Gibraltar Announces Second-Quarter 2018 Financial Results

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								Income Taxes					Net Income				Diluted Earnings Per 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 [phone] or [phone]. 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 Ended June 30,										Six Months Ended June 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 Ended June 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 Ended June 30, 2018
			As Reported In GAAP Statements					Restructuring Charges					Senior Leadership Transition Costs					Adjusted Financial Measures
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 Ended June 30, 2017
			As Reported In GAAP Statements					Acquisition & Restructuring Charges					Senior Leadership Transition Costs					Portfolio Management					Adjusted Financial Measures
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 Ended June 30, 2018
			As Reported In GAAP Statements					Restructuring Charges					Senior Leadership Transition Costs					Tax Reform					Adjusted Financial Measures
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 Ended June 30, 2017
			As Reported In GAAP Statements					Acquisition & Restructuring Charges					Senior Leadership Transition Costs					Portfolio Management					Adjusted Financial Measures
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		%

View source version on businesswire.com: https://www.businesswire.com/news/home/20180726005419/en/