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 September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net sales $ 391,291 $ 369,353 $ 1,076,105 $ 1,005,334 Cost of sales 296,735 286,101 826,434 781,133 Gross profit 94,556 83,252 249,671 224,201 Selling, general, and administrative expense 47,160 45,274 140,941 141,999 Income from operations 47,396 37,978 108,730 82,202 Interest expense 1,048 491 2,189 1,180 Other expense (income) 363 72 797 ( 4,279 ) Income before taxes 45,985 37,415 105,744 85,301 Provision for income taxes 11,690 9,561 26,686 20,578 Income from continuing operations 34,295 27,854 79,058 64,723 Discontinued operations: (Loss) income before taxes — ( 201 ) — 1,867 Provision for income taxes — 97 — 323 (Loss) income from discontinued operations — ( 298 ) — 1,544 Net income $ 34,295 $ 27,556 $ 79,058 $ 66,267 Net earnings per share – Basic: Income from continuing operations $ 1.08 $ 0.85 $ 2.44 $ 1.97 (Loss) income from discontinued operations — ( 0.01 ) — 0.05 Net income $ 1.08 $ 0.84 $ 2.44 $ 2.02 Weighted average shares outstanding – Basic 31,707 32,802 32,396 32,791 Net earnings per share – Diluted: Income from continuing operations $ 1.08 $ 0.84 $ 2.43 $ 1.96 (Loss) income from discontinued operations — ( 0.01 ) — 0.05 Net income $ 1.08 $ 0.83 $ 2.43 $ 2.01 Weighted average shares outstanding – Diluted 31,812 33,050 32,503 33,055 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 September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net income $ 34,295 $ 27,556 $ 79,058 $ 66,267 Other comprehensive (loss) income: Foreign currency translation adjustment ( 3,568 ) ( 1,057 ) ( 6,993 ) 2,902 Minimum post retirement benefit plan adjustments, net of tax 12 27 37 81 Other comprehensive (loss) income ( 3,556 ) ( 1,030 ) ( 6,956 ) 2,983 Total comprehensive income $ 30,739 $ 26,526 $ 72,102 $ 69,250 See accompanying notes to consolidated financial statements. 4 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) September 30, 2022 December 31, 2021 (unaudited) Assets Current assets: Cash and cash equivalents $ 21,919 $ 12,849 Accounts receivable, net of allowance of $ 3,847 and $ 3,738 , respectively 275,704 236,444 Inventories, net 204,000 176,207 Prepaid expenses and other current assets 37,578 21,467 Total current assets 539,201 446,967 Property, plant, and equipment, net 105,097 96,885 Operating lease assets 24,850 18,120 Goodwill 510,866 510,942 Acquired intangibles 145,374 141,504 Other assets 875 483 $ 1,326,263 $ 1,214,901 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 157,167 $ 172,286 Accrued expenses and other current liabilities 82,789 67,993 Billings in excess of cost 42,412 46,711 Total current liabilities 282,368 286,990 Long-term debt 121,840 23,781 Deferred income taxes 40,257 40,278 Non-current operating lease liabilities 17,956 11,390 Other non-current liabilities 20,351 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; 34,034 shares and 33,799 shares issued and outstanding in 2022 and 2021 340 338 Additional paid-in capital 320,428 314,541 Retained earnings 624,630 545,572 Accumulated other comprehensive (loss) income ( 6,769 ) 187 Treasury stock, at cost, 2,530 and 1,107 shares in 2022 and 2021 ( 95,138 ) ( 35,380 ) Total stockholders’ equity 843,491 825,258 $ 1,326,263 $ 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) Nine Months Ended September 30, 2022 2021 Cash Flows from Operating Activities Net income $ 79,058 $ 66,267 Income from discontinued operations — 1,544 Income from continuing operations 79,058 64,723 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 19,192 23,958 Stock compensation expense 5,889 6,769 Exit activity costs, non-cash 1,427 1,193 Provision for (benefit of) deferred income taxes 181 ( 689 ) Other, net 3,620 1,274 Changes in operating assets and liabilities, excluding the effects of acquisitions: Accounts receivable ( 25,538 ) ( 65,297 ) Inventories ( 19,840 ) ( 65,906 ) Other current assets and other assets 393 ( 316 ) Accounts payable ( 24,756 ) 32,029 Accrued expenses and other non-current liabilities ( 1,065 ) ( 12,261 ) Net cash provided by (used in) operating activities of continuing operations 38,561 ( 