Gibraltar’s Net Sales Increase 21% In Fourth Quarter

Gibraltar Industries, Inc. (Nasdaq: ROCK), a leading manufacturer and distributor of products for building and industrial markets, today reported its financial results for the three months and year ended December 31, 2011.

Management Comments

“Gibraltar continued to deliver solid results in the fourth quarter of 2011, concluding a year of strong performance despite minimal growth in our traditional core markets,” said Chairman and Chief Executive Officer Brian Lipke. “Net sales grew 21% for the quarter, including 7% organic growth and 14% growth from recent acquisitions, and 20% for the full year. Adjusted gross margins were up by 180 basis points and 250 basis points for the quarter and the full year, respectively. Excluding special items, adjusted EPS from continuing operations improved modestly for the quarter and significantly for 2011 as a whole.”

“This was another solid operational quarter for Gibraltar, as we continued growing our top line, lowering our breakeven point and enhancing the performance of our business,” said Henning Kornbrekke, President and Chief Operating Officer. “Gibraltar’s growing presence in the industrial and infrastructure markets has enabled us to offset weak demand for housing by selling our products into two of the strongest segments of the economy. Equally important, in our traditional core markets – residential and nonresidential construction and remodeling – we have established Gibraltar as the leader in the majority of our product categories, while increasing our overall market share by launching new products, expanding our geographic coverage and improving our penetration of existing nationwide customer accounts.”

“At the same time, we continued to make consistent progress toward our goal of positioning Gibraltar as the low-cost global supplier in its markets coupled with outstanding customer service,” Kornbrekke said. “Focusing on operational excellence across the Company, we further lowered our cost structure with ongoing lean initiatives, maintained low levels of working capital, and continued to improve our management of commodity costs. In addition, the D.S. Brown and Pacific Award Metals businesses acquired in 2011 made the contributions we expected to Gibraltar’s fourth-quarter growth, operating characteristics, product mix and profitability, and we continued to expand our pipeline of potential future acquisitions.”

Financial Results

Net sales for the fourth quarter of 2011 increased 21% to $174.1 million from $144.1 million for the fourth quarter of 2010, including $20 million in revenues from two second-quarter 2011 acquisitions. Gibraltar’s fourth-quarter 2011 adjusted loss from continuing operations declined to $5.1 million, or $0.17 per share, from a loss of $6.6 million, or $0.22 per share, in the fourth quarter of 2010. Fourth-quarter 2011 adjusted results excluded after-tax special charges of $1.8 million, or $0.05 per share, resulting from acquisition-related costs and exit activity costs related to business restructuring. The adjusted loss from continuing operations for the fourth quarter of 2010 excluded after-tax special charges totaling $69.8 million, or $2.30 per share, primarily consisting of $62.7 million for intangible asset impairments. Adjusting for these items, the GAAP loss from continuing operations was $6.9 million, or $0.22 per share, in the fourth quarter 2011, compared with a loss of $76.3 million, or $2.52 per share, for the fourth quarter last year.

Adjusted gross margin for the fourth quarter of 2011 increased to 16.6% from 14.8% in the fourth quarter of 2010. The increase was primarily due to favorable purchase price variance, improved efficiencies and the impact of recent acquisitions. Adjusted selling, general and administrative expense increased 25% to $33.2 million for the fourth quarter of 2011 from $26.6 million a year earlier, primarily reflecting additional costs incurred by recent acquisitions and an increase in equity compensation tied to Gibraltar’s stock price improvement.

For the year ended December 31, total net sales for 2011 increased to $766.6 million from $637.5 million a year earlier, a 20% increase which included 9% organic growth. Gibraltar’s full-year 2011 adjusted income from continuing operations was $15.3 million, or $0.50 per diluted share, compared with an adjusted loss from continuing operations of $4.0 million, or $0.13 per share, in 2010. The adjusted results for 2011 excluded after-tax special charges of $6.1 million, or $0.20 per share, for acquisition-related costs, exit activity costs related to business restructuring, and equity compensation declined by Mr. Lipke. The adjusted loss from continuing operations for full-year 2010 excluded after-tax special charges of $71.3 million, or $2.36 per share, largely consisting of $62.6 million for intangible asset impairment. Adjusting for these items, Gibraltar’s GAAP income from continuing operations for 2011 was $9.2 million, or $0.30 per diluted share, compared with a loss of $75.4 million, or $2.49 per diluted share, in 2010.

Adjusted gross margin for the full year 2011 increased to 19.8% from 17.3% in 2010. The increase was primarily due to favorable purchase price variance, improved efficiencies and the impact of recent acquisitions. Adjusted selling, general and administrative expense increased 8% to $106.5 million in 2011 from $98.8 million a year earlier, reflecting additional costs incurred by two businesses acquired in 2011. Adjusted selling, general and administration expenses as a percent of net sales fell to 13.9% in 2011 from 15.5% in 2010.

