UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20202021
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)
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Delaware | | 16-1445150 |
(State or incorporation ) | | (I.R.S. Employer Identification No.) |
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3556 Lake Shore Road | P.O. Box 2028 | Buffalo | New York | | 14219-0228 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (716) (716) 826-6500
Securities registered pursuant to Section 12(b) of the Act: |
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Title of each class | | Trading Symbol | | Name of each exchange on which registered |
Common Stock, $0.01 par value per share | | ROCK | | NASDAQ Stock Market |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer | ☒ | 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). Yes ☐ No ☒
As of May 4, 2020,2021, the number of common shares outstanding was: 32,408,882.32,629,646.
GIBRALTAR INDUSTRIES, INC.
INDEX
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| PAGE NUMBER
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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 INCOME
(in thousands, except per share data)
(unaudited)
| | | Three Months Ended March 31, | | Three Months Ended March 31, | |
| 2020 | | 2019 | | 2021 | | 2020 | |
Net Sales | $ | 249,439 |
| | $ | 227,417 |
| Net Sales | $ | 287,592 | | | $ | 215,401 | | |
Cost of sales | 193,052 |
| | 183,517 |
| Cost of sales | 227,574 | | | 165,540 | | |
Gross profit | 56,387 |
| | 43,900 |
| Gross profit | 60,018 | | | 49,861 | | |
Selling, general, and administrative expense | 41,197 |
| | 33,334 |
| Selling, general, and administrative expense | 47,203 | | | 37,084 | | |
| Income from operations | 15,190 |
| | 10,566 |
| Income from operations | 12,815 | | | 12,777 | | |
Interest (income) expense | (47 | ) | | 2,061 |
| |
Interest expense | | Interest expense | 444 | | | 44 | | |
Other expense | 192 |
| | 589 |
| Other expense | 315 | | | 518 | | |
Income before taxes | 15,045 |
| | 7,916 |
| Income before taxes | 12,056 | | | 12,215 | | |
Provision for income taxes | 2,986 |
| | 1,571 |
| Provision for income taxes | 1,560 | | | 2,313 | | |
Income from continuing operations | | Income from continuing operations | 10,496 | | | 9,902 | | |
Discontinued operations: | | Discontinued operations: | | |
Income before taxes | | Income before taxes | 2,570 | | | 2,830 | | |
Provision for income taxes | | Provision for income taxes | 304 | | | 673 | | |
Income from discontinued operations | | Income from discontinued operations | 2,266 | | | 2,157 | | |
Net income | $ | 12,059 |
| | $ | 6,345 |
| Net income | $ | 12,762 | | | $ | 12,059 | | |
Net earnings per share – Basic: | | Net earnings per share – Basic: | | | | |
Income from continuing operations | | Income from continuing operations | $ | 0.32 | | | $ | 0.30 | | |
Income from discontinued operations | | Income from discontinued operations | 0.07 | | | 0.07 | | |
Net income | | Net income | $ | 0.39 | | | $ | 0.37 | | |
Weighted average shares outstanding -- Basic | | Weighted average shares outstanding -- Basic | 32,771 | | | 32,586 | | |
Net earnings per share – Diluted: | | Net earnings per share – Diluted: | | | | |
Income from continuing operations | | Income from continuing operations | $ | 0.32 | | | $ | 0.30 | | |
Income from discontinued operations | | Income from discontinued operations | 0.07 | | | 0.07 | | |
Net income | | Net income | $ | 0.39 | | | $ | 0.37 | | |
Weighted average shares outstanding -- Diluted | | Weighted average shares outstanding -- Diluted | 33,104 | | | 32,883 | | |
| | | | |
Net earnings per share: | | | | |
Basic | $ | 0.37 |
| | $ | 0.20 |
| |
Diluted | $ | 0.37 |
| | $ | 0.19 |
| |
Weighted average shares outstanding: | | | | |
Basic | 32,586 |
| | 32,279 |
| |
Diluted | 32,883 |
| | 32,617 |
| |
|
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
| | | Three Months Ended March 31, | | Three Months Ended March 31, | |
| 2020 | | 2019 | | 2021 | | 2020 | |
Net income | $ | 12,059 |
| | $ | 6,345 |
| Net income | $ | 12,762 | | | $ | 12,059 | | |
Other comprehensive (loss) income: | | | | |
Other comprehensive income (loss): | | Other comprehensive income (loss): | | |
Foreign currency translation adjustment | (5,898 | ) | | 842 |
| Foreign currency translation adjustment | 3,198 | | | (5,898) | | |
Minimum pension and post retirement benefit plan adjustments | 18 |
| | 12 |
| |
Other comprehensive (loss) income | (5,880 | ) | | 854 |
| |
| Minimum post retirement benefit plan adjustments | | Minimum post retirement benefit plan adjustments | 27 | | | 18 | | |
| Other comprehensive income (loss) | | Other comprehensive income (loss) | 3,225 | | | (5,880) | | |
Total comprehensive income | $ | 6,179 |
| | $ | 7,199 |
| Total comprehensive income | $ | 15,987 | | | $ | 6,179 | | |
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
| | | March 31, 2020 | | December 31, 2019 | | March 31, 2021 | | December 31, 2020 |
| (unaudited) | | | | (unaudited) | | |
Assets | | | | Assets | |
Current assets: | | | | Current assets: | |
Cash and cash equivalents | $ | 85,966 |
| | $ | 191,363 |
| Cash and cash equivalents | $ | 20,731 | | | $ | 32,054 | |
Accounts receivable, net of allowance of $5,781 and $6,330 | 172,452 |
| | 147,515 |
| |
Inventories | 88,585 |
| | 78,476 |
| |
Accounts receivable, net of allowance of $3,319 and $3,529 | | Accounts receivable, net of allowance of $3,319 and $3,529 | 199,598 | | | 197,990 | |
Inventories, net | | Inventories, net | 107,004 | | | 98,307 | |
Prepaid expenses and other current assets | 16,149 |
| | 19,748 |
| Prepaid expenses and other current assets | 24,684 | | | 19,671 | |
Assets of discontinued operations | | Assets of discontinued operations | 0 | | | 77,438 | |
Total current assets | 363,152 |
| | 437,102 |
| Total current assets | 352,017 | | | 425,460 | |
Property, plant, and equipment, net | 95,882 |
| | 95,409 |
| Property, plant, and equipment, net | 91,717 | | | 89,562 | |
Operating lease assets | 33,991 |
| | 27,662 |
| Operating lease assets | 23,465 | | | 25,229 | |
Goodwill | 382,045 |
| | 329,705 |
| Goodwill | 523,446 | | | 514,279 | |
Acquired intangibles | 107,528 |
| | 92,592 |
| Acquired intangibles | 151,877 | | | 156,365 | |
Other assets | 1,924 |
| | 1,980 |
| Other assets | 12,669 | | | 1,599 | |
| $ | 984,522 |
| | $ | 984,450 |
| | $ | 1,155,191 | | | $ | 1,212,494 | |
Liabilities and Shareholders’ Equity | | | | |
Liabilities and Stockholders’ Equity | | Liabilities and Stockholders’ Equity | | | |
Current liabilities: | | | | Current liabilities: | |
Accounts payable | $ | 102,816 |
| | $ | 83,136 |
| Accounts payable | $ | 135,130 | | | $ | 134,738 | |
Accrued expenses | 84,140 |
| | 98,463 |
| Accrued expenses | 71,946 | | | 83,505 | |
Billings in excess of cost | 34,567 |
| | 47,598 |
| Billings in excess of cost | 51,591 | | | 34,702 | |
| Liabilities of discontinued operations | | Liabilities of discontinued operations | 0 | | | 49,295 | |
Total current liabilities | 221,523 |
| | 229,197 |
| Total current liabilities | 258,667 | | | 302,240 | |
Long-term debt | | Long-term debt | 58,023 | | | 85,636 | |
Deferred income taxes | 39,999 |
| | 40,334 |
| Deferred income taxes | 37,996 | | | 39,057 | |
Non-current operating lease liabilities | 24,968 |
| | 19,669 |
| Non-current operating lease liabilities | 16,165 | | | 17,730 | |
Other non-current liabilities | 20,675 |
| | 21,286 |
| Other non-current liabilities | 25,932 | | | 24,026 | |
Shareholders’ equity: | | | | |
Preferred stock, $0.01 par value; authorized 10,000 shares; none outstanding | — |
| | — |
| |
Common stock, $0.01 par value; authorized 50,000 shares; 33,388 shares and 33,192 shares issued and outstanding in 2020 and 2019 | 334 |
| | 332 |
| |
Stockholders’ equity: | | Stockholders’ equity: | |
Preferred stock, $0.01 par value; authorized 10,000 shares; NaN outstanding | | Preferred stock, $0.01 par value; authorized 10,000 shares; NaN outstanding | 0 | | | 0 | |
Common stock, $0.01 par value; authorized 50,000 shares; 33,711 shares and 33,568 shares issued and outstanding in 2021 and 2020 | | Common stock, $0.01 par value; authorized 50,000 shares; 33,711 shares and 33,568 shares issued and outstanding in 2021 and 2020 | 337 | | | 336 | |
Additional paid-in capital | 297,269 |
| | 295,582 |
| Additional paid-in capital | 308,147 | | | 304,870 | |
Retained earnings | 417,436 |
| | 405,668 |
| Retained earnings | 482,705 | | | 469,943 | |
Accumulated other comprehensive loss | (11,271 | ) | | (5,391 | ) | |
Cost of 986 and 906 common shares held in treasury in 2020 and 2019 | (26,411 | ) | | (22,227 | ) | |
Total shareholders’ equity | 677,357 |
| | 673,964 |
| |
Accumulated other comprehensive income (loss) | | Accumulated other comprehensive income (loss) | 764 | | | (2,461) | |
Cost of 1,082 and 1,028 common shares held in treasury in 2021 and 2020 | | Cost of 1,082 and 1,028 common shares held in treasury in 2021 and 2020 | (33,545) | | | (28,883) | |
Total stockholders’ equity | | Total stockholders’ equity | 758,408 | | | 743,805 | |
| $ | 984,522 |
| | $ | 984,450 |
| | $ | 1,155,191 | | | $ | 1,212,494 | |
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)(unaudited) |
| | | | | | | |
| Three Months Ended March 31, |
| 2020 | | 2019 |
Cash Flows from Operating Activities | | | |
Net income | $ | 12,059 |
| | $ | 6,345 |
|
Adjustments to reconcile net income to net cash used in operating activities: | | | |
Depreciation and amortization | 5,338 |
| | 4,941 |
|
Stock compensation expense | 1,665 |
| | 2,371 |
|
(Benefit of) provision for deferred income taxes | (216 | ) | | 393 |
|
Other, net | 411 |
| | 2,456 |
|
Changes in operating assets and liabilities, excluding the effects of acquisitions: | | | |
Accounts receivable | (7,059 | ) | | (27,623 | ) |
Inventories | (6,004 | ) | | 35 |
|
Other current assets and other assets | 6,144 |
| | 165 |
|
Accounts payable | (17,789 | ) | | 5,332 |
|
Accrued expenses and other non-current liabilities | (37,561 | ) | | (31,903 | ) |
Net cash used in operating activities | (43,012 | ) | | (37,488 | ) |
Cash Flows from Investing Activities | | | |
Acquisitions, net of cash acquired | (54,539 | ) | | (264 | ) |
Net proceeds from sale of property and equipment | 52 |
| | 22 |
|
Purchases of property, plant, and equipment | (2,822 | ) | | (3,132 | ) |
Net cash used in investing activities | (57,309 | ) | | (3,374 | ) |
Cash Flows from Financing Activities | | | |
Long-term debt payments | — |
| | (210,000 | ) |
Payment of debt issuance costs | — |
| | (1,235 | ) |
Purchase of treasury stock at market prices | (4,184 | ) | | (2,151 | ) |
Net proceeds from issuance of common stock | 24 |
| | 139 |
|
Net cash used in financing activities | (4,160 | ) | | (213,247 | ) |
Effect of exchange rate changes on cash | (916 | ) | | 612 |
|
Net decrease in cash and cash equivalents | (105,397 | ) | | (253,497 | ) |
Cash and cash equivalents at beginning of year | 191,363 |
| | 297,006 |
|
Cash and cash equivalents at end of period | $ | 85,966 |
| | $ | 43,509 |
|
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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, 2019 | 33,192 |
| | $ | 332 |
| | $ | 295,582 |
| | $ | 405,668 |
| | $ | (5,391 | ) | | 906 |
| | $ | (22,227 | ) | | $ | 673,964 |
|
Net income | — |
| | — |
| | — |
| | 12,059 |
| | — |
| | — |
| | — |
| | 12,059 |
|
Foreign currency translation adjustment | — |
| | — |
| | — |
| | — |
| | (5,898 | ) | | — |
| | — |
| | (5,898 | ) |
Minimum pension and post retirement benefit plan adjustments, net of taxes of $7 | — |
| | — |
| | — |
| | — |
| | 18 |
| | — |
| | — |
| | 18 |
|
Stock compensation expense | — |
| | — |
| | 1,665 |
| | — |
| | — |
| | — |
| | — |
| | 1,665 |
|
Cumulative effect of accounting change (See Note 2) | — |
| | — |
| | — |
| | (291 | ) | | — |
| | — |
| | — |
| | (291 | ) |
Stock options exercised | 3 |
| | — |
| | 24 |
| | — |
| | — |
| | — |
| | — |
| | 24 |
|
Net settlement of restricted stock units | 193 |
| | 2 |
| | (2 | ) | | — |
| | — |
| | 80 |
| | (4,184 | ) | | (4,184 | ) |
Balance at March 31, 2020 | 33,388 |
| | $ | 334 |
| | $ | 297,269 |
| | $ | 417,436 |
| | $ | (11,271 | ) | | 986 |
| | $ | (26,411 | ) | | $ | 677,357 |
|
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2021 | | 2020 |
Cash Flows from Operating Activities | | | |
Net income | $ | 12,762 | | | $ | 12,059 | |
Income from discontinued operations | 2,266 | | | 2,157 | |
Income from continuing operations | 10,496 | | | 9,902 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | |
| | | |
Depreciation and amortization | 7,974 | | | 4,780 | |
Stock compensation expense | 2,368 | | | 1,665 | |
| | | |
| | | |
Exit activity costs, non-cash | 1,193 | | | 0 | |
| | | |
| | | |
Benefit of deferred income taxes | 0 | | | (178) | |
| | | |
Other, net | (162) | | | 386 | |
| | | |
Changes in operating assets and liabilities, excluding the effects of acquisitions: | | | |
Accounts receivable | (2,522) | | | (7,180) | |
Inventories | (15,262) | | | (7,242) | |
Other current assets and other assets | (435) | | | 6,218 | |
Accounts payable | 1,470 | | | (18,909) | |
Accrued expenses and other non-current liabilities | (6,334) | | | (33,268) | |
Net cash used in operating activities of continuing operations | (1,214) | | | (43,826) | |
Net cash (used in) provided by operating activities of discontinued operations | (2,011) | | | 814 | |
Net cash used in operating activities | (3,225) | | | (43,012) | |
Cash Flows from Investing Activities | | | |
Purchases of property, plant, and equipment | (4,389) | | | (2,144) | |
Acquisitions, net of cash acquired | (2) | | | (54,539) | |
Net proceeds from sale of business | 26,991 | | | 0 | |
| | | |
Net proceeds from sale of property and equipment | 0 | | | 52 | |
Net cash provided by (used in) investing activities of continuing operations | 22,600 | | | (56,631) | |
Net cash used in investing activities of discontinued operations | (176) | | | (678) | |
Net cash provided by (used in) investing activities | 22,424 | | | (57,309) | |
Cash Flows from Financing Activities | | | |
