11/01/18 at 7:30 AM EDT

Gibraltar Announces Third-Quarter 2018 Financial Results

PDF Version

Reports Revenues of $280.1 million, GAAP EPS of $0.60 and Adjusted EPS of $0.71

GAAP and Adjusted EPS at Higher End of Guidance

Strong Demand for Innovative Products Continues

BUFFALO, N.Y.--(BUSINESS WIRE)--Nov. 1, 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 nine-month periods ended September 30, 2018. All financial metrics in this release reflect only the Company’s continuing operations unless otherwise noted.

Third-quarter Consolidated Results

Gibraltar reported the following consolidated results:

    Three Months Ended September 30,
Dollars in millions, except EPS     GAAP     Adjusted

2018

 

2017

 

% Change

2018

 

2017

 

% Change

Net Sales $280.1 $274.6 2.0% $280.1 $274.6 2.0%
Net Income $19.5 $20.6 (5.3)% $23.2 $21.5 7.9%
Diluted EPS $0.60 $0.64 (6.3)% $0.71 $0.67 6.0%

The Company reported third-quarter 2018 net sales of $280.1 million. The 2 percent increase was driven by strong growth in the Renewable Energy & Conservation segment and increased demand for higher-margin, innovative products, which were partially offset by an unfavorable year-over-year comparison in the Residential Segment due to strong storm-related roofing activity in the third quarter of 2017, and lower end-market activity in Infrastructure.

GAAP and adjusted earnings were at the higher end of the Company’s guidance as noted in its second-quarter earnings release, reflecting strong results in the Renewable Energy & Conservation segment, a greater mix of higher-margin innovative products, effective price-material cost management and ongoing benefits from 80/20 simplification initiatives. The adjusted amounts for the third 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 another solid quarter, reporting year-over-year growth on both the top and bottom lines, excluding special charges, even as we faced market headwinds,” said President and CEO Frank Heard. “We executed on our four-pillar strategy, managed cost volatility extremely well, achieved growth through innovative new products, and maintained the momentum we have generated in the renewable energy and conservation markets. Revenues were up 2 percent year over year and GAAP and adjusted earnings of $0.60 and $0.71, respectively, were at the higher end of our guidance range.”

Third-quarter Segment Results

Residential Products

For the third quarter, the Residential Products segment reported:

    Three Months Ended September 30,
Dollars in millions     GAAP     Adjusted

2018

 

2017

 

% Change

2018

 

2017

 

% Change

Net Sales $125.8 $129.5 (2.9)% $125.8 $129.5 (2.9)%
Operating Margin 16.0% 18.4% (240) bps 17.5% 19.1% (160) bps

Third-quarter 2018 revenues in Gibraltar’s Residential Products segment were down 3 percent year over year, primarily due to higher storm-related roofing activity in the third quarter of 2017, and softness in the commercial and multi-family construction markets. Steady customer demand for rain management products partially offset those factors.

Lower operating margin resulted from unfavorable product mix, and to a lesser extent, volume leverage. The adjusted operating margin for the third 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 third quarter, the Industrial & Infrastructure Products segment reported:

    Three Months Ended September 30,
Dollars in millions     GAAP     Adjusted

2018

 

2017

 

% Change

2018

 

2017

 

% Change

Net Sales $55.8 $56.9 (1.9)% $55.8 $56.9 (1.9)%
Operating Margin 5.2% 4.5% 70 bps 8.4% 5.1% 330 bps

Third-quarter 2018 revenues in Gibraltar’s Industrial & Infrastructure Products segment were down 2 percent year over year as strong performance from the Industrial business was more than offset by lower demand in the Infrastructure business. The Company expects continued demand for innovative products in its Industrial business and growing demand in its Infrastructure business.

GAAP and adjusted operating margin improvement for the segment resulted from demand for higher-margin innovative products, the continued benefit from 80/20 simplification initiatives and effective price-material cost management. This segment’s adjusted operating margin for the third quarter of 2018 and 2017 removes the special charges for restructuring initiatives under the 80/20 program, portfolio management activities, and senior leadership transition costs.

