UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
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x(Mark One) |
☒ | 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, 2023
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)
GIBRALTAR INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | | | | |
Delaware | | 16-1445150 |
(State or other jurisdictionOther Jurisdiction ofincorporation Incorporation or organization) 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) |
(716) 826-6500
(Registrant’s telephone number, including area code: (716) 826-6500code)
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 Registrantregistrant (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 Registrantregistrant 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 Registrantregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitionthe definitions 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 NovemberMay 1, 2017,2023, the number of common shares outstanding was: 31,688,154.30,410,872.
GIBRALTAR INDUSTRIES, INC.
INDEX
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| PAGE NUMBER |
PART I. | | | |
Item 1. | | | |
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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, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net Sales | $ | 274,574 |
| | $ | 272,734 |
| | $ | 728,806 |
| | $ | 776,143 |
|
Cost of sales | 205,839 |
| | 204,847 |
| | 548,991 |
| | 585,263 |
|
Gross profit | 68,735 |
| | 67,887 |
| | 179,815 |
| | 190,880 |
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Selling, general, and administrative expense | 33,042 |
| | 41,365 |
| | 109,513 |
| | 118,021 |
|
Income from operations | 35,693 |
| | 26,522 |
| | 70,302 |
| | 72,859 |
|
Interest expense | 3,486 |
| | 3,625 |
| | 10,612 |
| | 10,982 |
|
Other expense | 404 |
| | 159 |
| | 811 |
| | 8,319 |
|
Income before taxes | 31,803 |
| | 22,738 |
| | 58,879 |
| | 53,558 |
|
Provision for income taxes | 11,184 |
| | 8,952 |
| | 21,090 |
| | 12,131 |
|
Income from continuing operations | 20,619 |
| | 13,786 |
| | 37,789 |
| | 41,427 |
|
Discontinued operations: | | | | | | | |
Loss before taxes | — |
| | — |
| | (644 | ) | | — |
|
Benefit of income taxes | — |
| | — |
| | (239 | ) | | — |
|
Loss from discontinued operations | — |
| | — |
| | (405 | ) | | — |
|
Net income | $ | 20,619 |
| | $ | 13,786 |
| | $ | 37,384 |
| | $ | 41,427 |
|
Net earnings per share – Basic: | | | | | | | |
Income from continuing operations | $ | 0.65 |
| | $ | 0.44 |
| | $ | 1.19 |
| | $ | 1.32 |
|
Loss from discontinued operations | — |
| | — |
| | (0.01 | ) | | — |
|
Net income | $ | 0.65 |
| | $ | 0.44 |
| | $ | 1.18 |
| | $ | 1.32 |
|
Weighted average shares outstanding – Basic | 31,703 |
| | 31,579 |
| | 31,700 |
| | 31,493 |
|
Net earnings per share – Diluted: | | | | | | | |
Income from continuing operations | $ | 0.64 |
| | $ | 0.43 |
| | $ | 1.17 |
| | $ | 1.29 |
|
Loss from discontinued operations | — |
| | — |
| | (0.01 | ) | | — |
|
Net income | $ | 0.64 |
| | $ | 0.43 |
| | $ | 1.16 |
| | $ | 1.29 |
|
Weighted average shares outstanding – Diluted | 32,210 |
| | 32,176 |
| | 32,216 |
| | 32,005 |
|
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
Net sales | $ | 293,267 | | | $ | 317,865 | | | | | |
Cost of sales | 216,338 | | | 253,021 | | | | | |
Gross profit | 76,929 | | | 64,844 | | | | | |
Selling, general, and administrative expense | 47,559 | | | 43,649 | | | | | |
| | | | | | | |
Income from operations | 29,370 | | | 21,195 | | | | | |
Interest expense | 1,491 | | | 485 | | | | | |
Other (income) expense | (397) | | | 153 | | | | | |
Income before taxes | 28,276 | | | 20,557 | | | | | |
Provision for income taxes | 7,177 | | | 5,101 | | | | | |
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Net income | $ | 21,099 | | | $ | 15,456 | | | | | |
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Net earnings per share: | | | | | | | |
Basic | $ | 0.68 | | | $ | 0.47 | | | | | |
Diluted | $ | 0.68 | | | $ | 0.47 | | | | | |
Weighted average shares outstanding: | | | | | | | |
Basic | 30,897 | | | 32,913 | | | | | |
Diluted | 31,024 | | | 33,022 | | | | | |
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, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net income | $ | 20,619 |
| | $ | 13,786 |
| | $ | 37,384 |
| | $ | 41,427 |
|
Other comprehensive income (loss): | | | | | | | |
Foreign currency translation adjustment | 1,581 |
| | (193 | ) | | 3,351 |
| | 10,638 |
|
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 |
|
Other comprehensive income (loss) | 1,608 |
| | (94 | ) | | 3,431 |
| | 10,811 |
|
Total comprehensive income | $ | 22,227 |
| | $ | 13,692 |
| | $ | 40,815 |
| | $ | 52,238 |
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| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
Net income | $ | 21,099 | | | $ | 15,456 | | | | | |
Other comprehensive (loss) income: | | | | | | | |
Foreign currency translation adjustment | (115) | | | (227) | | | | | |
| | | | | | | |
Minimum post retirement benefit plan adjustments, net of tax | 8 | | | 24 | | | | | |
| | | | | | | |
Other comprehensive loss | (107) | | | (203) | | | | | |
Total comprehensive income | $ | 20,992 | | | $ | 15,253 | | | | | |
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, 2023 | | December 31, 2022 |
| (unaudited) | | | | (unaudited) | | |
Assets | | | | Assets | |
Current assets: | | | | Current assets: | |
Cash and cash equivalents | $ | 208,032 |
| | $ | 170,177 |
| Cash and cash equivalents | $ | 7,497 | | | $ | 17,608 | |
Accounts receivable, net | 166,718 |
| | 124,072 |
| |
Inventories | 85,156 |
| | 89,612 |
| |
Other current assets | 8,195 |
| | 7,336 |
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Accounts receivable, net of allowance of $4,164 and $3,746, respectively | | Accounts receivable, net of allowance of $4,164 and $3,746, respectively | 230,132 | | | 217,156 | |
Inventories, net | | Inventories, net | 171,634 | | | 170,360 | |
Prepaid expenses and other current assets | | Prepaid expenses and other current assets | 19,015 | | | 18,813 | |
| Total current assets | 468,101 |
| | 391,197 |
| Total current assets | 428,278 | | | 423,937 | |
Property, plant, and equipment, net | 94,488 |
| | 108,304 |
| Property, plant, and equipment, net | 107,701 | | | 109,584 | |
Operating lease assets | | Operating lease assets | 24,432 | | | 26,502 | |
Goodwill | 321,093 |
| | 304,032 |
| Goodwill | 512,639 | | | 512,363 | |
Acquired intangibles | 107,943 |
| | 110,790 |
| Acquired intangibles | 134,735 | | | 137,526 | |
Other assets | 4,672 |
| | 3,922 |
| Other assets | 707 | | | 701 | |
| $ | 996,297 |
| | $ | 918,245 |
| | $ | 1,208,492 | | | $ | 1,210,613 | |
Liabilities and Shareholders’ Equity | | | | |
Liabilities and Stockholders’ Equity | | Liabilities and Stockholders’ Equity | | | |
Current liabilities: | | | | Current liabilities: | |
Accounts payable | $ | 96,181 |
| | $ | 69,944 |
| Accounts payable | $ | 129,661 | | | $ | 106,582 | |
Accrued expenses | 83,264 |
| | 70,392 |
| Accrued expenses | 67,103 | | | 73,721 | |
Billings in excess of cost | 18,234 |
| | 11,352 |
| Billings in excess of cost | 42,929 | | | 35,017 | |
Current maturities of long-term debt | 400 |
| | 400 |
| |
| Total current liabilities | 198,079 |
| | 152,088 |
| Total current liabilities | 239,693 | | | 215,320 | |
Long-term debt | 209,425 |
| | 209,237 |
| Long-term debt | 49,876 | | | 88,762 | |
Deferred income taxes | 38,162 |
| | 38,002 |
| Deferred income taxes | 47,030 | | | 47,088 | |
Non-current operating lease liabilities | | Non-current operating lease liabilities | 17,488 | | | 19,041 | |
Other non-current liabilities | 45,200 |
| | 58,038 |
| Other non-current liabilities | 19,018 | | | 18,303 | |
Shareholders’ equity: | | | | |
Stockholders’ equity: | | Stockholders’ equity: | |
Preferred stock, $0.01 par value; authorized 10,000 shares; none outstanding | — |
| | — |
| 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 |
| |
Common stock, $0.01 par value; authorized 100,000 shares; 34,148 and 34,060 shares issued and outstanding in 2023 and 2022 | | Common stock, $0.01 par value; authorized 100,000 shares; 34,148 and 34,060 shares issued and outstanding in 2023 and 2022 | 341 | | | 340 | |
Additional paid-in capital | 269,880 |
| | 264,418 |
| Additional paid-in capital | 324,466 | | | 322,873 | |
Retained earnings | 249,386 |
| | 211,748 |
| Retained earnings | 649,077 | | | 627,978 | |
Accumulated other comprehensive loss | (4,290 | ) | | (7,721 | ) | Accumulated other comprehensive loss | (3,539) | | | (3,432) | |
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 |
| |
Cost of 3,389 and 3,199 common shares held in treasury in 2023 and 2022 | | Cost of 3,389 and 3,199 common shares held in treasury in 2023 and 2022 | (134,958) | | | (125,660) | |
Total stockholders’ equity | | Total stockholders’ equity | 835,387 | | | 822,099 | |
| $ | 996,297 |
| | $ | 918,245 |
| | $ | 1,208,492 | | | $ | 1,210,613 | |
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 | | 2023 | | 2022 |
Cash Flows from Operating Activities | | | | Cash Flows from Operating Activities | | | |
Net income | $ | 37,384 |
| | $ | 41,427 |
| Net income | $ | 21,099 | | | $ | 15,456 | |
Loss from discontinued operations | (405 | ) | | — |
| |
Income from continuing operations | 37,789 |
| | 41,427 |
| |
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 | 6,834 | | | 6,336 | |
Stock compensation expense | 5,069 |
| | 4,666 |
| Stock compensation expense | 1,594 | | | 1,352 | |
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 |
| Exit activity (recoveries) costs, non-cash | (63) | | | 1,198 | |
| (Benefit of) provision for deferred income taxes | (136 | ) | | 355 |
| (Benefit of) provision for deferred income taxes | (51) | | | 17 | |
| Other, net | 1,411 |
| | 735 |
| Other, net | 1,023 | | | 1,395 | |
| 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 | (18,004) | | | (11,101) | |
Inventories | 2,016 |
| | 9,738 |
| Inventories | (1,586) | | | (20,937) | |
Other current assets and other assets | (2,002 | ) | | (1,901 | ) | Other current assets and other assets | 2,536 | | | 731 | |
Accounts payable | 25,134 |
| | 2,367 |
