Gibraltar Reports Fourth-Quarter 2014 Financial Results

  • Q4 Adjusted EPS of $0.02; Q4 Sales Up 7% Versus Prior Year
  • Generates $33M of Operating Cash Flow in 2014; Contributes to $209M of Liquidity

BUFFALO, N.Y.--()--Gibraltar Industries, Inc. (Nasdaq: ROCK), a leading manufacturer and distributor of products for residential and industrial markets, today reported its financial results for the three and twelve months ended December 31, 2014. All financial metrics in this release reflect only the Company’s continuing operations unless otherwise noted.

Fourth-Quarter Consolidated Results

Gibraltar’s net sales for the fourth quarter of 2014 increased 7% to $202.0 million, compared with $188.8 million for the fourth quarter of 2013. Fourth-quarter 2014 adjusted net income was $0.7 million, or $0.02 per diluted share, compared with adjusted net income of $2.4 million, or $0.08 per diluted share, in the fourth quarter of 2013. The adjusted fourth-quarter 2014 results exclude special items with an after-tax net charge totaling $96.4 million, or $3.10 per share, resulting primarily from a non-cash intangible assets impairment. The impairment relates primarily to businesses within the Company’s Industrial and Infrastructure Products segment and reflects reductions in the estimated fair values of these businesses. The adjusted fourth-quarter 2013 results exclude special items with an after-tax net benefit totaling $1.6 million, or $0.05 per diluted share, resulting primarily from the non-cash gain associated with the reversal of the Company's tax valuation allowance. Including these items in the respective periods, the Company’s fourth-quarter 2014 GAAP results were a net loss of $95.7 million, or $3.08 per share, compared with net income of $4.0 million, or $0.13 per diluted share, in the fourth quarter of 2013.

Twelve-Month Consolidated Results

For the twelve months ended December 31, 2014, total net sales increased 4% to $862.1 million, from $827.6 million in 2013. Adjusted net income from continuing operations was $14.6 million, or $0.47 per diluted share, compared with $21.4 million, or $0.69 per diluted share, in 2013. The adjusted results for the twelve months of 2014 exclude special items with a non-cash after-tax net charge totaling $96.4 million, or $3.10 per share, resulting primarily from the aforementioned intangible assets impairment. The adjusted results for 2013 exclude after-tax special charges of $27.0 million, or $0.87 per diluted share, primarily for intangible asset impairment and debt refinancing costs. Including these items, GAAP net loss for 2014 was $81.8 million, or $2.63 per share, compared with a net loss of $5.6 million, or $0.18 per share, in 2013.

Management Comments

“Gibraltar closed 2014 with a solid fourth quarter,” said Chief Executive Officer Frank Heard. “Net sales for the fourth quarter exceeded the high end of our guidance, growing 7% year-over-year. For the full year, net sales were up 4% representing growth primarily driven by stronger product demand in our postal storage and roofing-related businesses in the Residential Products segment, partially offset by lower demand in our Industrial and Infrastructure Products segment. Reflecting the impact of our operational initiatives, partially offset by pricing and material cost inflation, adjusted EPS for the fourth quarter came in near the top end of the range at $0.02 per share. For the full year, adjusted EPS matched the high end of our guidance at $0.47 per share.”

“The fourth-quarter 2014 intangible assets impairment charge relates primarily to our Industrial and Infrastructure Products segment,” stated Chief Financial Officer Kenneth Smith. “The segment’s revenues and profit margins have decreased, and future cash flows are expected to be modest in the near term. This reflects, in part, slower economic conditions, excess capacity and increased competition, plus greater and ongoing uncertainty regarding government funding for future U.S. transportation projects.”

