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Gibraltar Announces Third-Quarter 2019 Financial Results

Gibraltar Industries, Inc. (Nasdaq:ROCK), a leading manufacturer and distributor of building products and services for the renewable energy, conservation, residential, industrial, and infrastructure markets, today reported its financial results for the three- and nine-month periods ended September 30, 2019.

“We delivered solid third quarter results as we continued our focus on top-line execution and operational excellence across our businesses,” stated President and Chief Executive Officer Bill Bosway. “Our Renewable Energy & Conservation segment led our overall top-line performance, largely driven by organic growth and share gains in both of our end markets. We also continued to invest in our Conservation business, which now includes both growing and processing solutions, with the acquisition of Apeks Supercritical, a North American leader in CO2 extraction.

“Additionally, both our Industrial & Infrastructure Products and Residential Products segments continue to benefit from ongoing simplification actions, with Industrial & Infrastructure products delivering stronger profitability this quarter compared to the prior year quarter. In all, we delivered solid adjusted EPS performance, generated $66 million in operating cash flow, up 57% over last year, and continued to generate growing backlog of $241 million heading into the fourth quarter, up 45% over last year, demonstrating the success of our drive to be more relevant to our customers.”

Third Quarter 2019 Consolidated Results

Gibraltar reported the following consolidated results:

Three Months Ended September 30,

Dollars in millions, except EPS

GAAP

Adjusted

2019

 

2018

 

% Change

2019

 

2018

 

% Change

Net Sales

$299.2

 

$280.1

 

6.8%

$299.2

 

$280.1

 

6.8%

Net Income

$24.5

 

$19.5

 

25.6%

$31.2

 

$23.2

 

34.5%

Diluted EPS

$0.75

 

$0.60

 

25.0%

$0.95

 

$0.71

 

33.8%

Third quarter 2019 net sales increased 6.8% to $299.2 million from third quarter 2018 and were above the quarterly guidance range provided in Gibraltar’s second quarter 2019 earnings release. Of the 6.8% increase, 4.3% was driven through organic growth, primarily in the Renewables & Conservation business, and 2.5% resulted from the prior year acquisition of SolarBOS and the recent acquisition of Apeks Supercritical, which was completed during the third quarter of 2019. Residential Products and Industrial & Infrastructure Products revenues were essentially flat.

GAAP earnings increased 25.6% to $24.5 million, or $0.75 per share, at the midpoint of the Company’s quarterly guidance range, while adjusted earnings increased 34.5% to $31.2 million, or $0.95 per share, above the quarterly guidance range. The increases over prior year were the result of increased profitability in the Renewable Energy & Conservation and Industrial & Infrastructure Products segments along with reduced interest expense compared to prior year, partially offset by lower earnings in the Residential Products segment. The adjusted amounts for the third quarter of 2019 remove expenses of $6.7 million, or $0.20 per share, associated with restructuring, senior leadership transition, and acquisitions. Special items removed from both the third quarters of 2019 and 2018 amounts are further described in the appended reconciliation of adjusted financial measures.

Third Quarter Segment Results

Renewable Energy & Conservation

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

Three Months Ended September 30,

Dollars in millions

GAAP

 

Adjusted

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

Net Sales

$116.8

 

$98.5

 

18.6%

 

$116.8

 

$98.5

 

18.6%

Operating Margin

16.8%

 

15.3%

 

150 bps

 

17.8%

 

15.1%

 

270 bps

Third quarter Renewable Energy & Conservation segment revenues increased 18.6% on strong demand. Of the increase, 11.3% was driven by organic growth resulting from our continued efforts to be more relevant to our customers, and 7.3% was driven by the third quarter 2018 acquisition of SolarBOS and the third quarter 2019 acquisition of Apeks Supercritical. Segment backlog is up 72% on a year over year basis, driven by continued strength in end markets as well as participation gains.

Operating margins expanded through better operating execution, volume leverage and favorable product and vertical market mix. This segment’s adjusted operating margin for the third quarters of 2019 and 2018 removes the special charges for acquisition related items and restructuring initiatives, respectively.

Apeks Supercritical Acquisition

On August 30, 2019, Gibraltar acquired Apeks Supercritical, a U.S.-based designer and manufacturer of botanical oil extraction technologies utilizing subcritical and supercritical CO2. Apeks’ trailing twelve-month revenues as of June 30, 2019 were $17.7 million. Apeks sells direct to customers primarily in the cannabis industry.

