Good day, ladies and gentlemen, and welcome to the Gibraltar Industries' First Quarter 2017 Earnings Conference Call. Today's call is being recorded and webcasted. My name is Audrey and I will be your coordinator today. At this time, all participants will in a listen-only mode. We will be conducting a question-and-answer session towards the end of the conference call. I will now turn the call over to David Calusdian, from the Company's Investor Relations firm Sharon Merrill Associates. 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 first quarter performance. These slides are also posted to the company's website. Please turn to Slide 2 in the presentation. The company's earnings press release and slide presentation 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. Additionally, Gibraltar's earnings release and remarks this morning contain adjusted financial measures. Reconciliations of GAAP to adjusted financial measures have been appended to the earnings release. On our call this morning are Gibraltar's Chief Executive Officer, Frank Heard; and Chief Financial Officer, Tim Murphy. At this point, I will turn the call over to Frank. And please turn it Slide 3.

Thanks, David. Good morning, everyone, and thank you for joining us on our call today. We began the year with a solid first quarter performance that came in just about as we anticipated. Business conditions for the quarter were generally in line with our expectations and our top and bottom-line results were within the high-end of our guidance range. As we discussed in our last call, we entered the quarter facing some headwinds, mainly lower backlog in our renewable energy, industrial infrastructure segments and a difficult year-over-year comparison with Q1 2016 results - as a result of exited businesses. And while raw material pricing also had an anticipated impact on results, we worked in close partnership with our key customers to mitigate these incremental cost. On the positive side, strong demand for our centralized mail and ExpressLocker solutions combined with solid performance from our ventilation building products businesses grow topline and margin growth in the residential products segment. Looking at the high level numbers for Gibraltar overall, Q1 consolidated revenues were down 13% resulting in GAAP earnings of $0.12 and adjusted earnings of $0.20 landing at the high-end of our guidance. During the quarter we continue to gain traction from our four pillar strategy particularly in areas of innovation and acquisitions. Our product development initiatives are gaining momentum and we're very excited about our two most recent acquisitions which are playing out as we had expected. I'll provide an update on our progress on each pillar later in the call. But first I would like to take a moment to introduce our new Chief Financial Officer, Tim Murphy who was previously Vice President, Treasurer and Secretary at Gibraltar. He brings strong financial acumen, a deep understanding of Gibraltar's business drivers and a high level of strategic thinking to his new role. I also want to thank Ken, whose dedication and contributions during his nine year tenure as CFO for Gibraltar. Ken on behalf of Gibraltar, of the Gibraltar team, our shareholders and the board we wish you all the best in retirement. I’ll speak more about the traction we've gained with our four pillar strategy and provide guidance after Tim reviews our financials. Tim?

Thank you, Frank and good morning everyone. Let's move to Slide 4 in the presentation entitled Consolidated Results. Overall we reported solid Q1 with both top and bottom line within our guidance for the quarter. This expected performance was against the backdrop of the headwinds that Frank mentioned earlier and that we discussed on our last call. These challenges were partially offset by strong demand for our residential products particularly our centralized mail and ExpressLocker solutions. As expected, revenues declined 13% compared to the first quarter of 2016 driven by a 12% decline from portfolio management actions we took during 2016. Base revenues excluding divestitures and the impact of acquisitions were down 5% which was in line with our expectation. The decline in base revenue was partially offset by revenue from our recent acquisitions. The map shown on the slide, gross margin increased 100 basis points from 22.8% in the first quarter of 2016 to 23.8% this quarter which provides evidence of value of 80/20 process in the portfolio management actions taken during the previous 12 months. As anticipated, in additional lower volume, our bottom line was negatively affected by increased material cost and equity compensation costs that we were not able cover with the 80/20 benefits realized during the quarter. While our portfolio management actions created these difficult year-over-year comparison and the results being a $3 million charge during the quarter, we expect to see positive effect on margins, reduced investment in working capital fixed asset and overhead and an improvement in total return on capital from those product line items. Overall, we delivered results as guided and we saw backlog recovered in our renewable energy and conservation business which now flows at the end of the year prior first quarter. Next, let's talk about each of our three…