14,523 ) Net cash used in operating activities of discontinued operations — ( 2,002 ) Net cash provided by (used in) operating activities 38,561 ( 16,525 ) Cash Flows from Investing Activities Acquisitions, net of cash acquired ( 51,621 ) 4,143 Purchases of property, plant, and equipment ( 15,704 ) ( 13,251 ) Net proceeds from sale of business — 38,062 Net cash (used in) provided by investing activities of continuing operations ( 67,325 ) 28,954 Net cash used in investing activities of discontinued operations — ( 176 ) Net cash (used in) provided by investing activities ( 67,325 ) 28,778 Cash Flows from Financing Activities Proceeds from long-term debt 197,800 58,500 Long-term debt payments ( 100,000 ) ( 83,636 ) Purchase of common stock at market prices ( 58,125 ) ( 6,161 ) Net proceeds from issuance of common stock — 1,021 Net cash provided by (used in) financing activities 39,675 ( 30,276 ) Effect of exchange rate changes on cash ( 1,841 ) ( 97 ) Net increase (decrease) in cash and cash equivalents 9,070 ( 18,120 ) Cash and cash equivalents at beginning of year 12,849 32,054 Cash and cash equivalents at end of period $ 21,919 $ 13,934 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 Net income — — — 34,295 — — — 34,295 Foreign currency translation adjustment — — — — ( 3,568 ) — — ( 3,568 ) Minimum post retirement benefit plan adjustments, net of taxes of $ 5 — — — — 12 — — 12 Stock compensation expense — — 1,764 — — — — 1,764 Awards of common shares — — — — — — — — Net settlement of restricted stock units 45 — — — — 18 ( 749 ) ( 749 ) Common stock repurchased under stock repurchase program — — — — — 138 ( 5,541 ) ( 5,541 ) Balance at September 30, 2022 34,034 $ 340 $ 320,428 $ 624,630 $ ( 6,769 ) 2,530 $ ( 95,138 ) $ 843,491 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 Net income — — — 27,556 — — — 27,556 Foreign currency translation adjustment — — — — ( 1,057 ) — — ( 1,057 ) Minimum post retirement benefit plan adjustments, net of taxes of $ 9 — — — — 27 — — 27 Stock compensation expense — — 1,834 — — — — 1,834 Stock options exercised 10 — 97 — — — — 97 Net settlement of restricted stock units 54 1 ( 1 ) — — 19 ( 1,381 ) ( 1,381 ) Total other comprehensive loss — — — — — — — — Balance at September 30, 2021 33,782 $ 338 $ 312,658 $ 536,210 $ 522 1,102 $ ( 35,044 ) $ 814,684 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 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): September 30, 2022 December 31, 2021 Trade accounts receivable $ 222,368 $ 185,745 Costs in excess of billings 57,183 54,437 Total accounts receivables 279,551 240,182 Less allowance for doubtful accounts and contract assets ( 3,847 ) ( 3,738 ) Accounts receivable, net $ 275,704 $ 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 nine month period ended September 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 960 Accounts written off against allowance and other adjustments ( 851 ) Ending balance as of September 30, 2022 $ 3,847 (4) REVENUE Sales includes revenue from contracts with customers for designing, engineering, manufacturing and installation of solar racking systems; electrical balance of systems; roof and foundation ventilation products; centralized mail systems and electronic package solutions; retractable awnings; gutter guards; rain dispersion products; trims and flashings and other accessories; designing, engineering, manufacturing and installation of greenhouses; structural bearings; expansion joints; pavement sealant; elastomeric concrete; and bridge cable protection systems. Refer to Note 15 "Segment Information" for additional information related to revenue recognized by timing of transfer of control by reportable segment. As of September 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 September 30, 2022 and December 31, 2021 was $ 3.4 million and $ 3.7 million, respectively. Revenue recognized during the nine months ended September 30, 2022 and 2021 that was in contract liabilities at the beginning of the respective periods was $ 41.2 million and $ 52.6 million, respectively. 