Certain information set forth herein, other than historical statements, contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that are based, in whole or in part, on current expectations, estimates, forecasts, and projections about the Company's business, and management's beliefs about future operations, results, and financial position. These statements are not guarantees of future performance and are subject to a number of risk factors, uncertainties, and assumptions. Risk factors that could affect these statements include, but are not limited to, the following: the availability of raw materials and the effects of changing raw material prices on the Company's results of operations; energy prices and usage; changing demand for the Company's products and services; changes in the liquidity of the capital and credit markets; risks associated with the integration of acquisitions; and changes in interest and tax rates. In addition, such forward-looking statements could also be affected by general industry and market conditions, as well as general economic and political conditions. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law or regulation.

Overview

Gibraltar is a leading manufacturer and distributor of products for building and industrial markets. Our products provide structural and architectural enhancements for residential homes, low-rise retail, other commercial and professional buildings, and a wide-variety of other structures. These products include ventilation products, mail storage solutions including mailboxes and package delivery products, rain dispersion products and accessories, bar grating, expanded metal, metal lath, and expansion joints and structural bearings. Our customers are major home improvement retailers and distributors predominantly throughout North America with less than ten percent of revenues from Europe. As of September 30, 2012, we operated 40 facilities in 20 states, Canada, England, and Germany, giving us a broad platform for just-in-time delivery and support to our customers.

Our strategy is to position Gibraltar as a low-cost provider and a market share leader in product areas that offer the opportunity for sales growth and margin enhancement over the long-term. We focus on operational excellence including lean initiatives throughout the Company to position Gibraltar as our customers' low-cost provider of the products we offer. We continuously seek to improve our on-time delivery, quality, and service to position Gibraltar as a preferred supplier to our customers. We also strive to develop new products, enter new markets, expand market share in the residential markets, and further penetrate domestic and international building and industrial markets to strengthen our product leadership positions.

The end markets served by our business are subject to economic conditions that are influenced by interest rates, commodity costs, demand for residential construction, and the level of non-residential construction and infrastructure projects. The United States construction markets continue an uneven recovery from an unprecedented recession that began in 2008, which led to significantly reduced demand for the products we manufacture and distribute. In addition, tightened credit markets over the same period may have limited the ability of end customers to obtain financing for construction projects. While the economy has grown since the recession, the construction markets continue to face significant challenges. Construction markets have only recovered modestly and many economic indicators, such as housing starts, continue to remain at levels well below long-term averages.

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

On June 3, 2011, the Company acquired Pacific Award Metals, Inc. (Award Metals) for $13 million. Award Metals is a leading regional manufacturer of roof ventilation, roof trims, flashing and rain ware, drywall trims, and specialized clips and connectors for concrete forms used in the West Coast residential construction markets.

On April 1, 2011, the Company acquired The D.S. Brown Company (D.S. Brown) for $98 million. D.S. Brown is the largest U.S. manufacturer of specialty components for the transportation infrastructure industry and has established a leading market position for many of the products offered. Products manufactured and distributed by D.S. Brown include expansion joint systems, structural bearing assemblies, pavement sealing systems, and other specialty components for bridges, highways, and other infrastructure projects.

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

We have been able to improve our strong liquidity position as a result of consolidation of facilities, acquisitions, introduction of new products and expansion of market share. Using cash generated from operations, we made significant repayments against our outstanding debt and had no debt outstanding against our revolving credit facility during the nine months ended September 30, 2012. At September 30, 2012, our liquidity was $211 million including $71 million of cash and $140 million of availability under our revolving credit facility.

For the quarter ended September 30, 2012, our net sales declined 7% compared to the prior year. The decline was attributable to slower repair and remodeling activity, unfavorable weather conditions, and recession-driven weakness in the demand for products for our businesses serving the European markets. Continued improvement in the Company's operating efficiencies, along with reductions of restructuring costs for the integration of our West Coast operations, helped offset margin compression from lower sales volume. Our operating margin declined to 7.7% for the third quarter of 2012 from 8.3% in the third quarter of 2011.

Results of Operations

Three Months Ended September 30, 2012 Compared to the Three Months Ended
September 30, 2011

The following table sets forth selected data from our statement of operations
and the related percentage of net sales for the three months ended September 30
(in thousands):



                                                          2012                          2011
Net sales                                        $ 205,514         100.0 %     $ 220,096         100.0 %
Cost of sales                                      165,286          80.4         177,133          80.5

Gross profit                                        40,228          19.6          42,963          19.5
Selling, general, and administrative expense        24,479          11.9          24,602          11.2

Income from operations                              15,749           7.7          18,361           8.3
Interest expense                                     4,688           2.3           4,869           2.2
Other (income) expense                                 (55 )         0.0              15           0.0