Thank you, Tim. Our four pillar creation strategy continues to gain traction and deliver results. In our first pillar of operational excellence where our focus is on reducing complexity, adjusting cost, and simplifying our product offering through the 80/20 initiative, we continue to see benefits from project started in 2016, with savings at 2 million or $0.04 per share achieved during the first quarter. We're on track to deliver the expected $0.21 per share increase from the implementation of these projects in 2017. We also expect to see the acceleration of the in lining of our manufacturing processes which is the foundation for implementing market rate of demand replenishment and the resulting make versus buy decisions as the year progresses. During the quarter, we reviewed four key projects related to in lining and our teams are planning for the necessary physical changes as the year progresses. All is going according to plan with this effort to date. In portfolio management where we evaluate product lines, customers, and end markets that allocate leadership time and resources to the highest potential platforms and businesses. Our planned actions were essentially completed at the end of 2016. This included the exit of three platforms, two in our industrial segment and the third one our European solar racking business that served the residential rooftop market. During the past quarter we continue to wind down the last pieces of these exited businesses. At the same time, we're enthusiastic about the businesses that remain in our portfolio on these areas. For example, our team at AMICO is working on some very innovative products which should provide us with good growth prospects in 2017 and beyond. This leads me to our third pillar, innovation. We define innovative products as those with patent protection driven by internal product development…

[Operator Instructions] Our first question comes from the line of Daniel Moore with CJS Securities. Please proceed.

Good morning, Frank. Good morning, Tim. Thanks for taking the questions. I wanted to just parse out a little bit you the - updated guide and implications for H2. May be talk about your obviously backlog is up a little bit talk about the fact that it drive your confidence in renewables returning to growth or reaccelerating as well as your visibility and a quick follow-up or two there?

Tim, do you want?

Yes let me give a little background. I guess lot of our confidence is driven by our customer discussions. Our customers are generally telling us that they're going to install more solar dishes than they did last year. We’re seeing bidding activity at greater levels than last year and our hit rates remain consistent. The reason that we have a little pause in our sales forecast certainly in the second quarter and then drifting into the second half of the year is that we’re seeing lead times a little bit longer than we have historically and we think that's driven by a lack of hard ITC credit stop and so projects are just taking a bit longer from when we sign the contract and when we can complete them.

And I think Tim’s opening point around our customer interaction, we have very strong partnerships, Dan we are focused on kind of ground-mount fixed and we’re about a third in the market there and our value proposition is slightly weakened and that we do from project design all the way to install unlike our competitors. So we have a strong connection. So we created a little bit of a flat spot for our quarter that we expect in first quarter simply because we drove an awful lot of profitability through the investment of introducing new roll formers and raw material sourcing and we kind of suppress the top end for the back end of 2016 a little bit in order to let the supply side catch up in terms of the implementation of those three roll formers once a quarter so then take advantage of being able to sell a more cost effective racking solutions. So we expected a flat spot in the first quarter but Tim’s added point about as we gone back out to chat with our key customer base, we got a rising backlog, we’ve got increase in bidding activity, our customers expect stronger numbers this year than last year so we're feeling pretty confident that the back end is similar to some of the prior year's that RBI experienced as they entered the market prior to us acquiring them and that hard stop or that full stop at the end of 215 that created some confusion in the market. So I think we’re getting back to a stable market. And the third-party outside reports outside of residential, outside of track, outside of commercial rooftop suggests 5% to 7% topline growth in the fixed tilt market that we participate in. And that’s what we kind of expect to experience going forward. So we take out the international piece which is a little bit of a headwind for us that can consolidated in these numbers and our core business in North America look strong going forward so we’re feeling very good about it.

Helpful. Another component of that guide was raw material, maybe just if you can quantify the impact of rising raw material prices in Q1 and then do you expect that to lessen is that based on price increases that you're putting in or you’re expecting raw material prices to decline as we go through the back half of the year?

