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 2 , 202 1 , and 20 20 37 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 202 2 , 202 1 , and 20 20 38 Consolidated Balance Sheets as of December 31, 202 2 and 202 1 39 Consolidated Statements of Cash Flows for the Years Ended December 31, 202 2 , 202 1 , and 20 20 40 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 202 2 , 202 1 , and 20 20 41 Notes to Consolidated Financial Statements 42 Index for Notes to Consolidated Financial Statements: Note 1. Summary of Significant Accounting Policies 42 Note 2. Accounts Receivabl e, Net 46 Note 3. Revenue 46 Note 4. Inventories 47 Note 5. Property, Plant and Equipment 48 Note 6. Acquisitions 48 Note 7. Goodwill and Related Intangible Assets 51 Note 8. Accrued Expenses 53 Note 9. Debt 54 Note 10. Pension and Other Postretirement Benefits 55 Note 11. Accumulated Other Comprehensive Income (Loss) 57 Note 12. Equity-Based Compensation 57 Note 13. Fair Value Measurements 61 Note 14. Held for Sale and Discontinued Operations 61 Note 15. Exit Activity Costs and Asset Impairments 63 Note 16. Income Taxes 64 Note 17. Earnings per Share 67 Note 18. Leases 67 Note 19. Commitments and Contingencies 68 Note 20. Segment Information 69 34 Table of Co n tents 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, 2022 and 2021, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, 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, 2022, 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 22, 2023 expressed an unqualified opinion thereon. 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 Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 35 Table of Co n tents Revenue Recognition on Contracts Description of the Matter During the year ended December 31, 2022, the amount of revenue recognized over time was $555 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. /s/ Ernst & Young LLP We have served as the Company‘s auditor since 2005. Boston, Massachusetts February 22, 2023 36 Table of Co n tents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Years Ended December 31, 2022 2021 2020 Net sales $ 1,389,966 $ 1,339,783 $ 1,032,578 Cost of sales 1,071,272 1,049,772 776,235 Gross profit 318,694 290,011 256,343 Selling, general, and administrative expense 188,592 184,723 149,153 Intangible asset impairment — 8,300 — Income from operations 130,102 96,988 107,190 Interest expense, net 4,047 1,639 703 Other expense (income) 14,565 ( 4,213 ) ( 1,272 ) Income before taxes 111,490 99,562 107,759 Provision for income taxes 29,084 25,046 24,468 Income from continuing operations 82,406 74,516 83,291 Discontinued operations: Income (loss) before taxes — 1,479 ( 16,602 ) Provision for income taxes — 366 2,123 Income (loss) from discontinued operations — 1,113 ( 18,725 ) Net income $ 82,406 $ 75,629 $ 64,566 Net earnings per share – Basic: Income from continuing operations $ 2.57 $ 2.27 $ 2.55 Income (loss) from discontinued operations — 0.03 ( 0.57 ) Net income $ 2.57 $ 2.30 $ 1.98 Weighted average shares outstanding – Basic 32,096 32,873 32,664 Net earnings per share – Diluted: Income from continuing operations $ 2.56 $ 2.25 $ 2.53 Income (loss) from discontinued operations — 0.04 ( 0.57 ) Net income $ 2.56 $ 2.29 $ 1.96 Weighted average shares outstanding – Diluted 32,192 33,054 32,918 See accompanying notes to consolidated financial statements. 37 Table of Co n tents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Years Ended December 31, 2022 2021 2020 Net income $ 82,406 $ 75,629 $ 64,566 Other comprehensive (loss) income: Foreign currency translation adjustment ( 5,022 ) 2,512 3,301 Adjustment to post-retirement benefit liability, net of tax 1,403 136 ( 371 ) Other comprehensive (loss) income ( 3,619 ) 2,648 2,930 Total comprehensive income $ 78,787 $ 78,277 $ 67,496 See accompanying notes to consolidated financial statements. 38 Table of Co n tents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands) December 31, 2022 December 31, 2021 Assets Current assets: Cash and cash equivalents $ 17,608 $ 12,849 Accounts receivable, net of allowance of $ 3,746 and $ 3,738 , respectively 217,156 236,444 Inventories, net 170,360 176,207 Prepaid expenses and other current assets 18,813 21,467 Total current assets 423,937 446,967 Property, plant, and equipment, net 109,584 96,885 Operating lease assets 26,502 18,120 Goodwill 512,363 510,942 Acquired intangibles 137,526 141,504 Other assets 701 483 $ 1,210,613 $ 1,214,901 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 106,582 $ 172,286 Accrued expenses 73,721 67,993 Billings in excess of cost 35,017 46,711 Total current liabilities 215,320 286,990 Long-term debt 88,762 23,781 Deferred income taxes 47,088 40,278 Non-current operating lease liabilities 19,041 11,390 Other non-current liabilities 18,303 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; 34,060 and 33,799 shares issued and outstanding in 2022 and 2021 340 338 Additional paid-in capital 322,873 314,541 Retained earnings 627,978 545,572 Accumulated other comprehensive (loss) income ( 3,432 ) 187 Cost of 3,199 and 1,107 common shares held in treasury in 2022 and 2021 ( 125,660 ) ( 35,380 ) Total stockholders’ equity 822,099 825,258 $ 1,210,613 $ 1,214,901 See accompanying notes to consolidated financial statements. 