Income before taxes                                 11,116           5.4          13,477           6.1
Provision for income taxes                           4,094           2.0           6,094           2.7

Income from continuing operations                    7,022           3.4           7,383           3.4
Income (loss) from discontinued operations             279           0.2            (469 )        -0.3

Net income                                       $   7,301           3.6 %     $   6,914           3.1 %

Net sales decreased by $14.6 million, or 6.6%, to $205.5 million for the three months ended September 30, 2012 from net sales of $220.1 million for the three months ended September 30, 2011. The following table sets forth the impact of the Company's acquisitions on net sales for the three months ended September 30 (in thousands):

Total Change Due To 2012 2011 Change Acquisitions Operations Net sales $ 205,514 $ 220,096 $ (14,582 ) $ 1,155 $ (15,737 )

The decrease in net sales from the prior year was the result of a 4.6% decrease in volumes along with a 2.6% decrease in pricing to customers, partially offset by the incremental sales generated by the Edvan acquisition completed earlier this year. These Edvan incremental sales were not included in the prior year quarter, and contributed $1.2 million of net sales for the third quarter of 2012. Volumes decreased in several of our residential markets due in part to reduced demand for roofing materials resulting from the unusually dry weather this year compared to greater storm related repair activity last year. In our domestic and European industrial markets, weak economic conditions suppressed demand for our building and vehicle filtration products. The lower selling prices were primarily the result of declining commodity costs for steel and aluminum and meeting selective competitive situations.

Our gross margin increased slightly to 19.6% for the three months ended September 30, 2012 compared to 19.5% for the three months ended September 30, 2011. Despite decreased volume and pricing, we achieved a more favorable alignment of material costs to customer selling prices. Decreased acquisition and restructuring costs also contributed to the increased gross margin. In addition, our efforts to continue to reduce costs and consolidate facilities contributed to the improved margin. All these actions more than offset the margin compression experienced as a result of decreased volume.

Selling, general, and administrative expenses (SG&A) slightly decreased to $24.5 million for the three months ended September 30, 2012 from $24.6 million for the three months ended September 30, 2011. For the current quarter,we experienced a $1.9 million increase in equity compensation costs compared to the prior year quarter, which included a $0.6 million benefit in the third quarter of 2011. However, this increase was more than offset by cost reductions generated through our continued restructuring and consolidation of facilities. Although we experienced a minor decrease in expenses, SG&A expenses as a percentage of net sales increased to 11.9% for the third quarter of 2012 compared to 11.2% in 2011 as a result of reduced net sales.

Interest expense decreased $0.2 million to $4.7 million for the three months ended September 30, 2012 compared to $4.9 million for the three months ended September 30, 2011. Net interest expense in the third quarter of 2011 was higher due to funds borrowed under our revolving credit facility to finance the acquisitions of D.S. Brown and Award Metals. No amounts were outstanding under our revolving credit facility during the three months ended September 30, 2012.

We recognized a provision for income taxes of $4.1 million for the three months ended September 30, 2012, an effective tax rate of 36.8%, compared with a provision for income taxes of $6.1 million, an effective rate of 45.2% for the same period in 2011. The effective tax rate for the third quarter of 2012 was lower than the third quarter of 2011 due to a reduction in non-deductible expenses and the recognition of certain discrete benefits, including a reversal of uncertain tax positions, incurred in the current quarter. The effective tax rate for the third quarter of 2011 exceeded the U.S. federal statutory rate due to state taxes and non-deductible permanent differences.

Nine Months Ended September 30, 2012 Compared to the Nine Months Ended
September 30, 2011

The following table sets forth selected data from our statement of operations
and the related percentage of net sales for the nine months ended September 30
(in thousands):



                                                          2012                          2011
Net sales                                        $ 617,419         100.0 %     $ 592,466         100.0 %
Cost of sales                                      499,984          81.0         474,030          80.0

Gross profit                                       117,435          19.0         118,436          20.0
Selling, general, and administrative expense        78,370          12.7          75,463          12.7

Income from operations                              39,065           6.3          42,973           7.3
Interest expense                                    13,989           2.3          14,321           2.5
Other income                                          (401 )        -0.1             (46 )         0.0

Income before taxes                                 25,477           4.1          28,698           4.8
Provision for income taxes                           9,091           1.4          12,628           2.1

Income from continuing operations                   16,386           2.7          16,070           2.7
Income from discontinued operations                    183           0.0           7,058           1.2

Net income                                       $  16,569           2.7 %     $  23,128           3.9 %

Net sales increased by $25.0 million, or 4.2%, to $617.4 million for the nine months ended September 30, 2012 from net sales of $592.5 million for the nine months ended September 30, 2011. The following table sets forth the impact of the Company's acquisitions on net sales for the nine months ended September 30 (in thousands):