| Accounts payable | 23,077 | | | (11,962) | |
Accrued expenses and other non-current liabilities | 7,503 |
| | 11,038 |
| Accrued expenses and other non-current liabilities | 1,586 | | | 9,761 | |
Net cash provided by operating activities | 48,831 |
| | 102,186 |
| |
| Net cash provided by (used in) operating activities | | Net cash provided by (used in) operating activities | 38,045 | | | (7,754) | |
Cash Flows from Investing Activities | | | | Cash Flows from Investing Activities | | | |
Cash paid for acquisitions, net of cash acquired | (18,494 | ) | | (2,314 | ) | |
Net proceeds from sale of property and equipment | 12,935 |
| | 249 |
| |
Purchases of property, plant, and equipment | (5,152 | ) | | (7,600 | ) | |
Net proceeds from sale of business | — |
| | 8,250 |
| |
Other, net | — |
| | 1,118 |
| |
Acquisitions, net of cash acquired | | Acquisitions, net of cash acquired | 554 | | | — | |
Purchases of property, plant, and equipment, net | | Purchases of property, plant, and equipment, net | (2,190) | | | (4,402) | |
| Net cash used in investing activities | (10,711 | ) | | (297 | ) | Net cash used in investing activities | (1,636) | | | (4,402) | |
Cash Flows from Financing Activities | | | | Cash Flows from Financing Activities | | | |
Long-term debt payments | (400 | ) | | (400 | ) | Long-term debt payments | (50,000) | | | (29,000) | |
Payment of debt issuance costs | — |
| | (54 | ) | |
Purchase of treasury stock at market prices | (1,982 | ) | | (1,178 | ) | |
Net proceeds from issuance of common stock | 649 |
| | 2,892 |
| |
Proceeds from long-term debt | | Proceeds from long-term debt | 11,000 | | | 47,500 | |
| Purchase of common stock at market prices | | Purchase of common stock at market prices | (7,509) | | | (3,461) | |
| Net cash (used in) provided by financing activities | (1,733 | ) | | 1,260 |
| Net cash (used in) provided by financing activities | (46,509) | | | 15,039 | |
Effect of exchange rate changes on cash | 1,468 |
| | 1,055 |
| Effect of exchange rate changes on cash | (11) | | | (159) | |
Net increase in cash and cash equivalents | 37,855 |
| | 104,204 |
| |
Net (decrease) increase in cash and cash equivalents | | Net (decrease) increase in cash and cash equivalents | (10,111) | | | 2,724 | |
Cash and cash equivalents at beginning of year | 170,177 |
| | 68,858 |
| Cash and cash equivalents at beginning of year | 17,608 | | | 12,849 | |
Cash and cash equivalents at end of period | $ | 208,032 |
| | $ | 173,062 |
| Cash and cash equivalents at end of period | $ | 7,497 | | | $ | 15,573 | |
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
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| 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, 2022 | 34,060 | | | $ | 340 | | | $ | 322,873 | | | $ | 627,978 | | | $ | (3,432) | | | 3,199 | | | $ | (125,660) | | | $ | 822,099 | |
Net income | — | | | — | | | — | | | 21,099 | | | — | | | — | | | — | | | 21,099 | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | (115) | | | — | | | — | | | (115) | |
Minimum post retirement benefit plan adjustments, net of taxes of $3 | — | | | — | | | — | | | — | | | 8 | | | — | | | — | | | 8 | |
Stock compensation expense | — | | | — | | | 1,594 | | | — | | | — | | | — | | | — | | | 1,594 | |
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Net settlement of restricted stock units | 88 | | | 1 | | | (1) | | | — | | | — | | | 36 | | | (1,929) | | | (1,929) | |
Common stock repurchased under stock repurchase program | — | | | — | | | — | | | — | | | — | | | 154 | | | (7,369) | | | (7,369) | |
Balance at March 31, 2023 | 34,148 | | | $ | 341 | | | $ | 324,466 | | | $ | 649,077 | | | $ | (3,539) | | | 3,389 | | | $ | (134,958) | | | $ | 835,387 | |
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Balance at December 31, 2021 | 33,799 | | | $ | 338 | | | $ | 314,541 | | | $ | 545,572 | | | $ | 187 | | | 1,107 | | | $ | (35,380) | | | $ | 825,258 | | |
Net income | — | | | — | | | — | | | 15,456 | | | — | | | — | | | — | | | 15,456 | | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | (227) | | | — | | | — | | | (227) | | |
Minimum post retirement benefit plan adjustments, net of taxes of $10 | — | | | — | | | — | | | — | | | 24 | | | — | | | — | | | 24 | | |
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Stock compensation expense | — | | | — | | | 1,352 | | | — | | | — | | | — | | | — | | | 1,352 | | |
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Net settlement of restricted stock units | 173 | | | 2 | | | (2) | | | — | | | — | | | 72 | | | (3,461) | | | (3,461) | | |
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Balance at March 31, 2022 | 33,972 | | | $ | 340 | | | $ | 315,891 | | | $ | 561,028 | | | $ | (16) | | | 1,179 | | | $ | (38,841) | | | $ | 838,402 | | |
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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.
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(consisting of normal recurring adjustmentsadjustments) 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 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 ourthe Company's annual report on Form 10-K for the year ended December 31, 2016.2022.
The consolidated balance sheet at December 31, 2022 has been derived 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 complete financial statements.
Certain prior year amounts have been reclassified to conform to current year's presentation. Refer to Note 2 for a summary of ASUs we adopted during 2017 and the related financial statement impact.
2.(2) RECENT ACCOUNTING PRONOUNCEMENTS
The Company considers the applicability and impact of Accounting Standards Updates ("ASUs"), and ASUs effective in or after 2023, respectively, which were assessed and determined to be either not applicable, or had or are expected to have minimal impact on the Company's consolidated financial statements and related disclosures.
Recent Accounting Pronouncements Adopted |
| | |
Standard | Description | Financial Statement Effect or Other Significant Matters |
ASU No. 2016-09
Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
| The standard simplifies the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The provisions of this standard are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption 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, except 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, 2017 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.
Date of adoption: Q1 2017
|
|
| | |
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, NET
Accounts receivable consistsconsisted of the following (in thousands):
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Trade accounts receivable | $ | 189,281 | | | $ | 179,170 | |
Costs in excess of billings | 45,015 | | | 41,732 | |
Total accounts receivables | 234,296 | | | 220,902 | |
Less allowance for doubtful accounts and contract assets | (4,164) | | | (3,746) | |
Accounts receivable, net | $ | 230,132 | | | $ | 217,156 | |
|
| | | | | | | |
| 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. CostsCompany's costs in excess of billings principally represent revenuesbillings.
The following table provides a roll-forward of the allowance for credit losses, for the three month period ended March 31, 2023, that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected (in thousands):
| | | | | |
Beginning balance as of January 1, 2023 | $ | 3,746 | |
| |
Bad debt expense, net of recoveries | 260 | |
Accounts written off against allowance and other adjustments | 158 | |
Ending balance as of March 31, 2023 | $ | 4,164 | |
(4) REVENUE
Sales includes revenue from contracts with customers for designing, engineering, manufacturing and installation of solar racking systems; electrical balance of systems; roof and foundation ventilation products; centralized mail systems and electronic package solutions; retractable awnings; gutter guards; rain dispersion products; trims and flashings and other accessories; designing, engineering, manufacturing and installation of greenhouses; structural bearings; expansion joints; pavement sealant; elastomeric concrete; and bridge cable protection systems.
Refer to Note 14 "Segment Information" for additional information related to revenue recognized onby timing of transfer of control by reportable segment.
As of March 31, 2023, the Company's remaining performance obligations are part of contracts that were not billable ashave an original expected duration of the balance sheet date. These amounts will be billed in accordance with contract terms, generally as certain milestones are reachedone year or upon shipment. Allless.
Contract assets consist of the costs in excess of billings are expected to be collectedpresented within one year. In situations where billings exceed revenues recognized,accounts receivable in the excess is included inCompany's consolidated balance sheets. Contract liabilities consist of billings in excess of cost, classified as current liabilities, and unearned revenue, presented within accrued expenses, in the Consolidated Balance Sheet.
Company's consolidated balance sheets. Unearned revenue as of March 31, 2023 and December 31, 2022 was $7.8 million and $4.6 million, respectively. Revenue recognized during the three months ended March 31, 2023 and 2022 that was in contract liabilities at the beginning of the respective periods was $18.7 million and $27.4 million, respectively.
4.(5) INVENTORIES
Inventories consistconsisted of the following (in thousands):
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Raw material | $ | 120,150 | | | $ | 111,187 | |
Work-in-process | 12,824 | | | 17,944 | |
Finished goods | 44,944 | | | 47,523 | |
Gross inventory | 177,918 | | | 176,654 | |
Less reserves | (6,284) | | | (6,294) | |
Total inventories, net | $ | 171,634 | | | $ | 170,360 | |
|
| | | | | | | |
| 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. ACQUISITIONS(6) ACQUISITION
On FebruaryAugust 22, 2017,2022, the Company acquiredpurchased all the issued and outstanding membership interests of the outstanding stockQuality Aluminum Products ("QAP"), a manufacturer of Package Concierge. Package Concierge is a leading provider of multifamily electronic package delivery locker systems in the United States.
