Gibraltar Reports Second-Quarter Financial Results

Business Wire

BUFFALO, N.Y.--(BUSINESS WIRE)--

Gibraltar Industries, Inc. (ROCK), a leading manufacturer and distributor of products for building and industrial markets, today reported its financial results for the three- and six-month periods ended June 30, 2013. All financial measures in this release reflect only the Company’s continuing operations unless otherwise noted.

Second-Quarter Financial Results

Gibraltar’s net sales for the second quarter of 2013 rose 2% to $224.5 million, compared with $219.7 million for the second quarter of 2012. Second-quarter 2013 adjusted net income was $8.2 million, or $0.26 per diluted share, compared with $8.7 million, or $0.28 per diluted share, in the second quarter of 2012. The adjusted second-quarter 2013 results exclude after-tax special charges of $0.5 million, or $0.01 per diluted share, resulting from exit activity costs related to business restructuring. The adjusted net income for the second quarter of 2012 excluded after-tax special charges totaling $0.8 million, or $0.02 per diluted share, consisting of exit activity and acquisition-related costs. Including these items in the respective periods, the second-quarter 2013 GAAP results were net income of $7.7 million, or $0.25 per diluted share, compared with net income of $7.9 million, or $0.26 per diluted share, in the second quarter of 2012.

Six-Month Financial Results

For the six months ended June 30, 2013, total net sales increased to $421.3 million, from $411.9 million in the comparable 2012 period, a 2% increase. Adjusted net income from continuing operations was $9.4 million, or $0.30 per diluted share, compared to $11.3 million, or $0.37 per diluted share, in the comparable period of 2012. The adjusted results for the first half of 2013 exclude after-tax special charges of $5.3 million, or $0.17 per diluted share, resulting primarily from costs related to the Company’s successful re-financing of its senior subordinated notes during the first quarter, which lowered the interest rate by 175 basis points. Adjusted net income for the first six months of 2012 excludes after-tax special charges of $2.0 million, or $0.07 per diluted share, for exit activity costs related to business restructuring and acquisition-related costs. Including these items, the GAAP net income in the first six months of 2013 was $4.1 million, or $0.13 per diluted share, compared with $9.4 million, or $0.30 per diluted share, in the comparable period of 2012.

Management Comments

“We continued to see improvement as anticipated in some key areas of our business in the second quarter, but these positive developments were offset by lower-than-expected organic revenues,” said Chairman and Chief Executive Officer Brian Lipke. “Our guidance for the quarter was for consolidated revenues to increase 9% year-over-year, led by incremental sales from our recent acquisitions. Although we did see the double-digit growth in the multi-family building market that we anticipated, sales in all of our other end markets were lower than our forecast. Growth in the infrastructure market was modestly slower as expected; however, industrial product revenues were significantly slower. Repair and remodel activity in the residential and low-rise commercial building markets also fell short of our expectations. As a result, our organic sales were down 5% year-over-year, and our total revenues grew only 2% from the second quarter last year.”

“Several positive factors combined to partially offset the shortfall in organic revenue growth in terms of both our top and bottom lines,” said Lipke. “The three acquisitions we completed during the fourth quarter of 2012 contributed meaningfully to our second-quarter sales and margins. These businesses are continuing to perform as expected, and their integration processes are continuing as planned. In addition, our West Coast operation continued to deliver on its margin improvement goals. We also continued to benefit from lower interest expense due to the refinancing of our notes in January of this year. Nonetheless, adjusted earnings per share for the quarter were below our guidance due to the revenue weakness.”

“Sales of our products for single- and multi-family new home construction increased from the second quarter last year,” said Henning Kornbrekke, President and Chief Operating Officer. “We clearly have entered a fundamentally solid long-term recovery in residential new construction, which represents about 10% of our business. Our largest revenue exposure for residential products is related to repair and remodeling where second-quarter activity continued to lag expectations and the prior year period.”

“Residential roofing demand, in particular, did not increase as we had expected in the second quarter,” Kornbrekke said. “We believe this was partly due to weather that was unfavorable for roofing in some parts of the country. It also reflected, we believe, continued reluctance among homeowners to commit to big-ticket remodeling projects. However, our infrastructure products business continued to perform well in the second quarter, driven by backlog, new orders and results from one of the businesses we acquired in the fourth quarter of 2012.”

