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Gibraltar Reports Third-Quarter 2015 Financial Results

Q3 Adjusted EPS Increase 67% to $0.50 Year-Over-Year; Sales Grow 30%

Raises Guidance Again for Full-Year 2015 Revenue and Earnings

BUFFALO, N.Y.--(BUSINESS WIRE)--Oct. 28, 2015-- Gibraltar Industries, Inc. (Nasdaq: ROCK), a leading manufacturer and distributor of building products for industrial, infrastructure and residential markets, today reported its financial results for the three and nine month periods ended September 30, 2015. All financial metrics in this release reflect only the Company's continuing operations unless otherwise noted.

Third-Quarter Consolidated Results

Gibraltar’s net sales for the third quarter of 2015 increased 30 percent to $305.0 million, compared with $234.1 million in the third quarter of 2014. Adjusted net income was $15.7 million, or $0.50 per diluted share, compared with $9.5 million, or $0.30 per diluted share, in the third quarter of 2014. The adjusted third-quarter 2015 results exclude special items with an after-tax net charge totaling $2.1 million, or $0.07 per diluted share, resulting primarily from costs related to the acquisition of RBI Solar, Inc., Rough Brothers Manufacturing Inc., and affiliates (collectively “RBI”) on June 9, costs related to business restructuring and the Company’s senior leadership transition. The adjusted third-quarter 2014 results excluded special items with an after-tax net gain totaling $0.1 million, or $0.01 per diluted share, resulting primarily from acquisition-related gains and exit activity costs related to business restructuring. Including these items in the respective periods, the Company’s third-quarter 2015 GAAP net income was $13.6 million, or $0.43 per diluted share, compared with net income of $9.6 million, or $0.31 per diluted share, in the third quarter of 2014.

Management Comments

“Gibraltar delivered strong financial results in the third quarter, as we continued to execute on the value-creation strategy we introduced late last year,” said Chief Executive Officer Frank Heard. “Although we continue to see very little market lift in any of our businesses, consolidated net sales were up 30 percent from the third quarter of 2014. This growth reflected sales at RBI, a strategic acquisition that we completed in the second quarter. Organic sales were down 5 percent year-over-year, as ongoing soft demand in the Industrial and Infrastructure Products segment more than offset continued growth in our postal storage and roofing-related businesses in the Residential Products segment.”

“In addition to pursuing acquisitions as a strategic accelerator, our value creation strategy includes a strong focus on operational improvement in areas such as overhead reduction, strategic pricing, facilities consolidation and increased efficiency across the business,” Heard said. “As a result of these initiatives, our third-quarter adjusted EPS grew 67 percent year-over-year. Thirteen percentage points of this EPS improvement was generated by our base businesses despite the decline in organic sales, with the balance of 54 percentage points coming from the accretive addition of RBI.”

Third-Quarter Segment Results

Separate from the performance of the two segments highlighted below, the Company’s third-quarter results benefited from its acquisition of RBI, which was completed on June 9, 2015. RBI has established itself during the past six years as North America’s fastest-growing provider of solar racking solutions. RBI was accretive to the Company’s third-quarter results, adding adjusted earnings of $0.16 per diluted share on revenues of $81.6 million.

Residential Products

Third-quarter 2015 net sales in Gibraltar’s Residential Products segment increased 4 percent to $127.0 million, compared with $122.1 million for the third quarter of 2014. Third-quarter 2015 adjusted operating margin increased 150 basis points year-over-year to 13.1 percent. Sales growth in this segment reflected strong demand for postal storage products driven by conversions to centralized delivery, partially offset by a modest decrease in demand for roofing-related products. The segment’s adjusted operating margin reflected the benefit of higher volume and improved operational efficiencies.

Industrial and Infrastructure Products

Third-quarter 2015 net sales in Gibraltar’s Industrial & Infrastructure Products segment decreased 14 percent to $96.4 million, compared with $112.0 million for the third quarter of 2014. Adjusted operating margin improved by 240 basis points year-over-year to 8.4 percent as the combination of improved manufacturing efficiencies, tighter management of raw material costs, and initial benefits from 80/20 simplification helped offset the effect of the considerable revenue decrease. Sales in this segment reflected lower shipment volumes to industrial markets and a 3 percent decrease due to the effect of weaker foreign currencies in its Canadian and European operations. Third-quarter industrial demand was lower year-over-year as domestic energy and mining activity declined, in part due to the effects of lower oil prices, while the transportation infrastructure market continued to reflect near-term uncertainty in federal funding programs.

Business Outlook

“We begin the fourth quarter fully focused on driving transformational change in our portfolio and in our financial results through the execution of our four-pillar strategy, which includes operational improvement, portfolio management, product innovation and acquisitions. In the near term, we are confident that Gibraltar will achieve the three key financial objectives we set for 2015: increasing adjusted earnings, making more efficient use of our capital, and delivering higher shareholder returns than we did in 2014,” Heard concluded.

