UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
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x☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2017March 31, 2021
OR
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| | | | |
¨☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 0-22462
GIBRALTAR INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
| | 16-1445150 | | | | | | | | | | | | | | | |
Delaware | | 16-1445150 |
(State or other jurisdiction ofincorporation or organization) ) | | (I.R.S. Employer Identification No.) |
| | | | |
3556 Lake Shore Road | P.O. Box 2028 | Buffalo | New York | | 14219-0228 |
| (Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (716) 826-6500
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | | Trading Symbol | | Name of each exchange on which registered |
| Common Stock, $0.01 par value per share | | ROCK | | NASDAQ Stock Market |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No ¨☐
Indicate by checkmarkcheck mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x☒ No ¨☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitiondefinitions of “large accelerated filer”,filer,” “accelerated filer” andfiler,” “smaller reporting company”company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Large accelerated filer | x☒ | Accelerated filer | ¨☐ | Non-accelerated filer | ¨☐ | Smaller reporting company | ¨ |
| ☐ | | | | | | Emerging growth company | ¨☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)Act). Yes ¨☐ No x☒
As of November 1, 2017,May 4, 2021, the number of common shares outstanding was: 31,688,154.32,629,646.
GIBRALTAR INDUSTRIES, INC.
INDEX
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| PAGE
NUMBER |
| PART I. | | | |
| Item 1. | | | |
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| | | |
| | | |
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| | | |
| | | |
| Item 2. | | | |
| Item 3. | | | |
| Item 4. | | | |
| PART II. | | | |
| Item 1. | | | |
| Item 1A. | | | |
| Item 2. | | | |
| Item 3. | | | |
| Item 4. | | | |
| Item 5. | | | |
| Item 6. | | | |
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONSINCOME
(in thousands, except per share data)
(unaudited)
| | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three Months Ended
March 31, | |
| | 2017 | | 2016 | | 2017 | | 2016 | | 2021 | | 2020 | |
| Net Sales | $ | 274,574 |
| | $ | 272,734 |
| | $ | 728,806 |
| | $ | 776,143 |
| Net Sales | $ | 287,592 | | | $ | 215,401 | | |
| Cost of sales | 205,839 |
| | 204,847 |
| | 548,991 |
| | 585,263 |
| Cost of sales | 227,574 | | | 165,540 | | |
| Gross profit | 68,735 |
| | 67,887 |
| | 179,815 |
| | 190,880 |
| Gross profit | 60,018 | | | 49,861 | | |
| Selling, general, and administrative expense | 33,042 |
| | 41,365 |
| | 109,513 |
| | 118,021 |
| Selling, general, and administrative expense | 47,203 | | | 37,084 | | |
| | Income from operations | 35,693 |
| | 26,522 |
| | 70,302 |
| | 72,859 |
| Income from operations | 12,815 | | | 12,777 | | |
| Interest expense | 3,486 |
| | 3,625 |
| | 10,612 |
| | 10,982 |
| Interest expense | 444 | | | 44 | | |
| Other expense | 404 |
| | 159 |
| | 811 |
| | 8,319 |
| Other expense | 315 | | | 518 | | |
| Income before taxes | 31,803 |
| | 22,738 |
| | 58,879 |
| | 53,558 |
| Income before taxes | 12,056 | | | 12,215 | | |
| Provision for income taxes | 11,184 |
| | 8,952 |
| | 21,090 |
| | 12,131 |
| Provision for income taxes | 1,560 | | | 2,313 | | |
| Income from continuing operations | 20,619 |
| | 13,786 |
| | 37,789 |
| | 41,427 |
| Income from continuing operations | 10,496 | | | 9,902 | | |
| Discontinued operations: | | | | | | | | Discontinued operations: | | |
| Loss before taxes | — |
| | — |
| | (644 | ) | | — |
| |
| Benefit of income taxes | — |
| | — |
| | (239 | ) | | — |
| |
| Loss from discontinued operations | — |
| | — |
| | (405 | ) | | — |
| |
| Income before taxes | | Income before taxes | 2,570 | | | 2,830 | | |
| Provision for income taxes | | Provision for income taxes | 304 | | | 673 | | |
| Income from discontinued operations | | Income from discontinued operations | 2,266 | | | 2,157 | | |
| Net income | $ | 20,619 |
| | $ | 13,786 |
| | $ | 37,384 |
| | $ | 41,427 |
| Net income | $ | 12,762 | | | $ | 12,059 | | |
| Net earnings per share – Basic: | | | | | | | | Net earnings per share – Basic: | | | | |
| Income from continuing operations | $ | 0.65 |
| | $ | 0.44 |
| | $ | 1.19 |
| | $ | 1.32 |
| Income from continuing operations | $ | 0.32 | | | $ | 0.30 | | |
| Loss from discontinued operations | — |
| | — |
| | (0.01 | ) | | — |
| |
| Income from discontinued operations | | Income from discontinued operations | 0.07 | | | 0.07 | | |
| Net income | $ | 0.65 |
| | $ | 0.44 |
| | $ | 1.18 |
| | $ | 1.32 |
| Net income | $ | 0.39 | | | $ | 0.37 | | |
| Weighted average shares outstanding – Basic | 31,703 |
| | 31,579 |
| | 31,700 |
| | 31,493 |
| |
| Weighted average shares outstanding -- Basic | | Weighted average shares outstanding -- Basic | 32,771 | | | 32,586 | | |
| Net earnings per share – Diluted: | | | | | | | | Net earnings per share – Diluted: | | | | |
| Income from continuing operations | $ | 0.64 |
| | $ | 0.43 |
| | $ | 1.17 |
| | $ | 1.29 |
| Income from continuing operations | $ | 0.32 | | | $ | 0.30 | | |
| Loss from discontinued operations | — |
| | — |
| | (0.01 | ) | | — |
| |
| Income from discontinued operations | | Income from discontinued operations | 0.07 | | | 0.07 | | |
| Net income | $ | 0.64 |
| | $ | 0.43 |
| | $ | 1.16 |
| | $ | 1.29 |
| Net income | $ | 0.39 | | | $ | 0.37 | | |
| Weighted average shares outstanding – Diluted | 32,210 |
| | 32,176 |
| | 32,216 |
| | 32,005 |
| |
| Weighted average shares outstanding -- Diluted | | Weighted average shares outstanding -- Diluted | 33,104 | | | 32,883 | | |
|
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
| | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three Months Ended
March 31, | |
| | 2017 | | 2016 | | 2017 | | 2016 | | 2021 | | 2020 | |
| Net income | $ | 20,619 |
| | $ | 13,786 |
| | $ | 37,384 |
| | $ | 41,427 |
| Net income | $ | 12,762 | | | $ | 12,059 | | |
| Other comprehensive income (loss): | | | | | | | | Other comprehensive income (loss): | | |
| Foreign currency translation adjustment | 1,581 |
| | (193 | ) | | 3,351 |
| | 10,638 |
| Foreign currency translation adjustment | 3,198 | | | (5,898) | | |
| Adjustment to retirement benefit liability, net of tax | (2 | ) | | 61 |
| | (8 | ) | | 59 |
| |
| Adjustment to post employment health care benefit liability, net of tax | 29 |
| | 38 |
| | 88 |
| | 114 |
| |
| | Minimum post retirement benefit plan adjustments | | Minimum post retirement benefit plan adjustments | 27 | | | 18 | | |
| | Other comprehensive income (loss) | 1,608 |
| | (94 | ) | | 3,431 |
| | 10,811 |
| Other comprehensive income (loss) | 3,225 | | | (5,880) | | |
| Total comprehensive income | $ | 22,227 |
| | $ | 13,692 |
| | $ | 40,815 |
| | $ | 52,238 |
| Total comprehensive income | $ | 15,987 | | | $ | 6,179 | | |
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
| | | | September 30,
2017 | | December 31,
2016 | | March 31,
2021 | | December 31,
2020 |
| | (unaudited) | | | | (unaudited) | | |
| Assets | | | | Assets | |
| Current assets: | | | | Current assets: | |
| Cash and cash equivalents | $ | 208,032 |
| | $ | 170,177 |
| Cash and cash equivalents | $ | 20,731 | | | $ | 32,054 | |
| Accounts receivable, net | 166,718 |
| | 124,072 |
| |
| Inventories | 85,156 |
| | 89,612 |
| |
| Other current assets | 8,195 |
| | 7,336 |
| |
| Accounts receivable, net of allowance of $3,319 and $3,529 | | Accounts receivable, net of allowance of $3,319 and $3,529 | 199,598 | | | 197,990 | |
| Inventories, net | | Inventories, net | 107,004 | | | 98,307 | |
| Prepaid expenses and other current assets | | Prepaid expenses and other current assets | 24,684 | | | 19,671 | |
| Assets of discontinued operations | | Assets of discontinued operations | 0 | | | 77,438 | |
| Total current assets | 468,101 |
| | 391,197 |
| Total current assets | 352,017 | | | 425,460 | |
| Property, plant, and equipment, net | 94,488 |
| | 108,304 |
| Property, plant, and equipment, net | 91,717 | | | 89,562 | |
| Operating lease assets | | Operating lease assets | 23,465 | | | 25,229 | |
| Goodwill | 321,093 |
| | 304,032 |
| Goodwill | 523,446 | | | 514,279 | |
| Acquired intangibles | 107,943 |
| | 110,790 |
| Acquired intangibles | 151,877 | | | 156,365 | |
| Other assets | 4,672 |
| | 3,922 |
| Other assets | 12,669 | | | 1,599 | |
| | $ | 996,297 |
| | $ | 918,245 |
| | $ | 1,155,191 | | | $ | 1,212,494 | |
| Liabilities and Shareholders’ Equity | | | | |
| Liabilities and Stockholders’ Equity | | Liabilities and Stockholders’ Equity | | | |
| Current liabilities: | | | | Current liabilities: | |
| Accounts payable | $ | 96,181 |
| | $ | 69,944 |
| Accounts payable | $ | 135,130 | | | $ | 134,738 | |
| Accrued expenses | 83,264 |
| | 70,392 |
| Accrued expenses | 71,946 | | | 83,505 | |
| Billings in excess of cost | 18,234 |
| | 11,352 |
| Billings in excess of cost | 51,591 | | | 34,702 | |
| Current maturities of long-term debt | 400 |
| | 400 |
| |
| | Liabilities of discontinued operations | | Liabilities of discontinued operations | 0 | | | 49,295 | |
| Total current liabilities | 198,079 |
| | 152,088 |
| Total current liabilities | 258,667 | | | 302,240 | |
| Long-term debt | 209,425 |
| | 209,237 |
| Long-term debt | 58,023 | | | 85,636 | |
| Deferred income taxes | 38,162 |
| | 38,002 |
| Deferred income taxes | 37,996 | | | 39,057 | |
| Non-current operating lease liabilities | | Non-current operating lease liabilities | 16,165 | | | 17,730 | |
| Other non-current liabilities | 45,200 |
| | 58,038 |
| Other non-current liabilities | 25,932 | | | 24,026 | |
| Shareholders’ equity: | | | | |
| Preferred stock, $0.01 par value; authorized 10,000 shares; none outstanding | — |
| | — |
| |
| Common stock, $0.01 par value; authorized 50,000 shares; 32,275 shares and 32,085 shares issued and outstanding in 2017 and 2016 | 322 |
| | 320 |
| |
| Stockholders’ equity: | | Stockholders’ equity: | |
| Preferred stock, $0.01 par value; authorized 10,000 shares; NaN outstanding | | Preferred stock, $0.01 par value; authorized 10,000 shares; NaN outstanding | 0 | | | 0 | |
| Common stock, $0.01 par value; authorized 50,000 shares; 33,711 shares and 33,568 shares issued and outstanding in 2021 and 2020 | | Common stock, $0.01 par value; authorized 50,000 shares; 33,711 shares and 33,568 shares issued and outstanding in 2021 and 2020 | 337 | | | 336 | |
| Additional paid-in capital | 269,880 |
| | 264,418 |
| Additional paid-in capital | 308,147 | | | 304,870 | |
| Retained earnings | 249,386 |
| | 211,748 |
| Retained earnings | 482,705 | | | 469,943 | |
| Accumulated other comprehensive loss | (4,290 | ) | | (7,721 | ) | |
| Cost of 588 and 530 common shares held in treasury in 2017 and 2016 | (9,867 | ) | | (7,885 | ) | |
| Total shareholders’ equity | 505,431 |
| | 460,880 |
| |
| Accumulated other comprehensive income (loss) | | Accumulated other comprehensive income (loss) | 764 | | | (2,461) | |
| Cost of 1,082 and 1,028 common shares held in treasury in 2021 and 2020 | | Cost of 1,082 and 1,028 common shares held in treasury in 2021 and 2020 | (33,545) | | | (28,883) | |
| Total stockholders’ equity | | Total stockholders’ equity | 758,408 | | | 743,805 | |
| | $ | 996,297 |
| | $ | 918,245 |
| | $ | 1,155,191 | | | $ | 1,212,494 | |
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| | | | Nine Months Ended
September 30, | | Three Months Ended
March 31, |
| | 2017 | | 2016 | | 2021 | | 2020 |
| Cash Flows from Operating Activities | | | | Cash Flows from Operating Activities | | | |
| Net income | $ | 37,384 |
| | $ | 41,427 |
| Net income | $ | 12,762 | | | $ | 12,059 | |
| Loss from discontinued operations | (405 | ) | | — |
| |
| Income from discontinued operations | | Income from discontinued operations | 2,266 | | | 2,157 | |
| Income from continuing operations | 37,789 |
| | 41,427 |
| Income from continuing operations | 10,496 | | | 9,902 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |
| | Depreciation and amortization | 16,427 |
| | 17,551 |
| Depreciation and amortization | 7,974 | | | 4,780 | |
| Stock compensation expense | 5,069 |
| | 4,666 |
| Stock compensation expense | 2,368 | | | 1,665 | |
| Net gain on sale of assets | (139 | ) | | (225 | ) | |
| Loss on sale of business | — |
| | 8,763 |
| |
| Exit activity (recoveries) costs, non-cash | (1,931 | ) | | 3,876 |
| |
| (Benefit of) provision for deferred income taxes | (136 | ) | | 355 |
| |
| | Exit activity costs, non-cash | | Exit activity costs, non-cash | 1,193 | | | 0 | |
| | Benefit of deferred income taxes | | Benefit of deferred income taxes | 0 | | | (178) | |
| | Other, net | 1,411 |
| | 735 |
| Other, net | (162) | | | 386 | |
| | Changes in operating assets and liabilities, excluding the effects of acquisitions: | | | | Changes in operating assets and liabilities, excluding the effects of acquisitions: | |
| Accounts receivable | (42,310 | ) | | 3,796 |
| Accounts receivable | (2,522) | | | (7,180) | |
| Inventories | 2,016 |
| | 9,738 |
| Inventories | (15,262) | | | (7,242) | |
| Other current assets and other assets | (2,002 | ) | | (1,901 | ) | Other current assets and other assets | (435) | | | 6,218 | |
| Accounts payable | 25,134 |
| | 2,367 |
| Accounts payable | 1,470 | | | (18,909) | |
| Accrued expenses and other non-current liabilities | 7,503 |
| | 11,038 |
| Accrued expenses and other non-current liabilities | (6,334) | | | (33,268) | |
| Net cash provided by operating activities | 48,831 |
| | 102,186 |
| |
| Net cash used in operating activities of continuing operations | | Net cash used in operating activities of continuing operations | (1,214) | | | (43,826) | |
| Net cash (used in) provided by operating activities of discontinued operations | | Net cash (used in) provided by operating activities of discontinued operations | (2,011) | | | 814 | |
| Net cash used in operating activities | | Net cash used in operating activities | (3,225) | | | (43,012) | |
| Cash Flows from Investing Activities | | | | Cash Flows from Investing Activities | | | |
| Cash paid for acquisitions, net of cash acquired | (18,494 | ) | | (2,314 | ) | |
| Purchases of property, plant, and equipment | | Purchases of property, plant, and equipment | (4,389) | | | (2,144) | |
| Acquisitions, net of cash acquired | | Acquisitions, net of cash acquired | (2) | | | (54,539) | |
| Net proceeds from sale of business | | Net proceeds from sale of business | 26,991 | | | 0 | |
| | Net proceeds from sale of property and equipment | 12,935 |
| | 249 |
| Net proceeds from sale of property and equipment | 0 | | | 52 | |
| Purchases of property, plant, and equipment | (5,152 | ) | | (7,600 | ) | |
| Net proceeds from sale of business | — |
| | 8,250 |
| |
| Other, net | — |
| | 1,118 |
| |
| Net cash used in investing activities | (10,711 | ) | | (297 | ) | |
| Net cash provided by (used in) investing activities of continuing operations | | Net cash provided by (used in) investing activities of continuing operations | 22,600 | | | (56,631) | |
| Net cash used in investing activities of discontinued operations | | Net cash used in investing activities of discontinued operations | (176) | | | (678) | |
| Net cash provided by (used in) investing activities | | Net cash provided by (used in) investing activities | 22,424 | | | (57,309) | |
| Cash Flows from Financing Activities | | | | Cash Flows from Financing Activities | | | |
| Proceeds from long-term debt | | Proceeds from long-term debt | 20,000 | | | 0 | |
| Long-term debt payments | (400 | ) | | (400 | ) | Long-term debt payments | (46,636) | | | 0 | |
| Payment of debt issuance costs | — |
| | (54 | ) | |
| | Purchase of treasury stock at market prices | (1,982 | ) | | (1,178 | ) | Purchase of treasury stock at market prices | (4,662) | | | (4,184) | |
| Net proceeds from issuance of common stock | 649 |
| | 2,892 |
| Net proceeds from issuance of common stock | 910 | | | 24 | |
| Net cash (used in) provided by financing activities | (1,733 | ) | | 1,260 |
| |
| | Net cash used in financing activities | | Net cash used in financing activities | (30,388) | | | (4,160) | |
| Effect of exchange rate changes on cash | 1,468 |
| | 1,055 |
| Effect of exchange rate changes on cash | (134) | | | (916) | |
| Net increase in cash and cash equivalents | 37,855 |
| | 104,204 |
| |
| Net decrease in cash and cash equivalents | | Net decrease in cash and cash equivalents | (11,323) | | | (105,397) | |
| Cash and cash equivalents at beginning of year | 170,177 |
| | 68,858 |
| Cash and cash equivalents at beginning of year | 32,054 | | | 191,363 | |
| Cash and cash equivalents at end of period | $ | 208,032 |
| | $ | 173,062 |
| Cash and cash equivalents at end of period | $ | 20,731 | | | $ | 85,966 | |
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional
Paid-In Capital | | Retained Earnings | | Accumulated
Other
Comprehensive (Loss) Income | | Treasury Stock | | Total
Stockholders’ Equity |
| | Shares | | Amount | | | | | Shares | | Amount | |
| Balance at December 31, 2020 | 33,568 | | | $ | 336 | | | $ | 304,870 | | | $ | 469,943 | | | $ | (2,461) | | | 1,028 | | | $ | (28,883) | | | $ | 743,805 | |
| Net income | — | | | — | | | — | | | 12,762 | | | — | | | — | | | — | | | 12,762 | |
| Foreign currency translation adjustment | — | | | — | | | — | | | — | | | 3,198 | | | — | | | — | | | 3,198 | |
| Minimum post retirement benefit plan adjustments, net of taxes of $10 | — | | | — | | | — | | | — | | | 27 | | | — | | | — | | | 27 | |
| | | | | | | | | | | | | | | |
| Stock compensation expense | — | | | — | | | 2,368 | | | — | | | — | | | — | | | — | | | 2,368 | |
| | | | | | | | | | | | | | | |
| Stock options exercised | 25 | | | — | | | 910 | | | — | | | — | | | — | | | — | | | 910 | |
| | | | | | | | | | | | | | | |
| Net settlement of restricted stock units | 118 | | | 1 | | | (1) | | | — | | | — | | | 54 | | | (4,662) | | | (4,662) | |
| | | | | | | | | | | | | | | |
| Balance at March 31, 2021 | 33,711 | | | $ | 337 | | | $ | 308,147 | | | $ | 482,705 | | | $ | 764 | | | 1,082 | | | $ | (33,545) | | | $ | 758,408 | |
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| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Total Shareholders’ Equity |
| | Shares | | Amount | | | | | Shares | | Amount | |
| Balance at December 31, 2016 | 32,085 |
| | $ | 320 |
| | $ | 264,418 |
| | $ | 211,748 |
| | $ | (7,721 | ) | | 530 |
| | $ | (7,885 | ) | | $ | 460,880 |
|
| Net income | — |
| | — |
| | — |
| | 37,384 |
| | — |
| | — |
| | — |
| | 37,384 |
|
| Foreign currency translation adjustment | — |
| | — |
| | — |
| | — |
| | 3,351 |
| | — |
| | — |
| | 3,351 |
|
| Adjustment to retirement benefit liability, net of taxes of ($5) | — |
| | — |
| | — |
| | — |
| | (8 | ) | | — |
| | — |
| | (8 | ) |
| Adjustment to post employment health care benefit liability, net of taxes of $54 | — |
| | — |
| | — |
| | — |
| | 88 |
| | — |
| | — |
| | 88 |
|
| Stock compensation expense | — |
| | — |
| | 5,069 |
| | — |
| | — |
| | — |
| | — |
| | 5,069 |
|
Cumulative effect of accounting change (see Note 2) | — |
| | — |
| | (254 | ) | | 254 |
| | — |
| | — |
| | — |
| | — |
|
| Stock options exercised | 40 |
| | — |
| | 649 |
| | — |
| | — |
| | — |
| | — |
| | 649 |
|
| Issuance of restricted stock | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Net settlement of restricted stock units | 148 |
| | 2 |
| | (2 | ) | | — |
| | — |
| | 58 |
| | (1,982 | ) | | (1,982 | ) |
| Balance at September 30, 2017 | 32,275 |
| | $ | 322 |
| | $ | 269,880 |
| | $ | 249,386 |
| | $ | (4,290 | ) | | 588 |
| | $ | (9,867 | ) | | $ | 505,431 |
|
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional
Paid-In Capital | | Retained Earnings | | Accumulated
Other
Comprehensive Loss | | Treasury Stock | | Total
Stockholders’ Equity | |
| Shares | | Amount | | | | | Shares | | Amount | | |
| Balance at December 31, 2019 | 33,192 | | | $ | 332 | | | $ | 295,582 | | | $ | 405,668 | | | $ | (5,391) | | | 906 | | | $ | (22,227) | | | $ | 673,964 | | |
| Net income | — | | | — | | | — | | | 12,059 | | | — | | | — | | | — | | | 12,059 | | |
| Foreign currency translation adjustment | — | | | — | | | — | | | — | | | (5,898) | | | — | | | — | | | (5,898) | | |
| Minimum post retirement benefit plan adjustments, net of taxes of $7 | — | | | — | | | — | | | — | | | 18 | | | — | | | — | | | 18 | | |
| | | | | | | | | | | | | | | | |
| Stock compensation expense | — | | | — | | | 1,665 | | | — | | | — | | | — | | | — | | | 1,665 | | |
| Cumulative effect of accounting change | — | | | — | | | — | | | (291) | | | — | | | — | | | — | | | (291) | | |
| Stock options exercised | 3 | | | — | | | 24 | | | — | | | — | | | — | | | — | | | 24 | | |
| | | | | | | | | | | | | | | | |
| Net settlement of restricted stock units | 193 | | | 2 | | | (2) | | | — | | | — | | | 80 | | | (4,184) | | | (4,184) | | |
| | | | | | | | | | | | | | | | |
| Balance at March 31, 2020 | 33,388 | | | $ | 334 | | | $ | 297,269 | | | $ | 417,436 | | | $ | (11,271) | | | 986 | | | $ | (26,411) | | | $ | 677,357 | | |
| | | | | | | | | | | | | | | | |
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See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.(1) CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of Gibraltar Industries, Inc. (the "Company") have been prepared by management in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting of normal recurring adjustments considered necessary for the fair presentation of results for the interim period have been included. The Company's operations are seasonal; for this and other reasons, such as the impact of the COVID-19 pandemic, financial results of operations for the three and nine month periods ended September 30, 2017any interim period are not necessarily indicative of the results expected for any subsequent interim period or for the full year. The Company is subject to reduced activity in the first and fourth quarters as colder, inclement weather reduces order rates from end markets it serves. The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our annual Form 10-K for the year ended December 31, 2016.2020.
