GIBRALTAR INDUSTRIES, INC. 10-K

Item 8. Financial Statements and Supplementary Data Page Number Financial Statements: Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 35 Consolidated Statements of Operations for the Years Ended December 31, 202 1 , 20 20 , and 201 9 38 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 202 1 , 20 20 , and 201 9 39 Consolidated Balance Sheets as of December 31, 202 1 and 2 020 40 Consolidated Statements of Cash Flows for the Years Ended December 31, 202 1 , 20 20 , and 201 9 41 Consolidated Statements of S tock holders’ Equity for the Years Ended December 31, 202 1 , 20 20 , and 201 9 42 Notes to Consolidated Financial Statements 43 Index for Notes to Consolidated Financial Statements: Note 1. Summary of Significant Accounting Policies 43 Note 2. Accounts Receivable 48 Note 3. Revenue 48 Note 4. Inventories 49 Note 5. Property, Plant and Equipment 49 Note 6. Acquisitions 49 Note 7. Goodwill and Related Intangible Assets 52 Note 8. Accrued Expenses 54 Note 9. Debt 55 Note 10. Pension and Other Postretirement Benefits 55 Note 11. Accumulated Other Comprehensive Income (Loss) 57 Note 12. Equity-Based Compensation 58 Note 13. Fair Value Measurements 61 Note 14. Discontinued Operations 62 Note 15. Exit Activity Costs and Asset Impairments 63 Note 16. Income Taxes 64 Note 17. Earnings per Share 68 Note 18. Leases 68 Note 19. Commitments and Contingencies 69 Note 20. Segment Information 69 34 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors of Gibraltar Industries, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Gibraltar Industries, Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 23, 2022 expressed an unqualified opinion thereon. Adoption of New Accounting Standards As discussed in Note 1 to the consolidated financial statements, the Company changed its method for calculating expected credit losses as a result of the adoption of ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), effective January 1, 2020. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 35 Table of Contents Revenue Recognition on Contracts Description of the Matter During the year ended December 31, 2021, the amount of revenue recognized over time was $628.0 million. As discussed in Note 1 to the consolidated financial statements, the Company’s revenue on contracts is accounted for based on the cost-to-cost input measure of progress, whereby the extent of progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Auditing management’s estimates to complete for certain components is especially subjective due to significant judgment required in estimating the remaining costs to complete. Factors inherent in the estimation process include direct labor hours, direct material costs, and other direct costs. Due to uncertainties attributed to such factors, a significant change in an estimate on one or more contracts could have a material effect on the Company’s results of operations. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that address the risks of material misstatement relating to the measurement and valuation of the Company’s review of estimated costs to complete, including the determination of the underlying significant assumptions and the completeness and accuracy of the open contracts reviewed. For example, we tested controls over management’s quarterly review of the cost estimates, monthly review of open contracts and completed contracts, and review over the cost estimates used to develop initial cost estimates on projects. To test the amount of revenue recognized from contracts, our audit procedures included, among others, assessing whether the performance obligations identified were appropriately recognized on an over time basis through inspection of the contract and inquiry from program management regarding the nature and scope of work and testing the completeness and accuracy of the data underlying the determination of the amount of revenue recognized in the current period. To assess the over time revenue recognition, we tested that the actual costs incurred on the project are complete and accurate through agreement to supporting evidence. Our testing of the assumptions included a combination of confirmation of contract terms, billings, and project status directly with customers, inquiries of the program management and financial personnel, inspection of evidence to support future estimated costs, performance of an analysis of actual gross margin on completed contracts compared to prior estimates, evaluation of subsequent year-end expenses incurred on projects, and assessment of the historical accuracy of management’s estimates by analyzing changes in project gross margins during project lifecycles and determining if those changes were driven by cost factors that should have been known or could have been reasonably estimated at project inception. 36 Table of Contents Accounting for Acquisitions Description of the Matter As discussed in Note 6 of the consolidated financial statements, during 2020, the Company completed five acquisitions in separate transactions, for which the aggregate consideration was $309.0 million. All five transactions were accounted for as business combinations. Auditing the Company’s accounting for its acquisitions was complex due to the significant estimation uncertainty in the Company’s determination of the fair values of the acquired intangible assets aggregating $102.2 million. The Company used discounted cash flow methods and independent market appraisals to estimate the fair value of acquired intangible assets. The significant assumptions used to estimate the value of the intangible assets included discount rates, customer attrition, and certain assumptions that form the basis of the forecasted results (e.g., revenue growth rates and operating profit margin). The significant assumptions related to estimating the fair value of the intangible assets above are forward looking and could be affected by future economic market conditions. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting for acquisitions. For example, we tested controls over the recognition and measurement of consideration transferred and acquired intangible assets, including the valuation models and underlying assumptions used to develop such estimates. To test the fair value of the estimated fair value of the acquired intangible assets, we performed audit procedures that included, among others, evaluating the Company's selection of the valuation methodology, evaluating the methods and significant assumptions used by the Company’s valuation specialists and evaluating the completeness and accuracy of the underlying data. For example, we compared the significant assumptions to current industry, market and economic trends, to the assumptions used to value similar assets in other acquisitions, to the historical results of the acquired business and to other guidelines used by companies within the same industry. We involved our valuation specialists to assist in our evaluation of the methodology used by the Company and significant assumptions and to assist with reconciling the prospective financial information with other prospective financial information prepared by the Company. /s/ Ernst & Young LLP We have served as the Company‘s auditor since 2005. Boston, Massachusetts February 23, 2022 37 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Years Ended December 31, 2021 2020 2019 Net sales $ 1,339,783 $ 1,032,578 $ 898,233 Cost of sales 1,049,772 776,235 678,336 Gross profit 290,011 256,343 219,897 Selling, general, and administrative expense 184,723 149,153 139,085 Intangible asset impairment 8,300 — — Income from operations 96,988 107,190 80,812 Interest expense, net 1,639 703 2,323 Other (income) expense ( 4,213 ) ( 1,272 ) 408 Income before taxes 99,562 107,759 78,081 Provision for income taxes 25,046 24,468 18,153 Income from continuing operations 74,516 83,291 59,928 Discontinued operations: Income (loss) before taxes 1,479 ( 16,602 ) 6,682 Provision for income taxes 366 2,123 1,519 Income (loss) from discontinued operations 1,113 ( 18,725 ) 5,163 Net income $ 75,629 $ 64,566 $ 65,091 Net earnings per share – Basic: Income from continuing operations $ 2.27 $ 2.55 $ 1.85 Income (loss) from discontinued operations 0.03 ( 0.57 ) 0.16 Net income $ 2.30 $ 1.98 $ 2.01 Weighted average shares outstanding – Basic 32,873 32,664 32,389 Net earnings per share – Diluted: Income from continuing operations $ 2.25 $ 2.53 $ 1.83 Income (loss) from discontinued operations 0.04 ( 0.57 ) 0.16 Net income $ 2.29 $ 1.96 $ 1.99 Weighted average shares outstanding – Diluted 33,054 32,918 32,722 See accompanying notes to consolidated financial statements. 38 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Years Ended December 31, 2021 2020 2019 Net income $ 75,629 $ 64,566 $ 65,091 Other comprehensive income (loss): Foreign currency translation adjustment 2,512 3,301 1,766 Adjustment to post-retirement benefit liability, net of tax 136 ( 371 ) 77 Other comprehensive income 2,648 2,930 1,843 Total comprehensive income $ 78,277 $ 67,496 $ 66,934 See accompanying notes to consolidated financial statements. 39 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands) December 31, 2021 December 31, 2020 Assets Current assets: Cash and cash equivalents $ 12,849 $ 32,054 Accounts receivable, net of allowance of $ 3,738 and $ 3,529 , respectively 236,444 197,990 Inventories, net 176,207 98,307 Prepaid expenses and other current assets 21,467 19,671 Assets of discontinued operations — 77,438 Total current assets 446,967 425,460 Property, plant, and equipment, net 96,885 89,562 Operating lease assets 18,120 25,229 Goodwill 510,942 514,279 Acquired intangibles 141,504 156,365 Other assets 483 1,599 $ 1,214,901 $ 1,212,494 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 172,286 $ 134,738 Accrued expenses 67,993 83,505 Billings in excess of cost 46,711 34,702 Liabilities of discontinued operations — 49,295 Total current liabilities 286,990 302,240 Long-term debt 23,781 85,636 Deferred income taxes 40,278 39,057 Non-current operating lease liabilities 11,390 17,730 Other non-current liabilities 27,204 24,026 Stockholders’ equity: Preferred stock, $ 0.01 par value; authorized 10,000 shares; none outstanding — — Common stock, $ 0.01 par value; authorized 100,000 and 50,000 shares in 2021 and 2020; 33,799 and 33,568 shares issued and outstanding in 2021 and 2020 338 336 Additional paid-in capital 314,541 304,870 Retained earnings 545,572 469,943 Accumulated other comprehensive income (loss) 187 ( 2,461 ) Cost of 1,107 and 1,028 common shares held in treasury in 2021 and 2020 ( 35,380 ) ( 28,883 ) Total stockholders’ equity 825,258 743,805 $ 1,214,901 $ 1,212,494 See accompanying notes to consolidated financial statements. 