GIBRALTAR INDUSTRIES, INC. 10-Q

Item 1. Financial Statements GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Net sales $ 366,949 $ 348,389 $ 684,814 $ 635,981 Cost of sales 276,678 267,458 529,699 495,032 Gross profit 90,271 80,931 155,115 140,949 Selling, general, and administrative expense 50,132 49,522 93,781 96,725 Income from operations 40,139 31,409 61,334 44,224 Interest expense 656 245 1,141 689 Other expense (income) 281 ( 4,666 ) 434 ( 4,351 ) Income before taxes 39,202 35,830 59,759 47,886 Provision for income taxes 9,895 9,457 14,996 11,017 Income from continuing operations 29,307 26,373 44,763 36,869 Discontinued operations: (Loss) income before taxes — ( 502 ) — 2,068 (Benefit from) provision for income taxes — ( 78 ) — 226 (Loss) income from discontinued operations — ( 424 ) — 1,842 Net income $ 29,307 $ 25,949 $ 44,763 $ 38,711 Net earnings per share – Basic: Income from continuing operations $ 0.90 $ 0.80 $ 1.37 $ 1.12 (Loss) income from discontinued operations — ( 0.01 ) — 0.06 Net income $ 0.90 $ 0.79 $ 1.37 $ 1.18 Weighted average shares outstanding – Basic 32,585 32,790 32,748 32,791 Net earnings per share – Diluted: Income from continuing operations $ 0.90 $ 0.80 $ 1.36 $ 1.11 (Loss) income from discontinued operations — ( 0.01 ) — 0.06 Net income $ 0.90 $ 0.79 $ 1.36 $ 1.17 Weighted average shares outstanding – Diluted 32,660 33,056 32,843 33,071 See accompanying notes to consolidated financial statements. 3 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Net income $ 29,307 $ 25,949 $ 44,763 $ 38,711 Other comprehensive (loss) income: Foreign currency translation adjustment ( 3,198 ) 761 ( 3,425 ) 3,959 Minimum post retirement benefit plan adjustments, net of tax 1 27 25 54 Other comprehensive (loss) income ( 3,197 ) 788 ( 3,400 ) 4,013 Total comprehensive income $ 26,110 $ 26,737 $ 41,363 $ 42,724 See accompanying notes to consolidated financial statements. 4 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) June 30, 2022 December 31, 2021 (unaudited) Assets Current assets: Cash and cash equivalents $ 17,149 $ 12,849 Accounts receivable, net of allowance of $ 3,901 and $ 3,738 , respectively 275,596 236,444 Inventories, net 197,499 176,207 Prepaid expenses and other current assets 39,333 21,467 Total current assets 529,577 446,967 Property, plant, and equipment, net 100,998 96,885 Operating lease assets 26,206 18,120 Goodwill 509,357 510,942 Acquired intangibles 128,725 141,504 Other assets 550 483 $ 1,295,413 $ 1,214,901 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 160,058 $ 172,286 Accrued expenses and other current liabilities 77,606 67,993 Billings in excess of cost 65,864 46,711 Total current liabilities 303,528 286,990 Long-term debt 93,454 23,781 Deferred income taxes 40,150 40,278 Non-current operating lease liabilities 19,252 11,390 Other non-current liabilities 21,751 27,204 Stockholders’ equity: Preferred stock, $ 0.01 par value; authorized 10,000 shares; none outstanding — — Common stock, $ 0.01 par value; authorized 100,000 shares in 2022 and 2021; 33,989 shares and 33,799 shares issued and outstanding in 2022 and 2021 340 338 Additional paid-in capital 318,664 314,541 Retained earnings 590,335 545,572 Accumulated other comprehensive (loss) income ( 3,213 ) 187 Treasury stock, at cost, 2,374 and 1,107 shares in 2022 and 2021 ( 88,848 ) ( 35,380 ) Total stockholders’ equity 817,278 825,258 $ 1,295,413 $ 1,214,901 See accompanying notes to consolidated financial statements. 5 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Six Months Ended June 30, 2022 2021 Cash Flows from Operating Activities Net income $ 44,763 $ 38,711 Income from discontinued operations — 1,842 Income from continuing operations 44,763 36,869 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 12,677 16,014 Stock compensation expense 4,125 4,935 Exit activity costs, non-cash 1,198 1,193 Provision for (benefit of) deferred income taxes 29 ( 36 ) Other, net 2,666 349 Changes in operating assets and liabilities, excluding the effects of acquisitions: Accounts receivable ( 40,473 ) ( 29,150 ) Inventories ( 33,616 ) ( 42,686 ) Other current assets and other assets ( 1,612 ) ( 611 ) Accounts payable ( 10,501 ) 35,174 Accrued expenses and other non-current liabilities 21,288 ( 9,274 ) Net cash provided by operating activities of continuing operations 544 12,777 Net cash used in operating activities of discontinued operations — ( 