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Gibraltar Announces Third Quarter 2021 Financial Results

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Q3 Revenue Increased 25% - 4% Organic and 21% from Acquisitions

GAAP EPS of $0.84; Adjusted EPS of $0.91

Order Backlog Increases 10% to $385M, Driven by Renewables

2021 Outlook Adjusted for Amplified Inflation and Supply Chain Challenges

BUFFALO, N.Y., October 27, 2021--(BUSINESS WIRE)--Gibraltar Industries, Inc. (Nasdaq: ROCK), a leading manufacturer and provider of products and services for the renewable energy, residential, agtech and infrastructure markets, today reported its financial results for the three-month period ended September 30, 2021.

"Our team executed well and delivered solid results despite significant acceleration of inflation and supply chain disruption that exceeded our expectations going into the quarter," President and Chief Executive Officer Bill Bosway stated. "We continued to drive growth through price management, participation gains, and steady end market demand, and our backlog of $385 million increased 10% on a proforma basis. We focused on optimizing operating profit dollars while navigating margin performance through higher input costs, the timing and alignment of additional price increases with our higher input costs, and project schedule disruptions in our Renewables and Agtech businesses related to industry-specific supply dynamics. We remain confident that margins will begin to improve once inflation moderates and expand further as supply chain disruptions become less impactful. Given strong fundamental demand drivers in our end markets, we expect today’s environment to have minimal impact on the long-term outlook for our portfolio businesses."

Third Quarter 2021 Consolidated Results from Continuing Operations

Below are third quarter 2021 consolidated results from continuing operations:

Three Months Ended September 30,

$Millions, except EPS

GAAP

Adjusted

2021

2020

% Change

2021

2020

% Change

Net Sales

$369.4

$296.8

24.5%

$369.4

$296.8

24.5%

Net Income

$27.9

$31.3

-10.9%

$30.2

$32.3

-6.5%

Diluted EPS

$0.84

$0.95

-11.6%

$0.91

$0.98

-7.1%

Net sales from continuing operations increased 24.5% to $369.4 million, with organic growth contributing 3.9% and recent acquisitions 20.6%. Organic growth was driven by pricing, end market demand in Renewables and Infrastructure and participation gains primarily in Residential.

GAAP earnings decreased 10.9% to $27.9 million, or $0.84 per share, and adjusted earnings decreased 6.5% to $30.2 million, or $0.91 per share, as materials and transportation inflation curves steepened more sharply and supply chain became more difficult during the third quarter across the businesses, partially offset by price increases, 80/20 and lean productivity initiatives, the TerraSmart acquisition, and margin expansion in the legacy Renewables business. Adjusted measures remove charges for restructuring initiatives, acquisition-related items, and senior leadership transition costs, as further described in the appended reconciliation of adjusted financial measures.

Third Quarter Segment Results

Renewables

For the third quarter, the Renewables segment reported:

Three Months Ended September 30,

$Millions

GAAP

Adjusted

2021

2020

% Change

2021

2020

% Change

Net Sales

$130.2

$70.2

85.5%

$130.2

$70.2

85.5%

Operating Income

$12.2

$9.1

34.1%

$14.8

$9.1

62.6%

Operating Margin

9.4%

12.9%

(350) bps

11.4%

12.9%

(150) bps

The solar industry continued to experience regulatory, geo-political, inflation, panel supply, and project management headwinds during the quarter. Despite these challenges, revenue increased 85.5% including revenue from the acquisition of TerraSmart. On a pro forma basis, revenue increased a robust 19.0% with growth in both the legacy and TerraSmart businesses. Customer bookings reflected good order strength across all product lines – fixed tilt, tracker, canopy, and eBos – and grew 30.4%, helping increase backlog to a record $184 million, up 80% over last year. On a proforma basis, backlog increased 15%.