Certain prior year amounts haveThe balance sheet at December 31, 2020 has been reclassified to conform to current year's presentation. Refer to Note 2derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for a summarycomplete financial statements.
2.(2) RECENT ACCOUNTING PRONOUNCEMENTS
Recent Accounting Pronouncements Adopted |
| | | | | | | | | | | | | |
| Standard | Description | Description | | Financial Statement Effect or Other Significant Matters |
ASU No. 2016-092019-12 Compensation - Stock CompensationIncome Taxes (Topic 718): Improvements to Employee Share-Based Payment740), Simplifying the Accounting for Income Taxes
| | The standard simplifiesamendments in this update simplify the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilitiestaxes by removing certain exceptions to the general principles in Topic 740 and classification on the statement of cash flows.improve consistent application by clarifying and amending existing guidance. The provisionsamendments of this standard are effective for fiscal years beginning after December 15, 2016,2020, including interim periods within those fiscal years. Early adoption | | The standard is permitted. | The Company has adopted all amendments included in this standard under each required transition method. The Company concluded there were no material changes to prior periods, excepteffective for the following: the Company (a) reclassified its prior interim period excess tax benefit for stock compensation of $941,000 on its consolidated statement of cash flows from a financing activity to an operating activity; and (b) recognized a cumulative-effect adjustment of $254,000 as an increase to retained earnings and decrease to additional paid-in capital on the Company's consolidated statement of shareholders' equity as of January 1, 20172021. The Company adopted the amendments in this update and the adoption did not have a material impact to reflect the change in value for a restricted stock unit liability award as of December 31, 2016, as if the award had been classified as an equity award since its respective grant date.
Company’s financial statements.
Date of adoption: Q1 2017 2021 |
|
| | |
Standard | Description | Financial Statement Effect or Other Significant Matters |
ASU No. 2017-04
Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
| The standard eliminates the "Step 2" analysis to determine the amount of impairment realized when a reporting unit's carrying amount exceeds its fair value in its "Step 1" analysis of accounting for impairment of goodwill. The impairment charge would be the amount determined in "Step 1." The provisions of this standard are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. | The Company has adopted this standard and it did not have any impact on the Company's consolidated financial statements.
Date of Adoption: Q1 2017
|
ASU No. 2017-07
Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
| The standard requires an employer to recognize the service cost component of net periodic pension costs and net periodic postretirement benefit costs in the same line item(s) as other compensation costs from services rendered by pertinent employees during the period. Other components of net benefit cost are required to be presented separately from the service cost component and outside a subtotal of income from operations. The provisions of this standard are effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. | The Company has adopted this standard and has applied it retrospectively for the presentation of the service cost component, as well as, other components of net periodic pension cost and net periodic postretirement benefit cost in our statement of operations. The adoption decreased selling, general, and administrative expense by $159,000 for the three months ended September 30, 2016 and $479,000 for the nine months ended September 30, 2016, and comparably increased other expense by the same amounts, respectively. This guidance did not have any impact on our balance sheet or our statement of cash flows.
Date of Adoption: Q1 2017
|
Recent Accounting Pronouncements Not Yet Adopted |
| | |
Standard | Description | Financial Statement Effect or Other Significant Matters |
ASU No. 2014-09
Revenue from Contracts with Customers (Topic 606)
And All Related ASUs
| The standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also requires additional disclosures about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and assets recognized from costs incurred to obtain or fulfill a contract. The provisions of the standard, as well as all subsequently issued clarifications to the standard, are effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The standard can be adopted using either a full retrospective or modified retrospective approach. | The Company currently believes the most significant impact of this standard upon adoption relates to the revenue recognition for custom fabricated products within the Company's Industrial and Infrastructure Products segment. Under this standard, the Company expects to recognize revenue on an over time basis on custom fabricated products in the Industrial and Infrastructure Products segment which is a change from our current revenue recognition policy of point-in-time basis. The Company expects revenue recognition related to the remaining Industrial and Infrastructure Products segment, Residential Products segment and Renewable Energy and Conservation segment to remain substantially unchanged upon adoption of this standard. The Company has identified and is in the process of implementing appropriate changes to the Company's business processes, systems and internal controls to support recognition and disclosure under this standard. The Company currently anticipates adopting the modified retrospective transition method approach. The Company has not yet completed the process of quantifying the effects of any changes that will result from adoption.
Planned date of adoption: Q1 2018
|
|
| | |
Standard | Description | Financial Statement Effect or Other Significant Matters |
ASU No. 2016-02
Leases (Topic 842)
| The standard requires lessees to recognize most leases as assets and liabilities on the balance sheet, but record expenses on the statement of operations in a manner similar to current accounting. For lessors, the guidance modifies the classification criteria and accounting for sales-type and direct financing leases. The standard also requires additional disclosures about leasing arrangements and requires a modified retrospective transition approach for existing leases, whereby the standard will be applied to the earliest year presented. The provisions of the standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. | The Company is currently evaluating the impact of this standard on the Company's consolidated financial statements and related disclosures, including the impact on the Company's current lease portfolio from both a lessor and lessee perspective. The adoption of this standard will primarily result in an increase in the assets and liabilities on the Company's consolidated balance sheet and related disclosures.
Planned date of adoption: Q1 2019
|
ASU No. 2016-15
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
| The standard provides guidance on eight specific cash flow issues to reduce diversity in reporting. The provisions of this standard are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. | The Company is currently evaluating the requirements of this standard and has not yet determined its impact on the Company's consolidated financial statements.
Planned date of adoption: Q1 2018
|
ASU No. 2016-16
Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory
| The standard allows an entity to recognize income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The provisions of this standard are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance. | The Company is currently evaluating the requirements of this standard and has not yet determined its impact on the Company's consolidated financial statements.
Planned date of adoption: Q1 2018
|
3.(3) ACCOUNTS RECEIVABLE NETAND ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable consists of the following (in thousands):
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Trade accounts receivable | $ | 175,277 | | | $ | 174,604 | |
| Costs in excess of billings | 27,640 | | | 26,915 | |
| Total accounts receivables | 202,917 | | | 201,519 | |
| Less allowance for doubtful accounts and contract assets | (3,319) | | | (3,529) | |
| Accounts receivable, net | $ | 199,598 | | | $ | 197,990 | |
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| Trade accounts receivable | $ | 104,031 |
| | $ | 81,193 |
|
| Contract receivables: | | | |
| Amounts billed | 49,866 |
| | 41,569 |
|
| Costs in excess of billings | 18,374 |
| | 6,582 |
|
| Total contract receivables | 68,240 |
| | 48,151 |
|
| Total accounts receivable | 172,271 |
| | 129,344 |
|
| Less allowance for doubtful accounts | (5,553 | ) | | (5,272 | ) |
| Accounts receivable | $ | 166,718 |
| | $ | 124,072 |
|
Contract receivables are primarily associated with developers, contractors and customers in connection withRefer to Note 4 "Revenue" concerning the Renewable Energy and Conservation segment. Costs in excess of billings principally represent revenues recognized on contracts that were not billable as of the balance sheet date. These amounts will be billed in accordance with contract terms, generally as certain milestones are reached or upon shipment. All of theCompany's costs in excess of billings arebillings.
The following table provides a roll-forward of the allowance for credit losses, for the three month period ended March 31, 2021, that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected withincollected.
| | | | | |
| Beginning balance as of January 1, 2021 | $ | 3,529 | |
| |
| Bad debt expense, net of recoveries | (159) | |
| Accounts written off against allowance and other adjustments | (51) | |
| Ending balance as of March 31, 2021 | $ | 3,319 | |
(4) REVENUE
Sales includes revenue from contracts with customers for: designing, engineering, manufacturing and installation of solar racking systems and greenhouse structures; electrical balance of systems; extraction systems; roof and foundation ventilation products; centralized mail systems and electronic package solutions; rain dispersion products and roofing accessories; retractable awnings; gutter guards; expansion joints and structural bearings.
Refer to Note 15 "Segment Information" for additional information related to revenue recognized by timing of transfer of control by reportable segment.
As of March 31, 2021, the Company's remaining performance obligations are part of contracts that have an original expected duration of one year. In situations where billings exceed revenues recognized, theyear or less.
Contract assets consist of costs in excess is included inof billings. Contract liabilities consist of billings in excess of cost and unearned revenue. Unearned revenue as of March 31, 2021 and December 31, 2020 was $13.1 million and $21.3 million, respectively. Revenue recognized during the three months ended March 31, 2021 and 2020 that was in contract liabilities at the Consolidated Balance Sheet.
beginning of the respective periods was $40.7 million and $38.1 million, respectively.
4.(5) INVENTORIES
Inventories consist of the following (in thousands):
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Raw material | $ | 73,364 | | | $ | 66,018 | |
| Work-in-process | 4,844 | | | 5,382 | |
| Finished goods | 32,757 | | | 31,205 | |
| Gross inventory | $ | 110,965 | | | $ | 102,605 | |
| Less reserves | (3,961) | | | (4,298) | |
| Total inventories, net | $ | 107,004 | | | $ | 98,307 | |
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| Raw material | $ | 41,569 |
| | $ | 41,758 |
|
| Work-in-process | 12,123 |
| | 12,268 |
|
| Finished goods | 31,464 |
| | 35,586 |
|
| Total inventories | $ | 85,156 |
| | $ | 89,612 |
|
5.(6) ACQUISITIONS
On February 22, 2017,
2020 Acquisitions
During the year ended December 31, 2020, the Company acquired all5 businesses in separate transactions, 2 of the outstanding stock of Package Concierge. Package Concierge is a leading provider of multifamily electronic package delivery locker systemswhich are included within our Renewables segment, 2 in the United States.
The acquisition of Package Concierge is expected to enable the Company to expand its positionour Agtech segment, and 1 in the fast-growing package delivery solutions market.our Residential segment. The results of Package Concierge have been included in the Company's consolidated financial results since the date of acquisition (within the Company's Residential Products segment). The final aggregate purchase consideration for the acquisition of Package Concierge was $18,917,000, which includes a working capital adjustment and certain other adjustments provided for in the stock purchase agreement.
The purchase price for theeach acquisition was allocated to the assets acquired and liabilities assumed based upon their respective fair values.
On December 31, 2020, the Company purchased all the outstanding membership interests of TerraSmart LLC ("TerraSmart"), a leading provider of screw-based, ground-mount solar racking technology, particularly used for solar projects installed on challenging terrain. The results of TerraSmart have been included in the Company's consolidated financial results since the date of acquisition within the Company's Renewables segment. The preliminary purchase consideration for the acquisition of TerraSmart was $223.7 million, which includes a preliminary working capital adjustment and certain other adjustments provided for in the stock purchase agreement.
The purchase price for the TerraSmart acquisition was preliminarily allocated to the assets acquired and liabilities assumed based upon their respective fair values estimated as of the date of acquisition. The Company has commenced the process to confirm the existence, condition and completeness of the assets acquired and liabilities assumed to establish fair values of such acquired assets and assumed liabilities and to determine the amount of goodwill to be recognized as of the date of acquisition. Due to the timing of the acquisition, we continue to gather information supporting the acquired assets and assumed liabilities. Accordingly, all amounts recorded are provisional. These provisional amounts are subject to change if new information is obtained concerning facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. The final determination of the fair value of certain assets and liabilities will be completed within a measurement period of up to one year from the date of acquisition. The final values may also result in changes to depreciation and amortization expense related to certain assets such as property, plant and equipment and acquired intangible assets. The preliminary excess consideration was recorded as goodwill and approximated $16,863,000,$153.7 million, all of which is not deductible for tax purposes. Goodwill represents future economic benefits arising from other assets acquired that could not be individually identified including workforce additions, growth opportunities, and increased presence in the building products markets.domestic solar energy market. The final purchase price allocation will be completed no later than December 31, 2021.
The preliminary allocation of the TerraSmart purchase consideration to the estimated fair value of the assets acquired and liabilities assumed is as follows as of the date of the acquisition (in thousands):
| | | | | |
| Cash | $ | 1,491 | |
| Working capital | 7,158 | |
| Property, plant and equipment | 9,396 | |
| Acquired intangible assets | 51,700 | |
| Other assets | 1,855 | |
| Other liabilities | (1,636) | |
| Goodwill | 153,690 | |
| Fair value of purchase consideration | $ | 223,654 | |
|
| | | |
| Cash | $ | 590 |
|
| Working capital | (2,071 | ) |
| Property, plant and equipment | 55 |
|
| Acquired intangible assets | 3,600 |
|
| Other assets | 8 |
|
| Deferred income taxes | (128 | ) |
| Goodwill | 16,863 |
|
| Fair value of purchase consideration | $ | 18,917 |
|
The intangible assets acquired in thisthe TerraSmart acquisition consisted of the following (in thousands):
| | | | | | | | | | | |
| Fair Value | | Weighted-Average Amortization Period |
| Trademarks | $ | 16,400 | | | Indefinite |
| Trademarks | 300 | | | 7 years |
| Technology | 2,500 | | | 15 years |
| Customer relationships | 24,000 | | | 10 years |
| Non-compete agreements | 2,200 | | | 5 years |
| Backlog | 6,300 | | | Less than 1 year |
| Total | $ | 51,700 | | | |
|
| | | | | |
| | Fair Value | | Estimated
Useful Life |
| Trademarks | $ | 600 |
| | Indefinite |
| Technology | 1,300 |
| | 10 years |
| Customer relationships | 1,700 |
| | 7 years |
| Total | $ | 3,600 |
| | |
On OctoberDecember 11, 2016,2020, the Company acquiredpurchased all of the outstanding stock of NexusSunfig Corporation ("Nexus"Sunfig"). Nexus is, a leading provider of commercial-scale greenhouses to customerssoftware solutions that optimize solar energy investments through upstream design, performance and financial modeling, for a preliminary purchase consideration of $3.8 million, which includes a preliminary working capital adjustment and certain other adjustments provided for in the United States.
The acquisition of Nexus is expected to enable the Company to strengthen its position in the commercial greenhouse market in the United States.stock purchase agreement. The results of NexusSunfig have been included in the Company's consolidated financial results since the date of acquisition (withinwithin the Company's Renewable EnergyRenewables segment. The excess consideration was recorded as goodwill and Conservation segment). The final aggregateapproximated $3.2 million, all of which is deductible for tax purposes.
On October 15, 2020, the Company purchased substantially all of the assets of Architectural Mailboxes LLC ("Architectural Mailboxes"), a complementary addition to the Company's existing mail and package solutions business within the Residential segment, for a preliminary purchase consideration for the acquisition of Nexus was $23,762,000,$26.9 million, which includes a working capital adjustment and certain other adjustments provided for in the stockasset purchase agreement. At December 31, 2016, $1,000,000The results of Architectural Mailboxes have been included in the estimated purchase price was accrued. Upon settlementCompany's consolidated financial results since the date of acquisition within the final purchase adjustments, $167,000 was paid in cash by the Company during the first quarter of 2017.