40 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2021 2020 2019 Cash Flows from Operating Activities Net income $ 75,629 $ 64,566 $ 65,091 Income (loss) from discontinued operations 1,113 ( 18,725 ) 5,163 Income from continuing operations 74,516 83,291 59,928 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 31,966 20,915 17,557 Intangible asset impairment 8,300 — — Gain on sale of business — ( 1,881 ) — Stock compensation expense 8,652 8,173 12,570 Exit activity costs, non-cash 1,193 493 408 Provision for deferred income taxes 2,968 3,786 4,120 Other, net 1,570 1,944 5,399 Changes in operating assets and liabilities (excluding the effects of acquisitions): Accounts receivable ( 41,887 ) 2,277 ( 11,256 ) Inventories ( 85,763 ) ( 5,719 ) 14,272 Other current assets and other assets ( 426 ) 5,467 ( 9,306 ) Accounts payable 38,367 ( 1,160 ) 4,804 Accrued expenses and other non-current liabilities ( 14,384 ) ( 44,570 ) 14,040 Net cash provided by operating activities of continuing operations 25,072 73,016 112,536 Net cash (used in) provided by operating activities of discontinued operations ( 2,002 ) 16,088 17,399 Net cash provided by operating activities 23,070 89,104 129,935 Cash Flows from Investing Activities Purchases of property, plant, and equipment ( 17,705 ) ( 13,068 ) ( 8,776 ) Acquisitions, net of cash acquired 4,143 ( 313,686 ) ( 8,595 ) Net proceeds from sale of property and equipment 214 77 92 Net proceeds from sale of business 38,062 2,000 — Net cash provided by (used in) investing activities of continuing operations 24,714 ( 324,677 ) ( 17,279 ) Net cash used in investing activities of discontinued operations ( 176 ) ( 2,033 ) ( 2,394 ) Net cash provided by (used in) investing activities 24,538 ( 326,710 ) ( 19,673 ) Cash Flows from Financing Activities Long-term debt payments ( 120,636 ) — ( 212,000 ) Proceeds from long-term debt 59,500 85,000 — Payment of debt issuance costs — — ( 1,235 ) Purchase of common stock at market prices ( 6,497 ) ( 6,656 ) ( 4,305 ) Net proceeds from issuance of common stock 1,021 1,119 490 Net cash (used in) provided by financing activities ( 66,612 ) 79,463 ( 217,050 ) Effect of exchange rate changes on cash ( 201 ) ( 1,166 ) 1,145 Net decrease in cash and cash equivalents ( 19,205 ) ( 159,309 ) ( 105,643 ) Cash and cash equivalents at beginning of year 32,054 191,363 297,006 Cash and cash equivalents at end of year $ 12,849 $ 32,054 $ 191,363 See accompanying notes to consolidated financial statements. 41 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) 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, 2018 32,887 $ 329 $ 282,525 $ 338,995 $ ( 7,234 ) 796 $ ( 17,922 ) $ 596,693 Net income — — — 65,091 — — — 65,091 Foreign currency translation adjustment — — — — 1,766 — — 1,766 Minimum post retirement benefit plan adjustments, net of taxes of $ 24 — — — — 77 — — 77 Stock compensation expense — — 12,570 — — — — 12,570 Cumulative effect of accounting change — — — 1,582 — — — 1,582 Net settlement of restricted stock units 255 3 ( 3 ) — — 110 ( 4,305 ) ( 4,305 ) Issuance of restricted stock units 8 — — — — — — — Stock options exercised 42 — 490 — — — — 490 Balance at December 31, 2019 33,192 $ 332 $ 295,582 $ 405,668 $ ( 5,391 ) 906 $ ( 22,227 ) $ 673,964 Net income — — — 64,566 — — — 64,566 Foreign currency translation adjustment — — — — 3,301 — — 3,301 Minimum post retirement benefit plan adjustments, net of taxes of $ 116 — — — — ( 371 ) — — ( 371 ) Stock compensation expense — — 8,173 — — — — 8,173 Cumulative effect of accounting change — — — ( 291 ) — — — ( 291 ) Net settlement of restricted stock units 296 4 ( 4 ) — — 122 ( 6,656 ) ( 6,656 ) Issuance of restricted stock units 4 — — — — — — — Stock options exercised 76 — 1,119 — — — — 1,119 Balance at December 31, 2020 33,568 $ 336 $ 304,870 $ 469,943 $ ( 2,461 ) 1,028 $ ( 28,883 ) $ 743,805 Net income — — — 75,629 — — — 75,629 Foreign currency translation adjustment — — — — 2,512 — — 2,512 Minimum post retirement benefit plan adjustments, net of taxes of $ 43 — — — — 136 — — 136 Stock compensation expense — — 8,652 — — — — 8,652 Net settlement of restricted stock units 192 2 ( 2 ) — — 79 ( 6,497 ) ( 6,497 ) Issuance of restricted stock units 3 — — — — — — — Stock options exercised 36 — 1,021 — — — — 1,021 Balance at December 31, 2021 33,799 $ 338 $ 314,541 $ 545,572 $ 187 1,107 $ ( 35,380 ) $ 825,258 See accompanying notes to consolidated financial statements. 42 Table of Contents GIBRALTAR INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The consolidated financial statements include the accounts of Gibraltar Industries, Inc. and subsidiaries (the "Company"). All intercompany accounts and transactions have been eliminated in consolidation. Use of estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates due to uncertainty in current economic environment. Segment Reporting The Company has four reportable segments: Renewables, Residential, Agtech and Infrastructure. In 2021, the Company's former Renewable Energy and Conservation segment was divided into two segments, Renewables and Agtech. For further disclosure regarding the Company's reportable segments, refer to Note 20 "Segment Information." Revenue recognition Revenue is recognized when, or as, the Company transfers control of promised products or service to a customer in an amount that reflects the consideration the Company expects to be entitled in exchange for transferring those products or service. Performance obligations satisfied at a point in time and significant judgments The majority of the Company's revenue from contracts with customers is recognized when the Company transfers control of the promised product at a point in time, which is determined when the customer has legal title and the significant risks and rewards of ownership of the asset, and the Company has a present right to payment for the product. The Company allocates the transaction price, which is generally the quoted price per terms of the contract and the consideration the Company expects to receive, to each performance obligation. These products are generally sold with rights of return and these contracts may provide other credits or incentives, which are accounted for as variable consideration. Sales returns, allowances, and customer incentives, including rebates, are treated as reductions to the sales transaction price and based largely on an assessment of all information (i.e., historical, current and forecasted) that is reasonably available to the Company, and estimated at contract inception and updated at the end of each reporting period as additional information becomes available. Performance obligations satisfied over time and significant judgments For a contract to construct an asset that the customer controls as it is being created or enhanced, or a promise to provide a product that has no alternative use to the Company and the Company has enforceable rights to payment, the Company recognizes revenue over time. For the contracts to construct a certain asset, the Company determines that the customer controls the asset while it is being constructed. For the contracts for products that have no alternative use and for which the Company has an enforceable right to payment, the Company identifies these products as products that are not a standard inventory item or the Company cannot readily direct the product to another customer for use without incurring a significant economic loss, or significant costs to rework the product. The Company determines the transaction price for each contract based on the consideration the Company expects to receive for the promised products and services under the entire contract, which is generally the stated contract price based on an expected cost plus a margin. For the above contracts with customers with respect to which the Company satisfies a performance obligation over time, the Company recognizes revenue based on the extent of progress towards completion of the performance obligation using the cost-to-cost measure of progress. Under the cost-to-cost measure of progress, for which the extent of progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recognized proportionally as costs are incurred. 43 Table of Contents Costs to fulfill a contract include all direct costs related to contract performance. Selling and administrative expenses are charged to operations as incurred. Provision for loss on an uncompleted performance obligation is recognized in the period in which such loss is determined. The Company regularly reviews the progress under the cost-to-cost method and any adjustments are recognized as necessary. Changes in estimates are recognized as they become known using cumulative catch-up basis. The Company also recognizes revenues from services contracts over time. The Company recognizes revenue over time during the term of the agreement as the customer is simultaneously receiving and consuming the benefits provided throughout the Company's performance. Therefore due to control transferring over time, the Company recognizes revenue on a straight-line basis throughout the contract period. Contract assets and contract liabilities Contract assets primarily represents revenue recognized for performance obligations that have been satisfied but for which amounts receivable have not been billed. These are included as current assets and included within accounts receivable on the Company's consolidated balance sheet. Contract liabilities include payments received from customers in advance of the satisfaction of performance obligations for a contract. The Company does not consider contract advances to be significant financing components as the intent of these payments in advance are for reasons other than providing a significant financing benefit and are customary in the Company's industry. Unearned revenue relates to payments received in advance of performance under the contract and is recognized when the Company performs under the contract. Unearned revenue is presented within accrued expenses in the Company's consolidated balance sheets. Costs to obtain a contract with a customer The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year. If the amortization period of the asset is one year or less, the Company recognizes the incremental costs of obtaining a contract as an expense when incurred. These incremental costs include, but are not limited to, sales commissions incurred to obtain a contract with a customer. Cash and cash equivalents All highly liquid investments with a maturity of three months or less are considered cash equivalents. Accounts receivable and allowance for doubtful accounts and contract assets Accounts receivable are composed of trade and contract receivables recorded at either the invoiced amount or costs in excess of billings, are expected to be collected within one year, and do not bear interest. 