2,002 ) Net cash provided by operating activities 544 10,775 Cash Flows from Investing Activities Purchases of property, plant, and equipment ( 11,287 ) ( 9,474 ) Acquisitions, net of cash acquired — ( 2 ) Net proceeds from sale of business — 39,991 Net proceeds from sale of property and equipment 85 — Net cash (used in) provided by investing activities of continuing operations ( 11,202 ) 30,515 Net cash used in investing activities of discontinued operations — ( 176 ) Net cash (used in) provided by investing activities ( 11,202 ) 30,339 Cash Flows from Financing Activities Proceeds from long-term debt 120,500 31,200 Long-term debt payments ( 51,000 ) ( 83,636 ) Purchase of common stock at market prices ( 53,468 ) ( 4,780 ) Net proceeds from issuance of common stock — 924 Net cash provided by (used in) financing activities 16,032 ( 56,292 ) Effect of exchange rate changes on cash ( 1,074 ) 87 Net increase (decrease) in cash and cash equivalents 4,300 ( 15,091 ) Cash and cash equivalents at beginning of year 12,849 32,054 Cash and cash equivalents at end of period $ 17,149 $ 16,963 See accompanying notes to consolidated financial statements. 6 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (in thousands) (unaudited) Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders’ Equity Shares Amount Shares Amount Balance at December 31, 2021 33,799 $ 338 $ 314,541 $ 545,572 $ 187 1,107 $ ( 35,380 ) $ 825,258 Net income — — — 15,456 — — — 15,456 Foreign currency translation adjustment — — — — ( 227 ) — — ( 227 ) Minimum post retirement benefit plan adjustments, net of taxes of $ 10 — — — — 24 — — 24 Stock compensation expense — — 1,352 — — — — 1,352 Net settlement of restricted stock units 173 2 ( 2 ) — — 72 ( 3,461 ) ( 3,461 ) Balance at March 31, 2022 33,972 $ 340 $ 315,891 $ 561,028 $ ( 16 ) 1,179 $ ( 38,841 ) $ 838,402 Net income — — — 29,307 — — — 29,307 Foreign currency translation adjustment — — — — ( 3,198 ) — — ( 3,198 ) Minimum post retirement benefit plan adjustments, net of taxes of $ 0 — — — — 1 — — 1 Stock compensation expense — — 2,773 — — — — 2,773 Awards of common stock 16 — — — — — — — Net settlement of restricted stock units 1 — — — — — ( 7 ) ( 7 ) Common stock repurchased under stock repurchase program — — — — — 1,195 ( 50,000 ) ( 50,000 ) Balance at June 30, 2022 33,989 $ 340 $ 318,664 $ 590,335 $ ( 3,213 ) 2,374 $ ( 88,848 ) $ 817,278 See accompanying notes to consolidated financial statements. 7 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (in thousands) (unaudited) Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive (Loss) Income Treasury Stock Total Stockholders’ Equity Shares Amount Shares Amount Balance at December 31, 2020 33,568 $ 336 $ 304,870 $ 469,943 $ ( 2,461 ) 1,028 $ ( 28,883 ) $ 743,805 Net income — — — 12,762 — — — 12,762 Foreign currency translation adjustment — — — — 3,198 — — 3,198 Minimum post retirement benefit plan adjustments, net of taxes of $ 10 — — — — 27 — — 27 Stock compensation expense — — 2,368 — — — — 2,368 Stock options exercised 25 — 910 — — — — 910 Net settlement of restricted stock units 118 1 ( 1 ) — — 54 ( 4,662 ) ( 4,662 ) Balance at March 31, 2021 33,711 $ 337 $ 308,147 $ 482,705 $ 764 1,082 $ ( 33,545 ) $ 758,408 Net income — — — 25,949 — — — 25,949 Foreign currency translation adjustment — — — — 761 — — 761 Minimum post retirement benefit plan adjustments, net of taxes of $ 10 — — — — 27 — — 27 Stock compensation expense — — 2,567 — — — — 2,567 Stock options exercised 1 — 14 — — — — 14 Awards of common shares 3 — — — — — — — Net settlement of restricted stock units 3 — — — — 1 ( 118 ) ( 118 ) Balance at June 30, 2021 33,718 $ 337 $ 310,728 $ 508,654 $ 1,552 1,083 $ ( 33,663 ) $ 787,608 See accompanying notes to consolidated financial statements. 