Adjusted operating income increased 62.6% and operating margins contracted 160 basis points. The legacy business delivered adjusted operating margin improvement from last year, driven by 80/20 productivity, lean enterprise quote-to-cash initiatives, price/cost management, and product and business mix benefits. TerraSmart margin expanded less than expected but accelerated sequentially. Margin was impacted by project management and field operations inefficiencies amplified by supply chain inconsistencies for solar panels and other key components plaguing the industry. The integration of TerraSmart remains on track with organization, process development, information systems, supply chain, and in-sourcing activities gaining momentum per plan.

Residential

For the third quarter, the Residential segment reported:

Three Months Ended September 30,

$Millions

GAAP

Adjusted

2021

2020

% Change

2021

2020

% Change

Net Sales

$171.5

$151.7

13.1%

$171.5

$151.7

13.1%

Operating Income

$29.5

$32.5

(9.2%)

$29.6

$32.6

(9.2%)

Operating Margin

17.2%

21.4%

(420) bps

17.2%

21.5%

(430) bps

Revenue increased 13.1%, marking the fifth consecutive quarter of double-digit growth. Of total growth, 8.7% was organic and 4.4% was delivered by Architectural Mailboxes. Revenue was driven by additional price actions, recent weather-related repair demand, and participation gains. Architectural Mailboxes, acquired in 2020, continued to deliver revenue growth as expected.

Adjusted operating income was down $3.0 million or 9.2%. Adjusted operating margin of 17.2% improved 60 basis points sequentially. Current period margins were negatively impacted by continued and accelerating material cost inflation and supply chain disruptions. Gibraltar implemented additional price increases, and also executed key 80/20 in-sourcing initiatives to mitigate cost and delivery risks associated with imported product. The sequential margin improvement indicates key operating actions are beginning to positively impact margin performance.

Agtech

For the third quarter, the Agtech segment reported:

Three Months Ended September 30,

$Millions

GAAP

Adjusted

2021

2020

% Change

2021

2020

% Change

Net Sales

$49.0

$58.0

-15.5%

$49.0

$58.0

-15.5%

Operating Income

$2.2

$5.1

-56.9%

$2.5

$5.9

-57.6%

Operating Margin

4.5%

8.8%

(430) bps

5.1%

10.1%

(500) bps

Revenue decreased 15.5%, impacted by delays in produce project schedules due to imported glass for roofing systems being held for extended time in both international and U.S. ports and project delays related to state licensing and permit approvals in our cannabis businesses. Despite the above headwinds, the commercial greenhouse business delivered sequential growth on strong demand. Order backlog continues to improve and is up 22% year-to-date, with new orders increasing 44% sequentially. The pipeline of expected new orders in all three businesses – Produce, Cannabis, and Commercial – remains strong and is expected to support momentum into the fourth quarter and 2022.

Adjusted operating margin improved 90 basis points sequentially despite overall lower sequential sales and the acceleration of both inflation and supply chain disruption in the quarter. Margin performance improvement was driven by sequential expansion in the commercial greenhouse business, 80/20 productivity and lean enterprise initiatives to effectively scale the business. Management continues to expect these benefits to accelerate sequential margin improvement through the remainder of the year.

Infrastructure

For the third quarter, the Infrastructure segment reported:

Three Months Ended September 30,

$Millions

GAAP

Adjusted

2021

2020

% Change

2021

2020

% Change

Net Sales

$18.7

$16.8

11.3%

$18.7

$16.8

11.3%

Operating Income

$1.6

$2.3

-30.4%

$1.6

$2.3

-30.4%

Operating Margin

8.8%

13.6%

(480) bps

8.8%

13.6%

(480) bps

Revenue increased 11.3% with improving demand for both fabricated and non-fabricated products and improving State D.O.T. and project funding driven by the overall economic recovery. Non-fabricated demand was somewhat muted by raw material supply constraints caused by Hurricane Ida damage to the industry’s key suppliers. Backlog at quarter-end increased to $49 million, up 29%, with new customer orders up 65.6% during the quarter, reflecting strength across the business and end markets.

Adjusted operating margin declined to 8.8% due to product line mix, rubber supply issues, production inefficiencies related to production capacity expansion, and price / cost alignment.

