GIBRALTAR INDUSTRIES, INC. 10-Q

Item 1. Financial Statements GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net sales $ 364,914 $ 366,949 $ 658,181 $ 684,814 Cost of sales 268,175 276,678 484,513 529,699 Gross profit 96,739 90,271 173,668 155,115 Selling, general, and administrative expense 53,662 50,132 101,221 93,781 Income from operations 43,077 40,139 72,447 61,334 Interest expense 1,308 656 2,799 1,141 Other (income) expense ( 509 ) 281 ( 906 ) 434 Income before taxes 42,278 39,202 70,554 59,759 Provision for income taxes 11,555 9,895 18,732 14,996 Net income $ 30,723 $ 29,307 $ 51,822 $ 44,763 Net earnings per share: Basic $ 1.01 $ 0.90 $ 1.69 $ 1.37 Diluted $ 1.00 $ 0.90 $ 1.68 $ 1.36 Weighted average shares outstanding: Basic 30,554 32,585 30,725 32,748 Diluted 30,684 32,660 30,846 32,843 See accompanying notes to consolidated financial statements. 3 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net income $ 30,723 $ 29,307 $ 51,822 $ 44,763 Other comprehensive (loss) income: Foreign currency translation adjustment ( 584 ) ( 3,198 ) ( 699 ) ( 3,425 ) Postretirement benefit plan adjustments, net of tax 8 1 16 25 Other comprehensive loss ( 576 ) ( 3,197 ) ( 683 ) ( 3,400 ) Total comprehensive income $ 30,147 $ 26,110 $ 51,139 $ 41,363 See accompanying notes to consolidated financial statements. 4 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) June 30, 2023 December 31, 2022 (unaudited) Assets Current assets: Cash and cash equivalents $ 18,621 $ 17,608 Accounts receivable, net of allowance of $ 4,849 and $ 3,746 , respectively 266,487 217,156 Inventories, net 159,542 170,360 Prepaid expenses and other current assets 18,320 18,813 Total current assets 462,970 423,937 Property, plant, and equipment, net 106,130 109,584 Operating lease assets 25,041 26,502 Goodwill 511,961 512,363 Acquired intangibles 131,925 137,526 Other assets 550 701 $ 1,238,577 $ 1,210,613 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 155,464 $ 106,582 Accrued expenses 82,746 73,721 Billings in excess of cost 54,838 35,017 Total current liabilities 293,048 215,320 Long-term debt 9,790 88,762 Deferred income taxes 47,024 47,088 Non-current operating lease liabilities 18,502 19,041 Other non-current liabilities 19,903 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; 34,194 and 34,060 shares issued and outstanding in 2023 and 2022 342 340 Additional paid-in capital 327,927 322,873 Retained earnings 679,800 627,978 Accumulated other comprehensive loss ( 4,115 ) ( 3,432 ) Cost of 3,770 and 3,199 common shares held in treasury in 2023 and 2022 ( 153,644 ) ( 125,660 ) Total stockholders’ equity 850,310 822,099 $ 1,238,577 $ 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) Six Months Ended June 30, 2023 2022 Cash Flows from Operating Activities Net income $ 51,822 $ 44,763 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,665 12,677 Stock compensation expense 5,056 4,125 Exit activity (recoveries) costs, non-cash ( 23 ) 1,198 Provision for deferred income taxes 179 29 Other, net 2,680 2,666 Changes in operating assets and liabilities, excluding the effects of acquisitions: Accounts receivable ( 54,979 ) ( 40,473 ) Inventories 12,130 ( 33,616 ) Other current assets and other assets 4,069 ( 1,612 ) Accounts payable 48,327 ( 10,501 ) Accrued expenses and other non-current liabilities 31,168 21,288 Net cash provided by operating activities 114,094 544 Cash Flows from Investing Activities Acquisitions, net of cash acquired 554 — Purchases of property, plant, and equipment, net ( 5,284 ) ( 11,202 ) Net cash used in investing activities ( 4,730 ) ( 11,202 ) Cash Flows from Financing Activities Long-term debt payments ( 120,000 ) ( 51,000 ) Proceeds from long-term debt 40,800 120,500 Purchase of common stock at market prices ( 28,770 ) ( 53,468 ) Net cash (used in) provided by financing activities ( 107,970 ) 16,032 Effect of exchange rate changes on cash ( 381 ) ( 1,074 ) Net increase in cash and cash equivalents 1,013 4,300 Cash and cash equivalents at beginning of year 17,608 12,849 Cash and cash equivalents at end of period $ 18,621 $ 17,149 See accompanying notes to consolidated financial statements. 