Gibraltar Announces Fourth-Quarter 2019 Financial Results

Gibraltar Industries, Inc. (Nasdaq: ROCK), a leading manufacturer and provider of products and services for the renewable energy, conservation, residential, industrial and infrastructure markets, today reported its financial results for the three- and twelve-month periods ended December 31, 2019.

“We continued our momentum in operating performance from the third quarter, delivering solid results in the fourth quarter,” said President and Chief Executive Officer Bill Bosway. “Revenue increased 7%, adjusted EPS increased 32%, and we generated $57 million of cash from operations. Our backlog continued to grow, up 35% to $218 million at the end of the fourth quarter as we further expanded participation in core end markets.”

“Within our segments, Renewable Energy & Conservation delivered growth and margin expansion as demand for our turnkey solutions continued to increase. Subsequent to quarter-end, we acquired Thermo Energy Systems, expanding our North American leadership position in commercial greenhouse solutions, and Delta Separations, continuing the buildout of our processing solutions platform. Our Residential Products performance remained consistent with the market, and Industrial & Infrastructure Products delivered continued margin expansion. Overall, our operating momentum, growing backlog, continued portfolio optimization and strong presence in solid end markets support our confidence as we head into 2020.”

Fourth Quarter 2019 Consolidated Results

Gibraltar reported the following consolidated results:

		Three Months Ended December 31,
Dollars in millions, except EPS		GAAP							Adjusted
		2019		2018		% Change			2019		2018		% Change
Net Sales		$258.1		$240.9		7.1%			$258.1		$240.9		7.1%
Net Income		$14.4		$13.1		9.9%			$20.3		$15.2		33.6%
Diluted EPS		$0.44		$0.40		10.0%			$0.62		$0.47		31.9%

Fourth quarter 2019 net sales increased 7.1% to $258.1 million versus 2018, above the midpoint of the quarterly guidance range provided in Gibraltar’s third quarter 2019 earnings release. Of the 7.1% increase, 5.3% was organic growth driven by the Renewable Energy & Conservation segment, and 1.8% was generated by the acquisition of Apeks Supercritical, which was completed in the third quarter of 2019.

GAAP earnings increased 9.9% to $14.4 million, or $0.44 per share, while adjusted earnings increased 33.6% to $20.3 million, or $0.62 per share. Earnings in the quarter included a charge of $3.2 million, or $0.07 per share related to the exit of the pension plan in the Industrial business. Without the impact of this charge, the Company would have delivered a 27.5% improvement in GAAP earnings per share year over year, the result of organic growth in Renewable Energy & Conservation, lower interest expense, and continuing benefits from operational excellence initiatives. The year-over-year improvement was partially offset by lower earnings in the Residential Products and Industrial & Infrastructure Products businesses. The adjusted amounts for the fourth quarter of 2019 remove expenses of $7.2 million, or $0.18 per share, associated with restructuring, senior leadership transition, and acquisitions. Special items removed from both the fourth quarters of 2019 and 2018 amounts are further described in the appended reconciliation of adjusted financial measures.

Fourth Quarter Segment Results

Renewable Energy & Conservation

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

		Three Months Ended December 31,
Dollars in millions		GAAP							Adjusted
		2019		2018		% Change			2019		2018		% Change
Net Sales		$111.4		$88.1		26.4%			$111.4		$88.1		26.4%
Operating Margin		14.9%		9.9%		500 bps			15.2%		11.6%		360 bps

Renewable Energy & Conservation revenues increased 26.4%, with 21.4% driven by organic growth and 5.0% from the acquisition of Apeks Supercritical. Segment backlog increased 51% versus 2018, the result of participation gains and healthy market dynamics.

Operating margin expanded through continued execution and volume leverage, along with favorable product and vertical market mix. Adjusted operating margin for the fourth quarter of 2019 and 2018 removes special charges for acquisition related items and restructuring initiatives, as further described in the appended reconciliation of adjusted financial measures.

Residential Products

For the fourth quarter, the Residential Products segment reported:

		Three Months Ended December 31,
Dollars in millions		GAAP							Adjusted
		2019		2018		% Change			2019		2018		% Change
Net Sales		$101.2		$102.3		(1.1)%			$101.2		$102.3		(1.1)%
Operating Margin		13.0%		12.0%		100 bps			13.1%		13.4%		(30) bps

Residential Products revenues decreased slightly versus 2018, as a modest increase in volume was offset by market pricing. Adjusted operating margin declined due to unfavorable product mix partially offset by improved material cost alignment and 80/20 simplification initiatives. Adjusted operating margin for the fourth quarters of 2019 and 2018 removes the special charges for restructuring initiatives under the 80/20 program from both periods.