The acquisition of Package Concierge is expected to enable the Company to expand its position in the fast-growing package delivery solutions market.aluminum and steel products including soffit, fascia, trim coil, rain carrying products and aluminum siding. The results of Package ConciergeQAP have been included in the Company's consolidated financial results since the date of acquisition (withinwithin the Company's Residential Products segment).segment. The final aggregate purchase consideration for the acquisition of Package ConciergeQAP was $18,917,000,$52.1 million, which includes a working capital adjustment and certain other adjustments provided for in the stockmembership interest purchase agreement.
The purchase price for the acquisition was allocated to the assets acquired and liabilities assumed based upon their respective fair values.values estimated as of the date of acquisition. The Company has completed the process to confirm the existence, condition, and completeness of the assets acquired and liabilities assumed to establish fair value of such assets and liabilities and to determine the amount of goodwill to be recognized as of the date of acquisition. The final determination of the fair value of certain assets and liabilities has been completed within a measurement period of up to one year from the date of acquisition. The excess consideration was recorded as goodwill and approximated $16,863,000,$4.0 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 domestic building products markets.
The allocation of the 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 | $ | 1,018 | |
Working capital | 23,372 | |
Property, plant and equipment | 8,486 | |
Acquired intangible assets | 14,700 | |
Other assets | 1,813 | |
Other liabilities | (1,295) | |
Goodwill | 3,991 | |
Fair value of purchase consideration | $ | 52,085 | |
|
| | | |
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 this acquisition consisted of the following (in thousands):
| | | | | | | | | | | |
| Fair Value | | Weighted-Average Amortization Period |
Trademarks | $ | 2,800 | | | Indefinite |
| | | |
| | | |
Customer relationships | 11,900 | | | 12 years |
Total | $ | 14,700 | | | |
|
| | | | | |
| Fair Value | | Estimated Useful Life |
Trademarks | $ | 600 |
| | Indefinite |
Technology | 1,300 |
| | 10 years |
Customer relationships | 1,700 |
| | 7 years |
Total | $ | 3,600 |
| | |
On October 11, 2016,In determining the Company acquired allallocation of the outstanding stock of Nexus Corporation ("Nexus"). Nexus is a leading provider of commercial-scale greenhouses to customers 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. The results of Nexus have been included in the Company's consolidated financial results since the date of acquisition (within the Company's Renewable Energy and Conservation segment). The final aggregate purchase consideration for the acquisition of Nexus was $23,762,000, which includes a working capital adjustment and certain other adjustments provided for in the stock purchase agreement. At December 31, 2016, $1,000,000 of the estimated purchase price was accrued. Upon settlement of 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 respectivethe Company uses all available information to make fair values. The excess consideration was recorded as goodwillvalue determinations using Level 3 unobservable inputs in which little or no market data exists, and approximated $11,451,000, of which all is deductible for tax purposes.
The allocation of the purchase considerationtherefore, engages independent valuation specialists to assist in the fair value determination of the assets acquired and liabilities assumed is as follows as of the date of the acquisition (in thousands):
|
| | | |
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 |
|
long-lived assets.
The intangible assets acquired in this acquisition consisted of QAP was financed primarily through borrowings under the following (in thousands):
|
| | | | | |
| 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 |
| | |
Company's revolving credit facility.
The Company recognized costs related to recent acquisitions of Package Concierge and Nexus were funded from available cash on hand. The Company incurred certain acquisition-related costs composedcomprised of legal and consulting fees and these costs were recognized as a component ofwithin selling, general, and administrative ("SG&A") expenses in the consolidated statements of operations.
The following table summarizes acquisition-related costs$21.0 thousand and $7.0 thousand for the three and nine months ended September 30 (in thousands):March 31, 2023 and 2022, 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, 2023 are as follows (in thousands):
|
| | | | | | | | | | | | | | | |
| 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 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Renewables | | Residential | | Agtech | | Infrastructure | | Total |
Balance at December 31, 2022 | $ | 188,030 | | | $ | 209,056 | | | $ | 83,599 | | | $ | 31,678 | | | $ | 512,363 | |
| | | | | | | | | |
Adjustments to prior year acquisitions | — | | | 387 | | | — | | | — | | | 387 | |
Foreign currency translation | (141) | | | — | | | 30 | | | — | | | (111) | |
Balance at March 31, 2023 | $ | 187,889 | | | $ | 209,443 | | | $ | 83,629 | | | $ | 31,678 | | | $ | 512,639 | |
Goodwill is recognized net of accumulated impairment losses of $235,419,000$133.2 million as of September 30, 2017March 31, 2023 and December 31, 2016.2022, respectively.
The Company is required to regularly assess whether a triggering event has occurred which would require interim impairment testing. The Company determined that no triggering event had occurred as of March 31, 2023 which would require an interim impairment test to be performed.
Acquired Intangible Assets
Acquired intangible assets consistconsisted of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 | | |
| Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization | | |
Indefinite-lived intangible assets: | | | | | | | | | |
Trademarks | $ | 55,500 | | | $ | — | | | $ | 55,500 | | | $ | — | | | |
Finite-lived intangible assets: | | | | | | | | | |
Trademarks | 5,449 | | | 4,516 | | | 5,448 | | | 4,481 | | | |
Unpatented technology | 34,165 | | | 22,610 | | | 34,163 | | | 22,037 | | | |
Customer relationships | 115,027 | | | 48,609 | | | 115,125 | | | 46,557 | | | |
Non-compete agreements | 2,371 | | | 2,042 | | | 2,371 | | | 2,006 | | | |
| | | | | | | | | |
| 157,012 | | | 77,777 | | | 157,107 | | | 75,081 | | | |
Total acquired intangible assets | $ | 212,512 | | | $ | 77,777 | | | $ | 212,607 | | | $ | 75,081 | | | |
|
| | | | | | | | | | | | | | | | | |
| 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 |
|
| | | | | | | | | | | | | | | |
| | | |
| 2023 | | 2022 | | | | |
Amortization expense | $ | 2,766 | | | $ | 3,098 | | | | | |
Amortization expense related to acquired intangible assets for the remainder of fiscal 20172023 and the next five years thereafter is estimated as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | | 2024 | | 2025 | | 2026 | | 2027 | | 2028 |
Amortization expense | $ | 8,297 | | | $ | 10,883 | | | $ | 10,745 | | | $ | 9,338 | | | $ | 7,699 | | | $ | 6,832 | |
|
| |
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 consistsconsisted of the following (in thousands):
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Revolving credit facility | $ | 52,000 | | | $ | 91,000 | |
| | | |
Less unamortized debt issuance costs | (2,124) | | | (2,238) | |
Total debt | $ | 49,876 | | | $ | 88,762 | |
|
| | | | | | | |
| 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 |
|
Revolving Credit FacilityThe Company's FifthOn December 8, 2022, the Company entered into a Credit Agreement (the "Credit Agreement"), and concurrently with entering into the Credit Agreement, the Company paid off all amounts owed under the Sixth 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.
as of January 24, 2019. 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 banks 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 Credit Agreement. The Senior Credit Agreement contains two financial covenants. As of September 30, 2017,March 31, 2023, the Company iswas in compliance with all financial covenants. The Credit Agreement terminates on December 8, 2027.
Borrowings under the SeniorCredit Agreement bear interest, at the Company’s option, at a rate equal to the applicable margin plus (a) a base rate, (b) a daily simple secured overnight financing rate ("SOFR") rate, (c) a term SOFR rate or (d) for certain foreign currencies, a foreign currency rate, in each case subject to a 0% floor. Through March 31, 2023, the Credit Agreement had an initial applicable margin of 0.125% for base rate loans and 1.125% for SOFR and alternative currency loans. Thereafter, the applicable margin ranges from 0.125% to 1.00% for base rate loans and from 1.125% to 2.00% for SOFR and alternative currency loans based on the Company’s Total Net Leverage Ratio, as defined in the Credit Agreement. In addition, the Credit Agreement is subject to an annual commitment fee, payable quarterly, which is initially 0.20% of the daily average undrawn balance of the revolving credit facility and, from and after April 1, 2023, ranges between 0.20% and 0.25% of the daily average undrawn balance of the revolving credit facility based on the Company’s Total Net Leverage Ratio.
Borrowings under the Credit Agreement are secured by the trade receivables, inventory, personal property, equipment, and certain real propertygeneral intangibles of the Company’s significant domestic subsidiaries. InterestCapital distributions are subject to certain Total Net Leverage Ratio requirements and capped by an annual aggregate limit under the Credit Agreement.
For the three months ended March 31, 2022, interest rates on the revolving credit facility areunder the Sixth Amended and Restated Credit Agreement were based on the LIBOR plus an additional margin that ranges from 1.25%1.125% to 2.25% for LIBOR loans based on the Total Leverage Ratio.
2.00%. In addition, the revolving credit facility isunder the Sixth Amended and Restated Credit Agreement was subject to an undrawn commitment fee ranging between 0.20%0.15% and 0.30%0.25% based on the Total Leverage Ratio and the daily average undrawn balance.
Standby letters of credit of $11,216,000$4.3 million have been issued under the Senior Credit Agreement to third parties on behalf of the Company as of September 30, 2017.March 31, 2023. 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$343.7 million and $304.5 million of availability under the revolving credit facility. No borrowings were outstanding under the revolving credit facility at September 30, 2017as of March 31, 2023 and December 31, 2016.