“Despite the non-cash charge this quarter, our businesses in the Industrial and Infrastructure Products segment remain very competitive, have strong operational capabilities, and are competing aggressively in the end markets served,” Heard said. “Looking ahead to 2015 and future years, our goals are to achieve stronger financial results, make more efficient use of Gibraltar’s capital, and deliver higher shareholder returns than we did in 2014. To make meaningful progress toward achieving these goals, we will need to be aggressive in three key areas. The first is operational excellence; the second is portfolio management; and the third is to make effective use of acquisitions as a strategic accelerator for the business. Our overarching goal is to achieve best-in-class as it relates to sustainable value creation and shareholder returns over the long term. We look forward to reporting our progress in executing against this goal in 2015, as well as delivering improved financial results.”

Fourth-Quarter Segment Results

Residential Products

Fourth-quarter 2014 net sales in Gibraltar’s Residential Products segment increased 23% to $105.4 million, compared with $85.5 million for the fourth quarter of 2013. Fourth-quarter 2014 adjusted operating margin decreased 190 basis points year over year to 5.0%. Sales growth in this segment reflected strong demand for postal storage products as growth in conversions to centralized delivery continue. The segment’s equivalent adjusted operating margin reflected the benefit of higher volume, offset by price reductions provided in certain product lines and costs to build out manufacturing capacity.

Industrial and Infrastructure Products

Fourth-quarter 2014 net sales in Gibraltar’s Industrial & Infrastructure Products segment decreased 6% to $96.6 million, compared to $103.3 million for the fourth quarter 2013. Fourth-quarter 2014 adjusted operating margin decreased 380 basis points year over year to 2.5%. Sales in the segment reflected lower shipment volumes to both the industrial and transportation infrastructure markets. Industrial demand was slightly lower than prior year as the domestic energy and mining markets declined. Meanwhile, the transportation infrastructure market continues to be impacted by short-term uncertainty in federal funding programs. This segment’s adjusted operating margin reflected lower volume and a less profitable mix compared with the year-earlier quarter due to lower infrastructure shipments. Higher raw material costs also contributed to the reduced margins for the segment.

Business Outlook

Gibraltar’s net sales for full-year 2015 are currently forecasted to be in the range of $870 million to $880 million – with growth expected in residential-related product lines. At this range, and reflecting anticipated profit expansion from cost reduction and other initiatives, adjusted earnings for 2015 are expected to be in the range of $0.55 to $0.65 per diluted share. For the first quarter of 2015, adjusted EPS are expected to be modestly improved compared to the first quarter of 2014.

Fourth-Quarter Conference Call Details

Gibraltar has scheduled a conference call today starting at 9:00 a.m. ET to review its results for the fourth quarter of 2014. 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 transportation 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 intangible asset impairments, restructuring primarily associated with the closing and consolidation of our facilities, acquisition-related items, non-cash adjustments to the tax valuation allowance, 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 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 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 month period ending March 31, 2015, on Thursday, May 7, and hold its earnings conference call later that morning, starting at 9:00 a.m. ET.

           

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2014   2013 2014   2013
Net Sales $ 201,994 $ 188,835 $ 862,087 $ 827,567
Cost of sales 173,514   153,383   722,042   669,470  
Gross profit 28,480 35,452 140,045 158,097
Selling, general, and administrative expense 24,325 29,299 102,492 113,457
Intangible asset impairment 107,970     107,970   23,160  
(Loss) income from operations (103,815 ) 6,153 (70,417 ) 21,480
Interest expense 3,433 3,811 14,421 22,489
Other expense (income) 84   (36 ) (88 ) (177 )
(Loss) income before taxes (107,332 ) 2,378 (84,750 ) (832 )
(Benefit of) provision for income taxes (11,624 ) (1,631 ) (2,958 ) 4,797  
(Loss) income from continuing operations (95,708 ) 4,009 (81,792 ) (5,629 )
Discontinued operations:
Loss before taxes (51 ) (7 )
Provision for (benefit of) income taxes 1     (19 ) (3 )
Loss from discontinued operations (1 )   (32 ) (4 )
Net (loss) income $ (95,709 ) $ 4,009   $ (81,824 ) $ (5,633 )
Net earnings per share – Basic:
(Loss) income from continuing operations $ (3.08 ) $ 0.13 $ (2.63 ) $ (0.18 )
Loss from discontinued operations        
Net (loss) income $ (3.08 ) $ 0.13   $ (2.63 ) $ (0.18 )
Weighted average shares outstanding – Basic 31,122   30,972   31,066   30,930  
Net earnings per share – Diluted:
(Loss) income from continuing operations $ (3.08 ) $ 0.13 $ (2.63 ) $ (0.18 )
Loss from discontinued operations        
Net (loss) income $ (3.08 ) $ 0.13   $ (2.63 ) $ (0.18 )
Weighted average shares outstanding – Diluted

