Good day, ladies and gentlemen, and welcome to the Gibraltar Industries Fourth Quarter 2012 Earnings Conference Call. [Operator Instructions] I would like to turn the call over to your host for today, Mr. David Calusdian from the Investor Relations firm, Sharon Merrill. Please proceed.

Good morning, everyone, and thank you for joining us. If you have not received a copy of the earnings press release that was issued this morning, you can find it in the Investor Info section of the Gibraltar website, gibraltar1.com. During the prepared remarks today, management will be referring to presentation slides that summarize the company's fourth quarter performance. These slides are also posted on the website. Please turn to Slide #2 in the presentation. Gibraltar's earnings release and this morning's slide presentation both contain adjusted non-GAAP financial measures. Reconciliations of GAAP to adjusted measures have been appended to the earnings release. Additionally, the company's remarks contain forward-looking statements about future financial results. The company's actual results may differ materially from the anticipated events, performance or results expressed or implied by these forward-looking statements. Gibraltar advises you to read the risk factors detailed in its SEC filings, which can also be accessed through the company's website. On our call this morning are Gibraltar's Chairman and CEO, Brian Lipke; Henning Kornbrekke, President and Chief Operating Officer; and its CFO, Ken Smith. At this point, I will turn the call over to Brian.

Thank you, David. Good morning, everyone. We appreciate you joining us on the call today. I'll begin, as usual, with a brief overview and then turn the call over to Henning and Ken for detailed comments on our results. And then I'll close our prepared remarks with some observations about the business outlook. And then, of course, following that, we'll open the call to any questions that any of you might have. Early 2012 was a better year for Gibraltar than 2011, and it was our second consecutive year of accelerating earnings growth. And that was in spite of the historically low levels of demand in our traditional core markets. And we're referring to Slide 3 in our presentation now. We concluded 2012 with strong year-over-year profit improvement in the fourth quarter and for the full year. And again, that was achieved without the benefit of any meaningful change in order volumes, as we felt only modest improvement in some of our end markets. The earnings growth was driven primarily by initiatives we've undertaken during the past 2 years to strengthen the performance of our business, which positions us well entering 2013. With that backdrop, we're optimistic about our prospects for growth on both the top and bottom lines and another year of improved results in 2013. That optimism stems from the contribution to both sales and earnings that we'll be receiving from the Q4 2012 acquisitions, the lower interest expense, which we'll incur in 2013 as a result of our successful bond offering in January of this year and the West Coast integration cost being substantially behind us. In addition, the brightening end market outlook for some of our products, which should be most prevalent in the second, third and fourth quarters of this year, as the improving demand picture starts to impact Gibraltar, further solidifies our optimism about our prospects for another year of improved performance in 2013. In addition, we have substantial manufacturing capacity in our existing operations throughout all of our product categories, which provides further upside sales and earnings potential, as the eventual improvement in our industrial and commercial and end markets develops. With that, I'll turn the call over to Henning.

Thanks, Brian. Turning now to Slide #4. I'll begin by focusing on our revenue for the fourth quarter. As a reminder, we're currently generating roughly 40% of our total sales in the residential building market, 10% in the low-rise commercial building markets, 40% in the industrial markets and 10% in the infrastructure market. Many of our industrial products are also indirectly serving the building market, which is showing strong indications of solid growth in 2013. As we expected, Gibraltar's net sales for the fourth quarter of 2012 were equivalent with quarter 4 last year at $172.6 million. Sluggish economic conditions continued through the second half of 2012, perhaps attributable to worries about the fiscal cliff and tax increases for individuals, which slightly contributed to the negative GDP in the U.S. during the fourth quarter. Full year sales were $790.1 million, up 3%, and in spite of the market and economic challenges, gross margin was 19% with a favorable pickup in material cost of 2 percentage points year-over-year. West Coast cost of integration was approximately 1.5 percentage points on gross margins. Looking at our market specifically, there were pockets of both strength and weakness in North America in the fourth quarter and full year and an ongoing recessionary environment in Europe where 7% of our sales come from. Our infrastructure products business continued to perform well in the fourth quarter. It entered the fourth quarter with a solid backlog, and its Q4 2012 was the third consecutive quarter in which sales and profits exceeded those of the comparable period in 2011, again, driven by a good mix. Full year sales are up approximately 20%. With the currently high level of quoting activity for bridge and highway products, coupled with our recent acquisition in this market which expands our product offering and…