Proceeds from long-term debt | 20,000 | | | 0 | |
Long-term debt payments | (46,636) | | | 0 | |
| | | |
| | | |
Purchase of treasury stock at market prices | (4,662) | | | (4,184) | |
Net proceeds from issuance of common stock | 910 | | | 24 | |
| | | |
Net cash used in financing activities | (30,388) | | | (4,160) | |
Effect of exchange rate changes on cash | (134) | | | (916) | |
Net decrease in cash and cash equivalents | (11,323) | | | (105,397) | |
Cash and cash equivalents at beginning of year | 32,054 | | | 191,363 | |
Cash and cash equivalents at end of period | $ | 20,731 | | | $ | 85,966 | |
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive (Loss) Income | | Treasury Stock | | Total Stockholders’ Equity |
| Shares | | Amount | | | | | Shares | | Amount | |
Balance at December 31, 2020 | 33,568 | | | $ | 336 | | | $ | 304,870 | | | $ | 469,943 | | | $ | (2,461) | | | 1,028 | | | $ | (28,883) | | | $ | 743,805 | |
Net income | — | | | — | | | — | | | 12,762 | | | — | | | — | | | — | | | 12,762 | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | 3,198 | | | — | | | — | | | 3,198 | |
Minimum post retirement benefit plan adjustments, net of taxes of $10 | — | | | — | | | — | | | — | | | 27 | | | — | | | — | | | 27 | |
| | | | | | | | | | | | | | | |
Stock compensation expense | — | | | — | | | 2,368 | | | — | | | — | | | — | | | — | | | 2,368 | |
| | | | | | | | | | | | | | | |
Stock options exercised | 25 | | | — | | | 910 | | | — | | | — | | | — | | | — | | | 910 | |
| | | | | | | | | | | | | | | |
Net settlement of restricted stock units | 118 | | | 1 | | | (1) | | | — | | | — | | | 54 | | | (4,662) | | | (4,662) | |
| | | | | | | | | | | | | | | |
Balance at March 31, 2021 | 33,711 | | | $ | 337 | | | $ | 308,147 | | | $ | 482,705 | | | $ | 764 | | | 1,082 | | | $ | (33,545) | | | $ | 758,408 | |
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| Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Total Shareholders’ Equity |
| Shares | | Amount | | | | | Shares | | Amount | |
Balance at December 31, 2018 | 32,887 |
| | $ | 329 |
| | $ | 282,525 |
| | $ | 338,995 |
| | $ | (7,234 | ) | | 796 |
| | $ | (17,922 | ) | | $ | 596,693 |
|
Net income | — |
| | — |
| | — |
| | 6,345 |
| | — |
| | — |
| | — |
| | 6,345 |
|
Foreign currency translation adjustment | — |
| | — |
| | — |
| | — |
| | 842 |
| | — |
| | — |
| | 842 |
|
Minimum pension and post retirement benefit plan adjustments, net of taxes of $4 | — |
| | — |
| | — |
| | — |
| | 12 |
| | — |
| | — |
| | 12 |
|
Stock compensation expense | — |
| | — |
| | 2,371 |
| | — |
| | — |
| | — |
| | — |
| | 2,371 |
|
Cumulative effect of accounting change | — |
| | — |
| | — |
| | 1,582 |
| | — |
| | — |
| | — |
| | 1,582 |
|
Stock options exercised | 12 |
| | — |
| | 139 |
| | — |
| | — |
| | — |
| | — |
| | 139 |
|
Net settlement of restricted stock units | 127 |
| | 1 |
| | (1 | ) | | — |
| | — |
| | 59 |
| | (2,151 | ) | | (2,151 | ) |
Balance at March 31, 2019 | 33,026 |
| | $ | 330 |
| | $ | 285,034 |
| | $ | 346,922 |
| | $ | (6,380 | ) | | 855 |
| | $ | (20,073 | ) | | $ | 605,833 |
|
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Total Stockholders’ Equity | |
| Shares | | Amount | | | | | Shares | | Amount | | |
Balance at December 31, 2019 | 33,192 | | | $ | 332 | | | $ | 295,582 | | | $ | 405,668 | | | $ | (5,391) | | | 906 | | | $ | (22,227) | | | $ | 673,964 | | |
Net income | — | | | — | | | — | | | 12,059 | | | — | | | — | | | — | | | 12,059 | | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | (5,898) | | | — | | | — | | | (5,898) | | |
Minimum post retirement benefit plan adjustments, net of taxes of $7 | — | | | — | | | — | | | — | | | 18 | | | — | | | — | | | 18 | | |
| | | | | | | | | | | | | | | | |
Stock compensation expense | — | | | — | | | 1,665 | | | — | | | — | | | — | | | — | | | 1,665 | | |
Cumulative effect of accounting change | — | | | — | | | — | | | (291) | | | — | | | — | | | — | | | (291) | | |
Stock options exercised | 3 | | | — | | | 24 | | | — | | | — | | | — | | | — | | | 24 | | |
| | | | | | | | | | | | | | | | |
Net settlement of restricted stock units | 193 | | | 2 | | | (2) | | | — | | | — | | | 80 | | | (4,184) | | | (4,184) | | |
| | | | | | | | | | | | | | | | |
Balance at March 31, 2020 | 33,388 | | | $ | 334 | | | $ | 297,269 | | | $ | 417,436 | | | $ | (11,271) | | | 986 | | | $ | (26,411) | | | $ | 677,357 | | |
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See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
| |
(1) | CONSOLIDATED FINANCIAL STATEMENTS |
(1) CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of Gibraltar Industries, Inc. (the "Company") have been prepared by management in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting of normal recurring adjustments considered necessary for the fair presentation of results for the interim period have been included. The Company's operations are seasonal; for this and other reasons, such as the impact of the COVID-19 pandemic, financial results for any interim period are not necessarily indicative of the results expected for any subsequent interim period or for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our annual Form 10-K for the year ended December 31, 2019.2020.
The balance sheet at December 31, 20192020 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.
| |
(2) | RECENT ACCOUNTING PRONOUNCEMENTS |
(2) RECENT ACCOUNTING PRONOUNCEMENTS
Recent Accounting Pronouncements Adopted
|
| | | | | | | | | | | | | |
Standard | | Description | | Financial Statement Effect or Other Significant Matters |
ASU No. 2016-13
Financial Instruments - Credit Losses
(Topic 326)
| | The objective of this standard is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit, including trade receivables, held by an entity at each reporting date. The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.
| | The standard is effective for the Company as of January 1, 2020. The Company adopted the amendments in this update using the modified retrospective approach through a cumulative-effect adjustment to retained earnings of $291,000, net of $96,000 of income taxes, on the opening consolidated balance sheet as of January 1, 2020. The Company's financial assets that are in the scope of the standard are contract assets and accounts receivables which are short-term in nature. Additionally, the Company has identified and implemented appropriate changes to the Company's business processes, policies and internal controls to support reporting and disclosures.
Date of adoption: Q1 2020
|
ASU 2018-15
Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
| | The amendments in this update require an entity to apply the same requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract as the entity would for implementation costs incurred to develop or obtain internal-use software. The accounting for the service element is not affected by the amendments in this update.
| | The standard is effective for the Company as of January 1, 2020. The Company adopted the amendments in this update using the prospective method of adoption, and the adoption did not have a material impact to the Company's financial statements.
Date of adoption: Q1 2020
|
Recent Accounting Pronouncements Not Yet Adopted
|
| | | | |
Standard | | Description | | Financial Statement Effect or Other Significant Matters |
ASU No. 2019-12 Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes
| | The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and improve consistent application by clarifying and amending existing guidance. The amendments of this standard are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued, with the amendments to be applied on a respective, modified retrospective or prospective basis, depending on the specific amendment.
| | The Company is currently evaluating the requirements of this standard. The standard is effective for the Company as of January 1, 2021. The Company adopted the amendments in this update and the adoption did not expected to have a material impact onto the Company'sCompany’s financial statements.
Date of adoption: Q1 2021 |
(3) ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
| |
(3) | ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS |
Accounts receivable consists of the following (in thousands):
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
Trade accounts receivable | $ | 175,277 | | | $ | 174,604 | |
Costs in excess of billings | 27,640 | | | 26,915 | |
Total accounts receivables | 202,917 | | | 201,519 | |
Less allowance for doubtful accounts and contract assets | (3,319) | | | (3,529) | |
Accounts receivable, net | $ | 199,598 | | | $ | 197,990 | |
|
| | | | | | | |
| March 31, 2020 | | December 31, 2019 |
Trade accounts receivable | $ | 156,399 |
| | $ | 133,238 |
|
Costs in excess of billings | 21,834 |
| | 20,607 |
|
Total accounts receivables | 178,233 |
| | 153,845 |
|
Less allowance for doubtful accounts and contract assets | (5,781 | ) | | (6,330 | ) |
Accounts receivable | $ | 172,452 |
| | $ | 147,515 |
|
Refer to Note 4 "Revenue" concerning the Company's costs in excess of billings.
The Company is exposed to credit losses through sales of products and services. The Company’s expected loss allowance methodology for accounts receivable and costs in excess of billings (collectively "accounts receivable") is developed using historical collection experience, current and future economic and market conditions, and a review of the current status of customers' accounts receivables. Due to the short-term nature of such accounts receivable, the estimated amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances. Additionally, specific allowance amounts are established to record the appropriate provision for customers that no longer share risk characteristics similar with other accounts receivable. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. The Company considered the current and expected future economic and market conditions surrounding the coronavirus ("COVID-19") pandemic and determined that the estimate of credit losses was not significantly impacted as of March 31, 2020.
Estimates are used to determine the allowance. It is based on assessment of anticipated payment and all other historical, current and future information that is reasonably available.
The following table provides a roll-forward of the allowance for credit losses, for the three month period ended March 31, 2021, that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected.
|
| | | |
Beginning balance as of January 1, 2020 | $ | 6,330 |
|
Adoption of ASU 2016-13, cumulative-effect adjustment to retained earnings | 387 |
|
Bad debt expense | 69 |
|
Write-off charged against the allowance and other adjustments | (1,005 | ) |
Ending balance as of March 31, 2020 | $ | 5,781 |
|
| | | | | |
Beginning balance as of January 1, 2021 | $ | 3,529 | |
| |
(4)Bad debt expense, net of recoveries | REVENUE(159) | |
Accounts written off against allowance and other adjustments | (51) | |
Ending balance as of March 31, 2021 | $ | 3,319 | |
(4) REVENUE
Sales includes revenue from contracts with customers forfor: designing, engineering, manufacturing and installation of solar racking systems and greenhouse structures; electrical balance of systems; extraction systems; roof and foundation ventilation products; centralized mail systems and electronic package solutions; rain dispersion products and roofing accessories; expanded and perforated metal; perimeter security solutions;retractable awnings; gutter guards; expansion joints and structural bearings.
Refer to Note 1415 "Segment Information" for additional information related to revenue recognized by timing of transfer of control by reportable segment.
As of March 31, 2020,2021, the Company's remaining performance obligations are part of contracts that have an original expected duration of one year or less.
Contract assets consist of costs in excess of billings. Contract liabilities consist of billings in excess of cost and unearned revenue. The following table presents the beginning and ending balances of costs in excess of billings, billings in excess of cost and unearnedUnearned revenue as of March 31, 20202021 and December 31, 2019, respectively,2020 was $13.1 million and
revenue $21.3 million, respectively. Revenue recognized during the three months ended March 31, 20202021 and 2019, respectively,2020 that was in billings in excess of cost and unearned revenuecontract liabilities at the beginning of the period (in thousands):respective periods was $40.7 million and $38.1 million, respectively.
|
| | | | | | | |
| March 31, 2020 | | December 31, 2019 |
Costs in excess of billings | $ | 21,834 |
| | $ | 20,607 |
|
Billings in excess of cost | (34,567 | ) | | (47,598 | ) |
Unearned revenue | (19,388 | ) | | (17,311 | ) |
|
| | | | | | | |
| Three Months Ended March 31, 2020 | | Three Months Ended March 31, 2019 |
Revenue recognized in the period from: | | | |
Amounts included in billings in excess of cost at the beginning of the period | $ | 29,221 |
| | $ | 9,697 |
|
Amounts included in unearned revenue at the beginning of the period | $ | 9,619 |
| | $ | 4,661 |
|
(5) INVENTORIES
Inventories consist of the following (in thousands):
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
Raw material | $ | 73,364 | | | $ | 66,018 | |
Work-in-process | 4,844 | | | 5,382 | |
Finished goods | 32,757 | | | 31,205 | |
Gross inventory | $ | 110,965 | | | $ | 102,605 | |
Less reserves | (3,961) | | | (4,298) | |
Total inventories, net | $ | 107,004 | | | $ | 98,307 | |
|
| | | | | | | |
| March 31, 2020 | | December 31, 2019 |
Raw material | $ | 50,601 |
| | $ | 45,700 |
|
Work-in-process | 9,471 |
| | 5,988 |
|
Finished goods | 28,513 |
| | 26,788 |
|
Total inventories | $ | 88,585 |
| | $ | 78,476 |
|
(6) ACQUISITIONS
2020 Acquisitions
During the year ended December 31, 2020, the Company acquired 5 businesses in separate transactions, 2 of which are included within our Renewables segment, 2 in our Agtech segment, and 1 in our Residential segment. The purchase consideration for each acquisition was allocated to the assets acquired and liabilities assumed based upon their respective fair values.
