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Gibraltar Reports Second-Quarter 2016 Financial Results

GAAP EPS Increases YOY to $0.53 from $0.13; Sales Grow 4%

Adjusted EPS Increases YOY to $0.46 from $0.25

BUFFALO, N.Y.--(BUSINESS WIRE)--Jul. 28, 2016-- 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 periods ended June 30, 2016. 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
2016     2015     % Change   2016     2015     % Change  
Net Sales $ 263.1     $ 253.2     4 % $ 263.1     $ 253.2     4 %
Net Income $ 17.0 $ 4.1 315 % $ 14.8 $ 7.8 90 %
Diluted EPS $ 0.53 $ 0.13 308 % $ 0.46 $ 0.25 84 %
 

The Company reported a more than 300 percent increase in GAAP net income and a 90 percent increase on an adjusted net income basis, on a 4 percent increase in sales. The second-quarter 2016 GAAP results included special items with an after-tax net gain totaling $2.2 million, or $0.07 per diluted share, primarily resulting from the gain on the divestiture of Gibraltar’s European industrial manufacturing operation in April 2016. The second-quarter 2015 GAAP results included special items with an after-tax charge totaling $3.7 million, or $0.12 per diluted share, resulting from restructuring costs related to the Company’s initial phase of its 80/20 simplification initiative along with costs related to the June 2015 acquisition of Rough Brothers Inc. (RBI).

Management Comments

“Gibraltar delivered another period of solid financial performance in the second quarter, as we exceeded our bottom-line guidance and grew revenue on both a sequential and year-over-year basis, despite ongoing market headwinds,” said Chief Executive Officer Frank Heard. “The strong quarter performance was the result of profitability from both the RBI business that we acquired in June 2015, as well as from our legacy residential and industrial businesses. Our bottom-line results exceeded our expectations due in large part to our ability to realize accelerated traction with our 80/20 initiative.”

“Our ongoing strong financial performance is a direct byproduct of our team’s ability to effectively execute on our four pillar growth strategy. By focusing on operational excellence, portfolio management, product innovation and accretive acquisitions, we have re-aligned resources, increased efficiencies and delivered enhanced profitability across the organization,” said Heard.

Second-quarter Segment Results

Residential Products

For the second quarter, the Residential Products segment reported:

   
Three Months Ended June 30,
Dollars in millions, except EPS     GAAP     Adjusted
2016       2015       % Change   2016       2015       % Change  
Net Sales $ 120.0     $ 134.7     (11 )% $ 120.0     $ 134.7     (11 )%
Operating Margin 17.3 % 8.8 % +850 bps 17.5 % 10.6 % +690 bps
 

Second-quarter 2016 net sales in Gibraltar’s Residential Products segment decreased, net of equivalent sales of roofing-related products and lower sales of postal products reflecting the completion of a two-year contract for centralized mailboxes as of December 2015.

The increase in segment operating margin reflects the benefit of improved operational efficiencies and early contributions from the 80/20 simplification initiative, as well as the completion of the centralized mailbox contract, which provided low profitability in the second quarter of 2015. The adjusted operating margin for the second quarter 2016 and 2015 remove the special charges for restructuring initiatives under the 80/20 program from both periods.

Industrial and Infrastructure Products

For the second quarter, the Industrial and Infrastructure Products segment reported:

   
Three Months Ended June 30,
Dollars in millions, except EPS     GAAP     Adjusted
2016       2015       % Change   2016     2015       % Change  
Net Sales $ 81.0     $ 101.4     (20 )% $ 81.0     $ 101.4     (20 )%
Operating Margin 7.6 % 5.3 % +230 bps 8.7 % 5.3 % +340 bps
 

Second-quarter 2016 net sales in Gibraltar’s Industrial & Infrastructure Products segment decreased on the combined effects of the April 15, 2016 divestiture of its European industrial business, lower order volumes from energy-related markets and, to a lesser degree, the ongoing effect of reduced steel costs on customer pricing.

