Gibraltar Announces First-Quarter 2020 Financial Results

Q1 Revenues Grow 10%, GAAP and Adjusted EPS Grow 95% and 68%, Respectively

Backlog of $258 Million up 39% on Renewable Energy and Conservation and Infrastructure Demand

Strong Balance Sheet and Liquidity Supports Execution and Ongoing Improvement in the Business

First-Hand Experience with SARS, Executing Pandemic Playbook

BUFFALO, N.Y.–(BUSINESS WIRE)–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-month period ended March 31, 2020.

“We got off to the start we expected with continued strength in our growth businesses, particularly Renewable Energy & Conservation. Overall revenue increased 9.7%, of which 2.8% was organic, adjusted EPS up 68% and our backlog grew 39% to a record level of $258 million. Renewable Energy & Conservation revenue grew 22.8% from acquisitions and 17.5% organically. Residential Products revenue was flat despite additional product line simplification, and strength in Infrastructure revenue was offset by weakness in our Industrial markets.”

“I managed a business in Asia during the SARS crisis, and I learned the most important thing we can do in times like this is to support our families, both at home and at work, focus on what we can control and do it well, and be aggressive in our fight to collectively solve problems. Since the COVID-19 pandemic emerged, our team has demonstrated tremendous resiliency and fortitude in navigating through this challenge, and I am incredibly proud of our entire organization,” said President and Chief Executive Officer Bill Bosway. “We launched our initial pandemic task force in February and shortly thereafter began implementing new operating protocols to further support the health and safety of our team while operating our businesses deemed essential for our customers.”

“The impact to our businesses across Gibraltar has varied by end market with continued strength in our renewables and conservation and infrastructure businesses, consistent demand in our core Residential Products business, and slower demand in line with market in our Industrial business. We continue to meet our customers’ needs as our teams operate well along with our supply chain partners. Where we have competency, technology and capacity to do so, we have repurposed production lines to manufacture personal protective equipment (PPE), including masks, face shields, and hand sanitizer. We have distributed PPE to each of our team members across Gibraltar, and their family members, and we are also supporting local health care providers and first responders as needed. In addition, our team recently donated 3.3 million meals to food banks located in the communities where we operate. We will continue to do our best to be part of the solution.”

First Quarter 2020 Consolidated Results

Gibraltar reported the following consolidated results:

 

Three Months Ended March 31,

Dollars in millions, except EPS

GAAP

 

Adjusted

 

2020

2019

% Change

 

2020

2019

% Change

Net Sales

$

249.4

$

227.4

9.7

%

 

$

249.4

$

227.4

9.7

%

Net Income

$

12.1

$

6.3

92.1

%

 

$

15.4

$

9.2

67.4

%

Diluted EPS

$

0.37

$

0.19

94.7

%

 

$

0.47

$

0.28

67.9

%

First quarter 2020 net sales increased 9.7% to $249.4 million versus 2019, in the range of the quarterly guidance provided in Gibraltar’s fourth quarter 2019 earnings release. Of the 9.7% increase, organic growth generated 2.8% driven by our Renewable Energy & Conservation segment, with inorganic growth generating 6.9% from our current quarter acquisitions of Thermo Energy Solutions and Delta Separations, along with Apeks Supercritical, which we acquired in the third quarter of 2019.

GAAP earnings increased 92.1% to $12.1 million, or $0.37 per share, while adjusted earnings increased 67.4% to $15.4 million, or $0.47 per share, the result of organic growth in Renewable Energy & Conservation, improved solar tracker field performance, favorable alignment of price to material costs, improved profitability in Residential Products, lower interest expense, and continuing benefits from operational excellence initiatives. The adjusted amounts for the first quarter of 2020 remove expenses of $0.10 per share, associated with senior leadership transition, acquisitions and restructuring. Special items removed from both the first quarters of 2020 and 2019 are further described in the appended reconciliation of adjusted financial measures.

