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Gibraltar Reports Third-Quarter 2017 Financial Results

Exceeds Q3 Earnings Guidance, Achieving GAAP EPS of $0.64 and Adjusted EPS of $0.67;

Revises Full Year Revenue and Narrows Earnings Guidance

BUFFALO, N.Y.--(BUSINESS WIRE)-- Gibraltar Industries, Inc. (Nasdaq: ROCK), a leading manufacturer and distributor of building products for industrial, infrastructure, residential, and renewable energy and conservation markets, today reported its financial results for the three- and nine-month periods ended September 30, 2017. All financial metrics in this release reflect only the Company’s continuing operations unless otherwise noted.

Third-quarter Consolidated Results

Gibraltar reported the following consolidated results:

Three Months Ended September 30,
Dollars in millions, except EPS GAAP Adjusted
2017 2016 % Change 2017 2016 % Change
Net Sales $275 $273 1 % $275 $273 1 %
Net Income $20.6 $13.8 49 % $21.5 $17.6 22 %
Diluted EPS $0.64 $0.43 49 % $0.67 $0.55 22 %

The Company reported third-quarter 2017 net sales of $275 million, attaining the lower end of the Company’s expectations of $275 million to $280 million as noted in its second-quarter earnings release. The 1 percent year-over-year sales increase was driven primarily by sales in the Residential and Renewable Energy & Conservation segments and the effect of its recent acquisitions, which offset the impact of the exit of the U.S. bar grating product line and its European residential solar racking business at the end of 2016, which provided $17 million in sales in the third quarter of 2016, as well as lower infrastructure activity. GAAP and adjusted earnings exceeded Company guidance due to the strong performance of the Residential Products business, improving margins in the Renewable Energy & Conservation space, and the benefit of lower corporate costs related to compensation plans.

The adjusted amounts for the third-quarter 2017 and 2016 remove special items from both periods, as described in the appended reconciliation of adjusted financial measures.

Management Comments

“We delivered another quarter of solid results as we continue to build positive momentum at Gibraltar,” said President and CEO Frank Heard. “We exceeded our GAAP and adjusted earnings guidance, reporting a 49% increase in GAAP EPS and a 22% increase in adjusted EPS. Earnings growth outpaced the increase in sales, which were in line with guidance, as a result of the success of our value creation strategy.

“During the quarter, we made excellent progress on our four-pillar strategy, as we achieved a number of notable accomplishments,” added Heard. “We delivered 190 basis points of margin improvement from 80/20 simplification projects, our innovation efforts are resulting in new product development successes across Gibraltar’s businesses, and the integration of the Nexus and Package Concierge acquisitions are generating improved financial results and enhancing Gibraltar’s long-term competitive position.”

Third-quarter Segment Results

Residential Products

For the third quarter, the Residential Products segment reported:

Three Months Ended September 30,
Dollars in millions GAAP Adjusted
2017 2016 % Change 2017 2016 % Change
Net Sales $130 $118 10% $130 $118 10%
Operating Margin 18.4% 16.5% 190 bps 19.1% 17.2% 190 bps

The 10 percent increase in third-quarter 2017 net sales in Gibraltar’s Residential Products segment reflects improvement in the repair and remodel and new housing construction markets, growing demand for the Company’s commercial package solutions, and the contribution of the Package Concierge acquisition.

Strong demand for electronic package lockers, as well as the benefit of 80/20 initiatives contributed to the segment’s GAAP and adjusted operating margin improvement. The adjusted operating margin for the third quarter of 2017 and 2016 removes the special charges for restructuring initiatives under the 80/20 program from both periods.

Industrial & Infrastructure Products

For the third quarter, the Industrial & Infrastructure Products segment reported:

Three Months Ended September 30,
Dollars in millions GAAP Adjusted
2017 2016 % Change 2017 2016 % Change
Net Sales $57 $73 (22)% $57 $73 (22)%
Operating Margin 4.5% 2.6% 190 bps 5.1% 7.0% (190) bps

Third-quarter 2017 revenues in Gibraltar’s Industrial & Infrastructure Products segment were down, with 94 percent of the decline driven by the 2016 divestiture of the U.S. bar grating product line. The remaining decline reflects lower activity in the infrastructure marketplace. Backlog and bookings for the infrastructure business increased year over year and the Company expects continued backlog improvement for the remainder of 2017 as the infrastructure market recovers. The Company also expects new products in the industrial business to continue to gain traction during the fourth quarter of 2017.