Dan, we experienced about $2 million of raw material price cost in this alignment let's say in the first quarter. We started the year expecting about $0.12 if you go to the bridge on Slide 11, we’ve increased that by $0.04 as we see some more of that coming to mainly in our I&I business in the second quarter. And then we expect it to moderate it doesn’t - we have to go to customers and work with them so we’re seeing price adjustments. And we’re also seeing steel cost come down in the marketplace. So a combination of those two give us confidence that as we look through the second quarter we’ll be pretty close to neutral for the rest of the year.

And yes, I think the kind of second quarter impact of that before we kind of see the affect of - no it takes a quarter of the impact it’s kind of implement the pricing in it and get those adjustments as best you can and we work with our key customer partners on that. I think the other side is we’re now seeing hard number where our raw material input cost going forward or coming down to some degree we got a quarter of adjustment on both because we’re carrying the inventory, let those higher cost that’s going to take a 60 to 90 days to burn through before we get the benefit of the lower material prices going forward. So there is kind of quarter of transition that's built into our second quarter guidance.

Perfect. And lastly and I'll jump back in queue, our third components of the expected increase in H2 is a little bit of industrial recovery and just talk may be a little bit more color on what you’re seeing there?

Our industrial business what’s left is a strong business they ran into some headwinds with material we’re going to have some material headwinds in the second quarter but as they sit with their customers, their customers demand is not growing at 10% double-digits but it’s low single digits and we’re participating in the markets, we’re happy with the relationships we have. We got new products launched in that place and perimeter security that are starting to get some traction. We expect more of that in the second half than in the second quarter but we’re seeing it come through during the quarter.

Yes, and certainly through our portfolio management actions exiting bar grating, exiting Europe, we really feel strong with what we have in the core group of businesses within the AMICO industrial group now and while they’re doing some tremendous work on 80/20 in the first year to drive margin enhancement and then portfolio management in the second year. Early in 2016 we really started to focusing on the perimeter security market where we've always participated with a small product line that - if you go way back actually help build part of the original wall between U.S. and Mexico. And as we research that industry segment we realized that the changing world it's a very significant rising tide, it’s over $1 billion market opportunity in the U.S. probably somewhere around two globally and growing at high single-digit CAGRs with some real technology product not just fencing related product only. So our guys have really spent their big part of 2016 while they’re doing some difficult work also refining designs, filing for new patents to have both renovation base security product, but we build product and they’re working on some very significant opportunities in terms of some of the larger players in Continental United States in terms of future contracts that could really help transform this business beginning in the back end of 2017 going forward in future years. So we’re pretty excited about the work they’re doing and we think this is going to be a key linchpin for why AMICO is going to be an important part of our portfolio going forward.

Got it. Thank you. Any follow-ups I’ll jump in queue.

Our next question comes from the line of Walter Liptak with Seaport Global Securities. Please proceed with your question.

Hi, thanks good morning guys. Just a follow-up on that our first question the 2 million it was price cost was that all in I&I or was there some in other segments as well?

It’s mix there's a little bit as you'll recall in renewable. We take some price adjustments at the end of last year so some of that would flow through there but I would say that I&I is the largest piece.

Okay, great. And then just to maybe dig a little bit deeper into the renewables part of the business U.S. had great success so far with portfolio management and thinking about what's going grow what's not going to grow. And I think that the solar business that's a little bit lumpier than maybe some of the other businesses that you currently have and I wonder what you think about still longer term in this business obviously you’re making investments into some new products there is a scenario that you'd be continuing to look for acquisitions.

Yes, we certainly there is four end markets we participate in one we think there is commercial rooftop residential rooftop and sort of the larger tracker space some are more similar to what we are review than others. But certainly the other three we would have interest in and we’ve been looking at various opportunities to enter those spaces since we bought the original RBI business our view of the market hasn't changed very much, it’s high single-digits CAGR going forward by an large all four segments are pretty close to group now in terms of cost and based on what we’ve been able to do in terms of some of the synergies we know we can make high teen kind of margins in this space and we can dominate with some fairly significant share and unique product solutions. So if the right opportunity came along and we looked then we certainly put money to work in that space. And in the meantime we’re spending an awful lot time working on it from an organic product development perspective and in advance of an acquisition feel pretty good about our progress and its potential impact and the back end of 2017 going forward into 2018. So no reservations about our investment today and actual fact we’re away ahead of our expectations in terms of financial returns.