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):2022, respectively.
|
| | | | | | | | | | | | | | | | |
| | 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 INCOME (LOSS) INCOME
The following tables summarize the cumulative balance of each component of accumulated other comprehensive loss,(loss) income, 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, 2022 | $ | (3,382) | | | $ | (395) | | | $ | (3,777) | | | $ | (345) | | | $ | (3,432) | | | |
| | | | | | | | | | | |
Minimum post retirement health care plan adjustments | — | | | 11 | | | 11 | | | 3 | | | 8 | | | |
Foreign currency translation adjustment | (115) | | | — | | | (115) | | | — | | | (115) | | | |
Balance at March 31, 2023 | $ | (3,497) | | | $ | (384) | | | $ | (3,881) | | | $ | (342) | | | $ | (3,539) | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Balance at December 31, 2021 | $ | 1,640 | | | $ | (2,247) | | | $ | (607) | | | $ | 794 | | | $ | 187 | |
| | | | | | | | | |
Minimum post retirement health care plan adjustments | — | | | 34 | | | 34 | | | (10) | | | 24 | |
Foreign currency translation adjustment | (227) | | | — | | | (227) | | | — | | | (227) | |
Balance at March 31, 2022 | $ | 1,413 | | | $ | (2,213) | | | $ | (800) | | | $ | 784 | | | $ | (16) | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
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, 2022, the shareholdersstockholders of the Company authorizedapproved the adoption of the Gibraltar Industries, Inc. Amended and Restated 2016 Stock Plan for Non-Employee Directors ("Non-Employee Directors Plan"). The Non-Employee Directors Plan is a compensation plan that which increases the total number of shares for issuance by the Company thereunder from 100,000 shares to 200,000 shares, allows the Company to grant awards of shares of the Company's common stock to non-employee Directors of the Company. In connection with 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 permitscurrent non-employee Directors of the Company, and permits the Directors 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, 2015,4, 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 "Plan""2015 Plan"). Both the 2018 Plan and simultaneously amended the 2005 Equity Incentive2015 Plan (the "Prior Plan") to terminate issuance of further awards from the Prior Plan. The Plan is an incentive compensation plan that allowsallow the Company to grant equity-based incentive compensation awards, to eligible participants. Awards under the Plan may be in the form of non-qualified options, restricted shares, restricted stock units, performance shares, performance stock units, and rights.stock rights to eligible participants.
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:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2023 | | 2022 |
Awards | | Number of Awards | | Weighted Average Grant Date Fair Value | | Number of Awards (2) | | Weighted Average Grant Date Fair Value |
Performance stock units (1) | | 81,611 | | | $ | 53.44 | | | 108,464 | | | $ | 47.00 | |
Restricted stock units | | 46,646 | | | $ | 53.44 | | | 58,958 | | | $ | 47.00 | |
| | | | | | | | |
| | | | | | | | |
|
| | | | | | | | | | | | | |
| 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 units that will convertshares earned depends on financial performance. The number of shares to shares will be determinedissued may vary between 0% and 200% of the number of PSUs granted depending on the relative achievement to targeted thresholds. The Company's PSUs with a financial performance condition are based on the Company’s actual return on invested capital (ROIC) relative(“ROIC”) over a one-year performance period.
(2) PSUs granted in the first quarter of 2022 includes 5,653 units that were forfeited in the first quarter of 2023 and 62,201 units that will be converted to shares and issued to recipients in the first quarter of 2025 at 60.5% of the target amount granted, based on the Company's actual ROIC targetedcompared to ROIC target 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.2022.
Performance Stock UnitsEquity Based Awards - Settled in Cash
The Company awarded performance stock units ("PSUs")Company's equity-based awards that will convert toare settled in cash after three years based upon a one year performance period in 2016 and 2015. The cost of theseare the awards is recognized overunder the requisite vesting period. The PSUs earned over the performance period are determined based on the Company’s actual return on invested capital (ROIC) relative to the ROIC targeted for the performance period.
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 |
|
Management Stock Purchase Plan
The Management Stock Purchase Plan ("MSPP"(the “MSPP”) which is authorized under the Company's equity incentive plans. The 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.
Total MSPP liabilities recorded on the consolidated balance sheet as of March 31, 2023 was $15.9 million, of which $2.0 million was included in current accrued expenses and $13.9 million was included in non-current liabilities. Total MSPP liabilities recorded on the consolidated balance sheet as of December 31, 2022 was $15.4 million, of which $2.3 million was included in current accrued expenses and $13.1 million was included in non-current liabilities. The value of the restricted stock units within the MSPP liability were $13.7 million and $13.4 million at March 31, 2023 and December 31, 2022, respectively.
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 liabilities during the ninethree months ended September 30,March 31,:
| | | | | | | | | | | |
| 2023 | | 2022 |
Restricted stock units credited | 41,743 | | | 2,876 | |
MSPP liabilities paid (in thousands) | $ | 2,147 | | | $ | 2,545 | |
|
| | | | | | | |
| 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 defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement 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.
Level 3 - Inputs that are unobservable inputs for the asset or liability.
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.
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.(11) 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. Company's manufacturing footprint.
Exit activity costs (recoveries) were incurred during the three months ended March 31, 2023 and 2022 which related to moving and closing costs, and severance, along with asset impairment charges were incurred(recoveries) related to the write-down of inventory associated with discontinued product lines, as a result of process simplification initiatives. In conjunction with these initiatives, the Company recorded costs during the three months ended March 31, 2023 associated with the final closure and sale of a facility closed during the fourth quarter of 2022. During the three months ended March 31, 2022, the Company closed one facility as a result of these initiatives.
Exit activity costs were incurred during the nine months ended September 30, 2017 which related to contract termination costs, severance costs, and other moving and closing costs. These costs were the result
Table of the closing and consolidation of facilities, relocation of inventory and equipment at those facilities and the reduction of workforce associated 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, 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.Contents During the nine months ended September 30, 2016, the Company incurred asset impairment charges and exit activity costs resulting from the above strategy 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 nine months of 2016.
The following tables set forth the exit activity costs (recoveries) and asset impairment charges and exit activity costs(recoveries) 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 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 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| 2023 | | 2022 |
| Exit activity costs | | Asset impairment recovery | | Total | | Exit activity costs (recoveries), net | | Asset impairment charges | | Total |
Renewables | $ | — | | | $ | (63) | | | $ | (63) | | | $ | 1,328 | | | $ | 1,198 | | | $ | 2,526 | |
Residential | 114 | | | — | | | 114 | | | 3 | | | — | | | 3 | |
Agtech | 561 | | | — | | | 561 | | | (9) | | | — | | | (9) | |
Infrastructure | — | | | — | | | — | | | (63) | | | — | | | (63) | |
Corporate | — | | | — | | | — | | | 20 | | | — | | | 20 | |
Total | $ | 675 | | | $ | (63) | | | $ | 612 | | | $ | 1,279 | | | $ | 1,198 | | | $ | 2,477 | |
The following table provides a summary of where the asset impairments and exit activity costs and asset impairment charges were recorded in the statementconsolidated statements of operationsincome for the three and nine months ended September 30,March 31, (in thousands):
| | | | | | | | | | | | | | | |
| | | |
| 2023 | | 2022 | | | | |
Cost of sales | $ | 513 | | | $ | 2,208 | | | | | |
Selling, general, and administrative expense | 99 | | | 269 | | | | | |
Total exit activity and asset impairment charges | $ | 612 | | | $ | 2,477 | | | | | |
|
| | | | | | | | | | | | | | | |
| 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):
| | | | | | | | | | | |
| 2023 | | 2022 |
Balance at January 1 | $ | 2,417 | | | $ | 272 | |
Exit activity costs recognized | 675 | | | 1,279 | |
Cash payments | (1,321) | | | (116) | |
Balance at March 31 | $ | 1,771 | | | $ | 1,435 | |
|
| | | | | | | |
| 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.(12) 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, | |
| 2017 | | 2016 | | 2017 | | 2016 | | 2023 | | 2022 | |
Provision for income taxes | $ | 11,184 |
| | $ | 8,952 |
| | $ | 21,090 |
| | $ | 12,131 |
| Provision for income taxes | $ | 7,177 | | | $ | 5,101 | | |
Effective tax rate | 35.2 | % | | 39.4 | % | | 35.8 | % | | 22.7 | % | Effective tax rate | 25.4 | % | | 24.8 | % | |
The effective tax rate for the three months ended March 31, 2023 and nine months ended September 30, 20172022, respectively, was greater than the U.S. federal statutory rate of 35%21% 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,nondeductible permanent differences 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, 2016 was less than the U.S. federal statutory rate of 35% due to deductible permanent differences and favorable discrete items partially offset by state taxes.
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.(13) EARNINGS PER SHARE
Basic earningsEarnings per share and the weighted average shares outstanding used in calculating basic and diluted weighted-average shares outstandingearnings per share are as follows for the three and nine months ended September 30,March 31, (in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
| 2017 | | 2016 | | 2017 | | 2016 | | 2023 | | 2022 | |
Numerator: | | | | | | | | 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 |
| |
| Net income available to common stockholders | | Net income available to common stockholders | $ | 21,099 | | | $ | 15,456 | | |
Denominator for basic earnings per share: | | | | | | | | Denominator for basic earnings per share: | | | | |
Weighted average shares outstanding | 31,703 |
| | 31,579 |
| | 31,700 |
| | 31,493 |
| Weighted average shares outstanding | 30,897 | | | 32,913 | | |
Denominator for diluted earnings per share: | | | | | | | | Denominator for diluted earnings per share: | | | | |
Weighted average shares outstanding | 31,703 |
| | 31,579 |
| | 31,700 |
| | 31,493 |
| Weighted average shares outstanding | 30,897 | | | 32,913 | | |
Common stock options and restricted stock | 507 |
| | 597 |
| | 516 |
| | 512 |
| |
Common stock units | | Common stock units | 127 | | | 109 | | |
Weighted average shares and conversions | 32,210 |
| | 32,176 |
| | 32,216 |
| | 32,005 |
| Weighted average shares and conversions | 31,024 | | | 33,022 | | |
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. The following table provides the potential anti-dilutive common stock units for the three months ended September 30, 2017 and 2016, respectively, and 523,000 and 690,000 for the nine months ended September 30, 2017 and 2016, respectively .March 31, (in thousands):
| | | | | | | | | | | | | | | |
| | | |
| 2023 | | 2022 | | | | |
Common stock units | 64 | | | 54 | | | | | |
16.(14) SEGMENT INFORMATION
The Company is organized into threefour 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 solutions including the designing, engineering, manufacturing and installation of greenhouses; 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.
