ROCK Gibraltar Industries Inc

Reports Revenues of $266.0 million, GAAP EPS of $0.70 and Adjusted EPS of $0.71

Revenues up 7% YOY; GAAP EPS up 71% YOY; Adjusted EPS up 65% YOY

Maintains Guidance for Full-Year 2018

Gibraltar Industries, Inc. (Nasdaq: ROCK), a leading manufacturer and distributor of building products for the residential, industrial, infrastructure, and renewable energy and conservation markets, today reported its financial results for the three- and six-month periods ended June 30, 2018. 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

2018

   

2017

   

% Change

   

2018

   

2017

   

% Change

Net Sales $266.0 $247.6 7.4% $266.0 $247.6 7.4% Net Income $22.8 $13.2 72.7% $23.1 $14.0 65.0% Diluted EPS $0. 70 $0.41 70.7% $0.71 $0.43 65.1%  

The Company reported second-quarter 2018 net sales of $266.0 million at the higher end of its expectations outlined in its first-quarter earnings release. The 7 percent year-over-year increase was driven by higher sales across all business segments.

GAAP and adjusted earnings exceeded the Company’s guidance due to improving performance in the Renewable Energy & Conservation and Industrial & Infrastructure businesses, the success of 80/20 simplification initiatives, a greater mix of higher-margin innovative products, better alignment of selling prices to material costs and a tax benefit related to performance share vesting. The adjusted amounts for the second quarter of 2018 and 2017 remove special items from both periods, as described in the appended reconciliation of adjusted financial measures.

Management Comments

“We delivered a strong second quarter as we achieved revenues at the high end of our guidance range and exceeded our earnings guidance,” said President and CEO Frank Heard. “Revenues benefited from strong domestic demand in the Renewable Energy & Conservation and Industrial & Infrastructure businesses, and from sales of new innovative products across our segments. On the bottom line, a greater mix of higher-margin innovative products, the impact of pricing actions, 80/20 simplification initiatives, and a tax benefit related to performance-based compensation resulted in a 71 percent year-over-year increase in GAAP EPS and a 65 percent increase in adjusted EPS.

“Four years into our transformation, we are now firmly in growth mode, where much of our work is centered on our 'Innovation' strategic pillar. While we are benefiting from ongoing operational excellence efforts, we are now squarely focused on driving sustainable organic growth through new product development. We have already made good progress, as innovative products advanced to 9 percent of revenues during the quarter, from 7 percent in 2017 and 4 percent in 2014.”

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

2018

   

2017

   

% Change

2018

   

2017

   

% Change

Net Sales $131.1 $127.3 3.0% $131.1 $127.3 3.0% Operating Margin 18.5% 17.7% 80 bps 18.5% 17.8% 70 bps  

Second-quarter 2018 revenues in Gibraltar’s Residential Products segment were up 3 percent versus 2017 primarily due to pricing actions related to raw material cost increases.

Product mix and improved raw material cost recovery through pricing actions accounted for the increase in adjusted operating income. The adjusted operating margin for the second quarter of 2018 and 2017 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

2018

   

2017

   

% Change

2018

   

2017

   

% Change

Net Sales $61.2 $57.6 6.3% $61.2 $57.6 6.3% Operating Margin 10.8% 5.9% 490 bps 10.8% 3.5% 730 bps  

Second-quarter 2018 revenues in Gibraltar’s Industrial & Infrastructure Products segment were up 6 percent versus 2017, driven primarily by contributions from new innovative industrial products and pricing actions related to raw material cost increases. The Company expects continued demand for innovative products to enhance this segment’s profitability for the remainder of the year.

GAAP and adjusted operating margin improvement for the segment reflects operational efficiencies resulting from the Company’s 80/20 initiatives, higher demand for innovative products, and timing of pricing actions relative to material cost increases. This segment’s adjusted operating margin for the second quarter of 2018 and 2017 removes the special charges for restructuring initiatives under the 80/20 program and portfolio management activities.