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. The Company is exposed to credit losses through sales of products and services. 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 u ncollectible after all means of collection have been exhausted and the potential for recovery is considered remote. Estimates are used to determine the allowance. These estimates are based on assessment of anticipated payment and all other historical, current and future information that is reasonably available. The following table summarizes activity recorded within the allowance for doubtful accounts and contract assets balances for the years ended December 31 (in thousands): 44 Table of Contents 2021 2020 2019 Beginning balance $ 3,529 $ 5,951 $ 6,170 Adoption of ASU 2016-13, cumulative-effect adjustment to retained earnings at January 1, 2020 — 385 — Bad debt expense, net of recoveries 898 1,321 2,577 Accounts written off against allowance and other adjustments ( 689 ) ( 4,128 ) ( 2,796 ) Ending balance $ 3,738 $ 3,529 $ 5,951 Concentrations of credit risk in accounts receivable are limited to those from significant customers that are believed to be financially sound. As of December 31, 2021 and 2020, the Company's most significant customer is a home improvement retailer. The home improvement retailer purchases from the Residential segment. Accounts receivable as a percentage of consolidated accounts receivable from the home improvement retailer was 14 % and 11 % as of December 31, 2021 and 2020, respectively. Net sales to the home improvement retailer as a percentage of consolidated net sales were 13 % during the year ended December 31, 2021 and 14 % during each of the years ended December 31, 2020 and 2019. Inventories Inventories are valued at the lower of cost, determined using the first-in, first-out method, or net realizable value. Shipping and handling costs are recognized as a component of cost of sales. Property, plant, and equipment Property, plant, and equipment are stated at cost and depreciated over their estimated useful lives using the straight-line method. Interest is capitalized in connection with construction of qualified assets. Expenditures that exceed an established dollar threshold and that extend the useful lives of assets are capitalized, while repair and maintenance costs are expensed as incurred. The estimated useful lives of land improvements, buildings, and building improvements are 15 to 40 years, while the estimated useful lives for machinery and equipment are 3 to 20 years. The table below sets forth the depreciation expense recognized during the years ended December 31 (in thousands): 2021 2020 2019 Depreciation expense $ 13,110 $ 11,252 $ 10,666 Acquisition related assets and liabilities Accounting for the acquisition of a business as a purchase transaction requires an allocation of the purchase price to the assets acquired and the liabilities assumed in the transaction at their respective estimated fair values. The most complex estimations of individual fair values are those involving long-lived assets, such as property, plant, and equipment and intangible assets. The Company uses all available information to make these fair value determinations and engages independent valuation specialists to assist in the fair value determination of the acquired long-lived assets. Goodwill and other intangible assets The Company tests goodwill for impairment at the reporting unit level on an annual basis at October 31, or more frequently if an event occurs, or circumstances change, that indicate that the fair value of a reporting unit could be below its carrying value. The reporting units are at the component level, or one level below the operating segment level. Goodwill is assigned to each reporting unit as of the date the reporting unit is acquired and based upon the expected synergies of the acquisition. The Company may elect to perform a qualitative assessment that considers economic, industry and company-specific factors for some or all of our selected reporting units. If, after completing the assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company proceeds to a quantitative test. The Company may also elect to perform a quantitative test instead of a qualitative test for any or all of the Company's reporting units. The quantitative impairment test consists of comparing the fair value of a reporting unit, determined using two valuation techniques, to its carrying value. If the carrying value of the reporting unit exceeds its fair value, goodwill is 45 Table of Contents considered impaired, and a loss measured by the excess of the carrying value of the reporting unit over the fair value of the reporting unit must be recorded. The Company also tests its indefinite-lived intangible assets for impairment on an annual basis as of October 31, or more frequently if an event occurs, or circumstances change, that indicate that the fair value of an indefinite-lived intangible asset could be below its carrying value. The impairment test consists of comparing the fair value of the indefinite-lived intangible asset, determined using discounted cash flows on a relief-from-royalty basis, with its carrying amount. An impairment loss would be recognized for the carrying amount in excess of its fair value. Acquired identifiable intangible assets are recorded at cost. Identifiable intangible assets with finite useful lives are amortized over their estimated useful lives. For additional disclosure of the Company's goodwill and other intangible assets refer to Note 7 "Goodwill and Related Intangible Assets." Impairment of long-lived assets Long-lived assets, including acquired identifiable intangible assets with finite useful lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable. In specific situations, when the Company has selected individual assets to be sold or scrapped, the Company obtains market value data for those specific assets and measures and records the impairment loss based on such data. Otherwise, the Company uses undiscounted cash flows to determine whether impairment exists and measures any impairment loss by approximating fair value using acceptable valuation techniques, including discounted cash flow models and third-party appraisals. For additional disclosure on impairment of the Company's long-lived assets refer to Note 7 "Goodwill and Related Intangible Assets" and Note 15 "Exit Activity Costs and Asset Impairments." Leases The Company determines if an agreement is, or contains, a lease at the inception of the agreement. At lease commencement, the Company recognizes a right-of-use asset and a lease liability for leases with terms greater than twelve months. The initial lease liability is recognized at the present value of remaining lease payments over the lease term. Leases with an initial term of twelve months or less are not recorded on the Company's consolidated balance sheet. The Company recognizes lease expense for operating leases on a straight-line basis over the lease term. The Company combines lease and non-lease components, such as common area maintenance costs, in calculating the related asset and lease liabilities for all underlying asset groups. Operating lease cost is included in income from operations and includes short-term leases and variable lease costs which are immaterial. Deferred charges Deferred charges associated with initial costs incurred to enter into new debt arrangements are included as a component of long-term debt and are amortized as a part of interest expense over the terms of the associated debt agreements. Advertising The Company expenses advertising costs as incurred. For the years ended December 31, 2021, 2020 and 2019, advertising costs were $ 8.0 million, $ 7.2 million, and $ 5.7 million, respectively. Foreign currency transactions and translation The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at the rate of exchange in effect at the balance sheet date. Income and expense items are translated at the average exchange rates prevailing during the period. Income taxes The provision for income taxes is determined using the asset and liability approach. Under this approach, deferred income taxes represent the expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities. The Company records a valuation allowance to reduce deferred tax assets when uncertainty exists regarding their realization. 46 Table of Contents Equity-based compensation The Company measures the cost of equity-based compensation based on grant date fair value and recognizes the cost over the period in which the employee is required to provide service in exchange for the award reduced by forfeitures. Equity-based compensation consists of grants of stock options, deferred stock units, common stock, restricted stock units, and performance stock units. Equity-based compensation expense is included as a component of selling, general, and administrative expenses. Recent accounting pronouncements Recent Accounting Pronouncements 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. The standard was effective for the Company as of January 1, 2021. The Company adopted the amendments in this update and the adoption did not have a material impact to the Company’s financial statements. Date of adoption: Q1 2021 Recent Accounting Pronouncements Not Yet Adopted Standard Description Financial Statement Effect or Other Significant Matters ASU No. 2020-04 Reference Rate Reform (Topic 842), Facilitation of Effects of Reference Rate Reform on Financial Reporting , and ASU No. 2021-01 Reference Rate Reform (Topic 842), Scope The amendments in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met, and apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued as a result of reference rate reform. The expedients and exceptions provided by the amendments in ASU 2020-04 do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022 The amendments in ASU 2021-01 clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The amendments in these updates are effective as of March 12, 2020 through December 31, 2020, and may be applied retrospectively to contract modifications and hedging relationships from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date the financial statements are available to be issued. The adoption of the amendments in these updates are not expected to have a material impact on the Company's financial statements. The Company considers the applicability and impact of all ASUs. ASUs not listed above were assessed and determined to be either not applicable, or had or are expected to have minimal impact on our financial statements and related disclosures. 