ROCK Gibraltar Industries Inc

Exceeds Q2 Earnings Guidance, Achieving GAAP EPS of $0.41 and Adjusted EPS of $0.43

Maintains Guidance for Full-Year 2017

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 six-month period ended June 30, 2017. All financial metrics in this release reflect only the Company’s continuing operations unless otherwise noted.

Second-quarter Consolidated Results

Gibraltar reported the following consolidated results:

      Three Months Ended June 30, Dollars in millions, except EPS       GAAP       Adjusted 2017       2016       % Change 2017       2016       % Change Net Sales $ 248 $ 266 (7 )% $ 248 $ 266 (7 )% Net Income $ 13.2 $ 18.6 (29 )% $ 14.0 $ 16.4 (15 )% Diluted EPS $ 0.41 $ 0.58 (29 )% $ 0.43 $ 0.51 (16 )%  

The Company reported second-quarter 2017 net sales of $248 million, essentially in line with its expectations as noted in its first-quarter earnings release. The 7 percent year-over-year sales decrease primarily reflects Gibraltar’s exit of the European industrial business, U.S. bar grating product line and the European residential solar racking business in 2016. GAAP and adjusted earnings exceeded Company guidance due to the strong performance of the Residential Products business.

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

Management Comments

“Gibraltar delivered another quarter of solid results, exceeding our earnings guidance,” said President and CEO Frank Heard. “Revenues were essentially in-line with our expectations as strong sales in our Residential segment and the continued benefits of our four-pillar value creation strategy partially offset expected headwinds, including lower backlog in our Industrial & Infrastructure segment as well as higher raw material costs.

“We continued to advance our four-pillar strategy, with several notable achievements: delivering 150 basis points of operating margin improvement through our 80/20 operational efficiency initiatives, improving our competitive position and financial results by effectively integrating our recent Package Concierge and Nexus acquisitions, and advancing our innovation strategy with new product development initiatives that are underway across all of our segments.”

Second-quarter Segment Results

Residential Products

For the second quarter, the Residential Products segment reported:

      Three Months Ended June 30, Dollars in millions       GAAP       Adjusted 2017       2016       % Change 2017       2016       % Change Net Sales $ 127 $ 120 6 % $ 127 $ 120 6 % Operating Margin 17.7 % 17.3 % 40 bps 17.8 % 17.5 % 30 bps  

The 6 percent increase in second-quarter 2017 net sales in Gibraltar’s Residential Products segment reflects the continued 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.

The segment’s GAAP and adjusted operating margin reflect the benefit of increased revenues as well as operational efficiencies stemming from 80/20 initiatives. The adjusted operating margin for the second 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 second quarter, the Industrial & Infrastructure Products segment reported:

      Three Months Ended June 30, Dollars in millions       GAAP       Adjusted 2017       2016       % Change 2017       2016       % Change Net Sales $ 58 $ 81 (29 )% $ 58 $ 81 (29 )% Operating Margin 5.9 % 7.6 % (170) bps 3.5 % 8.7 % (520) bps  

As expected, second-quarter 2017 net sales in Gibraltar’s Industrial & Infrastructure Products segment were down, with 80 percent of the decline driven by the 2016 divestiture of the European industrial operations and the US bar grating product line, with the remaining decline driven by lower activity in the infrastructure marketplace. Backlog for the segment increased on a sequential basis during the second quarter. The Company expects backlog improvement to continue throughout the second half of 2017, driven, in part, by the strengthening infrastructure market.

GAAP and adjusted operating margins were affected by higher raw material costs and lower volumes in the infrastructure market. This segment’s adjusted operating margin for the second quarters of 2017 and 2016 removes the special charges for portfolio management activities and restructuring initiatives under the 80/20 program. During the quarter, this segment continued to implement 80/20 simplification initiatives, which are expected to benefit margins during the second half of 2017.

Renewable Energy & Conservation

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

      Three Months Ended June 30,

Dollars in millions

      GAAP       Adjusted 2017       2016       % Change 2017       2016       % Change Net Sales $ 63 $ 65 (3 )% $ 63 $ 65 (3 )% Operating Margin 5.6 % 15.9 % (1030) bps 8.1 % 15.9 % (780) bps  

Segment revenues were down modestly year over year due to the exit of the European solar market, and continued softness in international markets, partially offset by the Nexus acquisition. Segment backlog increased from the prior year and sequentially compared with the first quarter of 2017.

The second-quarter 2017 GAAP and adjusted operating margin decrease reflects lower volume, planned price concessions, higher material costs and certain field installation issues. This segment’s adjusted operating margin for the second quarter 2017 removes the special charges for portfolio management activities related to the divestiture of the Company’s European residential solar racking business. The Company expects better volume leverage and improved price/material cost alignment as it moves into the seasonally strongest half of the year.

