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4-Traders Homepage  >  Equities  >  Nasdaq  >  Gibraltar Industries Inc    ROCK

Delayed Quote. Delayed  - 11/22 10:00:00 pm
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11/03 GIBRALTAR INDUS : profits top estimates
11/03 GIBRALTAR INDUS : ROCK) reported earnings of $0.67 per share beating..
11/03 GIBRALTAR INDUS : posts 3Q profit
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GIBRALTAR INDUSTRIES : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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05/05/2017 | 07:22pm CET
Certain information set forth herein includes statements that express our
opinions, expectations, beliefs, plans, objectives, assumptions or projections
regarding future events or future results and, therefore, are or may be deemed
to be, "forward-looking statements." These forward-looking statements can
generally be identified by the use of forward-looking terminology, including the
terms "believes," "anticipates," "expects," "estimates," "seeks," "projects,"
"intends," "plans," "may," "will" or "should" or, in each case, their negative
or other variations or comparable terminology. These forward-looking statements
include all matters that are not historical facts. They include statements
regarding our intentions, beliefs or current expectations concerning, among
other things, our results of operations, financial condition, liquidity,
prospects, growth, competition, strategies and the industry in which we operate.
By their nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may or may not
occur in the future. We believe that these risks and uncertainties include, but
are not limited to, those described in the "Risk Factors" disclosed in our
Annual Report on Form 10-K. Although we base these forward-looking statements on
assumptions that we believe are reasonable when made, we caution you that
forward-looking statements are not guarantees of future performance and that our
actual results of operations, financial condition and liquidity and the
development of the industries in which we operate may differ materially from
those made in or suggested by the forward-looking statements contained herein.
In addition, even if our results of operations, financial condition and
liquidity and the development of the industries in which we operate are
consistent with the forward-looking statements contained in this quarterly
report, those results or developments may not be indicative of results or
developments in subsequent periods. Given these risks and uncertainties, you are
cautioned not to place undue reliance on these forward-looking statements. Any
forward-looking statements that we make herein speak only as of the date of
those statements, and we undertake no obligation to update those statements or
to publicly announce the results of any revisions to any of those statements to
reflect future events or developments. Comparisons of results for current and
any prior periods are not intended to express any future trends or indications
of future performance, unless expressed as such, and should only be viewed as
historical data.
Overview
Gibraltar Industries, Inc. (the "Company") is a leading manufacturer and
distributor of building products for industrial, transportation infrastructure,
residential housing, renewable energy and resource conservation markets. Our
business strategy focuses on significantly elevating and accelerating the growth
and financial returns of the Company. We strive to deliver best-in-class,
sustainable value creation for our shareholders for the long-term. We believe
this can be achieved from a transformational change in the Company's portfolio
and its financial results. Our business strategy has four key elements, or
"pillars," which are: operational excellence, product innovation, portfolio
management, and acquisitions as a strategic accelerator.

Operational excellence is our first pillar in this strategy. 80/20
simplification ("80/20") is a core part of the operational excellence pillar and
is based on the analysis that 25% of the customers typically generate 89% of the
revenue in a business, and 150% of the profitability. Through the application of
data analysis generated by 80/20 practice, we are focusing on our largest and
best opportunities (the "80") and eliminating complexity associated with less
profitable opportunities (the "20") in order to generate more earnings year over
year, at a higher rate of return with a more efficient use of capital.

We have recently completed the second year of our multi-year simplification
initiative. Since initiation of 80/20 in 2015, we have achieved nearly 250 basis
points of operating margin improvement from 80/20 simplification initiatives and
exceeded our initial five-year target ending 2019 of $25 million of pre-tax
savings. We currently sit at the start of the "middle innings" of this 80/20
initiative, which means that there is both more work and more opportunity ahead.
We are targeting greater structural changes affecting the balance sheet. We are
just starting the follow-on management tools of in-lining our manufacturing
processes linked with market-rate-of-demand replenishment tools. These follow-on
tools are focused on process manufacturing the highest-volume products for our
largest customers, and on a much higher level of capacity utilization. We expect
these methods will yield additional benefits including lower manufacturing
costs, lower inventories and fixed assets, and an even higher level of service
to customers. Additionally, we are focused on driving top line growth with new
and innovative products. Our initiatives will be tailored toward reallocating
sales and marketing talent to target specific end user groups in order to better
understand their needs and the various market opportunities that may be
available. This effort is expected to produce ideas and opportunities that
generate profitable growth.