Industrial & Infrastructure Products

For the fourth quarter, the Industrial & Infrastructure Products segment reported:

		Three Months Ended December 31,
Dollars in millions		GAAP							Adjusted
		2019		2018		% Change			2019		2018		% Change
Net Sales		$45.5		$50.5		(9.9)%			$45.5		$50.5		(9.9)%
Operating Margin		(0.5)%		6.4%		(690) bps			7.0%		6.7%		30 bps

Industrial & Infrastructure Products revenues decreased nearly 10% driven by market pricing and lower demand for core Industrial products as customers delayed purchases to optimize their inventory in a declining steel price environment. Revenue from the Infrastructure business was consistent with the prior year.

The increase in adjusted operating margin was driven by a more favorable mix of higher margin products and continued execution on 80/20 profit improvement initiatives. Adjusted operating margin for the fourth quarters of 2019 and 2018 removes special charges for restructuring initiatives from both periods.

Strategy and Business Outlook

Following four years of steady improvement in operational execution and financial results, Gibraltar delivered another year of solid performance in 2019, and has strong momentum going into 2020. Gibraltar is now taking the next step forward in its strategy with a focus on delivering sustainable growth and returns and strengthening its leadership positions in faster growing end markets.

Mr. Bosway commented, “Over the past twelve months, we have completed a thorough evaluation of the markets we participate in, as well as our position in each of our markets. This work has solidified our strategy and defined our plans to accelerate growth and further improve Gibraltar’s margin profile, both through organic and inorganic investment. We have improved our portfolio through the recent acquisitions of Apeks Supercritical, Thermo Energy Systems and Delta Separations. Our operating foundation is focused on excelling across three core tenets: Business Systems, Portfolio Management, and Organization Development.

Mr. Bosway concluded, “With this strategy in place, we are confident in our plans for 2020 and the opportunity for our business to deliver increasing returns. Our position in faster growing markets continues to expand, and we continue to build on our solid and growing backlog. A larger percentage of our business is now direct with end customers, our new products and services are resonating well, and we are building stronger positions through investments across our businesses. We expect to deliver another solid year of performance in 2020 with revenue in the range of $1.21 billion to $1.23 billion, up 15 – 17% from 2019, and with GAAP EPS in the range of $2.58 and $2.75, or $2.95 to $3.12 on an adjusted basis, compared with $1.99 and $2.58, respectively, in 2019.”

For the first quarter of 2020, the Company is expecting revenue in the range of $246 million to $256 million. GAAP EPS for the first quarter 2020 are expected to be between $0.27 and $0.33, or $0.37 to $0.43 on an adjusted basis.

Gibraltar will hold an Investor Day featuring presentations on each of its businesses by members of senior management on March 18^th in New York City.

FY 2020 Guidance		Gibraltar Industries
Dollars in millions, except EPS		Revenue		Operating					Income			Net			Diluted Earnings
				Income			Margin		Taxes			Income			Per Share
GAAP Measures	$	1,210-$1,230		$	118 – 126		9.8–10.2%		$	33-35		$	85-91		$	2.58-2.75
Adjustments					15		1.2%		3			12			$0.37
Adjusted Measures				$	133 – 141		11.0-11.4%		$	36-38		$	97-103		$	2.95-3.12

Fourth Quarter Conference Call Details

Gibraltar will host a conference call today starting at 9:00 a.m. ET to review its results for the fourth quarter of 2019. Interested parties may access the call by dialing [phone] or [phone] or by accessing the webcast at the Investor Info section of the Company’s website at www.gibraltar1.com. Presentation slides referenced during the conference call will be available for download on the website. 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 provider of products and services for the renewable energy, conservation, residential, industrial, and infrastructure markets. With a three-pillar strategy focused on business systems, portfolio management, and organization and talent development, Gibraltar’s mission is to create compounding and sustainable value with strong leadership positions in higher growth, profitable end markets. Gibraltar serves customers primarily throughout North America. Comprehensive information about Gibraltar can be found on its website at www.gibraltar1.com.