“Conditions in our industrial markets were similar to those we experienced in the first quarter,” Kornbrekke said. “Industrial demand remained soft, primarily for products sold into the wholesale distribution channel, which ultimately serves a broad cross section of end markets. The reduced demand led to lower selling prices. These factors continued to affect our industrial product sales in North America, as well as in Europe where the ongoing recession continues to depress the automotive and construction markets that are a large part of our business.”

Outlook

“We continued to drive operational improvements across the company during the second quarter of 2013,” said Lipke. “Given the margin leverage in our business model, we are optimistic about Gibraltar’s prospects going forward. The fundamentals in the residential and low-rise commercial building markets are moving in a positive direction, but demand was not as strong as we had anticipated in the first half of 2013. Although we previously expected a second-half recovery in our industrial markets, which represent nearly 40% of our revenues, we now expect continued weakness in demand and pricing. As a result, we now expect that Gibraltar will deliver modest sales growth in 2013, led by the contributions from recent acquisitions, with slightly lower margins and earnings compared to 2012, with adjusted earnings per share in the range of $0.54 to $0.64 for the full year. Longer term, we believe that Gibraltar is well-positioned to deliver more significant improvement on both the top and bottom lines as our end markets resume their growth.”

Second-Quarter Conference Call Details

Gibraltar has scheduled a conference call today to discuss its results for the second quarter of 2013, starting at 9:00 a.m. ET. Interested parties may access the call by dialing (877) 407-5790 or (201) 689-8328. The presentation slides that will be discussed in the conference call are expected to be available this morning, prior to the start of the call. The slides may be downloaded from the Gibraltar website: http://www.gibraltar1.com. 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 distributor of building products, focused on residential and low-rise commercial building markets, as well as industrial and infrastructure markets. The Company generates more than 80% of its sales from products that hold leading positions in their markets, and serves customers across North America and Europe. Gibraltar’s strategy is to grow organically by expanding its product portfolio and penetration of existing customer accounts, while broadening its market and geographic coverage through the acquisition of companies with leadership positions in adjacent product categories. Comprehensive information about Gibraltar can be found on its website at http://www.gibraltar1.com.

Safe Harbor Statement

Information contained in this news release, other than historical information, contains forward-looking statements and is subject to a number of risk factors, uncertainties, and assumptions. Risk factors that could affect these statements include, but are not limited to, the following: the availability of raw materials and the effects of changing raw material prices on the Company’s results of operations; energy prices and usage; changing demand for the Company’s products and services; changes in the liquidity of the capital and credit markets; risks associated with the integration of acquisitions; and changes in interest and tax rates. In addition, such forward-looking statements could also be affected by general industry and market conditions, as well as general economic and political conditions. 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.

Non-GAAP Financial Data

To supplement Gibraltar’s consolidated financial statements presented on a GAAP basis, Gibraltar also presented certain adjusted financial data in this news release. Adjusted financial data excluded special charges consisting of restructuring primarily associated with the closing and consolidation of our facilities, acquisition-related costs, and note re-financing costs. These adjustments are shown in the non-GAAP reconciliation of adjusted operating results excluding special charges provided in the financial statements that accompany this news release. We believe 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 our ongoing business operations. These adjusted measures should not be viewed as a substitute for our GAAP results, and may be different than adjusted measures used by other companies.

Next Earnings Announcement

Gibraltar expects to release its financial results for the three- and nine-month periods ending September 30, 2013, on Thursday, October 31, 2013, and hold its earnings conference call later that morning, starting at 9:00 a.m. ET.

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share data)
(Unaudited)
 
 
       

Three Months Ended
June 30,

   

Six Months Ended
June 30,

2013     2012 2013     2012
Net sales $ 224,519 $ 219,734 $ 421,320 $ 411,905
Cost of sales 179,813 178,008 340,437 334,698
Gross profit 44,706 41,726 80,883 77,207
Selling, general, and administrative expense 28,423 25,433 59,404 53,891
Income from operations 16,283 16,293 21,479 23,316

Interest expense

3,690 4,627 14,850 9,301
Other income (9) (315) (75) (346)
Income before taxes 12,602 11,981 6,704 14,361
Provision for income taxes 4,870 4,066 2,615 4,997
Income from continuing operations 7,732 7,915 4,089 9,364
Discontinued operations:
Loss before taxes (16) (7) (153)
Benefit of income taxes (7) (3) (57)
Loss from discontinued operations (9) (4) (96)
 