39 Table of Co n tents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2022 2021 2020 Cash Flows from Operating Activities Net income $ 82,406 $ 75,629 $ 64,566 Income (loss) from discontinued operations — 1,113 ( 18,725 ) Income from continuing operations 82,406 74,516 83,291 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 26,167 31,966 20,915 Intangible asset impairment — 8,300 — Held for sale valuation allowance 13,990 — — Stock compensation expense 8,334 8,652 8,173 Exit activity costs, non-cash 2,276 1,193 493 Provision for deferred income taxes 6,337 2,968 3,786 Other, net 1,506 1,570 63 Changes in operating assets and liabilities (excluding the effects of acquisitions): Accounts receivable 32,754 ( 41,887 ) 2,277 Inventories 14,377 ( 85,763 ) ( 5,719 ) Other current assets and other assets 2,062 ( 426 ) 5,467 Accounts payable ( 76,260 ) 38,367 ( 1,160 ) Accrued expenses and other non-current liabilities ( 11,258 ) ( 14,384 ) ( 44,570 ) Net cash provided by operating activities of continuing operations 102,691 25,072 73,016 Net cash (used in) provided by operating activities of discontinued operations — ( 2,002 ) 16,088 Net cash provided by operating activities 102,691 23,070 89,104 Cash Flows from Investing Activities Purchases of property, plant, and equipment, net ( 20,062 ) ( 17,491 ) ( 12,991 ) Acquisitions, net of cash acquired ( 51,621 ) 4,143 ( 313,686 ) Net proceeds from sale of business — 38,062 2,000 Net cash (used in) provided by investing activities of continuing operations ( 71,683 ) 24,714 ( 324,677 ) Net cash used in investing activities of discontinued operations — ( 176 ) ( 2,033 ) Net cash (used in) provided by investing activities ( 71,683 ) 24,538 ( 326,710 ) Cash Flows from Financing Activities Long-term debt payments ( 138,000 ) ( 120,636 ) — Proceeds from long-term debt 204,500 59,500 85,000 Payment of debt issuance costs ( 2,013 ) — — Purchase of common stock at market prices ( 89,494 ) ( 6,497 ) ( 6,656 ) Net proceeds from issuance of common stock — 1,021 1,119 Net cash (used in) provided by financing activities ( 25,007 ) ( 66,612 ) 79,463 Effect of exchange rate changes on cash ( 1,242 ) ( 201 ) ( 1,166 ) Net increase (decrease) in cash and cash equivalents 4,759 ( 19,205 ) ( 159,309 ) Cash and cash equivalents at beginning of year 12,849 32,054 191,363 Cash and cash equivalents at end of year $ 17,608 $ 12,849 $ 32,054 See accompanying notes to consolidated financial statements. 40 Table of Co n tents 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, 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 ) Awards of common stock 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 ) Awards of common stock 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 Net income — — — 82,406 — — — 82,406 Foreign currency translation adjustment — — — — ( 5,022 ) — — ( 5,022 ) Minimum post retirement benefit plan adjustments, net of taxes of $ 449 — — — — 1,403 — — 1,403 Stock compensation expense — — 8,334 — — — — 8,334 Net settlement of restricted stock units 245 2 ( 2 ) — — 95 ( 4,404 ) ( 4,404 ) Awards of common stock 16 — — — — — — — Common stock repurchased under stock repurchase program — — — — — 1,997 ( 85,876 ) ( 85,876 ) Balance at December 31, 2022 34,060 $ 340 $ 322,873 $ 627,978 $ ( 3,432 ) 3,199 $ ( 125,660 ) $ 822,099 See accompanying notes to consolidated financial statements. 41 Table of Co n tents 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 the 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 services to a customer in an amount that reflects the consideration the Company expects to be entitled in exchange for transferring those products or services. Performance obligations satisfied at a point in time and significant judgments 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, 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. Costs to fulfill a contract include all direct costs related to contract performance. Selling and administrative expenses are 42 Table of Co n tents 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 the 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 sheets. 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. 43 Table of Co n tents The following table summarizes activity recorded within the allowance for doubtful accounts and contract assets balances for the years ended December 31 (in thousands): 2022 2021 2020 Beginning balance $ 3,738 $ 3,529 $ 5,951 Adoption of ASU 2016-13, cumulative-effect adjustment to retained earnings at January 1, 2020 — — 385 Bad debt expense, net of recoveries 1,221 898 1,321 Accounts written off against allowance and other adjustments ( 1,213 ) ( 689 ) ( 4,128 ) Ending balance $ 3,746 $ 3,738 $ 3,529 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, 2022 and 2021, 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 % as of December 31, 2022 and 2021. Net sales to the home improvement retailer as a percentage of consolidated net sales were 14 %, 13 %, and 14 % during the years ended December 31, 2022, 2021 and 2020, respectively. 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): 2022 2021 2020 Depreciation expense $ 14,583 $ 13,110 $ 11,252 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. The Company may elect to perform a qualitative assessment that considers economic, industry and company-specific factors for some or all of the Company's 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 44 Table of Co n tents 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," Note 14 "Held for Sale and Discontinued Operations" 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 sheets. 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 and marketing costs as incurred. For the years ended December 31, 2022, 2021 and 2020, advertising and marketing costs were $ 10.9 million, $ 8.0 million, and $ 7.2 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. 