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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 18th 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 (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 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

%

Contacts:

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

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