The second pillar of our strategy is portfolio management, which is a natural
adjunct to the 80/20 initiative. Using the 80/20 process, we conduct strategic
reviews of our customers and end markets, and allocate leadership time, capital
and resources to the highest-potential platforms and businesses. Following the
sale of our European industrial manufacturing business to a third party in April
2016, we next decided in December 2016 to exit our small European residential
solar racking business and U.S. bar grating product line, which are proceeding
as planned. These portfolio changes have helped contribute to the Company's

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realization of a higher rate of return on invested capital in 2016. We have now
acted on all near-term portfolio assessments and expect no additional changes in
2017 while we continue to position our resources on more attractive projects and
markets.

Product innovation is our third strategic pillar. Innovation is centered on the
allocation of new and existing resources to opportunities that drive sustainable
returns. We are focused on those products and technologies that have relevance
to the end-user and can be differentiated from our competition. Our focus on
innovation is centered on four markets: postal and parcel products, residential
air management, infrastructure and renewable energy. These respective markets
are expected to grow based on demand for: centralized mail and parcel delivery
systems; zero carbon footprint homes; the need for repairs to elevated bridges
that are structurally deficient or functionally obsolete; and energy sources not
dependent on fossil fuels.

The fourth pillar of our strategy is acquisitions. We are focused on making
strategic acquisitions in five key markets, four of which are served by existing
platforms within the Company. The existing platforms include the same areas in
which we are targeting the development of innovative products: postal and parcel
solutions, infrastructure, residential air management and renewable energy. The
remaining new platform is water management and conservation. These platforms are
all large markets in which the underlying trends for customer convenience and
safety, energy-savings and resource conservation are of increasing importance
and are expected to drive long-term demand. We believe these markets also offer
the opportunity for higher returns on our investments than those we have
generated in the past. The acquisitions of Rough Brothers Manufacturing, Inc.,
RBI Solar, Inc., and affiliates, collectively known as "RBI" in June 2015 and
more recently, Nexus Corporation ("Nexus") in October 2016 and Package Concierge
in February 2017, were the direct result of this fourth pillar strategy.
On February 22, 2017, the Company acquired all of the outstanding stock of
Package Concierge for approximately $19 million subject to a working capital
adjustment and certain other adjustments provided for in the stock purchase
agreement. The acquisition was financed through cash on hand. Package Concierge
is a leading provider of multifamily electronic package delivery locker systems
in the United States. The results of operations of Package Concierge have been
included within the Residential Products segment of the Company's consolidated
financial statements from the date of acquisition.
On February 6, 2017, the Company completed the sale of substantially all of its
U.S. bar grating product line assets to a third party. The Company had
previously announced, on December 2, 2016, its intentions to exit its U.S. bar
grating product line as part of its portfolio management initiative. These
assets were a part of our Industrial and Infrastructure Products segment.

On December 2, 2016, the Company announced its decision to exit its European
residential solar racking business and U.S. bar grating product line as part of
its portfolio management and 80/20 strategic initiatives. These businesses
contributed a combined $75 million in revenue and pre-tax operating losses of $6
million in 2016. This action resulted in the sale and closing of 3 facilities in
early 2017.

On October 11, 2016, the Company acquired all of the outstanding stock of Nexus
for approximately $24 million. The acquisition was financed through cash on
hand. Nexus is a leading provider of commercial-scale greenhouses to customers
in the United States. The results of operations of Nexus have been included
within the Renewable Energy and Conservation segment of the Company's
consolidated financial statements from the date of acquisition.

On April 15, 2016, the Company sold its European industrial manufacturing
business to a third party for net of cash proceeds of $8.3 million. This
business, which supplied expanded metal products for filtration and other
applications, contributed $36 million in revenue to the Company's Industrial and
Infrastructure Products segment in 2015 and had nearly break-even operating
results. The divestiture of this business is in alignment with the Company's
portfolio management assessments.

