Gibraltar Announces 30% Increase in Third Quarter Revenue

Sales Volume Leverage and Streamlined Cost Structure Drive Eightfold Increase in EPS

BUFFALO, N.Y.--(BUSINESS WIRE)--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 and nine months ended September 30, 2011.

Management Comments

“Gibraltar achieved another quarter of excellent top- and bottom-line results,” said Gibraltar Chairman and Chief Executive Officer Brian Lipke. “We grew sales 30%, including double-digit organic growth as well as a 17% increase from acquisitions. Our adjusted gross margin improved by 330 basis points, and we delivered 550% growth in adjusted income from continuing operations.”

“Gibraltar’s impressive performance reflects the success of our three-point growth strategy,” said Lipke. “This strategy includes focusing on operational excellence across the company, increasing our market share, and capitalizing on the strength of our balance sheet to make accretive acquisitions. As a result, we have been able to report consistently solid financial results in a challenging end-market environment.”

“Our long-term goal is to position Gibraltar as the low-cost global supplier,” said Gibraltar President and Chief Operating Officer Henning Kornbrekke. “We have made great strides toward that goal during the past few years through lean initiatives that have lowered our cost structure. At the same time, we have significantly reduced working capital and more effectively managed commodity costs. Our third-quarter financial performance is the result of these efforts, and we continued to make progress in each of these areas during the quarter.”

“In addition, we are aggressively executing on our organic growth strategy, which centers on launching new products, expanding our geographic market coverage, and leveraging our competitive strengths to penetrate new end markets adjacent to our core business,” said Kornbrekke. “As a result, we are continuing to shift Gibraltar’s overall business mix away from the residential building market and toward industrial construction and infrastructure, and our recent acquisitions have accelerated our progress in that direction.”

Financial Results

Net sales for the third quarter of 2011 increased 30% to $220.1 million from $169.7 million for the third quarter of 2010, including $28.9 million in revenues from two second-quarter 2011 acquisitions. GAAP income from continuing operations was $7.4 million, or $0.24 per diluted share, compared with $0.8 million, or $0.03 per diluted share for the third quarter last year. Results from the third quarter of 2011 and 2010 included after-tax special charges of $0.4 million for each period, resulting from acquisition-related costs and exit activity costs related to business restructuring. Adjusting for these items, Gibraltar’s third-quarter 2011 adjusted income from continuing operations increased 550% to $7.8 million, or $0.26 per diluted share, from $1.2 million, or $0.04 per diluted share, in the third quarter of 2010.

Adjusted gross margin increased to 19.8% in the third quarter of 2011 from 16.5% in the third quarter of 2010. The increase was primarily due to a more favorable alignment of raw material costs and customer selling prices, cost reductions, and the impact of the recent acquisitions. Adjusted selling, general and administrative expense increased 5% to $24.5 million for the third quarter of 2011 from $23.3 million a year earlier, primarily reflecting the net result of the addition of the acquisitions in the second quarter which were nearly offset by lower compensation costs. Adjusted selling, general, and administrative expenses were 11.1% of net sales, 260 basis points lower than the third quarter of 2010.

For the nine months ended September 30, total net sales increased 20% in 2011 to $592.5 million from $493.3 million in 2010. Gibraltar’s GAAP income from continuing operations for the first nine months of 2011 was $16.1 million, or $0.52 per diluted share, compared with $1.0 million, or $0.03 per diluted share, in 2010. Results for the first nine months of 2011 included after-tax special charges of $4.3 million for acquisition-related costs, exit activity costs related to business restructuring, and equity compensation declined by Mr. Lipke. After-tax special charges for the first nine months of 2010 included $1.5 million largely resulting from an ineffective interest rate swap and restructuring charges. Adjusting for these items, Gibraltar’s first nine months of 2011 adjusted income from continuing operations was $20.4 million, or $0.67 per diluted share, compared with adjusted income from continuing operations of $2.5 million, or $0.08 per diluted share, in 2010.