47 Table of Contents (2) ACCOUNTS RECEIVABLE, NET Accounts receivable at December 31 consisted of the following (in thousands): 2021 2020 Trade accounts receivable $ 185,745 $ 174,604 Costs in excess of billings 54,437 26,915 Total accounts receivables 240,182 201,519 Less allowance for doubtful accounts ( 3,738 ) ( 3,529 ) Accounts receivable, net $ 236,444 $ 197,990 Refer to Note 3 "Revenue" concerning the Company's costs in excess of billings. (3) REVENUE Sales includes revenue from contracts with customers for designing, engineering, manufacturing and installation of solar racking systems; electrical balance of systems; roof and foundation ventilation products; centralized mail systems and electronic package solutions; retractable awnings; gutter guards; rain dispersion products; trims and flashings and other accessories; designing, engineering, manufacturing and installation of greenhouses; botanical extraction systems; structural bearings; expansion joints; pavement sealant; elastomeric concrete; and bridge cable protection systems. Refer to Note 20 "Segment Information" for additional information related to revenue recognized by timing of transfer of control by reportable segment. Payment terms and conditions vary by contract, although terms generally include a requirement of payment within a range from 30 to 60 days, or in certain cases, up front deposits. In circumstances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that the Company's contracts generally do not include a significant financing component. Taxes collected from customers, which are subsequently remitted to governmental authorities, are excluded from sales. As of December 31, 2021, the Company's remaining performance obligations are part of contracts that have an original expected duration of one year or less. Additionally, as of December 31, 2021 and 2020, there were no assets recognized related to incremental costs of obtaining a contract with a customer as the benefits of these costs are not expected to exceed one year . Contract assets consist of costs in excess of billings presented within accounts receivable in the Company's consolidated balance sheets. Contract liabilities consist of billings in excess of cost, classified as current liabilities, and unearned revenue, presented within accrued expenses, in the Company's consolidated balance sheets. The following table presents the ending and beginning balances of costs in excess of billings, billings in excess of cost and unearned revenue, respectively, as of December 31, (in thousands): 2021 2020 2019 Costs in excess of billings $ 54,437 $ 26,915 $ 20,607 Billings in excess of cost ( 46,711 ) ( 34,702 ) ( 47,598 ) Unearned revenue ( 3,681 ) ( 21,325 ) ( 15,389 ) Revenue recognized during the years ended December 31, 2021, 2020, and 2019 that was in contract liabilities at the beginning of the respective periods was $ 53.0 million, $ 57.8 million, and $ 27.5 million, respectively. The increase in costs in excess of billings as of December 31, 2021 compared to December 31, 2020 was primarily due to the timing of the Company's right to invoice customers for performance satisfied by the Company for significant contracts in the Renewables and Agtech segments near the end of December 31, 2021. At December 31, 2020, costs in excess of billings, billings in excess of cost, and unearned revenue included approximately 48 Table of Contents $ 6.8 million, $ 12.4 million, and $ 9.0 million, respectively, from acquisitions during the year ended December 31, 2020. (4) INVENTORIES Inventories at December 31 consisted of the following (in thousands): 2021 2020 Raw material $ 135,558 $ 66,018 Work-in-process 5,858 5,382 Finished goods 39,256 31,205 Gross inventory $ 180,672 $ 102,605 Less reserves ( 4,465 ) ( 4,298 ) Total inventories $ 176,207 $ 98,307 The Company's gross inventory balances are reduced by reserves for excess, obsolete and slow moving inventory and estimates for determining net realizable value of the inventory that are reported on a net basis on the Company's consolidated balance sheet. The increase in the Company's total inventories balance as of December 31, 2021 from December 31, 2020 was largely the result of higher input costs, including raw material costs and in-bound freight, as compared to prior year, along with higher levels of inventory carried to accommodate for supply chain challenges in procuring adequate inventory to meet customer needs. The following table summarizes activity recorded within the reserve for excess, obsolete and slow moving inventory for the years ended December 31 (in thousands): 2021 2020 2019 Beginning balance $ 4,161 $ 3,463 $ 2,971 Excess, obsolete and slow moving inventory expense 215 355 1,134 Scrapped inventory and other adjustments 24 343 ( 642 ) Ending balance $ 4,400 $ 4,161 $ 3,463 (5) PROPERTY, PLANT, AND EQUIPMENT Components of property, plant, and equipment at December 31 consisted of the following (in thousands): 2021 2020 Land and land improvements $ 4,634 $ 4,605 Building and improvements 42,526 41,164 Machinery and equipment 194,015 188,853 Construction in progress 20,293 10,458 Property, plant, and equipment, gross 261,468 245,080 Less: accumulated depreciation ( 164,583 ) ( 155,518 ) Property, plant, and equipment, net $ 96,885 $ 89,562 (6) ACQUISITIONS 2020 Acquisitions During the year ended December 31, 2020, the Company acquired five businesses in separate transactions, described further below, two of which are included within the Company's Renewables segment, two in our Agtech segment, and one 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. 49 Table of Contents On December 31, 2020, the Company purchased all the outstanding membership interests of TerraSmart LLC and TerraTrak LLC (collectively, "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 purchase consideration for the acquisition of TerraSmart was $ 223.9 million, which includes a working capital adjustment and certain other adjustments provided for in the equity purchase agreement. The purchase price for the TerraSmart acquisition was allocated to the assets acquired and liabilities assumed based upon their respective fair values estimated as of the date of acquisition. The Company has completed the process to confirm the existence, condition and completeness of assets acquired and liabilities assumed to establish fair values of the assets acquired and liabilities assumed to determine the amount of goodwill to be recognized as of the date of acquisition. The final determination of the fair value of certain assets and liabilities was completed within a measurement period of up to one year from the date of acquisition. The excess consideration was recorded as goodwill and approximated $ 141.0 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 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 5,569 Property, plant and equipment 11,446 Acquired intangible assets 64,150 Other assets 1,854 Other liabilities ( 1,640 ) Goodwill 140,997 Fair value of purchase consideration $ 223,867 The intangible assets acquired in the TerraSmart acquisition consisted of the following (in thousands): Fair Value Weighted-Average Amortization Period Trademarks $ 20,830 Indefinite Technology 1,940 12 years Customer relationships 35,110 12 years Backlog 6,270 Less than 1 year Total $ 64,150 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 purchase consideration of $ 3.8 million, which includes a 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 $ 3.5 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 Gibraltar's existing mail and package solutions business within the Residential segment, for a 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. 50 Table of Contents 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, "Delta Separations") for a purchase consideration of $ 47.1 million, which includes a working capital adjustment and certain other adjustments provided for in the asset purchase agreement. Delta Separations was a privately-held engineering company primarily engaged in the assembly and sale of centrifugal ethanol-based extraction systems. The results of Delta Separations have been included in the Company's consolidated financial results since the date of acquisition within the Company's Agtech segment. The excess consideration was recorded as goodwill and approximated $ 32.2 million, all of which is deductible for tax purposes. On January 15, 2020, the Company purchased substantially all of the assets of Thermo Energy Systems Inc. ("Thermo"), a Canadian-based, privately held provider of commercial greenhouse solutions in North America providing growing infrastructure for the plant based organic food market, for a purchase consideration of $ 7.3 million. The results of Thermo have been included in the Company's consolidated financial results since the date of acquisition within the Company's Agtech segment. The excess consideration recorded as goodwill approximated $ 19.1 million, all of which is deductible for tax purposes. The 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 $ 179 Working capital ( 15,377 ) Property, plant and equipment 1,740 Acquired intangible assets 38,066 Other current assets 1,528 Other assets 2,381 Other liabilities ( 5,576 ) Goodwill 62,161 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 respective markets. The intangible assets acquired in the acquisitions of Sunfig, Architectural Mailboxes, Delta Separations and Thermo consisted of the following as of the respective date of the acquisition (in thousands): Fair Value Weighted-Average Amortization Period Trademarks $ 8,100 Indefinite Trademarks 1,177 3 years Technology 8,345 5 - 15 years Customer relationships 18,480 11 - 13 years Non-compete agreements 1,036 5 years Backlog 928 Less than 1 year Total $ 38,066 2019 Acquisition 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 Agtech segment. The aggregate purchase consideration for the acquisition of Apeks was $ 12.6 million, which includes a 51 Table of Contents working capital adjustment and certain other adjustments provided for in the membership interest purchase agreement. The purchase price for the acquisition was allocated to the assets acquired and liabilities assumed based upon their respective fair values. The excess consideration was recorded as goodwill and approximated $ 6.4 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 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 ( 1,515 ) Property, plant and equipment 1,059 Acquired intangible assets 3,000 Other assets 508 Other liabilities ( 1,081 ) Goodwill 6,436 Fair value of purchase consideration $ 12,561 The intangible assets acquired in this acquisition consisted of the following as of the date of the acquisition (in thousands): Fair Value Weighted-Average Amortization Period Trademarks $ 1,400 Indefinite Technology 900 7 years Customer relationships 700 6 years Total $ 3,000 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 and Apeks were funded from cash on hand. The Company recognized costs as