The segment’s second-quarter GAAP operating margin increased 230 basis points as the combination of improved manufacturing efficiencies, tighter management of raw material costs, and benefits from 80/20 simplification helped offset the effect of lower sales. This segment’s adjusted operating margin for the second quarter 2016 and 2015 also remove the special charges for restructuring initiatives under the 80/20 program from both periods.

Renewable Energy and Conservation

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

   
Three Months Ended June 30,
Dollars in millions, except EPS     GAAP     Adjusted
2016       2015       % Change 2016       2015       % Change
Net Sales $ 62.1     $ 17.1     nmf* $ 62.1     $ 17.1     nmf*
Operating Margin 12.3 % 5.8 % +650 bps 12.3 % 11.1 % +120 bps
*not meaningful
 

This segment contains the results of RBI, an acquisition the Company 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, while continuing its leadership serving the U.S. commercial greenhouse market. RBI has been accretive to the Company’s results since its acquisition, and contributed the equivalent of $0.15 per diluted share to GAAP earnings for the second quarter of 2016.

Comparing second-quarter 2016 net sales to proforma sales for the quarter-ended June 30, 2015, RBI’s revenues rose 4 percent, reflecting continued demand for RBI’s ground-mounted solar racking products.

Its second-quarter 2016 GAAP operating margin increased to 12.3 percent, reflecting the benefit of improved operational efficiencies and a significantly lower amount of acquisition-related expenses. Its adjusted operating margin for the second quarter 2015 has removed the special charge for acquisition-related costs.

Business Outlook

“Looking to the balance of 2016, we expect continuing positive momentum coming out of the first half of the year. Our balance sheet is solid with a strong cash position, and our increased liquidity provides the resources to pursue acquisitions as strategic accelerators to growth. As we continue to focus on operational excellence, we are also strengthening our team with a deeper bench of talent and leadership across the organization. While softness in certain end markets remain, we continue to expect to achieve our key financial objectives for 2016: increasing earnings, making more efficient use of our capital, and delivering higher shareholder returns than we did in 2015,” Heard concluded.

Gibraltar expects 2016 consolidated revenues in the range of $1.02 billion to $1.03 billion, a decrease of approximately 1 percent compared with $1.04 billion in 2015. This revenue guidance takes into account the nearly $100 million of 2015 revenues not repeating in 2016. This $100 million of sales included the Company’s divestiture in April 2016 of its European industrial business that contributed $36 million in revenues with breakeven operating results to the Industrial & Infrastructure Products segment in 2015; $50 million of annual sales related to the completed contract in December 2015 for centralized mailboxes; and discontinued products under the 80/20 simplification initiative.

Gibraltar is raising its guidance for higher after-tax earnings for full year 2016 due to the success of its operational excellence and 80/20 initiatives. GAAP earnings for 2016 are expected in the range of $1.38 to $1.48 per diluted share, compared with $0.74 per diluted share in 2015.

                 

Full Year 2016

Gibraltar Industries
Dollars in millions, except EPS Operating

Income
Taxes

     

Net
Income

Diluted

Earnings

Per Share
Income       Margin  
GAAP Measures $ 80 - 85   7.9 - 8.3 % $ 13 - 15 $ 44 - 47 $ 1.38–1.48
Restructuring Costs 4 0.4 1 3 0.08
Gain on Sale of European Business 11 (3 ) (0.09 )
                   
Adjusted Measures $ 84 - 89     8.3 - 8.7 %   $ 26 - 28   $ 44 - 47   $ 1.37–1.47  
 

Relative to GAAP profitability and EPS for 2016, Gibraltar has estimated additional restructuring costs for new initiatives affecting the second half of 2016. Any significant changes in the nature and scope of identified projects and any new programs would affect a change in our expected GAAP EPS results for the year.

For the third quarter of 2016, consolidated revenues are expected to decline 7 percent to approximately $280 million. The decline in revenue is due to $25 million of Q3 2015 revenues not repeating in Q3 2016 related to the Company’s April 2016 divestiture, the completed contract for centralized mailboxes, and discontinued products under the 80/20 simplification initiative.