Liquidity and Capital Resources

• Gibraltar’s liquidity was $158 million as of September 30, 2011, including cash on hand of $33 million and availability under the revolving credit facility.
• The Company invested $12.1 million in working capital since December 31, 2010, as 20% sales growth in the first nine months of 2011 increased the investment in accounts receivable and inventories. Days of net working capital, which consists of accounts receivable, inventory and accounts payable, were 63 for the third quarter of 2011, sustaining the Company’s improvement in managing working capital.
• The Company used cash and debt available under its revolving credit facility to help finance the D.S. Brown and Pacific Award Metals acquisitions in the second quarter. The strong cash flow of the third quarter enabled the Company to fully repay all amounts drawn on the revolving credit facility in September.
• Subsequent to quarter end, the Company amended its Senior Credit Agreement to extend the due date of the $200 million revolving credit facility for five years as well as secure a $35 million term loan commitment, reduce Gibraltar’s cost of borrowing, and provide additional financial flexibility.

Outlook

“We are enthusiastic about our growth prospects going forward,” said Lipke. “We plan to maintain our focus on operational excellence and product leadership, while at the same time, strengthening our balance sheet and considering accretive acquisitions. We have been able to deliver solid financial results without a significant recovery in our end markets. If our end markets do begin improving, we have an excellent opportunity to leverage margin growth both from incremental sales and from portfolio management as we acquire new businesses that take us further up the value chain. Looking forward near term, we are confident that Gibraltar will continue to report significantly improved year-over-year financial results, keeping in mind the lower historical seasonal demand in the first and fourth quarters of each year.”

Third Quarter Conference Call Details

Gibraltar has scheduled a conference call to review its results for the third quarter of 2011 tomorrow, November 3, 2011, starting at 9:00 a.m. ET. Interested parties may access the call by dialing [phone] or [phone]. The presentation slides that will be discussed in the conference call are expected to be available this evening, November 2, 2011. 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 42 facilities in 20 states, 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 and twelve months ending December 31, 2011, on February 23, 2012, and hold its earnings conference call on February 24, 2012, starting at 9:00 a.m. ET.

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Net sales	$	220,096		$	169,741		$	592,466		$	493,339
Cost of sales		177,133			142,243			474,030			405,403
Gross profit		42,963			27,498			118,436			87,936
Selling, general, and administrative expense		24,602			23,262			75,463			72,078
Income from operations		18,361			4,236			42,973			15,858
Interest expense		(4,869	)		(4,429	)		(14,321	)		(15,351	)
Other (expense) income		(15	)		30			46			161
Income (loss) before taxes		13,477			(163	)		28,698			668
Provision for (benefit of) income taxes		6,094			(944	)		12,628			(314	)
Income from continuing operations		7,383			781			16,070			982
Discontinued operations:
(Loss) income before taxes		(276	)		677			13,621			(27,949	)
Provision for (benefit of) income taxes		193			261			6,563			(10,414	)
(Loss) income from discontinued operations		(469	)		416			7,058			(17,535	)
Net income (loss)	$	6,914		$	1,197		$	23,128		$	(16,553	)
Net income (loss) per share – Basic:
Income from continuing operations	$	0.24		$	0.03		$	0.53		$	0.03
(Loss) income from discontinued operations		(0.01	)		0.01			0.23			(0.58	)
Net income (loss)	$	0.23		$	0.04		$	0.76		$	(0.55	)
Weighted average shares outstanding – Basic		30,554			30,325			30,474			30,295
Net income (loss) per share – Diluted:
Income from continuing operations	$	0.24		$	0.03		$	0.52		$	0.03
(Loss) income from discontinued operations		(0.01	)		0.01			0.24			(0.57	)
Net income (loss)	$	0.23		$	0.04		$	0.76		$	(0.54	)
Weighted average shares outstanding – Diluted		30,639			30,442			30,620			30,442

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
	September 30,			December 31,
	2011			2010
Assets
Current assets:
Cash and cash equivalents	$	33,055		$	60,866
Accounts receivable, net of reserve of $4,298 and $3,504 in 2011 and 2010		118,325			70,371
Inventories		110,967			77,848
Other current assets		24,352			20,229
Assets of discontinued operations		–			13,063
Total current assets		286,699			242,377
Property, plant, and equipment, net		154,483			145,783
Goodwill		348,551			298,346
Acquired intangibles		96,991			66,301
Other assets		6,915			16,766
Equity method investment		–			1,345
Assets of discontinued operations		–			39,972
	$	893,639		$	810,890
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	80,533		$	56,775
Accrued expenses		66,774			36,785
Current maturities of long-term debt		408			408
Liabilities of discontinued operations		–			6,150
Total current liabilities		147,715			100,118
Long-term debt		206,667			206,789
Deferred income taxes		51,370			37,119
Other non-current liabilities		22,314			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; 30,700 and 30,516 shares issued in 2011 and 2010		307			305
Additional paid-in capital		235,902			231,999
Retained earnings		236,042			212,914
Accumulated other comprehensive loss		(3,547	)		(2,060	)
Cost of 281 and 219 common shares held in treasury in 2011 and 2010		(3,131	)		(2,305	)
Total shareholders’ equity		465,573			440,853
	$	893,639		$	810,890