Mr. Bosway commented, “With Gibraltar’s established portfolio of products and services focused on assisting our customers in designing, building and enhancing their cultivation operations, we recognized our next opportunity to support our customers with optimizing their processing operations. As a result, we have taken our first step forward with the acquisition of Apeks Supercritical, a company that holds a leading position in extraction processing with a strong leadership team, patented technology, and leading-edge clean extraction technology. We are excited about this market, and will continue to broaden our capabilities, and relevance with our customers.”

Residential Products

For the third quarter, the Residential Products segment reported:

Three Months Ended September 30,

Dollars in millions

GAAP

 

Adjusted

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

Net Sales

$126.3

 

$125.8

 

nmf

 

$126.3

 

$125.8

 

nmf

Operating Margin

13.5%

 

16.0%

 

(250) bps

 

16.2%

 

17.5%

 

(130) bps

Third quarter 2019 Residential Products segment revenues increased slightly year-over-year, as modestly increased volumes were partially offset by market pricing.

The third quarter operating margin decline resulted from material cost alignment on a year-over-year basis and unfavorable product mix. This was partially offset by the benefit from restructuring and 80/20 simplification initiatives. Adjusted operating margin for the third 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 third quarter, the Industrial & Infrastructure Products segment reported:

Three Months Ended September 30,

Dollars in millions

GAAP

 

Adjusted

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

Net Sales

$56.2

 

$55.8

 

0. 7%

 

$56.2

 

$55.8

 

0.7%

Operating Margin

9.7%

 

5.2%

 

450 bps

 

10.2%

 

8.4%

 

180 bps

Third quarter 2019 Industrial & Infrastructure Products segment revenues increased nearly 1% year-over-year as continued strengthening of the Infrastructure business was partially offset by lower revenue in the Industrial business, driven by lower steel prices impacting its core industrial products.

The segment operating margin increase was driven by a more favorable mix of higher margin products, increased 80/20 focus on more profitable product lines and customers, and continuing efforts to reduce operating costs from the business. Adjusted operating margin for the third quarters of 2019 and 2018 removes the special charges for restructuring initiatives under the 80/20 program from both periods.

Business Outlook

Mr. Bosway concluded, “We expect continued profitable growth in the final quarter of the year based on the composition of projects in backlog and end market activity levels. Our focus remains achieving and expanding our leadership positions in attractive end markets through organic growth and acquisitions that strengthen our platforms, to increase our value to our customers through innovation and performance optimization, to expand our profitability through operational excellence and 80/20 acceleration, and to build a team and a culture that supports both growth and increasing returns to all our stakeholders.”

Gibraltar is narrowing its guidance for revenues and earnings for the full year 2019 to the upper end of the previously stated range. Gibraltar now expects 2019 consolidated revenues to be in the range of $1,040 million to $1,050 million. GAAP EPS for full year 2019 are now expected to be between $2.03 and $2.10, or $2.48 to $2.55 on an adjusted basis, compared with $1.96 and $2.14, respectively, in 2018.

For the fourth quarter of 2019, the Company expects revenue in the range of $251 million to $261 million, compared with $241 million in fourth quarter 2018. GAAP EPS for the fourth quarter 2019 is expected to be between $0.48 and $0.55, or $0.52 to $0.59 on an adjusted basis, compared with $0.40 and $0.47, respectively.

FY 2019 Guidance Reconciliation

 

 

Gibraltar Industries

Dollars in millions, except EPS

Operating

 

 

 

Diluted

Income

 

Margin

 

Income
Taxes

 

Net
Income

 

Earnings
Per Share

GAAP Measures

$

93 – 96

 

9.0 – 9.2%

 

$

21-22

 

$

66-69

 

$

2.03-2.10

Restructuring Costs

17

 

1.6%

 

3

 

15

 

$0.45

 

 

 

 

Adjusted Measures

$

110 – 113

 

10.6-10.8%

 

$

24-25

 

$

81-84

 

$

2.48-2.55

Third Quarter Conference Call Details

Gibraltar will host a conference call today starting at 9:00 a.m. ET to review its results for the third quarter of 2019. Interested parties may access the call by dialing (877) 407-3088 or (201) 389-0927 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 distributor of building products for the renewable energy, conservation, residential, industrial, and infrastructure, 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, 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
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

Net Sales

$

299,236

$

280,086

$

789,308

$

761,459

Cost of sales

222,658

209,807

605,272

572,359

Gross profit

76,578

70,279

184,036

189,100

Selling, general, and administrative expense

45,158

40,875

115,444

113,579

Income from operations

31,420

29,404

68,592

75,521

Interest expense

17

2,906

2,297

9,305

Other expense (income)

84

522

660

(50

)