First Quarter Segment Results

Renewable Energy & Conservation

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

 

Three Months Ended March 31,

Dollars in millions

GAAP

 

Adjusted

 

2020

2019

% Change

 

2020

2019

% Change

Net Sales

$

96.5

 

$

68.8

 

40.3

%

 

$

96.5

 

$

68.8

 

40.3

%

Operating Margin

 

5.9

%

 

2.4

%

350 bps

 

 

7.0

%

 

2.5

%

450 bps

Renewable Energy & Conservation revenues increased 40.3%, driven by organic growth of 17.5% and inorganic growth of 22.8% resulting from the acquisitions of Apeks Supercritical, Thermo Energy Solutions and Delta Separations. Segment backlog increased to record levels, up 58% versus 2019, the result of good market dynamics, participation gains, and the impact of recent acquisitions.

The segment’s core business continued to improve and deliver solid operating results driven by participation gains, volume leverage, productivity improvements, and favorable price/material cost alignment. The impact from acquisitions was consistent with expectations, and although early in the integration process, remains on track to deliver targeted returns in year three. Adjusted operating margin for the first quarter of 2020 and 2019 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 first quarter, the Residential Products segment reported:

 

Three Months Ended March 31,

Dollars in millions

GAAP

 

Adjusted

 

2020

2019

% Change

 

2020

2019

% Change

Net Sales

$

103.4

 

$

103.7

 

(0.3

)%

 

$

103.4

 

$

103.7

 

(0.3

)%

Operating Margin

 

13.3

%

 

11.7

%

160 bps

 

 

13.5

%

 

11.8

%

170 bps

Residential Products revenue decreased slightly versus 2019 due to additional product line simplification initiatives, and less demand for our product lines sold directly to homeowners. Total revenue grew slightly with solid growth in our core roofing-related products and postal businesses before the impact of product line simplification. Adjusted operating margin increased due to strong execution, improved material cost alignment and 80/20 simplification initiatives. Adjusted operating margin for the first quarters of 2020 and 2019 removes the special charges for restructuring initiatives under the 80/20 program as further described in the appended reconciliation of adjusted financial measures.

Industrial & Infrastructure Products

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

 

Three Months Ended March 31,

Dollars in millions

GAAP

 

Adjusted

 

2020

2019

% Change

 

2020

2019

% Change

Net Sales

$

49.5

 

$

54.9

 

(9.8

)%

 

$

49.5

 

$

54.9

 

(9.8

)%

Operating Margin

 

8.1

%

 

7.5

%

60 bps

 

 

8.1

%

 

7.5

%

60 bps

Segment revenue decreased nearly 10%, driven by lower demand for core industrial products as customers delayed purchases in a declining steel price environment. The infrastructure business delivered strong revenue growth driven by solid market activity, participation gains along with modest price increases, and continued to grow backlog.

The increase in adjusted operating margin was driven by strong performance in our infrastructure business and continued improvement in our industrial business, a more favorable alignment of price to material costs and continued execution on 80/20 profit improvement initiatives. Adjusted operating margin for the first quarters of 2020 and 2019 removes special charges for restructuring initiatives as further described in the appended reconciliation of adjusted financial measures.

Business Outlook

Gibraltar continues to accelerate growth and margin improvement through organic and inorganic investment in inherently attractive end markets that are vital to the economy’s core needs and less impacted by economic variables. Gibraltar’s higher growth businesses – renewable energy, commercial greenhouse growing, and processing – represented 39% of first quarter revenue and generated 58% growth in backlog as these markets continue to accelerate. The infrastructure business is also experiencing solid market growth and participation gains as reflected in backlog that has grown 13% over the prior year quarter.

The core residential building products businesses – ventilation, building accessories, and postal – delivered modest growth in the first quarter, but did see demand begin to slow after the end of the first quarter. The home improvement and industrial businesses have been the most impacted in today’s environment. Overall, Gibraltar expects demand in the immediate future to lag prior year until consumer confidence and spending improves.

