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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Gibraltar Industries Inc    ROCK

GIBRALTAR INDUSTRIES INC (ROCK)
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11/01GIBRALTAR INDUSTRIES : 3Q Earnings Snapshot
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11/01GIBRALTAR INDUSTRIES : Announces Third-Quarter 2018 Financial Results
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10/29GIBRALTAR INDUSTRIES INC : quaterly earnings release
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GIBRALTAR INDUSTRIES : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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11/01/2018 | 09:20pm CET

Certain information set forth herein includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and, therefore, are or may be deemed to be, "forward-looking statements." These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms "believes," "anticipates," "expects," "estimates," "seeks," "projects," "intends," "plans," "may," "will" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, competition, strategies and the industries in which we operate. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those described in the "Risk Factors" disclosed in our Annual Report on Form 10-K. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity and the development of the industries in which we operate may differ materially from those made in or suggested by the forward-looking statements contained herein. In addition, even if our results of operations, financial condition and liquidity and the development of the industries in which we operate are consistent with the forward-looking statements contained in this quarterly report, those results or developments may not be indicative of results or developments in subsequent periods. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statements that we make herein speak only as of the date of those statements, and we undertake no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

Overview

Gibraltar Industries, Inc. (the "Company") is a leading manufacturer and
distributor of building products for residential, industrial, infrastructure,
and renewable energy and conservation markets.
The Company operates and reports its results in the following three reporting
segments, entitled:
• Residential Products;


• Industrial and Infrastructure Products; and

• Renewable Energy and Conservation.




Our Residential Products segment services residential repair and remodeling
activity and new residential housing construction with products including roof
and foundation ventilation products, centralized mail systems and electronic
package solutions, rain dispersion products and accessories. This segment's
products are sold through major retail home centers, building material
wholesalers, distributor groups, residential contractors and directly to
multi-family property management companies.
Our Industrial and Infrastructure Products segment focuses on a variety of
markets including industrial and commercial construction, highway and bridge
construction, automotive, airports and energy and power generation markets with
products including perimeter security, expanded and perforated metal, plank
grating, architectural facades, as well as, expansion joints and structural
bearings for roadways and bridges. This segment sells its products through steel
fabricators and distributors, commercial and transportation contractors, and
original equipment manufacturers.
Our Renewable Energy and Conservation segment focuses on the design,
engineering, manufacturing and installation of solar racking systems and
commercial, institutional, and retail greenhouse structures. This segment's
services and products are provided directly to developers, power companies,
solar energy contractors, and institutional and commercial growers of plants.
As of September 30, 2018, we operated 42 facilities, comprised of 30
manufacturing facilities, six distribution centers, and six offices, which are
located in 18 states, Canada, China, and Japan. These facilities give us a base
of operations to provide customer support, delivery, service and quality to a
number of regional and national customers and provide us with manufacturing and
distribution primarily throughout North America and, to a lesser extent, Asia.