Thanks, Henning, and good morning. Now let's turn to Slide #6, entitled Year-Over-Year Performance. The P&L information on this slide and subsequent slides represent adjusted measures for continuing operations, and is reconciled to U.S. GAAP results and supplemental schedules of the earnings press release. On January 15, we issued a press release announcing preliminary guidance on our fourth quarter 2012 and full year 2012 results. In it, we disclosed a range for adjusted EPS for Q4 and the full year 2012, as well as adjusted EBITDA. These ranges were not affected by a subsequent impairment charge, and our final adjusted EPS for Q4 and for the full year 2012 being reported today are at the top end of the ranges of adjusted results disclosed in the January 15 press release. Subsequent to issuing a press release, as we were completing our audited results, we identified one change affecting our preliminary guidance, a $4.6 million impairment of purchased intangibles. The effect of this impairment was to lower our U.S. GAAP EPS by $0.15 per share compared to the range disclosed in the January 15 press release. Now I'll go down to Slide #6, and on Slide #6, I'll go down the fourth quarter columns. Revenues were down slightly, the net result of 3% lower revenue to industrial markets and residential markets, while revenues rose 1% for public infrastructure projects and 1% from the late fourth quarter acquisitions. Adjusted operating income grew significantly for the 3-month period, rising to nearly $7 million from a loss of $4 million in Q4 2011, reflecting our improved gross profit and lower SG&A expenses. Adjusted operating margin was up a comparable degree to 4% for Q4 2012 compared to a negative 2.5% for Q4 2011. Although not shown on Slide 7, the fourth quarter's adjusted gross…

Thank you, Ken. We believe that Gibraltar is well positioned for a year of top line growth in 2013. The trends we're seeing in our businesses generally mirror the optimism in the latest industry reports. First and foremost, among these trends is the increase in residential new construction activity. We're encouraged by the growth this past year in single and multi-family housing starts. The recent decline in housing inventory also bodes well for 2013 as do the increasing levels of bridge and highway construction activity and the improvement in repair and remodel that Henning and Ken both described. We've seen only a modest overall impact from these dynamics at this early point in the year, but we believe that we will see a greater impact as the year unfolds, especially in quarters 2, 3 and 4, particularly as wholesalers' and retailers' order rates pull-through improved orders from us and provide them confidence to increase their inventory levels. Most importantly, the work we've done over the past 5 years, and are continuing to do to improve our underlying operations and expand margins in every part of the business, should enable us to leverage even modest levels of end market growth and a stronger profitability. As summarized on Slide 13, our confidence in Gibraltar's outlook for another year of bottom line growth in 2013 is based on 4 key factors. The first is end market growth, we're becoming increasingly optimistic about the sustainability of the positive trends we currently see developing. As a result, we expect the leverage we have on a lower cost structure to result in some expanded margins and improved profitability. Second, we'll no longer be incurring the major restructuring charges and depressed margins related to our West Coast integration that we incurred during 2012. Third, the 3 acquisitions purchased in the late fourth quarter of 2012 from our -- funded from our existing cash are expected to be accretive in 2013. And fourth, we have the benefit of lower interest expense in 2013 as a result of the very successful bond refinancing we completed in Q1 2013. Reflecting our strong balance sheet, positive cash position and improved liquidity, acquisition-driven growth will continue to be one of our strategic priorities. Over the past 5 years, we've rationalized and refocused Gibraltar's business portfolio and product lines through a series of thoughtful and well-timed divestitures and acquisitions. Our plan is to continue to use portfolio management to drive continued performance enhancements. Summing up, we delivered much stronger financial results in 2012 than we did in 2011, and we look forward to extending this record of improvement in 2013 compared to 2012. That concludes our prepared remarks. At this point, we'll open the call to any questions that any of you may have. Operator, you can open the call line.

[Operator Instructions] Our first question comes from Robert Kelly of Sidoti & Company.

Just a question on the organic growth discussion. Pretty much okay with a lot of the category growth assumptions you put out there. Just the R&R part for res, I mean, we've seen a lot of fits and starts and disappointment as far as that. What gives you confidence that 2013 is going to be the year where we finally see growth in the replace remodel portion of your business?

I think as we outlined, our repair and remodel really is really -- and we're going to call it in 2 segments. One is roofing. We did about 24% of our business is repair and remodel directly related to roofing, and as I said earlier, that's probably going to be flat and we sense that the roofing manufacturing indicating 2013. The other portion of the business, both repair and remodel and new, is expected to both grow at double-digit rates, and we see that starting to happen in our business. A lot of orders from our customers were starting to move up more aggressively than they have in the past. So we have very strong conviction that as we go through the rest of this year, both the new building construction and repair and remodeling, not roofing-related, will continue to grow at the double-digit rate.