Bill Bosway commented, “We will continue to enhance our revenue and income streams and, backed by the strength of our balance sheet, will remain laser-focused on executing our strategy, working to improve our business, and helping our team, customers, suppliers, and partners successfully navigate through today’s environment. We are leveraging our operating system – Business Systems, Portfolio Management, and Organization Development – to refine our business, strengthen the organization, and execute critical initiatives that will accelerate growth, profitability, asset utilization, and further improve ROIC.”

Bill Bosway concluded, “Right now, without more clarity, it is difficult to provide guidance for the second quarter and full-year 2020. Therefore, we are going to rescind our previous guidance. That being said, we do expect to deliver positive earnings and generate cash from operations throughout 2020. We will revisit the practice of providing guidance as we gain insight into the timing of recovery from the pandemic.”

First Quarter 2020 Conference Call Details

Gibraltar will host a conference call today starting at 9:00 a.m. ET to review its results for the first quarter of 2020. 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. Factors that could cause actual results to differ materially from current expectations include, among other things, the impacts of COVID-19 on the global economy and on our customers, suppliers, employees, operations, business, liquidity and cash flows, other general economic conditions and conditions in the particular markets in which we operate, changes in customer demand and capital spending, competitive factors and pricing pressures, our ability to develop and launch new products in a cost-effective manner, our ability to realize synergies from newly acquired businesses, and our ability to derive expected benefits from restructuring, productivity initiatives, liquidity enhancing actions, and other cost reduction actions. 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

March 31,

 

2020

 

2019

Net Sales

$

249,439

 

 

$

227,417

 

Cost of sales

193,052

 

 

183,517

 

Gross profit

56,387

 

 

43,900

 

Selling, general, and administrative expense

41,197

 

 

33,334

 

Income from operations

15,190

 

 

10,566

 

Interest (income) expense

(47

)

 

2,061

 

Other expense

192

 

 

589

 

Income before taxes

15,045

 

 

7,916

 

Provision for income taxes

2,986

 

 

1,571

 

Net income

$

12,059

 

 

$

6,345

 

 

 

 

 

Net earnings per share:

 

 

 

Basic

$

0.37

 

 

$

0.20

 

Diluted

$

0.37

 

 

$

0.19

 

Weighted average shares outstanding:

 

 

 

Basic

32,586

 

 

32,279

 

Diluted

32,883

 

 

32,617

 

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

 

 

March 31,

2020

 

December 31,

2019

 

(unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

85,966

 

 

$

191,363

 

Accounts receivable, net of allowance of $5,781 and $6,330

172,452

 

 

147,515

 

Inventories

88,585

 

 

78,476

 

Prepaid expenses and other current assets

16,149

 

 

19,748

 

Total current assets

363,152

 

 

437,102

 

Property, plant, and equipment, net

95,882

 

 

95,409

 

Operating lease assets

33,991

 

 

27,662

 

Goodwill

382,045

 

 

329,705

 

Acquired intangibles

107,528

 

 

92,592

 

Other assets

1,924

 

 

1,980

 

 

$

984,522

 

 

$

984,450

 

Liabilities and Shareholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

102,816

 

 

$

83,136

 

Accrued expenses

84,140

 

 

98,463

 

Billings in excess of cost

34,567

 

 

47,598

 

Total current liabilities

221,523

 

 

229,197

 

Deferred income taxes

39,999

 

 

40,334

 

Non-current operating lease liabilities

24,968

 

 

19,669

 

Other non-current liabilities

20,675

 

 

21,286

 

Shareholders’ equity:

 

 

 

Preferred stock, $0.01 par value; authorized 10,000 shares; none outstanding

 

 

 

Common stock, $0.01 par value; authorized 50,000 shares; 33,388 shares and 33,192 shares issued and outstanding in 2020 and 2019

334

 

 

332

 

Additional paid-in capital

297,269

 

 

295,582

 

Retained earnings

417,436

 

 

405,668

 

Accumulated other comprehensive loss

(11,271

)

 

(5,391

)