The purchase price for the acquisition was allocated to the assets acquired and liabilities assumed based upon their respective fair values.Company's Residential segment. The excess consideration was recorded as goodwill and approximated $11,451,000,$7.4 million, all of which all is deductible for tax purposes.
On February 13, 2020, the Company purchased substantially all of the assets of Delta Separations, LLC and Teaching Tech, LLC (collectively, "Delta Separations") for a purchase consideration of $47.1 million, which includes a working capital adjustment and certain other adjustments provided for in the asset purchase agreement. Delta Separations was a privately-held engineering company primarily engaged in the assembly and sale of centrifugal ethanol-based extraction systems. The results of Delta Separations have been included in the Company's consolidated financial results since the date of acquisition within the Company's Agtech segment. The excess consideration was recorded as goodwill and approximated $32.2 million, all of which is deductible for tax purposes.
On January 15, 2020, the Company purchased substantially all of the assets of Thermo Energy Systems Inc. ("Thermo"), a Canadian-based, privately held provider of commercial greenhouse solutions in North America providing growing infrastructure for the plant based organic food market, for a purchase consideration of $7.3 million. The results of Thermo have been included in the Company's consolidated financial results since the date of acquisition within the Company's Agtech segment. Goodwill of approximately $18.7 million was recorded, all of which is deductible for tax purposes.
The preliminary allocation of the purchase price for Sunfig and Architectural Mailboxes remains subject to adjustments during the measurement period as third-party valuations are finalized. The preliminary and final allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed in the acquisitions of Sunfig, Architectural Mailboxes, Delta Separations and Thermo is as follows as of the respective date of the acquisition (in thousands):
| | | | | | | |
| Cash | $ | 200 | | | |
| Working capital | (14,957) | | | |
| Property, plant and equipment | 1,740 | | | |
| Acquired intangible assets | 38,296 | | | |
| Other current assets | 1,528 | | | |
| Other assets | 2,381 | | | |
| Other liabilities | (5,508) | | | |
| Goodwill | 61,422 | | | |
| Fair value of purchase consideration | $ | 85,102 | | | |
|
| | | |
| Cash | $ | 2,495 |
|
| Working capital | (1,109 | ) |
| Property, plant and equipment | 4,702 |
|
| Acquired intangible assets | 6,200 |
|
| Other assets | 23 |
|
| Goodwill | 11,451 |
|
| Fair value of purchase consideration | $ | 23,762 |
|
Goodwill represents future economic benefits arising from other assets acquired that could not be individually identified including workforce additions, growth opportunities, and increased presence in the respective markets.
The intangible assets acquired in this acquisitionthe acquisitions of Sunfig, Architectural Mailboxes, Delta Separations and Thermo consisted of the following (in thousands):
| | | | | | | | | | | |
| Fair Value | | Weighted-Average Amortization Period |
| Trademarks | $ | 8,200 | | | Indefinite |
| Trademarks | 1,177 | | | 3 years |
| Technology | 8,175 | | | 7 - 15 years |
| Customer relationships | 18,780 | | | 5 - 13 years |
| Non-compete agreements | 1,036 | | | 5 years |
| Backlog | 928 | | | Less than 1 year |
| Total | $ | 38,296 | | | |
|
| | | | | |
| | Fair Value | | Estimated
Useful Life |
| Trademarks | $ | 3,200 |
| | Indefinite |
| Technology | 1,300 |
| | 15 years |
| Customer relationships | 800 |
| | 11 years |
| Backlog | 900 |
| | 0.25 years |
| Total | $ | 6,200 |
| | |
In determining the allocation of the purchase price to the assets acquired and the liabilities assumed, the Company uses all available information to make fair value determinations using Level 3 unobservable inputs in which little or no market data exists, and therefore, engages independent valuation specialists to assist in the fair value determination of the acquired long-lived assets.
The acquisition of TerraSmart was financed through a combination of cash on hand and borrowings under the Company's revolving credit facility. The acquisitions of Package ConciergeSunfig, Architectural Mailboxes, Delta Separations and NexusThermo were funded from available cash on hand.
The Company incurred certain acquisition-related costs composed of legal and consulting fees, and thesefees. These costs were recognized as a component of selling, general, and administrative expenses in the consolidated statementsstatement of operations.
During the three months ended March 31, 2021 and 2020, the Company incurred $0.9 million and $1.3 million, respectively, in acquisition-related costs. The following table summarizesCompany did 0t recognize acquisition-related costs as a component of cost of sales for the three and nine months ended September 30 (in thousands):March 31, 2021 and 2020, respectively.
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Acquisition-related costs | $ | 31 |
| | $ | — |
| | $ | 146 |
| | $ | 31 |
|
6.(7) GOODWILL AND RELATED INTANGIBLE ASSETS
Goodwill
The changes in the carrying amount of goodwill for the ninethree months ended September 30, 2017March 31, 2021 are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Renewables | | Residential | | Agtech | | Infrastructure | | Total |
| Balance at December 31, 2020 | $ | 192,527 | | | $ | 205,452 | | | $ | 84,622 | | | $ | 31,678 | | | $ | 514,279 | |
| Adjustments to prior year acquisitions | 9,951 | | | 0 | | | 0 | | | 0 | | 9,951 | |
| | | | | | | | | |
| Foreign currency translation | (989) | | | 0 | | | 205 | | | 0 | | | (784) | |
| Balance at March 31, 2021 | $ | 201,489 | | | $ | 205,452 | | | $ | 84,827 | | | $ | 31,678 | | | $ | 523,446 | |
|
| | | | | | | | | | | | | | | |
| | Residential Products | | Industrial and Infrastructure Products | | Renewable Energy & Conservation | | Total |
| Balance at December 31, 2016 | $ | 181,285 |
| | $ | 53,884 |
| | $ | 68,863 |
| | $ | 304,032 |
|
| Acquired goodwill | 16,863 |
| | — |
| | — |
| | 16,863 |
|
| Adjustments to prior year acquisitions | — |
| | — |
| | (832 | ) | | (832 | ) |
| Foreign currency translation | — |
| | 432 |
| | 598 |
| | 1,030 |
|
| Balance at September 30, 2017 | $ | 198,148 |
| | $ | 54,316 |
| | $ | 68,629 |
| | $ | 321,093 |
|
GoodwillThe Company is recognized net of accumulatedrequired to regularly assess whether a triggering event has occurred which would require interim impairment losses of $235,419,000 as of September 30, 2017 and December 31, 2016.testing. The Company determined that a triggering event has not occurred which would require an interim impairment test to be performed.
Acquired Intangible Assets
Acquired intangible assets consist of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2021 | | December 31, 2020 | | |
| | Gross
Carrying
Amount | | Accumulated
Amortization | | Gross
Carrying
Amount | | Accumulated
Amortization | | |
| Indefinite-lived intangible assets: | | | | | | | | | |
| Trademarks | $ | 56,670 | | | $ | 0 | | | $ | 56,570 | | | $ | 0 | | | |
| Finite-lived intangible assets: | | | | | | | | | |
| Trademarks | 5,831 | | | 3,574 | | | 5,818 | | | 3,385 | | | |
| Unpatented technology | 38,892 | | | 18,479 | | | 38,752 | | | 17,765 | | | |
| Customer relationships | 98,135 | | | 33,298 | | | 98,500 | | | 31,580 | | | |
| Non-compete agreements | 4,888 | | | 1,913 | | | 4,885 | | | 1,747 | | | |
| Backlog | 7,235 | | | 2,510 | | | 7,228 | | | 911 | | | |
| 154,981 | | | 59,774 | | | 155,183 | | | 55,388 | | | |
| Total acquired intangible assets | $ | 211,651 | | | $ | 59,774 | | | $ | 211,753 | | | $ | 55,388 | | | |
|
| | | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 | | |
| | Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization | | Estimated Life |
| Indefinite-lived intangible assets: | | | | | | | | | |
| Trademarks | $ | 45,153 |
| | $ | — |
| | $ | 44,720 |
| | $ | — |
| | Indefinite |
| Finite-lived intangible assets: | | | | | | | | | |
| Trademarks | 5,882 |
| | 2,921 |
| | 5,808 |
| | 2,427 |
| | 5 to 15 Years |
| Unpatented technology | 28,020 |
| | 11,523 |
| | 26,720 |
| | 10,041 |
| | 5 to 20 Years |
| Customer relationships | 80,719 |
| | 38,182 |
| | 78,569 |
| | 33,585 |
| | 5 to 17 Years |
| Non-compete agreements | 1,649 |
| | 854 |
| | 1,649 |
| | 623 |
| | 4 to 10 Years |
| Backlog | — |
| | — |
| | 900 |
| | 900 |
| | 0.25 Years |
| | 116,270 |
| | 53,480 |
| | 113,646 |
| | 47,576 |
| | |
| Total acquired intangible assets | $ | 161,423 |
| | $ | 53,480 |
| | $ | 158,366 |
| | $ | 47,576 |
| | |
The following table summarizes the acquired intangible asset amortization expense for the three and nine months ended September 30March 31 (in thousands):
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Amortization expense | $ | 2,208 |
| | $ | 2,159 |
| | $ | 6,600 |
| | $ | 6,541 |
|
| | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| 2021 | | 2020 | | | | |
| Amortization expense | $ | 4,743 | | | $ | 1,984 | | | | | |
Amortization expense related to acquired intangible assets for the remainder of fiscal 20172021 and the next five years thereafter is estimated as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 |
| Amortization expense | $ | 14,140 | | | $ | 12,120 | | | $ | 11,195 | | | $ | 11,014 | | | $ | 10,780 | | | $ | 8,700 | |
|
| |
| 2017 | $2,157 |
| 2018 | $8,288 |
| 2019 | $7,617 |
| 2020 | $7,105 |
| 2021 | $6,503 |
| 2022 | $6,092 |
7.(8) LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Revolving credit facility | $ | 59,000 | | | $ | 85,000 | |
| Other debt | 0 | | | 636 | |
| Less unamortized debt issuance costs | (977) | | | 0 | |
| Total debt | $ | 58,023 | | | $ | 85,636 | |
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| Senior Subordinated 6.25% Notes | $ | 210,000 |
| | $ | 210,000 |
|
| Other debt | 2,400 |
| | 2,800 |
|
| Less unamortized debt issuance costs | (2,575 | ) | | (3,163 | ) |
| Total debt | 209,825 |
| | 209,637 |
|
| Less current maturities | 400 |
| | 400 |
|
| Total long-term debt | $ | 209,425 |
| | $ | 209,237 |
|
The Company'sSenior Credit Agreement
On January 24, 2019, the Company entered into a Sixth Amended and Restated Credit Agreement ("Senior Credit Agreement"), which amended and restated the Company’s Fifth Amended and Restated Credit Agreement dated December 9, 2015, (the "Senior Credit Agreement") was amended to convert our secured asset based credit facility into a secured cash flow revolver, and terminates on December 9, 2020.
The Senior Credit Agreement provides for a revolving credit facility and letters of credit in an aggregate amount of $300equal to $400 million. The Company has the option tocan request additional financing from the bankslenders to either increase the revolving credit facility to $500$700 million or to provideenter into a term loan of up to $200 million.$300 million subject to conditions set forth in the Senior Credit Agreement. The Senior Credit Agreement contains 3 financial covenants. As of September 30, 2017,March 31, 2021, the Company iswas in compliance with all 3 covenants.
Interest rates on the revolving credit facility are based on LIBOR plus an additional margin that ranges from 1.125% to 2.00%. In addition, the revolving credit facility is subject to an undrawn commitment fee ranging between 0.15% and 0.25% based on the Total Leverage Ratio (as defined in the Senior Credit Agreement) and the daily average undrawn balance. The Senior Credit Agreement terminates on January 23, 2024.
Borrowings under the Senior Credit Agreement are secured by the trade receivables, inventory, personal property, equipment, and certain real propertygeneral intangibles of the Company’s significant domestic subsidiaries. Interest rates on the revolving credit facility are based on the LIBOR plus an additional margin that ranges from 1.25% to 2.25% for LIBOR loans based on the Total Leverage Ratio.
In addition, the revolving credit facility is subject to an undrawn commitment fee ranging between 0.20% and 0.30% based on the Total Leverage Ratio and the daily average undrawn balance.
Standby letters of credit of $11,216,000$6.2 million have been issued under the Senior Credit Agreement on behalf of the Company as of September 30, 2017.March 31, 2021. These letters of credit reduce the amount otherwise available under the revolving credit facility. As of September 30, 2017, theThe Company had $288,784,000$334.8 million and $309.2 million of availability under the revolving credit facility. No borrowings were outstanding under the revolving credit facility at September 30, 2017March 31, 2021 and December 31, 2016.2020, respectively.
On January 31, 2013, the Company issued $210 million of 6.25% Senior Subordinated Notes (6.25% Notes) due February 1, 2021.The provisions of the 6.25% Notes include, without limitation, restrictions on indebtedness, liens, and distributions from restricted subsidiaries, asset sales, affiliate transactions, dividends, and other restricted payments. Dividend payments are subject to annual limits and interest is paid semiannually on February 1 and August 1 of each year.
8. RELATED PARTYTRANSACTIONS
An officer of one of the Company's operating segments is the owner of certain real estate properties leased for manufacturing and distribution purposes by that operating segment. The leases are in effect until June 2018 and June 2020. For the three and nine months ended September 30, 2017 and 2016, the Company incurred the following lease expense for these properties (in thousands):
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | | 2017 | | 2016 | | 2017 | | 2016 |
| Cost of sales | | $ | 262 |
| | $ | 227 |
| | $ | 787 |
| | $ | 679 |
|
9.(9) ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
The following tables summarize the cumulative balance of each component of accumulated other comprehensive loss, net of tax, is as followsfor the three months ended March 31, (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign Currency Translation Adjustment | | Minimum post retirement benefit plan
adjustments | | Total Pre-Tax Amount | | Tax (Benefit) Expense | | Accumulated Other
Comprehensive
(Loss) Income | | |
| Balance at December 31, 2020 | $ | (872) | | | $ | (2,426) | | | $ | (3,298) | | | $ | (837) | | | $ | (2,461) | | | |
| | | | | | | | | | | |
| Minimum post retirement health care plan adjustments | — | | | 37 | | | 37 | | | 10 | | | 27 | | | |
| Foreign currency translation adjustment | 3,198 | | | — | | | 3,198 | | | — | | | 3,198 | | | |
| Balance at March 31, 2021 | $ | 2,326 | | | $ | (2,389) | | | $ | (63) | | | $ | (827) | | | $ | 764 | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign Currency Translation Adjustment | | Minimum post retirement benefit plan
adjustments | | Total Pre-Tax Amount | | Tax (Benefit) Expense | | Accumulated Other
Comprehensive
(Loss) Income |
| Balance at December 31, 2019 | $ | (4,173) | | | $ | (1,939) | | | $ | (6,112) | | | $ | (721) | | | $ | (5,391) | |
| | | | | | | | | |
| Minimum post retirement health care plan adjustments | — | | | 25 | | | 25 | | | 7 | | | 18 | |
| Foreign currency translation adjustment | (5,898) | | | — | | | (5,898) | | | — | | | (5,898) | |
| Balance at March 31, 2020 | $ | (10,071) | | | $ | (1,914) | | | $ | (11,985) | | | $ | (714) | | | $ | (11,271) | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Foreign Currency Translation Adjustment | | Minimum Pension
Liability
Adjustment | | Unamortized Post Retirement Health
Care Costs | | Total Pre-Tax Amount | | Tax (Benefit) Expense | | Accumulated Other
Comprehensive
(Loss) Income |
| Balance at December 31, 2016 | $ | (5,848 | ) | | $ | 197 |
| | $ | (3,150 | ) | | $ | (8,801 | ) | | $ | (1,080 | ) | | $ | (7,721 | ) |
| Minimum pension and post retirement health care plan adjustments | — |
| | (13 | ) | | 142 |
| | 129 |
| | 49 |
| | 80 |
|
| Foreign currency translation adjustment | 3,351 |
| | — |
| | — |
| | 3,351 |
| | — |
| | 3,351 |
|
| Balance at September 30, 2017 | $ | (2,497 | ) | | $ | 184 |
| | $ | (3,008 | ) |
| $ | (5,321 | ) |
| $ | (1,031 | ) | | $ | (4,290 | ) |
The realized adjustments relating to the Company’s minimum pension liability and post retirement health care costs were reclassified from accumulated other comprehensive loss and included in other expense in the consolidated statements of operations.income.
10.
(10) EQUITY-BASED COMPENSATION
On May 6, 2016,4, 2018, the shareholdersstockholders of the Company authorizedapproved the adoption of the Gibraltar Industries, Inc. 2018 Equity Incentive Plan (the "2018 Plan"). The 2018 Plan provides for the issuance of up to 1,000,000 shares of common stock and supplements the remaining shares available for issuance under the Gibraltar Industries, Inc. 2015 Equity Incentive Plan (the "2015 Plan"). Both the 2018 Plan and the 2015 Plan allow the Company to grant equity-based incentive compensation awards, in the form of non-qualified options, restricted shares, restricted stock units, performance shares, performance stock units, and stock rights to eligible participants.
In 2016, the stockholders of the Company approved the adoption of the Gibraltar Industries, Inc. 2016 Stock Plan for Non-Employee Directors ("Non-Employee Directors Plan"). The Non-Employee Directors Plan is a compensation plan that which allows the Company to grant awards of shares of the Company's common stock to non-employee Directors of the Company. In connection withCompany and permits the Non-Employee Directors Plan, the Company adopted a new stock deferral plan, the Gibraltar Industries, Inc. Non-Employee Director Stock Deferral Plan ("Deferral Plan"). The Deferral Plan permits non-employee Directors of the Company to defer receipt of such shares of common stock which the non-employee Director is entitled to receive pursuant to the terms of the Non-Employee Directors Plan.
On May 7, 2015, the shareholders of the Company authorized the Gibraltar Industries, Inc. 2015 Equity Incentive Plan (the "Plan") and simultaneously amended the 2005 Equity Incentive Plan (the "Prior Plan") to terminate issuance of further awards from the Prior Plan. The Plan is an incentive compensation plan that allows the Company to grant equity-based incentive compensation awards to eligible participants. Awards under the Plan may be in the form of options, restricted shares, restricted units, performance shares, performance stock units, and rights.