Robert, I think some of it is due to the fact that there's been a lot of deferred maintenance driven by consumer, the lack of consumer confidence of what's going on in the economy overall. Some of the deferred maintenance simply has to get done, and I think that's a factor. I also think that consumer confidence, while going through overall bumpy road with all of the shenanigans going down in the Washington, D.C., but I think with the job picture improving, people are getting more confident that the economy is going to sustain improving levels of unemployment, and those with a job are more comfortable that their jobs will be in place, making them more confident and willing to spend money on some of these deferred projects.

Yes, no, I understand the theory of the pent-up demand. I guess, are your customers starting to see the orders flow through? I mean, is there more -- are you seeing orders for your R&R products and res starting to pick up here in January? Just trying to get a sense of what you're hearing.

Yes, we have not seen the pickup in the early part of the first quarter, but we are starting to see, when we talk to our business units and they talk to their customers, we are starting to see their activity as we move further out. And also recognize most of our repair and remodel products are not associated with large projects, but rather small and mid-sized projects, which are going to start to move faster than the larger projects. Those, I think, are going to take a little bit longer to be fully seeded and for people to be comfortable to do.

I think we're going to see the increase in demand in 2 tranches. First, many of our wholesale and retail customers are very tightly focused on working capital and inventory levels within their own business. So what we'll see first is not an increase in their inventory or increase in sales because they're building inventory, but simply an increase because their sales volumes' going up which will result in more of our sales being pulled through their stores. I think once they get confident that the demand level is going to increase that we'll then start to see or start to benefit from some inventory buildup to correspond to the higher levels of demand that will be developing as the year unfolds.

Okay. That's helpful. Two questions on M&A and the West Coast consolidation. First off, the businesses that you acquired in 4Q, what's the acquisition integration expense that you're expecting for 2013? And then as far as the West Coast consolidation, I think you said it was the cost from 97% behind you? Are we still expecting a plus-100 basis point benefit to the gross margin in '13, assuming flat volumes?

Yes, we've put 97%, and I had put that out there because there's probably some small expenses we might incur, but they're only going to be small. Most of it is really completed in terms of expense. And in terms of related to the integration of acquisitions, those expenses in '13 are almost -- they're very small, almost nonexistent, I would say, as we go through the year.

And we'll have some purchase accounting write-offs like on finished goods inventory and backlog. I've excluded those from our adjusted expectations that we talked about on the script.

Right, right.

Great. And then just as far as with West Coast being behind you, if the math is still 100 basis points of gross margin, assuming flat volumes in '13 or you had said that during 3Q?

Yes, yes.

One final one, it's more of a longer-term question. You put in your public investor presentations sort of the longer-term financial goals, $1 billion in revenue; adjusted operating margin, 10%; EBITDA, 13%. If we assume that you are a 30% kind of incremental margin company and we are able to hit those targets over the next couple of years, isn't that operating margin kind of light with the mix of acquisitions you've done? I mean, should we be updating our thoughts about the longer-term profit targets for Gibraltar?

I think there's 2 ways of looking, and I think Brian had touched on one of it. We're constantly looking at the mix of businesses that we have, and we intend to actively continually improve the mix of businesses that we have. But if you take the current portfolio that we currently have and the fact we've done this as early as -- as late as yesterday actually and you projected forward, we can hit the numbers that we have talked about in the Road Show with the current business mix we have as we go forward. And as we come out of the back-end of 2013 it would be, I'd say, very evident.

And I think that's the positive news because the better news is, as we continue to use portfolio management, we should be able to, Robert, as you're projecting, create a business model that could yield higher than that 10% operating margin. But as Henning pointed out, as we hit the targeted margin performance of each of the businesses that we have today, we believe we're fully capable of getting to a 10% operating margin at or around that $1 billion in sales, and I think we'll be proving that to you as the year unfolds.

Right. Yes, no my point was more that you should do that very easily just based on where you are today without even the benefit of the acquisitions in the mix yet...

I don't know if anything's easy in this world we live in today, but we understand.

We're always cautious, Robert, because it seems that the analyst community pulls for us and gets a little bit more aggressive with that so we're always a little bit more conservative, and we'd rather let our results do the talking as opposed to over -- and create overly high expectations.

Our next question comes from Ken Zener of KeyBanc Capital Markets.

The $0.65 in 2012 included how much cost tied to the West Coast integration that will not be there in 2013?

Approximately $8 million.

Weighted more towards equally 1, 2 and 3Q, is that the right way to think about it just as a refresher?

Yes. Makes senses, I think.