Renewable Energy & Conservation

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

    Three Months Ended September 30,
Dollars in millions     GAAP     Adjusted

2018

 

2017

 

% Change

2018

 

2017

 

% Change

Net Sales $98.5 $88.1 11.8% $98.5 $88.1 11.8%
Operating Margin 15.3% 13.1% 220 bps 15.1% 13.6% 150 bps

Renewable Energy & Conservation segment revenues were up 12 percent year over year, driven by strong domestic demand, continued growth in innovative products, and a contribution from the recently acquired SolarBos.

The third-quarter 2018 GAAP and adjusted operating margin improvement reflected the continued benefit from 80/20 simplification initiatives and leverage from the continued strong demand for our renewable energy and conservation products and services. This segment’s adjusted operating margin for the third quarter of 2018 and 2017 removes the special charges for restructuring initiatives and portfolio management activities.

Business Outlook

“We continue to be optimistic about innovative products driving organic growth across all of our segments, and we are confident in the end markets these products are targeting,” said Heard. “We also are excited about our growth momentum in the Renewable Energy & Conservation segment.”

“For the fourth quarter, our goals are to drive sustainable growth through the acceleration of new product development initiatives, to work with our customers to manage cost volatility, to implement 80/20 simplification projects, and to seek value-added acquisitions in attractive end markets. For the full year, we expect to continue to deliver on our promise to make more money at a higher rate of return with a more efficient use of capital, and create long-term value creation for our shareholders,” concluded Heard.

Gibraltar continues to expect 2018 consolidated revenues to exceed $1 billion, but is lowering its revenue growth expectations from 2-4% growth to 1-2% growth, considering current activity levels across the Company’s end markets. At the same time, Gibraltar is narrowing its full-year 2018 earnings guidance to the high end of the previous range. GAAP EPS for the full year 2018 are now expected to be in the range of $1.82 to $1.87, or $2.03 to $2.08 on an adjusted basis, compared with $1.95 and $1.71, respectively, in 2017.

For the fourth quarter of 2018, the Company is expecting revenue in the range of $239 million to $249 million. GAAP EPS for the fourth quarter 2018 are expected to be between $0.26 and $0.31, or $0.35 to $0.40 on an adjusted basis.

FY 2018 Guidance

    Gibraltar Industries
Dollars in millions, except EPS Operating  

Income
Taxes

 

Net
Income

 

Diluted
Earnings
Per Share

Income   Margin  
GAAP Measures $ 90-92     9.1-9.2 %   $ 19-20   $ 58-60   $ 1.82-1.87
Restructuring Costs 10 1% 2 8 0.21
                   
Adjusted Measures $ 100-102     10.1-10.2%   $ 21-22   $ 66-68   $ 2.03-2.08

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 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 twelve-month period ending December 31, 2018, on Thursday, February 21, 2019, 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,
2018   2017 2018   2017
Net Sales $ 280,086 $ 274,574 $ 761,459 $ 728,806
Cost of sales 209,807   205,839   572,359   548,991  

Gross profit

70,279 68,735 189,100 179,815
Selling, general, and administrative expense 40,875   33,042   113,579   109,513  
Income from operations 29,404 35,693 75,521 70,302
Interest expense 2,906 3,486 9,305 10,612
Other expense (income) 522   404   (50 ) 811  
Income before taxes 25,976 31,803 66,266 58,879
Provision for income taxes 6,473   11,184   15,574   21,090  
Income from continuing operations 19,503 20,619 50,692 37,789
Discontinued operations:
Loss before taxes — — — (644 )
Benefit of income taxes —   —   —   (239 )
Loss from discontinued operations —   —   —   (405 )
Net income $ 19,503   $ 20,619   $ 50,692   $ 37,384  
Net earnings per share – Basic:
Income from continuing operations $ 0.61 $ 0.65 $ 1.59 $ 1.19
Loss from discontinued operations —   —   —   (0.01 )
Net income $ 0.61   $ 0.65   $ 1.59   $ 1.18  

Weighted average shares outstanding – Basic

32,115   31,703   31,922   31,700  

Net earnings per share – Diluted:

Income from continuing operations $ 0.60 $ 0.64 $ 1.56 $ 1.17
Loss from discontinued operations —   —   —   (0.01 )
Net income $ 0.60   $ 0.64   $ 1.56   $ 1.16  

