GIBRALTAR INDUSTRIES, INC. 10-Q

Item 1. Financial Statements GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (unaudited) Three Months Ended March 31, 2023 2022 Net sales $ 293,267 $ 317,865 Cost of sales 216,338 253,021 Gross profit 76,929 64,844 Selling, general, and administrative expense 47,559 43,649 Income from operations 29,370 21,195 Interest expense 1,491 485 Other (income) expense ( 397 ) 153 Income before taxes 28,276 20,557 Provision for income taxes 7,177 5,101 Net income $ 21,099 $ 15,456 Net earnings per share: Basic $ 0.68 $ 0.47 Diluted $ 0.68 $ 0.47 Weighted average shares outstanding: Basic 30,897 32,913 Diluted 31,024 33,022 See accompanying notes to consolidated financial statements. 3 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) (unaudited) Three Months Ended March 31, 2023 2022 Net income $ 21,099 $ 15,456 Other comprehensive (loss) income: Foreign currency translation adjustment ( 115 ) ( 227 ) Minimum post retirement benefit plan adjustments, net of tax 8 24 Other comprehensive loss ( 107 ) ( 203 ) Total comprehensive income $ 20,992 $ 15,253 See accompanying notes to consolidated financial statements. 4 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) March 31, 2023 December 31, 2022 (unaudited) Assets Current assets: Cash and cash equivalents $ 7,497 $ 17,608 Accounts receivable, net of allowance of $ 4,164 and $ 3,746 , respectively 230,132 217,156 Inventories, net 171,634 170,360 Prepaid expenses and other current assets 19,015 18,813 Total current assets 428,278 423,937 Property, plant, and equipment, net 107,701 109,584 Operating lease assets 24,432 26,502 Goodwill 512,639 512,363 Acquired intangibles 134,735 137,526 Other assets 707 701 $ 1,208,492 $ 1,210,613 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 129,661 $ 106,582 Accrued expenses 67,103 73,721 Billings in excess of cost 42,929 35,017 Total current liabilities 239,693 215,320 Long-term debt 49,876 88,762 Deferred income taxes 47,030 47,088 Non-current operating lease liabilities 17,488 19,041 Other non-current liabilities 19,018 18,303 Stockholders’ equity: Preferred stock, $ 0.01 par value; authorized 10,000 shares; none outstanding — — Common stock, $ 0.01 par value; authorized 100,000 shares; 34,148 and 34,060 shares issued and outstanding in 2023 and 2022 341 340 Additional paid-in capital 324,466 322,873 Retained earnings 649,077 627,978 Accumulated other comprehensive loss ( 3,539 ) ( 3,432 ) Cost of 3,389 and 3,199 common shares held in treasury in 2023 and 2022 ( 134,958 ) ( 125,660 ) Total stockholders’ equity 835,387 822,099 $ 1,208,492 $ 1,210,613 See accompanying notes to consolidated financial statements. 5 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three Months Ended March 31, 2023 2022 Cash Flows from Operating Activities Net income $ 21,099 $ 15,456 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 6,834 6,336 Stock compensation expense 1,594 1,352 Exit activity (recoveries) costs, non-cash ( 63 ) 1,198 (Benefit of) provision for deferred income taxes ( 51 ) 17 Other, net 1,023 1,395 Changes in operating assets and liabilities, excluding the effects of acquisitions: Accounts receivable ( 18,004 ) ( 11,101 ) Inventories ( 1,586 ) ( 20,937 ) Other current assets and other assets 2,536 731 Accounts payable 23,077 ( 11,962 ) Accrued expenses and other non-current liabilities 1,586 9,761 Net cash provided by (used in) operating activities 38,045 ( 7,754 ) Cash Flows from Investing Activities Acquisitions, net of cash acquired 554 — Purchases of property, plant, and equipment, net ( 2,190 ) ( 4,402 ) Net cash used in investing activities ( 1,636 ) ( 4,402 ) Cash Flows from Financing Activities Long-term debt payments ( 50,000 ) ( 29,000 ) Proceeds from long-term debt 11,000 47,500 Purchase of common stock at market prices ( 7,509 ) ( 3,461 ) Net cash (used in) provided by financing activities ( 46,509 ) 15,039 Effect of exchange rate changes on cash ( 11 ) ( 159 ) Net (decrease) increase in cash and cash equivalents ( 10,111 ) 2,724 Cash and cash equivalents at beginning of year 17,608 12,849 Cash and cash equivalents at end of period $ 7,497 $ 15,573 See accompanying notes to consolidated financial statements. 