26,724				(37,793	)
Other current assets and other assets			1,223				1,353
Accounts payable			24,679				23,698
Accrued expenses and other non-current liabilities			(2,915	)			342
Net cash provided by (used in) continuing operations			54,856				(13,072	)
Net cash provided by discontinued operations			—				7,220
Net cash provided by (used in) provided by operating activities			54,856				(5,852	)
Cash flows from investing activities
Acquisitions, net of cash acquired			(84,424	)			(13,206	)
Purchases of property, plant and equipment			(9,292	)			(11,452	)
Net proceeds from sale of property and equipment			373				115
Net proceeds from sale of business			—				151,511
Net cash (used in) provided by investing activities from continuing operations			(93,343	)			126,968
Net cash used in investing activities for discontinued operations			—				(3,189	)
Net cash (used in) provided by investing activities			(93,343	)			123,779
Cash flows from financing activities
Long-term debt reduction			(1,654	)			(112,960	)
Proceeds from long-term debt			52,485				10,000
Payment of deferred financing costs			(8	)			(256	)
Payment of dividends			(2,983	)			(2,974	)
Net proceeds from issuance of common stock			93				764
Tax benefit from stock options			—				115
Net cash provided by (used in) financing activities			47,933				(105,311	)
Net increase in cash and cash equivalents			9,446				12,616
Cash and cash equivalents at beginning of year			13,475				28,529
Cash and cash equivalents at end of period		$	22,921			$	41,145

See accompanying notes to condensed consolidated financial statements

GIBRALTAR INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying condensed consolidated financial statements as of and for the three and six months ended June 30, 2007 and 2006 have been prepared by Gibraltar Industries, Inc. (the Company) without audit. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the financial position, results of operations and cash flows for these respective periods have been included.

Certain information and footnote disclosures including significant accounting policies normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements included in the Company’s Annual Report to Shareholders for the year ended December 31, 2006, as filed on Form 10-K.

The consolidated balance sheet at December 31, 2006 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

Certain 2006 amounts have been reclassified to conform with 2007 presentation.

The results of operations for the three and six month periods ended June 30, 2007 are not necessarily indicative of the results to be expected for the full year.

2. SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

The changes in shareholders’ equity and comprehensive income consist of (in thousands):

																						Accumulated
														Additional								Other												Total
		Comprehensive				Common Stock								Paid-In				Retained				Comprehensive				Treasury Stock								Shareholders’
		Income				Shares				Amount				Capital				Earnings				Income				Shares				Amount				Equity
Balance at January 1, 2007							29,841			$	299			$	215,944			$	332,920			$	1,065				43			$	—			$	550,228
Cumulative effect of adoption of FIN 48			—				—												(750	)			—				—				—				(750	)
Comprehensive income:
Net income		$	18,094				—				—				—				18,094				—				—				—				18,094
Other comprehensive income (loss):
Foreign currency translation adjustment			5,127
Amortization of other post retirement health care costs, net of tax of $20			32
Unrealized gain on interest rate swaps, net of tax of $236			325
Other comprehensive income			5,484				—				—				—				—				5,484				—				—				5,484
Total comprehensive income		$	23,578
Issuance of restricted shares							6				—				—				—				—				—				—				—
Equity based compensation expense							—				—				1,254				—				—				—				—				1,254
Stock options exercised							8				—				93				—				—				—				—				93
Forfeiture of restricted stock awards							—				—				—				—				—				1				—				—
Cash dividends — $.15 per share							—				—				—				(4,477	)			—				—				—				(4,477	)
Balance at June 30, 2007							29,855			$	299			$	217,291			$	345,787			$	6,549				44			$	—			$	569,926

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

		Foreign				Minimum				Unamortized				Unrealized				Accumulated
		currency				pension				post retirement				gain/(loss) on				other
		translation				liability				health care				interest				comprehensive
		adjustment				adjustment				costs				rate swaps				loss
Balance at January 1, 2007		$	1,977			$	3			$	(969	)		$	54			$	1,065
Current period change			5,127				—				32				325				5,484
Balance at June 30, 2007		$	7,104			$	3			$	(937	)		$	379			$	6,549

Total comprehensive income for the three and six months ended June 30, 2007, was $16,509,000 and $23,578,000, respectively and for the three and six months ended June 30, 2006 was $23,221,000 and $38,427,000, respectively.