45 Table of Co n tents 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 The Company considers the applicability and impact of ASUs, and ASUs effective in or after 2022, respectively, were assessed and determined to be either not applicable, or had or are expected to have minimal impact on the Company's consolidated financial statements and related disclosures. (2) ACCOUNTS RECEIVABLE, NET Accounts receivable at December 31 consisted of the following (in thousands): 2022 2021 Trade accounts receivable $ 179,170 $ 185,745 Costs in excess of billings 41,732 54,437 Total accounts receivables 220,902 240,182 Less allowance for doubtful accounts ( 3,746 ) ( 3,738 ) Accounts receivable, net $ 217,156 $ 236,444 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; 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, 2022, 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, 2022 and 2021, 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. 46 Table of Co n tents 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): 2022 2021 2020 Costs in excess of billings 41,732 $ 54,437 $ 26,915 Billings in excess of cost ( 35,017 ) ( 46,711 ) ( 34,702 ) Unearned revenue ( 4,572 ) ( 3,681 ) ( 21,325 ) Revenue recognized during the years ended December 31, 2022, 2021, and 2020 that was in contract liabilities at the beginning of the respective periods was $ 44.4 million, $ 53.0 million, and $ 57.8 million, respectively. The decreases in costs in excess of billings and billings in excess of cost as of December 31, 2022 compared to December 31, 2021, respectively, were primarily due to decline in volume in the Renewables and Agtech segments in 2022 compared to 2021. 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 2021. (4) INVENTORIES Inventories at December 31 consisted of the following (in thousands): 2022 2021 Raw material $ 111,187 $ 135,558 Work-in-process 17,944 5,858 Finished goods 47,523 39,256 Gross inventory 176,654 180,672 Less reserves ( 6,294 ) ( 4,465 ) Total inventories $ 170,360 $ 176,207 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 sheets. The following table summarizes activity recorded within the reserve for excess, obsolete and slow moving inventory for the years ended December 31 (in thousands): 2022 2021 2020 Beginning balance $ 4,400 $ 4,161 $ 3,463 Excess, obsolete and slow moving inventory expense 1,582 215 355 Scrapped inventory and other adjustments 197 24 343 Ending balance $ 6,179 $ 4,400 $ 4,161 47 Table of Co n tents (5) PROPERTY, PLANT, AND EQUIPMENT Components of property, plant, and equipment at December 31 consisted of the following (in thousands): 2022 2021 Land and land improvements $ 4,704 $ 4,634 Building and improvements 43,416 42,526 Machinery and equipment 223,843 194,015 Construction in progress 13,065 20,293 Property, plant, and equipment, gross 285,028 261,468 Less: accumulated depreciation ( 175,444 ) ( 164,583 ) Property, plant, and equipment, net $ 109,584 $ 96,885 (6) ACQUISITIONS 2022 Acquisitions 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 $ 52.1 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, the Company continues 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 $ 3.6 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 23,759 Property, plant, and equipment 8,486 Acquired intangible assets 14,700 Other assets 1,813 Other liabilities ( 1,295 ) Goodwill 3,604 Fair value of purchase consideration $ 52,085 48 Table of Co n tents The intangible assets acquired in this acquisition consisted of the following as of the date of acquisition (in thousands): Fair Value Weighted-Average Amortization Period Trademarks $ 2,800 Indefinite Customer relationships 11,900 12 years Total $ 14,700 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 the Company's Agtech segment, and one in the Company's Residential segment. The purchase consideration for each acquisition was allocated to the assets acquired and liabilities assumed based upon their respective fair values. On December 31, 2020, the Company purchased all the outstanding membership interests of TerraSmart LLC 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 49 Table of Co n tents The intangible assets acquired in the TerraSmart acquisition consisted of the following as of the date of acquisition (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. 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. 50 Table of Co n tents 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 The acquisition of QAP was financed primarily through borrowings under the Company's revolving credit facility. 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, and Thermo 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): 2022 2021 2020 Cost of sales $ 1,427 $ — $ 634 Selling, general and administrative costs 545 949 3,230 Total acquisition related costs $ 1,972 $ 949 $ 3,864 51 Table of Co n tents (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, 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 Acquired goodwill — 3,604 — — 3,604 Adjustment to prior year acquisition 904 — — — 904 Foreign currency translation ( 1,554 ) — ( 1,533 ) — ( 3,087 ) Balance at December 31, 2022 $ 188,030 $ 209,056 $ 83,599 $ 31,678 $ 512,363 Goodwill is recognized net of accumulated impairment losses of $ 133.2 million as of December 31, 2022 and 2021, respectively. No goodwill impairment charges were recognized by the Company during 2022 or 2021. 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 2022, 2021 and 2020, no indicators of impairment were identified as of interim dates; therefore, no interim tests were performed. During the October 31, 2022 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 2022, 2021 and 2020, none of the reporting units with goodwill as of the testing date had carrying values in excess of their fair values. 52 Table of Co n tents Acquired Intangible Assets Acquired intangible assets consisted of the following (in thousands): December 31, 2022 December 31, 2021 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Indefinite-lived intangible assets: Trademarks $ 55,500 $ — $ 52,700 $ — Finite-lived intangible assets: Trademarks 5,448 4,481 5,521 4,011 Unpatented technology 34,163 22,037 38,474 20,656 Customer relationships 115,125 46,557 108,591 39,832 Non-compete agreements 2,371 2,006 2,686 1,969 Backlog — — 7,200 7,200 157,107 75,081 162,472 73,668 Total acquired intangible assets $ 212,607 $ 75,081 $ 215,172 $ 73,668 The Company did not recognize impairment charges related to intangible assets during the year ended December 31, 2022. 