Forward-Looking Statements

Certain information set forth in this news release, other than historical statements, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are based, in whole or in part, on current expectations, estimates, forecasts, and projections about the Company’s business, and management’s beliefs about future operations, results, and financial position. These statements are not guarantees of future performance and are subject to a number of risk factors, uncertainties, and assumptions. Actual events, performance, or results could differ materially from the anticipated events, performance, or results expressed or implied by such forward-looking statements. Before making any investment decisions regarding our company, we strongly advise you to read the section entitled “Risk Factors” in our most recent annual report on Form 10-K which can be accessed under the “SEC Filings” link of the “Investor Info” page of our website at www.Gibraltar1.com. 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, senior leadership transition costs, debt repayment, acquisition related costs, 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.

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
		Three Months Ended December 31,								Twelve Months Ended December 31,
		2019				2018				2019				2018
Net Sales		$	258,131			$	240,913			$	1,047,439			$	1,002,372
Cost of sales		197,276				187,653				802,548				760,012
Gross profit		60,855				53,260				244,891				242,360
Selling, general, and administrative expense		41,608				33,261				157,052				146,840
Intangible asset impairment		—				1,552				—				1,552
Income from operations		19,247				18,447				87,839				93,968
Interest (income) expense		(92		)		2,759				2,205				12,064
Other expense		211				2,009				871				1,959
Income before taxes		19,128				13,679				84,763				79,945
Provision for income taxes		4,771				562				19,672				16,136
Net income		$	14,357			$	13,117			$	65,091			$	63,809
Net earnings per share:
Basic		$	0.44			$	0.41			$	2.01			$	2.00
Diluted		$	0.44			$	0.40			$	1.99			$	1.96
Weighted average shares outstanding:
Basic		32,505				32,148				32,389				31,979
Diluted		32,880				32,562				32,722				32,534

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
		December 31, 2019				December 31, 2018
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	191,363			$	297,006
Accounts receivable, net		147,515				140,283
Inventories		78,476				98,913
Prepaid expenses and other current assets		19,748				8,351
Total current assets		437,102				544,553
Property, plant, and equipment, net		95,409				95,830
Operating lease assets		27,662				—
Goodwill		329,705				323,671
Acquired intangibles		92,592				96,375
Other assets		1,980				1,216
		$	984,450			$	1,061,645
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	83,136			$	79,136
Accrued expenses		98,463				87,074
Billings in excess of cost		47,598				17,857
Current maturities of long-term debt		—				208,805
Total current liabilities		229,197				392,872
Long-term debt		—				1,600
Deferred income taxes		40,334				36,530
Non-current operating lease liabilities		19,669				—
Other non-current liabilities		21,286				33,950
Shareholders’ equity:
Preferred stock, $0.01 par value; authorized 10,000 shares; none outstanding		—				—
Common stock, $0.01 par value; authorized 50,000 shares; 33,192 and 32,887 shares issued in 2019 and 2018		332				329
Additional paid-in capital		295,582				282,525
Retained earnings		405,668				338,995
Accumulated other comprehensive loss		(5,391		)		(7,234		)
Cost of 906 and 796 common shares held in treasury in 2019 and 2018		(22,227		)		(17,922		)
Total shareholders’ equity		673,964				596,693
		$	984,450			$	1,061,645

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
		Twelve Months Ended December 31,
		2019				2018
Cash Flows from Operating Activities
Net income		$	65,091			$	63,809
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		19,949				20,374
Intangible asset impairment		—				1,552
Stock compensation expense		12,570				9,189
Exit activity costs, non-cash		408				1,344
Provision for deferred income taxes		3,303				4,781
Other, net		5,296				1,243
Changes in operating assets and liabilities (excluding the effects of acquisitions):
Accounts receivable		(9,418		)		9,737
Inventories		23,105				(16,951		)
Other current assets and other assets		(9,118		)		(22		)
Accounts payable		2,571				(4,828		)
Accrued expenses and other non-current liabilities		16,178				7,317
Net cash provided by operating activities		129,935				97,545
Cash Flows from Investing Activities
Purchases of property, plant, and equipment		(11,184		)		(12,457		)
Acquisitions, net of cash acquired		(8,595		)		(5,241		)
Net proceeds from sale of property and equipment		106				3,149
Net cash used in investing activities		(19,673		)		(14,549		)
Cash Flows from Financing Activities
Long-term debt payments		(212,000		)		(400		)
Payment of debt issuance costs		(1,235		)		—
Purchase of treasury stock at market prices		(4,305		)		(7,165		)
Net proceeds from issuance of common stock		490				1,385
Net cash used in financing activities		(217,050		)		(6,180		)
Effect of exchange rate changes on cash		1,145				(2,090		)
Net (decrease) increase in cash and cash equivalents		(105,643		)		74,726
Cash and cash equivalents at beginning of year		297,006				222,280
Cash and cash equivalents at end of year		$	191,363			$	297,006