Business Outlook

“Looking toward the second half of 2017, we continue to expect generally favorable market conditions for each of our segments, increased bidding activity and continued backlog growth in both our Industrial & Infrastructure and Renewable Energy & Conservation segments, as well as increased revenues from our new product development initiatives,” said Heard. “As we head into our seasonally strongest quarter, we are maintaining our full year guidance.

“For the second half of 2017 our financial priorities will be to accelerate sales through innovative products, seek value-added acquisitions in attractive end markets, and continue to advance our 80/20 initiatives,” concluded Heard.

The Company is maintaining its full-year revenue guidance in the range of $970 million and $980 million. The Company expects GAAP EPS to be between $1.37 and $1.50 per diluted share, or $1.57 to $1.70 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 flat, the Company continues to expect increasing ROIC and liquidity.

For the third quarter of 2017, the Company is expecting revenue in the range of $275 million to $280 million, and GAAP EPS to be between $0.51 and $0.58 per diluted share, or $0.58 to $0.65 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 $ 85-91   8.8-9.3 % $ 25-28 $ 44-48 $ 1.37-1.50 Restructuring Costs 10 1.0 % 4 7 0.20                     Adjusted Measures $ 95-101     9.8-10.3 %   $ 29-32   $ 51-55   $ 1.57-1.70  

Second-quarter Conference Call Details

Gibraltar has scheduled a conference call today starting at 9:00 a.m. ET to review its results for the second 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 nine-month periods ending September 30, 2017, on Friday, November 3, 2017, 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 EndedJune 30, Six Months EndedJune 30, 2017       2016 2017       2016 Net Sales $ 247,627 $ 265,738 $ 454,232 $ 503,409 Cost of sales 185,802   196,895   343,152   380,416 Gross profit 61,825 68,843 111,080 122,993 Selling, general, and administrative expense 36,895   40,267   76,471   76,656 Income from operations 24,930 28,576 34,609 46,337 Interest expense 3,550 3,666 7,126 7,357 Other expense 353   8,195   407   8,160 Income before taxes 21,027 16,715 27,076 30,820 Provision for (benefit of) income taxes 7,853   (1,897 ) 9,906   3,179 Income from continuing operations 13,174 18,612 17,170 27,641 Discontinued operations: Loss before taxes (644 ) — (644) — Benefit of income taxes (239 ) —   (239)   — Loss from discontinued operations (405 ) —   (405)   — Net income $ 12,769   $ 18,612   $ 16,765   $ 27,641 Net earnings per share – Basic: Income from continuing operations $ 0.41 $ 0.59 $ 0.54 $ 0.88 Loss from discontinued operations (0.01 ) —   (0.01 ) — Net income $ 0.40   $ 0.59   $ 0.53   $ 0.88 Weighted average shares outstanding – Basic 31,709   31,475   31,698   31,447 Net earnings per share – Diluted: Income from continuing operations $ 0.41 $ 0.58 $ 0.53 $ 0.87 Loss from discontinued operations (0.01 ) —   (0.01 ) — Net income $ 0.40   $ 0.58   $ 0.52   $ 0.87 Weighted average shares outstanding – Diluted 32,183   32,007   32,219   31,916              

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

  June 30,2017 December 31,2016 (unaudited) Assets Current assets: Cash and cash equivalents $ 182,379 $ 170,177 Accounts receivable, net 138,871 124,072 Inventories 86,065 89,612 Other current assets 8,351   7,336   Total current assets 415,666 391,197 Property, plant, and equipment, net 95,869 108,304 Goodwill 320,848 304,032 Acquired intangibles 110,325 110,790 Other assets 4,750   3,922   $ 947,458   $ 918,245   Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 88,007 $ 69,944 Accrued expenses 69,389 70,392 Billings in excess of cost 13,963 11,352 Current maturities of long-term debt 400   400   Total current liabilities 171,759 152,088 Long-term debt 209,229 209,237 Deferred income taxes 38,203 38,002 Other non-current liabilities 46,364 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; 32,155 shares and 32,085 shares issued and outstanding in 2017 and 2016 321 320 Additional paid-in capital 267,601 264,418 Retained earnings 228,767 211,748 Accumulated other comprehensive loss (5,898 ) (7,721 ) Cost of 554 and 530 common shares held in treasury in 2017 and 2016 (8,888 ) (7,885 ) Total shareholders’ equity 481,903   460,880   $ 947,458   $ 918,245          

