In the first nine months of 2008, we continued to face slowdowns in two of the key end markets we serve, automotive and residential new housing construction, that affected sales volumes in both of our segments. Despite the market slowdowns, Gibraltar has been able to increase its net sales through the third quarter of 2008 compared to the prior year period. We offset the sales decline from lower residential new home construction in our Building Products segment was offset by increased activity in the commercial, industrial, architectural, and international markets. We are also managing increased costs from raw material suppliers by working with customers to obtain price increases to allow us to achieve better margin alignment. Due to these factors, our historic businesses collectively had modest sales increases compared to 2007, which was amplified in 2008 by the benefit of the incremental sales and profits from our 2007 acquisitions.
We have also focused on operational excellence through lean initiatives and consolidating facilities to reduce our operating costs. We closed or consolidated a total of 22 facilities since January 2007. Operating margins have improved during 2008 due to better alignment of customer selling prices to material costs and savings from lean initiatives and facility consolidations completed during 2007 and 2008.
Results of Operations for the Three Months Ended September 30, 2008 Compared to the Three Months Ended September 30, 2007 The following table sets forth the Company's net sales by reportable segment for the three months ended September 30 (in thousands):

                                                                                                   Change due to
                                                                 Total                                 Foreign
                                2008             2007            Change          Acquisitions         Currency          Operations
Net sales:
Building Products             $ 277,494        $ 247,175        $ 30,319        $       13,716        $     877        $     15,726
Processed Metal Products         99,627           95,395           4,232                     -              250               3,982

                              $ 377,121        $ 342,570        $ 34,551        $       13,716        $   1,127        $     19,708

Net sales increased by $34.6 million, or 10% to $377.1 million for the quarter ended September 30, 2008, compared to the quarter ended September 30, 2007. The 2007 acquisition of Florence provided incremental sales of $13.7 million, or 4%, of the third quarter increase. Changes in foreign currency exchange rates have contributed to $1.1 million, or less than one percent, of the third quarter increase. Sales by our historic businesses without the effects of exchange rate fluctuations increased $19.7 million, or 6%.
Net sales in our Building Products segment increased by $30.3 million, or 12%, to $277.5 million for the quarter ended September 30, 2008, from net sales of $247.2 million for the quarter ended September 30, 2007. Excluding the $13.7 million in incremental net sales provided by the 2007 acquisition of Florence and the $0.9 million impact of exchange rate fluctuations, the increase in net sales was $15.7 million, or 6% from the same period in the prior year, a net result of higher customer selling prices on products used in the commercial, industrial, architectural, and international markets which offset declining volumes from our residential products due to the effects of the slowdown in the residential housing market.
Net sales in our Processed Metal Products segment increased by $4.2 million, or 4%, to $99.6 million for the quarter ended September 30, 2008, from net sales of $95.4 million for the quarter ended September 30, 2007. Excluding the $0.2 million impact of exchange rate fluctuations, the increase in net sales was $4.0 million, or 4%, from the same period in the prior year. The increase in net sales was primarily a function of increased sales in Asia and increased selling prices that allow us to achieve better margin alignment offset by volume reductions due to the decline in domestic automotive production.

Gross margin increased to 20.9% for the quarter ended September 30, 2008, from 18.6% for the quarter ended September 30, 2007. The increase in gross margin was the result of a better alignment of customer selling prices to raw material costs and lower costs due to our lean initiatives and facility consolidations, partially offset by the effects of reductions in volume and product mix. Selling, general and administrative expenses increased by approximately $5.0 million, or 13%, to $43.4 million for the quarter ended September 30, 2008, from $38.4 million for the quarter ended September 30, 2007. The acquisition of Florence generated a $1.5 million increase in selling, general and administrative expenses. Excluding the effect of acquisitions, selling, general and administrative expenses increased $3.5 million, or 9% during the quarter. Selling, general and administrative expenses as a percentage of net sales increased to 11.5% for the quarter ended September 30, 2008, from 11.2% for the quarter ended September 30, 2007 as a result of a $1.1 million charge for software no longer in use, higher incentive compensation costs due to improved operating results, and costs incurred from our continued facility consolidation efforts.
As a result of the above, income from operations as a percentage of net sales for the quarter ended September 30, 2008 increased to 9.4% from 7.4% for the prior year's comparable period.
The following table sets forth the Company's income from operations by reportable segment for the three months ending September 30 (in thousands):