And that's going to be largely in the gross margin, correct? Or would that be in your SG&A level, which is still based $27.5 million at quarter, if that's correct, plus the $7 million over 4 quarters?

That's mostly the West Coast improvements will largely be influenced on gross.

Gross margins.

On the gross? And now the SG&A increase of $7 million tied to these acquisitions, is that additive? That's obviously an annual number. But you've talked about SG&A being between $27 million and $28 million on your old legacy business. Is that still the right baseline to be operating from?

Yes, the additional cost in SG&A is not going to change the ratio of sales to SG&A. In fact, as I think Ken outlined, our SG&A, as a percent of sale, is actually coming down.

Right. I guess, on a dollar basis though per quarter, is it -- in the past, you guys have talked 27, 28, excluding equity...

It's -- I would say for 2013, it's going to be closer to $26 million a quarter, plus the acquisitions.

Yes, right.

Okay. So you guys took that down. I guess, the strength that you had in fourth quarter relative to what you guys kind of talked about in the third quarter, which seemed more like kind of a 17%, can you talk about the -- you talked -- highlighted the word efficiency in cost. Did the 4Q come in better in terms of your fixed operating leverage or was it that cost that you expected to incur didn't? Can you just talk about the exact dynamic in fourth quarter that led to your strong gross margin?

For the most part, the fourth quarter did come in stronger. If we just look at the gross margins in the fourth quarter, we were 19% versus 16.6% in the prior year quarter. And so, again, most of the efficiencies, the ones we're talking about, are going to show up in cost of sales and be represented in gross margin. You can see, we had a nice pick up in gross margin in the fourth quarter.

Right, okay. And then the last question, the acquisitions, $55 million in sales, I believe, in the press release, it said $7 million in EBIT or operating. Is that correct?

No, it was not. We said it was correct revenue number, but the $7 million was EBITDA.

Oh, that was EBITDA? Got it. How much purchase accounting are you expecting related to those acquisitions in 2013 that I assume more front-end loaded that we will not see in 2014?

It could be approaching about $700,000 and $900,000.

Is that kind of spread equally, I guess, not really -- would it be mostly 1 and 2Q?

Yes, it is. Yes, it is. But I'm also not taking those into consideration in the adjusted measures that we cited during our remarks.

Right, right.

Oh, so it's already excluded from your -- the $0.05?

Yes, it is.

Exactly.

So you won't be comp-ing easy in the first part of '14 is what you're saying?

2014?

If it's not in your -- the numbers that you're giving us for 1Q '13?

Right. It would not be in the first quarter '14.

'14, yes. We really have paid more comps in '14 [indiscernible].

[Operator Instructions] The next question comes from Yilma Abebe of JPMorgan.

One quick one for me, a bit of a financial and a policy question. Your current liquidity looks ample to me, given the expected cash generation and the cash balance and availability on ABL. How do you think about liquidity through the cycle? Should we expect to continue to see this level of liquidity going forward, especially in the context of your long-term targets, which is a lot bigger company than you are currently?

Yes, we're projecting liquidity to increase going forward. I know we looked yesterday at 2013 and the liquidity was increasing as we went into the fourth quarter.

Yes, that's correct. The question, I think, is normal, but we -- as we've stated about our capital deployment and business strategy, acquisitions play a prominent role in the company's future. And it would certainly probably tap into that liquidity for strategic tuck-ins for sure so -- but absent those, we would make expect improving and increasing liquidity during 2013.

I think one of the keys to our strategy, going forward, is that we're focused on cash flow generation. And while we do intend to be active in the acquisition arena, we're hoping that we'll be able to fund a greater percentage of our acquisitions out of cash that we're generating as opposed to debt as we did in the fourth quarter using $41 million of our cash to make the 3 acquisitions. From an overall leverage standpoint, these levels that we're currently at today are relatively conservative, and we may move them upwards into the 3 range, but would hope that if we do move up in that range that through positive cash flow generation that we'd be able to bring that down. So our current outlook from a leverage perspective is to maintain a conservative posture. I think, today, we're in a very conservative position and might if certain acquisition potentials come along, move it up into the 3 range, but I would hope to bring it down after that through good cash flow generation.

Yes, we're always trying to balance it as we've indicated.

It appears we have no further questions at this time. I would now like to pass the floor back to Brian Lipke for closing comments.

Thank you, all, for joining us on the call today. Thanks for your questions. We're continuing to work hard to create shareholder value, and we look forward to talking with you in about 3 months. Thank you.

Ladies and gentlemen, thank you very much for your participation in today's conference call. You may now disconnect. Have a wonderful day.