10 Table of Contents (5) INVENTORIES Inventories consist of the following (in thousands): September 30, 2022 December 31, 2021 Raw material $ 132,084 $ 135,558 Work-in-process 21,642 5,858 Finished goods 56,955 39,256 Gross inventory 210,681 180,672 Less reserves ( 6,681 ) ( 4,465 ) Total inventories, net $ 204,000 $ 176,207 (6) ACQUISITION On August 22, 2022, the Company purchased all the issued and outstanding membership interests of Quality Aluminum Products ("QAP"), a manufacturer of aluminum and steel products including soffit, fascia, trim coil, rain carrying products and aluminum siding. The results of QAP have been included in the Company's consolidated financial results since the date of acquisition within the Company's Residential segment. The preliminary purchase consideration for the acquisition of QAP was $ 52.6 million, which includes a preliminary working capital adjustment and certain other adjustments provided for in the membership interest purchase agreement. The purchase price for the acquisition was preliminarily allocated to the assets acquired and liabilities assumed based upon their respective fair values estimated as of the date of acquisition. The Company has commenced the process to confirm the existence, condition, and completeness of the assets acquired and liabilities assumed to establish fair value of such assets and liabilities and to determine the amount of goodwill to be recognized as of the date of acquisition. Due to the timing of the acquisition, we continue to gather information supporting the acquired assets and assumed liabilities. Accordingly, all amounts recorded are provisional. These provisional amounts are subject to change if new information is obtained concerning facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. The final determination of the fair value of certain assets and liabilities will be completed within a measurement period of up to one year from the date of acquisition. The final values may also result in changes to depreciation and amortization expense related to certain assets such as property, plant and equipment and acquired intangible assets. The preliminary excess consideration was recorded as goodwill and approximated $ 3.5 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 building products markets. The final purchase price allocation will be completed no later than the third quarter of fiscal year 2023. The preliminary allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed is as follows as of the date of the acquisition (in thousands): Cash $ 1,018 Working capital 24,279 Property, plant and equipment 3,462 Acquired intangible assets 20,000 Other assets 404 Goodwill 3,476 Fair value of purchase consideration $ 52,639 The intangible assets acquired in this acquisition consisted of the following (in thousands): 11 Table of Contents Fair Value Weighted-Average Amortization Period Trademarks $ 5,000 Indefinite Customer relationships 15,000 15 years Total $ 20,000 In determining the preliminary allocation of the purchase price to the assets acquired and liabilities assumed, the Company uses all available information to make fair value determinations using Level 3 unobservable inputs in which little or no market data exists, and therefore, engages independent valuation specialists to assist in the fair value determination of the acquired long-lived assets. The acquisition of QAP was financed primarily through borrowings under the Company's revolving credit facility. The Company incurred costs related to the acquisition of QAP that have been recognized in the consolidated statements of income. Within cost of sales, the Company recognizes the amortization of the purchase price allocated to the step up of inventory to fair value. Legal and consulting fees incurred as a result of the acquisition were recognized as a component of selling, general, and administrative expenses. The acquisition-related costs consisted of the following for the three and nine months ended September 30 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Cost of sales $ 476 $ — $ 476 $ — Selling, general and administrative costs 522 53 529 946 Total acquisition related costs $ 998 $ 53 $ 1,005 $ 946 (7) GOODWILL AND RELATED INTANGIBLE ASSETS Goodwill The changes in the carrying amount of goodwill for the nine months ended September 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 Acquired goodwill — 3,476 — — 3,476 Adjustments to prior year acquisitions 904 — — — 904 Foreign currency translation ( 2,545 ) — ( 1,911 ) — ( 4,456 ) Balance at September 30, 2022 $ 187,039 $ 208,928 $ 83,221 $ 31,678 $ 510,866 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 September 30, 2022 which would require an interim impairment test to be performed. 