GIBRALTAR INDUSTRIES, INC.
Reconciliation of Adjusted Financial Measures
(in thousands, except per share data)
(unaudited)
		Three Months Ended December 31, 2019
		As Reported In GAAP Statements				Restructuring & Acquisition Related Items				Senior Leadership Transition Costs				Adjusted Financial Measures
Net Sales
Renewable Energy & Conservation		$	111,411			$	—			$	—			$	111,411
Residential Products		101,213				—				—				101,213
Industrial & Infrastructure Products		45,709				—				—				45,709
Less Inter-Segment Sales		(202		)		—				—				(202		)
		45,507				—				—				45,507
Consolidated sales		258,131				—				—				258,131
Income from operations
Renewable Energy & Conservation		16,644				288				—				16,932
Residential Products		13,167				72				—				13,239
Industrial & Infrastructure Products		(205		)		3,380				—				3,175
Segment Income		29,606				3,740				—				33,346
Unallocated corporate expense		(10,359		)		752				2,693				(6,914		)
Consolidated income from operations		19,247				4,492				2,693				26,432
Interest income		(92		)		—				—				(92		)
Other expense		211				—				—				211
Income before income taxes		19,128				4,492				2,693				26,313
Provision for income taxes		4,771				1,146				134				6,051
Net income		$	14,357			$	3,346			$	2,559			$	20,262
Net earnings per share – diluted		$	0.44			$	0.10			$	0.08			$	0.62
Operating margin
Renewable Energy & Conservation		14.9		%		0.2		%		—		%		15.2		%
Residential Products		13.0		%		0.1		%		—		%		13.1		%
Industrial & Infrastructure Products		(0.5		)%		7.4		%		—		%		7.0		%
Segments Margin		11.5		%		1.4		%		—		%		12.9		%
Consolidated		7.5		%		1.7		%		1.0		%		10.2		%

GIBRALTAR INDUSTRIES, INC.
Reconciliation of Adjusted Financial Measures
(in thousands, except per share data)
(unaudited)
		Three Months Ended December 31, 2018
		As Reported In GAAP Statements				Restructuring & Acquisition Related Items				Senior Leadership Transition Costs				Tax Reform				Adjusted Financial Measures
Net Sales
Renewable Energy & Conservation		$	88,066			$	—			$	—			$	—			$	88,066
Residential Products		102,301				—				—				—				102,301
Industrial & Infrastructure Products		50,788				—				—				—				50,788
Less Inter-Segment Sales		(242		)		—				—				—				(242		)
		50,546				—				—				—				50,546
Consolidated sales		240,913				—				—				—				240,913
Income from operations
Renewable Energy & Conservation		8,733				1,447				—				—				10,180
Residential Products		12,266				1,425				—				—				13,691
Industrial & Infrastructure Products		3,238				140				—				—				3,378
Segment Income		24,237				3,012				—				—				27,249
Unallocated corporate expense		(5,790		)		33				(430		)		—				(6,187		)
Consolidated income from operations		18,447				3,045				(430		)		—				21,062
Interest expense		2,759				—				—				—				2,759
Other expense (income)		2,009				(3,060		)		—				—				(1,051		)
Income before income taxes		13,679				6,105				(430		)		—				19,354
Provision for income taxes		562				3,978				(370		)		(48		)		4,122
Net income		$	13,117			$	2,127			$	(60	)		$	48			$	15,232
Net earnings per share – diluted		$	0.40			$	0.07			$	—			$	—			$	0.47
Operating margin
Renewable Energy & Conservation		9.9		%		1.6		%		—		%		—		%		11.6		%
Residential Products		12.0		%		1.4		%		—		%		—		%		13.4		%
Industrial & Infrastructure Products		6.4		%		0.3		%		—		%		—		%		6.7		%
Segments Margin		10.1		%		1.2		%		—		%		—		%		11.3		%
Consolidated		7.7		%		1.2		%		(0.2		)%		—		%		8.7		%

