Gibraltar Industries : Announces Second-Quarter 2020 Financial Results

Q2 Revenues Grow 9%, GAAP and Adjusted EPS Grow 36% and 15%, Respectively Backlog of $277 Million up 14% on Renewable Energy and Conservation Demand Strong Balance Sheet and Liquidity Supports Execution and Ongoing Investment in the Business Continue to Execute Pandemic Playbook

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 June 30, 2020.

“Our organization responded well to a better than expected demand profile in our Residential Products and Renewable Energy & Conservation end markets during the quarter. Despite the continuous challenge of the pandemic, our decision to keep our team intact enabled us to deliver revenue growth and adjusted EPS growth of 8.8% and 15.1%, respectively,” said President and Chief Executive Officer Bill Bosway. “As important, our GAAP and adjusted operating margins improved 200 and 130 basis points, respectively, supporting our continued investment in our business. We are gaining momentum and starting to see more consistent performance across our businesses, with our backlog continuing to build, up 14% to $277 million.”

Second Quarter 2020 Consolidated Results

Gibraltar reported the following consolidated results:

		Three Months Ended June 30,
Dollars in millions, except EPS		GAAP							Adjusted
		2020		2019		% Change			2020		2019		% Change
Net Sales		$285.8		$262.7		8.8%			$285.8		$262.7		8.8%
Net Income		$27.3		$19.9		37.2%			$27.7		$23.7		16.9%
Diluted EPS		$0.83		$0.61		36.1%			$0.84		$0.73		15.1%

Second quarter 2020 net sales increased 8.8% to $285.8 million, driven by the Residential Products and Renewable Energy & Conservation segments. Of the 8.8% increase, organic growth was 1.6%, and recent acquisitions contributed 7.2%.

GAAP earnings increased 37.2% to $27.3 million, or $0.83 per share, while adjusted earnings increased 16.9% to $27.7 million, or $0.84 per share, the result of organic growth in both Residential Products and Renewable Energy and Conservation, marked margin expansion in Residential and Industrial & Infrastructure Products, continued execution in all core businesses, product and services mix, favorable alignment of price to material costs, and ongoing benefits from operational excellence initiatives. Special items removed from both the second quarters of 2020 and 2019 are further described in the appended reconciliation of adjusted financial measures.

Mr. Bosway stated, “We continue to execute our operating playbook as we deal with the pandemic and make necessary adjustments as the current environment evolves. Our top priorities remain our organization, keeping them and their families as safe and healthy as possible, ensuring our supply chain operates well, and maintaining a high level of responsiveness to customers.”

Second Quarter Segment Results

Renewable Energy & Conservation

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

		Three Months Ended June 30,
Dollars in millions		GAAP							Adjusted
		2020		2019		% Change			2020		2019		% Change
Net Sales		$98.3		$76.0		29.3%			$98.3		$76.0		29.3%
Operating Margin		9.4%		12.7%		(330) bps			10.9%		12.6%		(170) bps

Renewable Energy & Conservation revenues increased 29.3%, with organic growth of 4.2%, and inorganic growth of 25.1% resulting from the acquisitions of Apeks Supercritical, Thermo Energy Solutions and Delta Separations. Segment backlog increased, up 15% versus 2019, the result of good market dynamics and participation gains, particularly in renewable energy, and the impact of recent acquisitions.

The segment’s core business continued to grow, driven by renewable energy, and delivered improved operating results driven by participation gains, product and service mix, strong execution, and continued improved solar tracker field performance. These benefits were partly offset by slower market demand for cannabis growing solutions. The impact on margins from acquisitions was consistent with expectations, with the pandemic creating near-term cannabis processing end market demand challenges, and while there have been a few integration challenges, integration overall is expected to be completed on time to deliver targeted returns in year three. Adjusted operating margin for the second 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 second quarter, the Residential Products segment reported:

		Three Months Ended June 30,
Dollars in millions		GAAP							Adjusted
		2020		2019		% Change			2020		2019		% Change
Net Sales		$139.5		$130.4		7.0%			$139.5		$130.4		7.0%
Operating Margin		20.0%		15.9%		410 bps			20.2%		16.2%		400 bps

Residential Products revenue increased 7.0% due to strong repair and remodel activity as homeowners started to “nest” during the pandemic and through participation gains across key product lines and customers. Adjusted operating margin increased due to consistent execution, better price and material cost management, product mix, 80/20 initiatives, and volume leverage. Adjusted operating margin for the second 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 second quarter, the Industrial & Infrastructure Products segment reported:

		Three Months Ended June 30,
Dollars in millions		GAAP							Adjusted
		2020		2019		% Change			2020		2019		% Change
Net Sales		$48.1		$56.2		(14.4)%			$48.1		$56.2		(14.4)%
Operating Margin		13.8%		7.2%		660 bps			14.5%		9.6%		490 bps

Segment revenue decreased 14.4%, driven by lower demand for core industrial products during the pandemic. The infrastructure business was comparable with the prior year’s quarter, and its backlog continued to grow.