a component of cost of sales related to the sale of inventory at fair value as a result of allocating the purchase price of recent acquisitions. The Company also 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 statements of operations. The acquisition-related costs consisted of the following for the years ended December 31 (in thousands): 2021 2020 2019 Cost of sales $ — $ 634 $ 401 Selling, general and administrative costs 949 3,230 1,517 Total acquisition related costs $ 949 $ 3,864 $ 1,918 52 Table of Contents (7) GOODWILL AND RELATED INTANGIBLE ASSETS Goodwill The changes in the carrying amount of goodwill for the years ended December 31 were as follows (in thousands): Renewables Residential Agtech Infrastructure Total Balance at December 31, 2019 $ 44,816 $ 198,075 $ 32,786 $ 31,678 $ 307,355 Acquired goodwill 147,004 7,377 50,862 — 205,243 Adjustments to prior year acquisitions — — 578 — 578 Foreign currency translation 707 — 396 — 1,103 Balance at December 31, 2020 $ 192,527 $ 205,452 $ 84,622 31,678 $ 514,279 Adjustments to prior year acquisitions ( 2,433 ) — 323 — ( 2,110 ) Foreign currency translation ( 1,414 ) — 187 — ( 1,227 ) Balance at December 31, 2021 $ 188,680 $ 205,452 $ 85,132 31,678 $ 510,942 Goodwill is recognized net of accumulated impairment losses of $ 133.2 million as of December 31, 2021 and 2020, respectively. No goodwill impairment charges were recognized by the Company during 2021 or 2020. Annual and Interim Impairment Testing The Company tests goodwill and indefinite-lived intangible assets for impairment on an annual basis as of October 31 and at interim dates when indicators of impairment are present. In 2021, 2020 and 2019, no indicators of impairment were identified as of interim dates; therefore, no interim tests were performed. During the October 31, 2021 impairment test, the Company conducted a quantitative analysis for all eight of the Company’s reporting units. The quantitative impairment test consists of comparing the fair value of a reporting unit with its carrying value including goodwill. The fair value of each reporting unit evaluated under the quantitative test was determined using two valuation techniques: an income approach and a market approach. Each valuation approach relies on significant assumptions including a weighted average cost of capital ("WACC") based upon the capital structure of market participants in the Company’s peer groups, projected revenue growth, forecasted cash flows, and earnings multiples based on the market value of the Company and market participants within its peer groups. As a result of the Company's annual testing for 2021, 2020 and 2019, none of the reporting units with goodwill as of the testing date had carrying values in excess of their fair values. 53 Table of Contents Acquired Intangible Assets Acquired intangible assets consist of the following (in thousands): December 31, 2021 December 31, 2020 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Indefinite-lived intangible assets: Trademarks $ 52,700 $ — $ 56,570 $ — Finite-lived intangible assets: Trademarks 5,521 4,011 5,818 3,385 Unpatented technology 38,474 20,656 38,752 17,765 Customer relationships 108,591 39,832 98,500 31,580 Non-compete agreements 2,686 1,969 4,885 1,747 Backlog 7,200 7,200 7,228 911 162,472 73,668 155,183 55,388 Total acquired intangible assets $ 215,172 $ 73,668 $ 211,753 $ 55,388 During the year ended December 31, 2021, the Company recognized impairment charges of $ 8.3 million related to indefinite-lived trademark intangible assets due to a rebranding initiative that resulted in the discontinuation of certain indefinite-lived trademarks in the Company's Agtech segment. The Company did no t recognize impairment charges related to indefinite-lived trademark intangible assets for the year ended December 31, 2020. The Company recognized amortization expense related to the definite-lived intangible assets. The following table summarizes amortization expense for the years ended December 31 (in thousands): 2021 2020 2019 Amortization expense $ 18,856 $ 9,663 $ 6,891 Amortization expense related to acquired intangible assets for the next five years ended December 31 is estimated as follows (in thousands): 2022 2023 2024 2025 2026 Amortization expense $ 12,124 $ 11,195 $ 11,014 $ 10,780 $ 9,161 (8) ACCRUED EXPENSES Accrued expenses at December 31 consist of the following (in thousands): 2021 2020 Compensation $ 15,293 $ 18,131 Customer rebates 15,253 11,575 Insurance 7,310 6,915 Current operating lease liability 7,239 8,034 Interest and taxes 5,463 1,850 Unearned revenue 3,681 21,325 Current portion of cash-settled share-based liabilities 2,947 3,504 Other 10,807 12,171 Total accrued expenses $ 67,993 $ 83,505 Accrued expenses for insurance are primarily for general liability, workers’ compensation and employee healthcare policies for which the Company is self-insured up to certain per-occurrence and aggregate limits. The amounts 54 Table of Contents accrued represent the Company's best estimates of the probable amount of claims to be paid. Differences between the amounts accrued and the amount that may be reasonably possible of payment are not material. Accrued expenses for unearned revenue primarily relate to up-front customer deposits received on contracts for goods and services to be provided by the Company as further discussed in Note 3 "Revenue". The current portion of share-based liabilities represents the Company's equity-based awards that are settled in cash, further described in Note 12 "Equity-Based Compensation". (9) DEBT Long-term debt consists of the following (in thousands): December 31, 2021 December 31, 2020 Revolving credit facility $ 24,500 $ 85,000 Other debt — 636 Less unamortized debt issuance costs ( 719 ) — Total debt $ 23,781 $ 85,636 Senior Credit Agreement On January 24, 2019, the Company entered into the Sixth Amended and Restated Credit Agreement ("Senior Credit Agreement"), which amended and restated the Company’s Fifth Amended and Restated Credit Agreement dated December 9, 2015, and provided a revolving credit facility and letters of credit in an aggregate amount equal to $ 400 million. The Company can request additional financing to increase the revolving credit facility to $ 700 million or enter into a term loan of up to $ 300 million subject to conditions set forth in the Senior Credit Agreement. The Senior Credit Agreement contains three financial covenants. As of December 31, 2021, the Company was in compliance with all three 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 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. Capital distributions are subject to certain Total Leverage Ratio requirements and capped by an annual aggregate limit under the Senior Credit Agreement. Standby letters of credit of $ 6.2 million have been issued under the Senior Credit Agreement to third parties on behalf of the Company as of December 31, 2021. These letters of credit reduce the amount otherwise available under the revolving credit facility. The Company had $ 369.3 million and $ 309.2 million of availability under the revolving credit facility as of December 31, 2021 and 2020, respectively. Total cash paid for interest in the years ended December 31 was (in thousands): 2021 2020 2019 Interest expense, net $ 1,639 $ 703 $ 2,323 Interest income 269 276 764 Other non-cash adjustments ( 345 ) ( 345 ) ( 380 ) Cash paid for interest $ 1,563 $ 634 $ 2,707 (10) PENSION AND OTHER POSTRETIREMENT BENEFITS The Company has a 401(k) plan which all employees of U.S. subsidiaries are eligible to participate. 55 Table of Contents The Company contributes to a multiemployer defined benefit pension plan under the terms of a collective-bargaining agreement that covers union-represented employees. The Company has an unfunded postretirement healthcare plan which provides health insurance to certain employees and their spouses upon retirement. This plan has been frozen and no additional participants will be added to the plan in the future. Total expense for all retirement plans for the years ended December 31 was (in thousands): 2021 2020 2019 401(k) plan $ 3,196 $ 2,403 $ 2,031 Multiemployer and other defined benefit and pension plans 78 70 195 Postretirement healthcare plan 411 351 346 Total retirement plan expense $ 3,685 $ 2,824 $ 2,572 The Company's one multiemployer plan is underfunded and has a rehabilitation plan in place. The rehabilitation plan requires minimum contributions from the Company. Given the status of this plan, it is reasonably possible that future contributions to the plan will increase although the Company cannot reasonably estimate a possible range of increased contributions as of December 31, 2021. The following table presents the changes in the accumulated postretirement benefit obligation related to the Company’s unfunded postretirement healthcare benefits at December 31 (in thousands): 2021 2020 Projected benefit obligation at January 1 $ 6,443 $ 6,024 Service cost — 10 Interest cost 125 172 Plan amendments 162 — Actuarial (gain) loss ( 200 ) 580 Benefits paid, net of contributions ( 328 ) ( 343 ) Projected benefit obligation at December 31 6,202 6,443 Fair value of plan assets — — Under funded status ( 6,202 ) ( 6,443 ) Unamortized prior service cost 412 294 Unrecognized actuarial loss 1,530 1,843 Net amount recognized $ ( 4,260 ) $ ( 4,306 ) Amounts recognized in the consolidated financial statements consisted of (in thousands): 2021 2020 Accrued postretirement benefit liability Current portion $ 358 $ 335 Long term portion 5,844 6,108 Pre-tax accumulated other comprehensive loss – unamortized post-retirement healthcare costs ( 1,942 ) ( 2,137 ) Net amount recognized $ 4,260 $ 4,306 The measurement date used to determine postretirement benefit obligation measures was December 31. 