Liquidity and Capital Resources
  • Gibraltar’s liquidity increased again to $170 million as of December 31, 2011, including cash on hand of $54 million and availability under the Company’s revolving credit facility.
  • Working capital management continued to be effective, as days of net working capital for 2011, which consists of accounts receivable, inventory and accounts payable, were 63, compared with 60 days for 2010, the modest rise reflecting a longer cash conversion cycle for the two businesses acquired in 2011.
  • During the fourth quarter of 2011, Gibraltar amended its Senior Credit Agreement to extend the due date of the $200 million revolving credit facility for five years, reduce the Company’s cost of borrowing, and provide additional financial flexibility. There have been no outstanding borrowings under this facility since September-end 2011.

Outlook

“Over the past three years we have been able to significantly improve Gibraltar’s top- and bottom-line performance during a period of unprecedented weakness in housing and nonresidential construction,” said Lipke. “Taking control of our own destiny, we have expanded our presence in attractive adjacent markets organically and through acquisitions, while gaining share in our traditional core markets, significantly lowering our cost structure, and strengthening our balance sheet. As a result, we believe that Gibraltar is well-positioned to improve margins by leveraging expected incremental sales in 2012 – particularly from our core businesses serving the industrial and infrastructure markets which now represent more than 50% of our business. We also expect to report year-over-year improvement in Gibraltar’s financial results for 2012.”

Fourth-Quarter Conference Call Details

Gibraltar has scheduled a conference call to review its results for the fourth quarter of 2011 tomorrow, February 24, 2012, 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 evening, February 23, 2012. The slides may be downloaded from the Gibraltar website: http://www.gibraltar1.com. A web cast 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 nonresidential repair and remodeling, as well as construction of industrial facilities and public infrastructure. The Company generates more than 80% of its sales from products that hold the #1 or #2 positions in their markets, and serves customers across the U.S. and throughout the world from 41 facilities in 20 states, 3 provinces in Canada, England and Germany. 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 intangible asset impairment, restructuring primarily associated with the closing and consolidation of our facilities, acquisition-related costs, surrendered equity compensation, deferred tax valuation allowances, and interest expense recognized as a result of our interest rate swap becoming ineffective. 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 months ending March 31, 2012, on May 2, 2012, and hold its earnings conference call on May 3, 2012, starting at 9:00 a.m. ET.
                   
 
GIBRALTAR INDUSTRIES, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)
 

Three Months EndedDecember 31,

Year EndedDecember 31,
2011   2010   2011   2010  
Net sales $ 174,141 $ 144,115 $ 766,607 $ 637,454
Cost of sales   147,462     128,183     621,492     533,586  
Gross profit 26,679 15,932 145,115 103,868
Selling, general, and administrative expense 33,494 27,291 108,957 99,546
Intangible asset impairment       77,141         76,964  
(Loss) income from operations (6,815 ) (88,500 ) 36,158 (72,642 )
Interest expense 5,042 4,363 19,363 19,714
Other (income) expense   (44 )   84     (90 )   (77 )
(Loss) income before taxes (11,813 ) (92,947 ) 16,885 (92,279 )
(Benefit of) provision for income taxes   (4,959 )   (16,609 )   7,669     (16,923 )
(Loss) income from continuing operations (6,854 ) (76,338 ) 9,216 (75,356 )

Discontinued operations:
Income (loss) before taxes 219 824 13,840 (27,125 )
(Benefit of) provision for income taxes   (30 )   (999 )   6,533     (11,413 )
Income (loss) from discontinued operations   249     1,823     7,307     (15,712 )

Net (loss) income
$ (6,605 ) $ (74,515 ) $ 16,523   $ (91,068 )
 
Net (loss) income per share – Basic:
(Loss) income from continuing operations $ (0.22 ) $ (2.52 ) $ 0.30 $ (2.49 )
Income (loss) from discontinued operations   0.00     0.06     0.24     (0.52 )
Net (loss) income $ (0.22 ) $ (2.46 ) $ 0.54   $ (3.01 )
Weighted average shares outstanding – Basic   30,606     30,327     30,507     30,303  
 
Net (loss) income per share – Diluted:
(Loss) income from continuing operations $ (0.22 ) $ (2.52 ) $ 0.30 $ (2.49 )
Income (loss) from discontinued operations   0.00     0.06     0.24     (0.52 )
Net (loss) income $ (0.22 ) $ (2.46 ) $ 0.54   $ (3.01 )
Weighted average shares outstanding – Diluted   30,606     30,327     30,650     30,303  
       