Equity Based Awards - Settled in Stock
The following table providessets forth the number of stock unitequity-based awards granted during the ninethree months ended September 30,March 31, which will convert to shares upon vesting, along with the weighted average grant date fair values:
| | | | | | | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 |
| Awards | Number of
Awards | | Weighted
Average
Grant Date
Fair Value | | Number of
Awards (2) | | Weighted
Average
Grant Date
Fair Value |
| Performance stock units (1) | 62,778 | | | $ | 87.84 | | | 123,870 | | | $ | 53.29 | |
| Restricted stock units | 33,187 | | | $ | 87.91 | | | 42,101 | | | $ | 52.31 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
|
| | | | | | | | | | | | | |
| | 2017 | | 2016 |
| Awards | Number of Awards | | Weighted Average Grant Date Fair Value | | Number of Awards | | Weighted Average Grant Date Fair Value |
| Performance stock units | 108,748 |
| | $ | 42.72 |
| | — |
| | $ | — |
|
| Restricted stock units | 120,048 |
| | $ | 37.14 |
| | 139,982 |
| | $ | 25.15 |
|
| Options | 25,000 |
| | $ | 42.35 |
| | — |
| | $ | — |
|
| Deferred stock units | 10,170 |
| | $ | 34.42 |
| | 11,945 |
| | $ | 29.30 |
|
| Restricted shares | 2,034 |
| | $ | 34.42 |
| | 3,185 |
| | $ | 29.30 |
|
Included in the(1) The Company’s performance stock units disclosed above are 78,482 units awarded in February 2017 and 5,266 units award in April 2017(“PSUs”) represent shares granted for which the final number of shares earned depends on financial performance or market conditions. The number of shares to be issued may vary between 0% and 200% of the number of performance stock units granted depending on the relative achievement to targeted thresholds. The Company's PSUs with a financial performance condition are based on either the Company’s return on invested capital (“ROIC”) over a one-year performance period or revenue, gross profit and operating profit thresholds over a twoc or three-year performance period. The Company's PSUs with a market condition are based on the ranking of the Company’s total stockholder return (“TSR”) performance, on a percentile basis, over a three year performance period compared to the S&P Small Cap Industrial sector, over the same three year performance period.
(2) PSUs granted in the first quarter of 2020 include 72,239 units that will convertbe converted to shares will be determinedand issued to recipients in the first quarter of 2023 at 109.5% of the target amount granted, based on the Company’s actual return on invested capital (ROIC) relativeROIC compared to the ROIC targetedtarget for the performance period ended December 31, 2017. Additionally, included in the performance stock units disclosed above, there were 20,000 units awarded in February 2017 and 5,000 units award in April 2017. For these awards, the final number of shares to be issued to the recipient will be determined based upon the ranking of the Company’s total shareholder return over a three (3) year performance period ended February 1, 2020 compared to the total shareholder return of companies in the S&P Small Cap Industrial Sector over such period.2020.
Performance Stock UnitsEquity Based Awards - Settled in Cash
The Company awarded performanceCompany's equity-based liability is comprised of awards under a management stock units ("PSUs") that will convert to cash after three years based upon a one year performance period in 2016 and 2015. The costpurchase plan. As of these awards is recognized overMarch 31, 2021, the requisite vesting period. The PSUs earned over the performance period are determined basedCompany's total share-based liabilities recorded on the Company’s actual return on invested capital (ROIC) relative to the ROIC targeted for the performance period.consolidated balance sheet were $19.3 million, of which $16.4 million was included in non-current liabilities. The share-based liabilities as of December 31, 2020 were $18.2 million, of which $14.7 million was included in non-current liabilities.
During the 2016 performance period, the participants earned an aggregate of 256,000 PSUs, representing 200% of the targeted
2016 award of 128,000. This award will convert to cash payable in January 2019.
During the 2015 performance period, the participants earned an aggregate of 438,000 PSUs, representing 200% of the targeted 2015 award of 219,000. This award will convert to cash payable in January 2018.
The following table summarizes the compensation expense recognized for the PSUs, which will convert to cash, for the three and nine months ended September 30, (in thousands):
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| PSUs compensation (recovery) expense | $ | (405 | ) | | $ | 4,148 |
| | $ | 1,673 |
| | $ | 7,889 |
|
The Management Stock Purchase Plan ("MSPP") provides participants the ability to defer a portion of their compensation, which deferral is convertedconvertible to unrestricted investments, restricted stock units, or a combination of both, or defer a portion of their directors’ fees, convertible to restricted stock units, and creditedunits. Employees eligible to an account. Under the MSPP, the Company providesdefer a matchingportion of their compensation also receive a company-matching award in restricted stock units equal to a percentage of the employees'their compensation. Matching awards
The deferrals and related company match are not providedcredited to directors. Thean account that represents a share-based liabilityliability. The portion of the account deferred to unrestricted investments is measured at fair market value of the unrestricted investments, and the portion of the account deferred to restricted stock units and company-matching restricted stock units is measured at a 200-day average of the Company’s stock price. The account will be converted to and settled in cash which is payable to participants upon retirement or a termination of their service to the Company.
The following table provides the number of restricted stock units credited to active participant accounts and the payments made with respect to restricted stock units issued under the MSPP during the ninethree months ended September 30,March 31,:
| | | | | | | | | | | |
| 2021 | | 2020 |
| Restricted stock units credited | 24,085 | | | 52,411 | |
| Share-based liabilities paid (in thousands) | $ | 3,510 | | | $ | 4,433 | |
|
| | | | | | | |
| | 2017 | | 2016 |
| Restricted stock units credited | 90,754 |
| | 192,380 |
|
| Share-based liabilities paid (in $1000s) | $ | 2,392 |
| | $ | 2,753 |
|
11. FAIR VALUE MEASUREMENTS
Fair value is definedOn February 23, 2021, the Company sold the stock of its Industrial business which had been classified as held for sale and reported as a discontinued operation in the price that would be received to sell an asset or paid to transferCompany’s consolidated financial statements for the year ended December 31, 2020. Net proceeds of $38 million, consisting of cash and a liability$13 million seller note, resulted in an orderly transaction between market participants atestimated pre-tax loss of $30 million, subject to working capital and other adjustments, of which $29.6 million was recorded when the measurement date. Depending on the natureassets of the asset or liability, various techniquesIndustrial business were written down to fair market value during the fourth quarter of 2020.
The results of operations and assumptions can be usedfinancial position of the Industrial business have been presented as a discontinued operation in the Company's consolidated financial statements for all periods presented. The Company allocates interest to estimate fair value. A financial asset or liability’s classification within the hierarchy is determinedits discontinued operations in accordance with ASC Subtopic 205-20, “Presentation of Financial Statements – Discontinued Operations.” Interest was allocated based on the lowest level input that is significantamount of net assets held by the discontinued operation in comparison to consolidated net assets.
The following carrying amounts of the major classes of assets and liabilities included in discontinued operations related to the fair value measurementIndustrial business has been segregated from the Company's continuing operations and are reported as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than quoted prices in active markets for similar assets and liabilities.liabilities of discontinued operations, respectively, in the consolidated balance sheet at December 31, 2020 (in thousands):
Level 3 - Inputs | | | | | | | | | |
| December 31, 2020 | | | | |
| Assets | | | | | |
| Accounts receivable, net | $ | 11,261 | | | | | |
| Inventories, net | 13,041 | | | | | |
| Prepaid expenses and other current assets | 21,310 | | | | | |
| Total current assets (1) | 45,612 | | | | | |
| Property, plant, and equipment, net | 16,999 | | | | | |
| Operating lease assets | 6,470 | | | | | |
| Goodwill | 22,475 | | | | | |
| Acquired intangibles | 15,482 | | | | | |
| Loss recognized on classification as held for sale | (29,600) | | | | | |
| Total noncurrent assets (1) | 31,826 | | | | | |
| Total assets classified as held for sale | $ | 77,438 | | | | | |
| | | | | |
| Liabilities | | | | | |
| Accounts payable | $ | 10,708 | | | | | |
| Accrued expenses | 9,274 | | | | | |
| Total current liabilities (1) | 19,982 | | | | | |
| Deferred income taxes | 24,657 | | | | | |
| Non-current operating lease liabilities | 4,639 | | | | | |
| Other non-current liabilities | 17 | | | | | |
| Total noncurrent liabilities (1) | 29,313 | | | | | |
| Total liabilities classified as held for sale | $ | 49,295 | | | | | |
(1) The assets and liabilities of the discontinued operations were classified as current on the December 31, 2020 consolidated balance sheet, as it was probable that are unobservable inputsthe sale would occur and proceeds will be collected within one year.
Components of income from discontinued operations before taxes, including the interest allocated to discontinued operations, for the asset or liability.three months ended March 31 are as follows (in thousands):
The Company had no financial assets or liabilities measured at fair value on a recurring basis at September 30, 2017 and December 31, 2016. The Company’s only financial instrument for which the carrying value differs from its fair value is long-term debt. At September 30, 2017 and December 31, 2016, the fair value of outstanding debt net of unamortized debt issuance costs was $218,700,000 and $219,898,000, respectively, compared to its carrying value of $209,825,000 and $209,637,000, respectively. The fair value of the Company’s 6.25% Notes is classified as Level 2 within the fair value hierarchy and was estimated based on quoted market prices adjusted for unamortized debt issuance costs. | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | | | |
| Net sales | $ | 20,391 | | | $ | 34,038 | | | | | |
| Operating expenses | 17,493 | | | 31,202 | | | | | |
| Adjustment to loss on disposal | 328 | | | 0 | | | | | |
| Interest expense allocation | 0 | | | 6 | | | | | |
| Income from discontinued operations before taxes | $ | 2,570 | | | $ | 2,830 | | | | | |
12. DISCONTINUED OPERATIONS
For certain divestiture transactions completed in prior years, the Company has agreed to indemnify the buyer for various liabilities that may arise after the disposal date, subject to limits of time and amount. The Company is a party to certain claims made under these indemnification provisions. As of September 30, 2017, the Company has a contingent liability recorded for such provisions related to discontinued operations. Management does not believe that the outcome of this claim, or other claims, would significantly affect the Company's financial condition or results of operation.
13.(12) EXIT ACTIVITY COSTS AND ASSET IMPAIRMENTS
The Company is in the third yearhas incurred exit activity costs and asset impairment charges as a result of its five year planned transformation strategy formulated to transform its operations and improve its financial results over this five year period. This strategy includes an 80/20 simplification initiative which,and portfolio management initiatives. These initiatives have resulted in part, focuses the Company’s internal resources on further increasing the value provided to our customers. A result of this initiative was the identification of low-volume, low margin, internally-produced products which have been or will be outsourced or discontinued. Portfolio management, another key partdiscontinued, the simplification of the strategy and a natural adjunct to the 80/20 initiative, is another initiative in which management conducts strategic reviews of our current portfolio for future profitable growth and greater shareholder returns. This initiative has resulted inprocesses, the sale and exiting of less profitable businesses or productsproduct lines, and a reduction in order to enable the Company to re-allocate leadership, time, capital and resources to the highest potential platforms and businesses. Exit activity costs and asset impairment charges were incurred as a resultour manufacturing footprint.
Exit activity costs were incurred during the ninethree months ended September 30, 2017March 31, 2021 which related to contract termination costs, severance costs, and other moving and closing costs. These costs, were the result of the closingcontract terminations, and consolidation of facilities, relocation of inventory and equipment at those facilities and the reduction of workforce associatedseverance, along with the discontinued products and closed facilities. During the nine months ended September 30, 2017, asset impairment charges incurred were more than offset by a gain on sale of assets previously impaired in 2016 as a result of businesses and product lines discontinued. Specifically, the exit of both the Company's small European residential solar racking business and the exit of the Company's U.S. bar grating product line, which commenced during the fourth quarter of 2016, transacted sales of assets during the nine months ended September 30, 2017 which resulted in a net gain. These exits were completed in the first half of 2017. During the nine months ended September 30, 2017, asset impairment charges were incurred related to the write-down of inventory and impairment of machinery and equipment and intangible assets associated with either discontinued product lines, or the reduction of manufactured goods offered within a product line. These assets were written down to their sale or scrap value, and were subsequently sold or disposed of. During the nine months ended September 30, 2017, the Company closed three facilities as a result of this strategy.
Duringprocess simplification initiatives. In conjunction with these initiatives, the nineCompany closed 2 facilities during the three months ended September 30, 2016, the Company incurred asset impairment charges and exitMarch 31, 2021. Exit activity costs resultingwere incurred from the above strategyinitiatives for the three months ended March 31, 2020. NaN facilities were closed as well. As a result of these initiatives the Company sold its European industrial manufacturing business to a third party in April 2016, as well as closed four other facilities during the first ninethree months of 2016.ended March 31, 2020.
The following tables set forth the asset impairment charges and exit activity costs incurred by segment during the three and nine months ended September 30,March 31, related to the restructuring activities described above (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, |
| 2021 | | 2020 |
| Asset impairment charges | | Exit activity costs (recoveries), net | | Total | | Asset impairment charges | | Exit activity costs | | Total |
| Renewables | $ | 1,193 | | | $ | 3,778 | | | $ | 4,971 | | | $ | 0 | | | $ | 18 | | | $ | 18 | |
| Residential | 0 | | | 65 | | | 65 | | | 0 | | | 221 | | | 221 | |
| Agtech | 0 | | | 204 | | | 204 | | | 0 | | | 0 | | | 0 | |
| Infrastructure | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
| Corporate | — | | | 0 | | | 0 | | | 0 | | | 54 | | | 54 | |
| Total exit activity costs & asset impairments | $ | 1,193 | | | $ | 4,047 | | | $ | 5,240 | | | $ | 0 | | | $ | 293 | | | $ | 293 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, |
| | 2017 | | 2016 |
| | Inventory write-downs &/or asset impairment recoveries, net | | Exit activity costs | | Total | | Inventory write-downs &/or asset impairment charges | | Exit activity costs | | Total |
| Residential Products | $ | 442 |
| | $ | 566 |
| | $ | 1,008 |
| | $ | 373 |
| | $ | 207 |
| | $ | 580 |
|
| Industrial & Infrastructure Products | 98 |
| | (12 | ) | | 86 |
| | 2,429 |
| | 756 |
| | 3,185 |
|
| Renewable Energy & Conservation | 266 |
| | 191 |
| | 457 |
| | — |
| | — |
| | — |
|
| Corporate | — |
| | 16 |
| | 16 |
| | — |
| | — |
| | — |
|
| Total exit activity costs & asset impairments | $ | 806 |
| | $ | 761 |
| | $ | 1,567 |
| | $ | 2,802 |
| | $ | 963 |
| | $ | 3,765 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended
September 30, |
| | 2017 | | 2016 |
| | Inventory write-downs &/or asset impairment recoveries, net | | Exit activity costs | | Total | | Inventory write-downs &/or asset impairment charges | | Exit activity costs | | Total |
| Residential Products | $ | 295 |
| | $ | 958 |
| | $ | 1,253 |
| | $ | 1,179 |
| | $ | 677 |
| | $ | 1,856 |
|
| Industrial & Infrastructure Products | (2,492 | ) | | 2,959 |
| | 467 |
| | 2,697 |
| | 2,019 |
| | 4,716 |
|
| Renewable Energy & Conservation | 266 |
| | 2,610 |
| | 2,876 |
| | — |
| | — |
| | — |
|
| Corporate | — |
| | 179 |
| | 179 |
| | — |
| | — |
| | — |
|
| Total exit activity costs & asset impairments | $ | (1,931 | ) | | $ | 6,706 |
| | $ | 4,775 |
| | $ | 3,876 |
| | $ | 2,696 |
| | $ | 6,572 |
|
The following table provides a summary of where the asset impairments and exit activity costs were recorded in the statementconsolidated statements of operationsincome for the three and nine months ended September 30,March 31, (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| 2021 | | 2020 | | | | |
| Cost of sales | $ | 5,047 | | | $ | 69 | | | | | |
| Selling, general, and administrative expense | 193 | | | 224 | | | | | |
| Total asset impairment and exit activity charges | $ | 5,240 | | | $ | 293 | | | | | |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Cost of sales | $ | 860 |
| | $ | 3,433 |
| | $ | 382 |
| | $ | 5,111 |
|
| Selling, general, and administrative expense | 707 |
| | 332 |
| | 4,393 |
| | 1,461 |
|
| Net asset impairment and exit activity charges | $ | 1,567 |
| | $ | 3,765 |
| | $ | 4,775 |
| | $ | 6,572 |
|
The following table reconciles the beginning and ending liability for exit activity costs relating to the Company’s facility consolidation efforts (in thousands):
| | | | | | | | | | | |
| 2021 | | 2020 |
| Balance at January 1 | $ | 1,030 | | | $ | 2,083 | |
| Exit activity costs recognized | 4,047 | | | 293 | |
| Cash payments | (1,464) | | | (1,365) | |
| Balance at March 31 | $ | 3,613 | | | $ | 1,011 | |
|
| | | | | | | |
| | 2017 | | 2016 |
| Balance at January 1 | $ | 3,744 |
| | $ | 603 |
|
| Exit activity costs recognized | 6,706 |
| | 2,696 |
|
| Cash payments | (9,207 | ) | | (2,182 | ) |
| Balance at September 30 | $ | 1,243 |
| | $ | 1,117 |
|
As noted above, the Company sold its European industrial manufacturing business to a third party on April 15, 2016 from its Industrial and Infrastructure Products segment. This divestiture did not meet the criteria to be reported as a discontinued operation as it does not represent a strategic shift that has or will have a major effect on the Company’s operations. Similarly, neither the exiting of the Company’s small European residential solar racking business nor its U.S. bar grating product line met the criteria to be reported as a discontinued operation for the year ended December 31, 2016. Therefore, prior period results of continuing operations have not been restated to exclude the impact of the divested and existed businesses' financial results. The pretax loss on sale of the European industrial manufacturing business is presented within other expense (income) in the consolidated statement of operations. The costs related to the exit of the Company's small European residential solar racking business and its U.S. bar grating product line are reflected in the above tables.
14.(13) INCOME TAXES
The following table summarizes the provision for income taxes for continuing operations (in thousands) for the three and nine months ended September 30,March 31, and the applicable effective tax rates:
| | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three Months Ended
March 31, | |
| | 2017 | | 2016 | | 2017 | | 2016 | | 2021 | | 2020 | |
| Provision for income taxes | $ | 11,184 |
| | $ | 8,952 |
| | $ | 21,090 |
| | $ | 12,131 |
| Provision for income taxes | $ | 1,560 | | | $ | 2,313 | | |
| Effective tax rate | 35.2 | % | | 39.4 | % | | 35.8 | % | | 22.7 | % | Effective tax rate | 12.9 | % | | 18.9 | % | |
The effective tax rate for the three months ended March 31, 2021 and nine months ended September 30, 2017 was greater than the U.S. federal statutory rate of 35% due to state taxes and $2.2 million of pretax losses generated by the European residential solar racking business for which no tax benefit has been recorded, as such benefit is not expected to be realizable, partially offset by net deductible permanent differences and favorable discrete items. The effective tax rate for the third quarter of 2016 exceeded the U.S. federal statutory rate of 35% due to state taxes and unfavorable discrete items. The effective tax rate for the nine months ended September 30, 20162020, respectively, was less than the U.S. federal statutory rate of 35%21% due to deductible permanent differences and favorable discrete items due to an excess tax benefit on stock-based compensation, partially offset by state taxes.taxes and nondeductible permanent differences.
The Company recorded a discrete tax benefit of $11.4 million during the nine months ended September 30, 2016 due to the effect of a worthless stock deduction and an associated bad debt deduction of inter-company debt resulting from the sale of its European industrial manufacturing business to a third party. The amount of this benefit was subsequently adjusted and reduced by $4.8 million in the fourth quarter of 2016.