Gibraltar is raising its guidance for revenues and earnings for full year 2015. Gibraltar now expects to report full-year 2015 total revenues in the range of $990 million to $1.0 billion, an increase of approximately 15% compared to $862 million in 2014. Organic net sales for 2015 in the Company’s base businesses are expected to be slightly lower, year-over-year, with growth in residential-related product lines offset by a decline in industrial-related revenues. From the June 9, 2015 date of acquisition, RBI is expected to generate revenues of $155 million to $160 million through December 31, 2015.

The anticipated profit expansion from operational improvement initiatives, as well as accretion from RBI, are expected to result in adjusted earnings for 2015 in the range of $0.90 to $0.95 per diluted share, compared with $0.47 per diluted share in 2014. This range includes non-GAAP adjusted earnings accretion from RBI in the range of $0.24 to $0.26 per diluted share, excluding purchase accounting and transaction expenses.

For the fourth quarter of 2015, revenues and adjusted EPS are expected to substantially increase compared with the fourth quarter of 2014, benefiting from the accretive income from the RBI acquisition and other profit improvement initiatives.

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 2015. 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: http://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 industrial, infrastructure and residential 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 worldwide through facilities in the United States, Canada, England, Germany, China, and Japan. Comprehensive information about Gibraltar can be found on its website at http://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 property, restructuring primarily associated with the closing and consolidation of our facilities, acquisition-related items, and senior leadership transition costs. These adjustments are shown in the non-GAAP reconciliation of adjusted operating results excluding special charges provided in the 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 our ongoing business operations. These adjusted measures should not be viewed as a substitute for our 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 period ending December 31, 2015, on Thursday, February 18, 2016, 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,
2015   2014 2015   2014
Net Sales $ 304,994 $ 234,101 $ 758,780 $ 660,093
Cost of sales 243,598   192,523   623,350   548,528  
Gross profit 61,396 41,578 135,430 111,565
Selling, general, and administrative expense 38,002   23,186   91,865   78,167  
Income from operations 23,394 18,392 43,565 33,398
Interest expense 3,878 3,657 11,389 10,988
Other income (1,780 ) (664 ) (4,238 ) (172 )
Income before taxes 21,296 15,399 36,414 22,582
Provision for income taxes 7,664   5,828   13,158   8,666  
Income from continuing operations 13,632 9,571 23,256 13,916
Discontinued operations:
Loss before taxes (51 ) (44 ) (51 )
Benefit of income taxes   (20 ) (16 ) (20 )
Loss from discontinued operations   (31 ) (28 ) (31 )
Net income $ 13,632   $ 9,540   $ 23,228   $ 13,885  
Net earnings per share – Basic:
Income from continuing operations $ 0.44 $ 0.31 $ 0.74 $ 0.45
Loss from discontinued operations   (0.01 )   (0.01 )
Net income $ 0.44   $ 0.30   $ 0.74   $ 0.44  
Weighted average shares outstanding – Basic 31,242   31,083   31,214   31,046  
Net earnings per share – Diluted:
Income from continuing operations $ 0.43 $ 0.31 $ 0.74 $ 0.45
Loss from discontinued operations   (0.01 )   (0.01 )
Net income $ 0.43   $ 0.30   $ 0.74   $ 0.44  
Weighted average shares outstanding – Diluted 31,558   31,298   31,479   31,256  
 
           

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

 
September 30,
2015
December 31,
2014
Assets
Current assets:
Cash and cash equivalents $ 43,331 $ 110,610
Accounts receivable, net 177,117 101,141
Inventories 126,006 128,743
Other current assets 24,514   19,937  
Total current assets 370,968 360,431
Property, plant, and equipment, net 121,218 129,575
Goodwill 291,940 236,044
Acquired intangibles 131,872 82,215
Other assets 4,199   2,206  
$ 920,197   $ 810,471  
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 104,244 $ 81,246
Accrued expenses 69,576 52,439
Billings in excess of cost 22,206
Current maturities of long-term debt 400   400  

Total current liabilities

196,426   134,085  
Long-term debt 220,814 209,511
Deferred income taxes 54,880 49,772
Other non-current liabilities 39,696 29,874
Shareholders’ equity:

Preferred stock, $0.01 par value; authorized 10,000 shares; none outstanding

Common stock, $0.01 par value; authorized 50,000 shares; 31,478 and 31,342
shares issued in 2015 and 2014

315 313
Additional paid-in capital 250,129 247,232
Retained earnings 177,853 154,625
Accumulated other comprehensive loss (13,958 ) (9,551 )
Cost of 464 and 429 common shares held in treasury in 2015 and 2014 (5,958 ) (5,390 )
Total shareholders’ equity 408,381   387,229  
$ 920,197   $ 810,471  
 