6 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS 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 March 31, 2023 34,148 $ 341 $ 324,466 $ 649,077 $ ( 3,539 ) 3,389 $ ( 134,958 ) $ 835,387 Net income — — — 30,723 — — — 30,723 Foreign currency translation adjustment — — — — ( 584 ) — — ( 584 ) Postretirement benefit plan adjustments, net of taxes of $ 3 — — — — 8 — — 8 Stock compensation expense — — 3,462 — — — — 3,462 Net settlement of restricted stock units 38 1 ( 1 ) — — 14 ( 874 ) ( 874 ) Awards of common stock 8 — — — — — — — Common stock repurchased under stock repurchase program — — — — — 367 ( 17,812 ) ( 17,812 ) Balance at June 30, 2023 34,194 $ 342 $ 327,927 $ 679,800 $ ( 4,115 ) 3,770 $ ( 153,644 ) $ 850,310 Balance at March 31, 2022 33,972 $ 340 $ 315,891 $ 561,028 $ ( 16 ) 1,179 $ ( 38,841 ) $ 838,402 Net income — — — 29,307 — — — 29,307 Foreign currency translation adjustment — — — — ( 3,198 ) — — ( 3,198 ) Postretirement benefit plan adjustments, net of taxes of $ 0 — — — — 1 — — 1 Stock compensation expense — — 2,773 — — — — 2,773 Net settlement of restricted stock units 1 — — — — — ( 7 ) ( 7 ) Awards of common stock 16 — — — — — — — Common stock repurchased under stock repurchase program — — — — — 1,195 ( 50,000 ) ( 50,000 ) Balance at June 30, 2022 33,989 $ 340 $ 318,664 $ 590,335 $ ( 3,213 ) 2,374 $ ( 88,848 ) $ 817,278 See accompanying notes to consolidated financial statements. 7 Table of Contents GIBRALTAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS 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 — — — 51,822 — — — 51,822 Foreign currency translation adjustment — — — — ( 699 ) — — ( 699 ) Postretirement benefit plan adjustments, net of taxes of $ 6 — — — — 16 — — 16 Stock compensation expense — — 5,056 — — — — 5,056 Net settlement of restricted stock units 126 2 ( 2 ) — — 50 ( 2,803 ) ( 2,803 ) Awards of common stock 8 — — — — — — — Common stock repurchased under stock repurchase program — — — — — 521 ( 25,181 ) ( 25,181 ) Balance at June 30, 2023 34,194 $ 342 $ 327,927 $ 679,800 $ ( 4,115 ) 3,770 $ ( 153,644 ) $ 850,310 Balance at December 31, 2021 33,799 $ 338 $ 314,541 $ 545,572 $ 187 1,107 $ ( 35,380 ) $ 825,258 Net income — — — 44,763 — — — 44,763 Foreign currency translation adjustment — — — — ( 3,425 ) — — ( 3,425 ) Postretirement benefit plan adjustments, net of taxes of $ 10 — — — — 25 — — 25 Stock compensation expense — — 4,125 — — — — 4,125 Net settlement of restricted stock units 174 2 ( 2 ) — — 72 ( 3,468 ) ( 3,468 ) Awards of common stock 16 — — — — — — — Common stock repurchased under stock repurchase program — — — — — 1,195 ( 50,000 ) ( 50,000 ) Balance at June 30, 2022 33,989 $ 340 $ 318,664 $ 590,335 $ ( 3,213 ) 2,374 $ ( 88,848 ) $ 817,278 See accompanying notes to consolidated financial statements. 8 Table of Contents GIBRALTAR INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (1) CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited consolidated financial statements of Gibraltar Industries, Inc. (the "Company") have been prepared by management in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for the fair presentation of results for the interim period have been included. The Company's operations are seasonal; for this and other reasons financial results for any interim period are not necessarily indicative of the results expected for any subsequent interim period or for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in 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): June 30, 2023 December 31, 2022 Trade accounts receivable $ 232,177 $ 179,170 Costs in excess of billings 39,159 41,732 Total accounts receivable 271,336 220,902 Less allowance for doubtful accounts and contract assets ( 4,849 ) ( 3,746 ) Accounts receivable, net $ 266,487 $ 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 six month period ended June 30, 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 1,328 Accounts written off against allowance and other adjustments ( 225 ) Ending balance as of June 30, 2023 $ 4,849 (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. 