Cost of 986 and 906 common shares held in treasury in 2020 and 2019

(26,411

)

 

(22,227

)

Total shareholders’ equity

677,357

 

 

673,964

 

 

$

984,522

 

 

$

984,450

 

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

Three Months Ended

March 31,

 

2020

 

2019

Cash Flows from Operating Activities

 

 

 

Net income

$

12,059

 

 

$

6,345

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

Depreciation and amortization

5,338

 

 

4,941

 

Stock compensation expense

1,665

 

 

2,371

 

(Benefit of) provision for deferred income taxes

(216

)

 

393

 

Other, net

411

 

 

2,456

 

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

 

 

 

Accounts receivable

(7,059

)

 

(27,623

)

Inventories

(6,004

)

 

35

 

Other current assets and other assets

6,144

 

 

165

 

Accounts payable

(17,789

)

 

5,332

 

Accrued expenses and other non-current liabilities

(37,561

)

 

(31,903

)

Net cash used in operating activities

(43,012

)

 

(37,488

)

Cash Flows from Investing Activities

 

 

 

Acquisitions, net of cash acquired

(54,539

)

 

(264

)

Net proceeds from sale of property and equipment

52

 

 

22

 

Purchases of property, plant, and equipment

(2,822

)

 

(3,132

)

Net cash used in investing activities

(57,309

)

 

(3,374

)

Cash Flows from Financing Activities

 

 

 

Long-term debt payments

 

 

(210,000

)

Payment of debt issuance costs

 

 

(1,235

)

Purchase of treasury stock at market prices

(4,184

)

 

(2,151

)

Net proceeds from issuance of common stock

24

 

 

139

 

Net cash used in financing activities

(4,160

)

 

(213,247

)

Effect of exchange rate changes on cash

(916

)

 

612

 

Net decrease in cash and cash equivalents

(105,397

)

 

(253,497

)

Cash and cash equivalents at beginning of year

191,363

 

 

297,006

 

Cash and cash equivalents at end of period

$

85,966

 

 

$

43,509

 

GIBRALTAR INDUSTRIES, INC.

Reconciliation of Adjusted Financial Measures

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

March 31, 2020

 

 

As

Reported

In GAAP

Statements

 

Restructuring

Charges

 

Senior

Leadership

Transition

Costs

 

Acquisition

Related

Items

 

Adjusted

Financial

Measures

Net Sales

 

 

 

 

 

 

 

 

 

 

Renewable Energy & Conservation

 

$

96,497

 

 

$

 

 

$

 

 

$

 

 

$

96,497

 

Residential Products

 

103,419

 

 

 

 

 

 

 

 

103,419

 

Industrial & Infrastructure Products

 

49,801

 

 

 

 

 

 

 

 

49,801

 

Less Inter-Segment Sales

 

(278

)

 

 

 

 

 

 

 

(278

)

 

 

49,523

 

 

 

 

 

 

 

 

49,523

 

Consolidated sales

 

249,439

 

 

 

 

 

 

 

 

249,439

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

 

 

 

 

 

 

 

 

Renewable Energy & Conservation

 

5,699

 

 

18

 

 

 

 

1,001

 

 

6,718

 

Residential Products

 

13,725

 

 

221

 

 

 

 

 

 

13,946

 

Industrial & Infrastructure Products

 

3,989

 

 

(2

)

 

 

 

 

 

3,987

 

Segments Income

 

23,413

 

 

237

 

 

 

 

1,001

 

 

24,651

 

Unallocated corporate expense

 

(8,223

)

 

54

 

 

2,226

 

 

259

 

 

(5,684

)

Consolidated income from operations

 

15,190

 

 

291

 

 

2,226

 

 

1,260

 

 

18,967

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

(47

)

 

 

 

 

 

 

 

(47

)

Other expense

 

192

 

 

 

 

 

 

 

 

192

 

Income before income taxes

 

15,045

 

 

291

 

 

2,226

 

 

1,260

 

 

18,822

 

Provision for income taxes

 