3. INCOME TAXES

The Company and its U. S. subsidiaries file a U.S. federal consolidated income tax return. The Internal Revenue Service has concluded its examination of the Company’s income tax returns for the years prior to 2003. The U.S. federal statute of limitations remains open for the 2003 tax year and beyond. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 4 to 6 years. Several of our tax returns are currently under examination in various U.S. state jurisdictions.

We adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (FIN 48) effective January 1, 2007. As a result of the implementation of FIN 48, the Company recognized a $750,000 increase in tax liabilities, with a corresponding reduction in retained earnings. The recognition was caused by uncertain tax positions of $408,000 and the provision for related interest and penalties of $342,000.

During the three and six months ended June 30, 2007, the Company incurred an additional $25,000 and $50,000 to account for uncertain tax positions. The Company does not anticipate significant increases or decreases in our uncertain tax positions within the next twelve months.

The Company recognizes penalties and interest relating to uncertain tax positions in the provision for income taxes.

4. EQUITY-BASED COMPENSATION

On May 19, 2005, the Gibraltar Industries, Inc. 2005 Equity Incentive Plan (the “2005 Equity Incentive Plan”) was approved by the Company’s stockholders. The 2005 Equity Incentive Plan is an incentive compensation plan that allows the Company to grant equity-based incentive compensation awards to eligible participants to provide them an additional incentive to promote the business of the Company, to increase their proprietary interest in the success of the Company and to encourage them to remain in the Company’s employ. Awards under the plan may be in the form of options, restricted shares, restricted units, performance shares, performance units and rights. The 2005 Equity Incentive Plan provides for the issuance of up to 2,250,000 shares of common stock. Of the total number of shares of common stock issuable under the 2005 Equity Incentive Plan, the aggregate number of shares that may be issued in connection with grants of restricted stock or restricted units cannot exceed 1,350,000 shares, and the aggregate number of shares which may be issued in connection with grants of incentive stock options and rights cannot exceed 900,000 shares. Vesting terms and award life are governed by the award document.

The Management Stock Purchase Plan (“MSPP”) was approved by the shareholders in conjunction with the adoption of the 2005 Equity Incentive Plan. The MSPP provides participants the ability to defer up to 50% of their annual bonus under the Management Incentive Compensation Plan. The deferral is converted to restricted stock units and credited to an account along with a match equal to the deferral amount. The account is converted to cash at the current value of the Company’s stock and payable to the participants upon their termination from employment with the Company. The matching portion is payable only if the participant has reached their sixtieth birthday. If a participant terminates prior to age 60, the match is forfeited. Upon termination, the account is converted to a cash account that accrues interest at 2% over the then current 10 year U. S. Treasury note. The account is then paid out in five equal annual cash installments.

During the six months ended June 30, 2007 and 2006, the Company issued 6,000 and 6,000 restricted shares, 164,248 and 167,125 restricted stock units, and granted 15,800 and 18,625 non-qualified stock options, respectively.

The fair value of restricted stock units held in the MSPP equals the trailing 200 day average of the closing market price of our common stock as of the last day of the period. As of June 30, 2007, 120,206 restricted

stock units were credited to participant accounts. At June 30, 2007, the trailing 200 day average of the closing market price of our common stock was $22.67 per share.

5. INVENTORIES

Inventories consist of the following (in thousands):

		June 30,				December 31,
		2007				2006
Raw material		$	114,792			$	122,181
Work-in process			40,257			$	41,164
Finished goods			98,970				91,646
Total inventories		$	254,019			$	254,991

6. NET INCOME PER SHARE

Basic net income per share is based on the weighted average number of common shares outstanding. Diluted net income per share is based on the weighted average number of common shares outstanding, as well as dilutive potential common shares which, in the Company’s case, comprise shares issuable under the 2005 Equity Incentive Plan, the stock option and restricted stock plans. The treasury stock method is used to calculate dilutive shares, which reduces the gross number of dilutive shares by the number of shares purchasable from the proceeds and applicable tax benefits of the options assumed to be exercised.

The following table sets forth the computation of basic and diluted earnings per share as of:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2007				2006				2007				2006
Numerator:
Income available to common stockholders from continuing operations		$	11,926,000			$	19,761,000			$	18,094,000			$	31,494,000
Weighted average shares outstanding			29,863,030				29,689,402				29,849,977				29,658,841
Denominator for diluted income per share:
Weighted average shares outstanding			29,863,030				29,689,402				29,849,977				29,658,841
Common stock options and restricted stock			281,205				323,069				246,248				307,472
Weighted average shares and conversions			30,144,235				30,012,471				30,096,225				29,966,313

7. ACQUISITIONS

On June 8, 2006 the Company acquired all of the outstanding stock of Home Impressions, Inc. (Home Impressions). Home Impressions is based in Hickory, North Carolina and markets and distributes mail boxes and postal accessories. The acquisition of Home Impressions served to strengthen the Company’s position in the mail box and storage systems markets, and is expected to provide marketing, manufacturing and distribution synergies with our existing operations. The results of Home Impressions (included in the Company’s Building Products segment) are included in the Company’s consolidated financial results from the date of acquisition. The acquisition of Home Impressions is not considered significant to the Company’s consolidated results of operations.