9 Table of Contents As of June 30, 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 June 30, 2023 and December 31, 2022 was $ 6.5 million and $ 4.6 million, respectively. Revenue recognized during the six months ended June 30, 2023 and 2022 that was in contract liabilities at the beginning of the respective periods was $ 33.7 million and $ 38.6 million, respectively. (5) INVENTORIES Inventories consisted of the following (in thousands): June 30, 2023 December 31, 2022 Raw material $ 105,401 $ 111,187 Work-in-process 13,658 17,944 Finished goods 46,336 47,523 Gross inventory 165,395 176,654 Less reserves ( 5,853 ) ( 6,294 ) Total inventories, net $ 159,542 $ 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 10 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") expense. While no SG&A expenses were incurred during the three months ended June 30, 2023 and 2022, the Company recognized expenses of $ 21 thousand and $ 7 thousand for the six months ended June 30, 2023 and 2022, respectively. (7) GOODWILL AND RELATED INTANGIBLE ASSETS Goodwill The changes in the carrying amount of goodwill for the six months ended June 30, 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 ( 990 ) — 201 — ( 789 ) Balance at June 30, 2023 $ 187,040 $ 209,443 $ 83,800 $ 31,678 $ 511,961 Goodwill is recognized net of accumulated impairment losses of $ 133.2 million as of June 30, 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 June 30, 2023 which would require an interim impairment test to be performed. Acquired Intangible Assets Acquired intangible assets consisted of the following (in thousands): June 30, 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 5,472 4,572 5,448 4,481 Unpatented technology 34,232 23,205 34,163 22,037 Customer relationships 114,507 50,303 115,125 46,557 Non-compete agreements 2,374 2,080 2,371 2,006 156,585 80,160 157,107 75,081 Total acquired intangible assets $ 212,085 $ 80,160 $ 212,607 $ 75,081 11 Table of Contents The following table summarizes the acquired intangible asset amortization expense for the three and six months ended June 30, (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Amortization expense $ 2,760 $ 2,819 $ 5,526 $ 5,917 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 $ 5,526 $ 10,872 $ 10,735 $ 9,335 $ 7,702 $ 6,834 (8) LONG-TERM DEBT Long-term debt consisted of the following (in thousands): June 30, 2023 December 31, 2022 Revolving credit facility $ 11,800 $ 91,000 Less unamortized debt issuance costs ( 2,010 ) ( 2,238 ) Total debt $ 9,790 $ 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 June 30, 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 was 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 and six months ended June 30, 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 ranged 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 June 30, 2023. These letters of credit reduce the amount otherwise available under the revolving credit facility. The Company had $ 383.9 million and $ 304.5 million of availability under the revolving credit facility as of June 30, 2023 and December 31, 2022, respectively. 12 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 June 30, (in thousands): Foreign Currency Translation Adjustment Postretirement Benefit Plan Adjustments Total Pre-Tax Amount Tax Benefit (Expense) Accumulated Other Comprehensive (Loss) Income Balance at March 31, 2023 $ ( 3,497 ) $ ( 384 ) $ ( 3,881 ) $ ( 342 ) $ ( 3,539 ) Postretirement health care plan adjustments — 11 11 3 8 Foreign currency translation adjustment ( 584 ) — ( 584 ) — ( 584 ) Balance at June 30, 2023 $ ( 4,081 ) $ ( 373 ) $ ( 4,454 ) $ ( 339 ) $ ( 4,115 ) Balance at March 31, 2022 $ 1,413 $ ( 2,213 ) $ ( 800 ) $ 784 $ ( 16 ) Postretirement health care plan adjustments — 1 1 — 1 Foreign currency translation adjustment ( 3,198 ) — ( 3,198 ) — ( 3,198 ) Balance at June 30, 2022 $ ( 1,785 ) $ ( 2,212 ) $ ( 3,997 ) $ 784 $ ( 3,213 ) The following tables summarize the cumulative balance of each component of accumulated other comprehensive (loss) income, net of tax, for the six months ended June 30, (in thousands): Foreign Currency Translation Adjustment Postretirement 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 ) Postretirement health care plan adjustments — 22 22 6 16 Foreign currency translation adjustment ( 699 ) — ( 699 ) — ( 699 ) Balance at June 30, 2023 $ ( 4,081 ) $ ( 373 ) $ ( 4,454 ) $ ( 339 ) $ ( 4,115 ) Balance at December 31, 2021 $ 1,640 $ ( 2,247 ) $ ( 607 ) $ 