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Table of Contents


Business Strategy
Our business strategy focuses on significantly elevating and accelerating the
growth and financial returns of the Company. We strive to deliver best-in-class,
sustainable value creation for our shareholders for the long-term, and to
generate more earnings at a higher rate of return with a more efficient use of
capital year over year.
Our business strategy has four key elements, or "pillars," which consist of
operational excellence, product innovation, portfolio management and
acquisitions as a strategic accelerator. We believe that the continuing
implementation of these pillars will produce transformational change in the
Company's portfolio and performance, resulting in sustainable value creation for
our shareholders.
Operational excellence is our first pillar in this strategy. We focus on
reducing complexity, adjusting costs and simplifying our product offering
through 80/20 initiatives ("80/20"). 80/20 is the practice of focusing on our
largest and best opportunities (the "80") and eliminating complexity associated
with less profitable opportunities (the "20"). Implementation of 80/20 across
our businesses, along with in-lining and market rate of demand replenishment
initiatives, and outsourcing initiatives for our lower volume products provided
to our customers to achieve our value proposition, will improve our
profitability. Our next step in operational excellence is to concentrate on
selling and marketing strategies, known as trade focus, to drive organic growth
by developing new and innovative products which respond to our customers' needs
to simplify their operations.
Product innovation is our second strategic pillar where we focus on products
with patent protection, developed internally or through acquired product lines.
Innovation is centered on the allocation of new and existing resources to
opportunities that we believe will produce sustainable returns. Our focus is on
driving top line growth with new and innovative products. We are focused on the
development or acquisition of those products and technologies that we believe
have relevance to the end-user and can be differentiated from our competition.
We believe that development of these innovative products and technologies will
support our objectives to produce sustainable returns for our shareholders.
The third pillar of our strategy is portfolio management, which involves the
evaluation of our product lines, customers and end markets with the objective of
allocating leadership time and financial resources to the highest-potential
platforms and businesses. We view portfolio management as a continuous process
that will remain an important part of our strategy as we look to improve the
Company's long-term financial performance. We are currently supporting all of
the businesses in our portfolio today.
The fourth pillar of our strategy is acquisitions, which we consider an
important part of the Company's transformation. Our low leverage, high liquidity
and strong cash flow enables us to consider larger acquisition targets. Our
executive leadership team continues to invest time and energy in prospecting for
and vetting of potential acquisition candidates. However, we remain committed to
only making acquisitions which will contribute long-term value to the Company
and its shareholders. We continue to seek acquisition prospects in attractive
end markets, with unique value propositions and patented products or
technologies. Our target markets include postal and parcel solutions,
residential building products, perimeter security, infrastructure, renewable
energy and conservation. Our recent acquisition of SolarBOS in August 2018 was
the direct result of this strategy.
Overall, we believe our business strategy has enabled us to achieve stronger
financial results, make more efficient use of capital, and deliver higher
shareholder returns. We have and expect to continue to restructure our
operations, including consolidation of facilities, reducing overhead costs, and
controlling investments in inventory, which enables us to better react to
fluctuations in commodity costs and customer demand and has contributed to both
improved margins and cash flows.
Acquisitions and Divestitures
On August 21, 2018, the Company acquired all of the outstanding stock of
SolarBOS for approximately $6 million subject to a working capital adjustment
and certain other adjustments provided for in the stock purchase agreement. The
acquisition was financed through cash on hand. SolarBOS is a provider of
electrical balance of systems products, which consists of electrical components
such as wiring, switches, and combiner boxes that support photovoltaic systems,
for the U.S. solar renewable energy market. The results of operations of
SolarBOS have been included in the Renewable Energy and Conservation segment of
the Company's consolidated financial statements from the date of acquisition.
On February 22, 2017, the Company acquired all of the outstanding stock of
Package Concierge for approximately $19 million subject to a working capital
adjustment and certain other adjustments provided for in the stock purchase

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Table of Contents


agreement. The acquisition was financed through cash on hand. Package Concierge
is a leading provider of multifamily electronic package delivery locker systems
in the United States. The results of operations of Package Concierge have been
included within the Residential Products segment of the Company's consolidated
financial statements from the date of acquisition.
On February 6, 2017, the Company completed the sale of substantially all of its
U.S. bar grating product line assets to a third party. The Company had
previously announced, on December 2, 2016, its intentions to exit its U.S. bar
grating product line and its European residential solar racking business as part
of its portfolio management initiative. This action also resulted in the sale
and closing of 3 facilities in early 2017. These assets were a part of our
Industrial and Infrastructure Products segment.
Economic Conditions
The end markets our businesses serve are subject to economic conditions that are
influenced by various factors. These factors include but are not limited to
changes in general economic conditions, interest rates, exchange rates,
commodity costs, demand for residential construction, demand for repair and
remodeling, governmental policies and funding, tax policies and incentives,
tariffs, trade policies, the level of non-residential construction and
infrastructure projects, need for protection of high value assets, demand for
renewable energy sources, and climate change. We believe the key elements of our
strategy will allow us to respond timely to changes in these factors.
Results of Operations
Three Months Ended September 30, 2018 Compared to the Three Months Ended
September 30, 2017
The following table sets forth selected data from our consolidated statements of
income and the related percentage of net sales for the three months ended
September 30, (in thousands):
                                                     2018                   2017
Net sales                                    $ 280,086    100.0 %   $ 274,574    100.0 %
Cost of sales                                  209,807     74.9 %     205,839     75.0 %
Gross profit                                    70,279     25.1 %      68,735     25.0 %
Selling, general, and administrative expense    40,875     14.6 %      33,042     12.0 %
Income from operations                          29,404     10.5 %      35,693     13.0 %
Interest expense                                 2,906      1.0 %       3,486      1.3 %
Other expense                                      522      0.2 %         404      0.1 %
Income before taxes                             25,976      9.3 %      31,803     11.6 %
Provision for income taxes                       6,473      2.3 %      11,184      4.1 %
Net income                                   $  19,503      7.0 %   $  20,619      7.5 %