On December 31, 2020, the Company purchased all the outstanding membership interests of TerraSmart LLC ("TerraSmart"), a leading provider of screw-based, ground-mount solar racking technology, particularly used for solar projects installed on challenging terrain. The results of TerraSmart have been included in the Company's consolidated financial results since the date of acquisition within the Company's Renewables segment. The preliminary purchase consideration for the acquisition of TerraSmart was $223.7 million, which includes a preliminary working capital adjustment and certain other adjustments provided for in the stock purchase agreement.
The purchase price for the TerraSmart acquisition was preliminarily allocated to the assets acquired and liabilities assumed based upon their respective fair values estimated as of the date of acquisition. The Company has commenced the process to confirm the existence, condition and completeness of the assets acquired and liabilities assumed to establish fair values of such acquired assets and assumed liabilities and to determine the amount of goodwill to be recognized as of the date of acquisition. Due to the timing of the acquisition, we continue to gather information supporting the acquired assets and assumed liabilities. Accordingly, all amounts recorded are provisional. These provisional amounts are subject to change if new information is obtained concerning facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. The final determination of the fair value of certain assets and liabilities will be completed within a measurement period of up to one year from the date of acquisition. The final values may also result in changes to depreciation and amortization expense related to certain assets such as property, plant and equipment and acquired intangible assets. The preliminary excess consideration was recorded as goodwill and approximated $153.7 million, all of which is 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 solar energy market. The final purchase price allocation will be completed no later than December 31, 2021.
The preliminary allocation of the TerraSmart purchase consideration to the estimated fair value of the assets acquired and liabilities assumed is as follows as of the date of the acquisition (in thousands):
| | | | | |
Cash | $ | 1,491 | |
Working capital | 7,158 | |
Property, plant and equipment | 9,396 | |
Acquired intangible assets | 51,700 | |
Other assets | 1,855 | |
Other liabilities | (1,636) | |
Goodwill | 153,690 | |
Fair value of purchase consideration | $ | 223,654 | |
The intangible assets acquired in the TerraSmart acquisition consisted of the following (in thousands):
| | | | | | | | | | | |
| Fair Value | | Weighted-Average Amortization Period |
Trademarks | $ | 16,400 | | | Indefinite |
Trademarks | 300 | | | 7 years |
Technology | 2,500 | | | 15 years |
Customer relationships | 24,000 | | | 10 years |
Non-compete agreements | 2,200 | | | 5 years |
Backlog | 6,300 | | | Less than 1 year |
Total | $ | 51,700 | | | |
On December 11, 2020, the Company purchased all the outstanding stock of Sunfig Corporation ("Sunfig"), a provider of software solutions that optimize solar energy investments through upstream design, performance and financial modeling, for a preliminary purchase consideration of $3.8 million, which includes a preliminary working capital adjustment and certain other adjustments provided for in the stock purchase agreement. The results of Sunfig have been included in the Company's consolidated financial results since the date of acquisition within the Company's Renewables segment. The excess consideration was recorded as goodwill and approximated $3.2 million, all of which is deductible for tax purposes.
On October 15, 2020, the Company purchased substantially all of the assets of Architectural Mailboxes LLC ("Architectural Mailboxes"), a complementary addition to the Company's existing mail and package solutions business within the Residential segment, for a preliminary purchase consideration of $26.9 million, which includes a working capital adjustment and certain other adjustments provided for in the asset purchase agreement. The results of Architectural Mailboxes have been included in the Company's consolidated financial results since the date of acquisition within the Company's Residential segment. The excess consideration was recorded as goodwill and approximated $7.4 million, all of which is deductible for tax purposes.
On February 13, 2020, the Company purchased substantially all of the assets of Delta Separations, LLC a California limited liability company, and Teaching Tech, LLC a California limited liability company (collectively, described as "Delta Separations"). for a purchase consideration of $47.1 million, which includes a working capital adjustment and certain other adjustments provided for in the asset purchase agreement. Delta Separations was a privately-held engineering company primarily engaged in the assembly and sale of centrifugal ethanol-based extraction systems. The results of Delta Separations have been included in the Company's consolidated financial results since the date of acquisition within the Company's Renewable Energy and ConservationAgtech segment. The preliminary purchase consideration for the acquisition of Delta Separations was $47.2 million, which includes a working capital adjustment and certain other adjustments provided for in the asset purchase agreement expected to be remitted in the next three to six months, at which time a final purchase price will be determined.
The purchase price for the acquisition of the assets was preliminarily allocated to the assets acquired and liabilities assumed based upon their respective fair values. The excess consideration was recorded as goodwill and approximated $39.3$32.2 million, all of which is 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 presence in the extraction processing markets.
The preliminary allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed is as follows as of the date of the acquisition (in thousands):
|
| | | |
Working capital | $ | 3,183 |
|
Property, plant and equipment | 337 |
|
Acquired intangible assets | 7,600 |
|
Other assets | 923 |
|
Other liabilities | (4,189 | ) |
Goodwill | 39,335 |
|
Fair value of purchase consideration | $ | 47,189 |
|
The intangible assets acquired in this acquisition consisted of the following (in thousands):
|
| | | | | |
| Fair Value | | Weighted-Average Amortization Period |
Trademarks | $ | 2,000 |
| | 5 years |
Technology | 2,200 |
| | 10 years |
Customer relationships | 3,400 |
| | 5 years |
Total | $ | 7,600 |
| | |
On January 15, 2020, the Company purchased substantially all of the assets of Thermo Energy Systems Inc. ("Thermo"), a Canadian-based, privately held provider of commercial greenhouse solutions in North America supportingproviding growing infrastructure for the plant based organic food market.market, for a purchase consideration of $7.3 million. The results of Thermo Energy Systems have been included in the Company's consolidated financial results since the date of acquisition within the Company's Renewable Energy and ConservationAgtech segment. The preliminary purchase consideration for the acquisition of Thermo Energy Systems was $7.3 million.
The purchase price for the acquisition was preliminarily allocated to the assets acquired and liabilities assumed based upon their respective estimated fair values and the remaining consideration was recorded to goodwill. Goodwill of approximately $13.3$18.7 million was recorded, all of which is deductible for tax purposes.
The preliminary allocation of the purchase price for Sunfig and Architectural Mailboxes remains subject to adjustments during the measurement period as third-party valuations are finalized. The preliminary and final allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed in the acquisitions of Sunfig, Architectural Mailboxes, Delta Separations and Thermo is as follows as of the respective date of the acquisition (in thousands):
| | | | | | | |
Cash | $ | 200 | | | |
Working capital | (14,957) | | | |
Property, plant and equipment | 1,740 | | | |
Acquired intangible assets | 38,296 | | | |
Other current assets | 1,528 | | | |
Other assets | 2,381 | | | |
Other liabilities | (5,508) | | | |
Goodwill | 61,422 | | | |
Fair value of purchase consideration | $ | 85,102 | | | |
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 commercial greenhouserespective markets.
The preliminary 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 | $ | 58 |
|
Working capital | (16,464 | ) |
Property, plant and equipment | 1,029 |
|
Acquired intangible assets | 9,386 |
|
Other assets | 1,285 |
|
Other liabilities | (1,285 | ) |
Goodwill | 13,324 |
|
Fair value of purchase consideration | $ | 7,333 |
|
The intangible assets acquired in this acquisitionthe acquisitions of Sunfig, Architectural Mailboxes, Delta Separations and Thermo consisted of the following (in thousands):
| | | | | | | | | | | |
| Fair Value | | Weighted-Average Amortization Period |
Trademarks | $ | 8,200 | | | Indefinite |
Trademarks | 1,177 | | | 3 years |
Technology | 8,175 | | | 7 - 15 years |
Customer relationships | 18,780 | | | 5 - 13 years |
Non-compete agreements | 1,036 | | | 5 years |
Backlog | 928 | | | Less than 1 year |
Total | $ | 38,296 | | | |
|
| | | | | |
| Fair Value | | Weighted-Average Amortization Period |
Trademarks | $ | 635 |
| | 3 years |
Technology | 2,541 |
| | 15 years |
Customer relationships | 6,210 |
| | 10 years |
Total | $ | 9,386 |
| | |
On August 30, 2019, the Company acquired all of the outstanding membership interests of Apeks LLC ("Apeks"), a designer and manufacturer of botanical oil extraction systems and equipment. The results of Apeks 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 aggregate purchase consideration for the acquisition of Apeks was $12.6 million, which includes a working capital adjustment and certain other adjustments provided for in the stock purchase agreement.
The purchase price for the acquisition was preliminarily allocated to the assets acquired and liabilities assumed based upon their respective fair values. The excess consideration was recorded as goodwill and approximated $5.9 million, all of which is 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 presence in the extraction processing markets.
The preliminary allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed is as follows as of the date of the acquisition (in thousands):
|
| | | |
Cash | $ | 4,154 |
|
Working capital | (1,412 | ) |
Property, plant and equipment | 1,059 |
|
Acquired intangible assets | 3,400 |
|
Other assets | 508 |
|
Other liabilities | (1,081 | ) |
Goodwill | 5,933 |
|
Fair value of purchase consideration | $ | 12,561 |
|
The intangible assets acquired in this acquisition consisted of the following (in thousands):
|
| | | | | |
| Fair Value | | Weighted-Average Amortization Period |
Trademarks | $ | 1,900 |
| | 5 years |
Technology | 900 |
| | 7 years |
Customer relationships | 600 |
| | 6 years |
Total | $ | 3,400 |
| | |
In determining the allocation of the purchase price to the assets acquired and the liabilities assumed, the Company uses all available information to make fair value determinations using Level 3 unobservable inputs in which little or no market data exists, and therefore, engages independent valuation specialists to assist in the fair value determination of the acquired long-lived assets.
The acquisition of TerraSmart was financed through a combination of cash on hand and borrowings under the Company's revolving credit facility. The acquisitions of Sunfig, Architectural Mailboxes, Delta Separations Thermo Energy Systems and ApeksThermo were funded from available cash on hand.
The Company incurred certain acquisition-related costs composed of legal and consulting fees. These costs were recognized as a component of selling, general, and administrative expenses in the consolidated statement of operations.
During the three months ended March 31, 2021 and 2020, the Company incurred $0.9 million and $1.3 million, ofrespectively, in acquisition-related costs. The Company did 0t incur anyrecognize acquisition-related costs duringas a component of cost of sales for the three months ended March 31, 2019.2021 and 2020, respectively.
| |
(7) | GOODWILL AND RELATED INTANGIBLE ASSETS |
(7) GOODWILL AND RELATED INTANGIBLE ASSETS
Goodwill
The changes in the carrying amount of goodwill for the three months ended March 31, 20202021 are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Renewables | | Residential | | Agtech | | Infrastructure | | Total |
Balance at December 31, 2020 | $ | 192,527 | | | $ | 205,452 | | | $ | 84,622 | | | $ | 31,678 | | | $ | 514,279 | |
Adjustments to prior year acquisitions | 9,951 | | | 0 | | | 0 | | | 0 | | 9,951 | |
| | | | | | | | | |
Foreign currency translation | (989) | | | 0 | | | 205 | | | 0 | | | (784) | |
Balance at March 31, 2021 | $ | 201,489 | | | $ | 205,452 | | | $ | 84,827 | | | $ | 31,678 | | | $ | 523,446 | |
|
| | | | | | | | | | | | | | | |
| Renewable Energy & Conservation | | Residential Products | | Industrial and Infrastructure Products | | Total |
Balance at December 31, 2019 | $ | 77,602 |
| | $ | 198,075 |
| | $ | 54,028 |
| | $ | 329,705 |
|
Acquired goodwill | 52,659 |
| | — |
| | — |
| | 52,659 |
|
Adjustments to prior year acquisitions | 75 |
| | — |
| | — |
| | 75 |
|
Foreign currency translation | 75 |
| | — |
| | (469 | ) | | (394 | ) |
Balance at March 31, 2020 | $ | 130,411 |
| | $ | 198,075 |
| | $ | 53,559 |
| | $ | 382,045 |
|
The Company conducts its annual goodwill impairment test as of October 31 each year. All of the Company’s ten reporting units had fair values exceeding their carrying values as of October 31, 2019. In addition to the annual impairment test, the Company is required to regularly assess whether a triggering event has occurred which would require interim impairment testing. The Company considered the current and future macroeconomic and market conditions, along with its current market capitalization, projected cash flows and internal and external forecasts, and projections relating to the impact of the COVID-19 pandemic on each of its reporting units. The Company determined that a triggering event has not occurred which would require an interim impairment test to be performed.