       

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 
Nine Months Ended
September 30,
2015     2014
Cash Flows from Operating Activities
Net income $ 23,228 $ 13,885
Loss from discontinued operations (28 ) (31 )
Income from continuing operations 23,256 13,916
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 22,657 19,452
Stock compensation expense 2,675 2,379
Net gain on sale of assets (7,903 )
Other non-cash adjustments 3,351 (1,579 )
Non-cash charges to interest expense 13 772
(Benefit of) provision for deferred income taxes (724 ) 77
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable (28,085 ) (33,031 )
Inventories 7,562 (5,526 )
Other current assets and other assets (529 ) (1,202 )
Accounts payable 9,845 22,260
Accrued expenses and other non-current liabilities 12,370   667  
Net cash provided by operating activities of continuing operations 44,488 18,185
Net cash used in operating activities of discontinued operations   (40 )
Net cash provided by operating activities 44,488   18,145  
Cash Flows from Investing Activities
Cash paid for acquisitions (140,620 )
Net proceeds from sale of property and equipment

26,392

5,958
Purchases of property, plant and equipment (6,822 ) (19,180 )
Other investing activities 1,154   121  
Net cash used in investing activities (119,896 ) (13,101 )
Cash Flows from Financing Activities
Proceeds from long-term debt 58,192
Long-term debt payments (47,592 ) (407 )
Purchase of treasury stock at market prices (568 ) (505 )
Net proceeds from issuance of common stock 237 508
Excess tax benefit from stock compensation   99  
Net cash provided by (used in) financing activities 10,269   (305 )
Effect of exchange rate changes on cash (2,140 ) (765 )
Net (decrease) increase in cash and cash equivalents (67,279 ) 3,974
Cash and cash equivalents at beginning of year 110,610   97,039  
Cash and cash equivalents at end of period $ 43,331   $ 101,013  
 
       

GIBRALTAR INDUSTRIES, INC.

Non-GAAP Reconciliation of Adjusted Statements of Operations

(in thousands, except per share data)

(Unaudited)

 
Three Months Ended
September 30, 2015

As
Reported
In GAAP
Statements

   

Acquisition
Related
Items

   

 

Restructuring
Costs

   

Senior
Leadership
Transition
Costs

   

Adjusted
Statement
of
Operations

Net Sales
Residential Products $ 126,995 $ $ $ $ 126,995
Industrial & Infrastructure Products 96,636 96,636
Less Inter-Segment Sales (286 )       (286 )
96,350         96,350  
RBI 81,649 81,649
Consolidated sales 304,994 304,994
 
Income from operations
Residential Products 15,879 757 16,636
Industrial & Infrastructure Products 8,083 8 8,091
RBI 5,017   2,746      

7,763

 

Segment Income 28,979 2,746 765 32,490
Unallocated corporate expense (5,585 ) 208     (308 ) (5,685 )
Consolidated income from operations 23,394 2,954 765 (308 ) 26,805
 
Interest expense 3,878 3,878
Other income (1,780 )       (1,780 )
Income before income taxes 21,296 2,954 765 (308 ) 24,707
Provision for income taxes 7,664   1,125   305   (104 ) 8,990  
Income from continuing operations $ 13,632   $ 1,829   $ 460   $ (204 ) $ 15,717  
Income from continuing operations per share – diluted $ 0.43   $ 0.06   $ 0.01   $   $ 0.50  
 
Operating margin
Residential Products 12.5 % % 0.6 % % 13.1 %
Industrial & Infrastructure Products 8.4 % % % % 8.4 %
RBI 6.1 % 3.4 % % % 9.5 %
Segments Margin 9.5 % 0.9 % 0.3 % % 10.7 %
Consolidated 7.7 % 1.0 % 0.3 % (0.1 )% 8.8 %
 
       

GIBRALTAR INDUSTRIES, INC.

Non-GAAP Reconciliation of Adjusted Statements of Operations

(in thousands, except per share data)

(Unaudited)

 
Three Months Ended
September 30, 2014

As Reported
In GAAP
Statements

   

Acquisition
Related
Items

   

Restructuring
Costs

   

Adjusted
Statement of
Operations

Net Sales
Residential Products $ 122,100 $ $ $ 122,100
Industrial & Infrastructure Products 112,329 112,329
Less Inter-Segment Sales (328 )     (328 )
112,001       112,001  
Consolidated sales 234,101 234,101
 
Income from operations
Residential Products 13,694 487 14,181
Industrial & Infrastructure Products 6,574     175   6,749  
Segment Income 20,268 662 20,930
Unallocated corporate expense (1,876 ) (781 )   (2,657 )
Consolidated income from operations 18,392 (781 ) 662 18,273
 