2,986

 

 

73

 

 

 

 

316

 

 

3,375

 

Net income

 

$

12,059

 

 

$

218

 

 

$

2,226

 

 

$

944

 

 

$

15,447

 

Net earnings per share – diluted

 

$

0.37

 

 

$

0.01

 

 

$

0.06

 

 

$

0.03

 

 

$

0.47

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

 

 

 

 

 

 

 

 

 

Renewable Energy & Conservation

 

5.9

%

 

%

 

%

 

1.0

%

 

7.0

%

Residential Products

 

13.3

%

 

0.2

%

 

%

 

%

 

13.5

%

Industrial & Infrastructure Products

 

8.1

%

 

%

 

%

 

%

 

8.1

%

Segments Margin

 

9.4

%

 

0.1

%

 

%

 

0.4

%

 

9.9

%

Consolidated

 

6.1

%

 

0.1

%

 

0.9

%

 

0.5

%

 

7.6

%

GIBRALTAR INDUSTRIES, INC.

Reconciliation of Adjusted Financial Measures

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

March 31, 2019

 

 

As

Reported

In GAAP

Statements

 

Restructuring

Charges

 

Senior

Leadership

Transition

Costs

 

Debt

Repayment

 

Adjusted

Financial

Measures

Net Sales

 

 

 

 

 

 

 

 

 

 

Renewable Energy & Conservation

 

$

68,837

 

 

$

 

 

$

 

 

$

 

 

$

68,837

 

Residential Products

 

103,709

 

 

 

 

 

 

 

 

103,709

 

Industrial & Infrastructure Products

 

55,188

 

 

 

 

 

 

 

 

55,188

 

Less Inter-Segment Sales

 

(317

)

 

 

 

 

 

 

 

(317

)

 

 

54,871

 

 

 

 

 

 

 

 

54,871

 

Consolidated sales

 

227,417

 

 

 

 

 

 

 

 

227,417

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

 

 

 

 

 

 

 

 

Renewable Energy & Conservation

 

1,632

 

 

94

 

 

 

 

 

 

1,726

 

Residential Products

 

12,090

 

 

151

 

 

 

 

 

 

12,241

 

Industrial & Infrastructure Products

 

4,129

 

 

(33

)

 

 

 

 

 

4,096

 

Segments income

 

17,851

 

 

212

 

 

 

 

 

 

18,063

 

Unallocated corporate expense

 

(7,285

)

 

7

 

 

2,495

 

 

 

 

(4,783

)

Consolidated income from operations

 

10,566

 

 

219

 

 

2,495

 

 

 

 

13,280

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

2,061

 

 

 

 

 

 

(1,041

)

 

1,020

 

Other expense

 

589

 

 

 

 

 

 

 

 

589

 

Income before income taxes

 

7,916

 

 

219

 

 

2,495

 

 

1,041

 

 

11,671

 

Provision for income taxes

 

1,571

 

 

54

 

 

621

 

 

260

 

 

2,506

 

Net income

 

$

6,345

 

 

$

165

 

 

$

1,874

 

 

$

781

 

 

$

9,165

 

Net earnings per share – diluted

 

$

0.19

 

 

$

0.01

 

 

$

0.06

 

 

$

0.02

 

 

$

0.28

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

 

 

 

 

 

 

 

 

 

Renewable Energy & Conservation

 

2.4

%

 

0.1

%

 

%

 

%

 

2.5

%

Residential Products

 

11.7

%

 

0.1

%

 

%

 

%

 

11.8

%

Industrial & Infrastructure Products

 

7.5

%

 

(0.1

)%

 

%

 

%

 

7.5

%

Segments margin

 

7.8

%

 

0.1

%

 

%

 

%

 

7.9

%

Consolidated

 

4.6

%

 

0.1

%

 

1.1

%

 

%

 

5.8

%

 

Contacts

LHA Investor Relations

Jody Burfening/Carolyn Capaccio

(212) 838-3777

rock@lhai.com