6 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (in thousands) (unaudited) Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive (Loss) Income Treasury Stock Total Stockholders’ Equity Shares Amount Shares Amount Balance at December 31, 2022 34,060 $ 340 $ 322,873 $ 627,978 $ ( 3,432 ) 3,199 $ ( 125,660 ) $ 822,099 Net income — — — 21,099 — — — 21,099 Foreign currency translation adjustment — — — — ( 115 ) — — ( 115 ) Minimum post retirement benefit plan adjustments, net of taxes of $ 3 — — — — 8 — — 8 Stock compensation expense — — 1,594 — — — — 1,594 Net settlement of restricted stock units 88 1 ( 1 ) — — 36 ( 1,929 ) ( 1,929 ) Common stock repurchased under stock repurchase program — — — — — 154 ( 7,369 ) ( 7,369 ) Balance at March 31, 2023 34,148 $ 341 $ 324,466 $ 649,077 $ ( 3,539 ) 3,389 $ ( 134,958 ) $ 835,387 Balance at December 31, 2021 33,799 $ 338 $ 314,541 $ 545,572 $ 187 1,107 $ ( 35,380 ) $ 825,258 Net income — — — 15,456 — — — 15,456 Foreign currency translation adjustment — — — — ( 227 ) — — ( 227 ) Minimum post retirement benefit plan adjustments, net of taxes of $ 10 — — — — 24 — — 24 Stock compensation expense — — 1,352 — — — — 1,352 Net settlement of restricted stock units 173 2 ( 2 ) — — 72 ( 3,461 ) ( 3,461 ) Balance at March 31, 2022 33,972 $ 340 $ 315,891 $ 561,028 $ ( 16 ) 1,179 $ ( 38,841 ) $ 838,402 See accompanying notes to consolidated financial statements. 7 Table of Contents GIBRALTAR INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (1) CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited consolidated financial statements of Gibraltar Industries, Inc. (the "Company") have been prepared by management in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for the fair presentation of results for the interim period have been included. The Company's operations are seasonal; for this and other reasons financial results for any interim period are not necessarily indicative of the results expected for any subsequent interim period or for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2022. The consolidated balance sheet at December 31, 2022 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. (2) RECENT ACCOUNTING PRONOUNCEMENTS The Company considers the applicability and impact of Accounting Standards Updates ("ASUs"), and ASUs effective in or after 2023, respectively, which 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. (3) ACCOUNTS RECEIVABLE, NET Accounts receivable consisted of the following (in thousands): March 31, 2023 December 31, 2022 Trade accounts receivable $ 189,281 $ 179,170 Costs in excess of billings 45,015 41,732 Total accounts receivables 234,296 220,902 Less allowance for doubtful accounts and contract assets ( 4,164 ) ( 3,746 ) Accounts receivable, net $ 230,132 $ 217,156 Refer to Note 4 "Revenue" concerning the Company's costs in excess of billings. The following table provides a roll-forward of the allowance for credit losses, for the three month period ended March 31, 2023, that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected (in thousands): Beginning balance as of January 1, 2023 $ 3,746 Bad debt expense, net of recoveries 260 Accounts written off against allowance and other adjustments 158 Ending balance as of March 31, 2023 $ 4,164 (4) REVENUE Sales includes revenue from contracts with customers for designing, engineering, manufacturing and installation of solar racking systems; electrical balance of systems; roof and foundation ventilation products; centralized mail systems and electronic package solutions; retractable awnings; gutter guards; rain dispersion products; trims and flashings and other accessories; designing, engineering, manufacturing and installation of greenhouses; structural bearings; expansion joints; pavement sealant; elastomeric concrete; and bridge cable protection systems. Refer to Note 14 "Segment Information" for additional information related to revenue recognized by timing of transfer of control by reportable segment. 8 Table of Contents As of March 31, 2023, the Company's remaining performance obligations are part of contracts that have an original expected duration of one year or less. Contract assets consist of costs in excess of billings presented within accounts receivable in the Company's consolidated balance sheets. Contract liabilities consist of billings in excess of cost, classified as current liabilities, and unearned revenue, presented within accrued expenses, in the Company's consolidated balance sheets. Unearned revenue as of March 31, 2023 and December 31, 2022 was $ 7.8 million and $ 4.6 million, respectively. Revenue recognized during the three months ended March 31, 2023 and 2022 that was in contract liabilities at the beginning of the respective periods was $ 18.7 million and $ 