GIBRALTAR INDUSTRIES, INC.
Reconciliation of Adjusted Financial Measures
(in thousands, except per share data)
(unaudited)
		Twelve Months Ended December 31, 2019
		As Reported In GAAP Statements				Restructuring & Acquisition Related Items				Senior Leadership Transition Costs				Debt Repayment				Adjusted Financial Measures
Net Sales
Renewable Energy & Conservation		$	373,023			$	—			$	—			$	—			$	373,023
Residential Products		461,630				—				—				—				461,630
Industrial & Infrastructure Products		213,805				—				—				—				213,805
Less Inter-Segment Sales		(1,019		)		—				—				—				(1,019		)
		212,786				—				—				—				212,786
Consolidated sales		1,047,439				—				—				—				1,047,439
Income from operations
Renewable Energy & Conservation		47,558				1,490				—				—				49,048
Residential Products		63,047				3,857				78				—				66,982
Industrial & Infrastructure Products		13,455				4,978				—				—				18,433
Segment Income		124,060				10,325				78				—				134,463
Unallocated corporate expense		(36,221		)		2,145				9,666				—				(24,410		)
Consolidated income from operations		87,839				12,470				9,744				—				110,053
Interest expense		2,205				—				—				(1,079		)		1,126
Other expense		871				—				—				—				871
Income before income taxes		84,763				12,470				9,744				1,079				108,056
Provision for income taxes		19,672				3,180				615				269				23,736
Net income		$	65,091			$	9,290			$	9,129			$	810			$	84,320
Net earnings per share – diluted		$	1.99			$	0.28			$	0.28			$	0.03			$	2.58
Operating margin
Renewable Energy & Conservation		12.7		%		0.4		%		—		%		—		%		13.1		%
Residential Products		13.7		%		0.8		%		—		%		—		%		14.5		%
Industrial & Infrastructure Products		6.3		%		2.3		%		—		%		—		%		8.7		%
Segments Margin		11.8		%		0.9		%		—		%		—		%		12.8		%
Consolidated		8.4		%		1.2		%		0.9		%		—		%		10.5		%

GIBRALTAR INDUSTRIES, INC.
Reconciliation of Adjusted Financial Measures
(in thousands, except per share data)
(unaudited)
		Twelve Months Ended December 31, 2018
		As Reported In GAAP Statements				Restructuring & Acquisition Related Items				Senior Leadership Transition Costs				Tax Reform				Adjusted Financial Measures
Net Sales
Renewable Energy & Conservation		$	317,253			$	—			$	—			$	—			$	317,253
Residential Products		463,216				—				—				—				463,216
Industrial & Infrastructure Products		223,006				—				—				—				223,006
Less Inter-Segment Sales		(1,103		)		—				—				—				(1,103		)
		221,903				—				—				—				221,903
Consolidated sales		1,002,372				—				—				—				1,002,372
Income from operations
Renewable Energy & Conservation		37,423				1,424				178				—				39,025
Residential Products		69,838				3,107				—				—				72,945
Industrial & Infrastructure Products		15,336				1,402				—				—				16,738
Segment Income		122,597				5,933				178				—				128,708
Unallocated corporate expense		(28,629		)		935				414				—				(27,280		)
Consolidated income from operations		93,968				6,868				592				—				101,428
Interest expense		12,064				—				—				—				12,064
Other expense (income)		1,959				(3,060		)		—				—				(1,101		)
Income before income taxes		79,945				9,928				592				—				90,465
Provision for income taxes		16,136				4,889				(106		)		(225		)		20,694
Net income		$	63,809			$	5,039			$	698			$	225			$	69,771
Net earnings per share – diluted		$	1.96			$	0.15			$	0.02			$	0.01			$	2.14
Operating margin
Renewable Energy & Conservation		11.8		%		0.4		%		0.1		%		—		%		12.3		%
Residential Products		15.1		%		0.6		%		—		%		—		%		15.7		%
Industrial & Infrastructure Products		6.9		%		0.6		%		—		%		—		%		7.5		%
Segments Margin		12.2		%		0.6		%		—		%		—		%		12.8		%
Consolidated		9.4		%		0.7		%		0.1		%		—		%		10.1		%

 

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