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):
| | | | | | | | | | | | | | | |
| | | |
| 2023 | | 2022 | | | | |
Net sales: | | | | | | | |
Renewables | $ | 59,205 | | | $ | 78,783 | | | | | |
Residential | 179,495 | | | 179,485 | | | | | |
Agtech | 35,852 | | | 42,428 | | | | | |
Infrastructure | 18,715 | | | 17,169 | | | | | |
Total net sales | $ | 293,267 | | | $ | 317,865 | | | | | |
| | | | | | | |
Income from operations: | | | | | | | |
Renewables | $ | 2,269 | | | $ | (6,984) | | | | | |
Residential | 29,509 | | | 33,435 | | | | | |
Agtech | 2,330 | | | 31 | | | | | |
Infrastructure | 2,714 | | | 1,181 | | | | | |
Unallocated Corporate Expenses | (7,452) | | | (6,468) | | | | | |
Total income from operations | $ | 29,370 | | | $ | 21,195 | | | | | |
|
| | | | | | | | | | | | | | | |
| 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 |
|
17. SUPPLEMENTAL FINANCIAL INFORMATION | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Total assets: | | | |
Renewables | $ | 393,088 | | | $ | 392,368 | |
Residential | 535,423 | | | 519,567 | |
Agtech | 180,688 | | | 193,966 | |
Infrastructure | 82,795 | | | 80,264 | |
Unallocated corporate assets | 16,498 | | | 24,448 | |
| | | |
| $ | 1,208,492 | | | $ | 1,210,613 | |
The following information sets forthtables illustrate segment revenue disaggregated by timing of transfer of control to the consolidating summary financial statements ofcustomer for 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.three months ended March 31 (in thousands):
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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 |
| Renewables | | Residential | | Agtech | | Infrastructure | | Total |
Net sales: | | | | | | | | | |
Point in Time | $ | 9,094 | | | $ | 177,942 | | | $ | 5,107 | | | $ | 6,061 | | | $ | 198,204 | |
Over Time | 50,111 | | | 1,553 | | | 30,745 | | | 12,654 | | | 95,063 | |
Total net sales | $ | 59,205 | | | $ | 179,495 | | | $ | 35,852 | | | $ | 18,715 | | | $ | 293,267 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
| Renewables | | Residential | | Agtech | | Infrastructure | | Total |
Net sales: | | | | | | | | | |
Point in Time | $ | 5,650 | | | $ | 178,131 | | | $ | 1,613 | | | $ | 6,303 | | | $ | 191,697 | |
Over Time | 73,133 | | | 1,354 | | | 40,815 | | | 10,866 | | | 126,168 | |
Total net sales | $ | 78,783 | | | $ | 179,485 | | | $ | 42,428 | | | $ | 17,169 | | | $ | 317,865 | |
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
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, andmargins, integration of acquired businesses, the industries in which we operate.operate and the expected impact of evolving laws and regulation. 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” discloseddisclosures in our most recent Annual Report on Form 10-K. 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,Quarterly Report on Form 10-Q, 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.
The Company uses certain operating performance measures, specifically consolidated gross margin, operating margin by segment and consolidated operating margin, to manage the Company's businesses, set operational goals, and establish performance targets for incentive compensation for the Company's employees. The Company defines consolidated gross margin as a percentage of total consolidated gross profit to total consolidated net sales. The Company defines 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. The Company believes consolidated gross margin, operating margin and consolidated operating margin may be useful to investors in evaluating the profitability of the Company's segments and the 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 conservationinfrastructure 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 and 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. At March 31, 2023, the Company operated 33 facilities, comprised of 25 manufacturing facilities, one distribution center, and seven offices, which are located in 15 states, Canada, China, and Japan. The Company's operational infrastructure provides the necessary scale to support regional and national customers in each of the Company's markets.
IndustrialRecent Trends
The broader market dynamics over the past few years, have resulted in impacts to the Company, including material cost inflation, labor availability issues and Infrastructure Products.
logistics costs increases. The Company has also been impacted from supply constraints for materials and commodities used in its operations and from shortages in solar panels used by
Our Residential Products segmentthe Company's customers in conjunction with the goods and services residential repairthe Company provides. In certain instances these constraints have resulted in project delays, cost inflation and remodeling activitylogistical delays. The Company continues to work with its customers and new residential housing construction with products including roofsuppliers in this dynamic environment to better align pricing, understand the existing 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 directlypotential future impacts to the multi-family property management companies.supply chain, and make efforts to mitigate such impacts. The Company expects that some of these dynamics will continue in 2023 and could continue to have an impact on demand, material costs, labor and logistics.
In June 2022, the Uyghur Forced Labor Prevention Act ("UFLPA") was enacted. The UFLPA requires traceability of components of imported goods to validate that the components are not sourced from areas in the Xinjiang region of China. This has caused solar panels to be held at the border awaiting a determination that the panels do not contain components from Xinjiang. While a few of the historically significant suppliers have begun to have panels cleared for importation, the clearance is still on a shipment-by-shipment basis, and formal documentation requirements have not yet been published. Some of the Company's larger customers have continued to shift sourcing to modules manufactured outside of China in efforts to clear U.S. customs more efficiently and ramp up the execution of solar projects.
Our Renewable EnergyIn December 2022, the U.S. Department of Commerce ("USDOC") announced its preliminary ruling regarding the circumvention of antidumping and Conservation segment focusescountervailing duties (“AD/CVD”) on Chinese imports of solar panels produced in four other countries in Southeast Asia. Four of eight major manufacturers across the four countries investigated were found to have been circumventing the AD/CVD orders. The findings are preliminary and further investigation is occurring with a final determination scheduled for August 17, 2023. Independent of the DOC’s final determination, the Presidential Proclamation issued in June 2022 provides that duties will not be collected on the design, engineering, manufacturingimports from the impacted countries until June 2024. This provides U.S. solar importers time to adjust supply chains to ensure compliance with U.S. law. As the timing and installationprogress of many of our customers’ projects depend upon the supply of solar rackingpanels, our operating results have been and could be impacted by these actions. We continue to work with customers who are assessing their ability to source panels needed to complete projects.
On August 16, 2022, the Inflation Reduction Act ("IRA") was signed into law. Among other things, the IRA provides for Investment Tax Credits ("ITC") for renewable energy. The IRA provides a 30% ITC for projects started prior January 29, 2023. Projects started on or after this date have the opportunity to claim the 30% rate only if the project is less than one megawatt or adheres to the new prevailing wage and apprenticeship requirements. Otherwise, these projects will default to a base rate of 6%. The IRA also provides the option to earn an additional 10% credit for domestic content, and separately, an additional 10% credit for siting a project in an “energy community.” Lastly, under the IRA, Manufacturers Tax Credits ("MTC") that support clean energy manufacturing were established and expanded, and are available to suppliers of certain, specific solar tracker components, including mechanical parts and battery storage, that are made in the U.S. Final guidance is pending and expected to be issued by the Department of Treasury over the course of 2023 for the domestic content, energy community, and MTC credits. The Company believes that these enhanced tax credits under the IRA will provide long-term certainty for the industry and should reduce policy driven demand swings for our products. We will work with our customers to maximize the tax credits available to them.
Business Strategy
The Company's mission is to make life better for people and the planet, fueled by advancing the disciplines of engineering, science, and technology. The Company is innovating to reshape critical markets in sustainable power, comfortable and efficient living, and productive growing throughout North America. Furthermore, the Company strives to create compounding and sustainable value for its stockholders and stakeholders with strong and relevant leadership positions in higher growth, profitable end markets focused on addressing some of the world's most challenging opportunities. The foundation of the Company's strategy is built on three core pillars: Business System, Portfolio Management, and Organization Development.
1.Business System reflects the necessary systems, processes, and commercial, institutional,management tools required to deliver consistent and retail greenhouse structures. This segment'scontinuous performance improvement, every day. The Company's business system is a critical enabler to grow, scale, and deliver its plans. The Company's focus is on deploying effective tools to drive growth, improve operating performance, and develop the organization utilizing 80/20 and lean quote-to-cash initiatives along with digital systems for speed, agility and responsiveness. The Business System pillar challenges existing operating paradigms, drives day-to-day performance, forces prioritization of resources, tests the Company's business models, and drives new product and services and products are provided directly to developers, select distribution channels, and end users/owners.innovation.
Our Industrial and Infrastructure Products segment focuses2.Portfolio Management is focused on a variety of markets including industrial and commercial construction, highway and bridge construction, automotive, airports and energy and power generationoptimizing the Company’s business portfolio in higher growth markets with products including perimeter security, expandedleadership positions while ensuring its financial capital and perforated metal, plank grating, as well as, expansion jointshuman resources are effectively and structural bearings
efficiently deployed to deliver sustainable, profitable growth while increasing its relevance with customers and shaping its markets. In 2022, the Company acquired Quality Aluminum Products ("QAP") in the Residential segment and made the decision to divest its non-core Processing business within the Agtech segment to help achieve these objectives.
3.Organization Development drives the Company’s continuous focus on ensuring it has the right design and structure to scale the organization in order to execute the Company’s plans and meet commitments. The Company aspires to make its place of work the "Best Place to Work", where focus is on creating an environment for roadwaysour people to have the best opportunity for success, continue to develop, grow and bridges. This segment sellslearn. 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. The Company believes doing so helps it attract and retain the best people to execute its products through steel fabricators and distributors, commercial and transportation contractors, and original equipment manufacturers.business plans.