Income before taxes

31,319

25,976

65,635

66,266

Provision for income taxes

6,843

6,473

14,901

15,574

Net income

$

24,476

$

19,503

$

50,734

$

50,692

Net earnings per share:

Basic

$

0.75

$

0.61

$

1.57

$

1.59

Diluted

$

0.75

$

0.60

$

1.55

$

1.56

Weighted average shares outstanding:

Basic

32,470

32,115

32,357

31,922

Diluted

32,770

32,571

32,677

32,524

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

 

September 30,
2019

December 31,
2018

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

137,618

$

297,006

Accounts receivable, net

196,334

140,283

Inventories

83,048

98,913

Other current assets

17,527

8,351

Total current assets

434,527

544,553

Property, plant, and equipment, net

95,075

95,830

Operating lease assets

28,573

Goodwill

327,983

323,671

Acquired intangibles

96,185

96,375

Other assets

2,475

1,216

$

984,818

$

1,061,645

Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable

$

103,630

$

79,136

Accrued expenses

97,883

87,074

Billings in excess of cost

38,672

17,857

Current maturities of long-term debt

208,805

Total current liabilities

240,185

392,872

Long-term debt

1,600

Deferred income taxes

36,672

36,530

Non-current operating lease liabilities

20,461

Other non-current liabilities

30,287

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; 33,145 shares and 32,887 shares issued and outstanding in 2019 and 2018

332

329

Additional paid-in capital

293,009

282,525

Retained earnings

391,311

338,995

Accumulated other comprehensive loss

(6,022

)

(7,234

)

Cost of 888 and 796 common shares held in treasury in 2019 and 2018

(21,417

)

(17,922

)

Total shareholders’ equity

657,213

596,693

$

984,818

$

1,061,645

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

Nine Months Ended
September 30,

2019

2018

Cash Flows from Operating Activities

Net income

$

50,734

$

50,692

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

14,923

15,449

Stock compensation expense

10,087

6,854

Exit activity costs, non-cash

479

1,088

Benefit of deferred income taxes

(429

)

Other, net

3,267

1,114

Changes in operating assets and liabilities, excluding the effects of acquisitions:

Accounts receivable

(56,645

)

(30,534

)

Inventories

18,617

(16,263

)

Other current assets and other assets

(6,949

)

1,052

Accounts payable

22,770

9,237

Accrued expenses and other non-current liabilities

15,640

(479

)

Net cash provided by operating activities

72,494

38,210

Cash Flows from Investing Activities

Acquisitions, net of cash acquired

(8,665

)

(5,241

)

Net proceeds from sale of property and equipment

87

3,147

Purchases of property, plant, and equipment

(7,703

)

(6,767

)

Net cash used in investing activities

(16,281

)

(8,861

)

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

(3,495

)

(6,549

)

Net proceeds from issuance of common stock

400

1,343

Net cash used in financing activities

(216,330

)

(5,606

)

Effect of exchange rate changes on cash

729

(610

)

Net (decrease) increase in cash and cash equivalents

(159,388

)

23,133

Cash and cash equivalents at beginning of year

297,006

222,280

Cash and cash equivalents at end of period

$

137,618

$

245,413

GIBRALTAR INDUSTRIES, INC.

Reconciliation of Adjusted Financial Measures

(in thousands, except per share data)

(unaudited)

 

Three Months Ended
September 30, 2019

As
Reported
In GAAP
Statements

Restructuring
Charges

Senior
Leadership
Transition
Costs

Acquisition
Related
Items

Adjusted
Financial
Measures

Net Sales

Renewable Energy & Conservation

$

116,771

$

$

$

$

116,771

Residential Products

126,275

126,275

Industrial & Infrastructure Products

56,361

56,361

Less Inter-Segment Sales

(171

)

(171

)

56,190

56,190

Consolidated sales

299,236

299,236

Income from operations

Renewable Energy & Conservation

19,633

37

1,166

20,836

Residential Products

17,012

3,415

20,427

Industrial & Infrastructure Products

5,462

285

5,747

Segments Income

42,107

3,737

1,166

47,010

Unallocated corporate expense

(10,687

)

246

2,708

470

(7,263

)

