Item 1. Financial Statements
Item 1. Financial Statements
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
September 30, Nine Months Ended
September 30,
2023 2022 2023 2022
Net sales $ 390,744 $ 391,291 $ 1,048,925 $ 1,076,105
Cost of sales 285,360 296,735 769,873 826,434
Gross profit 105,384 94,556 279,052 249,671
Selling, general, and administrative expense 52,194 47,160 153,415 140,941
Income from operations 53,190 47,396 125,637 108,730
Interest expense 417 1,048 3,216 2,189
Other (income) expense ( 1,040 ) 363 ( 1,946 ) 797
Income before taxes 53,813 45,985 124,367 105,744
Provision for income taxes 14,536 11,690 33,268 26,686
Net income $ 39,277 $ 34,295 $ 91,099 $ 79,058
Net earnings per share:
Basic $ 1.29 $ 1.08 $ 2.97 $ 2.44
Diluted $ 1.28 $ 1.08 $ 2.96 $ 2.43
Weighted average shares outstanding:
Basic 30,485 31,707 30,638 32,396
Diluted 30,715 31,812 30,808 32,503
See accompanying notes to consolidated financial statements.
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GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Three Months Ended
September 30, Nine Months Ended
September 30,
2023 2022 2023 2022
Net income $ 39,277 $ 34,295 $ 91,099 $ 79,058
Other comprehensive (loss) income:
Foreign currency translation adjustment ( 1,376 ) ( 3,568 ) ( 2,075 ) ( 6,993 )
Postretirement benefit plan adjustments, net of tax 8 12 24 37
Other comprehensive loss ( 1,368 ) ( 3,556 ) ( 2,051 ) ( 6,956 )
Total comprehensive income $ 37,909 $ 30,739 $ 89,048 $ 72,102
See accompanying notes to consolidated financial statements.
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GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
September 30,
2023 December 31,
2022
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 85,465 $ 17,608
Accounts receivable, net of allowance of $ 4,069 and $ 3,746 , respectively
256,400 217,156
Inventories, net 141,008 170,360
Prepaid expenses and other current assets 24,817 18,813
Total current assets 507,690 423,937
Property, plant, and equipment, net 105,537 109,584
Operating lease assets 23,004 26,502
Goodwill 515,344 512,363
Acquired intangibles 134,047 137,526
Other assets 2,424 701
$ 1,288,046 $ 1,210,613
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 160,742 $ 106,582
Accrued expenses 100,657 73,721
Billings in excess of cost 51,616 35,017
Total current liabilities 313,015 215,320
Long-term debt — 88,762
Deferred income taxes 47,007 47,088
Non-current operating lease liabilities 16,901 19,041
Other non-current liabilities 21,274 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; 34,212 and 34,060 shares issued and outstanding in 2023 and 2022
342 340
Additional paid-in capital 330,128 322,873
Retained earnings 719,077 627,978
Accumulated other comprehensive loss ( 5,483 ) ( 3,432 )
Cost of 3,776 and 3,199 common shares held in treasury in 2023 and 2022
( 154,215 ) ( 125,660 )
Total stockholders’ equity 889,849 822,099
$ 1,288,046 $ 1,210,613
See accompanying notes to consolidated financial statements.