Acquired Intangible Assets
Acquired intangible assets consist of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 | | |
| Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization | | |
Indefinite-lived intangible assets: | | | | | | | | | |
Trademarks | $ | 56,670 | | | $ | 0 | | | $ | 56,570 | | | $ | 0 | | | |
Finite-lived intangible assets: | | | | | | | | | |
Trademarks | 5,831 | | | 3,574 | | | 5,818 | | | 3,385 | | | |
Unpatented technology | 38,892 | | | 18,479 | | | 38,752 | | | 17,765 | | | |
Customer relationships | 98,135 | | | 33,298 | | | 98,500 | | | 31,580 | | | |
Non-compete agreements | 4,888 | | | 1,913 | | | 4,885 | | | 1,747 | | | |
Backlog | 7,235 | | | 2,510 | | | 7,228 | | | 911 | | | |
| 154,981 | | | 59,774 | | | 155,183 | | | 55,388 | | | |
Total acquired intangible assets | $ | 211,651 | | | $ | 59,774 | | | $ | 211,753 | | | $ | 55,388 | | | |
|
| | | | | | | | | | | | | | | | | |
| March 31, 2020 | | December 31, 2019 | | |
| Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization | | Weighted-Average Amortization Period |
Indefinite-lived intangible assets: | | | | | | | | | |
Trademarks | $ | 45,770 |
| | $ | — |
| | $ | 45,770 |
| | $ | — |
| | Indefinite |
Finite-lived intangible assets: | | | | | | | | | |
Trademarks | 8,693 |
| | 4,239 |
| | 6,139 |
| | 4,105 |
| | 3 to 15 Years |
Unpatented technology | 34,289 |
| | 16,354 |
| | 29,544 |
| | 15,807 |
| | 5 to 20 Years |
Customer relationships | 80,777 |
| | 41,490 |
| | 71,195 |
| | 40,294 |
| | 5 to 17 Years |
Non-compete agreements | 1,649 |
| | 1,567 |
| | 1,649 |
| | 1,499 |
| | 4 to 10 Years |
| 125,408 |
| | 63,650 |
| | 108,527 |
| | 61,705 |
| | |
Total acquired intangible assets | $ | 171,178 |
| | $ | 63,650 |
| | $ | 154,297 |
| | $ | 61,705 |
| | |
The following table summarizes the acquired intangible asset amortization expense for the three months ended March 31 (in thousands):
|
| | | | | | | | |
| | Three Months Ended March 31, |
| | 2020 | | 2019 |
Amortization expense | | $ | 2,078 |
| | $ | 1,797 |
|
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2021 | | 2020 | | | | |
Amortization expense | $ | 4,743 | | | $ | 1,984 | | | | | |
Amortization expense related to acquired intangible assets for the remainder of fiscal 20202021 and the next five years thereafter is estimated as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 |
Amortization expense | $ | 14,140 | | | $ | 12,120 | | | $ | 11,195 | | | $ | 11,014 | | | $ | 10,780 | | | $ | 8,700 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | 2025 |
Amortization expense | $ | 5,311 |
| | $ | 6,937 |
| | $ | 6,459 |
| | $ | 5,921 |
| | $ | 5,666 |
| | $ | 5,566 |
|
The Company did 0t have any long-term
(8) LONG-TERM DEBT
Long-term debt outstanding at March 31, 2020 and December 31, 2019.consists of the following (in thousands):
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
Revolving credit facility | $ | 59,000 | | | $ | 85,000 | |
Other debt | 0 | | | 636 | |
Less unamortized debt issuance costs | (977) | | | 0 | |
Total debt | $ | 58,023 | | | $ | 85,636 | |
Senior Credit Agreement
On January 24, 2019, the Company entered into a Sixth Amended and Restated Credit Agreement ("Senior Credit Agreement"), which amendsamended and restatesrestated the Company’s Fifth Amended and Restated Credit Agreement dated December 9, 2015, and provides for a revolving credit facility and letters of credit in an aggregate amount equal to $400 million. The Company can request additional financing from the lenders 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 Senior Credit Agreement. The 2019 Senior Credit Agreement contains 3 financial covenants. As of March 31, 2020,2021, the Company iswas in compliance with all 3 covenants.
Interest rates on the revolving credit facility are based on LIBOR plus an additional margin that ranges from 1.125% to 2.00%. In addition, the revolving credit facility is subject to an undrawn commitment fee ranging between 0.15% and 0.25% based on the Total Leverage Ratio (as defined in the Senior Credit Agreement) and the daily average undrawn balance. The Senior Credit Agreement terminates on January 23, 2024.
Borrowings under the Senior Credit Agreement are secured by the trade receivables, inventory, personal property, equipment, and general intangibles of the Company’s significant domestic subsidiaries.
Standby letters of credit of $5.9$6.2 million have been issued under the Senior Credit Agreement on behalf of the Company as of March 31, 2020.2021. These letters of credit reduce the amount otherwise available under the revolving credit facility. As of March 31, 2020, theThe Company had $394.1$334.8 million and $309.2 million of availability under the revolving credit facility. NaN borrowings were outstanding under the Company's revolving credit facility at March 31, 20202021 and December 31, 2019.2020, respectively.
(9) ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
| |
(9) | ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME |
The following tables summarize the cumulative balance of each component of accumulated other comprehensive loss, net of tax, for the three months ended March 31, (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign Currency Translation Adjustment | | Minimum post retirement benefit plan adjustments | | Total Pre-Tax Amount | | Tax (Benefit) Expense | | Accumulated Other Comprehensive (Loss) Income | | |
Balance at December 31, 2020 | $ | (872) | | | $ | (2,426) | | | $ | (3,298) | | | $ | (837) | | | $ | (2,461) | | | |
| | | | | | | | | | | |
Minimum post retirement health care plan adjustments | — | | | 37 | | | 37 | | | 10 | | | 27 | | | |
Foreign currency translation adjustment | 3,198 | | | — | | | 3,198 | | | — | | | 3,198 | | | |
Balance at March 31, 2021 | $ | 2,326 | | | $ | (2,389) | | | $ | (63) | | | $ | (827) | | | $ | 764 | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | Foreign Currency Translation Adjustment | | Minimum post retirement benefit plan adjustments | | Total Pre-Tax Amount | | Tax (Benefit) Expense | | Accumulated Other Comprehensive (Loss) Income |
Balance at December 31, 2019 | | Balance at December 31, 2019 | $ | (4,173) | | | $ | (1,939) | | | $ | (6,112) | | | $ | (721) | | | $ | (5,391) | |
| Minimum post retirement health care plan adjustments | | Minimum post retirement health care plan adjustments | — | | | 25 | | | 25 | | | 7 | | | 18 | |
Foreign currency translation adjustment | | Foreign currency translation adjustment | (5,898) | | | — | | | (5,898) | | | — | | | (5,898) | |
Balance at March 31, 2020 | | Balance at March 31, 2020 | $ | (10,071) | | | $ | (1,914) | | | $ | (11,985) | | | $ | (714) | | | $ | (11,271) | |
| | | Foreign Currency Translation Adjustment | | Minimum pension and post retirement benefit plan adjustments | | Total Pre-Tax Amount | | Tax (Benefit) Expense | | Accumulated Other Comprehensive (Loss) Income | |
Balance at December 31, 2019 | $ | (4,173 | ) | | $ | (1,939 | ) | | $ | (6,112 | ) | | $ | (721 | ) | | $ | (5,391 | ) | |
Minimum pension and post retirement health care plan adjustments | — |
| | 25 |
| | 25 |
| | 7 |
| | 18 |
| |
Foreign currency translation adjustment | (5,898 | ) | | — |
| | (5,898 | ) | | — |
| | (5,898 | ) | |
Balance at March 31, 2020 | $ | (10,071 | ) | | $ | (1,914 | ) | | $ | (11,985 | ) | | $ | (714 | ) | | $ | (11,271 | ) | |
|
|
| | | | | | | | | | | | | | | | | | | |
| Foreign Currency Translation Adjustment | | Minimum pension and post retirement benefit plan adjustments | | Total Pre-Tax Amount | | Tax (Benefit) Expense | | Accumulated Other Comprehensive (Loss) Income |
Balance at December 31, 2018 | $ | (5,939 | ) | | $ | (2,040 | ) | | $ | (7,979 | ) | | $ | (745 | ) | | $ | (7,234 | ) |
Minimum pension and post retirement health care plan adjustments | — |
| | 16 |
| | 16 |
| | 4 |
| | 12 |
|
Foreign currency translation adjustment | 842 |
| | — |
| | 842 |
| | — |
| | 842 |
|
Balance at March 31, 2019 | $ | (5,097 | ) | | $ | (2,024 | ) | | $ | (7,121 | ) | | $ | (741 | ) | | $ | (6,380 | ) |
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 income.
| |
(10) | EQUITY-BASED COMPENSATION |
(10) EQUITY-BASED COMPENSATION
On May 4, 2018, the shareholdersstockholders of the Company approved 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 existing Gibraltar Industries, Inc. 2015 Equity Incentive Plan (the "2015 Plan"). Both the 2018 Plan and the 2015 Plan allow the Company to grant equity-based incentive compensation awards, in the form of non-qualified options, restricted shares, restricted stock units, performance shares, performance stock units, and stock rights to eligible participants.
In 2016, the shareholdersstockholders of the Company approved the adoption of the Gibraltar Industries, Inc. 2016 Stock Plan for Non-Employee Directors ("Non-Employee Directors Plan") which allows the Company to grant awards of shares of the Company's common stock to non-employee Directors of the Company and permits the Directors to defer receipt of such shares pursuant to the terms of the Non-Employee Directors Plan.
Equity Based Awards - Settled in Stock
The following table sets forth the number of equity-based awards granted during the three months ended March 31, which will convert to shares upon vesting, along with the weighted average grant date fair values:
|
| | | | | | | | | | | | | |
| 2020 | | 2019 |
Awards | Number of Awards (1) | | Weighted Average Grant Date Fair Value | | Number of Awards (2) | | Weighted Average Grant Date Fair Value |
Performance stock units | 123,870 |
| | $ | 53.29 |
| | 145,420 |
| | $ | 40.55 |
|
Restricted stock units | 42,101 |
| | $ | 52.31 |
| | 117,821 |
| | $ | 39.37 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 |
Awards | Number of Awards | | Weighted Average Grant Date Fair Value | | Number of Awards (2) | | Weighted Average Grant Date Fair Value |
Performance stock units (1) | 62,778 | | | $ | 87.84 | | | 123,870 | | | $ | 53.29 | |
Restricted stock units | 33,187 | | | $ | 87.91 | | | 42,101 | | | $ | 52.31 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
(1) The Company’s performance stock units (“PSUs”) represent shares granted for which the final number of shares earned depends on financial performance or market conditions. The number of shares to be issued may vary between 0% and 200% of the number of performance stock units granted depending on the relative achievement to targeted thresholds. The Company's PSUs with a financial performance condition are based on either the Company’s return on invested capital (“ROIC”) over a one-year period performance period or revenue, gross profit and operating profit thresholds over a twoc or three-year performance period. The Company's PSUs with a market condition are based on the ranking of the Company’s total shareholderstockholder return (“TSR”) performance, on a percentile basis, over a three year performance period compared to the S&P Small Cap Industrial sector, over the same three year performance period.
(2) Performance stock unitsPSUs granted in 2019 havethe first quarter of 2020 include 72,239 units that will be converted to 168,688 shares to beand issued to recipients in the first quarter of 2022, representing 116%2023 at 109.5% of the targeted 2019 award,target amount granted, based on the Company’s actual ROIC compared to ROIC target for the performance period ended December 31, 2019.2020.
Equity Based Awards - Settled in Cash
The Company's equity-based liability includesis comprised of awards under a management stock purchase plan. As of March 31, 2020,2021, the Company's total share-based liabilities recorded on the consolidated balance sheet were $28.7$19.3 million, of which $12.2$16.4 million was included in non-current liabilities. The share-based liabilities as of December 31, 20192020 were $28.0$18.2 million, of which $13.2$14.7 million was included in non-current liabilities.
The Management Stock Purchase Plan ("MSPP") provides participants the ability to defer a portion of their compensation, convertible to unrestricted investments, restricted stock units, or a combination of both, or defer a portion of their Directors’directors’ fees, convertible to restricted stock units. Employees eligible to defer a portion of their compensation also receive a company-matching award in restricted stock units equal to a percentage of their compensation.
The deferrals and company-matchingrelated company match are credited to an account that represents a share-based liability. 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 CompanyCompany’s stock price. The account will be converted to and settled in cash payable to participants upon retirement or a termination of their service to the Company.
The following table provides the number of restricted stock units credited to active participant accounts and the payments made with respect to restricted stock units issued under the MSPP during the three months ended March 31,:
| | | | | | | | | | | |
| 2021 | | 2020 |
Restricted stock units credited | 24,085 | | | 52,411 | |
Share-based liabilities paid (in thousands) | $ | 3,510 | | | $ | 4,433 | |
|
| | | | | | | |
| 2020 | | 2019 |
Restricted stock units credited | 52,411 |
| | 51,608 |
|
Share-based liabilities paid (in thousands) | $ | 4,433 |
| | $ | 4,933 |
|
(11) DISCONTINUED OPERATIONS
On February 23, 2021, the Company sold the stock of its Industrial business which had been classified as held for sale and reported as a discontinued operation in the Company’s consolidated financial statements for the year ended December 31, 2020. Net proceeds of $38 million, consisting of cash and a $13 million seller note, resulted in an estimated pre-tax loss of $30 million, subject to working capital and other adjustments, of which $29.6 million was recorded when the assets of the Industrial business were written down to fair market value during the fourth quarter of 2020.
The results of operations and financial position of the Industrial business have been presented as a discontinued operation in the Company's consolidated financial statements for all periods presented. The Company allocates interest to its discontinued operations in accordance with ASC Subtopic 205-20, “Presentation of Financial Statements – Discontinued Operations.” Interest was allocated based on the amount of net assets held by the discontinued operation in comparison to consolidated net assets.
The following carrying amounts of the major classes of assets and liabilities included in discontinued operations related to the Industrial business has been segregated from the Company's continuing operations and are reported as assets and liabilities of discontinued operations, respectively, in the consolidated balance sheet at December 31, 2020 (in thousands):
| | | | | | | | | |
(11) | EXIT ACTIVITY COSTS AND ASSET IMPAIRMENTSDecember 31, 2020 | | | | |
Assets | | | | | |
Accounts receivable, net | $ | 11,261 | | | | | |
Inventories, net | 13,041 | | | | | |
Prepaid expenses and other current assets | 21,310 | | | | | |
Total current assets (1) | 45,612 | | | | | |
Property, plant, and equipment, net | 16,999 | | | | | |
Operating lease assets | 6,470 | | | | | |
Goodwill | 22,475 | | | | | |
Acquired intangibles | 15,482 | | | | | |
Loss recognized on classification as held for sale | (29,600) | | | | | |
Total noncurrent assets (1) | 31,826 | | | | | |
Total assets classified as held for sale | $ | 77,438 | | | | | |
| | | | | |
Liabilities | | | | | |
Accounts payable | $ | 10,708 | | | | | |
Accrued expenses | 9,274 | | | | | |
Total current liabilities (1) | 19,982 | | | | | |
Deferred income taxes | 24,657 | | | | | |
Non-current operating lease liabilities | 4,639 | | | | | |
Other non-current liabilities | 17 | | | | | |
Total noncurrent liabilities (1) | 29,313 | | | | | |
Total liabilities classified as held for sale | $ | 49,295 | | | | | |
(1) The assets and liabilities of the discontinued operations were classified as current on the December 31, 2020 consolidated balance sheet, as it was probable that the sale would occur and proceeds will be collected within one year.