Net income $ 7,732 $ 7,906 $ 4,085 $ 9,268
 
Net earnings per share – Basic:
Income from continuing operations $ 0.25 $ 0.26 $ 0.13 $ 0.30
Loss from discontinued operations
Net income $ 0.25 $ 0.26 $ 0.13 $ 0.30
Weighted average shares outstanding - Basic 30,925 30,735 30,901 30,726
 
Net earnings per share – Diluted:
Income from continuing operations $ 0.25 $ 0.26 $ 0.13 $ 0.30
Loss from discontinued operations
Net income $ 0.25 $ 0.26 $ 0.13 $ 0.30
Weighted average shares outstanding - Diluted 31,099 30,815   31,079 30,806
 
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(Unaudited)
 
 
       

June 30,
2013

   

December 31,
2012

Assets
Current assets:
    Cash and cash equivalents $ 44,637 $ 48,028
Accounts receivable, net of reserve 121,851 89,473
Inventories 119,022 116,357
Other current assets   17,051   13,380
    Total current assets 302,561 267,238
 
Property, plant, and equipment, net 144,412 151,613
Goodwill 358,871 359,863
Acquired intangibles 94,966 98,759
Other assets   7,175   6,201
 
Total assets $ 907,985 $ 883,674
 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 81,812 $ 69,060
Accrued expenses 43,975 47,432
Current maturities of long-term debt   417   1,093
Total current liabilities 126,204 117,585
 
Long-term debt 213,604 206,710
Deferred income taxes 56,934 57,068
Other non-current liabilities 32,810 25,489
 
Shareholders’ equity:
Preferred stock, $0.01 par value; authorized 10,000 shares; none outstanding

Common stock, $0.01 par value; authorized 50,000 shares, 31,085 and 30,938 shares issued in 2013 and 2012

310 309
Additional paid-in capital 242,127 240,107
Retained earnings 246,167 242,082
Accumulated other comprehensive loss (5,434) (1,575)
Cost of 389 and 350 common shares held in treasury in 2013 and 2012   (4,737)   (4,101)
 
Total shareholders’ equity   478,433   476,822
 
Total liabilities & shareholders’ equity $ 907,985 $ 883,674
 
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
        Six Months Ended June 30,
2013     2012
Cash Flows from Operating Activities
Net income $ 4,085 $ 9,268
Loss from discontinued operations   (4)   (96)
Income from continuing operations 4,089 9,364
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 13,716 13,292
Loss on early note redemption 7,166
Stock compensation expense 1,623 2,038
Non-cash charges to interest expense 496 789
Other non-cash adjustments 1,653 2,806

Increase (decrease) in cash resulting from changes in the following (excluding the effects of acquisitions):

Accounts receivable (34,296) (24,860)
Inventories (3,628) (7,146)
Other current assets and other assets (3,206) 805
Accounts payable 13,487 15,851
Accrued expenses and other non-current liabilities   4,169   (14,937)
Net cash provided by (used in) operating activities of continuing operations 5,269 (1,998)
Net cash used in operating activities of discontinued operations   (7)   (36)
Net cash provided by (used in) operating activities   5,262   (2,034)
 
Cash Flows from Investing Activities
Purchases of property, plant, and equipment (4,741) (4,562)
Cash paid for acquisitions, net of cash acquired (146) (2,705)
Net proceeds from sale of property and equipment   247   414
Net cash used in investing activities   (4,640)   (6,853)
 
Cash Flows from Financing Activities
Proceeds from long-term debt 210,000
Long-term debt payments (205,080) (404)
Payment of deferred financing fees (3,755)
Payment of note redemption fees (3,702)
Purchase of treasury stock at market prices (636) (968)
Net proceeds from issuance of common stock 336 10
Excess tax benefit from stock compensation   62   59
Net cash used in financing activities   (2,775)   (1,303)
 
Effect of exchange rate changes on cash   (1,238)   136
 
Net decrease in cash and cash equivalents (3,391) (10,054)
 
Cash and cash equivalents at beginning of year   48,028   54,117
 
Cash and cash equivalents at end of period $ 44,637 $ 44,063
 
GIBRALTAR INDUSTRIES, INC.
Non-GAAP Reconciliation of Adjusted Income Statement
(Unaudited)
(in thousands, except per share data)
 