27.4 million, respectively. (5) INVENTORIES Inventories consisted of the following (in thousands): March 31, 2023 December 31, 2022 Raw material $ 120,150 $ 111,187 Work-in-process 12,824 17,944 Finished goods 44,944 47,523 Gross inventory 177,918 176,654 Less reserves ( 6,284 ) ( 6,294 ) Total inventories, net $ 171,634 $ 170,360 (6) ACQUISITION On August 22, 2022, the Company purchased all the issued and outstanding membership interests of Quality Aluminum Products ("QAP"), a manufacturer of aluminum and steel products including soffit, fascia, trim coil, rain carrying products and aluminum siding. The results of QAP have been included in the Company's consolidated financial results since the date of acquisition within the Company's Residential segment. The purchase consideration for the acquisition of QAP was $ 52.1 million, which includes a working capital adjustment and certain other adjustments provided for in the membership interest purchase agreement. The purchase price for the acquisition was allocated to the assets acquired and liabilities assumed based upon their respective fair values estimated as of the date of acquisition. The Company has completed 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. The final determination of the fair value of certain assets and liabilities has been completed within a measurement period of up to one year from the date of acquisition. The excess consideration was recorded as goodwill and approximated $ 4.0 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 building products markets. The 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 23,372 Property, plant and equipment 8,486 Acquired intangible assets 14,700 Other assets 1,813 Other liabilities ( 1,295 ) Goodwill 3,991 Fair value of purchase consideration $ 52,085 9 Table of Contents The intangible assets acquired in this acquisition consisted of the following (in thousands): Fair Value Weighted-Average Amortization Period Trademarks $ 2,800 Indefinite Customer relationships 11,900 12 years Total $ 14,700 In determining the allocation of the purchase price to the assets acquired and liabilities assumed, the Company uses all available information to make fair value determinations using Level 3 unobservable inputs in which little or no market data exists, and therefore, engages independent valuation specialists to assist in the fair value determination of the acquired long-lived assets. The acquisition of QAP was financed primarily through borrowings under the Company's revolving credit facility. The Company recognized costs related to recent acquisitions comprised of legal and consulting fees within selling, general, and administrative ("SG&A") expenses of $ 21.0 thousand and $ 7.0 thousand for the three months ended March 31, 2023 and 2022, respectively. (7) GOODWILL AND RELATED INTANGIBLE ASSETS Goodwill The changes in the carrying amount of goodwill for the three months ended March 31, 2023 are as follows (in thousands): Renewables Residential Agtech Infrastructure Total Balance at December 31, 2022 $ 188,030 $ 209,056 $ 83,599 $ 31,678 $ 512,363 Adjustments to prior year acquisitions — 387 — — 387 Foreign currency translation ( 141 ) — 30 — ( 111 ) Balance at March 31, 2023 $ 187,889 $ 209,443 $ 83,629 $ 31,678 $ 512,639 Goodwill is recognized net of accumulated impairment losses of $ 133.2 million as of March 31, 2023 and December 31, 2022, respectively. The Company is required to regularly assess whether a triggering event has occurred which would require interim impairment testing. The Company determined that no triggering event had occurred as of March 31, 2023 which would require an interim impairment test to be performed. Acquired Intangible Assets Acquired intangible assets consisted of the following (in thousands): March 31, 2023 December 31, 2022 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Indefinite-lived intangible assets: Trademarks $ 55,500 $ — $ 55,500 $ — Finite-lived intangible assets: Trademarks 5,449 4,516 5,448 4,481 Unpatented technology 34,165 22,610 34,163 22,037 Customer relationships 115,027 48,609 115,125 46,557 Non-compete agreements 2,371 2,042 2,371 2,006 157,012 77,777 157,107 75,081 Total acquired intangible assets $ 212,512 $ 77,777 $ 212,607 $ 75,081 10 Table of Contents The following table summarizes the acquired intangible asset amortization expense for the three months ended March 31, (in thousands): 2023 2022 Amortization expense $ 2,766 $ 3,098 Amortization expense related to acquired intangible assets for the remainder of fiscal 2023 and the next five years thereafter is estimated as follows (in thousands): 2023 2024 2025 2026 2027 2028 Amortization expense $ 8,297 $ 10,883 $ 10,745 $ 9,338 $ 7,699 $ 6,832 (8) LONG-TERM DEBT Long-term debt consisted of the following (in thousands): March 31, 2023 December 31, 2022 Revolving credit facility $ 52,000 $ 91,000 Less unamortized debt issuance costs ( 2,124 ) ( 2,238 ) Total debt $ 49,876 $ 88,762 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. 