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

Business Outlook

Although the Company delivered strong financial performance in the first half of 2020 and continues to experience a growing backlog, the uncertain pace and strength of an economic recovery in the current environment continue to make providing reliable quantitative guidance difficult.

Bill Bosway commented, “Our momentum and current market trends support a solid outlook for the remainder of the year and give us confidence that our second half of the year will be stronger than the first half. However, the current status of the pandemic across the country, and understanding its potential impact on our markets, makes it challenging to provide an outlook and guidance with reliable precision. Therefore, we will continue with suspension of quantitative guidance and will revisit this practice in three months. In the near term, we will continue to focus on what is in front of us and on what we can control. The resiliency inherent in our business model and our strong balance sheet position us to continue investing in our business and strengthening our position in the markets we serve.”

Second 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 second quarter of 2020. Interested parties may access the webcast through the Investor Info section of the Company’s website at www.gibraltar1.com or dial into the call at [phone] or [phone]. 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 80/20 simplification initiatives, senior leadership transition costs, early 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 INCOME
(in thousands, except per share data)
(unaudited)
		Three Months Ended June 30,										Six Months Ended June 30,
		2020					2019					2020					2019
Net Sales		$	285,814				$	262,655				$	535,253				$	490,072
Cost of sales		213,556					199,097					406,608					382,614
Gross profit		72,258					63,558					128,645					107,458
Selling, general, and administrative expense		37,667					36,952					78,864					70,286
Income from operations		34,591					26,606					49,781					37,172
Interest expense		214					219					167					2,280
Other (income) expense		(1,787		)			(13		)			(1,595		)			576
Income before taxes		36,164					26,400					51,209					34,316
Provision for income taxes		8,872					6,487					11,858					8,058
Net income		$	27,292				$	19,913				$	39,351				$	26,258
Net earnings per share:
Basic		$	0.84				$	0.62				$	1.21				$	0.81
Diluted		$	0.83				$	0.61				$	1.20				$	0.80
Weighted average shares outstanding:
Basic		32,605					32,321					32,596					32,300
Diluted		32,860					32,642					32,868					32,630

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
		June 30, 2020					December 31, 2019
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	120,859				$	191,363
Accounts receivable, net of allowance of $6,270 and $6,330		193,609					147,515
Inventories		79,058					78,476
Prepaid expenses and other current assets		22,849					19,748
Total current assets		416,375					437,102
Property, plant, and equipment, net		94,723					95,409
Operating lease assets		33,383					27,662
Goodwill		378,740					329,705
Acquired intangibles		110,481					92,592
Other assets		1,794					1,980
		$	1,035,496				$	984,450
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	116,853				$	83,136
Accrued expenses		94,009					98,463
Billings in excess of cost		29,281					47,598
Total current liabilities		240,143					229,197
Deferred income taxes		40,022					40,334
Non-current operating lease liabilities		24,400					19,669
Other non-current liabilities		21,167					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; 33,413 shares and 33,192 shares issued and outstanding in 2020 and 2019		334					332
Additional paid-in capital		299,829					295,582
Retained earnings		444,728					405,668
Accumulated other comprehensive loss		(8,438		)			(5,391		)
Cost of 993 and 906 common shares held in treasury in 2020 and 2019		(26,689		)			(22,227		)
Total shareholders’ equity		709,764					673,964
		$	1,035,496				$	984,450

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
		Six Months Ended June 30,
		2020					2019
Cash Flows from Operating Activities
Net income		$	39,351				$	26,258
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		11,054					9,892
Stock compensation expense		4,171					6,091
Gain on sale of business		(1,881		)			—
Exit activity costs, non-cash		346					—
(Benefit of) provision for deferred income taxes		(216		)			278
Other, net		1,018					2,437
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable		(25,842		)			(41,156		)
Inventories		5,661					13,464
Other current assets and other assets		1,996					(4,983		)
Accounts payable		(1,732		)			4,012
Accrued expenses and other non-current liabilities		(41,181		)			(9,807		)
Net cash (used in) / provided by operating activities		(7,255		)			6,486
Cash Flows from Investing Activities
Acquisitions, net of cash acquired		(54,385		)			(264		)
Net proceeds from sale of property and equipment		59					60
Purchases of property, plant, and equipment		(5,231		)			(6,265		)
Net proceeds from sale of business		704					—
Net cash used in investing activities		(58,853		)			(6,469		)
Cash Flows from Financing Activities
Long-term debt payments		—					(212,000		)
Payment of debt issuance costs		—					(1,235		)
Purchase of treasury stock at market prices		(4,462		)			(3,149		)
Net proceeds from issuance of common stock		78					208
Net cash used in financing activities		(4,384		)			(216,176		)
Effect of exchange rate changes on cash		(12		)			1,035
Net decrease in cash and cash equivalents		(70,504		)			(215,124		)
Cash and cash equivalents at beginning of year		191,363					297,006
Cash and cash equivalents at end of period		$	120,859				$	81,882