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 changes in general economic conditions, interest rates, exchange rates, commodity costs, demand for residential construction, governmental policies and funding, tax policies and the volume of non-residential construction and infrastructure projects. We believeCompany believes the key elements of ourthe Company's strategy have, and will allow uscontinue to, enable the Company to respond timely to changes in these factors. We havethe end markets the Company serves, including the broader market dynamics experienced over the past two years. The Company has and expectexpects to continue to restructure ourexamine the need for restructuring of the Company's operations, including consolidation of facilities, reducing overhead costs, curtailing investments in inventory,working capital, and managing ourthe Company's business to generate incremental cash. Additionally, we believe ourThe Company believes its strategy has enabled usenables the Company to better reactrespond to volatility in commodity and other input costs and fluctuations in commodity costs and customer demand, along with striving to maintain and improve margins. The Company has helped in improving margins. We have used the improved cash flows generated by these initiatives to minimize debt, improve ourthe Company's liquidity position, and invest in growth initiatives.initiatives and return capital to the Company's shareholders through share repurchases. Overall, we are strivingthe Company continues to strive to achieve stronger financial results, make more efficient use of capital, and deliver higher shareholderstockholder returns.
Recent Developments
On December 8, 2022, the Company entered into a Credit Agreement (the "Credit Agreement"), and concurrently with entering into the Credit Agreement, the Company paid off all amounts owed under the Sixth Amended and Restated Credit Agreement dated as of January 24, 2019, which was terminated with no prepayment penalties. The Credit Agreement provides for a revolving credit facility and letters of credit in an aggregate amount equal to $400 million. The Company can request additional financing to increase the revolving credit facility to $700 million or enter into a term loan of up to $300 million subject to conditions set forth in the Credit Agreement. The Credit Agreement contains two financial covenants. As of March 31, 2023, the Company was in compliance with both financial covenants. The Credit Agreement terminates on December 8, 2027.
On August 22, 2022, the Company purchased all the issued and outstanding membership interests of Quality Aluminum Products ("QAP"), a manufacturer of soffit, fascia, trim coil, rain carrying products and aluminum siding for an aggregate purchase price of $52.1 million. The acquisition of QAP was financed primarily through borrowings under the Company's revolving credit facility. The results of operations of QAP have been included in the Residential segment of the Company's consolidated financial statements from the date of acquisition.
In May 2022, the Company's Board of Directors authorized a share repurchase program of up to $200 million of the Company's issued and outstanding common stock. The program has a duration of three years, ending May 2, 2025. Repurchases may be made, from time to time, in amounts and at prices the Company deems appropriate, subject to market conditions, applicable legal requirements, debt covenants and other considerations. Any such repurchases may be executed using open market purchases, privately negotiated agreements or other transactions. The repurchase program may be suspended or discontinued at any time at the Company's discretion. As of March 31, 2023, the Company has repurchased 2,150,903 shares for an aggregate price of $93.2 million under this repurchase program.
Results of Operations
Three Months Ended September 30, 2017March 31, 2023 Compared to the Three Months Ended September 30, 2016March 31, 2022
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):
| | | 2017 | | 2016 | | 2023 | | 2022 |
Net sales | $ | 274,574 |
| | 100.0 | % | | $ | 272,734 |
| | 100.0 | % | Net sales | $ | 293,267 | | | 100.0 | % | | $ | 317,865 | | | 100.0 | % |
Cost of sales | 205,839 |
| | 75.0 | % | | 204,847 |
| | 75.1 | % | Cost of sales | 216,338 | | | 73.8 | % | | 253,021 | | | 79.6 | % |
Gross profit | 68,735 |
| | 25.0 | % | | 67,887 |
| | 24.9 | % | Gross profit | 76,929 | | | 26.2 | % | | 64,844 | | | 20.4 | % |
Selling, general, and administrative expense | 33,042 |
| | 12.0 | % | | 41,365 |
| | 15.2 | % | Selling, general, and administrative expense | 47,559 | | | 16.2 | % | | 43,649 | | | 13.7 | % |
| Income from operations | 35,693 |
| | 13.0 | % | | 26,522 |
| | 9.7 | % | Income from operations | 29,370 | | | 10.0 | % | | 21,195 | | | 6.7 | % |
Interest expense | 3,486 |
| | 1.3 | % | | 3,625 |
| | 1.3 | % | Interest expense | 1,491 | | | 0.5 | % | | 485 | | | 0.2 | % |
Other expense | 404 |
| | 0.1 | % | | 159 |
| | 0.1 | % | |
Other (income) expense | | Other (income) expense | (397) | | | (0.1) | % | | 153 | | | 0.0 | % |
Income before taxes | 31,803 |
| | 11.6 | % | | 22,738 |
| | 8.3 | % | Income before taxes | 28,276 | | | 9.6 | % | | 20,557 | | | 6.5 | % |
Provision for income taxes | 11,184 |
| | 4.1 | % | | 8,952 |
| | 3.2 | % | Provision for income taxes | 7,177 | | | 2.4 | % | | 5,101 | | | 1.6 | % |
| Net income | $ | 20,619 |
| | 7.5 | % | | $ | 13,786 |
| | 5.1 | % | Net income | $ | 21,099 | | | 7.2 | % | | $ | 15,456 | | | 4.9 | % |
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 |
| 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 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Impact of |
| 2023 | | 2022 | | Total Change | | Acquisitions | | Portfolio Management | | Ongoing Operations |
Net sales: | | | | | | | | | | | |
Renewables | $ | 59,205 | | | $ | 78,783 | | | $ | (19,578) | | | $ | — | | | $ | — | | | $ | (19,578) | |
Residential | 179,495 | | | 179,485 | | | 10 | | | 14,266 | | | — | | | (14,256) | |
Agtech | 35,852 | | | 42,428 | | | (6,576) | | | — | | | 691 | | | (7,267) | |
Infrastructure | 18,715 | | | 17,169 | | | 1,546 | | | — | | | — | | | 1,546 | |
Consolidated | $ | 293,267 | | | $ | 317,865 | | | $ | (24,598) | | | $ | 14,266 | | | $ | 691 | | | $ | (39,555) | |
Consolidated net sales increaseddecreased by $1.8$24.6 million, or 0.7%7.7%, to $274.6$293.3 million for the three months ended September 30, 2017March 31, 2023 compared to the three months ended September 30, 2016.March 31, 2022. The increase7.7% decrease in salesrevenue was driven by a $39.6 million or 12.4% decrease in organic revenue, largely the result of increased volumes in ongoing revenue streams along with 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. Also contributing to the increase was a modest 1.0%14% volume decline, partially offset by a 1% increase in pricing to customers. Partially offsetting these increasesthe year over year decrease were $14.3 million of revenues generated by QAP, which was acquired during the resultsthird quarter of divestitures related to the Company’s portfolio management activities during 2016. This included the exit2022 and reported as part of both the Company's small European residential solar racking business andResidential segment. Consolidated backlog decreased 18% to $360 million down from $437 million at the Company's U.S. bar grating product line, bothend of which commenced during the fourth quarter of 2016. These divestitures resulted in a decrease in revenues of $17.1 million from the prior year quarter.
Net sales in our Residential Productsthe Company's Renewables segment increased 9.7%decreased $19.6 million, or 24.9%, or $11.5 million to $129.5$59.2 million for the three months ended September 30, 2017March 31, 2023 compared to $118.0$78.8 million for the three months ended September 30, 2016. The increase was largelyMarch 31, 2022. Revenue declined as the result of a net increase in volume along with sales generateddemand for solar panel installation continues to be impacted by panel importation challenges resulting from the acquisitionUFLPA, which was implemented in June 2022. Additionally, adverse winter weather conditions experienced in the current year quarter impacted the scheduling of Package Concierge and an increase in pricingprojects. As a result, backlog decreased 20% from the prior year, however, the Company expects backlog to customers. The volume increase resulted from demand for our commercial package solutions as well as our roofing-related ventilation and rain dispersion products.improve once there is better understanding of documentary compliance requirements relative to the UFLPA.
Net sales in our Renewable Energythe Company's Residential segment were flat at $179.5 million for both the three months ended March 31, 2023 and Conservation2022, respectively. The positive impact of participation gains along with $14.3 million of sales generated by QAP, acquired in the third quarter of 2022, offset headwinds of channel inventory correction, the market's return to normal seasonal demand, and adverse winter weather in key regions of the U.S.
Net sales in the Company's Agtech segment increased 7.4%decreased 15.3%, or $6.1$6.6 million, to $88.1$35.9 million for the three months ended September 30, 2017March 31, 2023 compared to $82.0$42.4 million for the three months ended September 30, 2016. The increase was the resultMarch 31, 2022. Revenue declined in
the Company's small European residential solar racking businessproduce businesses as customers re-scope and continued softness in our international markets.re-prioritize project launch of fruit and vegetable growing facilities. While the active project pipeline continues to grow, backlog decreased 32% year over year.
Net sales in our Industrial andthe Company's Infrastructure Products segment decreased 21.7%increased 8.7%, or $15.8$1.5 million, to $56.9$18.7 million for the three months ended September 30, 2017March 31, 2023 compared to $72.8$17.2 million for the three months ended September 30, 2016.March 31, 2022. The decreaseincrease in net salesrevenue was primarily the result of the Company's exit from its U.S. bar grating product line. Also a decrease in demand for our infrastructure products 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 delaysolid market demand, which also resulted in an 38% increase in backlog year over year. Management expects continued positive momentum from increased infrastructure projects. We expect this decline to be temporary as backlog and bookings for this business have increased comparedspending related to the prior year quarterInfrastructure Investment and theJobs Act, and ongoing efforts to increase market shows signs of recovery.participation.
OurThe Company's consolidated gross margin slightly increased to 25.0%26.2% for the three months ended September 30, 2017March 31, 2023 compared to 24.9%20.4% for the three months ended September 30, 2016. ThisMarch 31, 2022. The increase was largelydriven by business mix, field operations productivity and improvement in supply chain management and efficiencies along with continuing progress in 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.Company's business operating system.