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 March 31, 2023, the Company was in compliance with all financial covenants. The Credit Agreement terminates on December 8, 2027. Borrowings 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 had 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. For the three months ended March 31, 2022, interest rates on the revolving credit facility under the Sixth Amended and Restated 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 Sixth Amended and Restated 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. Standby letters of credit of $ 4.3 million have been issued under the Credit Agreement to third parties on behalf of the Company as of March 31, 2023. These letters of credit reduce the amount otherwise available under the revolving credit facility. The Company had $ 343.7 million and $ 304.5 million of availability under the revolving credit facility as of March 31, 2023 and December 31, 2022, respectively. 11 Table of Contents (9) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following tables summarize the cumulative balance of each component of accumulated other comprehensive (loss) income, net of tax, for the three months ended March 31, (in thousands): Foreign Currency Translation Adjustment Minimum Post Retirement Benefit Plan Adjustments Total Pre-Tax Amount Tax Benefit (Expense) Accumulated Other Comprehensive (Loss) Income Balance at December 31, 2022 $ ( 3,382 ) $ ( 395 ) $ ( 3,777 ) $ ( 345 ) $ ( 3,432 ) Minimum post retirement health care plan adjustments — 11 11 3 8 Foreign currency translation adjustment ( 115 ) — ( 115 ) — ( 115 ) Balance at March 31, 2023 $ ( 3,497 ) $ ( 384 ) $ ( 3,881 ) $ ( 342 ) $ ( 3,539 ) Balance at December 31, 2021 $ 1,640 $ ( 2,247 ) $ ( 607 ) $ 794 $ 187 Minimum post retirement health care plan adjustments — 34 34 ( 10 ) 24 Foreign currency translation adjustment ( 227 ) — ( 227 ) — ( 227 ) Balance at March 31, 2022 $ 1,413 $ ( 2,213 ) $ ( 800 ) $ 784 $ ( 16 ) The realized adjustments relating to the Company’s minimum post retirement health care costs were reclassified from accumulated other comprehensive loss and included in other expense in the consolidated statements of income. (10) EQUITY-BASED COMPENSATION On May 4, 2022, the stockholders of the Company approved the adoption of the Gibraltar Industries, Inc. Amended and Restated 2016 Stock Plan for Non-Employee Directors ("Non-Employee Directors Plan") which increases the total number of shares for issuance by the Company thereunder from 100,000 shares to 200,000 shares, allows the Company to grant awards of shares of the Company's common stock to current non-employee Directors of the Company, and permits the Directors to defer receipt of such shares pursuant to the terms of the Non-Employee Directors Plan. On May 4, 2018, the stockholders of the Company approved the adoption of the Gibraltar Industries, Inc. 2018 Equity Incentive Plan (the "2018 Plan"). The 2018 Plan provides for the issuance of up to 1,000,000 shares of common stock and supplements the remaining shares available for issuance under the Gibraltar Industries, Inc. 2015 Equity Incentive Plan (the "2015 Plan"). Both the 2018 Plan and the 2015 Plan allow the Company to grant equity-based incentive compensation awards, in the form of non-qualified options, restricted shares, restricted stock units, performance shares, performance stock units, and stock rights to eligible participants. Equity Based Awards - Settled in Stock The following table sets forth the number of equity-based awards granted during the three months ended March 31, which will convert to shares upon vesting, along with the weighted average grant date fair values: 2023 2022 Awards Number of Awards Weighted Average Grant Date Fair Value Number of Awards (2) Weighted Average Grant Date Fair Value Performance stock units (1) 81,611 $ 53.44 108,464 $ 47.00 Restricted stock units 46,646 $ 53.44 58,958 $ 47.00 (1) The Company’s performance stock units (“PSUs”) represent shares granted for which the final number of shares earned depends on financial performance. The number of shares to be issued may vary between 0 % and 200 % of the number of PSUs granted depending on the relative achievement to targeted thresholds. The Company's PSUs with a financial performance condition are based on the Company’s return on invested capital (“ROIC”) over a one-year performance period. 