Gibraltar Industries, Inc. — Q3 2021 Form 10-Q
Business context and reporting period
Quarter ended September 30, 2021; comparisons are with the same 2020 periods. Gibraltar supplies products and services to renewable energy, residential, agricultural technology (Agtech), and infrastructure markets. The Industrial business was sold in February 2021 and is presented as discontinued operations.
Financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Net sales | $369.4M | $296.8M | $1,005.3M | $767.4M |
| Gross profit / margin | $83.3M / 22.5% | $78.5M / 26.4% | $224.2M / 22.3% | $193.9M / 25.3% |
| Operating income / margin | $38.0M / 10.3% | $40.9M / 13.8% | $82.2M / 8.2% | $84.5M / 11.0% |
| Income from continuing operations | $27.9M | $31.3M | $64.7M | $65.7M |
| Net income | $27.6M | $33.8M | $66.3M | $73.1M |
| Diluted EPS | $0.83 | $1.02 | $2.01 | $2.22 |
Q3 sales rose 24.5%; nine-month sales rose 31.0%. Acquisitions contributed $61.2M of Q3 growth and $169.3M of nine-month growth; reported organic growth was $11.4M and $68.7M, respectively. Margin compression reflected inflation and timing of price increases, supply and logistics disruptions, project timing, and lower margins and integration costs at recent acquisitions.
Q3 segment sales were Renewables $130.2M, Residential $171.5M, Agtech $49.0M, and Infrastructure $18.7M. Renewables and Residential led sales growth; Agtech sales fell 15.5% in Q3 amid project delays. Backlog was $385M, up 32% year over year (10% pro forma for acquisitions).
Cash flow, debt, and liquidity
For the first nine months, continuing-operations operating cash flow was negative $14.5M, versus positive $45.3M in 2020. The company attributed the outflow mainly to a $111.8M investment in working capital and other net assets, including higher inventory and receivables. Total operating cash flow, including discontinued operations, was negative $16.5M. Continuing-operations investing cash flow was positive $29.0M, including $38.1M in net proceeds from the Industrial sale; capital expenditures were $13.3M. Cash declined $18.1M to $13.9M.
Long-term debt was $59.7M at September 30, down from $85.6M at year-end. Revolver availability was $332.9M; reported cash plus availability was $346.8M. The company said it was in compliance with all three credit agreement financial covenants. Current assets were $451.6M and current liabilities $279.7M.
Outlook, risks, and unusual items
- Full-year 2021 guidance was revised to revenue of $1.31B–$1.35B and GAAP EPS from continuing operations of $2.45–$2.56. Q4 EPS guidance was $0.48–$0.60.
- Guidance assumes elevated material, labor, transportation, and supply-chain costs continue through Q4, with possible additional costs and labor/productivity impacts from administering upcoming COVID mandates.
- Management reported ongoing supply constraints, labor availability issues, inflation, logistics costs, and project delays. It expects these pressures to continue into Q4. Seasonality and COVID-related effects mean interim results may not indicate full-year or future performance.
- Nine-month other income included a $4.7M gain on securities received from the Thermo sellers to settle indemnification claims. The Industrial business sale generated $38M in net proceeds, including a seller note subsequently paid in full; a substantial disposal loss had largely been recorded in 2020.
- The company recorded $7.9M in nine-month exit and impairment charges, including costs associated with planned discontinuation of its organic solar tracker solution; two facilities were closed during the period.
- Management said there were no material changes to previously disclosed risk factors, no material pending legal proceedings, and no material changes to internal control over financial reporting.
Key facts for investors to verify
- Whether pricing actions catch up with input-cost inflation and margins recover as management expects.
- Whether supply-chain, labor, logistics, and project-delay pressures ease, particularly in Renewables and Agtech.
- Conversion of the $385M backlog into revenue and cash, and progress in reducing working-capital needs.
- Delivery against revised full-year guidance and its stated cost and COVID-related assumptions.
- Integration costs and acquisition-related margin effects, as well as finalization of the provisional TerraSmart purchase-price allocation.