The aggregate initial consideration was $12,473,000 which consisted of $9,612,000 in cash, including acquisition costs, and the assumption of $2,861,000 notes payable, with the final purchase price subject to adjustment for operating results through May 2009. The initial purchase price has been allocated to the assets acquired and liabilities assumed based upon respective fair market values. The fair market values of the property, plant and equipment, and identifiable intangible assets were determined with the assistance of an independent valuation. The identifiable intangible assets consisted of a non-compete agreement with a value of $530,000 (8 year estimated useful life), trademarks with a value of $1,340,000 (15 year estimated useful life), patents with a value of $535,000 (20 year estimated useful life), and customer relationships with a value of $1,570,000 (10 year estimated useful life). The excess consideration over fair value was recorded as goodwill and aggregated approximately $6,930,000, none of which is deductible for tax purposes. The allocation of purchase consideration to the assets acquired and liabilities assumed is as follows (in thousands):

Working capital		$	1,826
Property, plant and equipment			1,660
Other long term liabilities			(1,918	)
Intangibles			3,975
Goodwill			6,930
		$	12,473

As part of the purchase agreement with the former owners of Home Impressions, the Company is required to pay additional consideration through May 2009 based upon the operating results of Home Impressions. The Company paid $402,000 of such additional consideration during the six months ended June 30, 2007. These payments were recorded as additional goodwill.

On June 30, 2006, the Company acquired certain assets of Steel City Hardware, LLC (“Steel City”). The assets the Company acquired from Steel City are used to manufacture mailboxes and postal accessories. The acquisition of the assets of Steel City served to vertically integrate Home Impression’s major domestic supplier and expanded our manufacturing competency in the storage market. The results of Steel City (included in the Company’s Building Products segment) are included in the Company’s consolidated financial results from the date of acquisition. The acquisition of Steel City is not considered significant to the Company’s consolidated results of operations.

The aggregate consideration was approximately $4,879,000, in cash and acquisition costs. The purchase price has been allocated to the assets acquired based upon respective fair market values. The fair market value of the property, plant and equipment was determined with the assistance of an independent valuation. The excess consideration over fair value was recorded as goodwill and aggregated approximately $2,566,000, which is deductible for tax purposes. The allocation of purchase consideration to the assets and liabilities assumed is as follows (in thousands):

Working capital		$	1,736
Property, plant and equipment			577
Goodwill			2,566
		$	4,879

On November 1, 2006, the Company acquired all of the outstanding stock of The Expanded Metal Company Limited and Sorst Streckmetall GmbH (“EMC”). EMC has locations in England, Germany and Poland and manufactures, markets and distributes a diverse line of products used in the commercial and industrial sectors of the building products market. The acquisition of EMC is expected to strengthen the Company’s position in the expanded metal market and provide expanded market exposure for both EMC products and certain products currently manufactured by the Company. The results of operations of EMC (included in the Company’s Building Products segment) have been included in the Company’s consolidated results of operations from the date of acquisition.

The aggregate purchase consideration for the acquisition of EMC was approximately $44,722,000 in cash and acquisition costs. The purchase price was allocated to the assets acquired and liabilities assumed based upon a preliminary valuation of respective fair values. The identifiable intangible assets consisted of a trademark with a value of $4,771,000 (indefinite useful life) and customer relationships with a value of $7,443,000 (7 year estimated useful life). A final valuation is expected to be completed during the third quarter of 2007. The excess consideration over fair value was recorded as goodwill and aggregated approximately $20,819, 000, none of which is deductible for tax purposes. The allocation of purchase consideration to the assets acquired and liabilities assumed is as follows (in thousands):

Working capital		$	5,405
Property, plant and equipment			11,338
Other long term liabilities, net			(5,054	)
Intangible assets			12,214
Goodwill			20,819
		$	44,722

On March 9, 2007 the Company acquired all of the outstanding stock of Dramex Corporation (“Dramex”). Dramex has locations in Ohio, Canada and England and manufactures, markets and distributes a diverse line of expanded metal products used in the commercial and industrial sectors of the building products market. The acquisition of Dramex is expected to strengthen the Company’s position in the expanded metal market and provide additional exposure for both Dramex’s products and certain products currently manufactured by the Company. The results of Dramex (included in the Company’s Building Products segment) are included in the Company’s consolidated financial results from the date of acquisition. The acquisition of Dramex is not considered significant to the Company’s consolidated results of operations.