 
GIBRALTAR INDUSTRIES, INC.CONSOLIDATED BALANCE SHEETS(in thousands)
 
December 31,2011 December 31,2010
Assets
Current assets:
Cash and cash equivalents $ 54,117 $ 60,866
Accounts receivable, net of reserve 90,595 70,371
Inventories 109,270 77,848
Other current assets 14,872 20,229
Assets of discontinued operations       13,063  
Total current assets 268,854 242,377
 
Property, plant, and equipment, net 151,974 145,783
Goodwill 348,326 298,346
Acquired intangibles 95,265 66,301
Other assets 7,636 16,766
Equity method investment 1,345
Assets of discontinued operations       39,972  
 
$ 872,055   $ 810,890  
 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 67,320 $ 56,775
Accrued expenses 60,687 36,785
Current maturities of long-term debt 417 408
Liabilities of discontinued operations       6,150  
Total current liabilities 128,424 100,118
 
Long-term debt 206,746 206,789
Deferred income taxes 55,801 37,119
Other non-current liabilities 21,148 23,221
Liabilities of discontinued operations 2,790
 
Shareholders’ equity:

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

Common stock, $0.01 par value; authorized 50,000 shares; 30,702 and 30,516 shares issued in 2011 and 2010
307 305
Additional paid-in capital 236,673 231,999
Retained earnings 229,437 212,914
Accumulated other comprehensive loss (3,350 ) (2,060 )
Cost of 281 and 219 common shares held in treasury in 2011 and 2010   (3,131 )   (2,305 )
Total shareholders’ equity   459,936     440,853  
 
$ 872,055   $ 810,890  
       
 
GIBRALTAR INDUSTRIES, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)
 
Year Ended December 31,
2011 2010
Cash Flows from Operating Activities
Net income (loss) $ 16,523 $ (91,068 )
Income (loss) from discontinued operations   7,307     (15,712 )
Income (loss) from continuing operations 9,216 (75,356 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 26,181 23,964
Provision for deferred income taxes 5,028 (10,629 )
Stock compensation expense 4,642 4,315
Non-cash charges to interest expense 2,328 4,324
Intangible asset impairment 76,964
Other non-cash adjustments 3,321 7,252

Increase (decrease) in cash resulting from changes in the following (excluding the effects of acquisitions):
Accounts receivable (7,612 ) (4,186 )
Inventories (10,101 ) 152
Other current assets and other assets 10,172 1,626
Accounts payable 2,076 12,506
Accrued expenses and other non-current liabilities   4,577     6,259  
Net cash provided by operating activities of continuing operations 49,828 47,191
Net cash (used in) provided by operating activities of discontinued operations   (3,133 )   22,178  
Net cash provided by operating activities   46,695     69,369  
 
Cash Flows from Investing Activities
Cash paid for acquisitions, net of cash acquired (109,248 )
Purchases of property, plant, and equipment (11,552 ) (8,362 )
Purchase of equity method investment (250 ) (1,250 )
Net proceeds from sale of property and equipment 1,226 221
Net proceeds from sale of businesses   67,529     29,164  
Net cash (used in) provided by investing activities of continuing operations (52,295 ) 19,773
Net cash provided by (used in) investing activities of discontinued operations   2,089     (384 )
Net cash (used in) provided by investing activities   (50,206 )   19,389  
 
Cash Flows from Financing Activities
Long-term debt payments (74,262 ) (58,967 )
Proceeds from long-term debt 73,849 8,559
Payment of deferred financing fees (1,570 ) (164 )
Purchase of treasury stock at market prices (826 ) (1,114 )
Excess tax benefit from stock compensation 54
Net proceeds from issuance of common stock   34     270  
Net cash used in financing activities   (2,775 )   (51,362 )
 
Effect of exchange rate changes on cash   (463 )   (126 )
 
Net (decrease) increase in cash and cash equivalents (6,749 ) 37,270
 
Cash and cash equivalents at beginning of year   60,866     23,596  
 
Cash and cash equivalents at end of year $ 54,117   $ 60,866  
 
 

 

GIBRALTAR INDUSTRIES, INC.