31,122

  31,183   31,066   30,930  
 
           

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

 
December 31,
2014
December 31,
2013
Assets
Current assets:
Cash and cash equivalents $ 110,610 $ 97,039
Accounts receivable, net of reserve 101,141 90,082
Inventories 128,743 121,152
Other current assets 19,937   14,127  
Total current assets 360,431 322,400
Property, plant, and equipment, net 129,575 131,752
Goodwill 236,044 341,174
Acquired intangibles 82,215 91,777
Other assets 5,895   7,059  
$ 814,160   $ 894,162  
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 81,246 $ 69,625
Accrued expenses 52,439 49,879
Current maturities of long-term debt 400   409  
Total current liabilities 134,085 119,913
Long-term debt 213,200 213,598
Deferred income taxes 49,772 55,124
Other non-current liabilities 29,874 33,778
Shareholders’ equity:
Preferred stock, $0.01 par value; authorized 10,000 shares; none outstanding
Common stock, $0.01 par value; authorized 50,000 shares; 31,342 and 31,131 shares issued in 2014 and 2013 313 311
Additional paid-in capital 247,232 243,389
Retained earnings 154,625 236,449
Accumulated other comprehensive loss (9,551 ) (3,585 )
Cost of 429 and 395 common shares held in treasury in 2014 and 2013 (5,390 ) (4,815 )
Total shareholders’ equity 387,229   471,749  
$ 814,160   $ 894,162  
 
       

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 
Year Ended December 31,
2014     2013
Cash Flows from Operating Activities
Net loss $ (81,824 ) $ (5,633 )
Loss from discontinued operations (32 ) (4 )
Loss from continuing operations (81,792 ) (5,629 )
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization 25,432 27,050
Intangible asset impairment 107,970 23,160
Loss on early note redemption 7,166
Stock compensation expense 3,150 2,564
Non-cash charges to interest expense 1,012 1,006
Benefit of deferred income taxes (6,640

)

(1,237 )
Other non-cash adjustments (1,362 ) 3,800
Increase (decrease) in cash resulting from changes in the following (excluding the effects of acquisitions):
Accounts receivable (14,323 ) (1,020 )
Inventories (8,599 ) (4,971 )
Other current assets and other assets (2,456 ) (398 )
Accounts payable 11,205 417
Accrued expenses and other non-current liabilities (1,014 ) 8,396  
Net cash provided by operating activities of continuing operations 32,583 60,304
Net cash used in operating activities of discontinued operations (41 ) (9 )
Net cash provided by operating activities 32,542   60,295  
Cash Flows from Investing Activities
Purchases of property, plant, and equipment (23,291 ) (14,940 )
Cash paid for acquisitions, net of cash acquired (5,536 )
Proceeds from other investment 277
Net proceeds from sale of property and equipment 5,992   12,610  
Net cash used in investing activities (17,022 ) (7,866 )
Cash Flows from Financing Activities
Long-term debt payments (407 ) (205,094 )
Proceeds from long-term debt 210,000
Payment of note redemption fees (3,702 )
Payment of deferred financing fees (35 ) (3,899 )
Purchase of treasury stock at market prices (575 ) (714 )
Excess tax benefit from stock compensation 100 72
Net proceeds from issuance of common stock 595   648  
Net cash used in financing activities (322 ) (2,689 )
Effect of exchange rate changes on cash (1,627 ) (729 )
Net increase in cash and cash equivalents 13,571 49,011
Cash and cash equivalents at beginning of year 97,039   48,028  
Cash and cash equivalents at end of year $ 110,610   $ 97,039  
       

GIBRALTAR INDUSTRIES, INC.