Components of income from discontinued operations before taxes, including the interest allocated to discontinued operations, for the three months ended March 31 are as follows (in thousands):
| | | | | | | | | | | | | | | |
| 2021 | | 2020 | | | | |
Net sales | $ | 20,391 | | | $ | 34,038 | | | | | |
Operating expenses | 17,493 | | | 31,202 | | | | | |
Adjustment to loss on disposal | 328 | | | 0 | | | | | |
Interest expense allocation | 0 | | | 6 | | | | | |
Income from discontinued operations before taxes | $ | 2,570 | | | $ | 2,830 | | | | | |
(12) EXIT ACTIVITY COSTS AND ASSET IMPAIRMENTS
The Company has incurred exit activity costs and asset impairment charges as a result of its 80/20 simplification and portfolio management initiatives. These initiatives have resulted in the identification of low-volume, low margin, internally-produced products which have been or will be outsourced or discontinued, the simplification of processes, in the sale and exiting of less profitable businesses or productsproduct lines, and thea reduction in our manufacturing footprint.
Exit activity costs were incurred during the three months ended March 31, 2020 and 20192021 which related to moving and closing costs, contract terminations, and severance, incurredalong with asset impairment charges related to the write-down of inventory and impairment of machinery and equipment associated with discontinued product lines, as a result of process simplification initiatives. In conjunction with these initiatives, the Company closed 2 facilities during the three months ended March 31, 2021. Exit activity costs were incurred from the above initiatives for the three months ended March 31, 2020. NaN facilities were closed as a result of these initiatives during these respective periods.the three months ended March 31, 2020.
The following tables set forth the asset impairment charges and exit activity costs (recoveries) incurred by segment during the three months ended March 31, related to the restructuring activities described above (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, |
| 2021 | | 2020 |
| Asset impairment charges | | Exit activity costs (recoveries), net | | Total | | Asset impairment charges | | Exit activity costs | | Total |
Renewables | $ | 1,193 | | | $ | 3,778 | | | $ | 4,971 | | | $ | 0 | | | $ | 18 | | | $ | 18 | |
Residential | 0 | | | 65 | | | 65 | | | 0 | | | 221 | | | 221 | |
Agtech | 0 | | | 204 | | | 204 | | | 0 | | | 0 | | | 0 | |
Infrastructure | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
Corporate | — | | | 0 | | | 0 | | | 0 | | | 54 | | | 54 | |
Total exit activity costs & asset impairments | $ | 1,193 | | | $ | 4,047 | | | $ | 5,240 | | | $ | 0 | | | $ | 293 | | | $ | 293 | |
|
| | | | | | | |
| Three months ended March 31, |
| 2020 | | 2019 |
Renewable Energy and Conservation | $ | 18 |
| | $ | 94 |
|
Residential Products | 221 |
| | 151 |
|
Industrial and Infrastructure Products | (2 | ) | | (33 | ) |
Corporate | 54 |
| | 7 |
|
Total exit activity costs | $ | 291 |
| | $ | 219 |
|
The following table provides a summary of where the asset impairments and exit activity costs (recoveries) were recorded in the consolidated statements of income for the three months ended March 31, (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2021 | | 2020 | | | | |
Cost of sales | $ | 5,047 | | | $ | 69 | | | | | |
Selling, general, and administrative expense | 193 | | | 224 | | | | | |
Total asset impairment and exit activity charges | $ | 5,240 | | | $ | 293 | | | | | |
|
| | | | | | | |
| Three Months Ended March 31, |
| 2020 | | 2019 |
Cost of sales | $ | 87 |
| | $ | (34 | ) |
Selling, general, and administrative expense | 204 |
| | 253 |
|
Net exit activity charges | $ | 291 |
| | $ | 219 |
|
The following table reconciles the beginning and ending liability for exit activity costs relating to the Company’s facility consolidation efforts (in thousands):
| | | 2020 | | 2019 | | 2021 | | 2020 |
Balance at January 1 | $ | 5,449 |
| | $ | 1,923 |
| Balance at January 1 | $ | 1,030 | | | $ | 2,083 | |
Exit activity costs recognized | 291 |
| | 219 |
| Exit activity costs recognized | 4,047 | | | 293 | |
Cash payments | (4,728 | ) | | (550 | ) | Cash payments | (1,464) | | | (1,365) | |
Balance at March 31 | $ | 1,012 |
| | $ | 1,592 |
| Balance at March 31 | $ | 3,613 | | | $ | 1,011 | |
(13) INCOME TAXES
The following table summarizes the provision for income taxes for continuing operations (in thousands) for the three months ended March 31, and the applicable effective tax rates:
|
| | | | | | | |
| Three Months Ended March 31, |
| 2020 | | 2019 |
Provision for income taxes | $ | 2,986 |
| | $ | 1,571 |
|
Effective tax rate | 19.8 | % | | 19.8 | % |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2021 | | 2020 | | | | |
Provision for income taxes | $ | 1,560 | | | $ | 2,313 | | | | | |
Effective tax rate | 12.9 | % | | 18.9 | % | | | | |
The effective tax rate for the three months ended March 31, 20202021 and 2019,2020, respectively, was less than the U.S. federal statutory rate of 21% due to favorable discrete items due to an excess tax benefit on stock-based compensation, partially offset by state taxes and nondeductible permanent differences.
(13)(14) EARNINGS PER SHARE
Basic earnings and weighted-average of diluted weighted-average shares outstanding are as follows for the three months ended March 31, (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2021 | | 2020 | | | | |
Numerator: | | | | | | | |
Income from continuing operations | $ | 10,496 | | | $ | 9,902 | | | | | |
Income from discontinued operations | 2,266 | | | 2,157 | | | | | |
Net income available to common stockholders | $ | 12,762 | | | $ | 12,059 | | | | | |
Denominator for basic earnings per share: | | | | | | | |
Weighted average shares outstanding | 32,771 | | | 32,586 | | | | | |
Denominator for diluted earnings per share: | | | | | | | |
Weighted average shares outstanding | 32,771 | | | 32,586 | | | | | |
Common stock options and stock units | 333 | | | 297 | | | | | |
Weighted average shares and conversions | 33,104 | | | 32,883 | | | | | |
|
| | | | | | | |
| Three Months Ended March 31, |
| 2020 | | 2019 |
Numerator: | | | |
Net income available to common shareholders | $ | 12,059 |
| | $ | 6,345 |
|
Denominator for basic earnings per share: | | | |
Weighted average shares outstanding | 32,586 |
| | 32,279 |
|
Denominator for diluted earnings per share: | | | |
Weighted average shares outstanding | 32,586 |
| | 32,279 |
|
Common stock options and stock units | 297 |
| | 338 |
|
Weighted average shares and conversions | 32,883 |
| | 32,617 |
|
The weighted average number of diluted shares does not include potential anti-dilutive common shares issuable pursuant to equity based incentive compensation awards, aggregating to 18,000 and 258,000awards. There were 0 anti-dilutive shares outstanding for the three months ended March 31, 20202021 and 2019, respectively.18,000 for the three months ended March 31, 2020.
(15) SEGMENT INFORMATION
The Company is organized into 34 reportable segments on the basis of the production process andprocesses, products and services provided by each segment, identified as follows:
| |
(i) | Renewable Energy and Conservation, which primarily includes designing, engineering, manufacturing and installation of solar racking, electrical balance of systems, extraction systems and greenhouse structures; |
| |
(ii) | Residential Products, which primarily includes roof and foundation ventilation products, rain dispersion products and roofing accessories, centralized mail systems and electronic package solutions; and |
| |
(iii) | Industrial and Infrastructure Products, which primarily includes expanded and perforated metal, perimeter security systems, expansion joints, and structural bearings. |
(i)Renewables, which primarily includes designing, engineering, manufacturing and installation of solar racking and electrical balance of systems;
(ii)Residential, which primarily includes roof and foundation ventilation products, centralized mail systems and electronic package solutions, retractable awnings and gutter guards, and rain dispersion products, trims and flashings and other accessories;
(iii)Agtech, which provides growing and processing solutions including the designing, engineering, manufacturing and installation of greenhouses, and botanical extraction systems; and
(iv)Infrastructure, which primarily includes structural bearings, expansion joints and pavement sealant for bridges, airport runways and roadways, elastomeric concrete, and bridge cable protection systems.
When determining the reportable segments, the Company aggregated operating segments based on their similar economic and operating characteristics.
2021, the Company reassessed its reportable segments. As a result, the Company's former Renewable Energy and Conservation segment was divided into two reportable segments: Renewables and Agtech.
The following table illustrates certain measurements used by management to assess performance of the segments described above for the three months ended March 31, (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2021 | | 2020 | | | | |
Net sales: | | | | | | | |
Renewables | $ | 85,512 | | | $ | 47,263 | | | | | |
Residential | 140,217 | | | 103,419 | | | | | |
Agtech | 46,739 | | | 49,234 | | | | | |
Infrastructure | 15,124 | | | 15,485 | | | | | |
Total net sales | $ | 287,592 | | | $ | 215,401 | | | | | |
| | | | | | | |
Income from operations: | | | | | | | |
Renewables | $ | (521) | | | $ | 4,359 | | | | | |
Residential | 22,934 | | | 13,725 | | | | | |
Agtech | 929 | | | 1,340 | | | | | |
Infrastructure | 2,037 | | | 1,576 | | | | | |
Unallocated Corporate Expenses | (12,564) | | | (8,223) | | | | | |
Total income from operations | $ | 12,815 | | | $ | 12,777 | | | | | |
|
| | | | | | | |
| Three Months Ended March 31, |
| 2020 | | 2019 |
Net sales: | | | |
Renewable Energy and Conservation | $ | 96,497 |
| | $ | 68,837 |
|
Residential Products | 103,419 |
| | 103,709 |
|
Industrial and Infrastructure Products | 49,801 |
| | 55,188 |
|
Less: Intersegment sales | (278 | ) | | (317 | ) |
Net Industrial and Infrastructure Products | 49,523 |
| | 54,871 |
|
Total consolidated net sales | $ | 249,439 |
| | $ | 227,417 |
|
| | | |
Income from operations: | | | |
Renewable Energy and Conservation | $ | 5,699 |
| | $ | 1,632 |
|
Residential Products | 13,725 |
| | 12,090 |
|
Industrial and Infrastructure Products | 3,989 |
| | 4,129 |
|
Unallocated Corporate Expenses | (8,223 | ) | | (7,285 | ) |
Total consolidated income from operations | $ | 15,190 |
| | $ | 10,566 |
|
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
Total assets: | | | |
Renewables | $ | 393,499 | | | $ | 402,796 | |
Residential | 427,894 | | | 407,132 | |
Agtech | 212,507 | | | 216,275 | |
Infrastructure | 82,833 | | | 80,796 | |
Unallocated corporate assets | 38,458 | | | 28,057 | |
Assets of discontinued operations | 0 | | | 77,438 | |
| $ | 1,155,191 | | | $ | 1,212,494 | |
The following tables illustrate segment revenue disaggregated by timing of transfer of control to the customer for the three months ended March 31 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2021 |
| Renewables | | Residential | | Agtech | | Infrastructure | | Total |
Net sales: | | | | | | | | | |
Point in Time | 6,971 | | | 139,019 | | | 5,143 | | | 5,470 | | | $ | 156,603 | |
Over Time | 78,541 | | | 1,198 | | | 41,596 | | | 9,654 | | | 130,989 | |
Total net sales | $ | 85,512 | | | $ | 140,217 | | | $ | 46,739 | | | $ | 15,124 | | | $ | 287,592 | |
| | | Three Months Ended March 31, 2020 | | Three Months Ended March 31, 2020 |
| Renewable Energy and Conservation | | Residential Products | | Industrial and Infrastructure Products | | Total | | Renewables | | Residential | | Agtech | | Infrastructure | | Total |
Net sales: | | | | | | | | Net sales: | | | | | | | | | |
Point in Time | $ | 14,588 |
| | $ | 102,331 |
| | $ | 39,495 |
| | $ | 156,414 |
| Point in Time | $ | 3,696 | | | $ | 102,331 | | | $ | 14,096 | | | $ | 5,457 | | | $ | 125,580 | |
Over Time | 81,909 |
| | 1,088 |
| | 10,028 |
| | 93,025 |
| Over Time | 43,567 | | | 1,088 | | | 35,138 | | | 10,028 | | | 89,821 | |
Total net sales | $ | 96,497 |
| | $ | 103,419 |
| | $ | 49,523 |
| | $ | 249,439 |
| Total net sales | $ | 47,263 | | | $ | 103,419 | | | $ | 49,234 | | | $ | 15,485 | | | $ | 215,401 | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2019 |
| Renewable Energy and Conservation | | Residential Products | | Industrial and Infrastructure Products | | Total |
Net sales: | | | | | | | |
Point in Time | $ | 7,290 |
| | $ | 102,892 |
| | $ | 45,287 |
| | $ | 155,469 |
|
Over Time | 61,547 |
| | 817 |
| | 9,584 |
| | 71,948 |
|
Total net sales | $ | 68,837 |
| | $ | 103,709 |
| | $ | 54,871 |
| | $ | 227,417 |
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Certain information set forth herein includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and, therefore are, or may be deemed to be, “forward-looking statements.” These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “anticipates,” "aspires," “expects,” “estimates,” “seeks,” “projects,” “intends,” “plans,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, competition, strategies and the industries in which we operate. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those described in the “Risk Factors” disclosed in our Annual Report on Form 10-K along with Item 1A of this Form 10-Q. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition, 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, liquidity, and the development of the industries in which we operate are consistent with the forward-looking statements contained in this quarterly report, those results or developments may not be indicative of results or developments in subsequent periods. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statements that we make herein speak only as of the date of those statements, and we undertake no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.
