Gibraltar Industries : Announces Third-Quarter 2020 Financial Results

Q3 Revenues Grow 10%, GAAP and Adjusted EPS Grow 36% and 12%, Respectively Backlog of $304 million up 26% on Renewable Energy and Conservation Demand Strong Balance Sheet and Liquidity Supports Execution and Ongoing Investment in the Business Completes Acquisition of Architectural Mailboxes in Residential Products Segment

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 September 30, 2020.

“We delivered a solid performance as we continued to focus on executing our business plans. Revenue increased 10.2% and adjusted EPS increased 11.6%, with GAAP and adjusted operating margins improving 280 and 40 basis points respectively,” said President and Chief Executive Officer Bill Bosway. “Our investments across the business over the last nine months have been meaningful, targeted, and are beginning to generate positive results. We also recently completed a $27 million acquisition of Architectural Mailboxes, a complementary addition to our Mail and Package solutions business. We enter the fourth quarter with solid momentum and a backlog of $304 million, up 26%, and a strong, liquid balance sheet to fund key initiatives.”

Third Quarter 2020 Consolidated Results

Gibraltar reported the following consolidated results:

		Three Months Ended September 30,
Dollars in millions, except EPS		GAAP									Adjusted
		2020			2019			% Change			2020			2019			% Change
Net Sales		$	329.7		$	299.2		10.2	%		$	329.7		$	299.2		10.2	%
Net Income		$	33.8		$	24.5		38.0	%		$	34.9		$	31.2		11.9	%
Diluted EPS		$	1.02		$	0.75		36.0	%		$	1.06		$	0.95		11.6	%

Third quarter 2020 net sales increased 10.2% to $329.7 million, driven by the Residential Products and Renewable Energy & Conservation segments. Of the 10.2% increase, organic growth accounted for 2.1%, and recent acquisitions contributed 8.1%.

GAAP earnings increased 38.0% to $33.8 million, or $1.02 per share, while adjusted earnings increased 11.9% to $34.9 million, or $1.06 per share, the result of organic growth and marked margin expansion in our Residential Products segment, continued execution in all core businesses, product and services mix, favorable alignment of price to material costs, and ongoing benefits from operational excellence initiatives. Adjusted measures remove charges for restructuring initiatives, acquisition-related items, senior leadership transition costs, and other reclassifications, as 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
		2020				2019				% Change			2020				2019				% Change
Net Sales		$	128.3			$	116.8			9.8	%		$	128.3			$	116.8			9.8	%
Operating Margin			11.1	%			16.8	%		(570) bps				11.6	%			17.8	%		(620) bps

Segment revenue increased 9.8% driven by growth in Renewable Energy and previous acquisitions in the Conservation business, offset by a decline in the core Conservation business related to a slowdown in the cannabis and hemp markets. Total segment backlog increased 28% with Renewable Energy and Conservation businesses contributing equally to the increase over 2019. The strength in backlog is the result of strong end market demand in Renewable Energy, and in Conservation, driven by strength in the fruits and vegetables market and increasing activity in the cannabis market.

Adjusted operating margin declined for the quarter driven by near-term market challenges impacting the Conservation business, particularly related to the cannabis and hemp markets. The acquisitions made in the Conservation business delivered margins consistent with expectations, and margins are expected to improve moving forward. Renewable Energy margin performance remains solid, driven by strong execution, participation gains, and product and service mix.

Residential Products

For the third quarter, the Residential Products segment reported:

		Three Months Ended September 30,
Dollars in millions		GAAP											Adjusted
		2020				2019				% Change			2020				2019				% Change
Net Sales		$	151.7			$	126.3			20.1	%		$	151.7			$	126.3			20.1	%
Operating Margin			21.4	%			13.5	%		790 bps				21.5	%			16.2	%		530 bps

Segment revenue increased 20.1% as the home improvement market continued to show solid activity, and through participation gains across our various distribution channels. Adjusted operating margin increased with consistent execution on higher volume, effective price and material cost management, and additional 80/20 initiatives.

Subsequent to quarter-end, Gibraltar acquired Architectural Mailboxes for $27 million, a complementary addition to Gibraltar’s existing mail & package solutions business within the Residential segment. The acquisition provides an entry into new market segments while creating synergy across digital marketing, engineering, and supply chain initiatives. Architectural Mailboxes revenue is expected to be $26 million in 2020.