Selling, general, and administrative (SG&A)("SG&A") expenses decreasedincreased by $8.3$3.9 million, or 20.1%,9.0% to $33.0$47.6 million for the three months ended September 30, 2017 from $41.4March 31, 2023 compared to $43.6 million for the three months ended September 30, 2016.March 31, 2022. The $8.3$3.9 million decreaseincrease was primarily due to $7.6 millionthe combined result of lowerhigher performance-based compensation expenses,expense as compared to the prior year, largely the result of equity-based awards in the Company's deferred compensation plan that are valued based on its 200-day average stock price, along with a $2.2 million decreaseincremental SG&A expenses incurred by QAP, acquired in senior leadership transition costs. These were partially offset by $2.3 millionthe third quarter of additional expense from the acquisitions of Nexus and Package Concierge.2022. SG&A expenses as a percentage of net sales decreasedincreased to 12.0%16.2% for the three months ended September 30, 2017March 31, 2023 compared to 15.2%13.7% for the three months ended September 30, 2016.
March 31, 2022.
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):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Impact of |
| 2023 | | 2022 | | Total Change | | | | | | Portfolio Management | | Ongoing Operations |
Income from operations: | | | | | | | | | | | | | | | | | |
Renewables | $ | 2,269 | | | 3.8 | % | | $ | (6,984) | | | (8.9) | % | | $ | 9,253 | | | | | | | $ | — | | | $ | 9,253 | |
Residential | 29,509 | | | 16.4 | % | | 33,435 | | | 18.6 | % | | (3,926) | | | | | | | — | | | (3,926) | |
Agtech | 2,330 | | | 6.5 | % | | 31 | | | 0.1 | % | | 2,299 | | | | | | | 1,890 | | | 409 | |
Infrastructure | 2,714 | | | 14.5 | % | | 1,181 | | | 6.9 | % | | 1,533 | | | | | | | — | | | 1,533 | |
Unallocated Corporate Expenses | (7,452) | | | (2.5) | % | | (6,468) | | | (2.0) | % | | (984) | | | | | | | — | | | (984) | |
Consolidated income from operations | $ | 29,370 | | | 10.0 | % | | $ | 21,195 | | | 6.7 | % | | $ | 8,175 | | | | | | | $ | 1,890 | | | $ | 6,285 | |
|
| | | | | | | | | | | | | | | | | |
| 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%3.8% in the current year quarter compared to 20.0%(8.9)% in the prior year quarter. The declineincrease in operating margin reflectswas driven by field operations productivity and improved supply chain management that offset lower volumes, along with restructuring costs recorded in the prior year quarter.
The Residential segment generated an unfavorableoperating margin of 16.4% in the current year quarter compared to 18.6% in the prior year quarter. The decrease in operating margin was the result of expected compression in price to material cost alignment and the anticipated lower margins from the Company's recent acquisition of QAP. The Company expects margins to improve as seasonal volume accelerates, price / material costscost are better aligned, and QAP integration benefits are realized.
The Agtech segment generated an operating margin of 6.5% in the current year quarter compared to customer selling prices0.1% in the prior year quarter. Operating margin improved year over year, the result of business mix, improvement in its business operating system, along with supply chain productivity and efficiency improvement.
The Infrastructure segment generated an operating margin of 14.5% during the three months ended March 31, 2023 compared to 6.9% during the three months ended March 31, 2022. The margin improved year over year driven by strong operating execution, volume leverage, and supply chain productivity.
Unallocated corporate expenses increased $1.0 million from $6.5 million during the three months ended March 31, 2022 to $7.5 million during the three months ended March 31, 2023. The increase in expense was primarily the
result of higher performance-based compensation expense for equity-based awards in the Company's deferred compensation plan that are valued based on its 200-day average stock price as compared to the prior year quarter.
Our Industrial and Infrastructure Products segment generated an operating margin of 4.5% duringInterest expense increased year over year with $1.5 million for the three months ended September 30, 2017March 31, 2023 compared to 2.6% during$0.5 million for the three months ended September 30, 2016.March 31, 2022. The improvementincrease in expense was largely the result of costs incurred in the prior-year quarter relateddue 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 costsboth higher interest rates compared 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 $2.2higher outstanding balances on the Company's revolving credit facility during the quarter. The outstanding balances on the Company's revolving credit facility were $49.9 million decrease in senior leadership transition costs.and $42.4 million as of March 31, 2023, and 2022, respectively.
The Company recorded other expenseincome of $0.4 million for the three months ended September 30, 2017 andMarch 31, 2023, compared to other expense of $0.2 million recorded for the three months ended September 30, 2016.March 31, 2022. The increase fromchange year over year is primarily the prior year quarter was primarily due toresult of foreign currency translation 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, no amounts were outstanding under our revolving credit facility.
WeThe Company recognized a provision for income taxes of $11.2$7.2 million and $9.0$5.1 million, with effective tax rates of 35.2%25.4% and 39.4%24.8% for the three months ended September 30, 2017,March 31, 2023, and 2016,2022, respectively. The effective tax rate for the third quarter of 2017 exceeded the U.S. federal statutory rate of 35% due to state taxesthree months ended March 31, 2023, 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 20162022, respectively, was greater than the U.S. federal statutory rate of 35% primarily21% due to state taxes and unfavorablenondeductible permanent differences partially offset by 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 operationsLiquidity 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 | % |
Capital ResourcesThe following table sets forth the Company’s net sales by reportable segment for the nine months ended September 30,Company's liquidity position as of (in thousands):
| | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Cash and cash equivalents | | $ | 7,497 | | | $ | 17,608 | |
Availability on revolving credit facility | | 343,655 | | | 304,505 | |
| | $ | 351,152 | | | $ | 322,113 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | 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 | ) |
Sources of Liquidity
Consolidated net sales decreased by $47.3The Company's sources of liquidity are comprised of cash on hand and available borrowing capacity provided under the Company's Credit Agreement (the "Credit Agreement"), entered into on December 8, 2022. This Credit Agreement replaced and paid off all amounts owed under the Sixth Amended and Restated Credit Agreement dated as of January 24, 2019. The Credit Agreement maintains similar capacity as the prior agreement in which it provides for a revolving credit facility and letters of credit in an aggregate amount equal to $400 million. The Company can request additional financing to increase the revolving credit facility to $700 million or 6.1%,enter into a term loan of up to $728.8$300 million subject to conditions set forth in the Credit Agreement. The Company believes that these sources provide the Company with ample liquidity and capital resources to invest in operational excellence, growth initiatives and the development of the organization.
The Company has been able to weather the economic impacts of the broader market dynamics, including the inflationary cost environment, while continuing to make investments that support the Company's strategy. The Company continues to remain focused on managing its working capital, closely monitoring customer credit and collection activities, and working to extend payment terms with its vendors. The Company believes its liquidity, together with the cash expected to be generated from operations, should be sufficient to fund working capital needs and growth initiatives 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. foreseeable future.
The Company sold its European industrial manufacturing business in April 2016uses the Credit Agreement to a third partyprovide liquidity and exited both the Company's small European residential solar racking business andcapital resources primarily for the Company's U.S. bar grating product line, bothoperations. Generally, the Company's foreign operations have generated cash flow from operations sufficient to invest in working capital and fund their capital improvements. As of these divestitures commenced duringMarch 31, 2023 and December 31, 2022, the fourth quarterCompany's foreign subsidiaries held $7.5 million and $15.2 million of 2016. These divestitures resulted incash, respectively.
Outstanding balances on the Company's revolving credit facility under the Company's Credit Agreement accrue interest at a decrease in revenues of $66.2 million fromrate, at 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 contributedCompany's option, equal to the overall decrease in sales year over year.
Net sales in our Residential Products segment increased 6.9%applicable margin plus (a) a base rate, (b) a daily simple secured overnight financing rate ("SOFR"), (c) a term SOFR rate, or $23.2 million(d) for certain foreign currencies, a foreign currency rate. See Note 8 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 was 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 businessconsolidated financial statements in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for further information on the Company’s Credit Agreement.
Uses of Cash / Cash Requirements
The Company's material short-term cash requirements primarily include accounts payable, certain employee and continued softness in our international markets, partially offset by sales generated from the acquisitionretiree benefit-related obligations, operating lease obligations, interest payments on outstanding debt, repayments
of borrowing on its revolving credit facility, capital expenditures, and increased volume in our domestic markets. As expected, total volume declinedother purchase obligations originating in the first nine monthsnormal course 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 no tax benefit has been recorded as such benefit is not expected to be realizable, partially offset by net deductible permanent differencesinventory purchase orders and favorable discrete items.contractual service agreements. 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, partially offset by state taxes.
Outlook
For the remainder of 2017, we continue to expect generally favorable market conditions for each of our segments and increased bidding activity and continued growth of backlogs in both our Infrastructure business 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 our 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, and EPS to be between $0.23 and $0.30 per diluted share, compared to a loss of $0.24 per share in the fourth quarter of 2016.
Liquidity and Capital Resources
General
OurCompany's principal capital requirements are to fund ourits operations' working capital and capital improvements, as well as provide capital for acquisitions and to fund acquisitions. Westrategically allocate capital through repurchases of Company stock. The Company 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 ourits business. We have successfully generated positiveThe Company intends to fund its cash flows from operating activities which have funded our capital requirements and recent acquisitions as noted below in “Cash Flows.”
On December 9, 2015, we entered into the Company's Fifth Amended and Restated Credit Agreement (the "Senior Credit Agreement") which includes a 5-year, $300 million revolving credit facility and provides the Company with access to capital and improved financial flexibility. As of September 30, 2017, our liquidity of $496.8 million consisted of $208.0 million ofthrough cash plus $288.8 million of availability under our revolving credit facility. We believe this liquidity, together with the cash expected to be generated from operations shouldand, as necessary, from the availability on its revolving credit facility.
In May 2022, the Company's Board of Directors authorized a share repurchase program of up to $200 million of the Company's issued and outstanding common stock. The program has a duration of three years, ending May 2, 2025. Repurchases may be sufficientmade, from time to fund working capital needstime, in amounts 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.
Our Senior Credit Agreement providesat prices the Company with liquiditydeems appropriate, subject to market conditions, applicable legal requirements, debt covenants 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.other considerations. Any such repurchases may be executed using open market purchases, privately negotiated agreements or other transactions. The repurchase program may be suspended or discontinued at any time at the Company's discretion. As of September 30, 2017, our foreign subsidiaries held $25.2March 31, 2023, the Company has repurchased 2,150,903 shares for an aggregate price of $93.2 million under this repurchase program, including 153,537 shares repurchased for an aggregate price of cash in U.S. dollars. We believe cash held by our foreign subsidiaries provides our foreign operations with$7.4 million during the necessary liquidity to meet future obligations 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.three months ended March 31, 2023.