Weighted average shares outstanding – Diluted

32,571   32,210   32,524   32,216  
 
 

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

 
  September 30,
2018 		  December 31,
2017
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 245,413 $ 222,280
Accounts receivable, net 180,875 145,385
Inventories 97,486 86,372
Other current assets 8,949   8,727  
Total current assets 532,723 462,764
Property, plant, and equipment, net 93,718 97,098
Goodwill 323,321 321,074
Acquired intangibles 99,545 105,768
Other assets 4,480   4,681  
$ 1,053,787   $ 991,385  
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 92,997 $ 82,387
Accrued expenses 76,268 75,467
Billings in excess of cost 21,900 12,779
Current maturities of long-term debt 400   400  
Total current liabilities 191,565 171,033
Long-term debt 209,809 209,621
Deferred income taxes 32,110 31,237
Other non-current liabilities 37,428 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; 32,842 shares and 32,332 shares issued and outstanding in 2018 and 2017 328 323
Additional paid-in capital 280,149 271,957
Retained earnings 325,878 274,562
Accumulated other comprehensive loss (6,174 ) (4,366 )
Cost of 778 and 615 common shares held in treasury in 2018 and 2017 (17,306 ) (10,757 )
Total shareholders’ equity 582,875   531,719  
$ 1,053,787   $ 991,385  
 
 

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 
  Nine Months Ended
September 30,
2018   2017
Cash Flows from Operating Activities
Net income $ 50,692 $ 37,384
Loss from discontinued operations —   (405 )
Income from continuing operations 50,692 37,789
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 15,449 16,427
Stock compensation expense 6,854 5,069
Net gain on sale of assets (203 ) (139 )
Exit activity costs (recoveries), non-cash 1,088 (1,931 )
Benefit of deferred income taxes — (136 )
Other, net 1,317 1,411
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable (30,534 ) (42,310 )
Inventories (16,263 ) 2,016
Other current assets and other assets 1,052 (2,002 )
Accounts payable 9,237 25,134
Accrued expenses and other non-current liabilities (479 ) 7,503  
Net cash provided by operating activities 38,210   48,831  
Cash Flows from Investing Activities
Cash paid for acquisitions, net of cash acquired (5,241 ) (18,494 )
Net proceeds from sale of property and equipment 3,147 12,935
Purchases of property, plant, and equipment (6,767 ) (5,152 )
Net cash used in investing activities (8,861 ) (10,711 )
Cash Flows from Financing Activities
Long-term debt payments (400 ) (400 )
Purchase of treasury stock at market prices (6,549 ) (1,982 )
Net proceeds from issuance of common stock 1,343   649  
Net cash used in financing activities (5,606 ) (1,733 )
Effect of exchange rate changes on cash (610 ) 1,468  
Net increase in cash and cash equivalents 23,133 37,855
Cash and cash equivalents at beginning of year 222,280   170,177  
Cash and cash equivalents at end of period $ 245,413   $ 208,032  
 
 

GIBRALTAR INDUSTRIES, INC.

Reconciliation of Adjusted Financial Measures

(in thousands, except per share data)

(unaudited)

 
  Three Months Ended
September 30, 2018

As
Reported
In GAAP
Statements

 

Restructuring
Charges

 

Senior
Leadership
Transition
Costs

 

Acquisition
Related
Items

 

Tax
Reform

 

Adjusted
Financial
Measures

Net Sales
Residential Products $ 125,839 $ — $ — $ — $ — $ 125,839
Industrial & Infrastructure Products 56,033 — — — — 56,033
Less Inter-Segment Sales (272 ) —   —   —   —   (272 )
55,761 — — — — 55,761
Renewable Energy & Conservation 98,486   —   —   —   —   98,486  
Consolidated sales 280,086 — — — — 280,086
 
Income from operations
Residential Products 20,138 1,877 — — — 22,015
Industrial & Infrastructure Products 2,892 1,775 — — — 4,667
Renewable Energy & Conservation 15,072   (156 ) —   —   —   14,916  
Segments Income 38,102 3,496 — — — 41,598
Unallocated corporate expense (8,698 ) 164   386   471   —   (7,677 )
Consolidated income from operations 29,404 3,660 386 471 — 33,921
 