Total Change Due To 2012 2011 Change Acquisitions Operations Net sales $ 617,419 $ 592,466 $ 24,953 $ 27,257 $ (2,304 )

The increase in net sales from the prior year was primarily the result of the incremental sales generated by three acquisitions completed during the past eighteen months which contributed $27.3 million or 4.6% of the increase in net sales for the nine months ending September 30, 2012. Net sales from business units operating in both periods decreased 0.4% or $2.3 million, the result of a 0.8% decrease in pricing to customers offset by a 0.4% increase in volume. While volume increased compared to the similar period for 2011 for our products sold into the majority of our geographic markets, these increases were partially offset by the declines in volume sold in the West Coast residential markets and European markets. The lower selling prices were primarily the result of a slight decline in commodity costs for steel and aluminum and meeting selective competitive situations.

Despite our increase in net sales and a modest increase in volume, our gross margin decreased to 19.0% for the nine months ended September 30, 2012 compared to 20.0% for the nine months ended September 30, 2011. As we continue consolidating certain of our West Coast locations with similar products and market characteristics, we have incurred consolidation costs related to this consolidation which included a $2.2 million charge to write-down excess inventory in the second quarter of 2012. We believe completing the initiatives to restructure the West Coast locations will lead to improved gross margins in future periods. The decline in gross margin during the current period was partially offset by a more favorable alignment of material costs to customer selling prices.

Selling, general, and administrative (SG&A) expenses increased by $2.9 million, or 3.9%, to $78.4 million for the nine months ended September 30, 2012 from $75.5 million for the nine months ended September 30, 2011. The $2.9 million increase was the net result of $4.1 million of SG&A expense from acquired businesses and a $2.6 million increase in equity compensation, due to stronger performance of the Company's stock price. These increases were partially offset by $2.5 million in cost reductions due to consolidation of facilities along with a $0.9 million reduction in restructuring and acquisition related costs from the prior year. SG&A expenses as a percentage of net sales was unchanged at 12.7% for both the nine months ended September 30, 2012 and 2011.

Interest expense decreased $0.3 million to $14.0 million for the nine months ended September 30, 2012 compared to $14.3 million for the nine months ended September 30, 2011. The interest expense incurred in both periods primarily relates to our $204.0 million of Senior Subordinated 8% Notes. Net interest expense for the nine months ended September 30, 2011, was higher due to funds borrowed under our revolving credit facility to finance the acquisitions of D.S. Brown and Award Metals, partially offset by $0.2 million of interest income earned on the $8.5 million note held resulting from the sale of SCM Metal Products in 2008. This note receivable was collected in full during November 2011. No amounts were outstanding under our revolving credit facility during the nine months ended September 30, 2012.

We recognized a provision for income taxes of $9.1 million for the nine months ended September 30, 2012, an effective tax rate of 35.7%, compared with a provision for income taxes of $12.6 million, an effective rate of 44.0% for the same time period in 2011. The effective tax rate for the nine months ending September 30, 2012 was less than the rate from a year ago due to lower non-deductible expenses and discrete benefits including reversals of uncertain tax positions incurred during the current year. The effective tax rate for the same period in 2011 exceeded the U.S. federal statutory rate due to state taxes and non-deductible permanent differences, including a $0.9 million charge for the equity compensation surrendered by Gibraltar's Chief Executive Officer which was not deductible for tax purposes.

Outlook

For full year 2012, we expect revenues to increase approximately 3% primarily from incremental revenues of our most recent acquisitions. The markets we serve have been impacted by strong headwinds during 2012 which have limited our organic growth. We believe the continued recovery in the residential and non-residential construction markets will provide stronger growth opportunities during 2013.

We expect full year gross margin to approximate 19% in 2012 based on our assumption that volatility in raw material costs will level out, as well as, costs to complete our West Coast reorganization will continue to subside. For 2012, we expect SG&A expense to approximate $26 million per quarter, or 13% of full year revenues.

Our expectations for other financial measures for our continuing operations include net interest expense at a run rate of $4.7 to $4.8 million per quarter, a full year effective tax rate of 36%, and capital expenditures approximating $11 million for the year.

Over the long-term, we believe that the fundamentals of the residential and non-residential markets are positive and the aggressive actions taken to streamline and improve the efficiency of our businesses have reduced our break-even point and positioned Gibraltar to generate marked improvements in profitability when economic and market conditions return toward historical levels.

Liquidity and Capital Resources

General

Our principal capital requirements are to fund our operations, including working capital, the purchase and funding of capital improvements to our business and facilities, and to fund acquisitions. During the next twelve months, we will focus on investing in growth opportunities while also maintaining working capital efficiency and cost reduction efforts to minimize the cash invested to grow our business. During the first nine months of 2012, we invested cash in our working capital to meet the upcoming higher seasonal demand from our customers as noted below in the "Cash Flow" section of Item 2 of this Quarterly Report on Form 10-Q.