GAAP and adjusted operating margins for the segment were affected by lower volumes and continue to reflect less favorable alignment of material costs to customer selling prices. GAAP operating margin in 2016 reflects restructuring charges. This segment’s adjusted operating margin for the third quarter of 2017 and 2016 removes the special charges for portfolio management activities and restructuring initiatives under the 80/20 program.

Renewable Energy & Conservation

For the third quarter, the Renewable Energy & Conservation segment reported:

Three Months Ended September 30,
Dollars in millions GAAP Adjusted
2017 2016 % Change 2017 2016 % Change
Net Sales $88 $82 7% $88 $82 7%
Operating Margin 13.1% 20.0% (690) bps 13.6% 20.0% (640) bps

Renewable Energy & Conservation segment revenues were up 7 percent year over year due to the addition of the recently acquired Nexus business and an increase in the Company’s domestic markets, which offset a decline in international revenues and the exit of the European solar market. Segment backlog increased both sequentially and year over year on a proforma basis.

While improving significantly from the second-quarter 2017 and approaching its target margin profile, the third-quarter 2017 GAAP and adjusted operating margin still reflects a less favorable alignment of material costs to customer selling prices. This segment’s adjusted operating margin for the third quarter of 2017 removes the special charges for restructuring initiatives under the Company’s 80/20 program and portfolio management activities.

Business Outlook

“Looking ahead, we continue to expect generally favorable market conditions for each of our segments, and increased bidding activity and continued backlog growth in our Industrial & Infrastructure and Renewable Energy & Conservation segments. While we see reason for some caution in certain of our end markets, we are optimistic about the final quarter of the year and are narrowing full-year earnings guidance within our previous guidance range.

“For the fourth quarter of 2017 our priorities will be to accelerate new product development initiatives, seek value-added acquisitions in attractive end markets, and advance 80/20 projects. We expect that the execution of our five-year strategy and the continued success of these initiatives will build sustainable long-term value for our shareholders,” concluded Heard.

The Company is adjusting its full-year revenue guidance in the range of $960 million and $965 million. The Company is narrowing its full-year earnings guidance and expects GAAP EPS to be between $1.40 and $1.47 per diluted share, or $1.60 to $1.67 on an adjusted basis. In 2016, GAAP EPS was $1.05, or $1.67 on an adjusted basis. While year-over-year adjusted earnings are projected to be essentially flat, the Company continues to expect increasing return on invested capital and liquidity.

For the fourth quarter of 2017, the Company is expecting revenue in the range of $231 million to $236 million, and GAAP EPS to be between $0.23 and $0.30 per diluted share, or $0.29 to $0.36 per diluted share on an adjusted basis.

FY 2017 Guidance

Gibraltar Industries
Dollars in millions, except EPS Operating Income Net Diluted

Earnings

Income Margin Taxes Income Per Share
GAAP Measures $ 84-88 8.8-9.1 % $ 24-25 $ 46-48 $ 1.40-1.47
Restructuring Costs 10 1.0 % 4 6 0.20
Adjusted Measures $ 94-98 9.8-10.1 % $ 28-29 $ 52-54 $ 1.60-1.67

Third-quarter Conference Call Details

Gibraltar has scheduled a conference call today starting at 9:00 a.m. ET to review its results for the third quarter of 2017. Interested parties may access the call by dialing (877) 407-5790 or (201) 689-8328. The presentation slides that will be discussed in the conference call are expected to be available this morning, prior to the start of the call. The slides may be downloaded from the Gibraltar website: www.gibraltar1.com. A webcast replay of the conference call and a copy of the transcript will be available on the website following the call.

About Gibraltar

Gibraltar Industries is a leading manufacturer and distributor of building products for industrial, infrastructure, residential, and renewable energy and conservation markets. With a four-pillar strategy focused on operational improvement, product innovation, acquisitions and portfolio management, Gibraltar’s mission is to drive best-in-class performance. Gibraltar serves customers primarily throughout North America and to a lesser extent Asia. Comprehensive information about Gibraltar can be found on its website at www.gibraltar1.com.

Safe Harbor Statement

Information contained in this news release, other than historical information, contains forward-looking statements and is 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 and performance 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.