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 recognized amortization expense related to the definite-lived intangible assets. The following table summarizes amortization expense for the years ended December 31 (in thousands): 2022 2021 2020 Amortization expense $ 11,584 $ 18,856 $ 9,663 Amortization expense related to acquired intangible assets for the next five years ended December 31 is estimated as follows (in thousands): 2023 2024 2025 2026 2027 Amortization expense $ 11,102 $ 10,922 $ 10,782 $ 9,370 $ 7,728 (8) ACCRUED EXPENSES Accrued expenses at December 31 consisted of the following (in thousands): 2022 2021 Compensation $ 17,010 $ 15,293 Customer rebates 16,768 15,253 Current operating lease liability 8,620 7,239 Insurance 6,440 7,310 Accrued warranties 6,251 5,686 Interest and taxes 5,696 5,463 Unearned revenue 4,572 3,681 Current portion of MSPP liabilities 2,267 2,947 Other 6,097 5,121 Total accrued expenses $ 73,721 $ 67,993 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 53 Table of Co n tents 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 Management Stock Purchase Plan liabilities ("MSPP 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 consisted of the following (in thousands): December 31, 2022 December 31, 2021 Revolving credit facility $ 91,000 $ 24,500 Less unamortized debt issuance costs ( 2,238 ) ( 719 ) Total debt $ 88,762 $ 23,781 Revolving Credit Facility On December 8, 2022, the Company entered into a Credit Agreement (the "Credit Agreement"), and concurrently with entering into the Credit Agreement, the Company paid off all amounts owed under the Sixth Amended and Restated Credit Agreement dated as of January 24, 2019, and which was terminated without any prepayment penalties. The Credit Agreement provides for a revolving credit facility and letters of credit in an aggregate amount equal to $ 400 million. The Company can request additional financing to increase the revolving credit facility to $ 700 million or enter into a term loan of up to $ 300 million subject to conditions set forth in the Credit Agreement. The Credit Agreement contains two financial covenants. As of December 31, 2022, the Company was in compliance with all financial covenants. The Credit Agreement terminates on December 8, 2027. Interest rates on the revolving credit facility under the Credit Agreement bear interest, at the Company’s option, at a rate equal to the applicable margin plus (a) a base rate, (b) a daily simple secured overnight financing rate ("SOFR") rate, (c) a term SOFR rate or (d) for certain foreign currencies, a foreign currency rate, in each case subject to a 0% floor. Through March 31, 2023, the Credit Agreement has an initial applicable margin of 0.125 % for base rate loans and 1.125 % for SOFR and alternative currency loans. Thereafter, the applicable margin ranges from 0.125 % to 1.00 % for base rate loans and from 1.125 % to 2.00 % for SOFR and alternative currency loans based on the Company’s Total Net Leverage Ratio, as defined in the Credit Agreement. In addition, the Credit Agreement is subject to an annual commitment fee, payable quarterly, which is initially 0.20 % of the daily average undrawn balance of the revolving credit facility and, from and after April 1, 2023, ranges between 0.20 % and 0.25 % of the daily average undrawn balance of the revolving credit facility based on the Company’s Total Net Leverage Ratio. Borrowings under the Credit Agreement are secured by the trade receivables, inventory, personal property, equipment, and general intangibles of the Company’s significant domestic subsidiaries. Capital distributions are subject to certain Total Net Leverage Ratio requirements and capped by an annual aggregate limit under the 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 had the ability to 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. Interest rates on the revolving credit facility under the Senior Credit Agreement were based on LIBOR plus an additional margin that ranges from 1.125 % to 2.00 %. In addition, the revolving credit facility under the Senior Credit Agreement was 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 terminated on December 8, 2022. 54 Table of Co n tents Standby letters of credit of $ 4.5 million have been issued under the Credit Agreement to third parties on behalf of the Company as of December 31, 2022. These letters of credit reduce the amount otherwise available under the revolving credit facility. The Company had $ 304.5 million and $ 369.3 million of availability under the revolving credit facility as of December 31, 2022 and 2021, respectively. Total cash paid for interest in the years ended December 31 was (in thousands): 2022 2021 2020 Interest expense, net $ 4,047 $ 1,639 $ 703 Interest income 174 269 276 Other non-cash adjustments ( 679 ) ( 345 ) ( 345 ) Cash paid for interest $ 3,542 $ 1,563 $ 634 (10) PENSION AND OTHER POSTRETIREMENT BENEFITS The Company has a 401(k) plan which all employees of U.S. subsidiaries are eligible to participate. 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): 2022 2021 2020 401(k) plan $ 3,580 $ 3,196 $ 2,403 Multiemployer and other defined benefit and pension plans 79 78 70 Postretirement healthcare plan 342 411 351 Total retirement plan expense $ 4,001 $ 3,685 $ 2,824 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, 2022. 