12 Table of Contents (2) PSUs granted in the first quarter of 2022 includes 5,653 units that were forfeited in the first quarter of 2023 and 62,201 units that will be converted to shares and issued to recipients in the first quarter of 2025 at 60.5 % of the target amount granted, based on the Company's actual ROIC compared to ROIC target for the performance period ended December 31, 2022. Equity Based Awards - Settled in Cash The Company's equity-based awards that are settled in cash are the awards under the Management Stock Purchase Plan (the “MSPP”) which is authorized under the Company's equity incentive plans. The MSPP provides participants the ability to defer a portion of their compensation, convertible to unrestricted investments, restricted stock units, or a combination of both, or defer a portion of their directors’ fees, convertible to restricted stock units. Employees eligible to defer a portion of their compensation also receive a company-matching award in restricted stock units equal to a percentage of their compensation. The deferrals and related company match are credited to an account that represents a share-based liability. The portion of the account deferred to unrestricted investments is measured at fair market value of the unrestricted investments, and the portion of the account deferred to restricted stock units and company-matching restricted stock units is measured at a 200 -day average of the Company’s stock price. The account will be converted to and settled in cash payable to participants upon retirement or a termination of their service to the Company. Total MSPP liabilities recorded on the consolidated balance sheet as of March 31, 2023 was $ 15.9 million, of which $ 2.0 million was included in current accrued expenses and $ 13.9 million was included in non-current liabilities. Total MSPP liabilities recorded on the consolidated balance sheet as of December 31, 2022 was $ 15.4 million, of which $ 2.3 million was included in current accrued expenses and $ 13.1 million was included in non-current liabilities. The value of the restricted stock units within the MSPP liability were $ 13.7 million and $ 13.4 million at March 31, 2023 and December 31, 2022, respectively. The following table provides the number of restricted stock units credited to active participant accounts and the payments made with respect to MSPP liabilities during the three months ended March 31,: 2023 2022 Restricted stock units credited 41,743 2,876 MSPP liabilities paid (in thousands) $ 2,147 $ 2,545 (11) EXIT ACTIVITY COSTS AND ASSET IMPAIRMENTS The Company has incurred exit activity costs and asset impairment charges as a result of its 80/20 simplification and portfolio management initiatives. These initiatives have resulted in the identification of low-volume, low margin, internally-produced products which have been or will be outsourced or discontinued, the simplification of processes, the sale and exiting of less profitable businesses or product lines, and a reduction in the Company's manufacturing footprint. Exit activity costs (recoveries) were incurred during the three months ended March 31, 2023 and 2022 which related to moving and closing costs, and severance, along with asset impairment charges (recoveries) related to the write-down of inventory associated with discontinued product lines, as a result of process simplification initiatives. In conjunction with these initiatives, the Company recorded costs during the three months ended March 31, 2023 associated with the final closure and sale of a facility closed during the fourth quarter of 2022. During the three months ended March 31, 2022, the Company closed one facility as a result of these initiatives. 