GIBRALTAR INDUSTRIES, INC.
Reconciliation of Adjusted Financial Measures
(in thousands, except per share data)
(unaudited)
		Three Months Ended June 30, 2020
		As Reported In GAAP Statements					Restructuring Charges				Senior Leadership Transition Costs				Acquisition Related Items				Gain on Sale of Business					Adjusted Financial Measures
Net Sales
Renewable Energy & Conservation		$	98,259				$	—			$	—			$	—			$	—				$	98,259
Residential Products		139,472					—				—				—				—					139,472
Industrial & Infrastructure Products		48,263					—				—				—				—					48,263
Less Inter-Segment Sales		(180		)			—				—				—				—					(180		)
		48,083					—				—				—				—					48,083
Consolidated sales		285,814					—				—				—				—					285,814
Income from operations
Renewable Energy & Conservation		9,188					388				—				1,172				—					10,748
Residential Products		27,964					263				—				—				—					28,227
Industrial & Infrastructure Products		6,644					314				—				—				—					6,958
Segments Income		43,796					965				—				1,172				—					45,933
Unallocated corporate expense		(9,205		)			45				116				50				—					(8,994		)
Consolidated income from operations		34,591					1,010				116				1,222				—					36,939
Interest expense		214					—				—				—				—					214
Other (income) expense		(1,787		)			—				—				—				1,881					94
Income before income taxes		36,164					1,010				116				1,222				(1,881		)			36,631
Provision for income taxes		8,872					236				—				274				(469		)			8,913
Net income		$	27,292				$	774			$	116			$	948			$	(1,412	)			$	27,718
Net earnings per share - diluted		$	0.83				$	0.02			$	—			$	0.03			$	(0.04	)			$	0.84
Operating margin
Renewable Energy & Conservation		9.4			%		0.4		%		—		%		1.2		%		—			%		10.9			%
Residential Products		20.0			%		0.2		%		—		%		—		%		—			%		20.2			%
Industrial & Infrastructure Products		13.8			%		0.7		%		—		%		—		%		—			%		14.5			%
Segments Margin		15.3			%		0.3		%		—		%		0.4		%		—			%		16.1			%
Consolidated		12.1			%		0.4		%		—		%		0.4		%		—			%		12.9			%

GIBRALTAR INDUSTRIES, INC.
Reconciliation of Adjusted Financial Measures
(in thousands, except per share data)
(unaudited)
		Three Months Ended June 30, 2019
		As Reported In GAAP Statements					Restructuring and Acquisition Related Items					Senior Leadership Transition Costs					Debt Repayment					Adjusted Financial Measures
Net Sales
Renewable Energy & Conservation		$	76,004				$	—				$	—				$	—				$	76,004
Residential Products		130,433					—					—					—					130,433
Industrial & Infrastructure Products		56,547					—					—					—					56,547
Less Inter-Segment Sales		(329		)			—					—					—					(329		)
		56,218					—					—					—					56,218
Consolidated sales		262,655					—					—					—					262,655
Income from operations
Renewable Energy & Conservation		9,649					(95		)			—					—					9,554
Residential Products		20,778					219					78					—					21,075
Industrial & Infrastructure Products		4,069					1,346					—					—					5,415
Segments income		34,496					1,470					78					—					36,044
Unallocated corporate expense		(7,890		)			670					1,770					—					(5,450		)
Consolidated income from operations		26,606					2,140					1,848					—					30,594
Interest expense		219					—					—					(38		)			181
Other income		(13		)			—					—					—					(13		)
Income before income taxes		26,400					2,140					1,848					38					30,426
Provision for income taxes		6,487					533					(301		)			9					6,728
Net income		$	19,913				$	1,607				$	2,149				$	29				$	23,698
Net earnings per share - diluted		$	0.61				$	0.05				$	0.07				$	—				$	0.73
Operating margin
Renewable Energy & Conservation		12.7			%		(0.1		)	%		—			%		—			%		12.6			%
Residential Products		15.9			%		0.2			%		0.1			%		—			%		16.2			%
Industrial & Infrastructure Products		7.2			%		2.4			%		—			%		—			%		9.6			%
Segments margin		13.1			%		0.6			%		—			%		—			%		13.7			%
Consolidated		10.1			%		0.8			%		0.7			%		—			%		11.6			%