Over the long-term, we expectthe Company expects 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,the Credit Agreement, new
debt financing, the issuance of equity securities, or any combination of the above. Anyaforementioned. All potential acquisitions are evaluated based on ourthe Company's acquisition strategy, which includes the enhancement of ourthe Company's existing products, operations, and/or capabilities, as well as expanding ourthe Company's 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 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 levels, or sources of financing are not available or not available at acceptable terms, ourthe Company's future liquidity may be adversely affected.
Except as disclosed above, there have been no material changes in the Company's cash requirements since December 31, 2022, the end of fiscal year 2022. See Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Cash Flows
The following table sets forth selected cash flow data for the ninethree months ended September 30,March 31, (in thousands):
| | | | | | | | | | | |
| 2023 | | 2022 |
Cash provided by (used in): | | | |
Operating activities | $ | 38,045 | | | $ | (7,754) | |
Investing activities | (1,636) | | | (4,402) | |
Financing activities | (46,509) | | | 15,039 | |
| | | |
Effect of foreign exchange rate changes | (11) | | | (159) | |
Net (decrease) increase in cash and cash equivalents | $ | (10,111) | | | $ | 2,724 | |
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| | | | | | | |
| 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 |
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Operating ActivitiesDuringNet cash provided by operating activities for the ninethree months ended September 30, 2017, we generated net cash from operating activities totaling $48.8March 31, 2023 of $38.0 million composedconsisted of net income of $37.8$21.1 million, plus $20.5non-cash net charges totaling $9.3 million, fromwhich include depreciation, amortization, stock-based compensation, exit activity recoveries and other non-cash charges, including and $7.6 million of cash generated from working capital and other net assets. The cash generated from working capital and other net assets was due to an increase in accounts payable as a result of the timing of purchases and vendor payments, offset by an increase in accounts receivable as revenues increased in the latter part of the quarter.
Net cash used in operating activities for the three months ended March 31, 2022 of $7.7 million consisted of income from continuing operations of $15.5 million and non-cash net charges totaling $10.3 million, which include
depreciation, amortization, stock compensation, exit activity costs and exit activities, partiallyother non-cash charges, offset by ana $33.5 million investment in working capital and other net assets. The investment in working capital and other net assets was due to increases in inventory as a result of $9.5 million. Net cash provided by operating activitiesprovisioning for the nine months ended September 30, 2016 totaled $102.2 million, 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 businesspotential supply chain disruptions and non-cash exit activityraw material and freight 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 millionan increase in accounts receivable as the result of seasonal increases in demand and other current assets and other assets, respectively, partially offset by a $25.1 and $7.5 million increasedecrease 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 athe result of continued increase in seasonal manufacturing activity. The increase in total other current assets is primarily due to the timing of prepaid expenses. Accounts payable increased due to the seasonal increase in manufacturing activity as well as the timing of quarter end vendor payments.Thepayments. This was offset by an increase in accrued expenses and other non-current liabilities was largely due to costs related to the timing of customer contracts offset by a decreasean increase 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.unbilled project revenues.
Investing Activities
Net cash used in investing activities for the ninethree months ended September 30, 2017March 31, 2023 of $10.7$1.6 million was primarily consisted of $18.3 million of net cash paid for the acquisition of Package Concierge,due to capital expenditures of $5.1$2.2 million, and a paymentoffset by receipt of $0.2the $0.6 million related tofinal working capital settlement resulting from the final purchase adjustment for the2022 acquisition of Nexus. These payments were partially offset by net proceeds of $12.9 million from the sale of property and equipment. QAP.
Net cash used in investing activities for the ninethree months ended September 30, 2016March 31, 2022 of $0.3$4.4 million was the net result ofprimarily due to 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.$4.4 million.
Financing Activities
Net cash used in financing activities for the ninethree months ended September 30, 2017March 31, 2022 of $1.7$46.5 million consisted of the purchasenet long-term debt payments of treasury stock of $2.0$39.0 million and payment of long-term debt borrowings of $0.4$7.5 million partially offset by the proceeds received from the issuance of common stock repurchases. Net long-term debt payments consisted of $0.7 million. $50.0 million in long-term debt payments, offset by $11.0 million in proceeds from borrowing on the Company's long-term debt credit facility. The Company repurchased 153,537 shares under the Company's authorized share repurchase program which totaled $5.6 million paid during the three months ended March 31, 2023 with the balance repurchased common stock of $1.9 million related to the net settlement of tax obligations for participants in the Company's equity incentive plans.
Net cash provided by financing activities for the ninethree months ended September 30, 2016March 31, 2022 of $1.3$15.0 million consistedwas the result of $47.5 million in proceeds from borrowing on the proceeds received from the issuanceCompany's long-term credit facility, offset by $29.0 million in payments on long-term debt and $3.5 million of common stock repurchases related to the net settlement of $2.9 million offset by the purchase of treasury stock of $1.2 million and payment of long-term debt borrowings of $0.4 million.
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 providestax obligations 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 forthparticipants 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.Company's equity incentive plans.
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.
Critical Accounting PoliciesEstimates
In the current year, thereThere have been no material changes to ourthe Company's critical accounting policies and estimates during the three months ended March 31, 2023 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, 2016.2022.
Recent Accounting Pronouncements
See Note 2 to the Company's consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on recent accounting pronouncements.
Item 3. QualitativeQuantitative and QuantitativeQualitative 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, interest rates, 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. ThereIn the current year, there have been no material changes toin the information provided under Item 7A in the Company's exposure to market risk sinceAnnual Report on Form 10-K for the year ended December 31, 2016.
Item 4. Controls and Procedures
(a)Evaluation of Disclosure Controls and Procedures
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(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)1934, as amended). The Company’sManagement of the Company, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures 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, as amended, 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.
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(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)) under the Securities Exchange Act of 1934, as amended) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.From time to time the Company has been and may in the future become involved in litigation, as well as other legal proceedings in the ordinary course of the Company's business. The Company maintains liability insurance against risks arising out of the normal course of business. While the outcome of these legal proceedings cannot be predicted with certainty, the Company's management, based on currently available facts, does not believe that the ultimate outcome of any pending litigation will have a material effect on the Company's consolidated financial condition, results of operations, or liquidity.
There were no material legal proceedings terminated, settled, or otherwise resolved during the three months ended March 31, 2023.
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 ourthe Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2022. These risks and uncertainties have the potential to materially affect ourthe Company's business, financial condition, results of operation, cash flows, and future prospects. Additional risks and uncertainties not currently known to usthe Company or that wethe Company currently deemdeems immaterial may materially adversely impact ourthe Company's business, financial condition, or operating results. During the quarter ended March 31, 2023, there have been no material changes from the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.In May 2022, the Company's Board of Directors authorized a share repurchase program of up to $200 million of the Company's issued and outstanding common stock. The program was publicly announced on May 4, 2022 and has a duration of three years, ending May 2, 2025. Repurchases may be made, from time to time, in amounts and at prices the Company deems appropriate, subject to market conditions, applicable legal requirements, debt covenants and other considerations. Any such repurchases may be executed using open market purchases, privately negotiated agreements or other transactions. The repurchase program may be suspended or discontinued at any time at the Company's discretion.
The following table sets forth purchases made by or on behalf of the Company during the quarter ended March 31, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Issuer Purchases of Equity Securities |
Period | | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Program | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program |
January 1 - 31, 2023 | | 76,937 | | | $ | 47.98 | | | 76,937 | | | $ | 110,432,987 | |
February 1 - 28, 2023 | | 2,200 | | | $ | 48.56 | | | 2,200 | | | $ | 110,326,147 | |
March 1 - 31, 2023 | | 74,400 | | | $ | 47.98 | | | 74,400 | | | $ | 106,756,068 | |
Total | | 153,537 | | | $ | 47.99 | | | 153,537 | | | |
The Company did not sell unregistered equity securities during the period covered by this report.
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
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a. | | Certificate of Incorporation of Gibraltar Industries, Inc., as amended by: (i) Certificate of Amendment of Certificate of Incorporation of Gibraltar Industries, Inc. filed on October 27, 2004, (ii) Certificate of Change of Registered Agent and Registered Office of Gibraltar Industries, Inc. filed on May 11, 2005, (iii) Certificate of Amendment of Certificate of Incorporation of Gibraltar Industries, Inc. filed on May 22, 2012, (iv) Certificate of Amendment of Certificate of Incorporation of Gibraltar Industries, Inc. filed on May 11, 2015, (v) Certificate of Change of Registered Agent and/or Registered Office filed on January 10, 2019, and (vi) Certificate of Amendment of Certificate of Incorporation of Gibraltar Industries, Inc. filed on May 6, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on August 3, 2021) |
| | Second Amended and Restated By-Laws of Gibraltar Industries, Inc., effective as of December 7, 2022 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K/A filed on December 9, 2022) |
| | Certification of Chairman of the Board, 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 Chairman of the Board, 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.INS101.INS* | Inline XBRL Instance Document * |
f. | 101.SCH101.SCH* | Inline XBRL Taxonomy Extension Schema Document * |
g. | 101.CAL101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document * |
h. | 101.LAB101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document * |
i. | 101.PRA101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document * |
j. | 101.DEF101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document * |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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* | Submitted electronically with this Quarterly Report on Form 10-Q. |
** | Documents are furnished not filed herewith. |
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)
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/s/ Frank G. HeardGIBRALTAR INDUSTRIES, INC. |
Frank G. Heard(Registrant) |
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/s/ William T. Bosway |
William T. Bosway |
Chairman of the Board, President and Chief Executive Officer |
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/s/ Timothy F. Murphy |
Timothy F. Murphy |
Senior Vice President and Chief Financial Officer
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Date: NovemberMay 3, 20172023