GAAP EPS for the third quarter is expected to be between $0.46 and $0.51, compared with $0.43 for the third quarter of 2015. Adjusted EPS for the third quarter 2016 is expected to be between $0.47 and $0.52, compared with $0.50 for the third quarter of 2015. The higher GAAP earnings are a result of the expected higher income from the Residential Products and Renewable Energy and Conservation segments and lower restructuring costs as compared to the prior-year period.

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 2016. 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 worldwide through facilities in the United States, Canada, Germany, China, and Japan. 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 and nine-month periods ending September 30, 2016, on Thursday, October 27, 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
June 30,

Six Months Ended
June 30,

2016     2015 2016     2015
Net Sales $ 263,099 $ 253,171 $ 496,776 $ 453,786
Cost of sales 196,895   209,052   380,416   379,752  
Gross profit 66,204 44,119 116,360 74,034
Selling, general, and administrative expense 40,427   32,918   76,976   53,863  
Income from operations 25,777 11,201 39,384 20,171
Interest expense 3,666 3,811 7,357 7,511
Other expense (income) 8,035   1,101   7,840   (2,458 )
Income before taxes 14,076 6,289 24,187 15,118
(Benefit of) provision for income taxes (2,913 ) 2,202   705   5,494  
Income from continuing operations 16,989 4,087 23,482 9,624
Discontinued operations:
Loss before taxes (44 )
Benefit of income taxes       (16 )
Loss from discontinued operations       (28 )
Net income $ 16,989   $ 4,087   $ 23,482   $ 9,596  
Net earnings per share – Basic:
Income from continuing operations $ 0.54 $ 0.13 $ 0.75 $ 0.31
Loss from discontinued operations        
Net income $ 0.54   $ 0.13   $ 0.75   $ 0.31  
Weighted average shares outstanding – Basic 31,475   31,210   31,447   31,200  
Net earnings per share – Diluted:
Income from continuing operations $ 0.53 $ 0.13 $ 0.74 $ 0.31
Loss from discontinued operations        
Net income $ 0.53   $ 0.13   $ 0.74   $ 0.31  
Weighted average shares outstanding – Diluted 32,007   31,495   31,916   31,440  
 

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

 

       

June 30,
2016

December 31,
2015

Assets
Current assets:
Cash and cash equivalents $ 124,114 $ 68,858
Accounts receivable, net 150,170 164,969
Inventories 98,221 107,058
Other current assets 12,119   10,537  
Total current assets 384,624 351,422
Property, plant, and equipment, net 108,808 118,932
Goodwill 294,797 292,390
Acquired intangibles 120,435 123,013
Other assets 4,336   4,015  
$ 913,000   $ 889,772  
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 82,805 $ 89,204
Accrued expenses 49,331 67,605
Billings in excess of cost 30,358 28,186
Current maturities of long-term debt 400   400  
Total current liabilities 162,894 185,395
Long-term debt 208,836 208,882
Deferred income taxes 43,149 42,654
Other non-current liabilities 48,542 42,755
Shareholders’ equity:
Preferred stock, $0.01 par value; authorized 10,000 shares; none outstanding
Common stock, $0.01 par value; authorized 50,000 shares; 31,930 and 31,779 shares issued in 2016 and 2015 319 317
Additional paid-in capital 259,024 253,458
Retained earnings 201,555 178,073
Accumulated other comprehensive loss (4,511 ) (15,416 )
Cost of 502 and 484 common shares held in treasury in 2016 and 2015 (6,808 ) (6,346 )
Total shareholders’ equity 449,579   410,086  
$ 913,000   $ 889,772  
 

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

 

   