Business Outlook

Given year-to-date results and the ongoing dynamics surrounding today’s business environment, Gibraltar is adjusting its full year guidance as follows: consolidated revenue is expected to range between $1.31 billion and $1.35 billion; GAAP EPS from continuing operations is now expected to range from $2.45 and $2.56 compared to $2.53 in 2020; adjusted EPS from continuing operations is expected to range between $2.95 and $3.06 compared to $2.73 in 2020. With these adjustments, the Company anticipates full year revenue growth in the range of 27% - 31% and adjusted EPS growth of 8% - 12%. The new EPS range assumes today’s current cost environment and supply chain disruption (material, labor, transportation) remain elevated throughout the fourth quarter as well as incremental costs and potential labor and productivity impacts associated with administering upcoming COVID mandates. GAAP EPS from continuing operations and adjusted EPS from continuing operations for the fourth quarter is expected to range between $0.48 and $0.60, and $0.71 and $0.82 respectively, compared to $0.53 and $0.59, respectively, in fourth quarter 2020, with adjusted EPS growth reflecting a 21-39% increase driven by strong demand, some moderation in inflation and the benefits of pricing actions already taken.

Mr. Bosway commented, "Demand continues to be good across our business, and our EPS guidance revision reflects the effects of the current environment. We remain well positioned with strong backlog, increasing customer orders, a healthy balance sheet, and a continued focus on daily execution, acquisition integrations, and further strengthening our operating systems."

Third Quarter 2021 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 2021. 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 (877) 407-3088 or (201) 389-0927. For interested individuals unable to join the live conference call, a webcast replay will be available on the Company’s website for one year.

About Gibraltar

Gibraltar Industries is a leading manufacturer and provider of products and services for the renewable energy, residential, agtech 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, 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 INCOME
(in thousands, except per share data)
(unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Net Sales

$

369,353

$

296,792

$

1,005,334

$

767,377

Cost of sales

286,101

218,297

781,133

573,460

Gross profit

83,252

78,495

224,201

193,917

Selling, general, and administrative expense

45,274

37,552

141,999

109,449

Income from operations

37,978

40,943

82,202

84,468

Interest expense

491

217

1,180

483

Other expense (income)

72

(48

)

(4,279

)

(1,422

)

Income before taxes

37,415

40,774

85,301

85,407

Provision for income taxes

9,561

9,440

20,578

19,714

Income from continuing operations

27,854

31,334

64,723

65,693

Discontinued operations:

(Loss) income before taxes

(201

)

2,814

1,867

9,390

Provision for income taxes

97

388

323

1,972

(Loss) income from discontinued operations

(298

)

2,426

1,544

7,418

Net income

$

27,556

$

33,760

$

66,267

$

73,111

Net earnings per share – Basic:

Income from continuing operations

$

0.85

$

0.96

$

1.97

$

2.01

(Loss) income from discontinued operations

(0.01

)

0.07

0.05

0.23

Net income

$

0.84

$

1.03

$

2.02

$

2.24

Weighted average shares outstanding -- Basic

32,802

32,635

32,791

32,606

Net earnings per share – Diluted:

Income from continuing operations

$

0.84

$

0.95

$

1.96

$

2.00

(Loss) income from discontinued operations

(0.01

)

0.07

0.05

0.22

Net income

$

0.83

$

1.02

$

2.01

$

2.22

Weighted average shares outstanding -- Diluted

33,050

32,969

33,055

32,902

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

September 30,
2021

December 31,
2020

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

13,934

$

32,054

Accounts receivable, net of allowance of $5,799 and $3,529

260,624

197,990

Inventories, net

156,494

98,307

Prepaid expenses and other current assets

20,592

19,671

Assets of discontinued operations

77,438

Total current assets

451,644

425,460

Property, plant, and equipment, net

96,263

89,562

Operating lease assets

19,858

25,229

Goodwill

508,660

514,279

Acquired intangibles

154,655

156,365

Other assets

1,135

1,599

$

1,232,215

$

1,212,494

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

165,940

$

134,738

Accrued expenses

71,663

83,505

Billings in excess of cost

42,133

34,702

Liabilities of discontinued operations

49,295

Total current liabilities

279,736

302,240

Long-term debt

59,695

85,636

Deferred income taxes

37,000

39,057

Non-current operating lease liabilities

12,837

17,730

Other non-current liabilities

28,263

24,026

Stockholders’ equity:

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

Common stock, $0.01 par value; 100,000 and 50,000 shares authorized at September 30, 2021 and December 31, 2020, respectively; 33,782 shares and 33,568 shares issued and outstanding in 2021 and 2020

338

336

Additional paid-in capital

312,658

304,870

Retained earnings

536,210

469,943

Accumulated other comprehensive income (loss)

522

(2,461

)

Cost of 1,102 and 1,028 common shares held in treasury in 2021 and 2020

(35,044

)

(28,883

)

Total stockholders’ equity

814,684

743,805

$

1,232,215

$

1,212,494

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

Nine Months Ended
September 30,

2021

2020

Cash Flows from Operating Activities

Net income

$

66,267

$

73,111

Income from discontinued operations

1,544

7,418

Income from continuing operations

64,723

65,693

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation and amortization

23,958

15,749

Stock compensation expense

6,769

6,151

Gain on sale of business

(1,881

)

Exit activity costs, non-cash

1,193

505

(Benefit of) provision for deferred income taxes

(689

)

680

Other, net

1,274

763

Changes in operating assets and liabilities, excluding the effects of acquisitions:

Accounts receivable

(65,297

)

(40,883

)

Inventories

(65,906

)

2,007

Other current assets and other assets

(316

)

6,055

Accounts payable

32,029

12,856

Accrued expenses and other non-current liabilities

(12,261

)

(22,379

)

Net cash (used in) provided by operating activities of continuing operations

(14,523

)

45,316

Net cash (used in) provided by operating activities of discontinued operations

(2,002

)

10,878

Net cash (used in) provided by operating activities

(16,525

)

56,194

Cash Flows from Investing Activities

Acquisitions, net of cash acquired

4,143

(54,385

)

Net proceeds from sale of property and equipment

61

1,355

Purchases of property, plant, and equipment

(13,312

)

(7,893

)

Net proceeds from sale of business

38,062

723

Net cash provided by (used in) investing activities of continuing operations

28,954

(60,200

)

Net cash used in investing activities of discontinued operations

(176

)

(952

)

Net cash provided by (used in) investing activities

28,778

(61,152

)

Cash Flows from Financing Activities

Proceeds from long-term debt

58,500

Long-term debt payments

(83,636

)

Purchase of treasury stock at market prices

(6,161

)

(6,408

)

Net proceeds from issuance of common stock

1,021

377

Net cash used in financing activities

(30,276

)

(6,031

)

Effect of exchange rate changes on cash

(97

)

(558

)

Net decrease in cash and cash equivalents

(18,120

)

(11,547

)

Cash and cash equivalents at beginning of year

32,054

191,363

Cash and cash equivalents at end of period

$

13,934

$

179,816

GIBRALTAR INDUSTRIES, INC.
Reconciliation of Adjusted Financial Measures
(in thousands, except per share data)
(unaudited)

Three Months Ended
September 30, 2021

As Reported
In GAAP
Statements

Restructuring
Charges

Senior
Leadership
Transition
Costs

Acquisition
Related
Items

Adjusted
Financial
Measures

Net Sales

Renewables

$

130,162

$

$

$

$

130,162

Residential

171,545

171,545

Agtech

48,975

48,975

Infrastructure

18,671

18,671

Consolidated sales

369,353

369,353

Income from operations

Renewables

12,206

131

392

2,064

14,793

Residential

29,482

83

29,565

Agtech

2,227

293

2,520

Infrastructure

1,640

1,640

Segments Income

45,555

507

392

2,064

48,518

Unallocated corporate expense

(7,577

)

37

4

53

(7,483

)

Consolidated income from operations

37,978

...

396

2,117

41,035

Interest expense

491

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