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
	Nine Months Ended
	September 30,
	2011			2010
Cash Flows from Operating Activities
Net income (loss)	$	23,128		$	(16,553	)
Income (loss) from discontinued operations		7,058			(17,535	)
Income from continuing operations		16,070			982
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		19,515			18,049
Stock compensation expense		3,895			3,599
Non-cash charges to interest expense		1,689			3,762
Other non-cash adjustments		1,437			1,167
Increase (decrease) in cash resulting from changes in the following (excluding the effects of acquisitions):
Accounts receivable		(35,041	)		(23,419	)
Inventories		(11,449	)		(1,030	)
Other current assets and other assets		9,606			7,348
Accounts payable		13,485			18,575
Accrued expenses and other non-current liabilities		11,331			3,670
Net cash provided by operating activities of continuing operations		30,538			32,703
Net cash (used in) provided by operating activities of discontinued operations		(3,491	)		21,725
Net cash provided by operating activities		27,047			54,428
Cash Flows from Investing Activities
Cash paid for acquisitions, net of cash acquired		(107,605	)		–
Purchases of property, plant, and equipment		(7,838	)		(6,264	)
Purchase of equity method investment		(250	)		(1,000	)
Net proceeds from sale of property and equipment		978			179
Net proceeds from sale of businesses		59,029			29,164
Net cash (used in) provided by investing activities of continuing operations		(55,686	)		22,079
Net cash provided by (used in) investing activities of discontinued operations		2,089			(427	)
Net cash (used in) provided by investing activities		(53,597	)		21,652
Cash Flows from Financing Activities
Long-term debt payments		(74,260	)		(58,967	)
Proceeds from long-term debt		73,849			8,559
Purchase of treasury stock at market prices		(826	)		(1,114	)
Payment of deferred financing fees		(34	)		(164	)
Excess tax benefit from stock compensation		–			55
Net proceeds from issuance of common stock		10			270
Net cash used in financing activities		(1,261	)		(51,361	)
Net (decrease) increase in cash and cash equivalents		(27,811	)		24,719
Cash and cash equivalents at beginning of year		60,866			23,596
Cash and cash equivalents at end of period	$	33,055		$	48,315

GIBRALTAR INDUSTRIES, INC. Non-GAAP Reconciliation of Adjusted Statement of Operations (unaudited) (in thousands, except per share data)
	Three Months Ended September 30, 2011
	As Reported In GAAP Statements			Acquisition Related Costs			Restructuring Costs			Adjusted Statement of Operations
Net sales	$	220,096		$	-		$	-		$	220,096
Cost of sales		177,133			-			(522	)		176,611
Gross profit		42,963			-			522			43,485
Selling, general, and administrative expense		24,602			(156	)		7			24,453
Income from operations		18,361			156			515			19,032
Operating margin		8.3	%		0.1	%		0.2	%		8.6	%
Interest expense		(4,869	)		-			-			(4,869	)
Other expense		(15	)		-			-			(15	)
Income before income taxes		13,477			156			515			14,148
Provision for income taxes		6,094			-			240			6,334
Income from continuing operations	$	7,383		$	156		$	275		$	7,814
Income from continuing operations per share - diluted	$	0.24		$	0.01		$	0.01		$	0.26

GIBRALTAR INDUSTRIES, INC. Non-GAAP Reconciliation of Adjusted Statement of Operations (unaudited) (in thousands, except per share data)
	Three Months Ended September 30, 2010
	As Reported In GAAP Statements			Acquisition Related Costs			Restructuring Costs			Adjusted Statement of Operations
Net sales	$	169,741		$	-		$	-		$	169,741
Cost of sales		142,243			-			(438	)		141,805
Gross profit		27,498			-			438			27,936
Selling, general, and administrative expense		23,262			-			-			23,262
Income from operations		4,236			-			438			4,674
Operating margin		2.5	%		0.0	%		0.3	%		2.8	%
Interest expense		(4,429	)		-			-			(4,429	)
Other expense		30			-			-			30
(Loss) income before income taxes		(163	)		-			438			275
Benefit of income taxes		(944	)		-			12			(932	)
Income from continuing operations	$	781		$	-		$	426		$	1,207
Income from continuing operations per share - diluted	$	0.03		$	-		$	0.01		$	0.04