Renewable Energy & Conservation

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

    Three Months Ended June 30, Dollars in millions     GAAP     Adjusted

2018

   

2017

   

% Change

2018

   

2017

   

% Change

Net Sales $73.7 $62.8 17.4% $73.7 $62.8 17.4% Operating Margin 13.0% 5.6% 740 bps 13.0% 8.1% 490 bps  

Renewable Energy & Conservation segment revenues were up 17 percent year over year due to strong demand in both Gibraltar’s domestic renewable energy and conservation markets and continued traction of innovative products.

The second-quarter 2018 GAAP and adjusted operating margin reflects higher-margin product mix and 80/20 operational improvements. This segment’s adjusted operating margin for the second quarter of 2018 and 2017 removes the special charges for restructuring initiatives, senior leadership transition costs and portfolio management activities.

Business Outlook

“We are optimistic about the second half of the year as we expect our innovation projects to continue to gain traction across all of our segments,” said Heard. “At the same time, we are cautious about the domestic and global volatility and competitive pressures related to the impact of tariffs. In addition, we expect higher development costs as we execute on our new product initiatives. Our goals for 2018 continue to be to drive sustainable organic growth through the acceleration of new product development initiatives, implement 80/20 simplification projects, and seek value-added acquisitions in attractive end markets.”

Gibraltar is maintaining its guidance for revenues and earnings for full-year 2018. Gibraltar expects 2018 consolidated revenues to exceed $1 billion, considering modest growth across the Company’s end markets and continued traction from innovative products. GAAP EPS for the full year 2018 are expected to be in the range of $1.75 to $1.87, or $1.96 to $2.08 on an adjusted basis, compared with $1.95 and $1.71, respectively, in 2017.

For the third quarter of 2018, the Company is expecting revenue in the range of $285 million to $295 million as a result of continued traction from innovative products. GAAP EPS for the third quarter 2018 are expected to be between $0.54 and $0.61, or $0.65 to $0.72 on an adjusted basis.

             

FY 2018 Guidance

Gibraltar Industries Dollars in millions, except EPS Operating

IncomeTaxes

 

 

NetIncome

 

DilutedEarningsPer Share

Income     Margin   GAAP Measures $ 93-99     9.2-9.6 % $ 22-23 $ 56-60 $ 1.75-1.87 Restructuring Costs 10 1%   3 7 0.21             Adjusted Measures $ 103-109 10.2-10.6% $ 25-26 $ 63-67 $ 1.96-2.08  

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 2018. 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 the residential, industrial, infrastructure, and renewable energy and conservation markets. With a four-pillar strategy focused on operational improvement, product innovation, portfolio management and acquisitions, 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 macroeconomic factors including government monetary and trade policies, such as tariffs and expiration of tax credits along with currency fluctuations and general political conditions. Other risks and uncertainties that arise from time to time are described in Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K. 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.

Adjusted Financial Measures

To supplement Gibraltar’s consolidated financial statements presented on a GAAP basis, Gibraltar also presented certain adjusted financial measures in this news release. Adjusted financial measures exclude special charges consisting of restructuring costs primarily associated with the 80/20 simplification initiative and portfolio management actions, acquisition-related items, and other reclassifications. These adjustments are shown in the 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- and nine-month period ending September 30, 2018, on Thursday, November 1, 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 EndedJune 30,

Six Months EndedJune 30,

  2018     2017 2018     2017 Net Sales $ 266,036 $ 247,627 $ 481,373 $ 454,232 Cost of sales 195,533   185,802   362,552   343,152   Gross profit 70,503 61,825 118,821 111,080 Selling, general, and administrative expense 38,229   36,895   72,704   76,471   Income from operations 32,274 24,930 46,117 34,609 Interest expense 3,130 3,550 6,399 7,126 Other expense (income) 13   353   (572 ) 407   Income before taxes 29,131 21,027 40,290 27,076 Provision for income taxes 6,294   7,853   9,101   9,906   Income from continuing operations 22,837 13,174 31,189 17,170 Discontinued operations: Loss before taxes — (644 ) — (644 ) Benefit of income taxes —   (239 ) —   (239 ) Loss from discontinued operations —   (405 ) —   (405 ) Net income $ 22,837   $ 12,769   $ 31,189   $ 16,765   Net earnings per share – Basic: Income from continuing operations $ 0.72 $ 0.41 $ 0.98 $ 0.54 Loss from discontinued operations —   (0.01 ) —   (0.01 ) Net income $ 0.72   $ 0.40   $ 0.98   $ 0.53  