55 Table of Co n tents 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): 2022 2021 Projected benefit obligation at January 1 $ 6,202 $ 6,443 Interest cost 127 125 Plan amendments — 162 Actuarial gain ( 1,784 ) ( 200 ) Benefits paid, net of contributions ( 316 ) ( 328 ) Projected benefit obligation at December 31 4,229 6,202 Fair value of plan assets — — Under funded status ( 4,229 ) ( 6,202 ) Unamortized prior service cost 352 412 Unrecognized actuarial (gain) loss ( 278 ) 1,530 Net amount recognized $ ( 4,155 ) $ ( 4,260 ) Amounts recognized in the consolidated financial statements consisted of (in thousands): 2022 2021 Accrued postretirement benefit liability: Current portion $ 353 $ 358 Long term portion 3,876 5,844 Pre-tax accumulated other comprehensive loss – unamortized post-retirement healthcare costs ( 74 ) ( 1,942 ) Net amount recognized $ 4,155 $ 4,260 The measurement date used to determine postretirement benefit obligation measures was December 31. Components of net periodic postretirement benefit cost charged to expense for the years ended December 31 were as follows (in thousands): 2022 2021 2020 Service cost $ — $ — $ 10 Interest cost 127 125 172 Amortization of unrecognized prior service cost 60 44 44 Loss amortization ( 2 ) 24 113 64 Net periodic benefit cost $ 211 $ 282 $ 290 Assumptions used to calculate the benefit obligation: Discount rate 4.8 % 2.4 % 2.0 % Annual rate of increase in the per capita cost of: Medical costs before age 65 ( 1) 7.8 % 7.0 % 7.0 % Medical costs after age 65 ( 1) 4.5 % 4.5 % 4.5 % Prescription drug costs ( 1) 7.8 % 7.0 % 7.0 % (1) For 2022, it was assumed that these rates would gradually decline to 4.0 % by 2075. For 2021 and 2020, it was assumed that these rates would gradually decline to 3.8 % by 2075. (2) Actuarial 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. 56 Table of Co n tents Expected benefit payments from the plan for the years ended December 31 are as follows (in thousands): 2023 2024 2025 2026 2027 Years 2028 - 2032 Expected benefit payments $ 353 $ 357 $ 369 $ 359 $ 355 $ 1,649 (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, 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 Minimum post retirement benefit plan adjustments — 1,852 1,852 449 1,403 Foreign currency translation adjustment ( 5,022 ) — ( 5,022 ) — ( 5,022 ) Balance at December 31, 2022 $ ( 3,382 ) $ ( 395 ) $ ( 3,777 ) $ ( 345 ) $ ( 3,432 ) 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, 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 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. 57 Table of Co n tents At December 31, 2022, approximately 326,000 and 80,000 shares were available for issuance under the 2018 Plan and 2015 Plan, respectively, as incentive stock options or other stock awards, and approximately 101,000 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): 2022 2021 2020 Expense recognized under the Prior Plan $ 19 $ 29 $ 40 Expense recognized under the 2015 Plan 1,617 1,186 1,932 Expense recognized under the 2018 Plan 5,928 6,597 5,441 Expense recognized under the Non-Employee Directors Plan 770 840 760 Total stock compensation expense $ 8,334 $ 8,652 $ 8,173 Tax benefits recognized related to stock compensation expense $ 2,175 $ 2,189 $ 2,272 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: 2022 2021 2020 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 2,460 $ 42.69 7,536 $ 83.58 12,402 $ 45.98 Common stock 15,652 $ 42.49 2,512 $ 83.58 4,134 $ 45.98 Restricted stock units 132,430 $ 43.92 72,243 $ 79.28 81,397 $ 56.81 Performance stock units (1) 108,464 $ 47.00 62,778 $ 87.84 160,426 $ 55.98 (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 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. Stock Options No options were granted during the years ended December 31, 2022, 2021 and 2020. 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. 58 Table of Co n tents At December 31, 2022, the Company has one grant of options outstanding. The following table summarizes the Company's outstanding and exercisable options at December 31, 2022: Exercise Price Options Outstanding Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price Options Exercisable Weighted Average Exercise Price $ 39.55 5,000 4.26 $ 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, 2020 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 Exercised — — Balance at December 31, 2022 5,000 $ 39.55 4.26 $ 31,650 The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the $ 45.88 per share market price of the Company’s common stock as of December 31, 2022, which would have been received by the option holder had the option holder with an exercise price below the per share market price on December 31, 2022, exercised the options as of that date. Stock Units and Common Stock The following table summarizes information about non-vested restricted stock units and 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 Weighted Average Grant Date Fair Value Deferred Stock Units (2) Weighted Average Grant Date Fair Value Balance at December 31, 2021 204,584 $ 52.90 — $ — 363,474 $ 55.44 52,472 $ 43.99 Granted 132,430 $ 43.92 15,652 $ 42.49 108,464 $ 47.00 2,460 $ 42.69 Adjustments (1) — $ — — $ — ( 65,209 ) $ 82.75 — $ — Vested ( 83,714 ) $ 45.77 ( 15,652 ) $ 42.49 ( 145,153 ) $ 41.28 ( 14,582 ) $ 40.53 Forfeited ( 17,930 ) $ 59.62 — $ — ( 50,208 ) $ 61.51 — $ — Balance at December 31, 2022 235,370 $ 49.87 — $ — 211,368 $ 50.96 40,350 $ 45.16 (1) The Company's PSU adjustments during 2022 represents (i) 55,959 shares for which the performance condition was not achieved and the PSUs were adjusted in the first quarter of 2022 to reflect zero PSU earned 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 and (ii) 9,250 shares not earned that related to two separate PSU awards granted in 2019 and 2020 that the threshold level of achievement based on other performance criteria as defined in the respective awards over a two-year or three-year performance periods were not met for the performance periods ended December 31, 2021. (2) Vested and issuable upon termination from service as a member of the Company's Board of Directors. 