8 Table of Contents GIBRALTAR INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (1) CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited consolidated financial statements of Gibraltar Industries, Inc. (the "Company") have been prepared by management in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting of normal recurring adjustments considered necessary for the fair presentation of results for the interim period have been included. The Company's operations are seasonal; for this and other reasons, such as the impact of the COVID-19 pandemic, financial results for any interim period are not necessarily indicative of the results expected for any subsequent interim period or for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2021. The consolidated balance sheet at December 31, 2021 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. (2) RECENT ACCOUNTING PRONOUNCEMENTS Recent Accounting Pronouncements Not Yet Adopted Standard Description Financial Statement Effect or Other Significant Matters ASU No. 2020-04 Reference Rate Reform (Topic 848), Facilitation of Effects of Reference Rate Reform on Financial Reporting, and ASU No. 2021-01 Reference Rate Reform (Topic 848), 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, 2022, 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 is not expected to have a material impact on the Company's financial statements. 9 Table of Contents (3) ACCOUNTS RECEIVABLE, NET Accounts receivable consists of the following (in thousands): June 30, 2022 December 31, 2021 Trade accounts receivable $ 231,076 $ 185,745 Costs in excess of billings 48,421 54,437 Total accounts receivables 279,497 240,182 Less allowance for doubtful accounts and contract assets ( 3,901 ) ( 3,738 ) Accounts receivable, net $ 275,596 $ 236,444 Refer to Note 4 "Revenue" concerning the Company's costs in excess of billings. The following table provides a roll-forward of the allowance for credit losses, for the six month period ended June 30, 2022, that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected. Beginning balance as of January 1, 2022 $ 3,738 Bad debt expense, net of recoveries 772 Accounts written off against allowance and other adjustments ( 609 ) Ending balance as of June 30, 2022 $ 3,901 (4) REVENUE Sales includes revenue from contracts with customers for designing, engineering, manufacturing and installation of solar racking systems; electrical balance of systems; roof and foundation ventilation products; centralized mail systems and electronic package solutions; retractable awnings; gutter guards; rain dispersion products; trims and flashings and other accessories; designing, engineering, manufacturing and installation of greenhouses; botanical extraction systems; structural bearings; expansion joints; pavement sealant; elastomeric concrete; and bridge cable protection systems. Refer to Note 14 "Segment Information" for additional information related to revenue recognized by timing of transfer of control by reportable segment. As of June 30, 2022, the Company's remaining performance obligations are part of contracts that have an original expected duration of one year or less. Contract assets consist of costs in excess of billings 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. Unearned revenue as of June 30, 2022 and December 31, 2021 was $ 3.4 million and $ 3.7 million, respectively. Revenue recognized during the six months ended June 30, 2022 and 2021 that was in contract liabilities at the beginning of the respective periods was $ 38.6 million and $ 49.2 million, respectively. 10 Table of Contents (5) INVENTORIES Inventories consist of the following (in thousands): June 30, 2022 December 31, 2021 Raw material $ 141,877 $ 135,558 Work-in-process 9,152 5,858 Finished goods 53,090 39,256 Gross inventory 204,119 180,672 Less reserves ( 6,620 ) ( 4,465 ) Total inventories, net $ 197,499 $ 176,207 (6) GOODWILL AND RELATED INTANGIBLE ASSETS Goodwill The changes in the carrying amount of goodwill for the six months ended June 30, 2022 are as follows (in thousands): Renewables Residential Agtech Infrastructure Total Balance at December 31, 2021 $ 188,680 $ 205,452 $ 85,132 $ 31,678 $ 510,942 Adjustments to prior year acquisitions 904 — — — 904 Foreign currency translation ( 1,980 ) — ( 509 ) — ( 2,489 ) Balance at June 30, 2022 $ 187,604 $ 205,452 $ 84,623 $ 31,678 $ 509,357 The Company is required to regularly assess whether a triggering event has occurred which would require interim impairment testing. The Company determined that no triggering event had occurred as of June 30, 2022 which would require an interim impairment test to be performed. Acquired Intangible Assets Acquired intangible assets consist of the following (in thousands): June 30, 2022 December 31, 2021 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Indefinite-lived intangible assets: Trademarks $ 52,700 $ — $ 52,700 $ — Finite-lived intangible assets: Trademarks 5,504 4,268 5,521 4,011 Unpatented technology 34,322 20,941 38,474 20,656 Customer relationships 103,160 42,201 108,591 39,832 