    Three Months Ended June 30, 2013

As
Reported
In GAAP
Statements

   

Restructuring
Costs

    Non-GAAP Item
Net Sales $ 224,519 $ $ 224,519
Cost of sales 179,813 (681) 179,132
Gross profit 44,706 681 45,387
Selling, general, and administrative expense 28,423 (78) 28,345
Income from operations 16,283 759 17,042
Operating margin 7.3% 0.3% 7.6%
 
Interest expense 3,690 3,690
Other Income (9) (9)
Income before income taxes 12,602 759 13,361
Provision for income taxes 4,870 279 5,149
Income from continuing operations $ 7,732 $ 480 $ 8,212
 
Income from continuing operations per share - diluted $ 0.25 $ 0.01 $ 0.26
 
GIBRALTAR INDUSTRIES, INC.
Non-GAAP Reconciliation of Adjusted Income Statement
(Unaudited)
(in thousands, except per share data)
 
    Three Months Ended June 30, 2012

As
Reported
In GAAP
Statements

   

Restructuring
Costs

   

Acquisition
Related Costs

   

Adjusted
Statement of
Operations

Net sales $ 219,734 $ $ $ 219,734
Cost of sales 178,008 (1,113) (89) 176,806
Gross profit 41,726 1,113 89 42,928
Selling, general, and administrative expense 25,433 (4) (32) 25,397
Income from operations 16,293 1,117 121 17,531
Operating margin 7.4% 0.5% 0.1% 8.0%
 
Interest expense 4,627 4,627
Other income (315) (315)
Income before income taxes 11,981 1,117 121 13,219
Provision for income taxes 4,066 419 45 4,530
Income from continuing operations $ 7,915 $ 698 $ 76 $ 8,689
 
Income from continuing operations per share - diluted $ 0.26 $ 0.02 $ $ 0.28
 
GIBRALTAR INDUSTRIES, INC.
Non-GAAP Reconciliation of Adjusted Income Statement
(Unaudited)
(in thousands, except per share data)
 
    Six Months Ended June 30, 2013

As
Reported
In GAAP
Statements

   

Restructuring
Costs

   

Acquisition
Related
Costs

   

Note
Re-
Financing

   

Adjusted
Statement of
Operations

Net sales $ 421,320 $ $ $ $ 421,320
Cost of sales 340,437 (710) (203) 339,524
Gross profit 80,883 710 203 81,796
Selling, general, and administrative expense 59,404
(202)
(120) 59,082
Income from operations 21,479 912 323 22,714
Operating margin 5.1% 0.2% 0.1% 5.4%
 
Interest expense 14,850 (7,166) 7,684
Other income (75) (75)
Income before income taxes 6,704 912 323 7,166 15,105
Provision for income taxes 2,615 335 118 2,616 5,684
Income from continuing operations $ 4,089 $ 577 $ 205 $ 4,550 $ 9,421
 
Income from continuing operations per share - diluted $ 0.13 $ 0.02 $ $ 0.15 $ 0.30
 
GIBRALTAR INDUSTRIES, INC.
Non-GAAP Reconciliation of Adjusted Income Statement
(Unaudited)
(in thousands, except per share data)
 
    Six Months Ended June 30, 2012

As
Reported
In GAAP
Statements

   

Restructuring
Costs

   

Acquisition
Related
Costs

   

Adjusted
Statement of
Operations

Net sales $ 411,905 $ $ $ 411,905
Cost of sales 334,698 (2,879) (150) 331,669
Gross profit 77,207 2,879 150 80,236
Selling, general, and administrative expense 53,891 (18) (112) 53,761
Income from operations 23,316 2,897 262 26,475
Operating margin 5.7% 0.7% 0.0% 6.4%
 
Interest expense 9,301 9,301
Other income (346) (346)
Income before income taxes 14,361 2,897 262 17,520
Provision for income taxes 4,997 1,128 60 6,185
Income from continuing operations $ 9,364 $ 1,769 $ 202 $ 11,335
 
Income from continuing operations per share - diluted $ 0.30 $ 0.06 $ 0.01 $ 0.37
 

Contact:
Gibraltar Industries, Inc.
Kenneth Smith, 716-826-6500 ext. 3217
Chief Financial Officer
kwsmith@gibraltar1.com

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