The following table sets forth the Company's net sales by reportable segment for the three months ended September 30, (in thousands):

                                                                         Total
                                              2018          2017         Change
Net sales:
Residential Products                       $ 125,839     $ 129,501     $ (3,662 )

Industrial and Infrastructure Products 56,033 57,162 (1,129 ) Less: Intersegment sales

                        (272 )        (224 )        (48 )

Net Industrial and Infrastructure Products 55,761 56,938 (1,177 )

Renewable Energy and Conservation 98,486 88,135 10,351 Consolidated

                               $ 280,086     $ 274,574     $  5,512



Consolidated net sales increased by $5.5 million, or 2.0%, to $280.1 million for the three months ended September 30, 2018 compared to the three months ended September 30, 2017. The 2.0% increase, the net result of a 5.0% increase


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in pricing to customers, partially offset by a 3.0% decrease in volume, was driven by strong growth in our Renewable Energy and Conservation segment, which included a $1.6 million contribution from the recently acquired SolarBos. This growth was partially offset by lower revenues in both the Residential Products segment and the Industrial and Infrastructure Products segments.


Net sales in our Residential Products segment decreased 2.9%, or $3.7 million,
to $125.8 million for the three months ended September 30, 2018 compared to
$129.5 million for the three months ended September 30, 2017. The decrease from
the prior year quarter was primarily due to higher storm-related roofing
activity in the third quarter of 2017, and a slight decline in the
commercial/multi-family construction market, partially offset by steady customer
demand for rain dispersion products.
Net sales in our Industrial and Infrastructure Products segment decreased 2.1%,
or $1.2 million, to $55.8 million for the three months ended September 30, 2018
compared to $56.9 million for the three months ended September 30, 2017. Strong
performance from the Industrial business, and demand for innovative products,
was more than offset by lower demand in the Infrastructure business. The Company
expects continued demand for innovative products in its Industrial business and
growing demand in its Infrastructure business.
Net sales in our Renewable Energy and Conservation segment increased 11.8%, or
$10.4 million, to $98.5 million for the three months ended September 30, 2018
compared to $88.1 million for the three months ended September 30, 2017. The
increase was the result of strong domestic demand, continued growth in
innovative products, and a $1.6 million contribution from the recently acquired
SolarBos.
Our consolidated gross margin slightly increased to 25.1% for the three months
ended September 30, 2018 compared to 25.0% for the three months ended
September 30, 2017. This increase was the result of contributions from our new
innovative products, 80/20 profit improvement initiatives and a more favorable
alignment of material costs to customer selling prices.
Selling, general, and administrative (SG&A) expenses increased by $7.8 million,
or 23.7%, to $40.9 million for the three months ended September 30, 2018 from
$33.0 million for the three months ended September 30, 2017. The $7.8 million
increase was the combined result of $5.0 million of higher performance-based
compensation expenses, a $1.3 million increase in restructuring charges relating
to our 80/20 initiatives, along with a $1.0 million increase in senior
leadership transition costs as compared to the prior year quarter. The higher
performance-based compensation costs are the result of improvements in return on
invested capital year over year and an increasing average stock price in 2018.
SG&A expenses as a percentage of net sales increased to 14.6% for the three
months ended September 30, 2018 compared to 12.0% for the three months ended
September 30, 2017.
The following table sets forth the Company's income from operations and income
from operations as a percentage of net sales by reportable segment for the three
months ended September 30, (in thousands):

© Edgar Online, source Glimpses

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Financials ($)
Sales 2018 1 006 M
EBIT 2018 99,7 M
Net income 2018 61,8 M
Finance 2018 59,0 M
Yield 2018 -
P/E ratio 2018 18,07
P/E ratio 2019 14,90
EV / Sales 2018 1,03x
EV / Sales 2019 0,93x
Capitalization 1 099 M
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Mean consensus OUTPERFORM
Number of Analysts 3
Average target price 43,3 $
Spread / Average Target 26%
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Managers
NameTitle
Frank G. Heard President, Chief Executive Officer & Director
William Patrick Montague Chairman
John Neil Vice President-Strategic Operations
Timothy F. Murphy CFO, Principal Accounting officer & Senior VP
John L. Mehltretter Vice President-Information Technology
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