Okay. The bookings that you took in this quarter did those all ship in the back half of 2017 some of those pushed into 2018 and what's the – I think you kind of alluded to some of this already, but what are the chances that we see more slippage projects further into the fourth quarter into 2018 as we see more volatility in that renewal segment?

Based on what we know today based on our conversations with our customers, based on the orders we have and the schedules that they are. We think we got in the right period so to see wholesale slippage would be a surprise as we sit here today.

Yes, and Walter I just want to clarify I don't think that we're seeing a lot of volatility per se. I think what we’re seeing is kind of the first full year settling out of what normal demand would look like in this particular space which is forecast in the 7% range and its adjusting out for some of those artificial deadlines that were put in place through our forecast closure of ITC and people are now settling into kind of what normal demand would be without any false lines in the sand in terms of getting credits and so on and so forth. So – unless there is – and there is some political climate change where it created some uneasiness as well that’s come and gone so I think the markets back to expecting last extension of the ITC going out through 2020 as being what the expected marketing conditions they have to operate in. So I think that's our view of it, is that you starting to see the dust settle a little bit and people are getting back to what normal demand which should be. So it's our expectation that the backlog, the growing backlog position we have and the feedback we’re getting from our customers and the senior management in that group is line share that will be reflected in 2017.

Okay. Fair enough. Just a follow-on to that and I'll get back in queue new products you alluded to it sounds like you’re pretty far along with the final testing supply chain. Can you give us an idea of the market opportunity for the new renewable products?

We try not to go too far because at this stage it's certainly material in the context of the business space we're in today. And we think we could be disruptive, we don’t want to go too far at this stage and so we're kind of fully in the market launch we have a competitive landscape out there. So at this stage we’re not to go any detail.

Okay. Thank you.

[Operator Instructions] Our next question comes from the line of Ken Zener with KeyBanc Capital Markets. Please state your question.

Good morning gentlemen. So I've a lot of questions for you on solar. Some of you had raised with you in the past, but it’s going to be about visibility related to margins, more than sales actually. So I’m going to be - little set of question here, while interesting the macro backdrop for ground-mount that we addressed in recent note. If you could kind of talk about a little more explicitly the margin confidence factors that you have, and could it be related to several key factors. So if you have a pencil, Tim or Frank, that would be helpful. I apologize, but first, your backlog duration, I believe it's less than a quarter. So what is that? Second, related to the margins. You say you’re sharing price with customers. And what does that kind of mean versus I think you kind of talked about a 15% EBIT rate last quarter, perhaps the quarter before we you had the revision. So and where does that comments come from if your backlog is not going to the back half? And then the third component is, can you talk to the backlog margins for what you have today? What percent of 2Q, for example, revenue is there versus your guidance in 2Q and second half? If you can kind of be explicit around those EBIT margins, that’ll be useful. And what does that mean for kind of the contract purchase price agreements? Or is there a relationship between the PPAs that are out there in the market now as people like yourselves are sharing some of these price? And how does that relate to the PPA that’s out there? That's one large question I realize.

So let me start. Backlog duration, I mean a quarter 90 days is maybe what we had experienced. We think it's a little bit longer now because we’re seeing a bit of a shift of remaining customers want to look down from when they signed. So we might have some of the stuff in back log today that’ll drift into the third quarter. And that's it, getting perfect because sometimes you have something that’s not going to shift for nine months. But in general, I think maybe about a month of shift is what we're seeing. When we shared price with customer, so last year after we completed putting manufacturing in-house and rolling out our new design, we realized we’re even more efficient in manufacturing than we had planned. So we really had greater savings than we anticipated. And so thoughtfully in the fourth quarter we started to share that with customers. And so I think last year, we ended within the 17% operating margin range for that business, and we said that longer-term we think it should be around 15, give or take. So then I think the second half of your question is how does that impact quarter and then the rest of the year. And I guess I described second quarter, the pricing in backlog is consistent with that, but we have a little bit of a volume shortfall in the second quarter in that business. And then I think in the remainder of the year, from where we stand, we think we'd back into that expected range for that business. And then you asked about