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GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
September 30,
2023 2022
Cash Flows from Operating Activities
Net income $ 91,099 $ 79,058
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 20,574 19,192
Stock compensation expense 7,257 5,889
Exit activity costs, non-cash 572 1,427
Provision for deferred income taxes 179 181
Other, net 2,945 3,620
Changes in operating assets and liabilities net of effects from acquisitions:
Accounts receivable ( 44,331 ) ( 25,538 )
Inventories 30,431 ( 19,840 )
Other current assets and other assets ( 1,426 ) 393
Accounts payable 53,198 ( 24,756 )
Accrued expenses and other non-current liabilities 46,158 ( 1,065 )
Net cash provided by operating activities 206,656 38,561
Cash Flows from Investing Activities
Acquisitions, net of cash acquired ( 9,863 ) ( 51,621 )
Purchases of property, plant, and equipment, net ( 7,976 ) ( 15,704 )
Net cash used in investing activities ( 17,839 ) ( 67,325 )
Cash Flows from Financing Activities
Long-term debt payments ( 141,000 ) ( 100,000 )
Proceeds from long-term debt 50,000 197,800
Purchase of common stock at market prices ( 29,182 ) ( 58,125 )
Net cash (used in) provided by financing activities ( 120,182 ) 39,675
Effect of exchange rate changes on cash ( 778 ) ( 1,841 )
Net increase in cash and cash equivalents 67,857 9,070
Cash and cash equivalents at beginning of year 17,608 12,849
Cash and cash equivalents at end of period $ 85,465 $ 21,919
See accompanying notes to consolidated financial statements.
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GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
Common Stock Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss Treasury Stock Total
Stockholders’
Equity
Shares Amount Shares Amount
Balance at June 30, 2023 34,194 $ 342 $ 327,927 $ 679,800 $ ( 4,115 ) 3,770 $ ( 153,644 ) $ 850,310
Net income — — — 39,277 — — — 39,277
Foreign currency translation adjustment — — — — ( 1,376 ) — — ( 1,376 )
Postretirement benefit plan adjustments, net of taxes of $ 3
— — — — 8 — — 8
Stock compensation expense — — 2,201 — — — — 2,201
Net settlement of restricted stock units 18 — — — — 6 ( 412 ) ( 412 )
Excise tax on repurchase of common stock — — — — — — ( 159 ) ( 159 )
Balance at September 30, 2023 34,212 $ 342 $ 330,128 $ 719,077 $ ( 5,483 ) 3,776 $ ( 154,215 ) $ 889,849
Balance at June 30, 2022 33,989 $ 340 $ 318,664 $ 590,335 $ ( 3,213 ) 2,374 $ ( 88,848 ) $ 817,278
Net income — — — 34,295 — — — 34,295
Foreign currency translation adjustment — — — — ( 3,568 ) — — ( 3,568 )
Postretirement benefit plan adjustments, net of taxes of $ 5
— — — — 12 — — 12
Stock compensation expense — — 1,764 — — — — 1,764
Net settlement of restricted stock units 45 — — — — 18 ( 749 ) ( 749 )
Common stock repurchased under stock repurchase program — — — — — 138 ( 5,541 ) ( 5,541 )
Balance at September 30, 2022 34,034 $ 340 $ 320,428 $ 624,630 $ ( 6,769 ) 2,530 $ ( 95,138 ) $ 843,491
See accompanying notes to consolidated financial statements.
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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 — — — 91,099 — — — 91,099
Foreign currency translation adjustment — — — — ( 2,075 ) — — ( 2,075 )
Postretirement benefit plan adjustments, net of taxes of $ 9
— — — — 24 — — 24
Stock compensation expense — — 7,257 — — — — 7,257
Net settlement of restricted stock units 144 2 ( 2 ) — — 56 ( 3,215 ) ( 3,215 )
Awards of common stock 8 — — — — — — —
Excise tax on repurchase of common stock — — — — — — ( 159 ) ( 159 )
Common stock repurchased under stock repurchase program — — — — — 521 ( 25,181 ) ( 25,181 )
Balance at September 30, 2023 34,212 $ 342 $ 330,128 $ 719,077 $ ( 5,483 ) 3,776 $ ( 154,215 ) $ 889,849
Balance at December 31, 2021 33,799 $ 338 $ 314,541 $ 545,572 $ 187 1,107 $ ( 35,380 ) $ 825,258
Net income — — — 79,058 — — — 79,058
Foreign currency translation adjustment — — — — ( 6,993 ) — — ( 6,993 )
Postretirement benefit plan adjustments, net of taxes of $ 15
— — — — 37 — — 37
Stock compensation expense — — 5,889 — — — — 5,889
Net settlement of restricted stock units 219 2 ( 2 ) — — 90 ( 4,217 ) ( 4,217 )
Awards of common stock 16 — — — — — — —
Common stock repurchased under stock repurchase program — — — — — 1,333 ( 55,541 ) ( 55,541 )
Balance at September 30, 2022 34,034 $ 340 $ 320,428 $ 624,630 $ ( 6,769 ) 2,530 $ ( 95,138 ) $ 843,491
See accompanying notes to consolidated financial statements.