12 Table of Contents Acquired Intangible Assets Acquired intangible assets consist of the following (in thousands): September 30, 2022 December 31, 2021 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Indefinite-lived intangible assets: Trademarks $ 57,700 $ — $ 52,700 $ — Finite-lived intangible assets: Trademarks 5,432 4,337 5,521 4,011 Unpatented technology 34,117 21,456 38,474 20,656 Customer relationships 117,429 43,914 108,591 39,832 Non-compete agreements 2,368 1,965 2,686 1,969 Backlog 6,852 6,852 7,200 7,200 166,198 78,524 162,472 73,668 Total acquired intangible assets $ 223,898 $ 78,524 $ 215,172 $ 73,668 The following table summarizes the acquired intangible asset amortization expense for the three and nine months ended September 30 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Amortization expense $ 2,801 $ 4,646 $ 8,718 $ 14,125 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 $ 2,905 $ 11,140 $ 10,960 $ 10,820 $ 9,397 $ 7,747 (8) LONG-TERM DEBT Long-term debt consists of the following (in thousands): September 30, 2022 December 31, 2021 Revolving credit facility $ 122,300 $ 24,500 Less unamortized debt issuance costs ( 460 ) ( 719 ) Total debt $ 121,840 $ 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 September 30, 2022, the Company was in compliance with all three covenants. 13 Table of Contents 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 September 30, 2022. These letters of credit reduce the amount otherwise available under the revolving credit facility. The Company had $ 273.2 million and $ 369.3 million of availability under the revolving credit facility at September 30, 2022 and December 31, 2021, respectively. (9) 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 nine months ended September 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 ) Minimum post retirement health care plan adjustments — 17 17 ( 5 ) 12 Foreign currency translation adjustment ( 3,568 ) — ( 3,568 ) — ( 3,568 ) Balance at September 30, 2022 $ ( 5,353 ) $ ( 2,195 ) $ ( 7,548 ) $ 779 $ ( 6,769 ) 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 Minimum post retirement health care plan adjustments — 36 36 ( 9 ) 27 Foreign currency translation adjustment ( 1,057 ) — ( 1,057 ) — ( 1,057 ) Balance at September 30, 2021 $ 2,030 $ ( 2,316 ) $ ( 286 ) $ 808 $ 522 14 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 income. (10) 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. Equity Based Awards - Settled in Stock The following table sets forth the number of equity-based awards granted during the nine months ended September 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 123,351 $ 43.42 62,873 $ 80.43 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 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. 15 Table of Contents 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. Total MSPP liabilities recorded on the consolidated balance sheet as of September 30, 2022 was $ 16.2 million, of which $ 2.8 million was included in current accrued expenses and $ 13.4 million was included in non-current liabilities. Total MSPP 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. The value of the restricted stock units within the MSPP liabillity were $ 14.2 million and $ 20.7 million at September 30, 2022 and December 31, 2021, respectively. The following table provides the number of restricted stock units credited to active participant accounts and the payments made with respect to restricted stock units issued under the MSPP during the nine months ended September 30,: 2022 2021 Restricted stock units credited 9,564 28,230 Share-based liabilities paid (in thousands) $ 2,961 $ 4,022 (11) 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 September 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. 