59 Table of Co n tents 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, 2022 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, 2022 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 2022 and 2021. 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): 2022 2021 2020 Aggregate intrinsic value of options exercised $ — $ 2,103 $ 3,812 Aggregate fair value of vested restricted stock units $ 3,920 $ 6,320 $ 11,851 Aggregate fair value of vested common stock $ 665 $ 370 $ 190 Aggregate fair value of vested performance stock units $ 6,729 $ 9,080 $ 4,197 Aggregate fair value of vested deferred stock units $ 105 $ 630 $ 570 As of December 31, 2022, there was $ 9.3 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 2.3 years. Equity Based Awards - Settled in Cash Management Stock Purchase Plan 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 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. Total MSPP liabilities recorded on the consolidated balance sheet as of December 31, 2022 were $ 15.4 million, of which $ 2.3 million was included in current accrued expenses and $ 13.1 million was included in non-current liabilities. Total MSPP liabilities recorded on the consolidated balance sheet 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 value of the restricted stock units within the MSPP liability were $ 13.4 million and $ 20.7 million at December 31, 2022 and 2021, respectively. 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: 2022 2021 2020 Restricted stock units credited 12,365 30,475 57,046 Restricted stock units balance, vested and unvested 158,644 223,892 231,343 Share-based liabilities paid (in thousands) $ 3,689 $ 4,915 $ 15,401 MSPP (recovery) expense (in thousands) $ ( 4,459 ) $ 6,034 $ 4,518 60 Table of Co n tents (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, 2022 and 2021. As of December 31, 2022, the Company had $ 91.0 million outstanding on its revolving credit facility under its 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 $ 24.5 million outstanding on its revolving credit facility as of December 31, 2021. 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, 2022 and 2021. Other non-recurring fair value measurements The Company recorded impairment of property, plant and equipment during the years ended December 31, 2022 and 2020, and recognized impairment charges related to certain intangible assets during the year ended December 31, 2021. 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," Note 14 "Held for Sale and Discontinued Operations" 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 2022, 2021, and 2020. 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 "Goodwill and Related Intangible Assets" 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) 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 in prepaid expenses and other current assets and accrued expenses on the Company's consolidated balance sheets with a valuation allowance to recognize the net carrying amount at the lower of cost or fair value, less costs to sell. 61 Table of Co n tents As of December 31, 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) December 31, 2022 Assets held for sale Accounts receivable, net of allowance $ 266 Inventories, net of reserves 6,748 Other current assets 1,999 Property, plant, and equipment, net 331 Operating lease asset 495 Acquired intangibles, net 6,213 Valuation allowance ( 13,990 ) Total assets held for sale $ 2,062 Liabilities held for sale Accounts payable $ 733 Accrued expenses 1,159 Non-current operating lease liabilities 70 Total liabilities held for sale $ 1,962 Net sales, operating loss and valuation allowance recorded for this disposal group for the years ended December 31 are as follows (in thousands): 2022 2021 Net sales $ 7,840 $ 20,328 Operating loss $ ( 6,769 ) $ ( 3,539 ) Valuation allowance $ ( 13,990 ) $ — 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 the Company's 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, a valuation allowance of $ 14.0 million was recorded during the twelve months ended December 31, 2022 and has been presented within other expense (income) in the consolidated statements of operations. 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 years ended December 31, 2021 and 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 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 Co n tents 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): 2022 2021 2020 Net sales $ — $ 20,391 $ 128,915 Operating expenses — 17,493 115,822 Loss and adjustments to loss on disposal — 1,419 29,600 Interest expense allocation — — 95 Income (loss) from discontinued operations before taxes $ — $ 1,479 $ ( 16,602 ) 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 expense (income) in the consolidated statements of operations. This divestiture did not meet the criteria to be reported as a discontinued operation nor did it have a major effect on the Company's operations. (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 the Company's manufacturing footprint. Exit activity costs were incurred during 2022 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 2022, the Company exited a facility, relocating to a new one, and separately, closed two other facilities. In 2021, the Company closed four facilities. In 2020, the Company closed two facilities and, separately, sold a facility closed in 2017. These closures resulted in exit activity costs and asset impairment charges. The following table sets forth the exit activity costs (recoveries) and asset impairment charges incurred by segment during