We use certain operating performance measures, specifically consolidated gross margin, operating margin by segment and consolidated operating margin, to manage our businesses, set operational goals, and establish performance targets for incentive compensation for our employees. We define consolidated gross margin as a percentage of total consolidated gross profit to total consolidated net sales. We define operating margin by segment as a percentage of total income from operations by segment to total net sales by segment and consolidated operating margin as a percentage of total consolidated income from operations to total consolidated net sales. We believe consolidated gross margin, operating margin and consolidated operating margin may be useful to investors in evaluating the profitability of our segments and Company on a consolidated basis.
Overview
Gibraltar Industries, Inc. (the "Company") is a leading manufacturer and provider of products and services for the renewable energy, conservation, residential, industrialagtech, and infrastructure markets.
The Company operates and reports its results in the following threefour reporting segments:
Renewable Energy•Renewables;
•Residential;
•Agtech; and Conservation;
Residential Products; and•Infrastructure.
Industrial and Infrastructure Products.
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, home improvement retailers, wholesalers, distributors, and contractors. As part of our continuing operations at March 31, 2020,2021, we operated 4536 facilities, comprised of 26 manufacturing facilities, one distribution center, and nine offices, which are located in 1916 states, Canada, China, and Japan which includes 33 manufacturing facilities and five distribution centers.Japan. Our operational infrastructure provides the necessary scale to support local, regional, and national customers in each of our markets.
COVID-19 Update
While the Company continues to encounter challenges and uncertainty associated with COVID-19, the pandemic did not have a material adverse effect on our reported results during the first quarter of 2021. Our businessestop priority continues to be focused on our organization - keeping our team and their families as safe as possible, maintaining the end markets thattimely and effective functioning of our businesses serve are subjectsupply chain operating and providing a high level of responsiveness to changescustomer needs. We continue to proactively execute our pandemic “playbook” in economic conditions that are influenced2021 and make adjustments to our operating protocols as we navigate forward. The extent to which our operations will be impacted by various factors that could cause actual results to differ materially from current expectations. Such factors include,the outbreak, including but are not limited to:
to the impacts of the recent outbreak of the COVID-19 pandemic on the global economy, our customers, suppliers, employees, operations, business, liquidity and cash flows;
general economic conditions and conditions in the particular markets in which we operate;
changes in customer demand for residential construction, repair and remodeling, non-residential construction and infrastructure projects, botanical extraction equipment, and renewable energy sources;
capital spending, competitive factors and pricing pressures;
our ability to develop and launch new products in a cost-effective manner;
our ability to realize synergies from newly acquired businesses, and our ability to derive expected benefits from restructuring, productivity initiatives, liquidity enhancing actions, and other cost reduction actions;
changes in interest rates, exchange rates, commodity costs;
changes in governmental policies and funding, tax policies and incentives, tariffs, trade policies;
the need for protection of high value assets; and
climate change.
Thecurrent impact of the recent outbreak of COVID-19 pandemic on our future consolidated results of operations issupply chain, transportation and labor challenges, along with new requirements or regulations mandated by government authorities, remains uncertain and will depend on the duration of the outbreak and its impact on our customers, suppliers, employees and subcontractors.challenging to predict, Refer to the Company's Outlook section in this management discussion and analysis for consideration relative to future periods. We are taking proactive measures to respond to the challenges to our business and are altering our operations accordingly to continue to serve our end markets and maintain the safety of our employees.
We believe the key elements of our strategy discussed below will allow us to respond timely to the challenges presented by the COVID-19 pandemic and changes in the other various factors that could cause our actual results to differ materially from current expectations.
Business Strategy
Gibraltar’sThe Company's mission is to create compounding and sustainable value for our stockholders and other stakeholders with strong and relevantleadership positions in higher growth, profitable end markets. At the beginning of 2019, after four years of steady improvement in operational execution and financial results under the leadership of Frank Heard, the Company announced the appointment of Bill Bosway as Chief Executive Officer, with Frank Heard vacating the CEO role and being appointed Executive Vice Chairmarkets focused on addressing some of the Board through his planned retirement in March 2020. Under Mr. Bosway’s leadership, management completed a thorough evaluationworld's most challenging opportunities. The foundation of the markets the Company participates in, as well as its position in each market. This work solidified the Company’sCompany's strategy and defined plans to accelerate growth and further improve the Company’s margin profile, both through organic and inorganic investment. It has also helped focus and prioritize the Company's key investments to delivers increasing returns and sustainable value for its shareholders.
The Company migrated from a Four-Pillar strategy to a Three-Pillar strategy with the operating foundation focusedis built on three core tenets:pillars: Business Systems,System, Portfolio Management, and OrganizationalOrganization Development.
| |
1. | Business Systems, which combines two of the Company's previous strategic pillars - operational excellence and product innovation is supported by an execution review of the Company's monthly business performance, implementation of key investments, information technology operating and digital systems performance, and new product and services innovation. |
| |
2. | Portfolio Management, which combines the two other previous strategic pillars - acquisitions and portfolio management is focused on optimizing the Company’s business portfolio and ensuring our human and financial capital are invested to provide sustainable, profitable growth while expanding our relevance with customers and shaping our markets. The recent acquisitions of Apeks, LLC ("Apeks") in August 2019, Thermo Energy Systems, Inc. ("Thermo") in January 2020, and Delta Separations LLC and Teaching Tech LLC (collectively “Delta Separations”) in February 2020 were the direct result of our portfolio management strategy. |
| |
3. | Organizational Development is the third pillar of our strategy. In order to execute Business Systems and Portfolio Management, the Company must have a strong organization to execute, and the organization must continuously develop and improve. The Company aspires to make our workplace the "Best Place to Work", by focusing on creating the best development and learning environment for our people, proactively operate businesses that mitigate environmental and climate related impacts, and engage and support the communities in which we are located. We believe doing so helps us attract and retain the best people, enhancing our ability to execute our business plans. |
In addition to migrating from a Four-Pillar strategy to a Three-Pillar strategy,1.Business System reflects the Company:
Implemented newnecessary systems, processes, and management tools required to complementdeliver consistent and continuous performance improvement, every day. Our Business System is a critical enabler to grow, scale, and deliver our core 80/20 toolkitplans. Our Business System is focused on deploying effective tools to drive growth, improve operating performance, and drive improvementsdevelop the organization. Our Business System challenges existing paradigms, drives day-to-day performance, forces prioritization of resources, challenges our business models, and brings focus to new product and services development and innovation.
2.Portfolio Management is focused on optimizing the Company’s business portfolio and ensures our financial capital and human resources are effectively and efficiently deployed to deliver sustainable, profitable growth while increasing our relevance with customers and shaping our markets. For a description of recent portfolio management activities, see the actions described below in the Recent Developments section.
3.Organization Development drives the Company’s continuous focus on strengthening and scaling the organization to execute the Company’s plans and meet commitments. The Company aspires to make our operating margins;
Increasedwork the percentage of"Best Place to Work", where we focus on creating an environment for our sales that are direct to end customers, allowing uspeople to have a more meaningful connection withthe best opportunity for success, continue to develop, grow, and learn. At core of this pillar is the Company’s development process focused on helping employees reach their potential, improve performance, develop career roadmaps, identify ongoing education requirements, and respective succession plans. We believe doing so helps us attract and retain the best people so we can execute our end customers, providing the opportunity to better understand the challenges our customers face, and developing solutions to these challenges; andbusiness plans.
Continued to shift the focus of our portfolio to take advantage of rising tides in the renewable energy and conservation markets.
We believe the key elements of our strategy have, and will continue to, enable us to respond timely to changes in the end markets we serve, including evolving changes due to COVID-19 and the outbreak of COVID-19.challenges noted above. We have and expect to continue to examine the need for restructuring of our operations, including consolidation of facilities, reducing overhead costs, curtailing investments in inventory, and managing our business to generate incremental cash. We believe our enhanced strategy has enabled us to better react to volatility in commodity costs and fluctuations in customer demand, along with helping to improve margins. We have used the improved cash flows generated by these initiatives to pay down debt, improve our liquidity position, and invest in growth initiatives. Overall, we continue to strive to achieve stronger financial results, make more efficient use of capital, and deliver higher shareholderstockholder returns.
Recent Developments
On February 13,During the first quarter of 2021, the Company sold its Industrial business as a result of its Portfolio Management strategy to focus on participation in higher value and faster growing markets. The Industrial business, previously reported in the Company's Industrial and Infrastructure Products segment, was reported as discontinued operations as of December 31, 2020.
During 2020, the Company acquiredcompleted the assetsfollowing acquisitions:
| | | | | | | | | | | |
Business Acquired | Date of Acquisition in 2020 | Purchase price ( in millions)1 | Description |
TerraSmart LLC | December 31 | $ | 223.7 | | Provider of screw-based, ground-mount solar racking technology, particularly used for solar projects installed on challenging terrain |
Sunfig Corporation | December 11 | $ | 3.8 | | Provider of software solutions that optimize solar energy investments through upstream design, performance and financial modeling |
Architectural Mailboxes | October 15 | $ | 26.9 | | Provider, designer, and developer of decorative residential mailboxes and related products |
Delta Separations | February 13 | $ | 47.1 | | Provider of ethanol-based extraction systems manufacturer and training and laboratory design and operations consultative partner |
Thermo Energy Systems | January 15 | $ | 7.3 | | Provider of commercial greenhouse solutions in North America supporting the biologically grown organic food market |
Note 1: Except for TerraSmart, which was financed through a combination of California-based Delta Separationscash on hand and Teaching Tech ("Delta Separations"), a privately held ethanol-based extraction systems manufacturer and training and laboratory design and operations consultative partner for $50 million in an all cash transaction. Delta Separations had revenue of approximately $46 million in 2019.
On January 15, 2020,borrowings under the Company acquired the assets of Canadian-based Thermo Energy Systems ("Thermo"), a privately held provider of commercial greenhouse solutions in North America supporting the biologically grown organic food market, in an all cash transaction for approximately $7 million. The Company also expects to invest approximately $25 million into Thermo to provide an appropriate level of working capital. Thermo is expected to contribute annual revenue at a run rate of approximately $75 million.
On August 30, 2019, the Company acquiredCompany's revolving credit facility, all of the outstanding membership interests of Apeks LLC ("Apeks"), a designer and manufacturer of botanical oil extraction systems utilizing subcritical and supercritical carbon dioxide ("CO2"). The acquisition was financed throughabove 2020 acquisitions were funded from cash on handhand. The purchase price for the acquisitions of $12 million. Apeks had trailing twelve months of revenues as of June 30, 2019 of $17.7 million. The results of operations of Apeks have been included inTerraSmart, Sunfig, and Architectural Mailboxes represents the Renewable Energy and Conservation segment of the Company's consolidated financial statements from the date of acquisition.
On March 18, 2019, the Company appointed Patrick M. Burns as Chief Operating Officer. In his position as Chief Operating Officer, Mr. Burns is responsible for all aspects of Gibraltar’s day-to-day operations across its businesses and such other executive duties as he is assigned from time to time by the Board of Directors and the Chief Executive Officer.
On January 24, 2019, we entered into the Company's Sixth Amended and Restated Credit Agreement (the "Senior Credit Agreement") which includes a 5-year, $400 million revolving credit facility. The Senior Credit Agreement also provides the Company the opportunity, upon request, to increase the amount of the revolving credit facility to $700 million. In conjunction with entering into the Senior Credit Agreement, on February 1, 2019, the Company redeemed all $210 million of its outstanding 6.25% Senior Subordinated Bonds. The amended Senior Credit Agreement provides the Company with access to capital and improves our financial flexibility.
On January 2, 2019, the Company appointed William T. Bosway as President and Chief Executive Officer of the Company and a member of the Board of Directors. Over the past 29 years, Mr. Bosway has worked for two Fortune 500 industrial companies and bringspreliminary allocation to the Company strong leadership skillsassets acquired and significant experienceliabilities assumed in acquisitions, driving organic growth, lean manufacturingeach transaction. The purchase price shown above for Delta and continuous improvement techniques. In connection with Mr. Bosway’s appointment, then Chief Executive Officer Frank Heard was appointed Executive Vice Chair ofThermo represents the Board and he announced his intention to retire on March 3, 2020.final purchase price in each transaction.
Results of Operations
Three Months Ended March 31, 20202021 Compared to the Three Months Ended March 31, 2019
The Company did not experience any significant impact on its operations from the COVID-19 pandemic during the quarter ended March 31, 2020 as stay at home and shelter in place orders were not issued until the later days of March 2020. Our businesses are deemed essential and therefore we generally continued to operate after these orders were issued. Refer to the Company's Outlook section in the MD&A for consideration relative to future periods.