Non-GAAP Financial Data

To supplement Gibraltar’s consolidated financial statements presented on a GAAP basis, Gibraltar also presented certain adjusted financial data in this news release. Adjusted financial data excluded special charges consisting of gains/losses on sales of assets, restructuring primarily associated with the 80/20 simplification initiative, acquisition-related items, and other reclassifications. These adjustments are shown in the non-GAAP reconciliation of adjusted financial measures excluding special charges provided in the supplemental financial schedules that accompany this news release. The Company believes that the presentation of results excluding special charges provides meaningful supplemental data to investors, as well as management, that are indicative of the Company’s core operating results and facilitates comparison of operating results across reporting periods as well as comparison with other companies. Special charges are excluded since they may not be considered directly related to the Company’s ongoing business operations. These adjusted measures should not be viewed as a substitute for the Company’s GAAP results, and may be different than adjusted measures used by other companies.

Next Earnings Announcement

Gibraltar expects to release its financial results for the three-month and full-year periods ending December 31, 2017, on Thursday, February 22, 2018, and hold its earnings conference call later that morning, starting at 9:00 a.m. ET.

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2017 2016 2017 2016
Net Sales $ 274,574 $ 272,734 $ 728,806 $ 776,143
Cost of sales 205,839 204,847 548,991 585,263
Gross profit 68,735 67,887 179,815 190,880
Selling, general, and administrative expense 33,042 41,365 109,513 118,021
Income from operations 35,693 26,522 70,302 72,859
Interest expense 3,486 3,625 10,612 10,982
Other expense 404 159 811 8,319
Income before taxes 31,803 22,738 58,879 53,558
Provision for income taxes 11,184 8,952 21,090 12,131
Income from continuing operations 20,619 13,786 37,789 41,427
Discontinued operations:
Loss before taxes (644 )
Benefit of income taxes (239 )
Loss from discontinued operations (405 )
Net income $ 20,619 $ 13,786 $ 37,384 $ 41,427
Net earnings per share – Basic:
Income from continuing operations $ 0.65 $ 0.44 $ 1.19 $ 1.32
Loss from discontinued operations (0.01 )
Net income $ 0.65 $ 0.44 $ 1.18 $ 1.32
Weighted average shares outstanding – Basic 31,703 31,579 31,700 31,493
Net earnings per share – Diluted:
Income from continuing operations $ 0.64 $ 0.43 $ 1.17 $ 1.29
Loss from discontinued operations (0.01 )
Net income $ 0.64 $ 0.43 $ 1.16 $ 1.29
Weighted average shares outstanding – Diluted 32,210 32,176 32,216 32,005
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
September 30,
2017
December 31,
2016
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 208,032 $ 170,177
Accounts receivable, net 166,718 124,072
Inventories 85,156 89,612
Other current assets 8,195 7,336
Total current assets 468,101 391,197
Property, plant, and equipment, net 94,488 108,304
Goodwill 321,093 304,032
Acquired intangibles 107,943 110,790
Other assets 4,672 3,922
$ 996,297 $ 918,245
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 96,181 $ 69,944
Accrued expenses 83,264 70,392
Billings in excess of cost 18,234 11,352
Current maturities of long-term debt 400 400
Total current liabilities 198,079 152,088
Long-term debt 209,425 209,237
Deferred income taxes 38,162 38,002
Other non-current liabilities 45,200 58,038
Shareholders’ equity:
Preferred stock, $0.01 par value; authorized 10,000 shares; none outstanding
Common stock, $0.01 par value; authorized 50,000 shares; 32,275 shares and 32,085 shares issued and outstanding in 2017 and 2016 322 320
Additional paid-in capital 269,880 264,418
Retained earnings 249,386 211,748
Accumulated other comprehensive loss (4,290 ) (7,721 )
Cost of 588 and 530 common shares held in treasury in 2017 and 2016 (9,867 ) (7,885 )
Total shareholders’ equity 505,431 460,880
$ 996,297 $ 918,245
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
September 30,
2017 2016
Cash Flows from Operating Activities
Net income $ 37,384 $ 41,427
Loss from discontinued operations (405 )
Income from continuing operations 37,789 41,427
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 16,427 17,551
Stock compensation expense 5,069 4,666
Net gain on sale of assets (139 ) (225 )
Loss on sale of business 8,763
Exit activity (recoveries) costs, non-cash (1,931 ) 3,876