the years ended December 31 related to the restructuring activities described above (in thousands): 2022 2021 2020 Exit activity costs (recoveries) Asset impairment charges Total Exit activity costs Asset impairment charges Total Exit activity costs Asset impairment charges Total Renewables $ 3,256 $ 1,198 $ 4,454 $ 4,769 $ 1,193 $ 5,962 $ 15 $ — $ 15 Residential 1,825 12 1,837 393 — 393 731 9 740 Agtech 771 1,066 1,837 1,687 — 1,687 860 72 932 Infrastructure ( 63 ) — ( 63 ) 26 — 26 226 — 226 Corporate 250 — 250 145 — 145 375 — 375 Total $ 6,039 $ 2,276 $ 8,315 $ 7,020 $ 1,193 $ 8,213 $ 2,207 $ 81 $ 2,288 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): 2022 2021 2020 Cost of sales $ 5,258 $ 6,176 $ 1,059 Selling, general, and administrative expense 3,057 2,037 1,229 Total exit activity costs and asset impairments $ 8,315 $ 8,213 $ 2,288 63 Table of Co n tents 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 as of January 1 $ 272 $ 1,030 Exit activity costs recognized 6,039 7,020 Cash payments ( 3,894 ) ( 7,778 ) Balance as of December 31 $ 2,417 $ 272 (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. The components of income before taxes from continuing operations consisted of the following for the years ended December 31 (in thousands): 2022 2021 2020 Domestic $ 112,635 $ 93,155 $ 108,930 Foreign ( 1,145 ) 6,407 ( 1,171 ) Income before taxes from continuing operations $ 111,490 $ 99,562 $ 107,759 The provision for income taxes from continuing operations for the years ended December 31 consisted of the following (in thousands): 2022 2021 2020 Current: U.S. Federal $ 17,014 $ 16,137 $ 16,505 State 5,647 5,009 4,071 Foreign 86 932 106 Total current 22,747 22,078 20,682 Deferred: U.S. Federal 5,259 1,766 3,620 State 1,381 134 672 Foreign ( 303 ) 1,068 ( 506 ) Total deferred 6,337 2,968 3,786 Provision for income taxes $ 29,084 $ 25,046 $ 24,468 64 Table of Co n tents The provision for income taxes from discontinued operations for the years ended December 31 consisted of the following (in thousands): 2022 2021 2020 Current: U.S. Federal $ — $ 362 $ 1,345 State — 139 57 Foreign — 214 1,725 Total current — 715 3,127 Deferred: U.S. Federal — ( 340 ) ( 876 ) State — 2 10 Foreign — ( 11 ) ( 138 ) Total deferred — ( 349 ) ( 1,004 ) Provision for income taxes $ — $ 366 $ 2,123 The provision for income taxes from continuing operations differs from the federal statutory rate of 21 % due to the following for the years ended December 31 (in thousands, except for percentages) : 2022 2021 2020 Statutory rate 23,413 21.0 % 20,908 21.0 % 22,629 21.0 % State taxes, less federal effect 5,541 5.0 % 4,068 4.1 % 3,650 3.4 % Federal tax credits ( 549 ) ( 0.5 ) % ( 587 ) ( 0.6 ) % ( 1,064 ) ( 1.0 ) % Excess tax benefit on stock based compensation ( 214 ) ( 0.2 ) % ( 2,039 ) ( 2.0 ) % ( 1,674 ) ( 1.6 ) % Executive compensation 960 0.9 % 1,781 1.8 % 1,114 1.0 % Change in valuation allowance — — % — — % ( 130 ) ( 0.1 ) % Other ( 67 ) ( 0.1 ) % 915 0.9 % ( 57 ) — % $ 29,084 26.1 % $ 25,046 25.2 % $ 24,468 22.7 % Deferred tax liabilities at December 31 consisted of the following (in thousands): 2022 2021 Depreciation $ 14,570 $ 9,633 Goodwill 62,132 48,265 Intangible assets 3,706 1,657 Other 8,133 5,298 Gross deferred tax liabilities 88,541 64,853 Capital loss carryforward ( 26,490 ) ( 27,328 ) Equity compensation ( 5,993 ) ( 8,236 ) Assets held for sale ( 13,669 ) — Capitalized research and development costs ( 4,503 ) — Other ( 17,493 ) ( 15,641 ) Gross deferred tax assets ( 68,148 ) ( 51,205 ) Valuation allowances 26,488 26,581 Deferred tax assets, net of valuation allowances ( 41,660 ) ( 24,624 ) Net deferred tax liabilities $ 46,881 $ 40,229 65 Table of Co n tents At December 31, 2022, the Company had total net operating loss carry forwards of $ 7.9 million, which included $ 0.4 million for federal, $ 6.6 million for state, and $ 0.9 million for foreign income tax purposes. The federal and state net operating loss carry forwards expire between 2023 and 2042. The foreign net operating loss carry forwards expire between 2023 and 2031. 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 $ 0.4 million of state deferred tax assets and $ 0.2 million of foreign deferred tax assets. As a result of the sale of the Industrial business during 2021, the Company generated a capital loss of $ 113.7 million for federal and state purposes to the extent allowable under state tax regulations. Amended Federal returns were filed to carry back $ 3.7 million of capital loss. As of December 31, 2022, the remaining capital loss carry forward is $ 110.0 million. The capital loss carryforward will expire in 2026. The Company recognized a total of $ 26.5 million of deferred tax assets, net of the federal benefit, related to this carryforward prior to any valuation allowances, which included $ 22.2 million of federal and $ 4.3 million of state deferred tax assets. The Company has a full valuation allowance on the capital loss carry forward and as a result there is no deferred tax asset. 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 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): 2022 2021 2020 Balance as of January 1 $ 26,581 $ 111 $ 298 Cost charged to the tax provision 10 13 70 Reductions ( 103 ) ( 41 ) ( 248 ) Reclassification from discontinued operations upon sale of industrial group — 26,498 — Currency translation — — ( 9 ) Balance as of December 31 $ 26,488 $ 26,581 $ 111 The Company made net payments for income taxes for the following amounts for the years ended December 31 (in thousands): 2022 2021 2020 Payments made for income taxes, net $ 27,017 $ 22,076 $ 21,351 At December 31, 2022, the Company had approximately $ 2.2 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. In 2022, 2021 and 2020, the Company did not have any unrecognized tax benefits and no activity related to such benefits has occurred in any of the years presented in the consolidated financial statements. 