Non-GAAP Reconciliation of Adjusted Statements of Operations

(in thousands, except per share data)

(Unaudited)

 

Three Months Ended
December 31, 2014

As
Reported
In GAAP
Statements

 

Acquisition
Related Items

 

Intangible
Asset
Impairment

 

Restructuring
Costs

 

Adjusted
Statement of
Operations

Net Sales
Residential Products $ 105,432 $ 105,432
Industrial & Infrastructure Products 96,819 96,819
Less Inter-Segment Sales (257 )       (257 )
96,562         96,562  
Consolidated sales 201,994 201,994
 
(Loss) income from operations
Residential Products (10,324 ) 15,435 120 5,231
Industrial & Infrastructure Products (90,361 )   92,535   285   2,459  
Segment (loss) income (100,685 ) 107,970 405 7,690
Unallocated corporate expense (3,130 ) (73 )     (3,203 )
Consolidated (loss) income from operations (103,815 ) (73 ) 107,970 405 4,487
 
Interest expense 3,433 3,433
Other expense 84         84  
(Loss) income before income taxes (107,332 ) (73 ) 107,970 405 970
(Benefit of) provision for income taxes (11,624 ) (26 ) 11,811   111   272  
(Loss) income from continuing operations $ (95,708 ) $ (47 ) $ 96,159   $ 294   $ 698  
(Loss) income from continuing operations per share – diluted $ (3.08 ) $   $ 3.09   $ 0.01   $ 0.02  
 
Operating margin
Residential Products (9.8 )% % 14.6 % 0.1 % 5.0 %
Industrial & Infrastructure Products (93.6 )% % 95.8 % 0.3 % 2.5 %
Segments Margin (49.8 )% % 53.5 % 0.2 % 3.8 %
Consolidated (51.4 )% % 53.5 % 0.2 % 2.2 %
 
         

GIBRALTAR INDUSTRIES, INC.

Non-GAAP Reconciliation of Adjusted Statements of Operations

(in thousands, except per share data)

(Unaudited)

 
Three Months Ended
December 31, 2013

As
Reported
In GAAP
Statements

 

Acquisition
Related &
Restructuring
Costs

 

Deferred Tax
Valuation
Allowance

 

Adjusted
Statement of
Operations

Net Sales
Residential Products $ 85,535 $ 85,535
Industrial & Infrastructure Products 103,479 103,479
Less Inter-Segment Sales (179 )     (179 )
103,300       103,300  
Consolidated sales 188,835 188,835
 
Income from operations
Residential Products 5,040 880 5,920
Industrial & Infrastructure Products 6,445   41     6,486  
Segment Income 11,485 921 12,406
Unallocated corporate expense (5,332 ) (230 )   (5,562 )
Consolidated income from operations 6,153 691 6,844
 
Interest expense 3,811 3,811
Other income (36 )     (36 )
Income before income taxes 2,378 691 3,069
(Benefit of) provision for income taxes (1,631 ) 260   2,048   677  
Income (loss) from continuing operations $ 4,009   $ 431   $ (2,048 ) $ 2,392  
Income (loss) from continuing operations per share – diluted $ 0.13   $ 0.02   $ (0.07 ) $ 0.08  
 
Operating margin
Residential Products 5.9 % 1.0 % % 6.9 %
Industrial & Infrastructure Products 6.2 % % % 6.3 %
Segments Margin 6.1 % 0.5 % % 6.6 %
Consolidated 3.3 % 0.4 % % 3.6 %
 
       

GIBRALTAR INDUSTRIES, INC.