56 Table of Contents Components of net periodic postretirement benefit cost charged to expense for the years ended December 31 were as follows (in thousands): 2021 2020 2019 Service cost $ — $ 10 $ 17 Interest cost 125 172 234 Amortization of unrecognized prior service cost 44 44 44 Loss amortization ( 2 ) 113 64 51 Net periodic benefit cost $ 282 $ 290 $ 346 Assumptions used to calculate the benefit obligation: Discount rate 2.4 % 2.0 % 2.9 % Annual rate of increase in the per capita cost of: Medical costs before age 65 ( 1) 7.0 % 7.0 % 6.8 % Medical costs after age 65 ( 1) 4.5 % 4.5 % 4.5 % Prescription drug costs ( 1) 7.0 % 7.0 % 7.0 % (1) It was assumed that these rates would gradually decline to 3.8 % by 2075. (2) Actuarial (gains)/losses are amortized utilizing the corridor approach. Differences between actual experience and the actuarial assumptions are reflected in (gain)/loss. If the total net (gain) or loss exceeds 10 percent of the greater of the accumulated postretirement benefit obligation or plan assets, this excess must be amortized over the average remaining service period of the active plan participants. If most of the plan participants are inactive, the amortization period is the expected future lifetime of inactive plan participants. Expected benefit payments from the plan for the years ended December 31 are as follows (in thousands): 2022 2023 2024 2025 2026 Years 2027 - 2031 Expected benefit payments $ 358 $ 369 $ 377 $ 389 $ 401 $ 1,961 (11) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The cumulative balance of each component of accumulated other comprehensive income (loss) is as follows (in thousands): Foreign Currency Translation Adjustment Minimum post retirement benefit plan adjustments Total Pre-Tax Amount Tax (Benefit) Expense Accumulated Other Comprehensive Income (Loss) Balance at December 31, 2019 $ ( 4,173 ) $ ( 1,939 ) $ ( 6,112 ) $ ( 721 ) $ ( 5,391 ) Minimum post retirement benefit plan adjustments — ( 487 ) ( 487 ) ( 116 ) ( 371 ) Foreign currency translation adjustment 3,301 — 3,301 — 3,301 Balance at December 31, 2020 $ ( 872 ) $ ( 2,426 ) $ ( 3,298 ) $ ( 837 ) $ ( 2,461 ) Minimum post retirement benefit plan adjustments — 179 179 43 136 Foreign currency translation adjustment 2,512 — 2,512 — 2,512 Balance at December 31, 2021 $ 1,640 $ ( 2,247 ) $ ( 607 ) $ ( 794 ) $ 187 57 Table of Contents The realized adjustments relating to the Company’s minimum post retirement health care costs were reclassified from accumulated other comprehensive loss and included in other expense in the consolidated statements of operations. (12) EQUITY-BASED COMPENSATION The Company awards equity-based compensation to employees and directors, which is recognized in the statements of operations based on the grant-date fair value of the award. The Company uses the straight-line method for recording compensation expense over a vesting period generally up to four years with either graded or cliff vesting. Stock compensation expense recognized during the period is based on the value of the portion of equity-based awards that is ultimately expected to vest during the period reduced by the expense on unvested awards forfeited during the period. On May 4, 2018, the shareholders 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"). The Company's 2005 Equity Incentive Plan (the "Prior Plan") was amended in 2015 to terminate issuance of further awards from the Prior 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 shareholders 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. At December 31, 2021, approximately 393,000 and 120,000 shares were available for issuance under the 2018 Plan and 2015 Plan, respectively, as incentive stock options or other stock awards, and approximately 19,000 shares were available for issuance under the Non-Employee Directors Plan as awards of shares of the Company's common stock. The Company recognized the following compensation expense in connection with awards that vested under the 2018 Plan, the 2015 Plan, the Prior Plan, and the Non-Employee Directors Plan along with the related tax benefits recognized during the years ended December 31 (in thousands): 2021 2020 2019 Expense recognized under the Prior Plan $ 29 $ 40 $ 192 Expense recognized under the 2015 Plan 1,186 1,932 5,077 Expense recognized under the 2018 Plan 6,597 5,441 6,731 Expense recognized under the Non-Employee Directors Plan 840 760 570 Total stock compensation expense $ 8,652 $ 8,173 $ 12,570 Tax benefits recognized related to stock compensation expense $ 2,189 $ 2,272 $ 3,136 58 Table of Contents Equity Based Awards - Settled in Stock The following table provides the number of stock units and common stock granted during the years ended December 31, along with the weighted-average grant-date fair value of each award: 2021 2020 2019 Awards Number of Awards Weighted Average Grant Date Fair Value Number of Awards Weighted Average Grant Date Fair Value Number of Awards Weighted Average Grant Date Fair Value Deferred stock units 7,536 $ 83.58 12,402 $ 45.98 7,509 $ 37.95 Common stock 2,512 $ 83.58 4,134 $ 45.98 7,509 $ 37.95 Restricted stock units 72,243 $ 79.28 81,397 $ 56.81 152,472 $ 39.73 Performance stock units 62,778 $ 87.84 160,426 $ 55.98 183,908 $ 40.49 Stock Options No options were granted in 2021, 2020 and 2019. The Company determines the fair value of stock options granted based on the Black-Scholes option pricing model on the date of grant, and the expected stock volatility is based on volatility of the Company’s stock price using a historical period commensurate with the expected life of the options. The following table summarizes the ranges of outstanding and exercisable options at December 31, 2021: Range of Exercise Prices Options Outstanding Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price Options Exercisable Weighted Average Exercise Price $ 39.00 – $ 44.00 5,000 5.33 $ 39.55 5,000 $ 39.55 The following table summarizes information about stock option transactions: Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value Balance at January 1, 2019 159,759 $ 17.70 Exercised ( 42,350 ) 11.57 Balance at December 31, 2019 117,409 $ 19.91 Exercised ( 75,909 ) 14.73 Balance at December 31, 2020 41,500 $ 29.38 Exercised ( 36,500 ) 27.99 Balance at December 31, 2021 5,000 $ 39.55 5.33 $ 135,650 The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the $ 66.68 per share market price of the Company’s common stock as of December 31, 2021, which would have been received by the option holders had all option holders with an exercise price below the per share market price on December 31, 2021, exercised their options as of that date. 59 Table of Contents Stock Units and Common Stock The following table summarizes information about non-vested restricted stock units, performance stock units (that will convert to shares upon vesting) and common stock: Restricted Stock Units Weighted Average Grant Date Fair Value Common Stock Weighted Average Grant Date Fair Value Performance Stock Units (1) (2) Weighted Average Grant Date Fair Value Deferred Stock Units (3) Weighted Average Grant Date Fair Value Balance at December 31, 2020 237,442 $ 41.15 — $ — 407,289 $ 45.00 47,154 $ 37.30 Granted 72,243 $ 79.28 2,512 $ 83.58 62,778 $ 87.84 7,536 $ 83.58 Adjustments — $ — — $ — 7,400 $ 52.40 — $ — Vested ( 83,028 ) $ 43.09 ( 2,512 ) $ 83.58 ( 106,826 ) $ 35.06 ( 2,218 ) $ 36.47 Forfeited ( 22,073 ) $ 49.78 — $ — ( 7,167 ) $ 46.87 — $ — Balance at December 31, 2021 204,584 $ 52.90 — $ — 363,474 $ 55.44 52,472 $ 43.99 (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 PSUs 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 other criteria such as revenue, gross profit, and operating profit thresholds over a two-year or three-year performance period. The Company's PSUs with a market condition are based on the ranking of the Company’s total shareholder 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) The Company's PSU adjustments during 2021 represent shares earned for achievement in excess of targeted thresholds at the end of the performance period. The Company's PSUs with a financial performance condition, based on the Company ROIC, granted in 2020 accounted for the 7,400 PSUs that will be converted to shares and issued to recipients in the first quarter of 2023 at 109.5 % of the target amount granted, based on the Company's actual ROIC compared to ROIC target for the performance period ended December 31, 2020. (3) Vested and issuable upon termination from service as a member of the Company's Board of Directors. The fair value of the common stock, restricted stock units, and deferred stock units, as well as the performance stock units with a financial performance condition granted during the three years ended December 31, 2021 was based on the Company stock price at grant date of the award. The fair value of the performance stock units with a market condition granted during the three years ended December 31, 2021 were determined using a Monte Carlo simulation as of the grant date of the award. The Company granted performance units with a market condition during 2020, however, no such awards were granted in 2021 and 2019. The following table sets forth the aggregate intrinsic value of options exercised and aggregate fair value of restricted stock units and restricted shares that vested during the years ended December 31 (in thousands): 2021 2020 2019 Aggregate intrinsic value of options exercised $ 2,103 $ 3,812 $ 1,371 Aggregate fair value of vested restricted stock units $ 6,320 $ 11,851 $ 10,017 Aggregate fair value of vested common and restricted shares $ 370 $ 190 $ 285 Aggregate fair value of vested deferred stock units $ 630 $ 570 $ 285 As of December 31, 2021, there was $ 10.3 million of total unrecognized compensation cost related to non-vested restricted and performance stock units. That cost is expected to be recognized over a weighted average period of 2.1 years. 60 Table of Contents Equity Based Awards - Settled in Cash Management Stock Purchase Plan At December 31, 2021, the Company's equity based awards that are settled in cash are the awards under the Management Stock Purchase Plan ("MSPP"). The total of these share-based liabilities recorded on the consolidated balance sheet as of December 31, 2021 was $ 22.6 million, of which $ 2.9 million was included in current accrued expenses and $ 19.7 million was included in non-current liabilities. Total share-based liabilities as of December 31, 2020 were $ 18.2 million, of which $ 14.7 million was included in non-current liabilities. The 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’ 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 deferred compensation. The deferrals and related 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 Company 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, balance of vested and unvested restricted stock units within active participant accounts, payments made with respect to restricted stock units issued under the MSPP, and MSPP expense during years ended December 31: 2021 2020 2019 Restricted stock units credited 30,475 57,046 61,369 Restricted stock units balance, vested and unvested 223,892 231,343 415,760 Share-based liabilities paid, in thousands $ 4,915 $ 15,401 $ 6,543 MSPP expense, in thousands $ 6,034 $ 4,518 $ 2,699 (13) FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement as follows: • Level 1 - Quoted prices in active markets for identical assets or liabilities. • Level 2 - Observable inputs other than quoted prices in active markets for similar assets and liabilities. • Level 3 - Inputs that are unobservable inputs for the asset or liability. The Company had no financial assets or liabilities measured at fair value on a recurring basis and did not have any financial instruments for which carrying value differed from its fair value at December 31, 2021 and 2020. As of December 31, 2021, the Company had $ 24.5 million outstanding on its revolving credit facility under its Senior Credit Agreement. The Company determined the carrying value of the outstanding balance on its revolving credit facility approximates fair value due to the variable market interest rate terms of the credit facility. The Company had $ 85 million outstanding on its revolving credit facility as of December 31, 2020. The Company’s other financial instruments primarily consist of cash and cash equivalents, accounts receivable, notes receivable, and accounts payable. The carrying values for these financial instruments approximate fair value. The Company did not have any other material assets or liabilities carried at fair value and measured on a recurring basis as of December 31, 2021 and 2020. 