The aggregate purchase consideration for the acquisition of Dramex was $22,492,000 in cash and acquisition costs. The purchase price was allocated to the assets acquired and liabilities assumed based upon a preliminary valuation of respective fair values. A final valuation is expected to be completed prior to the end of the Company’s fiscal year. The excess consideration over fair value was recorded as goodwill and aggregated approximately $13,570,000, none of which is deductible for tax purposes. The allocation of purchase consideration to the assets acquired and liabilities assumed is as follows (in thousands):

Working capital		$	5,571
Property, plant and equipment			4,652
Other long term liabilities, net			(1,301	)
Goodwill			13,570
		$	22,492

On April 10, 2007 the Company acquired certain assets and liabilities of Noll Manufacturing Company, NorWesCo, and M&N Plastics (Noll). The assets the Company acquired from Noll are used to manufacture, market and distribute products for the building, HVAC, and lawn and garden components of the building products market. The acquisition of Noll will serve to strengthen our manufacturing, marketing and distribution capabilities and is expected to provide manufacturing and distribution synergies with our existing businesses. The results of Noll (included in the Company’s Building Products segment) have been included in the Company’s consolidated financial results from the date of acquisition. The acquisition of Noll is not considered significant to the Company’s consolidated results of operations.

The aggregate initial consideration was approximately $61,530,000 in cash and direct acquisition costs. The purchase price has been allocated to the assets acquired and liabilities assumed based upon a preliminary valuation of respective fair values. A final valuation is expected to be completed prior to the end of the Company’s fiscal year. The excess consideration over fair value was recorded as goodwill and aggregated approximately $16,600,000, which is deductible for tax purposes. The allocation of the purchase consideration to the assets acquired and liabilities assumed is as follows (in thousands):

Working capital		$	24,399
Property, plant and equipment			20,531
Goodwill			16,600
		$	61,530

8. DISCONTINUED OPERATIONS

As part of its continuing evaluation of its businesses, the Company determined that its thermal processing and strapping businesses no longer provided a strategic fit with its long-term growth and operational objectives. On June 16, 2006 and June 30, 2006, in separate transactions, the Company sold certain assets and liabilities of both its strapping and thermal processing businesses, respectively. The strapping business was previously included in the processed metals products segment and the thermal processing business previously was reported as a segment.

In accordance with the provisions of Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144), the results of operations for the thermal processing business and strapping business have been classified as discontinued operations in the condensed consolidated financial statements for all periods presented.

The Company allocates interest to its discontinued operations in accordance with the provisions of the Financial Accounting Standards Board’s Emerging Issues Task Force item 87-24, Allocation of Interest to Discontinued Operations. Interest expense of $1,384,000 and $2,652,000 was allocated to discontinued operations during the three and six months ended June 30, 2006, respectively.

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2007				2006				2007				2006
Net sales		$	—			$	37,913			$	—			$	75,631
Expenses			—				32,203				—				65,618
Income from discontinued operations before taxes		$	—			$	5,710			$	—			$	10,013

9. GOODWILL AND RELATED INTANGIBLE ASSETS

Goodwill

The changes in the carrying amount of goodwill by reportable segment for the six months ended June 30, 2007 is as follows (in thousands):

		Building				Processed Metal
		Products				Products
		Segment				Segment				Total
Balance as of January 1, 2007		$	358,856			$	15,965			$	374,821
Goodwill acquired			30,572				—				30,572
Additional acquisition costs, net			549				—				549
Foreign currency translation			2,173				86				2,259
Balance as of June 30, 2007		$	392,150			$	16,051			$	408,201

Intangible Assets

Acquired intangible assets subject to amortization at June 30, 2007 are as follows (in thousands):

		Gross Carrying				Accumulated				Estimated
		Amount				Amortization				Life
Trademark / Trade Name		$	1,993			$	(298	)			2 to 15 years
Unpatented Technology			5,135				(1,050	)			5 to 20 years
Customer Relationships			26,723				(3,762	)			5 to 15 years
Non-Competition Agreements			3,578				(1,619	)			5 to 10 years
Balance as of June 30, 2007		$	37,429			$	(6,729	)

Acquired intangible assets with indefinite useful lives not subject to amortization consist of trademarks and trade names valued at $30,450,000.