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

  Six Months EndedJune 30, 2017       2016 Cash Flows from Operating Activities Net income $ 16,765 $ 27,641 Loss from discontinued operations (405 ) —   Income from continuing operations 17,170 27,641 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,006 11,856 Stock compensation expense 3,191 3,218 Net gain on sale of assets (39 ) (198 ) Loss on sale of business — 8,533 Exit activity (recoveries) costs, non-cash (2,737 ) 1,074 Provision for deferred income taxes — 196 Other, net 628 (449 ) Changes in operating assets and liabilities, excluding the effects of acquisitions: Accounts receivable (14,446 ) 9,145 Inventories 2,245 4,988 Other current assets and other assets (2,174 ) (4,333 ) Accounts payable 16,962 (2,427 ) Accrued expenses and other non-current liabilities (10,086 ) (9,803 ) Net cash provided by operating activities 21,720   49,441   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 12,778 162 Purchases of property, plant, and equipment (3,274 ) (4,035 ) Net proceeds from sale of business — 8,479 Other, net —   1,118   Net cash (used in) provided by investing activities (8,990 ) 3,410   Cash Flows from Financing Activities Long-term debt payments (400 ) (400 ) Payment of debt issuance costs — (54 ) Purchase of treasury stock at market prices (1,003 ) (462 ) Net proceeds from issuance of common stock 247   2,057   Net cash (used in) provided by financing activities (1,156 ) 1,141   Effect of exchange rate changes on cash 628   1,264   Net increase in cash and cash equivalents 12,202 55,256 Cash and cash equivalents at beginning of year 170,177   68,858   Cash and cash equivalents at end of period $ 182,379   $ 124,114          

GIBRALTAR INDUSTRIES, INC.

Reconciliation of Adjusted Financial Measures

(in thousands, except per share data)

(unaudited)

  Three Months EndedJune 30, 2017

AsReportedIn GAAPStatements

     

Acquisition&RestructuringCharges

     

PortfolioManagement

     

SeniorLeadershipTransitionCosts

     

AdjustedFinancialMeasures

Net Sales Residential Products $ 127,252 $ — $ — $ — $ 127,252 Industrial & Infrastructure Products 57,926 — — — 57,926 Less Inter-Segment Sales (314 ) —   —   —   (314 ) 57,612 — — — 57,612 Renewable Energy & Conservation 62,763   —   —   —   62,763   Consolidated sales 247,627 — — — 247,627   Income from operations Residential Products 22,579 81 — — 22,660 Industrial & Infrastructure Products 3,397 — (1,379 ) — 2,018 Renewable Energy & Conservation 3,492   —   1,369   252   5,113   Segments income 29,468 81 (10 ) 252 29,791 Unallocated corporate expense (4,538 ) 148   —   73   (4,317 ) Consolidated income from operations 24,930 229 (10 ) 325 25,474   Interest expense 3,550 — — — 3,550 Other expense 353   —   —   —   353   Income before income taxes 21,027 229 (10 ) 325 21,571 Provision for income taxes 7,853   86   (479 ) 124   7,584   Income from continuing operations $ 13,174   $ 143   $ 469   $ 201   $ 13,987   Income from continuing operations per share – diluted $ 0.41   $ —   $ 0.01   $ 0.01   $ 0.43     Operating margin Residential Products 17.7 % 0.1 % — % — % 17.8 % Industrial & Infrastructure Products 5.9 % — % (2.4 )% — % 3.5 % Renewable Energy & Conservation 5.6 % — % 2.2 % 0.4 % 8.1 % Segments margin 11.9 % — % — % 0.1 % 12.0 % Consolidated 10.1 % 0.1 % — % 0.1 % 10.3 %        

GIBRALTAR INDUSTRIES, INC.

Reconciliation of Adjusted Financial Measures

(in thousands, except per share data)

(unaudited)

  Three Months EndedJune 30, 2016

As ReportedIn GAAPStatements

     

RestructuringCharges

     

PortfolioManagement

     

AdjustedFinancialMeasures

Net Sales Residential Products $ 119,965 $ — $   — $   119,965 Industrial & Infrastructure Products 81,380 — — 81,380 Less Inter-Segment Sales (373 ) —   —   (373 ) 81,007 — — 81,007 Renewable Energy & Conservation 64,766   —   —  

64,766

  Consolidated sales 265,738 — — 265,738

 