The Company serves customers primarily throughout North America and, to a lesser
extent, Asia. Our customers include major home improvement retailers,
wholesalers, industrial distributors, contractors, solar developers and
institutional and commercial growers of plants. As of March 31, 2017, we
operated 42 facilities in 18 states, Canada, China, and Japan giving us a base
of operations to provide customer support, delivery, service and quality to a
number of regional and national customers and providing us with manufacturing
and distribution efficiencies in North America, as well as a presence in the
Asian markets.

The Company operates and reports its results in the following three reporting
segments, entitled:
• Residential Products;

• Industrial and Infrastructure Products; and

• Renewable Energy and Conservation.



Our Residential Products segment services new residential housing construction
and residential repair and remodeling activity with products including roof and
foundation ventilation products, mail and package storage products, rain
dispersion products

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and roof ventilation accessories. This segment's products are sold through major retail home centers, building material wholesalers, buying groups, roofing distributors, and residential contractors.

Our Industrial and Infrastructure Products segment focuses on a variety of
markets including industrial and commercial construction, highway and bridge
construction, automotive, airports and energy and power generation markets with
products including perimeter security, expanded and perforated metal, plank
grating, as well as, expansion joints and structural bearings for roadways and
bridges. This segment sells its products through steel fabricators and
distributors, commercial and transportation contractors, and original equipment
manufacturers.

Our Renewable Energy and Conservation segment focuses on the design,
engineering, manufacturing and installation of solar racking systems and
commercial, institutional, and retail greenhouse structures. This segment's
services and products are provided directly to developers, select distribution
channels, and end users/owners.
The end markets our businesses serve include residential housing, industrial
manufacturing, transportation infrastructure, and renewable energy and
conservation. These end markets are subject to economic conditions that are
influenced by various factors. These factors include but are not limited to
changes in general economic conditions, interest rates, exchange rates,
commodity costs, demand for residential construction, governmental policies and
funding, tax policies and the level of non-residential construction and
infrastructure projects. We believe the key elements of our strategy will allow
us to respond timely to changes in these factors. We have and expect to continue
to restructure our operations, including consolidation of facilities, reducing
overhead costs, curtailing investments in inventory, and managing our business
to generate incremental cash. Additionally, we believe our current strategy has
enabled us to better react to fluctuations in commodity costs and customer
demand, and has helped in improving margins. We have used the improved cash
flows generated by these initiatives to maintain low levels of debt, improve our
liquidity position, and invest in growth initiatives. Overall, we are striving
to achieve stronger financial results, make more efficient use of capital, and
deliver higher shareholder returns.

Results of Operations
Three Months Ended March 31, 2017 Compared to the Three Months Ended March 31,
2016
The following table sets forth selected data from our statements of operations
and the related percentage of net sales for the three months ended March 31, (in
thousands):
                                                     2017                    2016
Net sales                                    $ 206,605    100.0 %   $ 237,671     100.0  %
Cost of sales                                  157,350     76.2 %     183,521      77.2  %
Gross profit                                    49,255     23.8 %      54,150      22.8  %
Selling, general, and administrative expense    39,576     19.1 %      36,389      15.3  %
Income from operations                           9,679      4.7 %      17,761       7.5  %
Interest expense                                 3,576      1.8 %       3,691       1.6  %
Other expense (income)                              54      0.0 %         (35 )     0.0  %
Income before taxes                              6,049      2.9 %      14,105       5.9  %
Provision for income taxes                       2,053      1.0 %       5,076       2.1  %
Net income                                   $   3,996      1.9 %   $   9,029       3.8  %

The following table sets forth the Company's net sales by reportable segment for the three months ended March 31, (in thousands):

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                                                                                        Change due to
                                                           Total
                               2017          2016         Change       Divestitures      Acquisitions      Operations
Net sales:
Residential Products        $ 104,551$ 100,147$   4,404     $           -     $         576     $     3,828
Industrial and
Infrastructure Products        50,718        80,017       (29,299 )         (27,104 )               -          (2,195 )
Less: Intersegment sales         (456 )        (367 )         (89 )               -                 -             (89 )
                               50,262        79,650       (29,388 )         (27,104 )               -          (2,284 )
    Renewable Energy and
Conservation                   51,792        57,874        (6,082 )          (1,400 )           4,308          (8,990 )
Consolidated                $ 206,605$ 237,671$ (31,066 )$     (28,504 )$       4,884$    (7,446 )