15.(14) EARNINGS PER SHARE
Basic earnings and weighted-average of diluted weighted-average shares outstanding are as follows for the three and nine months ended September 30,March 31, (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| 2021 | | 2020 | | | | |
| Numerator: | | | | | | | |
| Income from continuing operations | $ | 10,496 | | | $ | 9,902 | | | | | |
| Income from discontinued operations | 2,266 | | | 2,157 | | | | | |
| Net income available to common stockholders | $ | 12,762 | | | $ | 12,059 | | | | | |
| Denominator for basic earnings per share: | | | | | | | |
| Weighted average shares outstanding | 32,771 | | | 32,586 | | | | | |
| Denominator for diluted earnings per share: | | | | | | | |
| Weighted average shares outstanding | 32,771 | | | 32,586 | | | | | |
| Common stock options and stock units | 333 | | | 297 | | | | | |
| Weighted average shares and conversions | 33,104 | | | 32,883 | | | | | |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Numerator: | | | | | | | |
| Income from continuing operations | $ | 20,619 |
| | $ | 13,786 |
| | $ | 37,789 |
| | $ | 41,427 |
|
| Loss from discontinued operations | — |
| | — |
| | (405 | ) | | — |
|
| Net income available to common shareholders | $ | 20,619 |
| | $ | 13,786 |
| | $ | 37,384 |
| | $ | 41,427 |
|
| Denominator for basic earnings per share: | | | | | | | |
| Weighted average shares outstanding | 31,703 |
| | 31,579 |
| | 31,700 |
| | 31,493 |
|
| Denominator for diluted earnings per share: | | | | | | | |
| Weighted average shares outstanding | 31,703 |
| | 31,579 |
| | 31,700 |
| | 31,493 |
|
| Common stock options and restricted stock | 507 |
| | 597 |
| | 516 |
| | 512 |
|
| Weighted average shares and conversions | 32,210 |
| | 32,176 |
| | 32,216 |
| | 32,005 |
|
The weighted average number of diluted shares does not include potential anti-dilutive common shares aggregating 489,000 and 621,000issuable pursuant to equity based incentive compensation awards. There were 0 anti-dilutive shares outstanding for the three months ended September 30, 2017March 31, 2021 and 2016, respectively, and 523,000 and 690,00018,000 for the ninethree months ended September 30, 2017 and 2016, respectively .March 31, 2020.
16.
(15) SEGMENT INFORMATION
The Company is organized into three4 reportable segments on the basis of the production process andprocesses, products and services provided by each segment, identified as follows:
| |
(i) | Residential Products, which primarily includes roof and foundation ventilation products, mail and parcel storage products, rain dispersion products and roofing accessories; |
| |
(ii) | Industrial and Infrastructure Products, which primarily includes expanded and perforated metal, expansion joints and structural bearings; and |
| |
(iii) | Renewable Energy and Conservation, which primarily includes designing, engineering, manufacturing and installation of solar racking systems and greenhouse structures. |
(i)Renewables, which primarily includes designing, engineering, manufacturing and installation of solar racking and electrical balance of systems;
(ii)Residential, which primarily includes roof and foundation ventilation products, centralized mail systems and electronic package solutions, retractable awnings and gutter guards, and rain dispersion products, trims and flashings and other accessories;
(iii)Agtech, which provides growing and processing solutions including the designing, engineering, manufacturing and installation of greenhouses, and botanical extraction systems; and
(iv)Infrastructure, which primarily includes structural bearings, expansion joints and pavement sealant for bridges, airport runways and roadways, elastomeric concrete, and bridge cable protection systems.
When determining the reportable segments, the Company aggregated operating segments based on their similar economic and operating characteristics.
2021, the Company reassessed its reportable segments. As a result, the Company's former Renewable Energy and Conservation segment was divided into two reportable segments: Renewables and Agtech.
The following table illustrates certain measurements used by management to assess performance of the segments described above for the three and nine months ended September 30,March 31, (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| 2021 | | 2020 | | | | |
| Net sales: | | | | | | | |
| Renewables | $ | 85,512 | | | $ | 47,263 | | | | | |
| Residential | 140,217 | | | 103,419 | | | | | |
| Agtech | 46,739 | | | 49,234 | | | | | |
| Infrastructure | 15,124 | | | 15,485 | | | | | |
| Total net sales | $ | 287,592 | | | $ | 215,401 | | | | | |
| | | | | | | |
| Income from operations: | | | | | | | |
| Renewables | $ | (521) | | | $ | 4,359 | | | | | |
| Residential | 22,934 | | | 13,725 | | | | | |
| Agtech | 929 | | | 1,340 | | | | | |
| Infrastructure | 2,037 | | | 1,576 | | | | | |
| Unallocated Corporate Expenses | (12,564) | | | (8,223) | | | | | |
| Total income from operations | $ | 12,815 | | | $ | 12,777 | | | | | |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Net sales: | | | | | | | |
| Residential Products | $ | 129,501 |
| | $ | 117,957 |
| | $ | 361,304 |
| | $ | 338,069 |
|
| Renewable Energy and Conservation | 88,135 |
| | 82,008 |
| | 202,690 |
| | 204,648 |
|
| Industrial and Infrastructure Products | 57,162 |
| | 73,193 |
| | 165,806 |
| | 234,590 |
|
| Less: Intersegment sales | (224 | ) | | (424 | ) | | (994 | ) | | (1,164 | ) |
| Net Industrial and Infrastructure Products | 56,938 |
| | 72,769 |
| | 164,812 |
| | 233,426 |
|
| Total consolidated net sales | $ | 274,574 |
| | $ | 272,734 |
| | $ | 728,806 |
| | $ | 776,143 |
|
| | | | | | | | |
| Income from operations: | | | | | | | |
| Residential Products | $ | 23,764 |
| | $ | 19,407 |
| | $ | 61,984 |
| | $ | 52,363 |
|
| Renewable Energy and Conservation | 11,549 |
| | 16,366 |
| | 18,381 |
| | 34,969 |
|
| Industrial and Infrastructure Products | 2,554 |
| | 1,913 |
| | 5,914 |
| | 11,429 |
|
| Unallocated Corporate Expenses | (2,174 | ) | | (11,164 | ) | | (15,977 | ) | | (25,902 | ) |
| Total income from operations | $ | 35,693 |
| | $ | 26,522 |
| | $ | 70,302 |
| | $ | 72,859 |
|
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Total assets: | | | |
| Renewables | $ | 393,499 | | | $ | 402,796 | |
| Residential | 427,894 | | | 407,132 | |
| Agtech | 212,507 | | | 216,275 | |
| Infrastructure | 82,833 | | | 80,796 | |
| Unallocated corporate assets | 38,458 | | | 28,057 | |
| Assets of discontinued operations | 0 | | | 77,438 | |
| $ | 1,155,191 | | | $ | 1,212,494 | |
17. SUPPLEMENTAL FINANCIAL INFORMATION
The following information sets forth the consolidating summary financial statements of the issuer (Gibraltar Industries, Inc.) and guarantors, which guarantee the 6.25% Notes due February 1, 2021, and the non-guarantors. The guarantors are 100% owned domestic subsidiaries of the issuer and the guarantees are full, unconditional, joint and several.
Investments in subsidiaries are accounted for by the parent using the equity method of accounting. The guarantor subsidiaries and non-guarantor subsidiaries are presented on a combined basis. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.
The following tables illustrate segment revenue disaggregated by timing of transfer of control to the customer for the three months ended March 31 (in thousands):
GIBRALTAR INDUSTRIES, INC. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2021 |
| Renewables | | Residential | | Agtech | | Infrastructure | | Total |
| Net sales: | | | | | | | | | |
| Point in Time | 6,971 | | | 139,019 | | | 5,143 | | | 5,470 | | | $ | 156,603 | |
| Over Time | 78,541 | | | 1,198 | | | 41,596 | | | 9,654 | | | 130,989 | |
| Total net sales | $ | 85,512 | | | $ | 140,217 | | | $ | 46,739 | | | $ | 15,124 | | | $ | 287,592 | |
CONSOLIDATING STATEMENTS OF OPERATIONS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2020 |
| Renewables | | Residential | | Agtech | | Infrastructure | | Total |
| Net sales: | | | | | | | | | |
| Point in Time | $ | 3,696 | | | $ | 102,331 | | | $ | 14,096 | | | $ | 5,457 | | | $ | 125,580 | |
| Over Time | 43,567 | | | 1,088 | | | 35,138 | | | 10,028 | | | 89,821 | |
| Total net sales | $ | 47,263 | | | $ | 103,419 | | | $ | 49,234 | | | $ | 15,485 | | | $ | 215,401 | |
THREE MONTHS ENDED SEPTEMBER 30, 2017
(in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| | Gibraltar Industries, Inc. | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
| Net sales | $ | — |
| | $ | 264,448 |
| | $ | 15,514 |
| | $ | (5,388 | ) | | $ | 274,574 |
|
| Cost of sales | — |
| | 198,103 |
| | 12,844 |
| | (5,108 | ) | | 205,839 |
|
| Gross profit | — |
| | 66,345 |
| | 2,670 |
| | (280 | ) | | 68,735 |
|
| Selling, general, and administrative expense | 34 |
| | 31,003 |
| | 2,005 |
| | — |
| | 33,042 |
|
| (Loss) income from operations | (34 | ) | | 35,342 |
| | 665 |
| | (280 | ) | | 35,693 |
|
| Interest expense (income) | 3,402 |
| | 105 |
| | (21 | ) | | — |
| | 3,486 |
|
| Other expense | — |
| | 100 |
| | 304 |
| | — |
| | 404 |
|
| (Loss) income before taxes | (3,436 | ) | | 35,137 |
| | 382 |
| | (280 | ) | | 31,803 |
|
| (Benefit of) provision for income taxes | (1,124 | ) | | 12,219 |
| | 89 |
| | — |
| | 11,184 |
|
| Equity in earnings from subsidiaries | 23,211 |
| | 293 |
| | — |
| | (23,504 | ) | | — |
|
| Net income | $ | 20,899 |
| | $ | 23,211 |
| | $ | 293 |
| | $ | (23,784 | ) | | $ | 20,619 |
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2016
(in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| | Gibraltar Industries, Inc. | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
| Net sales | $ | — |
| | $ | 265,657 |
| | $ | 15,799 |
| | $ | (8,722 | ) | | $ | 272,734 |
|
| Cost of sales | — |
| | 202,199 |
| | 11,721 |
| | (9,073 | ) | | 204,847 |
|
| Gross profit | — |
| | 63,458 |
| | 4,078 |
| | 351 |
| | 67,887 |
|
| Selling, general, and administrative expense | 94 |
| | 38,505 |
| | 2,766 |
| | — |
| | 41,365 |
|
| (Loss) income from operations | (94 | ) | | 24,953 |
| | 1,312 |
| | 351 |
| | 26,522 |
|
| Interest expense (income) | 3,403 |
| | 241 |
| | (19 | ) | | — |
| | 3,625 |
|
| Other expense (income) | 230 |
| | 24 |
| | (95 | ) | | — |
| | 159 |
|
| (Loss) income before taxes | (3,727 | ) | | 24,688 |
| | 1,426 |
| | 351 |
| | 22,738 |
|
| (Benefit of) provision for income taxes | (1,416 | ) | | 10,804 |
| | (436 | ) | | — |
| | 8,952 |
|
| Equity in earnings from subsidiaries | 15,746 |
| | 1,862 |
| | — |
| | (17,608 | ) | | — |
|
| Net income | $ | 13,435 |
| | $ | 15,746 |
| | $ | 1,862 |
| | $ | (17,257 | ) | | $ | 13,786 |
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2017
(in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| | Gibraltar Industries, Inc. | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
| Net sales | $ | — |
| | $ | 700,848 |
| | $ | 37,383 |
| | $ | (9,425 | ) | | $ | 728,806 |
|
| Cost of sales | — |
| | 527,389 |
| | 30,565 |
| | (8,963 | ) | | 548,991 |
|
| Gross profit | — |
| | 173,459 |
| | 6,818 |
| | (462 | ) | | 179,815 |
|
| Selling, general, and administrative expense | 111 |
| | 101,190 |
| | 8,212 |
| | — |
| | 109,513 |
|
| (Loss) income from operations | (111 | ) | | 72,269 |
| | (1,394 | ) | | (462 | ) | | 70,302 |
|
| Interest expense (income) | 10,207 |
| | 459 |
| | (54 | ) | | — |
| | 10,612 |
|
| Other expense | — |
| | 345 |
| | 466 |
| | — |
| | 811 |
|
| (Loss) income before taxes | (10,318 | ) | | 71,465 |
| | (1,806 | ) | | (462 | ) | | 58,879 |
|
| (Benefit of) provision for income taxes | (3,808 | ) | | 24,957 |
| | (59 | ) | | — |
| | 21,090 |
|
| (Loss) income from continuing operations | (6,510 | ) | | 46,508 |
| | (1,747 | ) | | (462 | ) | | 37,789 |
|
| Discontinued operations: | | | | | | | | | |
| Loss from discontinued operations before taxes | — |
| | (644 | ) | | — |
| | — |
| | (644 | ) |
| Benefit of income taxes | — |
| | (239 | ) | | — |
| | — |
| | (239 | ) |
| Loss from discontinued operations | — |
| | (405 | ) | | — |
| | — |
| | (405 | ) |
| Equity in earnings (loss) from subsidiaries | 44,356 |
| | (1,747 | ) | | — |
| | (42,609 | ) | | — |
|
| Net income (loss) | $ | 37,846 |
| | $ | 44,356 |
| | $ | (1,747 | ) | | $ | (43,071 | ) | | $ | 37,384 |
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2016
(in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| | Gibraltar Industries, Inc. | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
| Net sales | $ | — |
| | $ | 728,782 |
| | $ | 63,014 |
| | $ | (15,653 | ) | | $ | 776,143 |
|
| Cost of sales | — |
| | 551,195 |
| | 49,436 |
| | (15,368 | ) | | 585,263 |
|
| Gross profit | — |
| | 177,587 |
| | 13,578 |
| | (285 | ) | | 190,880 |
|
| Selling, general, and administrative expense | 14,268 |
| | 99,622 |
| | 4,131 |
| | — |
| | 118,021 |
|
| (Loss) income from operations | (14,268 | ) | | 77,965 |
| | 9,447 |
| | (285 | ) | | 72,859 |
|
| Interest expense (income) | 10,207 |
| | 836 |
| | (61 | ) | | — |
| | 10,982 |
|
| Other expense (income) | 8,717 |
| | 465 |
| | (863 | ) | | — |
| | 8,319 |
|
| (Loss) income before taxes | (33,192 | ) | | 76,664 |
| | 10,371 |
| | (285 | ) | | 53,558 |
|
| (Benefit of) provision for income taxes | (10,898 | ) | | 22,189 |
| | 840 |
| | — |
| | 12,131 |
|
| Equity in earnings from subsidiaries | 64,006 |
| | 9,531 |
| | — |
| | (73,537 | ) | | — |
|
| Net income | $ | 41,712 |
| | $ | 64,006 |
| | $ | 9,531 |
| | $ | (73,822 | ) | | $ | 41,427 |
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED SEPTEMBER 30, 2017
(in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| | Gibraltar Industries, Inc. | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
| Net income | $ | 20,899 |
| | $ | 23,211 |
| | $ | 293 |
| | $ | (23,784 | ) | | $ | 20,619 |
|
| Other comprehensive income (loss): | | | | | | | | | |
| Foreign currency translation adjustment | — |
| | — |
| | 1,581 |
| | — |
| | 1,581 |
|
| Adjustment to retirement benefit liability, net of tax | — |
| | (2 | ) | | — |
| | — |
| | (2 | ) |
| Adjustment to post employment health care benefit liability, net of tax | — |
| | 29 |
| | — |
| | — |
| | 29 |
|
| Other comprehensive income | — |
| | 27 |
| | 1,581 |
| | — |
| | 1,608 |
|
| Total comprehensive income | $ | 20,899 |
| | $ | 23,238 |
| | $ | 1,874 |
| | $ | (23,784 | ) | | $ | 22,227 |
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED SEPTEMBER 30, 2016
(in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| | Gibraltar Industries, Inc. | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
| Net income | $ | 13,435 |
| | $ | 15,746 |
| | $ | 1,862 |
| | $ | (17,257 | ) | | $ | 13,786 |
|
| Other comprehensive income (loss): | | | | | | | | | |
| Foreign currency translation adjustment | — |
| | — |
| | (193 | ) | | — |
| | (193 | ) |
| Adjustment to retirement benefit liability, net of tax | — |
| | 61 |
| | — |
| | — |
| | 61 |
|
| Adjustment to post employment health care benefit liability, net of tax | — |
| | 38 |
| | — |
| | — |
| | 38 |
|
| Other comprehensive income (loss) | — |
| | 99 |
| | (193 | ) | | — |
| | (94 | ) |
| Total comprehensive income | $ | 13,435 |
| | $ | 15,845 |
| | $ | 1,669 |
| | $ | (17,257 | ) | | $ | 13,692 |
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2017
(in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| | Gibraltar Industries, Inc. | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
| Net income (loss) | $ | 37,846 |
| | $ | 44,356 |
| | $ | (1,747 | ) | | $ | (43,071 | ) | | $ | 37,384 |
|
| Other comprehensive income (loss): | | | | | | | | | |
| Foreign currency translation adjustment | — |
| | — |
| | 3,351 |
| | — |
| | 3,351 |
|
| Adjustment to retirement benefit liability, net of tax | — |
| | (8 | ) | | — |
| | — |
| | (8 | ) |
| Adjustment to post employment health care benefit liability, net of tax | — |
| | 88 |
| | — |
| | — |
| | 88 |
|
| Other comprehensive income | — |
| | 80 |
| | 3,351 |
| | — |
| | 3,431 |
|
| Total comprehensive income | $ | 37,846 |
| | $ | 44,436 |
| | $ | 1,604 |
| | $ | (43,071 | ) | | $ | 40,815 |
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2016
(in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| | Gibraltar Industries, Inc. | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
| Net income | $ | 41,712 |
| | $ | 64,006 |
| | $ | 9,531 |
| | $ | (73,822 | ) | | $ | 41,427 |
|
| Other comprehensive income: | | | | | | | | | |
| Foreign currency translation adjustment | — |
| | — |
| | 10,638 |
| | — |
| | 10,638 |
|
| Adjustment to retirement benefit liability, net of tax | — |
| | 59 |
| | — |
| | — |
| | 59 |
|
| Adjustment to post employment health care benefit liability, net of tax | — |
| | 114 |
| | — |
| | — |
| | 114 |
|
| Other comprehensive income | — |
| | 173 |
| | 10,638 |
| | — |
| | 10,811 |
|
| Total comprehensive income | $ | 41,712 |
| | $ | 64,179 |
| | $ | 20,169 |
| | $ | (73,822 | ) | | $ | 52,238 |
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 2017
(in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| | Gibraltar Industries, Inc. | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
| Assets | | | | | | | | | |
| Current assets: | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | 182,827 |
| | $ | 25,205 |
| | $ | — |
| | $ | 208,032 |
|
| Accounts receivable, net | — |
| | 158,877 |
| | 7,841 |
| | — |
| | 166,718 |
|
| Intercompany balances | (18,097 | ) | | 21,351 |
| | (3,254 | ) | | — |
| | — |
|
| Inventories | — |
| | 80,771 |
| | 4,385 |
| | — |
| | 85,156 |
|
| Other current assets | 4,036 |
| | (32 | ) | | 4,191 |
| | — |
| | 8,195 |
|
| Total current assets | (14,061 | ) | | 443,794 |
| | 38,368 |
| | — |
| | 468,101 |
|
| Property, plant, and equipment, net | — |
| | 90,933 |
| | 3,555 |
| | — |
| | 94,488 |
|
| Goodwill | — |
| | 298,331 |
| | 22,762 |
| | — |
| | 321,093 |
|
| Acquired intangibles | — |
| | 99,060 |
| | 8,883 |
| | — |
| | 107,943 |
|
| Other assets | — |
| | 4,672 |
| | — |
| | — |
| | 4,672 |
|
| Investment in subsidiaries | 730,080 |
| | 60,844 |
| | — |
| | (790,924 | ) | | — |
|
| | $ | 716,019 |
| | $ | 997,634 |
| | $ | 73,568 |
| | $ | (790,924 | ) | | $ | 996,297 |
|
| Liabilities and Shareholders’ Equity | | | | | | | | | |
| Current liabilities: | | | | | | | | | |
| Accounts payable | $ | — |
| | $ | 91,499 |
| | $ | 4,682 |
| | $ | — |
| | $ | 96,181 |
|
| Accrued expenses | 2,188 |
| | 79,332 |
| | 1,744 |
| | — |
| | 83,264 |
|
| Billings in excess of cost | — |
| | 14,578 |
| | 3,656 |
| | | | 18,234 |
|
| Current maturities of long-term debt | — |
| | 400 |
| | — |
| | — |
| | 400 |
|
| Total current liabilities | 2,188 |
| | 185,809 |
| | 10,082 |
| | — |
| | 198,079 |
|
| Long-term debt | 208,400 |
| | 1,025 |
| | — |
| | — |
| | 209,425 |
|
| Deferred income taxes | — |
| | 35,520 |
| | 2,642 |
| | — |
| | 38,162 |
|
| Other non-current liabilities | — |
| | 45,200 |
| | — |
| | — |
| | 45,200 |
|
| Shareholders’ equity | 505,431 |
| | 730,080 |
| | 60,844 |
| | (790,924 | ) | | 505,431 |
|
| | $ | 716,019 |