61 Table of Contents Other non-recurring fair value measurements The Company recognized impairment charges related to certain intangible assets during the year ended December 31, 2021, and recorded impairment of property, plant, and equipment during the year ended December 31, 2020. The Company did not recognize any impairment charges related to certain intangible assets or property, plant, and equipment during the year ended December 31, 2019. The Company uses unobservable inputs, classified as Level 3 inputs, in determining the fair value of these assets. See Note 7 "Goodwill and Related Intangible Assets" and Note 15 "Exit Activity Costs and Asset Impairments" for more disclosure regarding the impairment of certain intangible assets and property, plant, and equipment, respectively. The Company also applied fair value principles for the goodwill impairment tests performed during 2021, 2020, and 2019. The Company used two valuation models to estimate the fair values of its reporting units, both of which primarily use Level 3 inputs. See Note 7 of the consolidated financial statements for the results of the Company’s goodwill impairment tests. Additionally, the Company's recent acquisition activity, as described in Note 6 "Acquisitions", used Level 3 inputs to estimate fair values allocated to the assets acquired and liabilities assumed. (14) 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 seller note was paid in full to the Company during the second quarter of 2021. 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. 62 Table of Contents The following carrying amounts of the major classes of assets and liabilities included in discontinued operations related to the Industrial business have been segregated from the Company's continuing operations and are reported as assets and liabilities of discontinued operations held for sale, respectively, in the consolidated balance sheet at December 31, 2020 (in thousands): December 31, 2020 Assets Accounts receivable, net $ 11,261 Inventories, net 13,041 Prepaid expenses and other current assets 21,310 Total current assets (1) 45,612 Property, plant, and equipment, net 16,999 Operating lease assets 6,470 Goodwill 22,475 Acquired intangibles 15,482 Loss recognized on classification as held for sale ( 29,600 ) Total noncurrent assets (1) 31,826 Total assets classified as held for sale $ 77,438 Liabilities Accounts payable $ 10,708 Accrued expenses 9,274 Total current liabilities (1) 19,982 Deferred income taxes 24,657 Non-current operating lease liabilities 4,639 Other non-current liabilities 17 Total noncurrent liabilities (1) 29,313 Total liabilities classified as held for sale $ 49,295 (1) The assets and liabilities of the discontinued operations were classified as current on the December 31, 2020 consolidated balance sheet, as it was probable that the sale would occur and proceeds would be collected within one year. Components of the income (loss) from discontinued operations before taxes, including the interest allocated to discontinued operations, for the years ended December 31 were as follows (in thousands): 2021 2020 2019 Net sales $ 20,391 $ 128,915 $ 150,225 Operating expenses 17,493 115,822 143,335 Loss and adjustments to loss on disposal 1,419 29,600 — Interest expense allocation — 95 208 Income (loss) from discontinued operations before taxes $ 1,479 $ ( 16,602 ) $ 6,682 On June 30, 2020, the Company sold its self-guided apartment tour application business to a third party from its Residential segment. The $ 2.0 million net proceeds from the sale resulted in pre-tax net gain of $ 1.9 million and has been presented within other (income) expense in the consolidated statements of income. This divestiture does not meet the criteria to be reported as a discontinued operation nor did it have a major effect on the Company's operations. 63 Table of Contents (15) 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 products lines, and the reduction in our manufacturing footprint. Exit activity costs were incurred during 2021 related to moving and closing costs, severance and contract terminations, along 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, in 2021, the Company closed four facilities. In 2020, the Company closed two facilities and, separately, sold a facility closed in 2017. The Company closed and consolidated one facility during 2019. These closures resulted in exit activity costs and asset impairment charges. The following table sets forth the exit activity costs and asset impairment charges incurred by segment during the years ended December 31 related to the restructuring activities described above (in thousands): 2021 2020 2019 Exit activity costs Asset impairment charges Total Exit activity costs Asset impairment charges Total Exit activity costs Asset impairment charges Total Renewables $ 4,769 $ 1,193 $ 5,962 $ 15 $ — $ 15 $ 66 $ — $ 66 Residential 393 — 393 731 9 740 3,440 417 3,857 Agtech 1,687 — 1,687 860 72 932 — ( 9 ) ( 9 ) Infrastructure 26 — 26 226 — 226 — — — Corporate 145 — 145 375 — 375 1,660 — 1,660 Total exit activity costs & asset impairments $ 7,020 $ 1,193 $ 8,213 $ 2,207 $ 81 $ 2,288 $ 5,166 $ 408 $ 5,574 The following table provides a summary of where the above exit activity costs and asset impairments are recorded in the consolidated statements of operations for the years ended December 31 (in thousands): 2021 2020 2019 Cost of sales $ 6,176 $ 1,059 $ 767 Selling, general, and administrative expense 2,037 1,229 4,807 Total exit activity costs and asset impairments $ 8,213 $ 2,288 $ 5,574 The following table reconciles the beginning and ending liability for exit activity costs relating to the Company’s facility consolidation efforts (in thousands): 2021 2020 Balance as of January 1 $ 1,030 $ 2,083 Exit activity costs recognized 7,020 2,207 Cash payments ( 7,778 ) ( 3,260 ) Balance as of December 31 $ 272 $ 1,030 (16) INCOME TAXES The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. 64 Table of Contents The components of income before taxes from continuing operations consisted of the following for the years ended December 31 (in thousands): 2021 2020 2019 Domestic $ 93,155 $ 108,930 $ 78,351 Foreign 6,407 ( 1,171 ) ( 270 ) Income before taxes from continuing operations $ 99,562 $ 107,759 $ 78,081 The provision for income taxes from continuing operations for the years ended December 31 consisted of the following (in thousands): 2021 2020 2019 Current: U.S. Federal $ 16,137 $ 16,505 $ 10,394 State 5,009 4,071 3,547 Foreign 932 106 92 Total current 22,078 20,682 14,033 Deferred: U.S. Federal 1,766 3,620 3,740 State 134 672 486 Foreign 1,068 ( 506 ) ( 106 ) Total deferred 2,968 3,786 4,120 Provision for income taxes $ 25,046 $ 24,468 $ 18,153 The provision for income taxes from discontinued operations for the years ended December 31 consisted of the following (in thousands): 2021 2020 2019 Current: U.S. Federal $ 362 $ 1,345 $ 885 State 139 57 4 Foreign 214 1,725 1,447 Total current 715 3,127 2,336 Deferred: U.S. Federal ( 340 ) ( 876 ) ( 823 ) State 2 10 23 Foreign ( 11 ) ( 138 ) ( 17 ) Total deferred ( 349 ) ( 1,004 ) ( 817 ) Provision for income taxes $ 366 $ 2,123 $ 1,519 65 Table of Contents The provision for income taxes from continuing operations differs from the federal statutory rate of 21 % due to the following (in thousands) for the years ended December 31: 2021 2020 2019 Statutory rate 20,908 21.0 % 22,629 21.0 % 16,397 21.0 % State taxes, less federal effect 4,068 4.1 % 3,650 3.4 % 3,194 4.1 % Federal tax credits ( 587 ) ( 0.6 ) % ( 1,064 ) ( 1.0 ) % ( 1,621 ) ( 2.1 ) % Excess tax benefit on stock based compensation ( 2,039 ) ( 2.0 ) % ( 1,674 ) ( 1.6 ) % ( 871 ) ( 1.1 ) % Uncertain tax positions — — % — — % ( 260 ) ( 0.3 ) % Executive compensation 1,781 1.8 % 1,114 1.0 % 1,132 1.4 % Change in valuation allowance — — % ( 130 ) ( 0.1 ) % 88 0.1 % Other 915 0.9 % ( 57 ) — % 94 0.1 % $ 25,046 25.2 % $ 24,468 22.7 % $ 18,153 23.2 % Deferred tax liabilities at December 31 consist of the following (in thousands): 2021 2020 Depreciation $ 9,633 $ 7,697 Goodwill 48,265 41,842 Intangible assets 1,657 5,632 Other 5,298 6,878 Gross deferred tax liabilities 64,853 62,049 Capital loss carryforward ( 27,328 ) — Equity compensation ( 8,236 ) ( 7,496 ) Other ( 15,641 ) ( 15,682 ) Gross deferred tax assets ( 51,205 ) ( 23,178 ) Valuation allowances 26,581 111 Deferred tax assets, net of valuation allowances ( 24,624 ) ( 23,067 ) Net deferred tax liabilities $ 40,229 $ 38,982 At December 31, 2021, the Company had total net operating loss carry forwards of $ 15.1 million, which included $ 0.4 million for federal, $ 14.3 million for state, and $ 0.4 million for foreign income tax purposes. The federal and state net operating loss carry forwards expire between 2022 and 2041. The foreign net operating loss carry forwards expire between 2022 and 2030. The Company recognized a total of $ 0.7 million of deferred tax assets, net of the federal tax benefit, related to these net operating losses prior to any valuation allowances, which included $ 0.1 million of federal and $ 0.5 million of state deferred tax assets and $ 0.1 million of foreign deferred tax assets. As a result of the sale of the Industrial business during 2021, the Company will generate a capital loss of $ 113.8 million for federal and state purposes to the extent allowable under state tax regulations. The capital loss carryforward will expire in 2026. The Company recognized a total of $ 27.3 million of deferred tax assets, net of the federal benefit, related to this carryforward prior to any valuation allowances, which included $ 23.0 million of federal and $ 4.3 million of state deferred tax assets. 