13 Table of Contents The following tables set forth the exit activity costs (recoveries) and asset impairment charges (recoveries) incurred by segment during the three months ended March 31, related to the restructuring activities described above (in thousands): 2023 2022 Exit activity costs Asset impairment recovery Total Exit activity costs (recoveries), net Asset impairment charges Total Renewables $ — $ ( 63 ) $ ( 63 ) $ 1,328 $ 1,198 $ 2,526 Residential 114 — 114 3 — 3 Agtech 561 — 561 ( 9 ) — ( 9 ) Infrastructure — — — ( 63 ) — ( 63 ) Corporate — — — 20 — 20 Total $ 675 $ ( 63 ) $ 612 $ 1,279 $ 1,198 $ 2,477 The following table provides a summary of where the exit activity costs and asset impairment charges were recorded in the consolidated statements of income for the three months ended March 31, (in thousands): 2023 2022 Cost of sales $ 513 $ 2,208 Selling, general, and administrative expense 99 269 Total exit activity and asset impairment charges $ 612 $ 2,477 The following table reconciles the beginning and ending liability for exit activity costs relating to the Company’s facility consolidation efforts (in thousands): 2023 2022 Balance at January 1 $ 2,417 $ 272 Exit activity costs recognized 675 1,279 Cash payments ( 1,321 ) ( 116 ) Balance at March 31 $ 1,771 $ 1,435 (12) INCOME TAXES The following table summarizes the provision for income taxes for continuing operations (in thousands) for the three months ended March 31, and the applicable effective tax rates: 2023 2022 Provision for income taxes $ 7,177 $ 5,101 Effective tax rate 25.4 % 24.8 % The effective tax rate for the three months ended March 31, 2023 and 2022, respectively, was greater than the U.S. federal statutory rate of 21 % due to state taxes and nondeductible permanent differences partially offset by favorable discrete items. 14 Table of Contents (13) EARNINGS PER SHARE Earnings per share and the weighted average shares outstanding used in calculating basic and diluted earnings per share are as follows for the three months ended March 31, (in thousands): 2023 2022 Numerator: Net income available to common stockholders $ 21,099 $ 15,456 Denominator for basic earnings per share: Weighted average shares outstanding 30,897 32,913 Denominator for diluted earnings per share: Weighted average shares outstanding 30,897 32,913 Common stock units 127 109 Weighted average shares and conversions 31,024 33,022 The weighted average number of diluted shares does not include potential anti-dilutive common shares issuable pursuant to equity based incentive compensation awards. The following table provides the potential anti-dilutive common stock units for the three months ended March 31, (in thousands): 2023 2022 Common stock units 64 54 (14) SEGMENT INFORMATION The Company is organized into four reportable segments on the basis of the production processes, products and services provided by each segment, identified as follows: (i) Renewables, which primarily includes designing, engineering, manufacturing and installation of solar racking and electrical balance of systems; (ii) Residential, which primarily includes roof and foundation ventilation products, centralized mail systems and electronic package solutions, retractable awnings and gutter guards, and rain dispersion products, trims and flashings and other accessories; (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. 15 Table of Contents The following table illustrates certain measurements used by management to assess performance of the segments described above for the three months ended March 31, (in thousands): 2023 2022 Net sales: Renewables $ 59,205 $ 78,783 Residential 179,495 179,485 Agtech 35,852 42,428 Infrastructure 18,715 17,169 Total net sales $ 293,267 $ 317,865 Income from operations: Renewables $ 2,269 $ ( 6,984 ) Residential 29,509 33,435 Agtech 2,330 31 Infrastructure 2,714 1,181 Unallocated Corporate Expenses ( 7,452 ) ( 6,468 ) Total income from operations $ 29,370 $ 21,195 March 31, 2023 December 31, 2022 Total assets: Renewables $ 393,088 $ 392,368 Residential 535,423 519,567 Agtech 180,688 193,966 Infrastructure 82,795 80,264 Unallocated corporate assets 16,498 24,448 $ 1,208,492 $ 1,210,613 The following tables illustrate segment revenue disaggregated by timing of transfer of control to the customer for the three months ended March 31 (in thousands): Three Months Ended March 31, 2023 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 9,094 $ 177,942 $ 5,107 $ 6,061 $ 198,204 Over Time 50,111 1,553 30,745 12,654 95,063 Total net sales $ 59,205 $ 179,495 $ 35,852 $ 18,715 $ 293,267 Three Months Ended March 31, 2022 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 5,650 $ 178,131 $ 1,613 $ 6,303 $ 191,697 Over Time 73,133 1,354 40,815 10,866 126,168 Total net sales $ 78,783 $ 179,485 $ 42,428 $ 17,169 $ 317,865 16 Table of Contents