| | $ | 997,634 |
| | $ | 73,568 |
| | $ | (790,924 | ) | | $ | 996,297 |
|
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2016
(in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| | Gibraltar Industries, Inc. | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
| Assets | | | | | | | | | |
| Current assets: | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | 143,826 |
| | $ | 26,351 |
| | $ | — |
| | $ | 170,177 |
|
| Accounts receivable, net | — |
| | 117,526 |
| | 6,546 |
| | — |
| | 124,072 |
|
| Intercompany balances | (615 | ) | | 6,152 |
| | (5,537 | ) | | — |
| | — |
|
| Inventories | — |
| | 85,483 |
| | 4,129 |
| | — |
| | 89,612 |
|
| Other current assets | 13,783 |
| | (10,070 | ) | | 3,623 |
| | — |
| | 7,336 |
|
| Total current assets | 13,168 |
| | 342,917 |
| | 35,112 |
| | — |
| | 391,197 |
|
| Property, plant, and equipment, net | — |
| | 104,642 |
| | 3,662 |
| | — |
| | 108,304 |
|
| Goodwill | — |
| | 282,300 |
| | 21,732 |
| | — |
| | 304,032 |
|
| Acquired intangibles | — |
| | 101,520 |
| | 9,270 |
| | — |
| | 110,790 |
|
| Other assets | — |
| | 3,922 |
| | — |
| | — |
| | 3,922 |
|
| Investment in subsidiaries | 663,118 |
| | 58,477 |
| | — |
| | (721,595 | ) | | — |
|
| | $ | 676,286 |
| | $ | 893,778 |
| | $ | 69,776 |
| | $ | (721,595 | ) | | $ | 918,245 |
|
| Liabilities and Shareholders’ Equity | | | | | | | | | |
| Current liabilities: | | | | | | | | | |
| Accounts payable | $ | — |
| | $ | 66,363 |
| | $ | 3,581 |
| | $ | — |
| | $ | 69,944 |
|
| Accrued expenses | 7,369 |
| | 60,004 |
| | 3,019 |
| | — |
| | 70,392 |
|
| Billings in excess of cost | — |
| | 9,301 |
| | 2,051 |
| | — |
| | 11,352 |
|
| Current maturities of long-term debt | — |
| | 400 |
| | — |
| | — |
| | 400 |
|
| Total current liabilities | 7,369 |
| | 136,068 |
| | 8,651 |
| | — |
| | 152,088 |
|
| Long-term debt | 208,037 |
| | 1,200 |
| | — |
| | — |
| | 209,237 |
|
| Deferred income taxes | — |
| | 35,354 |
| | 2,648 |
| | — |
| | 38,002 |
|
| Other non-current liabilities | — |
| | 58,038 |
| | — |
| | — |
| | 58,038 |
|
| Shareholders’ equity | 460,880 |
| | 663,118 |
| | 58,477 |
| | (721,595 | ) | | 460,880 |
|
| | $ | 676,286 |
| | $ | 893,778 |
| | $ | 69,776 |
| | $ | (721,595 | ) | | $ | 918,245 |
|
GIBRALTAR INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2017
(in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| | Gibraltar Industries, Inc. | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
| Cash Flows from Operating Activities | | | | | | | | | |
| Net cash (used in) provided by operating activities | $ | (15,136 | ) | | $ | 64,702 |
| | $ | (735 | ) | | $ | — |
| | $ | 48,831 |
|
| Cash Flows from Investing Activities | | | | | | | | | |
| Cash paid for acquisitions | — |
| | (18,494 | ) | | — |
| | — |
| | (18,494 | ) |
| Net proceeds from sale of property and equipment | — |
| | 12,935 |
| | — |
| | — |
| | 12,935 |
|
| Purchases of property, plant, and equipment | — |
| | (4,929 | ) | | (223 | ) | | — |
| | (5,152 | ) |
| Net cash used in investing activities | — |
| | (10,488 | ) | | (223 | ) | | — |
| | (10,711 | ) |
| Cash Flows from Financing Activities | | | | | | | | | |
| Long-term debt payments | — |
| | (400 | ) | | — |
| | — |
| | (400 | ) |
| Purchase of treasury stock at market prices | (1,982 | ) | | — |
| | — |
| | — |
| | (1,982 | ) |
| Net proceeds from issuance of common stock | 649 |
| | — |
| | — |
| | — |
| | 649 |
|
| Intercompany financing | 16,469 |
| | (14,813 | ) | | (1,656 | ) | | — |
| | — |
|
| Net cash provided by (used in) financing activities | 15,136 |
| | (15,213 | ) | | (1,656 | ) | | — |
| | (1,733 | ) |
| Effect of exchange rate changes on cash | — |
| | — |
| | 1,468 |
| | — |
| | 1,468 |
|
| Net increase (decrease) in cash and cash equivalents | — |
| | 39,001 |
| | (1,146 | ) | | — |
| | 37,855 |
|
| Cash and cash equivalents at beginning of year | — |
| | 143,826 |
| | 26,351 |
| | — |
| | 170,177 |
|
| Cash and cash equivalents at end of period | $ | — |
| | $ | 182,827 |
| | $ | 25,205 |
| | $ | — |
| | $ | 208,032 |
|
GIBRALTAR INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2016
(in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| | Gibraltar Industries, Inc. | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
| Cash Flows from Operating Activities | | | | | | | | | |
| Net cash (used in) provided by operating activities | $ | (34,186 | ) | | $ | 119,790 |
| | $ | 16,582 |
| | $ | — |
| | $ | 102,186 |
|
| Cash Flows from Investing Activities | | | | | | | | | |
| Cash paid for acquisitions | — |
| | (2,314 | ) | | — |
| | — |
| | (2,314 | ) |
| Net proceeds from sale of property and equipment | — |
| | 220 |
| | 29 |
| | — |
| | 249 |
|
| Purchases of property, plant, and equipment | — |
| | (7,177 | ) | | (423 | ) | | — |
| | (7,600 | ) |
| Net proceeds from sale of business | — |
| | — |
| | 8,250 |
| | — |
| | 8,250 |
|
| Other, net | — |
| | 1,118 |
| | — |
| | — |
| | 1,118 |
|
| Net cash (used in) provided by investing activities | — |
| | (8,153 | ) | | 7,856 |
| | — |
| | (297 | ) |
| Cash Flows from Financing Activities | | | | | | | | | |
| Long-term debt payments | — |
| | (400 | ) | | — |
| | — |
| | (400 | ) |
| Payment of debt issuance costs | — |
| | (54 | ) | | — |
| | — |
| | (54 | ) |
| Purchase of treasury stock at market prices | (1,178 | ) | | — |
| | — |
| | — |
| | (1,178 | ) |
| Net proceeds from issuance of common stock | 2,892 |
| | — |
| | — |
| | — |
| | 2,892 |
|
| Intercompany financing | 32,472 |
| | (996 | ) | | (31,476 | ) | | — |
| | — |
|
| Net cash provided by (used in) financing activities | 34,186 |
| | (1,450 | ) | | (31,476 | ) | | — |
| | 1,260 |
|
| Effect of exchange rate changes on cash | — |
| | — |
| | 1,055 |
| | — |
| | 1,055 |
|
| Net increase (decrease) in cash and cash equivalents | — |
| | 110,187 |
| | (5,983 | ) | | — |
| | 104,204 |
|
| Cash and cash equivalents at beginning of year | — |
| | 39,597 |
| | 29,261 |
| | — |
| | 68,858 |
|
| Cash and cash equivalents at end of period | $ | — |
| | $ | 149,784 |
| | $ | 23,278 |
| | $ | — |
| | $ | 173,062 |
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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,” "aspires," “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 industries 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.10-K along with Item 1A of this Form 10-Q. 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.
We use certain operating performance measures, specifically consolidated gross margin, operating margin by segment and consolidated operating margin, to manage our businesses, set operational goals, and establish performance targets for incentive compensation for our employees. We define consolidated gross margin as a percentage of total consolidated gross profit to total consolidated net sales. We define operating margin by segment as a percentage of total income from operations by segment to total net sales by segment and consolidated operating margin as a percentage of total consolidated income from operations to total consolidated net sales. We believe consolidated gross margin, operating margin and consolidated operating margin may be useful to investors in evaluating the profitability of our segments and Company on a consolidated basis.
Overview
Gibraltar Industries, Inc. (the "Company") is a leading manufacturer and distributorprovider of building products and services for the industrial, transportation infrastructure, residential housing, renewable energy, residential, agtech, and resource conservation markets. Our business strategy is designed to significantly elevate and accelerate the growth and financial returns of the Company. We believe this can be achieved, in part, from a transformational change in the Company’s portfolio, as well as, the implementation of the strategy described below. Our business strategy has four key elements, or "pillars," which are: operational excellence, product innovation, portfolio management, and acquisitions as a strategic accelerator. We strive to deliver best-in-class, sustainable value creation for our shareholders for the long-term.
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 analysis of data generated by our 80/20 practices, 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 are in the third year of our multi-year simplification initiative. Since initiation of 80/20 in 2015, we have exceeded our initial five-year target ending 2019 of $25 million of pre-tax savings. We are currently in the middle of this 80/20 initiative, which means that there is both more work and more opportunity ahead. We are targeting greater structural changes affecting our balance sheet. We are 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 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.
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 platforms and businesses with the highest revenue and margin potential. Following the sale of our European industrial manufacturing business to a third party in April 2016, we decided in December 2016 to exit our small European residential solar racking business and U.S. bar grating product line, both of which proceeded as planned. These portfolio changes have helped contribute to the Company's 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 andinfrastructure markets.
Product innovation is our third strategic pillar. Innovation is centered on the allocation of new and existing resources to opportunities that we believe will produce sustainable returns. Our focus is on driving top line growth with new and innovative products. We are focused on those products and technologies that have relevance to the end-user and can be differentiated from our competition. 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. Our focus on innovation is centered on four markets: postal, parcel and storage solutions; 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 have targeted four key markets in which to make strategic acquisitions 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, parcel and storage solutions; infrastructure; residential air management; and renewable energy. These platforms are all in large markets in which the underlying trends for customer convenience and safety, energy-savings and resource conservation are of increasing importance to consumers 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 strategy. We also consider businesses outside of these four markets, as we continually search out opportunities to grow our business in large markets with expected growth in demand for the foreseeable future, where we can add value through our manufacturing experience, 80/20 process and purchasing synergies.
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 and its European residential solar racking business as part of its portfolio management initiative. 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. These assets were a part of our Industrial and Infrastructure Products segment.
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 Company's divestiture of this business was the result of 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 September 30, 2017, we operated 42 facilities in 17 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 threefour reporting segments, entitled:segments:
Residential Products;•Renewables;
Renewable Energy•Residential;
•Agtech; and Conservation;
•Infrastructure.
The Company serves customers primarily in North America including renewable energy (solar) developers, home improvement retailers, wholesalers, distributors, institutional and commercial growers of food and plants, and contractors. As part of our continuing operations at March 31, 2021, we operated 36 facilities, comprised of 26 manufacturing facilities, one distribution center, and nine offices, which are located in 16 states, Canada, China, and Japan. Our operational infrastructure provides the necessary scale to support local, regional, and national customers in each of our markets.
Industrial and Infrastructure Products.
COVID-19 Update
While the Company continues to encounter challenges and uncertainty associated with COVID-19, the pandemic did not have a material adverse effect on our reported results during the first quarter of 2021. Our Residential Products segment services residential repairtop priority continues to be focused on our organization - keeping our team and remodeling activitytheir families as safe as possible, maintaining the timely and new residential housing construction with productseffective functioning of our supply chain operating and providing a high level of responsiveness to customer needs. We continue to proactively execute our pandemic “playbook” in 2021 and make adjustments to our operating protocols as we navigate forward. The extent to which our operations will be impacted by the outbreak, including roof and foundation ventilation products, mail and parcel storage products, rain dispersion products and roof ventilation accessories. This segment's products are sold through major retail home centers, building material wholesalers, distributor groups, residential contractors and directly to the multi-family property management companies.
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.
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.
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 changesthe current impact of supply chain, transportation and labor challenges, along with new requirements or regulations mandated by government authorities, remains uncertain and challenging to predict, Refer to the Company's Outlook section in general economic conditions, interest rates, exchange rates, commodity costs, demandthis management discussion and analysis for residential construction, governmental policiesconsideration relative to future periods.
Business Strategy
The Company's mission is to create compounding and funding, tax policiessustainable value for our stockholders and other stakeholders with strong and relevantleadership positions in higher growth, profitable end markets focused on addressing some of the volumeworld's most challenging opportunities. The foundation of non-residential constructionthe Company's strategy is built on three core pillars: Business System, Portfolio Management, and infrastructure projects. Organization Development.
1.Business System reflects the necessary systems, processes, and management tools required to deliver consistent and continuous performance improvement, every day. Our Business System is a critical enabler to grow, scale, and deliver our plans. Our Business System is focused on deploying effective tools to drive growth, improve operating performance, and develop the organization. Our Business System challenges existing paradigms, drives day-to-day performance, forces prioritization of resources, challenges our business models, and brings focus to new product and services development and innovation.
2.Portfolio Management is focused on optimizing the Company’s business portfolio and ensures our financial capital and human resources are effectively and efficiently deployed to deliver sustainable, profitable growth while increasing our relevance with customers and shaping our markets. For a description of recent portfolio management activities, see the actions described below in the Recent Developments section.
3.Organization Development drives the Company’s continuous focus on strengthening and scaling the organization to execute the Company’s plans and meet commitments. The Company aspires to make our place of work the "Best Place to Work", where we focus on creating an environment for our people to have the best opportunity for success, continue to develop, grow, and learn. At core of this pillar is the Company’s development process focused on helping employees reach their potential, improve performance, develop career roadmaps, identify ongoing education requirements, and respective succession plans. We believe doing so helps us attract and retain the best people so we can execute our business plans.
We believe the key elements of our strategy have, and will allowcontinue to, enable us to respond timely to changes in these factors.the end markets we serve, including evolving changes due to COVID-19 and the challenges noted above. We have and expect to continue to restructureexamine the need for restructuring of our operations, including consolidation of facilities, reducing overhead costs, curtailing investments in inventory, and managing our business to generate incremental cash. Additionally, weWe believe our enhanced strategy has enabled us to better react to fluctuationsvolatility in commodity costs and fluctuations in customer demand, and has helped in improvingalong with helping to improve margins. We have used the improved cash flows generated by these initiatives to pay down debt, improve our liquidity position, and invest in growth initiatives. Overall, we are strivingcontinue to strive to achieve stronger financial results, make more efficient use of capital, and deliver higher shareholderstockholder returns.
Recent Developments
During the first quarter of 2021, the Company sold its Industrial business as a result of its Portfolio Management strategy to focus on participation in higher value and faster growing markets. The Industrial business, previously reported in the Company's Industrial and Infrastructure Products segment, was reported as discontinued operations as of December 31, 2020.
During 2020, the Company completed the following acquisitions:
| | | | | | | | | | | |
| Business Acquired | Date of Acquisition in 2020 | Purchase price ( in millions)1 | Description |
| TerraSmart LLC | December 31 | $ | 223.7 | | Provider of screw-based, ground-mount solar racking technology, particularly used for solar projects installed on challenging terrain |
| Sunfig Corporation | December 11 | $ | 3.8 | | Provider of software solutions that optimize solar energy investments through upstream design, performance and financial modeling |
| Architectural Mailboxes | October 15 | $ | 26.9 | | Provider, designer, and developer of decorative residential mailboxes and related products |
| Delta Separations | February 13 | $ | 47.1 | | Provider of ethanol-based extraction systems manufacturer and training and laboratory design and operations consultative partner |
| Thermo Energy Systems | January 15 | $ | 7.3 | | Provider of commercial greenhouse solutions in North America supporting the biologically grown organic food market |
Note 1: Except for TerraSmart, which was financed through a combination of cash on hand and borrowings under the Company's revolving credit facility, all of the above 2020 acquisitions were funded from cash on hand. The purchase price for the acquisitions of TerraSmart, Sunfig, and Architectural Mailboxes represents the preliminary allocation to the assets acquired and liabilities assumed in each transaction. The purchase price shown above for Delta and Thermo represents the final purchase price in each transaction.