(Benefit of) provision for deferred income taxes

(136 ) 355
Other, net 1,411 735
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable (42,310 ) 3,796
Inventories 2,016 9,738
Other current assets and other assets (2,002 ) (1,901 )
Accounts payable 25,134 2,367
Accrued expenses and other non-current liabilities 7,503 11,038
Net cash provided by operating activities 48,831 102,186
Cash Flows from Investing Activities
Cash paid for acquisitions, net of cash acquired (18,494 ) (2,314 )
Net proceeds from sale of property and equipment 12,935 249
Purchases of property, plant, and equipment (5,152 ) (7,600 )
Net proceeds from sale of business 8,250
Other, net 1,118
Net cash used in investing activities (10,711 ) (297 )
Cash Flows from Financing Activities
Long-term debt payments (400 ) (400 )
Payment of debt issuance costs (54 )
Purchase of treasury stock at market prices (1,982 ) (1,178 )
Net proceeds from issuance of common stock 649 2,892
Net cash (used in) provided by financing activities (1,733 ) 1,260
Effect of exchange rate changes on cash 1,468 1,055
Net increase in cash and cash equivalents 37,855 104,204
Cash and cash equivalents at beginning of year 170,177 68,858
Cash and cash equivalents at end of period $ 208,032 $ 173,062
GIBRALTAR INDUSTRIES, INC.
Reconciliation of Adjusted Financial Measures
(in thousands, except per share data)
(unaudited)
Three Months Ended
September 30, 2017

As
Reported
In GAAP
Statements

Acquisition
&
Restructuring
Charges

Portfolio
Management

Senior
Leadership
Transition
Costs

Adjusted
Financial
Measures

Net Sales
Residential Products $ 129,501 $ $ $ $ 129,501
Industrial & Infrastructure Products 57,162 57,162
Less Inter-Segment Sales (224 ) (224 )
56,938 56,938
Renewable Energy & Conservation 88,135 88,135
Consolidated sales 274,574 274,574
Income from operations
Residential Products 23,764 1,008 24,772
Industrial & Infrastructure Products 2,554 (15 ) 101 260 2,900
Renewable Energy & Conservation 11,549 534 (77 ) 12,006
Segments income 37,867 1,527 24 260 39,678
Unallocated corporate expense (2,174 ) 47 (762 ) (2,889 )
Consolidated income from operations 35,693 1,574 24 (502 ) 36,789
Interest expense 3,486 3,486
Other expense 404 404
Income before income taxes 31,803 1,574 24 (502 ) 32,899
Provision for income taxes 11,184 618 (267 ) (183 ) 11,352
Income from continuing operations $ 20,619 $ 956 $ 291 $ (319 ) $ 21,547
Income from continuing operations per share – diluted $ 0.64 $ 0.03 $ 0.01 $ (0.01 ) $ 0.67
Operating margin
Residential Products 18.4 % 0.8 % % % 19.1 %
Industrial & Infrastructure Products 4.5 % % 0.2 % 0.5 % 5.1 %
Renewable Energy & Conservation 13.1 % 0.6 % (0.1 )% % 13.6 %
Segments margin 13.8 % 0.6 % % 0.1 % 14.5 %
Consolidated 13.0 % 0.6 % % (0.2 )% 13.4 %
GIBRALTAR INDUSTRIES, INC.
Reconciliation of Adjusted Financial Measures
(in thousands, except per share data)
(unaudited)
Three Months Ended
September 30, 2016

As Reported
In GAAP
Statements

Restructuring
Charges

Senior
Leadership
Transition
Costs

Portfolio
Management

Adjusted
Financial
Measures

Net Sales
Residential Products $ 117,957 $ $ — $ $ 117,957
Industrial & Infrastructure Products 73,193 73,193
Less Inter-Segment Sales (424 ) (424 )
72,769 72,769
Renewable Energy & Conservation 82,008 82,008
Consolidated sales 272,734 272,734
Income from operations
Residential Products 19,407 580 252 20,239
Industrial & Infrastructure Products 1,913 3,185 5,098
Renewable Energy & Conservation 16,366 16,366
Segments income 37,686 3,765 252 41,703
Unallocated corporate expense (11,164 ) 1,454 (9,710 )
Consolidated income from operations 26,522 3,765 1,706 31,993
Interest expense 3,625 3,625
Other expense (income) 159 (230 ) (71 )
Income before income taxes 22,738 3,765 1,706 230 28,439
Provision for income taxes 8,952 1,221 588 86 10,847
Income from continuing operations $ 13,786 $ 2,544 $ 1,118 $ 144 $ 17,592
Income from continuing operations per share – diluted $ 0.43 $ 0.08 $ 0.04 $ $ 0.55
Operating margin
Residential Products 16.5 % 0.5 % 0.2 % % 17.2 %
Industrial & Infrastructure Products 2.6 % 4.4 % % % 7.0 %
Renewable Energy & Conservation 20.0 % % % % 20.0 %
Segments margin 13.8 % 1.4 % 0.1 % % 15.3 %
Consolidated 9.7 % 1.4 % 0.6 % % 11.7 %
GIBRALTAR INDUSTRIES, INC.
Reconciliation of Adjusted Financial Measures
(in thousands, except per share data)
(unaudited)
Nine Months Ended
September 30, 2017