Sequentially, can that be sequentially equal in first quarter then, with a bit of a volume drag…

Yes, it's improving, but it's just not all the way because the volume

And I think the other thing that will impact the second quarter a little bit is like in the other segments, even though we made significant progress in under raw material sourcing, work that we did for RBI, like in the other businesses, we took proportional increase in raw material. That were also seen subside, but we got inventories that we’re going to burn through in the second quarter, that would have some impact on that margin as well. That would start to relieve itself as we go forward in the third and fourth quarter as well, so all that being said, we bought close to a 9% business, and as Tim pointed out for a variety of circumstances and a lot of good work we ended up at '17, we don’t see those kinds of margins in that industry. We see kind of 10% below, but we do believe that we’ve got something unique. That’s why we bought it and we do think that on a sustainable basis that we could be mid-teens with very light capital investment, so some great significant returns from a return invested capital. So we think we're given away the appropriate amount, we think we've got a unique cost base, and value proposition that gives us a little bit of the premium versus competitors, and we’re not uncomfortable about thinking that we can maintain a 15% return for the type of shares that we’re looking for, which is about a third to 35% of the market in that segment.

So it sounds like it might be 10, might be kind of 13 in the back half. And I ask revising, there's a lot of macro factors, and I do believe that you guys are executing what you control well. I guess, this is obviously critical, Frank, to this story because given the momentum that you had, this is the first time we’ve seen kind of an air pocket if you will. I know you guys are going to be hosting solar kind of event in a few weeks, correct?

Yes, we are.

I guess one of the things given that this business is central I think to your stock, from an earnings basis, but also the multiple. So what investors are going to describe to your business in terms of the consistency in the valuation level. I’m not sure of how you guys are going to be filtering the message that you’re going to be communicating, if you’re going to be doing a publicly - to the extent that you can be sharing as much as is happening there. Broadly [indiscernible] I think that would be very helpful because there’s so many different questions, for example, like the PPAs, I mean, I understand the margins that our purchase price agreements. The deflation on that, how is that impacting you, for example?

Can I answer that question? So I think every year in solar, for that last how many year's its been, the costs comes down every year. And so we worked every year with our customers to help them with their balance assistance costs, part of what drives that cost is the cost per watt. So more efficient panels. Drive down cost per watt without any reduction in price of anything. We just get more power from the same space. We do have a ground amount 3.0 rolling out. So last year we rolled out 2.0. That’s a design that reduced our cost and still met all the needs. We’ve got some additional tweaks that are coming out this year. So that's a constant presence in that business to continue to engineer out costs and work with our customers to get more watts for the same piece of metal that’s in the ground.

And just to support that, when we bought into the space, we did an awful lot of modeling on what we felt those future cost would look like as it related to ultimately getting down to grid parity, as it related to competitive systems whether it be coal or nuclear or gas. The industry as it relates to whether it's wind or solar, it’s pretty much a grid parity in most of the large states in continent of United States. So it's not, we’re going to continue down this path as a collective group, whether we’re panel manufacturers or the belts of system segment where we participate, we’re down to kind of the last 10% or 15% of refinement on tweaking up costs and systems, and the reality is, we, as an industry, are already a better investment choice in the competitive alternatives regardless of policy. More than 50% of new investment in energy production in Continental United States comes out of renewals, and it’s the largest employer in the sector. So it’s not like there’s this overweighting. Every time we save a watt, we have to give away $0.90 of it. I mean, those days are way past us. And we did this modeling, we did a lot of homework in the future because we didn’t want to buy into space with rising tide, but had declining profitability that ultimately would be commoditized margin at 4% or 5% which is what we’re trying to, over the last couple of years, move away from. So we’re still pretty confident that we bought into the right space. It’s a rising tide. We think we’ve got technology, we got cost reductions that we’ve taken out, we’ve got more to come, terms of our systems and we got a great opportunity to get…

Thank you, gentlemen.

Thank you. At this time we have reached the end of the Q&A session. I will now turn the conference back over to Mr. Heard, for any closing or additional remarks.

Thank you everyone for joining us on our call today, and we'll speak to you soon.

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