Acquired intangible asset amortization expense for the three and six month periods ended June 30, 2007 and 2006 aggregated approximately $874,000 and $609,000, and $1,815,000 and $1,113,000, respectively.

Amortization expense related to acquired intangible assets for the remainder of fiscal 2007 and the next five years thereafter is as follows (in thousands)

Year Ended December 31,
2007		$	1,820
2008		$	3,511
2009		$	3,431
2010		$	3,363
2011		$	3,196
2012		$	3,171

10. RELATED PARTY TRANSACTIONS

In connection with the acquisition of Construction Metals, the Company entered into two unsecured subordinated notes each in the amount of $8,750,000 (aggregate total of $17,500,000). These notes were payable to the two former owners of Construction Metals and were considered related party in nature due to the former owners’ continuing employment relationship with the Company. These notes were payable in annual principal installments of $2,917,000 per note on April 1, and were satisfied on April 1, 2006. These notes required quarterly interest payments at an interest rate of 5.0% per annum. Interest expense related to these notes was approximately $72,000 for the six months ended June 30, 2006.

The Company has certain operating lease agreements related to operating locations and facilities with the former owners of Construction Metals or companies controlled by these parties. These operating leases are considered to be related party in nature. Rental expense associated with these related party operating leases aggregated approximately $678,000 and $676,000 for the six months ended June 30, 2007 and 2006, respectively.

Two members of our Board of Directors are partners in law firms that provide legal services to the Company. For the six months ended June 30, 2007 and 2006, the Company incurred $989,000 and $1,070,000, respectively, for legal services from these firms. Of the amount incurred, $714,000 and $822,000, was expensed during the six months ended June 30, 2007 and 2006, respectively. $275,000 and $188,000 were capitalized as acquisition costs and deferred debt issuance costs during the six months ended June 30, 2007 and 2006, respectively.

At June 30, 2007, the Company had $48,000 recorded in accounts payable for these law firms.

11. BORROWINGS UNDER REVOLVING CREDIT FACILITY

The aggregate borrowing limit under the Company’s revolving credit facility is $300,000,000. At June 30, 2007, the Company had $151,704,000 of availability under the revolving credit facility.

12. NET PERIODIC BENEFIT COSTS

The following tables present the components of net periodic pension and other postretirement benefit costs charged to expense (in thousands):

		Pension Benefit
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2007				2006				2007				2006
Service cost		$	42			$	40			$	82			$	80
Interest cost			39				30				70				61
Net periodic benefit costs		$	81			$	70			$	152			$	141

		Other Post Retirement Benefits
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2007				2006				2007				2006
Service cost		$	32			$	26			$	58			$	52
Interest cost			60				56				116				112
Amortization of unrecognized prior service cost			(5	)			(6	)			(10	)			(12	)
Loss amortization			34				28				62				56
Net periodic benefit costs		$	121			$	104			$	226			$	208

13. SEGMENT INFORMATION

The Company is organized into two reportable segments on the basis of the production process and products and services provided by each segment, identified as follows:

	(i)		Building Products, which primarily includes the processing of sheet steel, aluminum and other materials to produce a wide variety of building and construction products.
	(ii)		Processed Metal Products, which primarily includes the intermediate processing of wide, open tolerance flat-rolled sheet steel and other metals through the application of several different processes to produce high-quality, value-added coiled steel and other metal products to be further processed by customers.

The following table illustrates certain measurements used by management to assess the performance of the segments described above (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2007				2006				2007				2006
Net sales
Building products		$	260,224			$	239,056			$	467,450			$	453,800
Processed metal products			109,596				113,365				219,954				221,258
		$	369,820			$	352,421			$	687,404			$	675,058
Income (loss) from operations
Building products		$	31,218			$	40,519			$	49,949			$	71,792
Processed metal products			3,610				7,945				8,037				13,763
Corporate			(7,435	)			(10,149	)			(14,152	)			(21,849	)
		$	27,393			$	38,315			$	43,834			$	63,706
Depreciation and amortization
Building products		$	5,972			$	4,292			$	10,867			$	8,504
Processed metal products			1,846				2,302				3,735				4,127
Corporate			677				765				1,354				1,544
		$	8,495			$	7,359			$	15,956			$	14,175
Capital expenditures (excluding acquisitions)
Building products		$	2,428			$	4,998			$	6,379			$	8,454
Processed metal products			1,155				723				2,073				1,654
Corporate			340				428				840				1,344
		$	3,923			$	6,149			$	9,292			$	11,452