Consolidated net sales decreased by $31.1 million, or 13.1%, to $206.6 million
for the three months ended March 31, 2017 compared to the three months ended
March 31, 2016. The decrease in sales was primarily the result of divestitures
related to the Company's portfolio management activities during 2016. The
Company sold its European industrial manufacturing business in April 2016 to a
third party and exited both the Company's small European residential solar
racking business and the Company's U.S. bar grating product line, both of which
commenced during the fourth quarter of 2016. These divestitures resulted in a
decrease in revenues of $28.5 million from the prior year quarter. Along with
the divestitures, volumes in comparable revenue streams quarter over quarter
decreased 5.0%. Slightly offsetting these declines were net sales contributions
from our recent acquisitions in our Renewable Energy and Conservation and
Residential Products Segments, Nexus in October 2016 and Package Concierge in
February 2017, along with a modest 1.3% increase in pricing to customers.
Net sales in our Residential Products segment increased 4.4%, or $4.4 million to
$104.6 million for the three months ended March 31, 2017 compared to $100.1
million in the three months ended March 31, 2016. The increase was the result of
sales generated from the acquisition of Package Concierge, a 2.0% increase in
pricing to customers, and a 0.8% net increase in volume. The net sales volume
increase was primarily due to an increase in demand for our postal and parcel
storage products.
Net sales in our Industrial and Infrastructure Products segment decreased 36.9%,
or $29.4 million to $50.3 million for the three months ended March 31, 2017
compared to $79.7 million for the three months ended March 31, 2016. The
decrease in net sales was the combined result of the Company's exit from its
U.S. bar grating product line and the divestiture of our European industrial
manufacturing business, along with a 4.7% decrease in volume as compared to the
same period in the prior year. A decrease in demand for our infrastructure
products, which include components for bridges and elevated highways,
contributed to the decline in volume due to continued delay in infrastructure
projects. We expect this decline to be temporary due to pending federal and
state funding availability and as evidenced by an increase in infrastructure
backlog for the quarter.
Net sales in our Renewable Energy and Conservation segment decreased 10.5%, or
$6.1 million to $51.8 million for the three months ended March 31, 2017 compared
to $57.9 million for the three months ended March 31, 2016. The decrease was the
result of a 13.8% decrease in volume along with the effects of the exit of the
Company's small European residential solar racking business, partially offset by
sales generated from the acquisition of Nexus. The decline in volume from the
comparable quarter was largely due to carryover benefit realized in the first
quarter of 2016 from the increased sales activity near the end of 2015 as
developers pushed to complete new solar installations to qualify for the then
expected expiration of the federal investment tax credit at the end of 2015. In
addition, we were more selective with the projects pursued during 2016 to ensure
that we provided expected levels of service to our key customers as we moved
production of major components of our new racking system in-house.  We became
satisfied with the results of our progress with this design change and
in-sourcing project during the fourth quarter of 2016 and then we began to more
aggressively pursue projects.
As a result, we entered 2017 with lower backlogs as compared to the beginning of
2016.
Our consolidated gross margin increased to 23.8% for the three months ended
March 31, 2017 compared to 22.8% for the three months ended March 31, 2016. The
Company largely benefited from portfolio management actions during 2016 in which
less profitable businesses or products lines were sold or exited in order to
enable the Company to re-allocate leadership, time, capital and resources to the
highest potential platforms and businesses. In addition, other restructuring
actions taken resulting from our 80/20 initiatives in 2016 reduced costs and
contributed to the increased margin as well.
Selling, general, and administrative (SG&A) expenses increased by $3.2 million,
or 8.8%, to $39.6 million for the three months ended March 31, 2017 from $36.4
million for the three months ended March 31, 2016. The $3.2 million increase was
primarily

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due to a $1.8 million increase in restructuring costs related to our portfolio
management and 80/20 initiatives, as well as senior leadership transition and
acquisition-related costs. Also contributing to the increase was $1.4 million of
higher performance-based compensation expense, the result of the higher price of
the Company's shares which increased as compared to the first quarter of 2016.
SG&A expenses as a percentage of net sales increased to 19.1% in the three
months ended March 31, 2017 compared to 15.3% in the three months ended
March 31, 2016.
The following table sets forth the Company's income from operations and income
from operations as a percentage of net sales by reportable segment for the three
months ended March 31, (in thousands):

© Edgar Online, source Glimpses

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