Interest expense 2,906 — — — — 2,906
Other expense 522   —   —   —   —   522  
Income before income taxes 25,976 3,660 386 471 — 30,493
Provision for income taxes 6,473   904   91   113   (245 ) 7,336  
Income from continuing operations $ 19,503   $ 2,756   $ 295   $ 358   $ 245   $ 23,157  
Income from continuing operations per share - diluted $ 0.60   $ 0.08   $ 0.01   $ 0.01   $ 0.01   $ 0.71  
 
Operating margin
Residential Products 16.0 % 1.5 % — % — % — % 17.5 %
Industrial & Infrastructure Products 5.2 % 3.2 % — % — % — % 8.4 %
Renewable Energy & Conservation 15.3 % (0.2 )% — % — % — % 15.1 %
Segments Margin 13.6 % 1.3 % — % — % — % 14.9 %
Consolidated 10.5 % 1.3 % 0.1 % 0.2 % — % 12.1 %
 
 

GIBRALTAR INDUSTRIES, INC.

Reconciliation of Adjusted Financial Measures

(in thousands, except per share data)

(unaudited)

 
 

Three Months Ended
September 30, 2017

As
Reported
In GAAP
Statements

 

Acquisition
&
Restructuring
Charges

 

Senior
Leadership
Transition
Costs

 

Portfolio
Management

 

Adjusted
Financial
Measures

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

GIBRALTAR INDUSTRIES, INC.

Reconciliation of Adjusted Financial Measures

(in thousands, except per share data)

(unaudited)

 
 

Nine Months Ended
September 30, 2018

As Reported
In GAAP
Statements

 

Restructuring
Charges

 

Senior
Leadership
Transition
Costs

 

Acquisition
Related
Items

 

Tax
Reform

 

Adjusted
Financial
Measures

Net Sales
Residential Products $ 360,915 $ — $ — $ — $ — $ 360,915
Industrial & Infrastructure Products 172,218 — — — — 172,218
Less Inter-Segment Sales (861 ) —   —   —   —   (861 )
171,357 — — — — 171,357
Renewable Energy & Conservation 229,187   —   —   —   —   229,187  
Consolidated sales 761,459 — — — — 761,459
 
Income from operations
Residential Products 57,572 1,682 — — — 59,254
Industrial & Infrastructure Products 12,098 1,262 — — — 13,360
Renewable Energy & Conservation 28,690   (23 ) 178   —   —   28,845  
Segments Income 98,360 2,921 178 — — 101,459
Unallocated corporate expense (22,839 ) 431   844   471   —   (21,093 )
Consolidated income from operations 75,521 3,352 1,022 471 — 80,366
 
Interest expense 9,305 — — — — 9,305
Other income (50 ) —   —   —   —   (50 )
Income before income taxes 66,266 3,352 1,022 471 — 71,111
Provision for income taxes 15,574   798   264   113   (177 ) 16,572  
Income from continuing operations $ 50,692   $ 2,554   $ 758   $ 358   $ 177   $ 54,539  
Income from continuing operations per share – diluted $ 1.56   $ 0.08   $ 0.02   $ 0.01   $ 0.01   $ 1.68  
 
Operating margin
Residential Products 16.0 % 0.5 % — % — % — % 16.4 %
Industrial & Infrastructure Products 7.1 % 0.7 % — % — % — % 7.8 %
Renewable Energy & Conservation 12.5 % — % 0.1 % — % — % 12.6 %
Segments Margin 12.9 % 0.4 % — % — % — % 13.3 %
Consolidated 9.9 % 0.5 % 0.1 % 0.1 % — % 10.6 %
 
 

GIBRALTAR INDUSTRIES, INC.

Reconciliation of Adjusted Financial Measures

(in thousands, except per share data)

(unaudited)

 
  Nine Months Ended
September 30, 2017

As Reported In
GAAP
Statements

 

Acquisition &
Restructuring
Charges

 

Senior
Leadership
Transition
Costs

 

Portfolio
Management

 

Adjusted
Financial
Measures

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

Source: Gibraltar Industries, Inc.

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