Non-GAAP Reconciliation of Adjusted Statement of Operations

(unaudited)

(in thousands, except per share data)
 
  Three Months Ended December 31, 2011

As

Reported

In GAAPStatements
 

Intangible

AssetImpairment
 

RestructuringCosts
 

AcquisitionRelatedCosts
 

Adjusted

Statement ofOperations
Net sales $ 174,141 $ $ $ $ 174,141
Cost of sales 147,462     (2,219 )   145,243  
Gross profit 26,679 2,219 28,898
Selling, general, and administrative expense 33,494     (105 ) (216 ) 33,173  
Loss from operations (6,815 ) 2,324 216 (4,275 )
Operating margin (3.9 )% 0.0 % 1.3 % 0.1 % (2.5 )%
Interest expense 5,042 5,042
Other income (44 )       (44 )
Loss before income taxes (11,813 ) 2,324 216 (9,273 )
Benefit of income taxes (4,959 )   757     (4,202 )
Loss from continuing operations $ (6,854 ) $   $ 1,567   $ 216   $ (5,071 )
Loss from continuing operations per share – diluted $ (0.22 ) $ 0.00   $ 0.05   $ 0.00   $ (0.17 )
         
 

 

GIBRALTAR INDUSTRIES, INC.

Non-GAAP Reconciliation of Adjusted Statement of Operations

(unaudited)

(in thousands, except per share data)
 
Three Months Ended December 31, 2010

As

Reported

In GAAPStatements

Intangible

AssetImpairment

RestructuringCosts

Deferred

Tax

ValuationAllowance

Adjusted

Statement ofOperations
Net sales $ 144,115 $ $ $ $ 144,115
Cost of sales 128,183     (5,459 )   122,724  
Gross profit 15,932 5,459 21,391
Selling, general, and administrative expense 27,291 (647 ) 26,644
Intangible asset impairment 77,141   (77,141 )      
Loss from operations (88,500 ) 77,141 6,106 (5,253 )
Operating margin (61.4 )% 53.5 % 4.3 % 0.0 % (3.6 )%
Interest expense 4,363 4,363
Other expense 84         84  
Loss before income taxes (92,947 ) 77,141 6,106 (9,700 )
Benefit of income taxes (16,609 ) 14,485   1,374   (2,400 ) (3,150 )
Loss from continuing operations $ (76,338 ) $ 62,656   $ 4,732   $ 2,400   $ (6,550 )
Loss from continuing operations per share – diluted $ (2.52 ) $ 2.07   $ 0.15   $ 0.08   $ (0.22 )
         
 

 

GIBRALTAR INDUSTRIES, INC.

Non-GAAP Reconciliation of Adjusted Statement of Operations

(unaudited)

(in thousands, except per share data)
 
Year Ended December 31, 2011

As ReportedIn GAAPStatements

AcquisitionRelated Costs

SurrenderedCompensation

RestructuringCosts

AdjustedStatement ofOperations
Net sales $ 766,607 $ $ $ $ 766,607
Cost of sales 621,492   (2,467 )   (3,916 ) 615,109  
Gross profit 145,115 2,467 3,916 151,498
Selling, general, and administrative expense 108,957   (986 ) (885 ) (581 ) 106,505  
Income from operations 36,158 3,453 885 4,497 44,993
Operating margin 4.7 % 0.5 % 0.1 % 0.6 % 5.9 %
Interest expense 19,363 19,363
Other income (90 )       (90 )
Income before income taxes 16,885 3,453 885 4,497 25,720
Provision for income taxes 7,669   1,054     1,683   10,406  
Income from continuing operations $ 9,216   $ 2,399   $ 885   $ 2,814   $ 15,314  

Income from continuing operations per share – diluted
$ 0.30   $ 0.08   $ 0.03   $ 0.09   $ 0.50  
           
 

 

GIBRALTAR INDUSTRIES, INC.

Non-GAAP Reconciliation of Adjusted Statement of Operations

(unaudited)

(in thousands, except per share data)
 
Year Ended December 31, 2010

As ReportedIn GAAPStatements

IntangibleAssetImpairment

RestructuringCosts

IneffectiveInterestRate Swap

Deferred

Tax

Valuation

Allowance

AdjustedStatementofOperations
Net sales $ 637,454 $ $ $ $ $ 637,454
Cost of sales 533,586     (6,361 )     527,225  
Gross profit 103,868 6,361 110,229
Selling, general, and administrative expense 99,546 (724 ) 98,822
Intangible asset impairment 76,964   (76,964 )        
(Loss) income from operations (72,642 ) 76,964 7,085 11,407
Operating margin (11.4 )% 12.1 % 1.1 % 0.0 % 0.0 % 1.8 %
Interest expense 19,714 (1,424 ) 18,290
Other income (77 )         (77 )
Loss before income taxes (92,279 ) 76,964 7,085 1,424 (6,806 )
Benefit of income taxes (16,923 ) 14,412   1,634   520   (2,400 ) (2,757 )
Loss from continuing operations $ (75,356 ) $ 62,552   $ 5,451   $ 904   $ 2,400   $ (4,049 )
Loss from continuing operations per share - diluted $ (2.49 ) $ 2.06   $ 0.18   $ 0.03   $ 0.09   $ (0.13 )

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