Renewable Energy Segment Realizing Greater Synergies

1Q and 2Q Revised Upward; YTD GAAP EPS Increases YOY to $1.29 from $0.74

GAAP Guidance Unchanged; Adjusted EPS Increases to $1.57-$1.61

BUFFALO, N.Y.--(BUSINESS WIRE)--Oct. 27, 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 nine-month periods ended September 30, 2016. All financial metrics in this release reflect only the Company’s continuing operations unless otherwise noted.

Consolidated Results

Gibraltar reported the following consolidated results:

The Company reported third quarter 2016 net sales of $273 million, a 10 percent decrease from 2015 which had benefited from a since-completed sales contract and the April 2016 divestiture of a European industrial business. Third quarter GAAP net income was equivalent to the prior year and a 12 percent increase on an adjusted net income basis. The adjusted amounts for the third quarter 2016 and 2015 remove special items from both periods, as described in the appended reconciliation of adjusted financial measures.

For the nine months ended September 30, 2016, the Company reported a 78 percent increase in GAAP net income to $41.4 million, or $1.29 earnings per diluted share, compared to $23.3 million, or $0.74 earnings per diluted share, in the prior-year period. Adjusted results for the nine-month period also increased to adjusted net income of $44.1 million, or $1.38 per diluted share, increases of 74 percent and 70 percent, respectively, compared to the prior year period. The meaningful increase in net earnings stems from the ongoing improvements from the 80/20 simplification initiative plus a more significant realization of synergies benefiting Gibraltar’s renewable energy business in 2016.

Management Comments

“Gibraltar’s third-quarter and year-to-date results reflect continuing periods of success, as we exceeded both our guidance and prior-year results on the bottom line, despite lower revenues,” said Chief Executive Officer Frank Heard. “The strong quarter performance was largely the result of the continued market success of our RBI business, which delivered revenue growth and operational improvements above our expectations. Included in RBI’s increased contribution to our overall results were gains realized from margin improvement initiatives, including supply chain and operational synergies.

“In addition, we continued to increase profitability from our legacy residential businesses as we executed on our 80/20 initiatives to remove unprofitable revenue and costs out of the business. In our Industrial and Infrastructure segment, we are proactively taking actions to address our cost structure in order to minimize the impact of ongoing market pressures resulting from weaker incoming order volume,” said Heard.

“By focusing on operational excellence, portfolio management, product innovation and accretive acquisitions, we are rapidly re-aligning resources, increasing efficiencies and delivering enhanced profitability with a more efficient use of capital across the organization. Our strong financial performance is a direct byproduct of the rising tide of transformation and cultural change throughout the Gibraltar organization,” said Heard.

Third-quarter Segment Results

Residential Products

For the third quarter, the Residential Products segment reported:

Third-quarter 2016 net sales in Gibraltar’s Residential Products segment reflect the gradual improvement in the repair and remodel and new housing construction markets, partially offset by the lower year-over-year sales of postal products due to the completion of a two-year contract for centralized mailboxes as of December 2015.

The increase in segment GAAP operating margin reflects the benefit of improved operational efficiencies and contributions from the 80/20 simplification initiative, as well as the completion of the centralized mailbox contract completed in December 2015, which provided low profitability in the third quarter of 2015. The adjusted operating margin for the third 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 third quarter, the Industrial and Infrastructure Products segment reported:

Third-quarter 2016 net sales in Gibraltar’s Industrial & Infrastructure Products segment were down 24 percent, reflecting the divestiture of the low-margin European industrial operations, and continued market softness from lower order volumes from energy-related markets, construction delays for key infrastructure projects and increased competition in pricing.

The segment’s third-quarter adjusted operating margin decreased 140 basis points due to lower volumes and reduced customer pricing as raw material costs increased. This segment’s adjusted operating margin for the third quarter 2016 removes the special charges for restructuring initiatives under the 80/20 program.

Renewable Energy and Conservation

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

Segment revenues were essentially flat year over year, while its operating income and margin increased more significantly than expected. Its third-quarter 2016 GAAP operating margin increase reflects the diligent execution of operational efficiencies in the segment, including rising synergies from raw material sourcing, freight management, and strategic make-versus-buy decisions. These planned initiatives have yielded better-than-expected benefits.

During the third quarter of 2016, interim testing of RBI’s internal controls was completed, including controls over revenue recognition under its percentage of completion methodology. This new and ongoing testing at RBI, required under SEC guidelines no later than in the year following its acquisition, identified rising amounts of cost savings from margin improvement initiatives being realized, beginning in the first quarter 2016. Further, the analyses determined that $6.6 million of operating income and its net after-tax earnings effect of $0.13 per diluted share preliminarily recorded in the third quarter 2016 would have been more appropriately reported in earlier quarters: $4.0 million of operating income or $0.08 per share in the first quarter 2016 and $2.6 million of operating income or $0.05 per share in the second quarter 2016. As such, this segment’s results for the third quarter 2016 and Gibraltar’s GAAP EPS of $0.43 per diluted share and Adjusted EPS of $0.55 for third quarter 2016 reflect the restatement of the $6.6 million operating income and $0.13 per diluted share to the earlier quarters as noted above. While the reported results are not expected to change, the Company is in the process of finalizing, in consultation with its independent audit firm, whether it would be required to file amended Form 10-Qs for the periods ended March 31, 2016 and June 30, 2016.

Additionally, revised revenue recognition procedures, effective starting in the third quarter 2016, are expected to ensure completed projects are closed timely and that estimated project costs more precisely and timely account for the estimated costs to complete, including any effects being realized from operational initiatives.

This segment’s adjusted operating margin removes the special charges for acquisition-related costs from the third quarter 2015.

Nexus Corporation Acquisition

On October 11, 2016, the Company announced the completed acquisition of Nexus Corporation, a market-leading U.S. provider of commercial-scale greenhouses with expected annual revenues of $30 million for 2016. The addition of Nexus complements the Company’s RBI greenhouse business and positions Gibraltar as a leader in the U.S. commercial greenhouse market. The results of Nexus will be included in the Company’s Renewable Energy and Conservation segment from the date of acquisition.

Business Outlook

“We are again raising our fiscal year guidance,” said Heard. “GAAP EPS for the full year 2016 is expected to range between $1.43 to $1.48 per diluted share, or $1.57 to $1.61 on an adjusted basis. Our expected results compare favorably to the 2015 GAAP EPS results of $0.74, and $1.09 on an adjusted basis. The raised guidance reflects the strong year-to-date performance and our expectation to continue our positive momentum and sustained profitability during the last quarter of 2016. We believe the continued strength in the RBI and residential businesses will largely offset the end-market softness that we expect to impact our Industrial and Infrastructure segment through the fourth quarter. Our strong balance sheet and efficient capital management position us with ample resources to execute on strategic growth through both innovation and acquisition. We continue to develop acquisition opportunities as well as pursue inorganic opportunities to accelerate growth in the front half of 2017. We remain on track to achieve our key financial objectives for 2016: increasing year-over-year earnings, at a higher rate of return on revenues, and making more efficient use of our capital than we did in 2015.”

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

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 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-month and full-year period ending December 31, 2016, on Friday, February 17, 2017, and hold its earnings conference call later that morning, starting at 9:00 a.m. ET.

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Source: Gibraltar Industries, Inc.

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