Six Months Ended
June 30,

2016     2015
Cash Flows from Operating Activities
Net income $ 23,482 $ 9,596
Loss from discontinued operations   (28 )
Income from continuing operations 23,482 9,624
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 11,856 13,239
Stock compensation expense 3,218 1,406
Net gain on sale of assets (198 ) (8,375 )
Loss on sale of business 8,533
Restructuring charges, non-cash 1,074 2,745
Provision for (benefit of) deferred income taxes 196 (72 )
Other, net (741 ) (1,392 )
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable 9,145 (30,164 )
Inventories 4,988 1,596
Other current assets and other assets (4,333 ) (1,415 )
Accounts payable (2,427 ) 20,254
Accrued expenses and other non-current liabilities (5,644 ) 4,312  
Net cash provided by operating activities 49,149   11,758  
Cash Flows from Investing Activities
Cash paid for acquisitions (2,314 ) (134,318 )
Net proceeds from sale of property and equipment 162 26,181
Purchases of property, plant, and equipment (4,035 ) (4,624 )
Net proceeds from sale of business 8,479
Other, net 1,118   1,154  
Net cash provided by (used in) investing activities 3,410   (111,607 )
Cash Flows from Financing Activities
Proceeds from long-term debt 41,392
Long-term debt payments (400 ) (11,792 )
Payment of debt issuance costs (54 )
Purchase of treasury stock at market prices (462 ) (387 )
Net proceeds from issuance of common stock 2,057 180
Excess tax benefit from stock compensation 292   37  
Net cash provided by financing activities 1,433   29,430  
Effect of exchange rate changes on cash 1,264   (769 )
Net increase (decrease) in cash and cash equivalents 55,256 (71,188 )
Cash and cash equivalents at beginning of year 68,858   110,610  
Cash and cash equivalents at end of period $ 124,114   $ 39,422  
 

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

 

   

Three Months Ended
June 30, 2016

 

As
Reported
In GAAP
Statements

   

Restructuring
Charges

   

Gain on Sale
of Business

   

Adjusted
Financial
Measures

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 62,127       62,127  
Consolidated sales 263,099 263,099
 
Income from operations
Residential Products 20,725 258 20,983
Industrial & Infrastructure Products 6,190 851 7,041
Renewable Energy & Conservation 7,657       7,657  
Segment Income 34,572 1,109 35,681
Unallocated corporate expense (8,795 )     (8,795 )
Consolidated income from operations 25,777 1,109 26,886
 
Interest expense 3,666 3,666
Other expense (income) 8,035     (8,533 ) (498 )
Income before income taxes 14,076 1,109 8,533 23,718
(Benefit of) provision for income taxes (2,913 ) 424   11,414   8,925  
Income from continuing operations $ 16,989   $ 685   $ (2,881 ) $ 14,793  
Income from continuing operations per share – diluted $ 0.53   $ 0.02   $ (0.09 ) $ 0.46  
 
Operating margin
Residential Products 17.3 % 0.2 % % 17.5 %
Industrial & Infrastructure Products 7.6 % 1.0 % % 8.7 %
Renewable Energy & Conservation 12.3 % % % 12.3 %
Segments Margin 13.1 % 0.4 % % 13.6 %
Consolidated 9.8 % 0.4 % % 10.2 %
 

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

 

   

Three Months Ended
June 30, 2015

As Reported
In GAAP
Statements

   

Acquisition
Related
Items

   

Restructuring
Charges

   

Reclass of
Hedging
Activity

   

Adjusted
Financial
Measures

Net Sales
Residential Products $ 134,669 $ $ $ $ 134,669
Industrial & Infrastructure Products 101,900 101,900
Less Inter-Segment Sales (482 )       (482 )
101,418 101,418
Renewable Energy & Conservation 17,084         17,084  
Consolidated sales 253,171 253,171
 
Income from operations
Residential Products 11,910 3,251 (920 ) 14,241
Industrial & Infrastructure Products 5,356 59 5,415
Renewable Energy & Conservation 999   902       1,901  
Segment Income 18,265 902 3,310 (920 ) 21,557
Unallocated corporate expense (7,064 ) 699   1,042     (5,323 )
Consolidated income from operations 11,201 1,601 4,352 (920 ) 16,234
 
Interest expense 3,811 3,811
Other income 1,101       (920 ) 181  
Income before income taxes 6,289 1,601 4,352 12,242
Provision for income taxes 2,202   598   1,629     4,429  
Income from continuing operations $ 4,087   $ 1,003   $ 2,723     $ 7,813  
Income from continuing operations per share – diluted $ 0.13   $ 0.03   $ 0.09   $   $ 0.25  
 