The following table sets forth selected results of operations data (in thousands) and its percentage of net sales for the three months ended March 31:31 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 |
Net sales | $ | 287,592 | | | 100.0 | % | | $ | 215,401 | | | 100.0 | % |
Cost of sales | 227,574 | | | 79.1 | % | | 165,540 | | | 76.9 | % |
Gross profit | 60,018 | | | 20.9 | % | | 49,861 | | | 23.1 | % |
Selling, general, and administrative expense | 47,203 | | | 16.4 | % | | 37,084 | | | 17.2 | % |
| | | | | | | |
Income from operations | 12,815 | | | 4.5 | % | | 12,777 | | | 5.9 | % |
Interest expense | 444 | | | 0.2 | % | | 44 | | | 0.0 | % |
Other expense | 315 | | | 0.1 | % | | 518 | | | 0.2 | % |
Income before taxes | 12,056 | | | 4.2 | % | | 12,215 | | | 5.7 | % |
Provision for income taxes | 1,560 | | | 0.6 | % | | 2,313 | | | 1.1 | % |
Income from continuing operations | 10,496 | | | 3.6 | % | | 9,902 | | | 4.6 | % |
Income from discontinued operations | 2,266 | | | 0.8 | % | | 2,157 | | | 1.0 | % |
Net income | $ | 12,762 | | | 4.4 | % | | $ | 12,059 | | | 5.6 | % |
|
| | | | | | | | | | | | | |
| 2020 | | 2019 |
Net sales | $ | 249,439 |
| | 100.0 | % | | $ | 227,417 |
| | 100.0 | % |
Cost of sales | 193,052 |
| | 77.4 | % | | 183,517 |
| | 80.7 | % |
Gross profit | 56,387 |
| | 22.6 | % | | 43,900 |
| | 19.3 | % |
Selling, general, and administrative expense | 41,197 |
| | 16.5 | % | | 33,334 |
| | 14.7 | % |
Income from operations | 15,190 |
| | 6.1 | % | | 10,566 |
| | 4.6 | % |
Interest (income) expense | (47 | ) | | 0.0 | % | | 2,061 |
| | 0.9 | % |
Other expense | 192 |
| | 0.1 | % | | 589 |
| | 0.2 | % |
Income before taxes | 15,045 |
| | 6.0 | % | | 7,916 |
| | 3.5 | % |
Provision for income taxes | 2,986 |
| | 1.2 | % | | 1,571 |
| | 0.7 | % |
Net income | $ | 12,059 |
| | 4.8 | % | | $ | 6,345 |
| | 2.8 | % |
The following table sets forth the Company’s net sales by reportable segment for the three months ended March 31, (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Change due to |
| 2021 | | 2020 | | Total Change | | | | Acquisitions | | Operations |
Net sales: | | | | | | | | | | | |
Renewables | $ | 85,512 | | | $ | 47,263 | | | $ | 38,249 | | | | | $ | 37,256 | | | $ | 993 | |
Residential | 140,217 | | | 103,419 | | | 36,798 | | | | | 8,734 | | | 28,064 | |
Agtech | 46,739 | | | 49,234 | | | (2,495) | | | | | 4,600 | | | (7,095) | |
Infrastructure | 15,124 | | | 15,485 | | | (361) | | | | | — | | | (361) | |
Consolidated | $ | 287,592 | | | $ | 215,401 | | | $ | 72,191 | | | | | $ | 50,590 | | | $ | 21,601 | |
|
| | | | | | | | | | | |
| 2020 | | 2019 | | Total Change |
Net sales: | | | | | |
Renewable Energy and Conservation | $ | 96,497 |
| | $ | 68,837 |
| | $ | 27,660 |
|
Residential Products | 103,419 |
| | 103,709 |
| | (290 | ) |
Industrial and Infrastructure Products | 49,801 |
| | 55,188 |
| | (5,387 | ) |
Less: Intersegment sales | (278 | ) | | (317 | ) | | 39 |
|
Net Industrial and Infrastructure Products | 49,523 |
| | 54,871 |
| | (5,348 | ) |
Consolidated | $ | 249,439 |
| | $ | 227,417 |
| | $ | 22,022 |
|
Consolidated net sales increased by $22.0$72.2 million, or 9.7%33.5%, to $249.4$287.6 million for the three months ended March 31, 20202021 compared to the three months ended March 31, 2019.2020. The 9.7%33.5% increase in revenue was driven by $15.7 million of salesthe Renewables and Residential segments. Sales generated from our prior year acquisitions of TerraSmart, Thermo, Delta Separations and ThermoArchitectural Mailboxes contributed 23.5%, or $50.6 million to the growth from the prior year quarter. The $21.6 million, or 10.0% increase, in organic growth during the current year quarter was primarily the result of increased volume in both our Residential and the prior year acquisition of Apeks. The organic growth in the quarter stemmed from a 2.8% increase in volume, primarily from our Renewable Energy and Conservation segment,Renewables segments, which more than offset the organic volume declinedeclines in both our IndustrialAgtech and our Infrastructure Products segment. Revenue in our Residential Products segment was essentially flat as compared to the prior year quarter.segments.
Net sales in our Renewable Energy and ConservationRenewables segment increased 40.3%$38.2 million, or 80.8%, or $27.7 million, to $96.5$85.5 million for the three months ended March 31, 20202021 compared to $68.8$47.3 million for the three months ended March 31, 2019.2020. Sales generated from the current year quarter acquisitions of Delta Separations and Thermo, along with the prior year acquisition of Apeks,TerraSmart of $37.3 million, primarily contributed $15.7 million to the increase in the current year. In addition,year quarter. Organic revenue increased 2.1% during the quarter as strong organic growthexecution on continued demand for solar solutions was partially offset by projects impacted by the resultpandemic-related scheduling delays, inclement weather, ongoing supply chain dynamics including reduced customers' access to solar panels, as well as, a decline in safe-harbor related demand due to the extension of healthy market dynamics and participation gains as evidenced by our 58% improvementthe investment tax credit in backloglate 2020. Backlog improved 138% year over year, or 13%23% on an organic basis.
basis for this segment.
Net sales in our Residential Products segment decreased 0.3%increased 35.6%, or $0.3$36.8 million, to $140.2 million for the three months ended March 31, 2021 compared to $103.4 million for the three months ended March 31, 2020 compared2020. The increase from the prior year quarter was largely due to $103.7continued strong activity across all residential businesses along with
participation gains across that offset challenges from inclement weather, supply chain dynamics. Sales from the prior year acquisition of Architectural Mailboxes also contributed $8.7 million to the increase in the current year quarter.
Net sales in our Agtech segment decreased 5.1%, or $2.5 million, to $46.7 million for the three months ended March 31, 2019. The slight decrease from the prior year quarter was the result of product line simplification actions taken in 2019 and from lower volume for products sold directly2021 compared to homeowners.
Net sales in our Industrial and Infrastructure Products segment decreased 9.7%, or $5.3 million, to $49.5$49.2 million for the three months ended March 31, 2020. Organic revenue decreased $7.1 million, impacted by the pandemic, inclement weather, supply chain dynamics, along with slower but improving market conditions for greenhouse structure and processing extraction equipment serving the cannabis and hemp markets. Partially offsetting these impacts was continued growth and momentum in the produce market. Sales generated from Thermo and Delta Separations acquired in the first quarter of 2020, comparedcontributed $4.6 million, partially offsetting the decrease in this segment. While backlog decreased 12% year over year, due to $54.9the 2020 slowdown in the cannabis and hemp markets, which are improving but not fully recovered, sequentially, backlog increased 5% due primarily to strength in the produce business offsetting the impact of the slower demand in the cannabis and hemp markets.
Net sales in our Infrastructure segment decreased 2.6%, or $0.4 million, to $15.1 million for the three months ended March 31, 2019. Increased volume in the Infrastructure business was more than offset by lower revenue in the Industrial businesses, driven by lower demand and lower steel prices impacting its core industrial products.
Our consolidated gross margin increased to 22.6% for the three months ended March 31, 20202021 compared to 19.3% for the three months ended March 31, 2019. This increase was the result of improved operating execution compared to the prior year quarter which included $3.4 million of incremental costs for design refinement and field improvements for our solar tracking solution. Favorable alignment of material costs to customer selling prices, volume leverage and benefits from our 80/20 simplification initiatives also contributed to the improved gross margin year over year. Partially offsetting the above improvements were lower gross margins generated from our recent acquisitions.
Selling, general, and administrative (SG&A) expenses increased by $7.9 million, or 23.6%, to $41.2$15.5 million for the three months ended March 31, 20202020. While revenue was down modestly driven by delays in customer delivery schedules related to the timing of state and federal funding, backlog remained strong increasing 15% compared to the prior year quarter.
Our consolidated gross margin decreased to 20.9% for the three months ended March 31, 2021 compared to 23.1% for the three months ended March 31, 2020. This decrease was partly the result of costs incurred during the current year quarter related to the planned discontinuation of our organic solar tracker solution as we migrate towards the solution offered by our recently acquired TerraSmart business. Additionally, lower gross margins generated from $33.3our recent acquisitions contributed to the decline as we continue to integrate them operationally. Partially offsetting the decrease was improved operating execution in all our core businesses compared to the prior year quarter.
Selling, general, and administrative ("SG&A") expenses increased by $10.1 million, or 27.3%, to $47.2 million for the three months ended March 31, 2019.2021 from $37.1 million for the three months ended March 31, 2020. The $7.9$10.1 million increase was largely the result of $3.7primarily due to $5.5 million of incremental SG&A expenses recorded quarter over quarter for our recent acquisitions and transaction costs to complete those acquisitions, along with costs incurred$3.3 million of higher performance-based compensation expenses as compared to effect the acquisitions closed duringprior year quarter. Despite the quarter.above increases, SG&A expenses as a percentage of net sales increaseddecreased to 16.5%16.4% for the three months ended March 31, 20202021 compared to 14.7%17.2% for the three months ended March 31, 2019.2020.
The following table sets forth the Company’s income from operations and income from operations as a percentage of net sales by reportable segment for the three months ended March 31, (in thousands):
| | | 2020 | | 2019 | | Total Change | | 2021 | | 2020 | | Total Change | |
Income from operations: | | | | | | | | | | Income from operations: | | | | | | |
Renewable Energy and Conservation | $ | 5,699 |
| | 5.9 | % | | $ | 1,632 |
| | 2.4 | % | | $ | 4,067 |
| |
Residential Products | 13,725 |
| | 13.3 | % | | 12,090 |
| | 11.7 | % | | 1,635 |
| |
Industrial and Infrastructure Products | 3,989 |
| | 8.1 | % | | 4,129 |
| | 7.5 | % | | (140 | ) | |
Renewables | | Renewables | $ | (521) | | | (0.6) | % | | $ | 4,359 | | | 9.2 | % | | $ | (4,880) | | |
Residential | | Residential | 22,934 | | | 16.4 | % | | 13,725 | | | 13.3 | % | | 9,209 | | |
Agtech | | Agtech | 929 | | | 2.0 | % | | 1,340 | | | 2.7 | % | | (411) | | |
Infrastructure | | Infrastructure | 2,037 | | | 13.5 | % | | 1,576 | | | 10.2 | % | | 461 | | |
Unallocated Corporate Expenses | (8,223 | ) | | (3.3 | )% | | (7,285 | ) | | (3.2 | )% | | (938 | ) | Unallocated Corporate Expenses | (12,564) | | | (4.4) | % | | (8,223) | | | (3.8) | % | | (4,341) | | |
Consolidated income from operations | $ | 15,190 |
| | 6.1 | % | | $ | 10,566 |
| | 4.6 | % | | $ | 4,624 |
| Consolidated income from operations | $ | 12,815 | | | 4.5 | % | | $ | 12,777 | | | 5.9 | % | | $ | 38 | | |
The Renewable Energy and ConservationRenewables segment generated an operating margin of 5.9%(0.6)% in the current year quarter compared to 2.4%9.2% in the prior year quarter. The decrease in operating margin was the combined result of costs incurred during the current year quarter related to the discontinuation of our organic solar tracker solution along with expected lower margins generated by our recent acquisitions, the result of backlog amortization and integration costs, as we continue to integrate them operationally. Partially offsetting the lower margin is improvement in our core business resulting from continued strong execution in our manufacturing facilities and field operations and diligent price to cost management initiatives. Our acquisition integration plans remain on schedule and we expect to see margins expand during 2021.
The Residential segment generated an operating margin of 16.4% in the current year quarter compared to 13.3% in the prior year quarter. The increase in operating margin was largely the result of $3.4 millionvolume leverage, solid management of incrementalprice to input costs, and continued benefits from 80/20 simplification initiatives offsetting higher costs for materials, labor and logistics management challenges incurred during the priorcurrent year quarter for design refinement and field improvements for our solar tracking solution. Volume leverage, improved operating execution and favorable alignment of material costs to customer selling prices also contributed to the improved margin year over year. Partially offsetting the above improvements were losses generated from our recent acquisitions which incurred seasonally lower volumes and include lower margin projects as compared to our organic margin profile.quarter.
Our Residential ProductsAgtech segment generated an operating margin of 13.3%2.0% during the three months ended March 31, 20202021 compared to 11.7%2.7% during the three months ended March 31, 2019.2020. The increase resulted from a favorable alignmentdecrease in operating margin was the combined result of material coststhe continued slower greenhouse structures and processing equipment market for cannabis and hemp that impacted mix in the quarter. Integration of Thermo continues to customer selling prices along with continued benefits from 80/20 simplification initiatives. be impacted by the closure of the US Canadian border. We have completed the bulk of those lower margin projects that we acquired, substantially completed the integration of the processing businesses, and expect to see margins expand throughout the course of 2021.
Our Industrial and Infrastructure Products segment generated an operating margin of 8.1%13.5% during the three months ended March 31, 20202021 compared to 7.5%10.2% during the three months ended March 31, 2019.2020. The increase resulted from continued strong execution in operating margin was the result of a more favorable alignment of material costs to customer selling prices,our fabricated products sales along with higher margin mix resulting from increased non-fabricated product mix and ongoing benefit from the Company's 80/20 initiatives.volumes.
Unallocated corporate expenses increased $0.9$4.3 million from $7.3 million during the three months ended March 31, 2019 to $8.2 million during the three months ended March 31, 2020. This2020 to $12.6 million during the three months ended March 31, 2021. The increase fromin expense was primarily the result of $2.9 million of higher performance-based compensation expenses as compared to the prior year quarterquarter.
Interest expense of $0.4 million for the three months ended March 31, 2021 was largelyprimarily the result of costs incurred to effectoutstanding balances on the acquisitions closedCompany's revolving credit facility during the quarter.
which $58.0 million was outstanding as of March 31, 2021. Interest income realizedexpense incurred for the three months ended March 31, 2020 was negligible. The change from $2.1 million of interest expense incurred for the three months ended March 31, 2019 resulted from the redemption of the Company's outstanding 6.25% Senior Subordinated Notes during the first quarter of 2019. No amounts were outstanding under our revolving credit facility during the three months ended March 31, 2020 and 2019.2020.