                                                                                                 Change due to
                                                                Total                                Foreign
                                2008             2007           Change         Acquisitions         Currency          Operations
Income from operations:
Building Products             $  33,500        $ 28,497        $  5,003        $       1,619        $     650        $      2,734
Processed Metal Products         12,165           5,540           6,625                    -               31               6,594
Corporate                       (10,159 )        (8,672 )        (1,487 )                  -                -              (1,487 )

                              $  35,506        $ 25,365        $ 10,141        $       1,619        $     681        $      7,841

Income from operations as a percentage of net sales in our Building Products segment for the quarter ended September 30, 2008 increased to 12.1% from 11.5% in the quarter ended September 30, 2007. The increase in income from operations is the result of our continued efforts to reduce manufacturing costs and scale our operations for lower unit volumes through lean initiatives and facility consolidations and the acquisition of Florence all of which more than offset $2.7 million of reorganization costs related to facility consolidations. Income from operations as a percentage of net sales in our Processed Metal Products segment increased to 12.2% of net sales for the quarter ended September 30, 2008 from 5.8% for the prior year's comparable period. The increase in operating margin percentage is a result of lower costs due to the completion of our consolidation of the flat rolled business and a better alignment of customer selling prices to raw material costs.
Corporate expenses increased $1.5 million, or 17%, to $10.2 million for the quarter ended September 30, 2008 from $8.7 million in the quarter ended September 30, 2007. The increase in corporate expenses is primarily due to a $1.1 million charge for software no longer in use and higher incentive compensation costs due to improved operating results.
Interest expense decreased by approximately $1.8 million to $6.6 million for the quarter ended September 30, 2008, from $8.4 million for the quarter ended September 30, 2007. The decrease in interest expense was due to a combination of lower average borrowings and lower average interest rates during the quarter ended September 30, 2008 compared to the comparable period in the prior year.

As a result of the above, income from continuing operations before taxes increased by approximately $12.2 million, or 70%, to $29.5 million for the quarter ended September 30, 2008, compared to $17.3 million for the quarter ended September 30, 2007.
Income taxes for the quarter ended September 30, 2008 were $10.2 million, an effective tax rate of 34.7%, compared with $6.0 million, an effective rate of 34.5%, for the same period in 2007.
Results of Operations for the Nine Months Ended September 30, 2008 Compared to the Nine Months Ended September 30, 2007 The following table sets forth the Company's net sales by reportable segment for the nine months ended
September 30 (in thousands):

                                                                                                       Change due to
                                                                     Total                                 Foreign
                                 2008               2007             Change          Acquisitions         Currency          Operations
Net sales:
Building Products             $   787,875        $   710,522        $ 77,353        $       72,782        $   8,437        $     (3,866 )
Processed Metal Products          294,002            292,594           1,408                     -              555                 853

                              $ 1,081,877        $ 1,003,116        $ 78,761        $       72,782        $   8,992        $     (3,013 )

Net sales increased by $78.8 million, or 8% to $1,081.9 million for the nine months ended September 30, 2008, compared to the nine months ended September 30, 2007. The 2007 acquisitions of Dramex, Noll and Florence provided incremental sales of $72.8 million, or 7%, in the first nine months of 2008. Changes in foreign currency exchange rates have contributed to $9.0 million, or 1%, of the year to date increase. Sales by our historic businesses without the effects of exchange rate fluctuations decreased $3.0 million, or less than one percent. Net sales in our Building Products segment increased by $77.4 million, or 11%, to $787.9 million for the nine months ended September 30, 2008, from net sales of $710.5 million for the nine months ended September 30, 2007. Excluding the $72.8 million in incremental net sales provided by the 2007 acquisitions of Dramex, Noll and Florence and the $8.4 million impact of exchange rate fluctuations, net sales decreased $3.9 million, or 1%, from the same period in the prior year, the net result of declining volumes from our residential products due to the effects of the slowdown in the residential housing market which offset higher customer selling prices on products used in the commercial, industrial, architectural, and international markets.
Net sales in our Processed Metal Products segment increased by $1.4 million to $294.0 million for the nine months ended September 30, 2008, from net sales of $292.6 million for the nine months ended September 30, 2007. Excluding the $0.6 million impact of exchange rate fluctuations, the increase in net sales was $0.9 million, or less than one percent, from the same period in the prior year. Net sales have remained flat due to the net result of increased customer selling prices that allow us to achieve better margin alignment, exchange rate fluctuations, and volume reductions due to the decline in domestic automotive production.
Gross margin increased to 20.1% for the nine months ended September 30, 2008, from 18.1% for the nine months ended September 30, 2007. The increase in gross margin was the result of a better alignment of customer selling prices to raw material costs and lower costs due to our lean initiatives and facility consolidations, partially offset by the effects of an increase in freight costs, reductions in volume, and product mix. The 2007 acquisitions of Dramex and Florence also contributed to the higher gross margin during the nine months ended September 30, 2008.