Results of Operations
Three Months Ended September 30, 2017March 31, 2021 Compared to the Three Months Ended September 30, 2016March 31, 2020
The following table sets forth selected data from our consolidated statementsresults of operations data and the relatedits percentage of net sales for the three months ended September 30,March 31 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 |
| Net sales | $ | 287,592 | | | 100.0 | % | | $ | 215,401 | | | 100.0 | % |
| Cost of sales | 227,574 | | | 79.1 | % | | 165,540 | | | 76.9 | % |
| Gross profit | 60,018 | | | 20.9 | % | | 49,861 | | | 23.1 | % |
| Selling, general, and administrative expense | 47,203 | | | 16.4 | % | | 37,084 | | | 17.2 | % |
| | | | | | | |
| Income from operations | 12,815 | | | 4.5 | % | | 12,777 | | | 5.9 | % |
| Interest expense | 444 | | | 0.2 | % | | 44 | | | 0.0 | % |
| Other expense | 315 | | | 0.1 | % | | 518 | | | 0.2 | % |
| Income before taxes | 12,056 | | | 4.2 | % | | 12,215 | | | 5.7 | % |
| Provision for income taxes | 1,560 | | | 0.6 | % | | 2,313 | | | 1.1 | % |
| Income from continuing operations | 10,496 | | | 3.6 | % | | 9,902 | | | 4.6 | % |
| Income from discontinued operations | 2,266 | | | 0.8 | % | | 2,157 | | | 1.0 | % |
| Net income | $ | 12,762 | | | 4.4 | % | | $ | 12,059 | | | 5.6 | % |
|
| | | | | | | | | | | | | |
| | 2017 | | 2016 |
| Net sales | $ | 274,574 |
| | 100.0 | % | | $ | 272,734 |
| | 100.0 | % |
| Cost of sales | 205,839 |
| | 75.0 | % | | 204,847 |
| | 75.1 | % |
| Gross profit | 68,735 |
| | 25.0 | % | | 67,887 |
| | 24.9 | % |
| Selling, general, and administrative expense | 33,042 |
| | 12.0 | % | | 41,365 |
| | 15.2 | % |
| Income from operations | 35,693 |
| | 13.0 | % | | 26,522 |
| | 9.7 | % |
| Interest expense | 3,486 |
| | 1.3 | % | | 3,625 |
| | 1.3 | % |
| Other expense | 404 |
| | 0.1 | % | | 159 |
| | 0.1 | % |
| Income before taxes | 31,803 |
| | 11.6 | % | | 22,738 |
| | 8.3 | % |
| Provision for income taxes | 11,184 |
| | 4.1 | % | | 8,952 |
| | 3.2 | % |
| Net income | $ | 20,619 |
| | 7.5 | % | | $ | 13,786 |
| | 5.1 | % |
The following table sets forth the Company’s net sales by reportable segment for the three months ended September 30,March 31, (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Change due to |
| 2021 | | 2020 | | Total
Change | | | | Acquisitions | | Operations |
| Net sales: | | | | | | | | | | | |
| Renewables | $ | 85,512 | | | $ | 47,263 | | | $ | 38,249 | | | | | $ | 37,256 | | | $ | 993 | |
| Residential | 140,217 | | | 103,419 | | | 36,798 | | | | | 8,734 | | | 28,064 | |
| Agtech | 46,739 | | | 49,234 | | | (2,495) | | | | | 4,600 | | | (7,095) | |
| Infrastructure | 15,124 | | | 15,485 | | | (361) | | | | | — | | | (361) | |
| Consolidated | $ | 287,592 | | | $ | 215,401 | | | $ | 72,191 | | | | | $ | 50,590 | | | $ | 21,601 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Change due to |
| | 2017 | | 2016 | | Total Change | | Divestitures | | Acquisitions | | Operations |
| Net sales: | | | | | | | | | | | |
| Residential Products | $ | 129,501 |
| | $ | 117,957 |
| | $ | 11,544 |
| | $ | — |
| | $ | 1,811 |
| | $ | 9,733 |
|
| Renewable Energy and Conservation | 88,135 |
| | 82,008 |
| | 6,127 |
| | (2,266 | ) | | 6,423 |
| | 1,970 |
|
| Industrial and Infrastructure Products | 57,162 |
| | 73,193 |
| | (16,031 | ) | | (14,799 | ) | | — |
| | (1,232 | ) |
| Less: Intersegment sales | (224 | ) | | (424 | ) | | 200 |
| | — |
| | — |
| | 200 |
|
| Net Industrial and Infrastructure Products | 56,938 |
| | 72,769 |
| | (15,831 | ) | | (14,799 | ) | | — |
| | (1,032 | ) |
| Consolidated | $ | 274,574 |
| | $ | 272,734 |
| | $ | 1,840 |
| | $ | (17,065 | ) | | $ | 8,234 |
| | $ | 10,671 |
|
Consolidated net sales increased by $1.8$72.2 million, or 0.7%33.5%, to $274.6$287.6 million for the three months ended September 30, 2017March 31, 2021 compared to the three months ended September 30, 2016.March 31, 2020. The 33.5% increase in salesrevenue was driven by the Renewables and Residential segments. Sales generated from our prior year acquisitions of TerraSmart, Thermo, Delta Separations and Architectural Mailboxes contributed 23.5%, or $50.6 million to the growth from the prior year quarter. The $21.6 million, or 10.0% increase, in organic growth during the current year quarter was primarily the result of increased volumesvolume in ongoing revenue streams along with contributions fromboth our recent acquisitionsResidential and Renewables segments, which more than offset the organic volume declines in both our Agtech and our Infrastructure segments.
Net sales in our Renewable Energy and Conservation and Residential Products Segments, Nexus in October 2016 and Package Concierge in February 2017, respectively. Also contributingRenewables segment increased $38.2 million, or 80.8%, to $85.5 million for the three months ended March 31, 2021 compared to $47.3 million for the three months ended March 31, 2020. Sales generated from the prior year acquisition of TerraSmart of $37.3 million, primarily contributed to the increase in the current year quarter. Organic revenue increased 2.1% during the quarter as strong execution on continued demand for solar solutions was partially offset by projects impacted by the pandemic-related scheduling delays, inclement weather, ongoing supply chain dynamics including reduced customers' access to solar panels, as well as, a modest 1.0%decline in safe-harbor related demand due to the extension of the investment tax credit in late 2020. Backlog improved 138% year over year, or 23% on an organic basis for this segment.
Net sales in our Residential segment increased 35.6%, or $36.8 million, to $140.2 million for the three months ended March 31, 2021 compared to $103.4 million for the three months ended March 31, 2020. The increase from the prior year quarter was largely due to continued strong activity across all residential businesses along with
participation gains across that offset challenges from inclement weather, supply chain dynamics. Sales from the prior year acquisition of Architectural Mailboxes also contributed $8.7 million to the increase in pricing to customers. Partially offsetting these increases were the results of divestitures related to the Company’s portfolio management activities during 2016. This included the exit of 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 $17.1 million from the priorcurrent year quarter.
Net sales in our Residential ProductsAgtech segment increased 9.7%decreased 5.1%, or $11.5$2.5 million, to $129.5$46.7 million for the three months ended September 30, 2017March 31, 2021 compared to $118.0$49.2 million for the three months ended September 30, 2016. The increase was largelyMarch 31, 2020. Organic revenue decreased $7.1 million, impacted by the result of a net increase in volumepandemic, inclement weather, supply chain dynamics, along with salesslower but improving market conditions for greenhouse structure and processing extraction equipment serving the cannabis and hemp markets. Partially offsetting these impacts was continued growth and momentum in the produce market. Sales generated from Thermo and Delta Separations acquired in the acquisitionfirst quarter of Package Concierge2020, contributed $4.6 million, partially offsetting the decrease in this segment. While backlog decreased 12% year over year, due to the 2020 slowdown in the cannabis and an increasehemp markets, which are improving but not fully recovered, sequentially, backlog increased 5% due primarily to strength in pricing to customers. The volume increase resulted fromthe produce business offsetting the impact of the slower demand for our commercial package solutions as well as our roofing-related ventilationin the cannabis and rain dispersion products.hemp markets.
Net sales in our Renewable Energy and ConservationInfrastructure segment increased 7.4%decreased 2.6%, or $6.1$0.4 million, to $88.1$15.1 million for the three months ended September 30, 2017March 31, 2021 compared to $82.0$15.5 million for the three months ended September 30, 2016. The increaseMarch 31, 2020. While revenue was down modestly driven by delays in customer delivery schedules related to the timing of state and federal funding, backlog remained strong increasing 15% compared to the prior year quarter.
Our consolidated gross margin decreased to 20.9% for the three months ended March 31, 2021 compared to 23.1% for the three months ended March 31, 2020. This decrease was partly the result of salescosts incurred during the current year quarter related to the planned discontinuation of our organic solar tracker solution as we migrate towards the solution offered by our recently acquired TerraSmart business. Additionally, lower gross margins generated from our recent acquisitions contributed to the acquisition of Nexus and an increase in volume in our domestic markets.decline as we continue to integrate them operationally. Partially offsetting this increase were the effects ofdecrease was improved operating execution in all our core businesses compared to the exit of the Company's small European residential solar racking businessprior year quarter.
Selling, general, and continued softness in our international markets.
Net sales in our Industrial and Infrastructure Products segment decreased 21.7%administrative ("SG&A") expenses increased by $10.1 million, or 27.3%, or $15.8 million to $56.9$47.2 million for the three months ended September 30, 2017 compared to $72.8March 31, 2021 from $37.1 million for the three months ended September 30, 2016.March 31, 2020. The decrease in net sales$10.1 million increase was primarily the resultdue to $5.5 million of the Company's exit from its U.S. bar grating product line. Also a decrease in demandincremental SG&A expenses recorded quarter over quarter for our infrastructure productsrecent acquisitions and transaction costs to complete those acquisitions, along with $3.3 million of higher performance-based compensation expenses as compared to the third quarter in the prior year, 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 as backlog and bookings for this business have increased compared to the prior year quarter andquarter. Despite the market shows signs of recovery.
Our consolidated gross margin slightly increased to 25.0% for the three months ended September 30, 2017 compared to 24.9% for the three months ended September 30, 2016. This increase was largely the result of portfolio management actions during 2016 in which less profitable businesses or product 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. This increase was largely offset by a less favorable alignment of material costs to customer selling prices.
Selling, general, and administrative (SG&A) expenses decreased by $8.3 million, or 20.1%, to $33.0 million for the three months ended September 30, 2017 from $41.4 million for the three months ended September 30, 2016. The $8.3 million decrease was primarily due to $7.6 million of lower performance-based compensation expenses, along with a $2.2 million decrease in senior leadership transition costs. These were partially offset by $2.3 million of additional expense from the acquisitions of Nexus and Package Concierge.above increases, SG&A expenses as a percentage of net sales decreased to 12.0%16.4% for the three months ended September 30, 2017March 31, 2021 compared to 15.2%17.2% for the three months ended September 30, 2016.
March 31, 2020.
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 September 30,March 31, (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| 2021 | | 2020 | | Total
Change | | | | | | | | |
| Income from operations: | | | | | | | | | | | | | | | | | |
| Renewables | $ | (521) | | | (0.6) | % | | $ | 4,359 | | | 9.2 | % | | $ | (4,880) | | | | | | | | | |
| Residential | 22,934 | | | 16.4 | % | | 13,725 | | | 13.3 | % | | 9,209 | | | | | | | | | |
| Agtech | 929 | | | 2.0 | % | | 1,340 | | | 2.7 | % | | (411) | | | | | | | | | |
| Infrastructure | 2,037 | | | 13.5 | % | | 1,576 | | | 10.2 | % | | 461 | | | | | | | | | |
| Unallocated Corporate Expenses | (12,564) | | | (4.4) | % | | (8,223) | | | (3.8) | % | | (4,341) | | | | | | | | | |
| Consolidated income from operations | $ | 12,815 | | | 4.5 | % | | $ | 12,777 | | | 5.9 | % | | $ | 38 | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | |
| | 2017 | | 2016 | | Total Change |
| Income (loss) from operations: | | | | | | | | | |
| Residential Products | $ | 23,764 |
| | 18.4 | % | | $ | 19,407 |
| | 16.5 | % | | $ | 4,357 |
|
| Renewable Energy and Conservation | 11,549 |
| | 13.1 | % | | 16,366 |
| | 20.0 | % | | (4,817 | ) |
| Industrial and Infrastructure Products | 2,554 |
| | 4.5 | % | | 1,913 |
| | 2.6 | % | | 641 |
|
| Unallocated Corporate Expenses | (2,174 | ) | | (0.8 | )% | | (11,164 | ) | | (4.1 | )% | | 8,990 |
|
| Consolidated income from operations | $ | 35,693 |
| | 13.0 | % | | $ | 26,522 |
| | 9.7 | % | | $ | 9,171 |
|
Our Residential ProductsThe Renewables segment generated an operating margin of 18.4% during the three months ended September 30, 2017 compared to 16.5% during the three months ended September 30, 2016. The increase of $4.4 million of operating profit is due to the benefits of improved operational efficiencies and contributions from the 80/20 initiative.
The Renewable Energy and Conservation segment generated an operating margin of 13.1%(0.6)% in the current year quarter compared to 20.0%9.2% in the prior year quarter. The declinedecrease in operating margin reflectswas the combined result of costs incurred during the current year quarter related to the discontinuation of our organic solar tracker solution along with expected lower margins generated by our recent acquisitions, the result of backlog amortization and integration costs, as we continue to integrate them operationally. Partially offsetting the lower margin is improvement in our core business resulting from continued strong execution in our manufacturing facilities and field operations and diligent price to cost management initiatives. Our acquisition integration plans remain on schedule and we expect to see margins expand during 2021.
The Residential segment generated an unfavorable alignmentoperating margin of material16.4% in the current year quarter compared to 13.3% in the prior year quarter. The increase in operating margin was the result of volume leverage, solid management of price to input costs, and continued benefits from 80/20 simplification initiatives offsetting higher costs for materials, labor and logistics management challenges incurred during the current year quarter.
Our Agtech segment generated an operating margin of 2.0% during the three months ended March 31, 2021 compared to customer selling prices2.7% during the three months ended March 31, 2020. The decrease in operating margin was the combined result of the continued slower greenhouse structures and processing equipment market for cannabis and hemp that impacted mix in the quarter. Integration of Thermo continues to be impacted by the closure of the US Canadian border. We have completed the bulk of those lower margin projects that we acquired, substantially completed the integration of the processing businesses, and expect to see margins expand throughout the course of 2021.
Our Infrastructure segment generated an operating margin of 13.5% during the three months ended March 31, 2021 compared to 10.2% during the three months ended March 31, 2020. The increase resulted from continued strong execution in our fabricated products sales along with higher margin mix resulting from increased non-fabricated product volumes.
Unallocated corporate expenses increased $4.3 million from $8.2 million during the three months ended March 31, 2020 to $12.6 million during the three months ended March 31, 2021. The increase in expense was primarily the result of $2.9 million of higher performance-based compensation expenses as compared to the prior year quarter.
Our Industrial and Infrastructure Products segment generated an operating margin of 4.5% during the three months ended September 30, 2017 compared to 2.6% during the three months ended September 30, 2016. The improvement was largely the result of costs incurred in the prior-year quarter related to our 80/20 simplification initiatives. Partially offsetting this improvement were the effects of lower volumes from our infrastructure products and an unfavorable alignment of material costs to customer selling prices.
Unallocated corporate expenses decreased $9.0 million from $11.2 million during the three months ended September 30, 2016 to $2.2 million during the three months ended September 30, 2017. This decrease from the prior year quarter was largely due to a $7.4 million decrease in performance-based compensation expenses, along with a $2.2 million decrease in senior leadership transition costs.
The Company recorded otherInterest expense of $0.4 million for the three months ended September 30, 2017 and otherMarch 31, 2021 was primarily the result of outstanding balances on the Company's revolving credit facility during the quarter, of which $58.0 million was outstanding as of March 31, 2021. Interest expense of $0.2 millionincurred for the three months ended September 30, 2016. The increase from the prior year quarterMarch 31, 2020 was primarily due to foreign currency fluctuations.
Interest expense modestly decreased by $0.1 million to $3.5 million for the three months ended September 30, 2017 compared to $3.6 million for the three months ended September 30, 2016. During the three months ended September 30, 2017 and 2016, nonegligible. No amounts were outstanding under our revolving credit facility.facility during the three months ended March 31, 2020.
We recognized a provision for income taxes of $11.2$1.6 million and $9.0$2.3 million, with effective tax rates of 35.2%12.9% and 39.4%18.9% for the three months ended September 30, 2017,March 31, 2021, and 2016,2020, respectively. The effective tax raterates for the third quarter of 2017 exceeded the U.S. federal statutory rate of 35% due to state taxesthree months ended March 31, 2021 and $2.2 million of pretax losses generated by the European residential solar racking business for which no tax benefit has been recorded as such benefit is not expected to be realizable, partially offset by net deductible permanent differences and favorable discrete items. The effective tax rate for the third quarter of 2016 was greater2020, respectively, were lower than the U.S. federal statutory rate of 35% primarily21% due state taxes and unfavorableto favorable discrete items.
Nine Months Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016
The following table sets forth selected data from our consolidated statements of operations and the related percentage of net sales for the nine months ended September 30, (in thousands):
|
| | | | | | | | | | | | | |
| | 2017 | | 2016 |
| Net sales | $ | 728,806 |
| | 100.0 | % | | $ | 776,143 |
| | 100.0 | % |
| Cost of sales | 548,991 |
| | 75.3 | % | | 585,263 |
| | 75.4 | % |
| Gross profit | 179,815 |
| | 24.7 | % | | 190,880 |
| | 24.6 | % |
| Selling, general, and administrative expense | 109,513 |
| | 15.0 | % | | 118,021 |
| | 15.2 | % |
| Income from operations | 70,302 |
| | 9.7 | % | | 72,859 |
| | 9.4 | % |
| Interest expense | 10,612 |
| | 1.5 | % | | 10,982 |
| | 1.4 | % |
| Other expense | 811 |
| | 0.1 | % | | 8,319 |
| | 1.1 | % |
| Income before taxes | 58,879 |
| | 8.1 | % | | 53,558 |
| | 6.9 | % |
| Provision for income taxes | 21,090 |
| | 2.9 | % | | 12,131 |
| | 1.6 | % |
| Income from continuing operations | 37,789 |
| | 5.2 | % | | 41,427 |
| | 5.3 | % |
| Loss from discontinued operations | (405 | ) | | (0.1 | )% | | — |
| | 0.0 | % |
| Net income | $ | 37,384 |
| | 5.1 | % | | $ | 41,427 |
| | 5.3 | % |
The following table sets forth the Company’s net sales by reportable segment for the nine months ended September 30, (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Change due to |
| | 2017 | | 2016 | | Total Change | | Divestitures | | Acquisitions | | Operations |
| Net sales: | | | | | | | | | | | |
| Residential Products | $ | 361,304 |
| | $ | 338,069 |
| | $ | 23,235 |
| | $ | — |
| | $ | 4,089 |
| | $ | 19,146 |
|
| Renewable Energy and Conservation | 202,690 |
| | 204,648 |
| | (1,958 | ) | | (6,545 | ) | | 15,252 |
| | (10,665 | ) |
| Industrial and Infrastructure Products | 165,806 |
| | 234,590 |
| | (68,784 | ) | | (59,618 | ) | | — |
| | (9,166 | ) |
| Less: Intersegment sales | (994 | ) | | (1,164 | ) | | 170 |
| | — |
| | — |
| | 170 |
|
| Net Industrial and Infrastructure Products | 164,812 |
| | 233,426 |
| | (68,614 | ) | | (59,618 | ) | | — |
| | (8,996 | ) |
| Consolidated | $ | 728,806 |
| | $ | 776,143 |
| | $ | (47,337 | ) | | $ | (66,163 | ) | | $ | 19,341 |
| | $ | (515 | ) |
Consolidated net sales decreased by $47.3 million, or 6.1%, to $728.8 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 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 these divestitures commenced during the fourth quarter of 2016. These divestitures resulted in a decrease in revenues of $66.2 million from the prior year. Partially offsetting these divestitures 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, respectively. A net decrease in volume of 2.0% in comparable revenue streams nearly offset by a modest 2.0% increase in pricing to customers also contributed to the overall decrease in sales year over year.
Net sales in our Residential Products segment increased 6.9%, or $23.2 million to $361.3 million for the nine months ended September 30, 2017 compared to $338.1 million for the nine months ended September 30, 2016. The increase was largely the result of a net increase in volume along with sales generated from the acquisition of Package Concierge and an increase in pricing to customers. The net sales volume increase wasitems due to an increase in demand for our ventilation and roofing products along with increased demand for our multifamily postal and parcel storage products.
Net sales in our Renewable Energy and Conservation segment decreased 1.0%, or $2.0 million to $202.7 million for the nine months ended September 30, 2017 compared to $204.6 million for the nine months ended September 30, 2016. The decrease was the result of the exit of the Company's small European residential solar racking business and continued softness in our international markets, partially offset by sales generated from the acquisition of Nexus and increased volume in our domestic markets. As expected, total volume declined in the first nine months of 2017 as we entered 2017 with lower levels of backlog,
which resulted in lower sales in the first half of 2017 compared to the first half of 2016. Backlog has improved for this segment and now exceeds its prior year levels.