Non-compete agreements 2,382 1,933 2,686 1,969 Backlog 6,891 6,891 7,200 7,200 152,259 76,234 162,472 73,668 Total acquired intangible assets $ 204,959 $ 76,234 $ 215,172 $ 73,668 11 Table of Contents The following table summarizes the acquired intangible asset amortization expense for the three and six months ended June 30 (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Amortization expense $ 2,819 $ 4,736 $ 5,917 $ 9,479 Amortization expense related to acquired intangible assets for the remainder of fiscal 2022 and the next five years thereafter is estimated as follows (in thousands): 2022 2023 2024 2025 2026 2027 Amortization expense $ 5,412 $ 10,177 $ 9,996 $ 9,856 $ 8,415 $ 6,754 (7) LONG-TERM DEBT Long-term debt consists of the following (in thousands): June 30, 2022 December 31, 2021 Revolving credit facility $ 94,000 $ 24,500 Less unamortized debt issuance costs ( 546 ) ( 719 ) Total debt $ 93,454 $ 23,781 Senior Credit Agreement On January 24, 2019, the Company entered into a Sixth Amended and Restated Credit Agreement ("Senior Credit Agreement"), which amended and restated the Company’s Fifth Amended and Restated Credit Agreement dated December 9, 2015, and provides for a revolving credit facility and letters of credit in an aggregate amount equal to $ 400 million. The Company can request additional financing from the lenders to increase the revolving credit facility to $ 700 million or enter into a term loan of up to $ 300 million subject to conditions set forth in the Senior Credit Agreement. The Senior Credit Agreement contains three financial covenants. As of June 30, 2022, 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 (as defined in the Senior Credit Agreement) and the daily average undrawn balance. The Senior Credit Agreement terminates on January 23, 2024. Borrowings under the Senior Credit Agreement are secured by the trade receivables, inventory, personal property, equipment, and general intangibles of the Company’s significant domestic subsidiaries. Capital distributions under the Senior Credit Agreement are capped at an annual aggregate limit of $ 75 million if the Company's leverage ratio is over 3.0 times. Standby letters of credit of $ 4.5 million have been issued under the Senior Credit Agreement on behalf of the Company as of June 30, 2022. These letters of credit reduce the amount otherwise available under the revolving credit facility. The Company had $ 301.5 million and $ 369.3 million of availability under the revolving credit facility at June 30, 2022 and December 31, 2021, respectively. 12 Table of Contents (8) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following tables summarize the cumulative balance of each component of accumulated other comprehensive income (loss), net of tax, for the three and six months ended June 30, (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, 2021 $ 1,640 $ ( 2,247 ) $ ( 607 ) $ 794 $ 187 Minimum post retirement health care plan adjustments — 34 34 ( 10 ) 24 Foreign currency translation adjustment ( 227 ) — ( 227 ) — ( 227 ) Balance at March 31, 2022 1,413 ( 2,213 ) ( 800 ) 784 ( 16 ) Minimum post retirement health care plan adjustments — 1 1 — 1 Foreign currency translation adjustment ( 3,198 ) — ( 3,198 ) — ( 3,198 ) Balance at June 30, 2022 $ ( 1,785 ) $ ( 2,212 ) $ ( 3,997 ) $ 784 $ ( 3,213 ) Foreign Currency Translation Adjustment Minimum Post Retirement Benefit Plan Adjustments Total Pre-Tax Amount Tax Benefit (Expense) Accumulated Other Comprehensive (Loss) Income Balance at December 31, 2020 $ ( 872 ) $ ( 2,426 ) $ ( 3,298 ) $ 837 $ ( 2,461 ) Minimum post retirement health care plan adjustments — 37 37 ( 10 ) 27 Foreign currency translation adjustment 3,198 — 3,198 — 3,198 Balance at March 31, 2021 2,326 ( 2,389 ) ( 63 ) 827 764 Minimum post retirement health care plan adjustments — 37 37 ( 10 ) 27 Foreign currency translation adjustment 761 — 761 — 761 Balance at June 30, 2021 $ 3,087 $ ( 2,352 ) $ 735 $ 817 $ 1,552 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 income. (9) EQUITY-BASED COMPENSATION On May 4, 2022, the stockholders of the Company approved the adoption of the Gibraltar Industries, Inc. Amended and Restated 2016 Stock Plan for Non-Employee Directors ("Non-Employee Directors Plan") which increases the total number of shares for issuance by the Company thereunder from 100,000 shares to 200,000 shares, allows the Company to grant awards of shares of the Company's common stock to current 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. On May 4, 2018, the stockholders 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 Gibraltar Industries, Inc. 2015 Equity Incentive Plan (the "2015 Plan"). Both the 2018 Plan and the 2015 Plan allow the Company to grant equity-based incentive compensation awards, in the form of non-qualified options, restricted shares, restricted stock units, performance shares, performance stock units, and stock rights to eligible participants. 