As
Reported In
GAAP
Statements

Acquisition
&
Restructuring
Charges

Senior
Leadership
Transition
Costs

Portfolio
Management

Adjusted
Financial
Measures

Net Sales
Residential Products $ 361,304 $ — $ — $ — $ 361,304
Industrial & Infrastructure Products 165,806 165,806
Less Inter-Segment Sales (994 ) (994 )
164,812 164,812
Renewable Energy & Conservation 202,690 202,690
Consolidated sales 728,806 728,806
Income from operations
Residential Products 61,984 1,253 63,237
Industrial & Infrastructure Products 5,914 (15 ) 260 482 6,641
Renewable Energy & Conservation 18,381 534 252 2,342 21,509
Segments income 86,279 1,772 512 2,824 91,387
Unallocated corporate expense (15,977 ) 325 (342 ) (15,994 )
Consolidated income from operations 70,302 2,097 170 2,824 75,393
Interest expense 10,612 10,612
Other expense 811 811
Income before income taxes 58,879 2,097 170 2,824 63,970
Provision for income taxes 21,090 813 69 (70 ) 21,902
Income from continuing operations $ 37,789 $ 1,284 $ 101 $ 2,894 $ 42,068
Income from continuing operations per share – diluted $ 1.17 $ 0.04 $ $ 0.10 $ 1.31
Operating margin
Residential Products 17.2 % 0.3 % % % 17.5 %
Industrial & Infrastructure Products 3.6 % % 0.2 % 0.3 % 4.0 %
Renewable Energy & Conservation 9.1 % 0.3 % 0.1 % 1.2 % 10.6 %
Segments margin 11.8 % 0.2 % 0.1 % 0.4 % 12.5 %
Consolidated 9.6 % 0.2 % % 0.4 % 10.3 %
GIBRALTAR INDUSTRIES, INC.
Reconciliation of Adjusted Financial Measures
(in thousands, except per share data)
(unaudited)
Nine Months Ended
September 30, 2016

As Reported
In GAAP
Statements

Restructuring
Charges

Senior
Leadership
Transition
Costs

Portfolio
Management

Adjusted
Financial
Measures

Net Sales
Residential Products $ 338,069 $ — $ — $ — $ 338,069
Industrial & Infrastructure Products 234,590 234,590
Less Inter-Segment Sales (1,164 ) (1,164 )
233,426 233,426
Renewable Energy & Conservation 204,648 204,648
Consolidated sales 776,143 776,143
Income from operations
Residential Products 52,363 1,856 252 54,471
Industrial & Infrastructure Products 11,429 4,716 16,145
Renewable Energy & Conservation 34,969 34,969
Segments income 98,761 6,572 252 105,585
Unallocated corporate expense (25,902 ) 31 1,454 (24,417 )
Consolidated income from operations 72,859 6,603 1,706 81,168
Interest expense 10,982 10,982
Other expense (income) 8,319 (8,763 ) (444 )
Income before income taxes 53,558 6,603 1,706 8,763 70,630
Provision for income taxes 12,131 2,276 588 11,500 26,495
Income from continuing operations $ 41,427 $ 4,327 $ 1,118 $ (2,737 ) $ 44,135
Income from continuing operations per share – diluted $ 1.29 $ 0.14 $ 0.04 $ (0.09 ) $ 1.38
Operating margin
Residential Products 15.5 % 0.5 % 0.1 % % 16.1 %
Industrial & Infrastructure Products 4.9 % 2.0 % % % 6.9 %
Renewable Energy & Conservation 17.1 % % % % 17.1 %
Segments margin 12.7 % 0.8 % % % 13.6 %
Consolidated 9.4 % 0.9 % 0.2 % % 10.5 %

View source version on businesswire.com: http://www.businesswire.com/news/home/20171103005334/en/

Gibraltar Industries, Inc.
Timothy Murphy, 716-826-6500 ext. 3277
Chief Financial Officer
tfmurphy@gibraltar1.com

Source: Gibraltar Industries, Inc.

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