16 Table of Contents (in thousands) September 30, 2022 Assets held for sale Accounts receivable, net of allowance $ 89 Inventories, net of reserves 8,498 Other current assets 1,609 Property, plant, and equipment, net 331 Operating lease asset 603 Goodwill (1) — Acquired intangibles, net 6,213 Total assets held for sale $ 17,343 Liabilities held for sale Accounts payable $ 803 Accrued expenses 74 Non-current operating lease liabilities 165 Total liabilities held for sale $ 1,042 (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 nine months ended September 30 are as follows (in thousands): Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Net sales $ 2,326 $ 3,825 $ 6,897 $ 16,062 Operating loss $ ( 481 ) $ ( 1,387 ) $ ( 4,115 ) $ ( 2,689 ) 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 the nine months ended September 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. 17 Table of Contents Components of income from discontinued operations before taxes, including the interest allocated to discontinued operations, for the three and nine months ended September 30 are as follows (in thousands): Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Net sales $ — $ — $ — $ 20,391 Operating expenses — — — 17,493 Adjustment to loss on disposal — 201 — 1,031 (Loss) Income from discontinued operations before taxes $ — $ ( 201 ) $ — $ 1,867 (12) EXIT ACTIVITY COSTS AND ASSET IMPAIRMENTS The Company has incurred exit activity costs and asset impairment charges as a result of its 80/20 simplification and portfolio management initiatives. These initiatives have resulted in the identification of low-volume, low margin, internally-produced products which have been or will be outsourced or discontinued, the simplification of processes, 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 nine months ended September 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 nine months ended September 30, 2022. During the nine months ended September 30, 2021, the Company closed two facilities as a result of these initiatives. 18 Table of Contents The following tables set forth the exit activity costs (recoveries) and asset impairment charges incurred by segment during the three and nine months ended September 30, related to the restructuring activities described above (in thousands): Three months ended September 30, 2022 2021 Exit activity (recoveries) costs, net Asset impairment charges Total Exit activity costs Asset impairment charges Total Renewables $ ( 44 ) $ — $ ( 44 ) $ 131 $ — $ 131 Residential — 12 12 83 — 83 Agtech 15 217 232 293 — 293 Infrastructure — — — — — — Corporate 11 — 11 37 — 37 Total exit activity (recoveries) costs & asset impairments $ ( 18 ) $ 229 $ 211 $ 544 $ — $ 544 Nine months ended September 30, 2022 2021 Exit activity costs (recoveries), net Asset impairment charges Total Exit activity costs Asset impairment charges Total Renewables $ 1,359 $ 1,198 $ 2,557 $ 4,695 $ 1,193 $ 5,888 Residential 1,298 12 1,310 177 — 177 Agtech 103 217 320 1,784 — 1,784 Infrastructure ( 63 ) — ( 63 ) — — — Corporate 93 — 93 96 — 96 Total exit activity costs & asset impairments $ 2,790 $ 1,427 $ 4,217 $ 6,752 $ 1,193 $ 7,945 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 nine months ended September 30, (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Cost of sales $ ( 39 ) $ 194 $ 2,249 $ 5,959 Selling, general, and administrative expense 250 350 1,968 1,986 Total exit activity and asset impairment charges $ 211 $ 544 $ 4,217 $ 7,945 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 2,790 6,752 Cash payments ( 2,782 ) ( 5,970 ) Balance at September 30 $ 280 $ 1,812 19 Table of Contents (13) INCOME TAXES The following table summarizes the provision for income taxes for continuing operations (in thousands) for the three and nine months ended September 30, and the applicable effective tax rates: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Provision for income taxes $ 11,690 $ 9,561 $ 26,686 $ 20,578 Effective tax rate 25.4 % 25.6 % 25.2 % 24.1 % The effective tax rate for the three months ended September 30, 2022 and 