Net sales in our Industrial and Infrastructure Products segment decreased 29.4%, or $68.6 million to $164.8 million for the nine months ended September 30, 2017 compared to $233.4 million for the nine months ended September 30, 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 5.0% 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 federal and state funding availability and as evidenced by an increase in segment backlog during the current year.
Our consolidated gross margin remained relatively unchanged at 24.7% for the nine months ended September 30, 2017 compared to 24.6% for the nine months ended September 30, 2016. The Company 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 platforms and businesses with the highest potential revenue and margins. In addition, other portfolio management actions taken resulting from our 80/20 initiatives contributed to maintaining the margin as well. These benefits were largely offset by less favorable alignment of material costs to customer selling prices.
Selling, general, and administrative (SG&A) expenses decreased by $8.5 million, or 7.2%, to $109.5 million for the nine months ended September 30, 2017 from $118.0 million for the nine months ended September 30, 2016. The $8.5 million decrease was primarily due to a $11.5 million decrease in performance-based compensation expenses, along with a $1.5 million decrease in senior leadership transition costs. These decreases were partially offset by $5.9 million of additional expense from the acquisitions of Nexus and Package Concierge, along with a $2.9 million increase in portfolio management charges related to our 80/20 initiatives. SG&A expenses as a percentage of net sales decreased to 15.0% for the nine months ended September 30, 2017 compared to 15.2% for the nine months ended September 30, 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 nine months ended September 30, (in thousands):
|
| | | | | | | | | | | | | | | | | |
| | 2017 | | 2016 | | Total
Change |
| Income (loss) from operations: | | | | | | | | | |
| Residential Products | $ | 61,984 |
| | 17.2 | % | | $ | 52,363 |
| | 15.5 | % | | $ | 9,621 |
|
| Renewable Energy and Conservation | 18,381 |
| | 9.1 | % | | 34,969 |
| | 17.1 | % | | (16,588 | ) |
| Industrial and Infrastructure Products | 5,914 |
| | 3.6 | % | | 11,429 |
| | 4.9 | % | | (5,515 | ) |
| Unallocated Corporate Expenses | (15,977 | ) | | (2.2 | )% | | (25,902 | ) | | (3.3 | )% | | 9,925 |
|
| Consolidated income from operations | $ | 70,302 |
| | 9.6 | % | | $ | 72,859 |
| | 9.4 | % | | $ | (2,557 | ) |
Our Residential Products segment generated an operating margin of 17.2% during the nine months ended September 30, 2017 compared to 15.5% during the nine months ended September 30, 2016. The increase of $9.6 million of operating profit is primarily due to the benefits of improved operational efficiencies and contributions from the 80/20 initiative.
The Renewable Energy and Conservation segment generated an operating margin of 9.1% in the current year compared to 17.1% in the prior year. The decrease was primarily due to lower volume, an unfavorable alignment of material costs to customer selling prices, along with $2.4 million of reduction of workforce and facility cleanup costs incurred to exit the European solar racking business.
Our Industrial and Infrastructure Products segment generated an operating margin of 3.6% during the nine months ended September 30, 2017 compared to 4.9% during the nine months ended September 30, 2016. The decrease was largely an unfavorable alignment of material costs to customer selling prices, partially offset by a net reduction in costs incurred to exit the Company's U.S. bar grating product line .
Unallocated corporate expenses decreased $9.9 million from $25.9 million during the nine months ended September 30, 2016 to $16.0 million during the nine months ended September 30, 2017. The lower expenses in the current year was primarily due to the decrease in performance-based compensation expenses.
The Company recorded other expense of $0.8 million for the nine months ended September 30, 2017. Other expense of $8.3 million for the nine months ended September 30, 2016 was primarily comprised of the $8.8 million pre-tax loss on the sale of our European industrial manufacturing business, partially offset by net gains on foreign currency transactions.
Interest expense decreased by $0.4 million to $10.6 million for the nine months ended September 30, 2017 compared to $11.0 million for the nine months ended September 30, 2016. During the nine months ended September 30, 2017 and 2016, no amounts were outstanding under our revolving credit facility.
We recognized a provision for income taxes of $21.1 million and $12.1 million, with effective tax rates of 35.8% and 22.7% for the nine months ended September 30, 2017 and 2016, respectively. The effective tax rate for the nine months ended September 30, 2017 exceeded the U.S. federal statutory rate of 35% due to state taxes and $2.2 million of pretax losses generated by the European residential solar racking business for which noexcess tax benefit has been recorded as such benefit is not expected to be realizable, partially offset by net deductible permanent differences and favorable discrete items. The effective tax rate for the nine months ended September 30, 2016 was less than the U.S. federal statutory rate of 35% primarily due to a discrete tax benefit of $11.4 million resulting from the sale of our European industrial manufacturing business along with net deductible permanent differences,on stock-based compensation, partially offset by state taxes.taxes and nondeductible permanent differences.
Outlook
For
While we have solid end market demand and strong order backlog, general market challenges remain including but not limited to the remainder of 2017, wepandemic, general inflation, labor availability, and supply chain dynamics .We will remain focused on execution, continue to expect generally favorable market conditions for each ofwork on our segmentsbusinesses, and increased bidding activity and continued growth of backlogsuse our strong balance sheet to invest in both our Infrastructure businessorganic and Renewable Energy & Conservation segment. While we see reason for some caution in certain of our end markets, we are optimistic about the final quarter of the year. We are adjusting ourinorganic initiatives.
The Company is maintaining its full year guidance of revenues in the $960 million to $965 million range. We are narrowing our full-year earnings guidance within our previous guidance range and expect earnings per share ("EPS") to be between $1.40 and $1.47 per diluted share, comparing favorably to $1.05 in 2016.
Our priorities for the remainder of 2017 will be to accelerate new product development initiatives, seek value-added acquisitions in attractive end markets, and continue to advance our 80/20 projects.
For the fourth quarter of 2017, we expect revenues in the range of $231 million to $236 million,$1.30 billion and $1.35 billion, up from $1.03 billion in 2020 and GAAP EPS to be between $0.23$2.78 and $0.30 per diluted share,$2.95, compared to a loss of $0.24 per sharewith $2.53 in the fourth quarter of 2016.2020.
Liquidity and Capital Resources
General
Our principal capital requirements are to fund our operations' working capital and capital improvements and to fundprovide capital for acquisitions. We will continue to invest in growth opportunities as appropriate while focusing on working capital efficiency and profit improvement opportunities to minimize the cash invested to operate our business. The following table sets forth our liquidity position as of:
| | | | | | | | | | | | | | |
| (in thousands) | | March 31, 2021 | | December 31, 2020 |
| Cash and cash equivalents | | $ | 20,731 | | | $ | 32,054 | |
| Availability on revolving credit facility | | 334,780 | | | 309,175 | |
| | $ | 355,511 | | | $ | 341,229 | |
We have successfully generated positivebelieve that our cash flows from operating activities which have fundedon hand and available borrowing capacity provided under our capital requirements and recent acquisitions as noted below in “Cash Flows.”
On December 9, 2015, we entered into the Company's FifthSixth Amended and Restated Credit Agreement (the "Senior Credit Agreement") which includes a 5-year, $300 million revolvingprovide us with ample liquidity and capital resources to weather the economic impacts of the COVID-19 pandemic while continuing to invest in operational excellence, growth initiatives and the development of our organization. After pausing in early 2020 as the COVID-19 pandemic unfolded, we continued with our strategic initiatives to invest in opportunities that strengthen our business platforms for the markets we serve through the acquisitions of Architectural Mailboxes, Sunfig and TerraSmart in the fourth quarter of 2020. We continue to remain focused on managing our working capital, closely monitoring customer credit facility and provides the Company with accesscollection activities, and working to capital and improved financial flexibility. As of September 30, 2017, our liquidity of $496.8 million consisted of $208.0 million of cash plus $288.8 million of availability under our revolving credit facility.extend payment terms. We believe thisour liquidity, together with the cash expected to be generated from operations, should be sufficient to fund working capital needs and simplification initiatives that likely will need cash to fund transitions and future growth. We continue to search for strategic acquisitions and larger acquisitions may require additional borrowings and/or the issuance of our common stock.growth initiatives.
Our Senior Credit Agreement provides the Companyus with liquidity and capital resources for use by our U.S. operations. Historically, our foreign operations have generated cash flow from operations sufficient to invest in working capital and fund their capital improvements. As of September 30, 2017,March 31, 2021, our foreign subsidiaries held $25.2$15.2 million of cash in U.S. dollars. We believe
During 2020, we opted to defer remittance of the employer portion of Social Security tax as provided in the Coronavirus, Aid, Relief and Economic Security Act ("CARES Act"), which allowed us to retain $4.4 million in cash held by our foreign subsidiaries provides our foreign operations withduring 2020 that would have otherwise been remitted to the necessary liquidity to meet future obligationsfederal government. The deferred tax payments will be repaid equally in 2021 and allows the foreign business units to reinvest in their operations. These cash resources could eventually be used to grow our business internationally. Repatriation of this cash for domestic purposes could result in significant tax consequences.2022.
Over the long-term, we expect that future obligations,investments, including strategic business opportunities such as acquisitions, may be financed through a number of sources, including internally available cash, availability under our revolving credit facility, new
debt financing, the issuance of equity securities, or any combination of the above. AnyAll potential acquisitions are evaluated based on our acquisition strategy, which includes the enhancement of our existing products, operations, or capabilities, expanding our access to new products, markets, and customers, with the goal of creating compounding and the improvement of shareholdersustainable stockholder value. The recent acquisitions of Nexus Corporation and Package Concierge on October 11, 2016 and February 22, 2017, respectively, were financed through cash on hand.
These expectations are forward-looking statements based upon currently available plans and information and may change if conditions in the credit and equity markets deteriorate or other circumstances change. To the extent that operating cash flows are lower than current or expected levels, or sources of financing are not available or not available at acceptable terms, our future liquidity may be adversely affected.
Cash Flows
The following table sets forth selected cash flow data for the ninethree months ended September 30,March 31, (in thousands):
| | | | | | | | | | | |
| 2021 | | 2020 |
| Cash (used in) provided by: | | | |
| Operating activities of continuing operations | $ | (1,214) | | | $ | (43,826) | |
| Investing activities of continuing operations | 22,600 | | | (56,631) | |
| Financing activities of continuing operations | (30,388) | | | (4,160) | |
| Discontinued operations | (2,187) | | | 136 | |
| Effect of foreign exchange rate changes | (134) | | | (916) | |
| Net decrease in cash and cash equivalents | $ | (11,323) | | | $ | (105,397) | |
|
| | | | | | | |
| | 2017 | | 2016 |
| Cash provided by: | | | |
| Operating activities of continuing operations | $ | 48,831 |
| | $ | 102,186 |
|
| Investing activities of continuing operations | (10,711 | ) | | (297 | ) |
| Financing activities of continuing operations | (1,733 | ) | | 1,260 |
|
| Effect of exchange rate changes | 1,468 |
| | 1,055 |
|
| Net increase in cash and cash equivalents | $ | 37,855 |
| | $ | 104,204 |
|
DuringOperating Activities
Net cash used in operating activities of continuing operations for the ninethree months ended September 30, 2017, we generatedMarch 31, 2021 of $1.2 million consisted of income from continuing operations of $10.5 million and non-cash net charges totaling $11.4 million, which include depreciation, amortization, stock compensation, exit activity costs and other non-cash charges, offset by a $23.1 million investment in working capital and other net assets. The investment in net working capital and other net assets was largely driven by an increase in inventory due to strong sales demand in our Residential segment and rising raw material prices, along with a decrease in accrued expenses correlated to payments made during the quarter under the Company's performance based incentive programs.
Net cash fromused in operating activities of continuing operations for the three months ended March 31, 2020 of $43.8 million consisted of income from continuing operations of $9.9 million, non-cash net charges totaling $48.8$6.7 million, composed of net income of $37.8 million plus $20.5 million from non-cash charges includingwhich include depreciation, amortization, stock compensation, and exit activities, partially offset byother non-cash charges, and an investment in working capital and other net assets of $9.5$60.4 million. The working capital investment was largely comprised of nearly $40 million related to our acquisition of Thermo, which was undercapitalized at the time of purchase in the first quarter of 2020.
Investing Activities
Net cash provided by operatinginvesting activities of continuing operations for the ninethree months ended September 30, 2016 totaled $102.2 March 31, 2021 of $22.6million primarily composed of net income from continuing operations of $41.4 million plus non-cash charges including depreciation, amortization, stock compensation, loss on sale of a business and non-cash exit activity costs of $35.7 million along with a decease in working capital of $25.1 million.
During the nine months ended September 30, 2017, the cash invested in working capital and other net assets of $9.5 million included a $42.3 and $1.8 million increase in accounts receivable and other current assets and other assets, respectively, partially offset by a $25.1 and $7.5 million increase in accounts payable and accrued expenses and other non-current liabilities, respectively, as well as a $2.0 million decrease in inventory. The increase in accounts receivable is a result of continued increase in seasonal manufacturing activity. The increase in total other current assets iswas primarily due to $27.0 million in net proceeds received from the timingsale of prepaid expenses. Accounts payable increased due to the seasonal increase in manufacturing activity as well as the timing of quarter end vendor payments.The increase in accrued expenses and other non-current liabilities was largely due to costs related to the timing of customer contracts offset by a decrease in liabilities for equity based incentive plans as well as the timing of interest payments . The decrease in inventory is due to the Company's continued 80/20 simplification process efforts.Industrial business and capital expenditures of $4.4 million.
Net cash used in investing activities of continuing operations for the ninethree months ended September 30, 2017March 31, 2020 of $10.7$56.6 million primarily consisted of $18.3 million of net cash paid for the acquisitionacquisitions of Package Concierge,Delta Separations of $47.2 million and Thermo of $7.3 million and capital expenditures of $5.1 million and a payment of $0.2 million related to the final purchase adjustment for the acquisition of Nexus. These payments were partially offset by net proceeds of $12.9 million from the sale of property and equipment. Net cash used in investing activities for the nine months ended September 30, 2016 of $0.3 million was the net result of capital expenditures of $7.6 million and $2.3 million related to the final purchase adjustment for the acquisition of RBI, largely offset by net proceeds of $8.3 million from the sale of our European industrial manufacturing business.$2.1 million.
Financing Activities
Net cash used in financing activities of continuing operations for the ninethree months ended September 30, 2017March 31, 2021 of $1.7$30.4 million consistedwas primarily the result of the purchase$46.6 million in payments on long-term debt and $4.7 million of purchases of treasury stock related to the net settlement of $2.0tax obligations for participants in the Company's equity incentive plans, offset by $20.0 million and payment ofin proceeds from long-term debt borrowings of $0.4and $0.9 million partially offset by the proceeds received from the issuance of common stock of $0.7 million. from stock option exercises during the period.
Net cash provided byused in financing activities of continuing operations for the ninethree months ended September 30, 2016March 31, 2020 of $1.3$4.2 million consistedwas primarily the result of the proceeds received from the issuance of common stock of $2.9 million offset by the purchasepurchases of treasury stock related to the net settlement of $1.2 million and paymenttax obligations for participants in the Company's equity incentive plans.
See Note 8 to the Company's consolidated financial statements in Part I, Item 1, Financial Statements, of long-term debt borrowings of $0.4 million.
this Form 10-Q for further information on the Company’s Senior Credit Agreement and Senior Subordinated Notes.
Our Senior Credit Agreement is committed through December 9, 2020. Borrowings under the Senior Credit Agreement are secured by the trade receivables, inventory, personal property, equipment, and certain real property of the Company’s significant domestic subsidiaries. The Senior Credit Agreement provides for a revolving credit facility and letters of credit in an aggregate amount of $300 million. The Company can request additional financing from the banks to increase the revolving credit facility to $500 million or to provide a term loan of up to $200 million subject to conditions set forth in the Senior Credit Agreement. The Senior Credit Agreement contains three financial covenants. As of September 30, 2017, the Company is in compliance with all three covenants.
Interest rates on the revolving credit facility are based on the LIBOR plus an additional margin that ranges from 1.25% to 2.25% for LIBOR loans based on the Total Leverage Ratio. In addition, the revolving credit facility is subject to an undrawn commitment fee ranging between 0.20% and 0.30% based on the Total Leverage Ratio and the daily average undrawn balance.
As of September 30, 2017, we had $288.8 million of availability under the Senior Credit Agreement net of outstanding letters of credit of $11.2 million. No amounts were outstanding under our revolving credit facility as of either September 30, 2017 or December 31, 2016.
In addition to our Senior Credit Agreement, the Company issued $210.0 million of 6.25% Notes in January 2013 which are due February 1, 2021. Provisions of the 6.25% Notes include, without limitation, restrictions on indebtedness, liens, and distributions from restricted subsidiaries, asset sales, affiliate transactions, dividends, and other restricted payments. Dividend payments are subject to annual limits and interest is paid semiannually on February 1 and August 1 of each year.
Off Balance Sheet Financing Arrangements
We have no off-balance sheet arrangements other than operating leases, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
Contractual Obligations
Our contractual obligations have not changed materially from the disclosures included in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2020.
Critical Accounting PoliciesEstimates
In the current year, there have been no changes to our critical accounting policies and estimates from those disclosed in the consolidated financial statements and accompanying notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.2020.
Recent Accounting Pronouncements
See Note 2 to the Company's consolidated financial statements in Part I, Item 1 of this Form 10-Q for further information on recent accounting pronouncements.
Item 3. Qualitative and Quantitative Disclosures About Market Risk
In the ordinary course of business, the Company is exposed to various market risk factors, including changes in general economic conditions, competition, foreign exchange rates, and raw materials pricing and availability. In addition, the Company is exposed to other financial market risks, primarily related to its long-term debt and foreign operations. There have been no material changesRefer to Item 7A in the Company's Form 10-K for the year ended December 31, 2020 for more information about the Company's exposure to market risk since December 31, 2016.
Item 4. Controls and Procedures
| |
(a) | Evaluation of Disclosure Controls and Procedures |
(a)Evaluation of Disclosure Controls and Procedures
The Company maintains a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). The Company’s Chief Executive Officer and the Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls as of the end of the period covered in this report. Based upon that evaluation and the definition of disclosure controls and procedures contained in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of the end of such period the Company’s disclosure controls and procedures were effective.
| |
(b) | Changes in Internal Control over Financial Reporting |
(b)Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as defined by Rule 13a-15(f) or 15d-15(f)) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risks discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2020. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operation, cash flows, and future prospects. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may materially adversely impact our business, financial condition, or operating results. We believe there have been no material changes from the risk factors previously disclosed in our Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
(a) Exhibits
|
| | | | | | | |
a. | | Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002. |
b. | | Certification of Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002. |
c. | | Certification of the President and Chief Executive Officer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002. |
d. | | Certification of the Senior Vice President and Chief Financial Officer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002. |
e. | 101.INS | XBRL Instance Document * |
f. | 101.SCH | XBRL Taxonomy Extension Schema Document * |
g. | 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document * |
h. | 101.LAB | XBRL Taxonomy Extension Label Linkbase Document * |
i. | 101.PRA | XBRL Taxonomy Extension Presentation Linkbase Document * |
j. | 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document * |
|
| | | | |
| * | Submitted electronically with this Quarterly Report on Form 10-Q. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GIBRALTAR INDUSTRIES, INC.
(Registrant)
|
| |
/s/ Frank G. HeardWilliam T. Bosway |
Frank G. HeardWilliam T. Bosway |
| President and Chief Executive Officer |
|
| |
| /s/ Timothy F. Murphy |
| Timothy F. Murphy |
Senior Vice President and
Chief Financial Officer
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Date: November 3, 2017May 5, 2021