Interest expense 3,657 3,657
Other income (664 )     (664 )
Income before income taxes 15,399 (781 ) 662 15,280
Provision for income taxes 5,828   (290 ) 257   5,795  
Income from continuing operations $ 9,571   $ (491 ) $ 405   $ 9,485  
Income from continuing operations per share – diluted $ 0.31   $ (0.02 ) $ 0.01   $ 0.30  
 
Operating margin
Residential Products 11.2 % % 0.4 % 11.6 %
Industrial & Infrastructure Products 5.9 % % 0.2 % 6.0 %
Segments Margin 8.7 % % 0.3 % 8.9 %
Consolidated 7.9 % (0.3 )% 0.3 % 7.8 %
 
       

GIBRALTAR INDUSTRIES, INC.

Non-GAAP Reconciliation of Adjusted Statements of Operations

(in thousands, except per share data)

(Unaudited)

 
Nine Months Ended
September 30, 2015

As
Reported
In GAAP
Statements

   

Acquisition
Related
Items

   

Restructuring
Costs

   

Senior
Leadership
Transition
Costs

   

Gain on
Sale of
Facility

   

Adjusted
Statement of
Operations

Net Sales
Residential Products $ 368,459 $ $ $ $ $ 368,459
Industrial & Infrastructure Products 292,821 292,821
Less Inter-Segment Sales (1,233 )         (1,233 )
291,588           291,588  
RBI 98,733 98,733
Consolidated sales 758,780 758,780
 
Income from operations
Residential Products 39,922 4,227 (6,799 ) 37,350
Industrial & Infrastructure Products 15,445 49 382 15,876
RBI 6,016   3,648         9,664  
Segment Income 61,383 3,648 4,276 382 (6,799 ) 62,890
Unallocated corporate expense (17,818 ) 679     1,251     (15,888 )
Consolidated income from operations 43,565 4,327 4,276 1,633 (6,799 ) 47,002
 
Interest expense 11,389 11,389
Other income (4,238 )         (4,238 )
Income before income taxes 36,414 4,327 4,276 1,633 (6,799 ) 39,851
Provision for income taxes 13,158   1,638   1,619   619   (2,526 ) 14,508  
Income from continuing operations $ 23,256   $ 2,689   $ 2,657   $ 1,014   $ (4,273 ) $ 25,343  
Income from continuing operations per share – diluted $ 0.74   $ 0.09   $ 0.08   $ 0.04   $ (0.14 ) $ 0.81  
 
Operating margin
Residential Products 10.8 % % 1.1 % % (1.8 )% 10.1 %
Industrial & Infrastructure Products 5.3 % % % 0.1 % % 5.4 %
RBI 6.1 % 3.7 % % % % 9.8 %
Segments Margin 8.1 % 0.5 % 0.6 % 0.1 % (0.9 )% 8.3 %
Consolidated 5.7 % 0.6 % 0.6 % 0.2 % (0.9 )% 6.2 %
 
       

GIBRALTAR INDUSTRIES, INC.

Non-GAAP Reconciliation of Adjusted Statements of Operations

(in thousands, except per share data)

(Unaudited)

 
Nine Months Ended
September 30, 2014

As Reported
In GAAP
Statements

   

Acquisition
Related
Items

   

Restructuring
Costs

   

Adjusted
Statement of
Operations

Net Sales
Residential Products $ 326,483 $ $ $ 326,483
Industrial & Infrastructure Products 334,613 334,613
Less Inter-Segment Sales (1,003 )       (1,003 )
333,610         333,610  
Consolidated sales 660,093 660,093
 
Income from operations
Residential Products 26,740 206 632 27,578
Industrial & Infrastructure Products 15,727     634     16,361  
Segment Income 42,467 206 1,266 43,939
Unallocated corporate expense (9,069 ) (1,521 )     (10,590 )
Consolidated income from operations 33,398 (1,315 ) 1,266 33,349
 
Interest expense 10,988 10,988
Other income (172 )       (172 )
Income before income taxes 22,582 (1,315 ) 1,266 22,533
Provision for income taxes 8,666   (484 ) 482     8,664  
Income from continuing operations $ 13,916   $ (831 ) $ 784     $ 13,869  
Income from continuing operations per share – diluted $ 0.45   $ (0.04 ) $ 0.03     $ 0.44  
 
Operating margin
Residential Products 8.2 % 0.1 % 0.2 % 8.4 %
Industrial & Infrastructure Products 4.7 % % 0.2 % 4.9 %
Segments Margin 6.4 % % 0.2 % 6.7 %
Consolidated 5.1 % (0.2 )% 0.2 % 5.1 %
 

Source: Gibraltar Industries, Inc.

Gibraltar Industries, Inc.
Kenneth Smith, 716-826-6500 ext. 3217
Chief Financial Officer
kwsmith@gibraltar1.com