794 $ 187 Postretirement health care plan adjustments — 35 35 ( 10 ) 25 Foreign currency translation adjustment ( 3,425 ) — ( 3,425 ) — ( 3,425 ) Balance at June 30, 2022 $ ( 1,785 ) $ ( 2,212 ) $ ( 3,997 ) $ 784 $ ( 3,213 ) The realized adjustments relating to the Company’s postretirement 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 3, 2023, the stockholders of the Company approved the adoption of the Gibraltar Industries, Inc. Amended and Restated 2018 Equity Incentive Plan (the "Amended 2018 Plan") which increases the total number of shares for issuance by the Company from 1,000,000 shares to 1,550,000 shares. In addition, 81,707 shares that were unissued and available for grant under the Gibraltar Industries, Inc. 2015 Equity Incentive Plan (the "2015 Plan") were consolidated with the Amended 2018 Plan. No further grants will be made under the 2015 Plan. Consistent with the Gibraltar Industries, Inc. 2018 Equity Incentive Plan and the 2015 Plan, the Amended 2018 Plan allows the Company to grant equity-based incentive compensation awards, in the form of non-qualified options, restricted shares, restricted stock units, performance shares, performance stock units, and stock rights to eligible participants. 13 Table of Contents 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. Equity Based Awards - Settled in Stock The following table sets forth the number of equity-based awards granted during the six months ended June 30, which will convert to shares upon vesting, along with the weighted average grant date fair values: 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) 85,323 $ 53.22 108,464 $ 47.00 Restricted stock units 53,862 $ 53.49 67,158 $ 45.84 Deferred stock units 6,351 $ 54.33 2,460 $ 42.69 Common shares 8,468 $ 54.33 15,652 $ 42.49 (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. (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 June 30, 2023 was $ 16.9 million, of which $ 2.0 million was included in current accrued expenses and $ 14.9 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 $ 14.6 million and $ 13.4 million at June 30, 2023 and December 31, 2022, respectively. 14 Table of Contents 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 six months ended June 30,: 2023 2022 Restricted stock units credited 44,102 6,234 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 six months ended June 30, 2023 and 2022 which related to moving and closing costs, severance, and contract terminations, 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 six months ended June 30, 2023 associated with the final closure and sale of a facility closed during the fourth quarter of 2022. During the six months ended June 30, 2022, the Company exited a facility, relocating to a new one , and separately, closed one other facility as a result of these initiatives. The following tables set forth the exit activity costs (recoveries) and asset impairment charges (recoveries) incurred by segment during the three and six months ended June 30, related to the restructuring activities described above (in thousands): Three Months Ended June 30, 2023 2022 Exit activity costs Asset impairment charges Total Exit activity costs Asset impairment charges Total Renewables $ 2,909 $ 40 $ 2,949 $ 75 $ — $ 75 Residential — — — 1,295 — 1,295 Agtech 156 — 156 97 — 97 Infrastructure — — — — — — Corporate — — — 62 — 62 Total $ 3,065 $ 40 $ 3,105 $ 1,529 $ — $ 1,529 Six Months Ended June 30, 2023 2022 Exit activity costs Asset impairment recovery Total Exit activity costs (recoveries), net Asset impairment charges Total Renewables $ 2,909 $ ( 23 ) $ 2,886 $ 1,403 $ 1,198 $ 2,601 Residential 114 — 114 1,298 — 1,298 Agtech 717 — 717 88 — 88 Infrastructure — — — ( 63 ) — ( 63 ) Corporate — — — 82 — 82 Total $ 3,740 $ ( 23 ) $ 3,717 $ 2,808 $ 1,198 $ 4,006 15 Table of Contents The following table provides a summary of where the exit activity costs and asset impairment charges were recorded in the consolidated statements of income for the three and six months ended June 30, (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Cost of sales $ 3,098 $ 80 $ 3,611 $ 2,288 Selling, general, and administrative expense 7 1,449 106 1,718 Total exit activity and asset impairment charges $ 3,105 $ 1,529 $ 3,717 $ 4,006 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 3,740 2,808 Cash payments ( 2,377 ) ( 1,951 ) Balance at June 30 $ 3,780 $ 1,129 (12) INCOME TAXES The following table summarizes the provision for income taxes for continuing operations (in thousands) for the three and six months ended June 30, and the applicable effective tax rates: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Provision for income taxes $ 11,555 $ 9,895 $ 18,732 $ 14,996 Effective tax rate 27.3 % 25.2 % 26.6 % 25.1 % The effective tax rate for the three and six months ended June 30, 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 item s due to an excess tax benefit on stock-based compensation. (13) EARNINGS PER SHARE Earnings per share and the weighted average shares outstanding used in calculating basic and diluted earnings per share are as follows for the three and six months ended June 30, (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Numerator: Net income available to common stockholders $ 30,723 $ 29,307 $ 51,822 $ 44,763 Denominator for basic earnings per share: Weighted average shares outstanding 30,554 32,585 30,725 32,748 Denominator for diluted earnings per share: Weighted average shares outstanding 30,554 32,585 30,725 32,748 Common stock units 130 75 121 95 Weighted average shares and conversions 30,684 32,660 30,846 32,843 16 Table of Contents 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 and six months ended June 30, (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Common stock units 19 225 17 65 (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, 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. The following table illustrates certain measurements used by management to assess performance of the segments described above for the three and six months ended June 30, (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net sales: Renewables $ 77,459 $ 101,549 $ 136,664 $ 180,332 Residential 228,234 200,245 407,729 379,730 Agtech 35,028 43,680 70,880 86,108 Infrastructure 24,193 21,475 42,908 38,644 Total net sales $ 364,914 $ 366,949 $ 658,181 $ 684,814 Income from operations: Renewables $ 5,908 $ 6,829 $ 8,177 $ ( 155 ) Residential 43,959 35,664 73,468 69,099 Agtech ( 1,117 ) 1,542 1,213 1,573 Infrastructure 5,828 2,887 8,542 4,068 Unallocated Corporate Expenses ( 11,501 ) ( 6,783 ) ( 18,953 ) ( 13,251 ) Total income from operations $ 43,077 $ 40,139 $ 72,447 $ 61,334 17 Table of Contents June 30, 2023 December 31, 2022 Total assets: Renewables $ 404,447 $ 392,368 Residential 546,480 519,567 Agtech 182,942 193,966 Infrastructure 84,255 80,264 Unallocated corporate assets 20,453 24,448 $ 1,238,577 $ 1,210,613 The following tables illustrate segment revenue disaggregated by timing of transfer of control to the customer for the three and six months ended June 30 (in thousands): Three Months Ended June 30, 2023 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 10,633 $ 226,618 $ 880 $ 8,848 $ 246,979 Over Time 66,826 1,616 34,148 15,345 117,935 Total net sales $ 77,459 $ 228,234 $ 35,028 $ 24,193 $ 364,914 Three Months Ended June 30, 2022 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 5,259 $ 198,854 $ 4,029 $ 8,936 $ 217,078 Over Time 96,290 1,391 39,651 12,539 149,871 Total net sales $ 101,549 $ 200,245 $ 43,680 $ 21,475 $ 366,949 Six Months Ended June 30, 2023 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 19,727 $ 404,560 $ 4,803 $ 14,909 $ 443,999 Over Time 116,937 3,169 66,077 27,999 214,182 Total net sales $ 136,664 $ 407,729 $ 70,880 $ 42,908 $ 658,181 Six Months Ended June 30, 2022 Renewables Residential Agtech Infrastructure Total Net sales: Point in Time $ 10,909 $ 376,985 $ 5,642 $ 15,239 $ 408,775 Over Time 169,423 2,745 80,466 23,405 276,039 Total net sales $ 180,332 $ 379,730 $ 86,108 $ 38,644 $ 684,814 (15) SUBSEQUENT EVENT On July 5, 2023, the Company acquired the assets of a Utah based privately held company that manufactures and distributes roof flashing and accessory products, for $ 10.4 million in an all cash transaction. The company sells direct to roofing wholesalers and will be reported as a part of our Residential segment. The preliminary purchase price allocation has not yet been determined. 18 Table of Contents