Income from operations Residential Products 20,725 258 — 20,983 Industrial & Infrastructure Products 6,190 851 — 7,041 Renewable Energy & Conservation 10,296   —   —   10,296   Segments income 37,211 1,109 — 38,320 Unallocated corporate expense (8,635 ) —   —   (8,635 ) Consolidated income from operations 28,576 1,109 — 29,685   Interest expense 3,666 — — 3,666 Other expense (income) 8,195   —   (8,533 ) (338 ) Income before income taxes 16,715 1,109 8,533 26,357 (Benefit of) provision for income taxes (1,897 ) 424   11,414   9,941   Net income $ 18,612   $ 685   $   (2,881 ) $   16,416   Net earnings per share – diluted $ 0.58   $ 0.02   $   (0.09 ) $   0.51     Operating margin Residential Products 17.3 % 0.2 % — % 17.5 % Industrial & Infrastructure Products 7.6 % 1.1 % — % 8.7 % Renewable Energy & Conservation 15.9 % — % — % 15.9 % Segments margin 14.0 % 0.4 % — % 14.4 % Consolidated 10.8 % 0.4 % — % 11.2 %        

GIBRALTAR INDUSTRIES, INC.

Reconciliation of Adjusted Financial Measures

(in thousands, except per share data)

(unaudited)

  Six Months EndedJune 30, 2017

AsReported InGAAPStatements

     

Acquisition&RestructuringCharges

     

SeniorLeadershipTransitionCosts

     

PortfolioManagement

     

AdjustedFinancialMeasures

Net Sales Residential Products $ 231,803 — — — $ 231,803 Industrial & Infrastructure Products 108,644 — — — 108,644 Less Inter-Segment Sales (770 ) —   —   —   (770 ) 107,874   —   —   —   107,874   Renewable Energy & Conservation 114,555 — — — 114,555 Consolidated sales 454,232 — — — 454,232   Income from operations Residential Products 38,220 245 — — 38,465 Industrial & Infrastructure Products 3,360 — — 381 3,741 Renewable Energy & Conservation 6,832   —   252   2,419   9,503   Segments income 48,412 245 252 2,800 51,709 Unallocated corporate expense (13,803 ) 278   420   —   (13,105 ) Consolidated income from operations 34,609 523 672 2,800 38,604   Interest expense 7,126 — — — 7,126 Other expense 407   —   —   —   407   Income before income taxes 27,076 523 672 2,800 31,071 Provision for income taxes 9,906   195   252   197   10,550   Income from continuing operations $ 17,170   $ 328   $ 420   $ 2,603   $ 20,521   Income from continuing operations per share – diluted $ 0.53   $ 0.01   $ 0.02   $ 0.08   $ 0.64     Operating margin Residential Products 16.5 % 0.1 % — % — % 16.6 % Industrial & Infrastructure Products 3.1 % — % — % 0.4 % 3.5 % Renewable Energy & Conservation 6.0 % — % 0.2 % 2.1 % 8.3 % Segments margin 10.7 % 0.1 % 0.1 % 0.6 % 11.4 % Consolidated 7.6 % 0.1 % 0.1 % 0.6 % 8.5 %        

GIBRALTAR INDUSTRIES, INC.

Reconciliation of Adjusted Financial Measures

(in thousands, except per share data)

(unaudited)

  Six Months EndedJune 30, 2016

As ReportedIn GAAPStatements

     

RestructuringCharges

     

PortfolioManagement

     

AdjustedFinancialMeasures

Net Sales Residential Products $ 220,112 — — $ 220,112 Industrial & Infrastructure Products 161,397 — — 161,397 Less Inter-Segment Sales (740 ) —   —   (740 ) 160,657   —   —   160,657   Renewable Energy & Conservation 122,640 — — 122,640 Consolidated sales 503,409 — — 503,409   Income from operations Residential Products 32,956 1,276 — 34,232 Industrial & Infrastructure Products 9,516 1,531 — 11,047 Renewable Energy & Conservation 18,603   —   —   18,603   Segments income 61,075 2,807 — 63,882 Unallocated corporate expense (14,738 ) 31   —   (14,707 ) Consolidated income from operations 46,337 2,838 — 49,175   Interest expense 7,357 — — 7,357 Other expense (income) 8,160   —   (8,533 ) (373 ) Income before income taxes 30,820 2,838 8,533 42,191 Provision for income taxes 3,179   1,055   11,414   15,648   Net income $ 27,641   $ 1,783   $ (2,881 ) $ 26,543   Net earnings per share – diluted $ 0.87   $ 0.05   $ (0.09 ) $ 0.83     Operating margin Residential Products 15.0 % 0.6 % — % 15.6 % Industrial & Infrastructure Products 5.9 % 1.0 % — % 6.9 % Renewable Energy & Conservation 15.2 % — % — % 15.2 % Segments margin 12.1 % 0.6 % — % 12.7 % Consolidated 9.2 % 0.6 % — % 9.8 %  

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