Gibraltar Reports First Quarter Results
05/05/2011 - Gibraltar Industries reported GAAP income from continuing operations of $1.4 million on net sales of $163.6 million for the first quarter ended March 31, 2011.
Gibraltar Industries, Inc. reported GAAP income from continuing operations of $1.4 million on net sales of $163.6 million for the first quarter ended March 31, 2011.
As announced on March 10, 2011, Gibraltar completed its sale of the United Steel Products connector business. The operating results of this business have been reclassified to discontinued operations in the financial results being reported. Also, Gibraltar’s acquisition of The D.S. Brown Company was closed April 1, 2011, and, therefore, its financial position and results are not reported in Gibraltar’s financial results as of and for the three months ended March 31, 2011, but will be going forward.
Management Comments — “Our first-quarter 2011 results were in alignment with our expectations and, as we discussed last quarter, we capitalized on the ongoing improvements we have made in our businesses,” said Gibraltar Chairman and CEO Brian Lipke. “Although activity in our end markets remained generally weak, our first-quarter sales and profits were up both sequentially and year-over-year compared with the first quarter of 2010. We executed well on our plans to get deeper product penetration with our customers, and Gibraltar’s sales continued to grow faster than the market as a whole. Our focus on repair, remodel and replacement segments of both the residential and nonresidential markets across the broad geographic areas we serve helped our order rates despite weak new build housing activity.”
“Gibraltar’s improved top-line results for the first quarter included a shift in our business mix toward sales of products for the nonresidential market,” said Gibraltar President and Chief Operating Officer Henning Kornbrekke. “Our sales into industrial markets, in particular, were a bright spot in what otherwise remained an environment of very slow and uneven market growth in the first quarter. From a small base, we have been steadily increasing our industrial market penetration and these gains contributed to our first-quarter results.”
“During the first quarter, we closed two facilities in Europe, and are now servicing customers from our remaining European facilities,” said Kornbrekke. “Adopting lean manufacturing techniques across the company have allowed to us shorten our production lead times while freeing up space in our existing facilities, making such consolidations possible. Along with eliminating the inventories associated with closed facilities, we completed key investments in IT systems in 2010 that are enhancing our supply chain planning and procurement processes and inventory management capabilities.”
“These improvements have enabled us to successfully manage the recent volatility in raw material costs,” Kornbrekke said. “Although commodity volatility is likely to continue in the second and third quarters of this year, we expect to be able to manage this volatility with less impact on margins in 2011 than in 2010. These efforts will continue to center primarily on the cost side of the equation. We remain focused on providing outstanding service to our customers, and we are dedicated to providing them with competitive pricing.”
First Quarter Results — Net sales increased 12% to $163.6 million from $146.7 million for the first quarter of 2010. GAAP income from continuing operations, $1.4 million ($0.05 per diluted share), compares with a loss of $2.4 million ($0.08 per diluted share) for the year-ago first quarter. Results included after-tax special charges of $1.8 million ($0.06 per diluted share) resulting from acquisition costs, exit activity costs related to business restructuring, and equity compensation declined by Mr. Lipke. For the first quarter of 2010, after-tax special charges included $0.8 million largely for an ineffective interest rate swap.
Non-GAAP income from continuing operations before special charges was $3.2 million ($0.11 per share), compared with a loss of $1.6 million ($0.05 per share) in the first quarter of 2010.
Gross margin before special charges increased to 19% from 18% in the year-ago first quarter. The increase was primarily due to higher unit sales volume and operating efficiency.
Selling, general and administrative expense before special charges decreased 12% to $21.5 million from $24.4 million in the year-ago first quarter. The decrease was primarily the result of lower variable compensation and wages on reduced staffing levels.
Liquidity and Capital Resources — Gibraltar’s liquidity increased to $208 million as of March 31, 2011, including cash on hand of $105 million. Cash on hand included $58 million received on March 10, 2011, from the sale of the United Steel Products connectors business.
The company’s net working capital increased by $24.3 million since December 31, 2010, as 12% sales growth in Q1 2011 increased the investment in accounts receivable while days of net working capital improved to 56. The company defines working capital as accounts receivable plus inventory and accounts payable.
As a result, Gibraltar reduced its net debt outstanding by $43.5 million (30%) to $102.8 million as of March 31, 2011, from $146.3 million as of December 31, 2010.
Outlook — “With the work we have done to consolidate our footprint and improve our underlying operations and our success at obtaining market share gains, Gibraltar is in an excellent position to deliver improved sales and profitability in 2011,” said Lipke. “At the same time, with faster working capital turns and a good record of generating cash from operations, we are also in a position to supplement our organic growth with growth from accretive acquisitions.”
“Although the signs of end-market recovery have been inconsistent and modest at best, we have, in fact, seen some evidence of improvement,” said Lipke. “We entered 2011 with more efficient, centralized manufacturing and distribution facilities, as well as enhanced customer service capabilities aided by past restructuring activities. As a result, we are confident in our ability to report continued profitability improvement in the second quarter and full year.”
Gibraltar Industries is a leading North American manufacturer and distributor of ventilation products, mail storage (single and cluster), rain dispersion, bar grating, expanded metal, metal lath, expansion joints, and structural bearing products. The company serves customers in a variety of industries in all 50 states and throughout the world from 36 facilities in 19 states, Canada, England, and Germany and holds leadership positions in major product categories.