GIBRALTAR INDUSTRIES, INC.
Reconciliation of Adjusted Financial Measures
(in thousands, except per share data)
(unaudited)
		Six Months Ended June 30, 2020
		As Reported In GAAP Statements					Restructuring Charges				Senior Leadership Transition Costs				Acquisition Related Items				Gain on Sale of Business					Adjusted Financial Measures
Net Sales
Renewable Energy & Conservation		$	194,756				$	—			$	—			$	—			$	—				$	194,756
Residential Products		242,891					—				—				—				—					242,891
Industrial & Infrastructure Products		98,064					—				—				—				—					98,064
Less Inter-Segment Sales		(458		)			—				—				—				—					(458		)
		97,606					—				—				—				—					97,606
Consolidated sales		535,253					—				—				—				—					535,253
Income from operations
Renewable Energy & Conservation		14,887					406				—				2,173				—					17,466
Residential Products		41,689					484				—				—				—					42,173
Industrial & Infrastructure Products		10,633					312				—				—				—					10,945
Segments Income		67,209					1,202				—				2,173				—					70,584
Unallocated corporate expense		(17,428		)			99				2,342				309				—					(14,678		)
Consolidated income from operations		49,781					1,301				2,342				2,482				—					55,906
Interest expense		167					—				—				—				—					167
Other (income) expense		(1,595		)			—				—				—				1,881					286
Income before income taxes		51,209					1,301				2,342				2,482				(1,881		)			55,453
Provision for income taxes		11,858					309				—				590				(469		)			12,288
Net income		$	39,351				$	992			$	2,342			$	1,892			$	(1,412	)			$	43,165
Net earnings per share – diluted		$	1.20				$	0.03			$	0.07			$	0.05			$	(0.04	)			$	1.31
Operating margin
Renewable Energy & Conservation		7.6			%		0.2		%		—		%		1.1		%		—			%		9.0			%
Residential Products		17.2			%		0.2		%		—		%		—		%		—			%		17.4			%
Industrial & Infrastructure Products		10.9			%		0.3		%		—		%		—		%		—			%		11.2			%
Segments Margin		12.6			%		0.2		%		—		%		0.4		%		—			%		13.2			%
Consolidated		9.3			%		0.2		%		0.4		%		0.5		%		—			%		10.4			%

GIBRALTAR INDUSTRIES, INC.
Reconciliation of Adjusted Financial Measures
(in thousands, except per share data)
(unaudited)
		Six Months Ended June 30, 2019
		As Reported In GAAP Statements					Restructuring and Acquisition Related Items					Senior Leadership Transition Costs				Debt Repayment					Adjusted Financial Measures
Net Sales
Renewable Energy & Conservation		$	144,841				$	—				$	—			$	—				$	144,841
Residential Products		234,142					—					—				—					234,142
Industrial & Infrastructure Products		111,735					—					—				—					111,735
Less Inter-Segment Sales		(646		)			—					—				—					(646		)
		111,089					—					—				—					111,089
Consolidated sales		490,072					—					—				—					490,072
Income from operations
Renewable Energy & Conservation		11,281					(1		)			—				—					11,280
Residential Products		32,868					370					78				—					33,316
Industrial & Infrastructure Products		8,198					1,313					—				—					9,511
Segments income		52,347					1,682					78				—					54,107
Unallocated corporate expense		(15,175		)			677					4,265				—					(10,233		)
Consolidated income from operations		37,172					2,359					4,343				—					43,874
Interest expense		2,280					—					—				(1,079		)			1,201
Other expense		576					—					—				—					576
Income before income taxes		34,316					2,359					4,343				1,079					42,097
Provision for income taxes		8,058					587					320				269					9,234
Net income		$	26,258				$	1,772				$	4,023			$	810				$	32,863
Net earnings per share - diluted		$	0.80				$	0.06				$	0.12			$	0.03				$	1.01
Operating margin
Renewable Energy & Conservation		7.8			%		—			%		—		%		—			%		7.8			%
Residential Products		14.0			%		0.2			%		—		%		—			%		14.2			%
Industrial & Infrastructure Products		7.4			%		1.2			%		—		%		—			%		8.6			%
Segments margin		10.7			%		0.3			%		—		%		—			%		11.0			%
Consolidated		7.6			%		0.5			%		0.9		%		—			%		9.0			%

 

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