Consolidated income from operations

31,420

3,983

2,708

1,636

39,747

Interest expense

17

17

Other expense

84

84

Income before income taxes

31,319

3,983

2,708

1,636

39,646

Provision for income taxes

6,843

1,030

161

417

8,451

Net income

$

24,476

$

2,953

$

2,547

$

1,219

$

31,195

Net earnings per share - diluted

$

0.75

$

0.09

$

0.08

$

0.03

$

0.95

Operating margin

Renewable Energy & Conservation

16.8

%

%

%

1.0

%

17.8

%

Residential Products

13.5

%

2.7

%

%

%

16.2

%

Industrial & Infrastructure Products

9.7

%

0.5

%

%

%

10.2

%

Segments Margin

14.1

%

1.2

%

%

0.4

%

15.7

%

Consolidated

10.5

%

1.3

%

0.9

%

0.5

%

13.3

%

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

Renewable Energy & Conservation

$

98,486

$

$

$

$

$

98,486

Residential Products

125,839

125,839

Industrial & Infrastructure Products

56,033

56,033

Less Inter-Segment Sales

(272

)

(272

)

55,761

55,761

Consolidated sales

280,086

280,086

Income from operations

Renewable Energy & Conservation

15,072

(156

)

14,916

Residential Products

20,138

1,877

22,015

Industrial & Infrastructure Products

2,892

1,775

4,667

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

Net income

$

19,503

$

2,756

$

295

$

358

$

245

$

23,157

Net earnings per share - diluted

$

0.60

$

0.08

$

0.01

$

0.01

$

0.01

$

0.71

Operating margin

Renewable Energy & Conservation

15.3

%

(0.2

)%

%

%

%

15.1

%

Residential Products

16.0

%

1.5

%

%

%

%

17.5

%

Industrial & Infrastructure Products

5.2

%

3.2

%

%

%

%

8.4

%

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)

 

Nine Months Ended
September 30, 2019

As
Reported
In GAAP
Statements

Restructuring
Charges

Senior
Leadership
Transition
Costs

Acquisition
Related
Items

Debt
Repayment

Adjusted
Financial
Measures

Net Sales

Renewable Energy & Conservation

$

261,612

$

$

$

$

$

261,612

Residential Products

360,417

360,417

Industrial & Infrastructure Products

168,096

168,096

Less Inter-Segment Sales

(817

)

(817

)

167,279

167,279

Consolidated sales

789,308

789,308

Income from operations

Renewable Energy & Conservation

30,914

36

1,166

32,116

Residential Products

49,880

3,785

78

53,743

Industrial & Infrastructure Products

13,660

1,598

15,258

Segments Income

94,454

5,419

78

1,166

101,117

Unallocated corporate expense

(25,862

)

919

6,973

474

(17,496

)

Consolidated income from operations

68,592

6,338

7,051

1,640

83,621

Interest expense

2,297

(1,079

)

1,218

Other expense

660

660

Income before income taxes

65,635

6,338

7,051

1,640

1,079

81,743

Provision for income taxes

14,901

1,616

481

418

269

17,685

Net income

$

50,734

$

4,722

$

6,570

$

1,222

$

810

$

64,058

Net earnings per share – diluted

$

1.55

$

0.15

$

0.20

$

0.04

$

0.02

$

1.96

Operating margin

Renewable Energy & Conservation

11.8

%

%

%

0.4

%

%

12.3

%

Residential Products

13.8

%

1.1

%

%

%

%

14.9

%

Industrial & Infrastructure Products

8.2

%

1.0

%

%

%

%

9.1

%

Segments Margin

12.0

%

0.7

%

%

0.1

%

%

12.8

%

Consolidated

8.7

%

0.8

%

0.9

%

0.2

%

%

10.6

%

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

Renewable Energy & Conservation

$

229,187

$

$

$

$

$

229,187

Residential Products

360,915

360,915

Industrial & Infrastructure Products

172,218

172,218

Less Inter-Segment Sales

(861

)

(861

)

171,357

171,357

Consolidated sales

761,459

761,459

Income from operations

Renewable Energy & Conservation

28,690

(23

)

178

28,845

Residential Products

57,572

1,682

59,254

Industrial & Infrastructure Products

12,098

1,262

13,360

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

Net income

$

50,692

$

2,554

$

758

$

358

$

177

$

54,539

Net earnings per share - diluted

$

1.56

$

0.08

$

0.02

$

0.01

$

0.01

$

1.68

Operating margin

Renewable Energy & Conservation

12.5

%

%

0.1

%

%

%

12.6

%

Residential Products

16.0

%

0.5

%

%

%

%

16.4

%

Industrial & Infrastructure Products

7.1

%

0.7

%

%

%

%

7.8

%

Segments margin

12.9

%

0.4

%

%

%

%

13.3

%

Consolidated

9.9

%

0.5

%

0.1

%

0.1

%

%

10.6

%

Contacts:

LHA Investor Relations
Jody Burfening/Carolyn Capaccio
(212) 838-3777
rock@lhai.com

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