We recognized a provision for income taxes of $3.0$1.6 million and $1.6$2.3 million, with an effective tax raterates of 19.8% for both the three months ended March 31, 2020,12.9% and 2019, respectively. The effective tax rate18.9% for the three months ended March 31, 2021, and 2020, respectively. The effective tax rates for the three months ended March 31, 2021 and 2019,2020, respectively, was lesswere lower than the U.S. federal statutory rate of 21% due to favorable discrete items due to an excess tax benefit on stock-based compensation, partially offset by state taxes and nondeductible permanent differences.
Outlook
Gibraltar continues to accelerate growthWhile we have solid end market demand and margin improvement through organic and inorganic investment in inherently attractive end markets that are vitalstrong order backlog, general market challenges remain including but not limited to the economy’s core needspandemic, general inflation, labor availability, and less impacted by economic variables. Our higher growth businesses - renewable energy, commercial greenhouse growing, and processing - represented 39% of first quarter revenue and generated 58% growth in backlog as these markets continue to accelerate. The infrastructure business is also experiencing solid market growth and participation gains as reflected in backlog that has grown 13% over the prior year quarter.
The core residential building products businesses - ventilation, building accessories, and postal - delivered modest growth in the first quarter, but did see demand begin to slow after the end of the first quarter. The home improvement and industrial businesses have been the most impacted in today’s environment. Overall, the we expects demand in the immediate future to lag prior year until consumer confidence and spending improves. We have not seen a disruption from our suppliers. Our supply chain team remains in close contact with key suppliers and alternate supply sources to mitigate the risk of potential supply disruption.
We will continue to enhance our revenue and income streams and, backed by the strength of our balance sheet,dynamics .We will remain focused on executingexecution, continue to work on our strategy, workingbusinesses, and use our strong balance sheet to improve our business,invest in both organic and helping our team, customers, suppliers,inorganic initiatives.
The Company is maintaining its full year guidance of revenues in the range of $1.30 billion and partners successfully navigate through today’s environment. We are leveraging our operating system - Business Systems, Portfolio Management,$1.35 billion, up from $1.03 billion in 2020 and Organization Development - to refine our business, strengthen the organization,GAAP EPS between $2.78 and execute critical initiatives that will accelerate growth, profitability, asset utilization, and further improve return on invested capital.$2.95, compared with $2.53 in 2020.
Given the current economic environment and reduced visibility, it is difficult to provide guidance for the second quarter and full-year 2020. Therefore, we are going to rescind our previous guidance. However, we do expect to deliver positive earnings and generate cash from operations throughout 2020. We will revisit the practice of providing guidance as we complete the second quarter.
Liquidity and Capital Resources
Our principal capital requirements are to fund our operations' working capital and capital improvements and to provide capital for acquisitions. We will continue to invest in growth opportunities as appropriate while focusing on working capital efficiency and profit improvement opportunities to minimize the cash invested to operate our business. The following table sets forth our liquidity position as of:
| | | | | | | | | | | | | | |
(in thousands) | | March 31, 2021 | | December 31, 2020 |
Cash and cash equivalents | | $ | 20,731 | | | $ | 32,054 | |
Availability on revolving credit facility | | 334,780 | | | 309,175 | |
| | $ | 355,511 | | | $ | 341,229 | |
|
| | | | | | | | |
(in thousands) | | March 31, 2020 | | December 31, 2019 |
Cash and cash equivalents | | $ | 85,966 |
| | $ | 191,363 |
|
Availability on revolving credit facility | | 394,100 |
| | 393,991 |
|
| | $ | 480,066 |
| | $ | 585,354 |
|
We believe that our cash on hand lack of outstanding debt, and available borrowing capacity provided under the Seniorour Sixth Amended and Restated Credit Agreement (the "Senior Credit Agreement") provide us with ample liquidity and capital resources to weather the economic impacts of the COVID-19 pandemic while continuing to invest in operational excellence, growth initiatives and the development of our organization. Given the economic uncertainty caused byAfter pausing in early 2020 as the COVID-19 pandemic and federal, state and local governments response to it,unfolded, we have currently paused our acquisition activities. We remain in contact with the companies alignedcontinued with our strategic initiatives to invest in opportunities that strengthen our business platforms for the markets we serve through the acquisitions of Architectural Mailboxes, Sunfig and expectTerraSmart in the fourth quarter of 2020. We continue to re-engage in these acquisition processes when the economic impact becomes clearer. In the interim, we remain highly focused on managing our working capital, which may include adjusting scheduled deliveries of inventory to match current demand levels, closely monitoring customer credit and collection activities, and working to extend payment terms. We believe our liquidity, together with the cash expected to be generated from operations, should be sufficient to fund working capital needs and growth initiatives.
Our Senior Credit Agreement provides us with the liquidity and capital resources for use by our U.S. operations. Historically, our foreign operations have generated cash flow from operations sufficient to invest in working capital and fund their capital improvements. As of March 31, 2020,2021, our foreign subsidiaries held $29.6$15.2 million of cash in U.S. dollars, of which $12.9 million is available to be repatriated to the U.S., net of $0.6 million of withholding tax. Subsequent cash generated by our foreign subsidiaries will be reinvested into their operations.dollars.
We are taking advantage of the optionDuring 2020, we opted to defer remittance of the employer portion of Social Security tax as provided in the Coronavirus, Aid, Relief and Economic Security Act ("CARES Act"), and estimate that this deferral will allowwhich allowed us to retain approximately $4$4.4 million in cash during the remainder of 2020 that would have otherwise been remitted to the federal government. The deferred tax payments will be repaid equally in 2021 and 2022.
Over the long-term, we expect that future investments, including strategic business opportunities such as acquisitions, may be financed through a number of sources, including internally available cash, availability under our revolving credit facility, new debt financing, the issuance of equity securities, or any combination of the above. All potential acquisitions are evaluated based on our acquisition strategy, which includes the enhancement of our existing products, operations, or capabilities, expanding our access to new products, markets, and customers, with the goal of creating compounding and sustainable shareholderstockholder value.
These expectations are forward-looking statements based upon currently available plans and information and may change if conditions in the credit and equity markets deteriorate or other circumstances change. To the extent that operating cash flows are lower than current or expected levels, or sources of financing are not available or not available at acceptable terms, our future liquidity may be adversely affected.
Cash Flows
The following table sets forth selected cash flow data for the three months ended March 31, (in thousands):
| | | | | | | | | | | |
| 2021 | | 2020 |
Cash (used in) provided by: | | | |
Operating activities of continuing operations | $ | (1,214) | | | $ | (43,826) | |
Investing activities of continuing operations | 22,600 | | | (56,631) | |
Financing activities of continuing operations | (30,388) | | | (4,160) | |
Discontinued operations | (2,187) | | | 136 | |
Effect of foreign exchange rate changes | (134) | | | (916) | |
Net decrease in cash and cash equivalents | $ | (11,323) | | | $ | (105,397) | |
|
| | | | | | | |
| 2020 | | 2019 |
Cash (used in) provided by: | | | |
Operating activities of continuing operations | $ | (43,012 | ) | | $ | (37,488 | ) |
Investing activities of continuing operations | (57,309 | ) | | (3,374 | ) |
Financing activities of continuing operations | (4,160 | ) | | (213,247 | ) |
Effect of foreign exchange rate changes | (916 | ) | | 612 |
|
Net decrease in cash and cash equivalents | $ | (105,397 | ) | | $ | (253,497 | ) |
Operating Activities
Net cash used in operating activities of continuing operations for the three months ended March 31, 2021 of $1.2 million consisted of income from continuing operations of $10.5 million and non-cash net charges totaling $11.4 million, which include depreciation, amortization, stock compensation, exit activity costs and other non-cash charges, offset by a $23.1 million investment in working capital and other net assets. The investment in net working capital and other net assets was largely driven by an increase in inventory due to strong sales demand in our Residential segment and rising raw material prices, along with a decrease in accrued expenses correlated to payments made during the quarter under the Company's performance based incentive programs.
Net cash used in operating activities of continuing operations for the three months ended March 31, 2020 of $43.0$43.8 million consisted of net income from continuing operations of $12.1$9.9 million, non-cash net charges totaling $7.2$6.7 million, which include depreciation, amortization, stock compensation, and other non-cash charges, and an investment in working capital and other net assets of $62.3$60.4 million. In addition to seasonal increases in inventory and trade receivables and payables, the investment in netThe working capital and other net assetsinvestment was largely driven by an investmentcomprised of $37.5nearly $40 million inrelated to our acquisition of Thermo, one of our recent acquisitions, which was undercapitalized at the time of purchase along within the payments made during thefirst quarter for the Company's performance based incentive plans, customer rebates, and settlements of multi-employer pension plans terminated during 2019.2020.
Investing Activities
Net cash used in operatingprovided by investing activities of $37.5 million duringcontinuing operations for the three months ended March 31, 2019 consisted2021 of an investment$22.6million was primarily due to $27.0 million in workingnet proceeds received from the sale of the Company's Industrial business and capital and other net assetsexpenditures of $54.0 million offset by $10.2 million from non-cash charges including depreciation, amortization, stock compensation and other net charges as well as net income of $6.3$4.4 million.
Investing Activities
Net cash used in investing activities of continuing operations for the three months ended March 31, 2020 of $57.3$56.6 million primarily consisted of net cash paid for the acquisitions of Delta Separations of $47.2 million and Thermo Energy Systems of $7.3 million and capital expenditures of $2.8$2.1 million.
Financing Activities
Net cash used in investingfinancing activities of continuing operations for the three months ended March 31, 20192021 of $3.4$30.4 million consistedwas primarily the result of capital expenditures$46.6 million in payments on long-term debt and $4.7 million of $3.1 million and a paymentpurchases of $0.3 milliontreasury stock related to the acquisitionnet settlement of SolarBOS.tax obligations for participants in the Company's equity incentive plans, offset by $20.0 million in proceeds from long-term debt and $0.9 million from the issuance of common stock from stock option exercises during the period.
Financing Activities
Net cash used in financing activities of continuing operations for the three months ended March 31, 2020 of $4.2 million was primarily the result of purchases of treasury stock related to the net settlement of tax obligations for participants in the Company's equity incentive plans.
Net cash used in financing activities for the three months ended March 31, 2019 of $213.2 million consisted of the repayment of $210.0 million of 6.25% Senior Subordinated Notes on February 1, 2019, purchases of treasury stock of $2.1 million related to the net settlement of tax obligations for participants in the Company's equity incentive plans and the payment of debt issuance costs of $1.2 million.
See Note 8 to the Company's consolidated financial statements in Part I, Item 1, Financial Statements, of this Form 10-Q for further information on the Company’s Senior Credit Agreement.
Off Balance Sheet Financing Arrangements
We have no off-balance sheet arrangements 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, 2019.2020.
Critical Accounting Estimates
In the current year, there have been no changes to our critical accounting estimates from those disclosed in the consolidated financial statements and accompanying notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Recent Accounting Pronouncements
See Note 2 to the Company's consolidated financial statements in Part I, Item 1 of this Form 10-Q for further information on recent accounting pronouncements.
Item 3. Qualitative and Quantitative Disclosures About Market Risk
In the ordinary course of business, the Company is exposed to various market risk factors, including changes in general economic conditions, competition, foreign exchange rates, and raw materials pricing and availability. In addition, the Company is exposed to other financial market risks, primarily related to its foreign operations. Refer to Item 7A in the Company's Form 10-K for the year ended December 31, 20192020 for more information about the Company's exposure to market risk.
Item 4. Controls and Procedures
| |
(a) | Evaluation of Disclosure Controls and Procedures |
(a)Evaluation of Disclosure Controls and Procedures
The Company maintains a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). The Company’s Chief Executive Officer and the Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls as of the end of the period covered in this report. Based upon that evaluation and the definition of disclosure controls and procedures contained in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of the end of such period the Company’s disclosure controls and procedures were effective.
| |
(b) | Changes in Internal Control over Financial Reporting |
(b)Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as defined by Rule 13a-15(f) or 15d-15(f)) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risks discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.2020. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operation, cash flows, and future prospects. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may materially adversely impact our business, financial condition, or operating results. We believe there have been no material changes from the risk factors previously disclosed in our Form 10-K. During the quarter ended March 31, 2020, there have been no material changes to the risk factors previously disclosed under Part I, Item 1A. “Risk Factors” in our 2019 Annual Report, except as follows:
The COVID-19 pandemic has significantly impacted worldwide economic conditions and could have a material adverse effect on our business, results of operations, financial condition, and cash flows.
The COVID-19, or coronavirus, pandemic began to impact our operations late in the first quarter of 2020 and is likely to continue to affect our business as government authorities impose mandatory closures, work-from-home orders and social distancing protocols, seek voluntary facility closures or impose other restrictions to help control the spread of COVID-19. Although we cannot predict the duration or scope of the COVID-19 pandemic, current actions to control the spread of COVID-19 may adversely impact our business, including limiting our ability to implement our strategic growth initiatives, causing delays in our receipt of raw materials and other product components due to disruptions in our supply chain, limiting access to our distribution channels, reducing the availability of our workforce and subcontractors and increased threats of cyber attacks on our information technology infrastructure. The instability in global financial markets and unpredictable changes in our supply chain or our production capacity and customer demand resulting from the COVID-19 pandemic may pose material risk to our results of operations, financial condition, and cash flows. We are continuously monitoring the impact to our business and operations and taking action to mitigate the risks involved. However, prolonged disruption to the economy and the end markets we serve may have a material adverse impact our business, results of operations, financial condition, and cash flows.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
(a) Exhibits
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| | | | | | | |
| | Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002. |
| | Certification of Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002. |
| | Certification of the President and Chief Executive Officer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002. |
| | 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. |
| 101.INS | XBRL Instance Document * |
| 101.SCH | XBRL Taxonomy Extension Schema Document * |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document * |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document * |
| 101.PRA | XBRL Taxonomy Extension Presentation Linkbase Document * |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document * |
|
| | | | |
* | Submitted electronically with this Quarterly Report on Form 10-Q. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GIBRALTAR INDUSTRIES, INC.
(Registrant)
|
| |
/s/ William T. Bosway |
William T. Bosway |
President and Chief Executive Officer |
|
| |
/s/ Timothy F. Murphy |
Timothy F. Murphy |
Senior Vice President and Chief Financial Officer
|
Date: May 6, 20205, 2021