Operating margin
Residential Products 8.8 % % 2.4 % (0.7 )% 10.6 %
Industrial & Infrastructure Products 5.3 % % % % 5.3 %
Renewable Energy & Conservation 5.8 % 5.3 % % % 11.1 %
Segments Margin 7.2 % 0.4 % 1.3 % (0.4 )% 8.5 %
Consolidated 4.4 % 0.6 % 1.7 % (0.4 )% 6.4 %
 

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

 

   

Six Months Ended
June 30, 2016

As
Reported
In GAAP
Statements

   

Restructuring
Charges

   

Gain on
Sale of
Business

   

Adjusted
Financial
Measures

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 116,007       116,007  
Consolidated sales 496,776 496,776
 
Income from operations
Residential Products 32,956 1,276 34,232
Industrial & Infrastructure Products 9,516 1,531 11,047
Renewable Energy & Conservation 11,970       11,970  
Segment Income 54,442 2,807 57,249
Unallocated corporate expense (15,058 ) 31     (15,027 )
Consolidated income from operations 39,384 2,838 42,222
 
Interest expense 7,357 7,357
Other expense (income) 7,840     (8,533 ) (693 )
Income before income taxes 24,187 2,838 8,533 35,558
Provision for income taxes 705   1,055   11,414   13,174  
Income from continuing operations $ 23,482   $ 1,783   $ (2,881 ) $ 22,384  
Income from continuing operations per share – diluted $ 0.74   $ 0.05   $ (0.09 ) $ 0.70  
 
Operating margin
Residential Products 15.0 % 0.6 % % 15.6 %
Industrial & Infrastructure Products 5.9 % 1.0 % % 6.9 %
Renewable Energy & Conservation 10.3 % % % 10.3 %
Segments Margin 11.0 % 0.6 % % 11.5 %
Consolidated 7.9 % 0.6 % % 8.5 %
         

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

   

Six Months Ended
June 30, 2015

As
Reported
In GAAP
Statements

   

Acquisition
Related
Items

   

Restructuring
Charges

Gain on
Sale of
Facility

Reclass of
Hedging
Activity

Adjusted
Financial
Measures

Net Sales
Residential Products $ 241,464 $ $ $ $ $ 241,464
Industrial & Infrastructure Products 196,185 196,185
Less Inter-Segment Sales (947 )       (947 )
195,238 195,238
Renewable Energy & Conservation 17,084         17,084  
Consolidated sales 453,786 453,786
 
Income from operations
Residential Products 24,043 3,470 (6,799 ) 1,803 22,517
Industrial & Infrastructure Products 7,362 423 7,785
Renewable Energy & Conservation 999   902       1,901  
Segment Income 32,404 902 3,893 (6,799 ) 1,803 32,203
Unallocated corporate expense (12,233 ) 471   1,559     (10,203 )
Consolidated income from operations 20,171 1,373 5,452 (6,799 ) 1,803 22,000
 
Interest expense 7,511 7,511
Other income (2,458 )       1,803 (655 )
Income before income taxes 15,118 1,373 5,452 (6,799 ) 15,144
Provision for income taxes 5,494   513   2,037   (2,526 ) 5,518  
Income from continuing operations $ 9,624   $ 860   $ 3,415   $ (4,273 ) $ 9,626  
Income from continuing operations per share – diluted $ 0.31   $ 0.03   $ 0.11   $ (0.14 ) $ $ 0.31  
 
Operating margin
Residential Products 10.0 % % 1.4 % (2.8 )% 0.7

%

9.3 %
Industrial & Infrastructure Products 3.8 % % 0.2 % %

%

4.0 %
Renewable Energy & Conservation 5.8 % 5.3 % % %

%

11.1 %
Segments Margin 7.1 % 0.2 % 0.9 % (1.5 )% 0.4

%

7.1 %
Consolidated 4.4 % 0.3 % 1.2 % (1.5 )% 0.4

%

4.8 %

Source: Gibraltar Industries, Inc.

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