Non-GAAP Reconciliation of Adjusted Statements of Operations

(in thousands, except per share data)

(Unaudited)

 
Twelve Months Ended
December 31, 2014

As
Reported
In GAAP
Statements

 

Acquisition
Related Items

 

Intangible
Asset
Impairment

 

Restructuring
Costs

 

Adjusted
Statement of
Operations

Net Sales
Residential Products $ 431,915 $ 431,915
Industrial & Infrastructure Products 431,432 431,432
Less Inter-Segment Sales (1,260 )       (1,260 )
430,172         430,172  
Consolidated sales 862,087 862,087
 
Income (loss) from operations
Residential Products 16,416 206 15,435 752 32,809
Industrial & Infrastructure Products (74,634 )   92,535   919   18,820  
Segment (loss) income (58,218 ) 206 107,970 1,671 51,629
Unallocated corporate expense (12,199 ) (1,594 )     (13,793 )
Consolidated (loss) income from operations (70,417 ) (1,388 ) 107,970 1,671 37,836
 
Interest expense 14,421 14,421
Other income (88 )       (88 )
(Loss) income before income taxes (84,750 ) (1,388 ) 107,970 1,671 23,503
(Benefit of) provision for income taxes (2,958 ) (510 ) 11,811   593   8,936  
(Loss) income from continuing operations $ (81,792 ) $ (878 ) $ 96,159   $ 1,078   $ 14,567  
(Loss) income from continuing operations per share – diluted $ (2.63 ) $ (0.02 ) $ 3.09   $ 0.03   $ 0.47  
 
Operating margin
Residential Products 3.8 % % 3.6 % 0.2 % 7.6 %
Industrial & Infrastructure Products (17.3 )% % 21.5 % 0.2 % 4.4 %
Segments Margin (6.8 )% % 12.5 % 0.2 % 6.0 %
Consolidated (8.2 )% (0.2 )% 12.5 % 0.2 % 4.4 %
 
       

GIBRALTAR INDUSTRIES, INC.

Non-GAAP Reconciliation of Adjusted Statements of Operations

(in thousands, except per share data)

(Unaudited)

 
Twelve Months Ended
December 31, 2013

As
Reported
In GAAP
Statements

 

Acquisition
Related &
Restructuring
Costs

 

Intangible
Asset
Impairment

 

Note
Refinancing

 

Deferred Tax
Valuation
Allowance

 

Adjusted
Statement of
Operations

Net Sales
Residential Products $ 394,071 394,071
Industrial & Infrastructure Products 435,168 435,168
Less Inter-Segment Sales (1,672 )         (1,672 )
433,496           433,496  
Consolidated sales 827,567 827,567
 
Income from operations
Residential Products 34,965 3,001 1,000 38,966
Industrial & Infrastructure Products 7,169   324   22,160       29,653  
Segment Income 42,134 3,325 23,160 68,619
Unallocated corporate expense (20,654 ) 87         (20,567 )
Consolidated income from operations 21,480 3,412 23,160 48,052
 
Interest expense 22,489 (7,166 ) 15,323
Other income (177 )         (177 )
(Loss) income before income taxes (832 ) 3,412 23,160 7,166 32,906
Provision for income taxes 4,797   1,318   753   2,616   2,048   11,532  
(Loss) income from continuing operations $ (5,629 ) $ 2,094   $ 22,407   $ 4,550   $ (2,048 ) $ 21,374  
(Loss) income from continuing operations per share – diluted $ (0.18 ) $ 0.07   $ 0.72   $ 0.15   $ (0.07 ) $ 0.69  
 
Operating margin
Residential Products 8.9 % 0.8 % 0.3 % % % 9.9 %
Industrial & Infrastructure Products 1.7 % 0.1 % 5.1 % % % 6.8 %
Segments Margin 5.1 % 0.4 % 2.8 % % % 8.3 %
Consolidated 2.6 % 0.4 % 2.8 % % % 5.8 %
 

Contacts

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

Release Summary

Gibraltar Industries, Inc. (Nasdaq: ROCK), today reported its financial results for the three and twelve months ended December 31, 2014.

Contacts

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