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, 2022, 2021 or 2020. 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 . The Company is currently in appeals for an audit of tax years 2016 through 2019 in Massachusetts and believes the technical merits of the position will be sustained. 66 Table of Co n tents (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 "Equity-Based Compensation" of the consolidated financial statements. Weighted average shares outstanding for basic and diluted earnings were as follows for the years ended December 31 (in thousands): 2022 2021 2020 Numerator: Income from continuing operations $ 82,406 $ 74,516 $ 83,291 Income (loss) from discontinued operations — 1,113 ( 18,725 ) Net income available to common shareholders $ 82,406 $ 75,629 $ 64,566 Denominator for basic earnings per share: Weighted average shares outstanding 32,096 32,873 32,664 Denominator for diluted earnings per share: Common stock options and stock units 96 181 254 Weighted average shares and conversions 32,192 33,054 32,918 The weighted average number of diluted shares does not include potential anti-dilutive common shares issuable pursuant to equity based incentive compensation awards. 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. The following table provides the potential anti-dilutive common stock options and stock units for the years ended December 31 (in thousands): 2022 2021 2020 Common stock options and stock units 43 — 13 (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, 2022 and 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. 67 Table of Co n tents Amounts recognized in the Company's consolidated balance sheet at December 31 were as follows (in thousands): 2022 2021 Assets Operating lease assets $ 26,502 $ 18,120 Liabilities Current Accrued expenses $ 8,620 $ 7,239 Non-current Non-current operating lease liabilities 19,041 11,390 $ 27,661 $ 18,629 The components of lease costs for the years ended December 31 were as follows (in thousands): 2022 2021 2020 Operating lease cost $ 11,191 $ 10,977 $ 10,005 Short-term lease cost 5,694 7,153 996 Total lease cost $ 16,885 $ 18,130 $ 11,001 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): 2022 2021 2020 Cash paid for amounts included in the measurement of operating liabilities $ 8,835 $ 9,431 $ 9,502 Right-of-use assets obtained in exchange for new lease liabilities $ 17,008 $ 1,084 $ 12,745 Information related to the Company's lease terms and discount rates as of December 31 were as follows: 2022 2021 Weighted-average remaining lease term - operating leases 5.3 years 3.0 years Weighted-average discount rate - operating leases 5.0 % 5.2 % The future maturity of the Company's lease liabilities as of December 31, 2022 were as follows (in thousands): 2023 $ 9,734 2024 6,884 2025 3,850 2026 2,444 2027 1,817 After 2027 7,011 Total lease payments 31,740 Less: present value discount ( 4,079 ) Present value of lease liabilities $ 27,661 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. Management does not believe that the outcome of any claims, or other claims which are not clearly determinable at the present time, would result in a material adverse effect on the Company's financial condition or results of operations. 68 Table of Co n tents (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 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. 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. The following tables illustrate 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): 2022 2021 2020 Net sales: Renewables $ 377,567 $ 432,096 $ 238,107 Residential 767,248 635,505 522,814 Agtech 168,868 199,161 209,460 Infrastructure 76,283 73,021 62,197 Total consolidated net sales $ 1,389,966 $ 1,339,783 $ 1,032,578 Income from operations: Renewables $ 25,243 $ 20,158 $ 30,105 Residential 126,458 105,821 94,430 Agtech 2,914 ( 931 ) 10,633 Infrastructure 9,003 8,911 7,233 Segments income from operations 163,618 133,959 142,401 Unallocated corporate expenses ( 33,516 ) ( 36,971 ) ( 35,211 ) Total income from operations $ 130,102 $ 96,988 $ 107,190 Depreciation and Amortization Renewables $ 8,467 $ 14,682 $ 3,377 Residential 8,983 8,694 8,110 Agtech 4,377 5,279 6,068 Infrastructure 3,150 3,092 3,060 Unallocated corporate expenses 1,190 219 300 $ 26,167 $ 31,966 $ 20,915 69 Table of Co n tents 2022 2021 2020 Total assets Renewables $ 392,368 $ 445,486 $ 402,797 Residential 519,567 453,469 407,132 Agtech 193,966 212,038 216,274 Infrastructure 80,264 82,662 80,796 Unallocated corporate assets 24,448 21,246 28,057 Assets of discontinued operations — — 77,438 $ 1,210,613 $ 1,214,901 $ 1,212,494 Capital expenditures Renewables $ 3,589 $ 4,268 $ 423 Residential 10,050 4,182 3,313 Agtech 3,177 3,289 720 Infrastructure 1,898 2,097 1,511 Unallocated corporate expenditures 1,424 3,869 7,101 $ 20,138 $ 17,705 $ 13,068 The following tables illustrate revenue disaggregated by timing of transfer of control to the customer for the years ended December 31 (in thousands): 2022 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 27,317 $ 761,576 $ 13,011 $ 32,983 $ 834,887 Over Time 350,250 5,672 155,857 43,300 555,079 Total $ 377,567 $ 767,248 $ 168,868 $ 76,283 $ 1,389,966 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 70 Table of Co n tents 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): 2022 2021 2020 Net sales North America $ 1,373,907 $ 1,318,795 $ 1,018,406 Asia 16,059 20,988 14,172 Total $ 1,389,966 $ 1,339,783 $ 1,032,578 Long-lived assets North America $ 136,553 $ 97,003 $ 90,685 Asia 234 365 476 Total $ 136,787 $ 97,368 $ 91,161 71 Table of Co n tents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.