66 Table of Contents Deferred taxes include net deferred tax assets relating to certain state and foreign tax jurisdictions. A reduction of the carrying amount of deferred tax assets by a valuation allowance is required if it is more likely than not that such assets will not be realized. In 2019, a valuation allowance was recorded in China. In 2020, the valuation allowance in China was reversed and a tax attribute valuation allowance was also reversed as the Company expects to utilize the attribute. In 2021, a valuation allowance was recorded on federal and state capital loss carry forwards which are not expected to be utilized before expiration. The following sets forth a reconciliation of the beginning and ending amount of the Company’s valuation allowance (in thousands): 2021 2020 2019 Balance as of January 1 $ 111 $ 298 $ 206 Cost charged to the tax provision 13 70 100 Reductions ( 41 ) ( 248 ) ( 10 ) Reclassification from discontinued operations upon sale of industrial group 26,498 — — Currency translation — ( 9 ) 2 Balance as of December 31 $ 26,581 $ 111 $ 298 The Company made net payments for income taxes for the following amounts for the years ended December 31 (in thousands): 2021 2020 2019 Payments made for income taxes, net $ 22,076 $ 21,351 $ 16,744 At December 31, 2021, the Company had approximately $ 4.2 million of undistributed earnings of foreign subsidiaries. The Company continues to maintain its assertion that all remaining foreign earnings will be indefinitely reinvested. Any excess earnings could be used to grow the Company's foreign operations through launches of new capital projects or additional acquisitions. Determination of the amount of unrecognized deferred U.S. income tax liability related to the Company's remaining unremitted foreign earnings is not practicable due to the complexities associated with its hypothetical calculation. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands): 2021 2020 2019 Balance as of January 1 $ — $ — $ 329 Additions for tax positions of the current year — — — Additions for tax positions of prior years — — — Reductions for tax positions of prior years for: Settlements and changes in judgment — — — Lapses of applicable statute of limitations — — ( 329 ) Divestitures and foreign currency translation — — — Balance as of December 31 $ — $ — $ — In 2021 and 2020, the Company did not have any unrecognized tax benefits. In 2019, unrecognized tax benefit of $ 0.3 million was reversed as a result of the lapse of the statute of limitations. The Company classifies accrued interest and penalties related to unrecognized tax benefits in income tax expense. No interest or penalties have been recognized during the years ended December 31, 2021, 2020 or 2019. The Company and its U.S. subsidiaries file a U.S. federal consolidated income tax return. Foreign and U.S. state jurisdictions have statute of limitations generally ranging from four to ten years . An examination of the Company's 67 Table of Contents U.S. federal consolidated income tax return for 2015 through 2018 was closed during 2021 with no changes. No other open periods are currently under examination. (17) EARNINGS PER SHARE Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding, as well as dilutive common shares which include shares issuable pursuant to equity based incentive compensation awards under the equity compensation plans described in Note 12 of the consolidated financial statements. The weighted average number of diluted shares does not include potential anti-dilutive common shares issuable pursuant to equity based incentive compensation awards. There were no anti-dilutive shares outstanding at December 31, 2021. There were 13,000 and 30,000 shares issuable pursuant to equity based incentive compensation awards excluded from the diluted earnings calculation because the effect of their inclusion would be anti-dilutive for the years ended December 31, 2020 and 2019, respectively. The treasury stock method is used to calculate dilutive shares, which reduces the gross number of dilutive shares by the number of shares purchasable from the proceeds of the options assumed to be exercised and the unrecognized expense related to the options, restricted shares, restricted stock units, and performance stock units assumed to have vested. Weighted average shares outstanding for basic and diluted earnings are as follows for the years ended December 31 (in thousands): 2021 2020 2019 Numerator: Income from continuing operations $ 74,516 $ 83,291 $ 59,928 Income (loss) from discontinued operations 1,113 ( 18,725 ) 5,163 Net income available to common shareholders $ 75,629 $ 64,566 $ 65,091 Denominator for basic earnings per share: Weighted average shares outstanding 32,873 32,664 32,389 Denominator for diluted earnings per share: Common stock options and stock units 181 254 333 Weighted average shares and conversions 33,054 32,918 32,722 (18) LEASES The Company's leases are classified as operating leases and consist of manufacturing facilities, distribution centers, office space, vehicles and equipment. Most of the Company's leases include one or more options to renew, with renewal terms that can extend the respective lease term from one month to fifteen years . The exercise of lease renewal options is at the Company's sole discretion. As of December 31, 2021, the Company's renewal options are not part of the Company's operating lease assets and operating lease liabilities. Certain leases also include options to purchase at fair value the underlying leased asset at the Company's sole discretion. Amounts recognized in the Company's consolidated balance sheet at December 31 were as follows (in thousands): 2021 2020 Assets Operating lease assets $ 18,120 $ 25,229 Liabilities Current Accrued expenses $ 7,239 $ 8,034 Non-current Non-current operating lease liabilities 11,390 17,730 $ 18,629 $ 25,764 68 Table of Contents The components of lease costs for the years ended December 31 were as follows (in thousands): 2021 2020 2019 Operating lease cost $ 10,977 $ 10,005 $ 10,006 Short-term lease cost 7,153 996 435 Total lease cost $ 18,130 $ 11,001 $ 10,441 Information related to the Company's operating right-of-use assets and related operating lease liabilities for the years ended December 31 were as follows (in thousands): 2021 2020 2019 Cash paid for amounts included in the measurement of operating liabilities $ 9,431 $ 9,502 $ 9,238 Right-of-use assets obtained in exchange for new lease liabilities $ 1,084 $ 12,745 $ 6,364 Information related to the Company's lease terms and discount rates as of December 31 were as follows: 2021 2020 Weighted-average remaining lease term - operating leases 3.0 years 3.6 years Weighted-average discount rate - operating leases 5.2 % 5.2 % The future maturity of the Company's lease liabilities as of December 31, 2021 were as follows (in thousands): 2022 $ 7,931 2023 6,703 2024 3,443 2025 1,155 2026 300 After 2026 492 Total lease payments 20,024 Less: present value discount ( 1,395 ) Present value of lease liabilities $ 18,629 The Company uses the its incremental borrowing rate based on information available at the commencement date of a lease in determining the present value of lease payments as the rates implicit in most of the Company's leases are not readily determinable. (19) COMMITMENTS AND CONTINGENCIES The Company is a party to certain claims and legal actions generally incidental to its business. For certain divestiture transactions completed in prior years, the Company has agreed to indemnify the buyer for various liabilities that may arise after the disposal date. The Company is a party to certain claims made under these indemnification provisions. As of December 31, 2021, the Company has a contingent liability recorded for such provisions related to discontinued operations. Management does not believe that the outcome of this claim, or other claims which are not clearly determinable at the present time, would significantly affect the Company's financial condition or results of operation. 69 Table of Contents (20) SEGMENT INFORMATION The Company is organized into four reportable segments on the basis of the production processes, products and services provided by each segment, identified as follows: (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. During the first quarter of 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. 70 Table of Contents The following table illustrates certain measurements used by management to assess the performance of the segments described above as of and for the years ended December 31 (in thousands): 2021 2020 2019 Net sales: Renewables $ 432,096 $ 238,107 $ 229,755 Residential 635,505 522,814 461,630 Agtech 199,161 209,460 143,268 Infrastructure 73,021 62,197 63,580 Total consolidated net sales $ 1,339,783 $ 1,032,578 $ 898,233 Income from operations: Renewables $ 20,158 $ 30,105 $ 24,788 Residential 105,821 94,430 63,047 Agtech ( 931 ) 10,633 22,770 Infrastructure 8,911 7,233 6,428 Segments income from operations 133,959 142,401 117,033 Unallocated corporate expenses ( 36,971 ) ( 35,211 ) ( 36,221 ) Total income from operations $ 96,988 $ 107,190 $ 80,812 Depreciation and Amortization Renewables $ 14,682 $ 3,377 $ 3,480 Residential 8,694 8,110 7,906 Agtech 5,279 6,068 2,652 Infrastructure 3,092 3,060 3,129 Unallocated corporate expenses 219 300 390 $ 31,966 $ 20,915 $ 17,557 Total assets Renewables $ 445,486 $ 402,797 $ 127,856 Residential 453,469 407,132 359,657 Agtech 212,038 216,274 118,997 Infrastructure 82,662 80,796 110,611 Unallocated corporate assets 21,246 28,057 174,475 Assets of discontinued operations — 77,438 92,854 $ 1,214,901 $ 1,212,494 $ 984,450 Capital expenditures Renewables $ 4,268 $ 423 $ 252 Residential 4,182 3,313 4,968 Agtech 3,289 720 1,947 Infrastructure 2,097 1,511 1,028 Unallocated corporate expenditures 3,869 7,101 581 $ 17,705 $ 13,068 $ 8,776 71 Table of Contents The following tables illustrate revenue disaggregated by timing of transfer of control to the customer for the years ended December 31 (in thousands): 2021 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 28,630 $ 630,494 $ 20,157 $ 32,512 $ 711,793 Over Time 403,466 5,011 179,004 40,509 627,990 Total $ 432,096 $ 635,505 $ 199,161 $ 73,021 $ 1,339,783 2020 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 22,833 $ 518,281 $ 52,894 $ 22,781 $ 616,789 Over Time 215,274 4,533 156,566 39,416 415,789 Total $ 238,107 $ 522,814 $ 209,460 $ 62,197 $ 1,032,578 2019 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 2,677 $ 458,006 $ 39,919 $ 26,490 $ 527,092 Over Time 227,078 3,624 103,349 37,090 371,141 Total $ 229,755 $ 461,630 $ 143,268 $ 63,580 $ 898,233 Net sales by region or origin and long-lived assets by region of domicile for the years ended and as of December 31 are as follows (in thousands): 2021 2020 2019 Net sales North America $ 1,318,795 $ 1,018,406 $ 881,432 Asia 20,988 14,172 16,801 Total $ 1,339,783 $ 1,032,578 $ 898,233 Long-lived assets North America $ 97,003 $ 90,685 $ 79,590 Asia 365 476 542 Total $ 97,368 $ 91,161 $ 80,132 72 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.