GIBRALTAR INDUSTRIES, INC. Non-GAAP Reconciliation of Adjusted Statement of Operations (unaudited) (in thousands, except per share data)
	Nine Months Ended September 30, 2011
	As Reported In GAAP Statements			Acquisition Related Costs			Surrendered Compensation			Restructuring Costs			Adjusted Statement of Operations
Net sales	$	592,466		$	-		$	-		$	-		$	592,466
Cost of sales		474,030			(2,467	)		-			(1,697	)		469,866
Gross profit		118,436			2,467			-			1,697			122,600
Selling, general, and administrative expense		75,463			(770	)		(885	)		(476	)		73,332
Income from operations		42,973			3,237			885			2,173			49,268
Operating margin		7.3	%		0.5	%		0.1	%		0.4	%		8.3	%
Interest expense		(14,321	)		-			-			-			(14,321	)
Other income		46			-			-			-			46
Income before income taxes		28,698			3,237			885			2,173			34,993
Provision for income taxes		12,628			1,054			-			926			14,608
Income from continuing operations	$	16,070		$	2,183		$	885		$	1,247		$	20,385
Income from continuing operations per share - diluted	$	0.52		$	0.08		$	0.03		$	0.04		$	0.67

GIBRALTAR INDUSTRIES, INC. Non-GAAP Reconciliation of Adjusted Statement of Operations (unaudited) (in thousands, except per share data)
	Nine Months Ended September 30, 2010
	As Reported In GAAP Statements			Intangible Asset Impairment			Ineffective Interest Rate Swap			Restructuring Costs			Adjusted Statement of Operations
Net sales	$	493,339		$	-		$	-		$	-		$	493,339
Cost of sales		405,403			-			-			(902	)		404,501
Gross profit		87,936			-			-			902			88,838
Selling, general, and administrative expense		72,078			177			-			(77	)		72,178
Income from operations		15,858			(177	)		-			979			16,660
Operating margin		3.2	%		0.0	%		0.0	%		0.2	%		3.4	%
Interest expense		(15,351	)		-			1,424			-			(13,927	)
Other income		161			-			-			-			161
Income before income taxes		668			(177	)		1,424			979			2,894
(Benefit of) provision for income taxes		(314	)		(73	)		520			260			393
Income from continuing operations	$	982		$	(104	)	$	904		$	719		$	2,501
Income from continuing operations per share - diluted	$	0.03		$	(0.00	)	$	0.03		$	0.02		$	0.08

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 GAAP Statements			Exit Activity Costs			Deferred Tax Valuation Allowance			Intangible Asset Impairment			Adjusted Statement of Operations
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	)		6,106			—			77,141			(5,253	)
Operating margin		(61.4	)%		4.3	%		0.0	%		53.5	%		(3.6	)%
Interest expense		(4,363	)		—			—			—			(4,363	)
Other expense		(84	)		—			—			—			(84	)
Loss before income taxes		(92,947	)		6,106			—			77,141			(9,700	)
Benefit of income taxes		(16,609	)		1,374			(2,400	)		14,485			(3,150	)
Loss from continuing operations	$	(76,338	)	$	4,732		$	2,400		$	62,656		$	(6,550	)
Loss from continuing operations per share – diluted	$	(2.52	)	$	0.15		$	0.08		$	2.07		$	(0.22	)

GIBRALTAR INDUSTRIES, INC. Non-GAAP Reconciliation of Adjusted Statement of Operations (unaudited) (in thousands, except per share data)
		Year Ended December 31, 2010
		As Reported In GAAP Statements			Special Charges			Adjusted Statement of Operations
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	)		84,049			11,407
Operating margin		(11.4	)%		13.2	%		1.8	%
Interest expense		(19,714	)		1,424			(18,290	)
Other income		77			—			77
Loss before income taxes		(92,279	)		85,473			(6,806	)
Benefit of income taxes		(16,923	)		14,166			(2,757	)
Loss from continuing operations	$	(75,356	)	$	71,307		$	(4,049	)
Loss from continuing operations per share – diluted	$	(2.49	)	$	2.36		$	(0.13	)