2021, respectively, was greater than the U.S. federal statutory rate of 21 % due to state taxes and nondeductible permanent differences. Furthermore, the three months ended September 30, 2021 period was partially offset by favorable discrete items due to an excess tax benefit on stock-based compensation. The effective tax rate for the nine months ended September 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. (14) 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 nine months ended September 30, (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Numerator: Income from continuing operations $ 34,295 $ 27,854 $ 79,058 $ 64,723 (Loss) income from discontinued operations — ( 298 ) — 1,544 Net income available to common stockholders $ 34,295 $ 27,556 $ 79,058 $ 66,267 Denominator for basic earnings per share: Weighted average shares outstanding 31,707 32,802 32,396 32,791 Denominator for diluted earnings per share: Weighted average shares outstanding 31,707 32,802 32,396 32,791 Common stock options and stock units 105 248 107 264 Weighted average shares and conversions 31,812 33,050 32,503 33,055 The weighted average number of diluted shares does not include potential anti-dilutive common shares issuable pursuant to equity based incentive compensation awards. The following table provides the potential anti-dilutive common stock options and stock units for the three and nine months ended September 30, (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Common stock options and stock units 51 30 48 — 20 Table of Contents (15) 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 (iv) Infrastructure, which primarily includes structural bearings, expansion joints and pavement sealant for bridges, airport runways and roadways, elastomeric concrete, and bridge cable protection systems. When determining the reportable segments, the Company aggregated operating segments based on their similar economic and operating characteristics. The following table illustrates certain measurements used by management to assess performance of the segments described above for the three and nine months ended September 30, (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net sales: Renewables $ 111,119 $ 130,162 $ 291,451 $ 323,425 Residential 215,592 171,545 595,322 475,971 Agtech 44,217 48,975 130,325 149,410 Infrastructure 20,363 18,671 59,007 56,528 Total net sales $ 391,291 $ 369,353 $ 1,076,105 $ 1,005,334 Income from operations: Renewables $ 14,216 $ 12,206 $ 14,061 $ 21,195 Residential 35,802 29,482 104,901 79,571 Agtech 3,777 2,227 5,350 4,133 Infrastructure 2,572 1,640 6,640 7,863 Unallocated Corporate Expenses ( 8,971 ) ( 7,577 ) ( 22,222 ) ( 30,560 ) Total income from operations $ 47,396 $ 37,978 $ 108,730 $ 82,202 September 30, 2022 December 31, 2021 Total assets: Renewables $ 419,214 $ 445,486 Residential 581,167 453,469 Agtech 219,800 212,038 Infrastructure 84,626 82,662 Unallocated corporate assets 21,456 21,246 $ 1,326,263 $ 1,214,901 21 Table of Contents The following tables illustrate segment revenue disaggregated by timing of transfer of control to the customer for the three and nine months ended September 30 (in thousands): Three Months Ended September 30, 2022 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 7,660 $ 214,175 $ 3,510 $ 9,938 $ 235,283 Over Time 103,459 1,417 40,707 10,425 156,008 Total net sales $ 111,119 $ 215,592 $ 44,217 $ 20,363 $ 391,291 Three Months Ended September 30, 2021 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 8,835 $ 170,280 $ 4,010 $ 8,194 $ 191,319 Over Time 121,327 1,265 44,965 10,477 178,034 Total net sales $ 130,162 $ 171,545 $ 48,975 $ 18,671 $ 369,353 Nine Months Ended September 30, 2022 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 18,569 $ 591,160 $ 9,152 $ 25,177 $ 644,058 Over Time 272,882 4,162 121,173 33,830 432,047 Total net sales $ 291,451 $ 595,322 $ 130,325 $ 59,007 $ 1,076,105 Nine Months Ended September 30, 2021 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 21,855 $ 472,277 $ 16,541 $ 25,301 $ 535,974 Over Time 301,570 3,694 132,869 31,227 469,360 Total net sales $ 323,425 $ 475,971 $ 149,410 $ 56,528 $ 1,005,334 22 Table of Contents