Weighted average shares outstanding – Basic

31,862   31,709   31,824   31,698  

Net earnings per share – Diluted:

Income from continuing operations $ 0.70 $ 0.41 $ 0.96 $ 0.53 Loss from discontinued operations —   (0.01 ) —   (0.01 ) Net income $ 0.70   $ 0.40   $ 0.96   $ 0.52  

Weighted average shares outstanding – Diluted

32,553   32,183   32,498   32,219    

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

 

       

June 30,2018

December 31,2017 (unaudited) Assets Current assets: Cash and cash equivalents $ 210,743 $ 222,280 Accounts receivable, net 171,642 145,385 Inventories 95,694 86,372 Other current assets 11,594   8,727   Total current assets 489,673 462,764 Property, plant, and equipment, net 93,221 97,098 Goodwill 320,875 321,074 Acquired intangibles 101,554 105,768 Other assets 4,597   4,681   $ 1,009,920   $ 991,385   Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 88,547 $ 82,387 Accrued expenses 65,174 75,467 Billings in excess of cost 15,527 12,779 Current maturities of long-term debt 400   400   Total current liabilities 169,648 171,033 Long-term debt 209,613 209,621 Deferred income taxes 31,196 31,237 Other non-current liabilities 38,567 47,775 Shareholders’ equity: Preferred stock, $0.01 par value; authorized 10,000 shares; none outstanding — — Common stock, $0.01 par value; authorized 50,000 shares; 32,755 shares and 32,332 shares issued and outstanding in 2018 and 2017 327 323 Additional paid-in capital 277,307 271,957 Retained earnings 306,375 274,562 Accumulated other comprehensive loss (6,340 ) (4,366 ) Cost of 767 and 615 common shares held in treasury in 2018 and 2017 (16,773 ) (10,757 ) Total shareholders’ equity 560,896   531,719   $ 1,009,920   $ 991,385      

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

 

Six Months EndedJune 30,   2018     2017 Cash Flows from Operating Activities Net income $ 31,189 $ 16,765 Loss from discontinued operations —   (405 ) Income from continuing operations 31,189 17,170 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 10,345 11,006 Stock compensation expense 4,828 3,191 Net gain on sale of assets (52 ) (39 ) Exit activity recoveries, non-cash (662 ) (2,737 ) Other, net 709 628 Changes in operating assets and liabilities, excluding the effects of acquisitions: Accounts receivable (22,048 ) (14,446 ) Inventories (14,985 ) 2,245 Other current assets and other assets (2,840 ) (2,174 ) Accounts payable 6,064 16,962 Accrued expenses and other non-current liabilities (16,351 ) (10,086 ) Net cash (used in) provided by operating activities (3,803 ) 21,720   Cash Flows from Investing Activities Cash paid for acquisitions, net of cash acquired — (18,494 ) Net proceeds from sale of property and equipment 2,929 12,778 Purchases of property, plant, and equipment (3,704 ) (3,274 ) Net cash used in investing activities (775 ) (8,990 ) Cash Flows from Financing Activities Long-term debt payments (400 ) (400 ) Purchase of treasury stock at market prices (6,016 ) (1,003 ) Net proceeds from issuance of common stock 526   247   Net cash used in financing activities (5,890 ) (1,156 ) Effect of exchange rate changes on cash (1,069 ) 628   Net (decrease) increase in cash and cash equivalents (11,537 ) 12,202 Cash and cash equivalents at beginning of year 222,280   170,177   Cash and cash equivalents at end of period $ 210,743   $ 182,379    

GIBRALTAR INDUSTRIES, INC.Reconciliation of Adjusted Financial Measures (in thousands, except per share data)(unaudited)

 

   

Three Months EndedJune 30, 2018

AsReportedIn GAAPStatements

   

RestructuringCharges

   

SeniorLeadershipTransitionCosts

   