Selling, general and administrative expenses increased by approximately $14.7 million, or 13%, to $124.7 million for the nine months ended September 30, 2008, from $110.0 million for the nine months ended September 30, 2007. The increase in selling, general and administrative expenses was due primarily to the acquisitions noted above. Excluding the effect of acquisitions, selling, general and administrative expenses increased $6.1 million, or 6%, over the prior year period. Selling, general and administrative expenses as a percentage of net sales increased to 11.5% for the nine months ended September 30, 2008, from 11.0% for the nine months ended September 30, 2007 as a result of a $1.1 million charge for software no longer in use, increased amortization of acquired intangible assets due to the 2007 acquisitions, and higher incentive compensation costs due to improved operating results.
As a result of the above, income from operations as a percentage of net sales for the nine months ended September 30, 2008 increased to 8.6% from 7.1% for the prior year's comparable period.
The following table sets forth the Company's income from operations by reportable segment for the nine months ending September 30 (in thousands):

                                                                                                  Change due to
                                                                 Total                                Foreign
                                2008             2007            Change         Acquisitions         Currency          Operations
Income from operations:
Building Products             $  93,938        $  78,382        $ 15,556        $       8,874        $      52        $      6,630
Processed Metal Products         24,826           16,089           8,737                    -            2,597               6,140
Corporate                       (26,181 )        (22,923 )        (3,258 )                  -                -              (3,258 )

                              $  92,583        $  71,548        $ 21,035        $       8,874        $   2,649        $      9,512

Income from operations as a percentage of net sales in our Building Products segment for the nine months ended September 30, 2008 increased to 11.9% from 11.0% in the same period in 2007. The increase in income from operations is the result of our continued efforts to reduce manufacturing costs and scale our operations for lower unit volumes through lean initiatives and facility consolidations along with improved alignment of customer selling prices to raw material costs offset by a $3.6 million increase in reorganization costs compared to the prior year period related to our facility consolidation process. Income from operations as a percentage of net sales in our Processed Metal Products segment increased to 8.4% of net sales for the nine months ended September 30, 2008 from 5.5% for the prior year's comparable period. The increase in operating margin percentage is a result of lower costs due to the completion of our consolidation of the flat rolled business and a better alignment of customer selling prices to raw material costs.
Corporate expenses increased $3.3 million, or 14%, to $26.2 million for the nine months ended September 30, 2008 from $22.9 million in the nine months ended September 30, 2007. The increase in corporate expenses is due to a $1.1 million charge for software no longer in use and higher incentive compensation costs due to improved operating results.
Interest expense decreased by approximately $1.7 million to $21.4 million for the nine months ended September 30, 2008, from $23.1 million for the nine months ended September 30, 2007. Interest expense remained consistent with the prior year for the first six months of the year as lower average interest rates offset the effect of higher average borrowings during the six months ended June 30, 2008. Interest expense decrease during the third quarter of 2008 compared to the same period in the prior year due to a combination of lower average borrowings and lower average interest rates.