Industrial & Infrastructure Products

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

		Three Months Ended September 30,
Dollars in millions		GAAP											Adjusted
		2020				2019				% Change			2020				2019				% Change
Net Sales		$	49.7			$	56.2			(11.6	)%		$	49.7			$	56.2			(11.6	)%
Operating Margin			10.5	%			9.7	%		80 bps				11.0	%			10.2	%		80 bps

Segment revenue decreased 11.6%, driven by lower demand for core industrial products. The infrastructure business was down slightly as the pandemic affected spending on infrastructure projects in certain end markets. Infrastructure backlog grew slightly.

The increase in adjusted operating margin was driven by continued improvement in execution in the industrial business and effective price and material cost management.

Business Outlook

Gibraltar delivered solid revenue and adjusted EPS growth through the first three quarters, and expects fourth quarter performance to surpass 2019 results. Given the ongoing level of uncertainty related to the pandemic, the economy, and the upcoming election, Gibraltar is maintaining the practice of providing qualitative guidance.

“While our momentum and end market trends continue to be positive, we are closely monitoring the everchanging pandemic landscape and potential impact on the U.S. and global economy,” Bosway commented. “We remain focused on executing our operating playbook, maintaining a safe environment for our people, and meeting our customers’ needs every day. We will also continue key organic and inorganic investments to strengthen our business platforms for the markets we serve.”

Third 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 third quarter of 2020. Interested parties may access the webcast through the Investors 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 OPERATIONS (in thousands, except per share data) (unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Net Sales		$	329,665			$	299,236			$	864,918			$	789,308
Cost of sales		244,222				222,658				650,830				605,272
Gross profit		85,443				76,578				214,088				184,036
Selling, general, and administrative expense		41,584				45,158				120,448				115,444
Income from operations		43,859				31,420				93,640				68,592
Interest expense		218				17				385				2,297
Other expense (income)		53				84				(1,542)				660
Income before taxes		43,588				31,319				94,797				65,635
Provision for income taxes		9,828				6,843				21,686				14,901
Net income		$	33,760			$	24,476			$	73,111			$	50,734
Net earnings per share:
Basic		$	1.03			$	0.75			$	2.24			$	1.57
Diluted		$	1.02			$	0.75			$	2.22			$	1.55
Weighted average shares outstanding:
Basic		32,635				32,470				32,606				32,357
Diluted		32,969				32,770				32,902				32,677

GIBRALTAR INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)
		September 30, 2020				December 31, 2019
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	179,816			$	191,363
Accounts receivable, net of allowance of $3,319 and $6,330		203,488				147,515
Inventories, net		77,943				78,476
Prepaid expenses and other current assets		20,306				19,748
Total current assets		481,553				437,102
Property, plant, and equipment, net		94,983				95,409
Operating lease assets		32,359				27,662
Goodwill		382,427				329,705
Acquired intangibles		108,821				92,592
Other assets		1,703				1,980
		$	1,101,846			$	984,450
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	131,746			$	83,136
Accrued expenses		106,480				98,463
Billings in excess of cost		31,267				47,598
Total current liabilities		269,493				229,197
Deferred income taxes		40,942				40,334
Non-current operating lease liabilities		23,314				19,669
Other non-current liabilities		22,022				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; 33,519 shares and 33,192 shares issued and outstanding in 2020 and 2019		335				332
Additional paid-in capital		302,107				295,582
Retained earnings		478,488				405,668
Accumulated other comprehensive loss		(6,220)				(5,391)
Cost of 1,024 and 906 common shares held in treasury in 2020 and 2019		(28,635)				(22,227)
Total shareholders’ equity		746,075				673,964
		$	1,101,846			$	984,450

GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
		Nine Months Ended September 30,
		2020				2019
Cash Flows from Operating Activities
Net income		$	73,111			$	50,734
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		17,325				14,923
Stock compensation expense		6,151				10,087
Gain on sale of business		(1,881)				—
Exit activity costs, non-cash		505				479
Provision for (benefit of) deferred income taxes		668				(429)
Other, net		1,402				3,267
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable		(40,176)				(56,645)
Inventories		6,102				18,617
Other current assets and other assets		6,095				(6,949)
Accounts payable		13,408				22,770
Accrued expenses and other non-current liabilities		(26,516)				15,640
Net cash provided by operating activities		56,194				72,494
Cash Flows from Investing Activities
Acquisitions, net of cash acquired		(54,385)				(8,665)
Net proceeds from sale of property and equipment		568				87
Purchases of property, plant, and equipment		(9,335)				(7,703)
Net proceeds from sale of business		2,000				—
Net cash used in investing activities		(61,152)				(16,281)
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		(6,408)				(3,495)
Net proceeds from issuance of common stock		377				400
Net cash used in financing activities		(6,031)				(216,330)
Effect of exchange rate changes on cash		(558)				729
Net decrease in cash and cash equivalents		(11,547)				(159,388)
Cash and cash equivalents at beginning of year		191,363				297,006
Cash and cash equivalents at end of period		$	179,816			$	137,618