As of September 30, 2012, our liquidity of $211.1 million consisted of $71.1 million of cash and $140.0 million of availability under our revolving credit facility. We believe this liquidity together with the cash expected to be generated from operations should be sufficient to fund working capital needs and future growth. We continue to search for strategic acquisitions noting that a larger acquisition may require additional borrowings and/or the issuance of securities such as debt or our common stock.

Our Senior Credit Agreement provides the Company with liquidity and capital resources for use by our U.S. operations. Historically, our foreign operations generated cash flow from operations sufficient to invest in working capital and to fund capital improvements to their businesses and facilities. As of September 30, 2012, our foreign subsidiaries held $20.8 million of cash. We believe cash held by our foreign subsidiaries and their expected future ability to generate cash from operations provide our foreign operations with the necessary liquidity to meet their future obligations and allow the foreign business units to reinvest in their operations and could eventually be used to help grow our business internationally through transactions similar to our acquisition of Edvan.

Over the long-term, we expect that future obligations, including strategic business opportunities such as acquisitions, may be financed through a number of sources, including internally available cash resources, new debt financing, the issuance of equity securities, or any combination of the above. We evaluate potential acquisitions based upon their expected ability to enhance our existing products, operations, or capabilities, as well as provide access to new products, markets, and customers.

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

Cash Flows

The following table sets forth selected cash flow data for the nine months ended
September 30 (in thousands):



                                                            2012          2011
   Cash provided (used in) by:
   Operating activities of continuing operations          $ 26,616      $  31,210
   Investing activities of continuing operations            (9,140 )      (55,686 )
   Financing activities of continuing operations            (1,336 )       (1,261 )
   Discontinued operations                                     119         (1,402 )
   Effect of exchange rate changes                             751           (672 )

   Net increase (decrease) in cash and cash equivalents   $ 17,010      $ (27,811 )

During the nine months ended September 30, 2012, net cash provided by continuing operations totaled $26.6 million, primarily driven by income from continuing operations of $16.4 million and non-cash charges including depreciation, amortization, and stock compensation of $27.1 million, partially offset by a $16.9 million investment in working capital. Net cash provided by operating activities for the nine months ended September 30, 2011 was $31.2 million primarily driven by income from continuing operations of $16.1 million and non-cash charges including depreciation, amortization, and stock compensation of $26.5 million partially offset by a $11.4 million investment in working capital.

During the nine months ended September 30, 2012, the Company invested $16.9 million in its working capital to fund growth in sales and inventory to meet demand in our seasonally strongest periods. Cash invested in working capital and other net assets included $19.4 million and $0.6 million increases in accounts receivable and inventory, respectively, partially offset by a $6.1 million increase in accounts payable. The increase in accounts receivable was a result of increased sales volume. Inventory and accounts payable increased due to increased manufacturing activity. The increased sales volume and manufacturing activity were a direct result of the seasonally higher customer order levels that impact our business. The decrease in accrued liabilities of $5.2 million was largely due to performance-based variable compensation awards earned in 2009 and 2011 that were paid during the first quarter of 2012, partially offset by accruals for long term incentive plans earned during 2012.

Cash used in investing activities of continuing operations for the nine months ended September 30, 2012 of $9.1 million primarily consisted of $2.7 million for the Edvan acquisition and $6.9 million for capital expenditures. Cash used in investing activities during the nine months ended September 30, 2011 of $55.7 million consisted primarily of $107.6 million of acquisitions and capital expenditures of $7.8 million offset by $59.0 million of proceeds from the sale of our USP business.

Cash used in financing activities from continuing operations for the nine months ended September 30, 2012 of $1.3 million primarily consisted of $1.0 million of treasury stock repurchases related to net settlement of vested stock units and $0.4 million on long-term debt payments. Cash used in financing activities for the nine months ended September 30, 2011 of $1.3 million primarily consisted of $0.8 million of treasury stock repurchases related to net settlement upon vesting of restricted stock units and net repayments of $0.4 million on long-term debt.

Senior Credit Agreement and Senior Subordinated Notes

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

The revolving credit facility is currently committed through June 8, 2015, six months prior to the maturity date of the 8% Senior Subordinated Notes. Should the Company choose to refinance the Notes prior to June 8, 2015, the maturity date of the revolving credit facility extends to October 10, 2016. Only one financial covenant is contained within the Senior Credit Agreement, which requires the Company to maintain a fixed charge ratio (as defined in the agreement) of 1.25 to 1.00 or higher on a trailing four-quarter basis. The Company met this financial covenant as of Septembe 30, 2012 and believes it will maintain compliance with the covenant throughout 2012 and 2013.

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