13 Table of Contents Equity Based Awards - Settled in Stock The following table sets forth the number of equity-based awards granted during the six months ended June 30, which will convert to shares upon vesting, along with the weighted average grant date fair values: 2022 2021 Awards Number of Awards Weighted Average Grant Date Fair Value Number of Awards (2) Weighted Average Grant Date Fair Value Performance stock units (1) 108,464 $ 47.00 62,778 $ 87.84 Restricted stock units 67,158 $ 45.84 33,187 $ 87.91 Deferred stock units 2,460 $ 42.69 7,536 $ 83.58 Common shares 15,652 $ 42.49 2,512 $ 83.58 (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 the Company’s return on invested capital (“ROIC”) over a one-year performance period. (2) All PSUs granted in the first quarter of 2021 were forfeited in the first quarter of 2022 as the threshold level of achievement was not met based on the Company's actual ROIC achievement level for the performance period ended December 31, 2021. Equity Based Awards - Settled in Cash The Company's equity-based awards that are settled in cash are the awards under the Management Stock Purchase Plan (the “MSPP”) which is authorized under the Company's equity incentive plans. The total of these share-based liabilities recorded on the consolidated balance sheet as of June 30, 2022 was $ 17.6 million, of which $ 3.0 million was included in current accrued expenses and $ 14.6 million was included in non-current liabilities. Total share-based liabilities as of December 31, 2021 were $ 22.6 million, of which $ 2.9 million was included in current accrued expenses and $ 19.7 million was included in non-current liabilities. The Company's 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 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’s stock price. The account will be converted to and settled in cash payable to participants upon retirement or a termination of their service to the Company. The following table provides the number of restricted stock units credited to active participant accounts and the payments made with respect to restricted stock units issued under the MSPP during the six months ended June 30,: 2022 2021 Restricted stock units credited 6,234 26,240 Share-based liabilities paid (in thousands) $ 2,545 $ 3,510 14 Table of Contents (10) HELD FOR SALE AND DISCONTINUED OPERATIONS Held for Sale During the first quarter of 2022, the Company committed to a plan to sell its Processing business (the "disposal group") which is a business within the Company's Agtech reportable segment. The planned sale does not meet the criteria to be classified as a discontinued operation. As a result, the Company will continue reporting the operating results of the disposal group in the Company's consolidated operating results from continuing operations until the sale of the business is completed. The Company classifies assets and related liabilities as held for sale when: (i) management has committed to a plan to sell the assets, (ii) the net assets are available for immediate sale, (iii) there is an active program to locate a buyer and (iv) the sale and transfer of the net assets is probable within one year. Assets and liabilities held for sale are presented separately on our consolidated balance sheets with a valuation allowance, if necessary, to recognize the net carrying amount at the lower of cost or fair value, less costs to sell. As of June 30, 2022, the assets and liabilities of the disposal group have been classified as held for sale. The following table summarizes these assets and liabilities which have been measured at the lower of (i) the carrying value when classified as held for sale and (ii) the fair value of the business less costs to sell. (in thousands) June 30, 2022 Assets held for sale Accounts receivable, net of allowance $ 561 Inventories, net of reserves 8,563 Other current assets 1,926 