As a result of the above, income from continuing operations before taxes increased by approximately $22.7 million, or 46%, to $72.2 million for the nine months ended September 30, 2008, compared to $49.5 million for the nine months ended September 30, 2007.
Income taxes for the nine months ended September 30, 2008 were $25.5 million, an effective tax rate of 35.4%, compared with $18.1 million, an effective rate of 36.5%, for the same period in 2007. The lower effective rate for the first nine months of 2008 reflects the benefit of a decrease in our overall state income tax rate.
Outlook
We expect a more significant seasonal slowdown in sales volume during the fourth quarter primarily driven by the overall volatility of the U.S. economy. We expect 2008 earnings per share from continuing operations to be in the range of $1.61 to $1.68 per diluted share if the sale of SCM had not occurred, compared to previous guidance of $1.50 to $1.65, and $1.03 in 2007, barring a significant change in current business conditions. However, we closed the SCM transaction on November 5; therefore, the results of SCM will be reclassified to discontinued operations for all periods presented. As a result, we expect 2008 earnings per share from continuing operations in the range of $1.47 to $1.54 per diluted share compared to earnings per share from continuing operations of $0.89 per diluted share for 2007. The reduction of 2008 and 2007 earnings per share from continuing operations includes the reclassification to discontinued operations of SCM's profits plus a portion of interest expense related to SCM's net assets. Liquidity and Capital Resources
The Company's principal capital requirements are to fund its operations, including working capital, the purchase and funding of improvements to its facilities, machinery and equipment and to fund acquisitions.
During the first nine months of 2008, the Company's cash flows from continuing operations totaled $75.3 million driven by profitable operating results and working capital management. Net cash provided by operating activities for the nine months ended September 30, 2008 was $77.0 million and was primarily the result of net income from continuing operations of $46.7 million combined with depreciation and amortization of $27.4 million.
During the nine months ended September 30, 2008, working capital decreased by approximately $8.2 million, or 2.7%, to $298.3 million. This decrease in working capital was primarily driven by our focus on working capital efficiency. The net change included a $42.6 million increase in accounts payable, and a $23.0 million increase in accrued expenses along with a decrease of $7.8 million in cash, partially offset by a $38.0 million increase in accounts receivable and a $31.5 million increase in inventories. The increase in receivables is the result of the increase in sales during the third quarter of 2008, compared to sales during the fourth quarter of 2007. The increase in inventories was the result of the seasonality of our business and the increase in raw material costs during the first nine months of 2008. The increase in payables is due to the timing of purchases of, and payment for, raw material and the increase in accrued expenses is a result of the timing of payment for income taxes, incentive compensation, customer rebates and insurance coverage.
The cash on hand at the beginning of the nine month period and cash generated by operations was used to fund capital expenditures of $14.1 million, additional acquisition costs of $8.6 million primarily related to a payment to the former owners of Florence for the 338(h)(10) election, provide for net reduction in outstanding indebtedness by $60.1 million and pay cash dividends of $4.5 million.
We are using the cash proceeds from the sale of SCM to repay a portion of our term loan and revolving credit facility during the fourth quarter of 2008.

Senior credit facility and senior subordinated notes The Company's credit agreement provides a revolving credit facility and a term loan, which is due in December 2012. The revolving credit facility of up to $375.0 million and the term loan with a balance of $86.5 million as of September 30, 2008 are secured with the Company's accounts receivable, inventories and personal property and equipment. At September 30, 2008, the Company had used $135.0 million of the revolving credit facility and had letters of credit outstanding of $14.8 million, resulting in $225.2 million in availability. Borrowings under the revolving credit facility carry interest at LIBOR plus a fixed rate. The weighted average interest rate of these borrowings was 3.43% at September 30, 2008. Borrowings under the term loan carry interest at LIBOR plus a fixed rate. The weighted average rate in effect on September 30, 2008 was 4.97%.
The Company's $204.0 million of 8% senior subordinated notes were issued in December 2005 at a discount to yield 8.25% Provisions of the 8% notes include, without limitation, restrictions on indebtedness, liens, distributions from restricted subsidiaries, asset sales, affiliate transactions, dividends and other restricted payments. Dividend payments are subject to annual limits of $0.25 per share and $10 million. Prior to December 1, 2008, up to 35% of the 8% notes are redeemable at the option of the Company from the proceeds of an equity offering at a premium of 108% of the face value, plus accrued and unpaid interest. After December 1, 2010 the notes are redeemable at the option of the Company, in whole or in part, at the redemption price (as defined in the notes agreement), which declines annually from 104% to 100% on and after December 1, 2013. In the event of a Change of Control (as defined in the indenture for such notes), each holder of the 8% notes may require the Company to repurchase all or a portion of such holder's 8% Notes at a purchase price equal to 101% of the principal amount thereof. The 8% notes are guaranteed by certain existing and future domestic subsidiaries and are not subject to any sinking fund requirements.
The Company's 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. At September 30, 2008 the Company was in compliance with terms and provisions of all of its financing agreements.
For the remainder of 2008, the Company is focused on maximizing positive cash flow, working capital management, and debt reduction. As of September 30, 2008, we believe that availability of funds under our existing credit facility together with the cash generated from operations will be sufficient to provide the Company with the liquidity and capital resources necessary to support its principal capital requirements, including operating activities, capital expenditures, and dividends. One of the banks in our syndicate was acquired by . . .