GIBRALTAR INDUSTRIES, INC. Reconciliation of Adjusted Financial Measures (in thousands, except per share data) (unaudited)
		Three Months Ended September 30,2020
		As Reported In GAAP Statements				Restructuring Charges				Senior Leadership Transition Costs				Acquisition Related Items				Adjusted Financial Measures
Net Sales
Renewable Energy & Conservation		$	128,258			$	—			$	—			$	—			$	128,258
Residential Products		151,718				—				—				—				151,718
Industrial & Infrastructure Products		49,767				—				—				—				49,767
Less Inter-Segment Sales		(78)				—				—				—				(78)
		49,689				—				—				—				49,689
Consolidated sales		329,665				—				—				—				329,665
Income from operations
Renewable Energy & Conservation		14,195				172				—				572				14,939
Residential Products		32,454				186				—				—				32,640
Industrial & Infrastructure Products		5,199				252				—				—				5,451
Segments Income		51,848				610				—				572				53,030
Unallocated corporate expense		(7,989)				17				170				16				(7,786)
Consolidated income from operations		43,859				627				170				588				45,244
Interest expense		218				—				—				—				218
Other expense		53				—				—				—				53
Income before income taxes		43,588				627				170				588				44,973
Provision for income taxes		9,828				146				—				135				10,109
Net income		$	33,760			$	481			$	170			$	453			$	34,864
Net earnings per share - diluted		$	1.02			$	0.02			$	0.01			$	0.01			$	1.06
Operating margin
Renewable Energy & Conservation		11.1		%		0.1		%		—		%		0.4		%		11.6		%
Residential Products		21.4		%		0.1		%		—		%		—		%		21.5		%
Industrial & Infrastructure Products		10.5		%		0.5		%		—		%		—		%		11.0		%
Segments Margin		15.7		%		0.2		%		—		%		0.2		%		16.1		%
Consolidated		13.3		%		0.2		%		0.1		%		0.2		%		13.7		%

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)
		Nine Months Ended September 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		$	323,014			$	—			$	—			$	—			$	—			$	323,014
Residential Products		394,609				—				—				—				—				394,609
Industrial & Infrastructure Products		147,831				—				—				—				—				147,831
Less Inter-Segment Sales		(536)				—				—				—				—				(536)
		147,295				—				—				—				—				147,295
Consolidated sales		864,918				—				—				—				—				864,918
Income from operations
Renewable Energy & Conservation		29,082				578				—				2,745				—				32,405
Residential Products		74,143				670				—				—				—				74,813
Industrial & Infrastructure Products		15,832				564				—				—				—				16,396
Segments Income		119,057				1,812				—				2,745				—				123,614
Unallocated corporate expense		(25,417)				116				2,512				325				—				(22,464)
Consolidated income from operations		93,640				1,928				2,512				3,070				—				101,150
Interest expense		385				—				—				—				—				385
Other (income) expense		(1,542)				—				—				—				1,881				339
Income before income taxes		94,797				1,928				2,512				3,070				(1,881)				100,426
Provision for income taxes		21,686				455				—				725				(469)				22,397
Net income		$	73,111			$	1,473			$	2,512			$	2,345			$	(1,412)			$	78,029
Net earnings per share – diluted		$	2.22			$	0.04			$	0.08			$	0.07			$	(0.04)			$	2.37
Operating margin
Renewable Energy & Conservation		9.0		%		0.2		%		—		%		0.8		%		—		%		10.0		%
Residential Products		18.8		%		0.2		%		—		%		—		%		—		%		19.0		%
Industrial & Infrastructure Products		10.7		%		0.4		%		—		%		—		%		—		%		11.1		%
Segments Margin		13.8		%		0.2		%		—		%		0.3		%		—		%		14.3		%
Consolidated		10.8		%		0.2		%		0.3		%		0.4		%		—		%		11.7		%

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		%

 

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