Property, plant, and equipment, net 331 Operating lease asset 710 Goodwill (1) — Acquired intangibles, net 6,213 Total assets held for sale $ 18,304 Liabilities held for sale Accounts payable $ 1,731 Accrued expenses 1,127 Non-current operating lease liabilities 299 Total liabilities held for sale $ 3,157 (1) The assignment of goodwill was based on the relative fair value of the disposal group compared to the fair value of the total reporting unit it was included in prior to being reclassified as held for sale. Net sales and operating loss for held for sale operations for the three and six months ended June 30 are as follows (in thousands): Three months ended June 30, Six months ended June 30, 2022 2021 2022 2021 Net sales $ 2,748 $ 7,264 $ 4,571 $ 12,237 Operating loss $ ( 1,109 ) $ ( 466 ) $ ( 3,634 ) $ ( 1,302 ) Effective with the classification of the disposal group as held for sale, depreciation of property, plant, and equipment and amortization of finite-lived intangible assets and right-of-use assets are not recorded while these assets are classified as held for sale. As a result of our evaluation of the recoverability of the carrying value of the assets and liabilities held for sale relative to an estimated sales price, adjusted for costs to sell, no losses were recorded during 15 Table of Contents the six months ended June 30, 2022. The recoverability of the disposal group will be evaluated each reporting period until the sale of the business is completed. 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, 2021. 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. Components of income from discontinued operations before taxes, including the interest allocated to discontinued operations, for the three and six months ended June 30 are as follows (in thousands): Three months ended June 30, Six months ended June 30, 2022 2021 2022 2021 Net sales $ — $ — $ — $ 20,391 Operating expenses — — — 17,493 Adjustment to loss on disposal — 502 — 830 (Loss) Income from discontinued operations before taxes $ — $ ( 502 ) $ — $ 2,068 (11) 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, the sale and exiting of less profitable businesses or product lines, and a reduction in our manufacturing footprint. Exit activity costs (recoveries) were incurred during the six months ended June 30, 2022 and 2021 which 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, the Company exited a facility, relocating to a new one, and separately, closed one other facility during the six months ended June 30, 2022. During the six months ended June 30, 2021, the Company closed two facilities as a result of these initiatives. 16 Table of Contents The following tables set forth the exit activity costs (recoveries) and asset impairment charges incurred by segment during the three and six months ended June 30, related to the restructuring activities described above (in thousands): Three months ended June 30, 2022 2021 Exit activity costs Asset impairment charges Total Exit activity costs Asset impairment charges Total Renewables $ 75 $ — $ 75 $ 786 $ — $ 786 Residential 1,295 — 1,295 29 — 29 Agtech 97 — 97 1,287 — 1,287 Infrastructure — — — — — — Corporate 62 — 62 59 — 59 Total exit activity costs & asset impairments $ 1,529 $ — $ 1,529 $ 2,161 $ — $ 2,161 Six months ended June 30, 2022 2021 Exit activity costs (recoveries), net Asset impairment charges Total Exit activity costs Asset impairment charges Total Renewables $ 1,403 $ 1,198 $ 2,601 $ 4,564 $ 1,193 $ 5,757 Residential 1,298 — 1,298 94 — 94 Agtech 88 — 88 1,491 — 1,491 Infrastructure ( 63 ) — ( 63 ) — — — Corporate 82 — 82 59 — 59 Total exit activity costs & asset impairments $ 2,808 $ 1,198 $ 4,006 $ 6,208 $ 1,193 $ 7,401 The following table provides a summary of where the exit activity costs and asset impairment charges were recorded in the consolidated statements of income for the three and six months ended June 30, (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Cost of sales $ 80 $ 718 $ 2,288 $ 5,765 Selling, general, and administrative expense 1,449 1,443 1,718 1,636 Total exit activity and asset impairment charges $ 1,529 $ 2,161 $ 4,006 $ 7,401 The following table reconciles the beginning and ending liability for exit activity costs relating to the Company’s facility consolidation efforts (in thousands): 2022 2021 Balance at January 1 $ 272 $ 1,030 Exit activity costs recognized 2,808 6,208 Cash payments ( 1,951 ) ( 4,646 ) Balance at June 30 $ 1,129 $ 2,592 17 Table of Contents (12) INCOME TAXES The following table summarizes the provision for income taxes for continuing operations (in thousands) for the three and six months ended June 30, and the applicable effective tax rates: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Provision for income taxes $ 9,895 $ 9,457 $ 14,996 $ 11,017 Effective tax rate 25.2 % 26.4 % 25.1 % 23.0 % The effective tax rate for the three and six months ended June 30, 2022 and 2021, respectively, was greater than the U.S. federal statutory rate of 21 % due to state taxes and nondeductible permanent differences partially offset by favorable discrete items due to an excess tax benefit on stock-based compensation. (13) EARNINGS PER SHARE Earnings per share and the weighted average shares outstanding used in calculating basic and diluted earnings per share are as follows for the three and six months ended June 30, (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Numerator: Income from continuing operations $ 29,307 $ 26,373 $ 44,763 $ 36,869 (Loss) income from discontinued operations — ( 424 ) — 1,842 Net income available to common stockholders $ 29,307 $ 25,949 $ 44,763 $ 38,711 Denominator for basic earnings per share: Weighted average shares outstanding 32,585 32,790 32,748 32,791 Denominator for diluted earnings per share: Weighted average shares outstanding 32,585 32,790 32,748 32,791 Common stock options and stock units 75 266 95 280 Weighted average shares and conversions 32,660 33,056 32,843 33,071 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 225,000 and 52,000 shares issuable pursuant to equity based incentive compensation awards excluded from the diluted earnings per share calculation because the effect of their inclusion would be anti-dilutive for the three months ended June 30, 2022 and 2021, respectively. There were 65,000 anti-dilutive shares outstanding for the six months ended June 30, 2022 and no shares issuable pursuant to equity based incentive compensation awards excluded from the diluted earnings calculation for the six months ended June 30, 2021. (14) 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; 18 Table of Contents (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. The following table illustrates certain measurements used by management to assess performance of the segments described above for the three and six months ended June 30, (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Net sales: Renewables $ 101,549 $ 107,751 $ 180,332 $ 193,263 Residential 200,245 164,209 379,730 304,426 Agtech 43,680 53,696 86,108 100,435 Infrastructure 21,475 22,733 38,644 37,857 Total net sales $ 366,949 $ 348,389 $ 684,814 $ 635,981 Income from operations: Renewables $ 6,829 $ 9,510 $ ( 155 ) $ 8,989 Residential 35,664 27,155 69,099 50,089 Agtech 1,542 977 1,573 1,906 Infrastructure 2,887 4,186 4,068 6,223 Unallocated Corporate Expenses ( 6,783 ) ( 10,419 ) ( 13,251 ) ( 22,983 ) Total income from operations $ 40,139 $ 31,409 $ 61,334 $ 44,224 June 30, 2022 December 31, 2021 Total assets: Renewables $ 444,411 $ 445,486 Residential 532,226 453,469 Agtech 213,026 212,038 Infrastructure 85,652 82,662 Unallocated corporate assets 20,098 21,246 $ 1,295,413 $ 1,214,901 19 Table of Contents The following tables illustrate segment revenue disaggregated by timing of transfer of control to the customer for the three and six months ended June 30 (in thousands): Three Months Ended June 30, 2022 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 5,259 $ 198,854 $ 4,029 $ 8,936 $ 217,078 Over Time 96,290 1,391 39,651 12,539 149,871 Total net sales $ 101,549 $ 200,245 $ 43,680 $ 21,475 $ 366,949 Three Months Ended June 30, 2021 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 6,049 $ 162,978 $ 7,388 $ 11,637 $ 188,052 Over Time 101,702 1,231 46,308 11,096 160,337 Total net sales $ 107,751 $ 164,209 $ 53,696 $ 22,733 $ 348,389 Six Months Ended June 30, 2022 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 10,909 $ 376,985 $ 5,642 $ 15,239 $ 408,775 Over Time 169,423 2,745 80,466 23,405 276,039 Total net sales $ 180,332 $ 379,730 $ 86,108 $ 38,644 $ 684,814 Six Months Ended June 30, 2021 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 13,020 $ 301,997 $ 12,531 $ 17,107 $ 344,655 Over Time 180,243 2,429 87,904 20,750 291,326 Total net sales $ 193,263 $ 304,426 $ 100,435 $ 37,857 $ 635,981 20 Table of Contents