		June 30, 2007				December 31, 2006
		(unaudited)
Total identifiable assets
Building products		$	930,304			$	828,797
Processed metal products			276,664				283,546
Corporate			49,466				40,525
		$	1,256,434			$	1,152,868

14. SUPPLEMENTAL FINANCIAL INFORMATION

The following information sets forth the consolidating summary financial statements of the issuer (Gibraltar Industries, Inc.) and guarantors, which guarantee the 8% senior subordinated notes due December 1, 2015, and the non-guarantors. The guarantors are wholly owned subsidiaries of the issuer and the guarantees are full, unconditional, joint and several.

Investments in subsidiaries are accounted for by the parent using the equity method of accounting. The guarantor subsidiaries and non-guarantor subsidiaries are presented on a combined basis. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.

Gibraltar Industries, Inc.
Condensed Consolidating Balance Sheets
June 30, 2007
(in thousands)

		Gibraltar				Guarantor				Non-Guarantor
		Industries, Inc.				Subsidiaries				Subsidiaries				Eliminations				Total
Assets
Current assets:
Cash and cash equivalents		$	—			$	4,579			$	18,342			$	—			$	22,921
Accounts receivable, net			—				186,696				25,118				—				211,814
Intercompany balances			330,019				(313,485	)			(16,534	)			—				—
Inventories			—				240,065				13,954				—				254,019
Other current assets			—				19,305				846				—				20,151
Total current assets			330,019				137,160				41,726				—				508,905
Property, plant and equipment, net			—				239,825				21,899				—				261,724
Goodwill			—				363,082				45,119				—				408,201
Acquired intangibles			—				47,719				13,431				—				61,150
Investments in partnerships			—				2,522				—				—				2,522
Other assets			6,142				7,563				227				—				13,932
Investment in subsidiaries			436,351				93,530				—				(529,881	)			—
			772,512				891,401				122,402				(529,881	)			1,256,434
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable			—				86,678				14,151				—				100,829
Accrued expenses			1,637				39,763				7,206				—				48,606
Current maturities of long-term debt			—				2,555				—				—				2,555
Total current liabilities			1,637				128,996				21,357				—				151,990
Long-term debt			200,949				247,858				882				—				449,689
Deferred income taxes			—				65,578				6,212				—				71,790
Other non-current liabilities			—				12,618				421				—				13,039
Shareholders’ equity			569,926				436,351				93,530				(529,881	)			569,926
		$	772,512			$	891,401			$	122,402			$	(529,881	)		$	1,256,434

Gibraltar Industries, Inc.
Consolidating Balance Sheets
December 31, 2006
(in thousands)

		Gibraltar				Guarantor				Non-Guarantor
		Industries, Inc.				Subsidiaries				Subsidiaries				Eliminations				Total
Assets
Current assets:
Cash and cash equivalents		$	—			$	4,982			$	8,493			$	—			$	13,475
Accounts receivable			—				152,335				16,872				—				169,207
Intercompany balances			335,496				(313,514	)			(21,982	)			—				—
Inventories			—				243,036				11,955				—				254,991
Other current assets			—				17,297				810				—				18,107
Total current assets			335,496				104,136				16,148				—				455,780
Property, plant and equipment, net			—				223,535				19,603				—				243,138
Goodwill			—				346,108				28,713				—				374,821
Acquired intangibles			—				49,200				13,136				—				62,366
Investments in partnerships			—				2,440				—				—				2,440
Other assets			6,492				7,001				860				—				14,323
Investment in subsidiaries			410,578				56,823				—				(467,401	)			—
		$	752,566			$	789,243			$	78,460			$	(467,401	)		$	1,152,868
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	—			$	60,737			$	10,571			$	—			$	71,308
Accrued expenses			1,513				45,782				3,476				—				50,771
Current maturities of long-term debt			—				2,336				—				—				2,336
Total current liabilities			1,513				108,855				14,047				—				124,415
Long-term debt			200,825				196,152				1,240				—				398,217
Deferred income taxes			—				64,935				6,046				—				70,981
Other non-current liabilities			—				8,723				304				—				9,027
Shareholders’ equity			550,228				410,578				56,823				(467,401	)			550,228
		$	752,566			$	789,243			$	78,460			$	(467,401	)		$	1,152,868