AdjustedFinancialMeasures

Net Sales Residential Products $ 131,128 $ — $ — $ 131,128 Industrial & Infrastructure Products 61,561 — — 61,561 Less Inter-Segment Sales (368 ) —   —   (368 ) 61,193 — — 61,193 Renewable Energy & Conservation 73,715   —   —   73,715   Consolidated sales 266,036 — — 266,036   Income from operations Residential Products 24,196 (29 ) — 24,167 Industrial & Infrastructure Products 6,604 (28 ) — 6,576 Renewable Energy & Conservation 9,556   (3 ) —   9,553   Segments income 40,356 (60 ) — 40,296 Unallocated corporate expense (8,082 ) 223   153   (7,706 ) Consolidated income from operations 32,274 163 153 32,590   Interest expense 3,130 — — 3,130 Other expense 13   —   —   13   Income before income taxes 29,131 163 153 29,447 Provision for income taxes 6,294   40   43   6,377   Income from continuing operations $ 22,837   $ 123   $ 110   $ 23,070   Income from continuing operations per share - diluted $ 0.70   $ 0.01   $ —   $ 0.71     Operating margin Residential Products 18.5 % — % — % 18.5 % Industrial & Infrastructure Products 10.8 % — % — % 10.8 % Renewable Energy & Conservation 13.0 % — % — % 13.0 % Segments Margin 15.2 % — % — % 15.2 % Consolidated 12.1 % 0.1 % 0.1 % 12.3 %  

GIBRALTAR INDUSTRIES, INC.

Reconciliation of Adjusted Financial Measures(in thousands, except per share data)(unaudited)

 

    Three Months EndedJune 30, 2017

As ReportedIn GAAPStatements

   

Acquisition&RestructuringCharges

   

SeniorLeadershipTransitionCosts

   

PortfolioManagement

   

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   —   252   1,369   5,113   Segments income 29,468 81 252 (10 ) 29,791 Unallocated corporate expense (4,538 ) 148   73   —   (4,317 ) Consolidated income from operations 24,930 229 325 (10 ) 25,474   Interest expense 3,550 — — — 3,550 Other expense 353   —   —   —   353   Income before income taxes 21,027 229 325 (10 ) 21,571 Provision for income taxes 7,853   86   124   (479 ) 7,584   Income from continuing operations $ 13,174   $ 143   $ 201   $ 469   $ 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 % — % 0.4 % 2.2 % 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)

 

    Six Months EndedJune 30, 2018

As ReportedIn GAAPStatements

   

RestructuringCharges

   

SeniorLeadershipTransitionCosts

   

TaxReform

   

AdjustedFinancialMeasures

Net Sales Residential Products $ 235,076 $ — $ — $ — $ 235,076 Industrial & Infrastructure Products 116,185 — — — 116,185 Less Inter-Segment Sales (589 ) —   —   —   (589 ) 115,596 — — — 115,596 Renewable Energy & Conservation 130,701   —   —   —   130,701   Consolidated sales 481,373 — — — 481,373   Income from operations Residential Products 37,434 (195 ) — — 37,239 Industrial & Infrastructure Products 9,206 (513 ) — — 8,693 Renewable Energy & Conservation 13,618   133   178   —   13,929   Segments income 60,258 (575 ) 178 — 59,861 Unallocated corporate expense (14,141 ) 267   458   —   (13,416 ) Consolidated income from operations 46,117 (308 ) 636 — 46,445   Interest expense 6,399 — — — 6,399 Other income (572 ) —   —   —   (572 ) Income before income taxes 40,290 (308 ) 636 — 40,618 Provision for income taxes 9,101   (106 ) 173   68   9,236   Income from continuing operations $ 31,189   $ (202 ) $ 463   $ (68 ) $ 31,382   Income from continuing operations per share – diluted $ 0.96   $ (0.01 ) $ 0.02   $ —   $ 0.97     Operating margin Residential Products 15.9 % (0.1 )% — % — % 15.8 % Industrial & Infrastructure Products 8.0 % (0.4 )% — % — % 7.5 % Renewable Energy & Conservation 10.4 % 0.1 % 0.1 % — % 10.7 % Segments margin 12.5 % (0.1 )% — % — % 12.4 % Consolidated 9.6 % (0.1 )% 0.1 % — % 9.6 %  

GIBRALTAR INDUSTRIES, INC.Reconciliation of Adjusted Financial Measures(in thousands, except per share data)(unaudited)

 

    Six Months EndedJune 30, 2017

As ReportedIn GAAPStatements

   

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 %

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