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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):
September 30, 2023 December 31, 2022
Trade accounts receivable $ 216,754 $ 179,170
Costs in excess of billings 43,715 41,732
Total accounts receivable 260,469 220,902
Less allowance for doubtful accounts and contract assets ( 4,069 ) ( 3,746 )
Accounts receivable, net $ 256,400 $ 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 nine month period ended September 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 1,479
Accounts written off against allowance and other adjustments ( 1,156 )
Ending balance as of September 30, 2023 $ 4,069
(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.
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As of September 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 September 30, 2023 and December 31, 2022 was $ 7.2 million and $ 4.6 million, respectively. Revenue recognized during the nine months ended September 30, 2023 and 2022 that was in contract liabilities at the beginning of the respective periods was $ 32.2 million and $ 41.2 million, respectively.
(5) INVENTORIES
Inventories consisted of the following (in thousands):
September 30, 2023 December 31, 2022
Raw material $ 91,069 $ 111,187
Work-in-process 13,675 17,944
Finished goods 42,497 47,523
Gross inventory 147,241 176,654
Less reserves ( 6,233 ) ( 6,294 )
Total inventories, net $ 141,008 $ 170,360
(6) ACQUISITION
On July 5, 2023, the Company acquired the assets of a privately held Utah-based company that manufactures and distributes roof flashing and accessory products, and sells direct to roofing wholesalers. The results of this company 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 this acquisition was $ 10.4 million, which includes a preliminary working capital adjustment and certain other adjustments provided for in the asset 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 $ 4.1 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 2024.
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):
Working capital $ 889
Property, plant and equipment 195
Acquired intangible assets 5,200
Goodwill 4,133
Fair value of purchase consideration $ 10,417
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The intangible assets acquired in this acquisition consisted of the following (in thousands):
Fair Value Weighted-Average Amortization Period
Trademarks $ 300 2 years
Customer relationships 4,900 12 years
Total $ 5,200
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
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 the privately held Utah-based company and the acquisition of QAP were financed primarily through borrowings under the Company's revolving credit facility.
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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 comprised of legal and consulting fees within selling, general, and administrative ("SG&A") expense.
The acquisition-related costs consisted of the following for the three and nine months ended September 30 (in thousands):
Three Months Ended
September 30, Nine Months Ended
September 30,
2023 2022 2023 2022
Cost of sales $ 12 $ 476 $ 12 $ 476
Selling, general and administrative costs 224 522 245 529
Total acquisition related costs $ 236 $ 998 $ 257 $ 1,005
(7) GOODWILL AND RELATED INTANGIBLE ASSETS
Goodwill
The changes in the carrying amount of goodwill for the nine months ended September 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
Acquired goodwill — 4,133 — — 4,133
Adjustments to prior year acquisitions — 387 — — 387
Foreign currency translation ( 1,273 ) — ( 266 ) — ( 1,539 )
Balance at September 30, 2023 $ 186,757 $ 213,576 $ 83,333 $ 31,678 $ 515,344
Goodwill is recognized net of accumulated impairment losses of $ 133.2 million as of September 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 September 30, 2023 which would require an interim impairment test to be performed.
Acquired Intangible Assets
Acquired intangible assets consisted of the following (in thousands):
September 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 5,745 4,616 5,448 4,481
Unpatented technology 34,155 23,749 34,163 22,037
Customer relationships 119,078 52,323 115,125 46,557
Non-compete agreements 2,370 2,113 2,371 2,006
161,348 82,801 157,107 75,081
Total acquired intangible assets $ 216,848 $ 82,801 $ 212,607 $ 75,081
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The following table summarizes the acquired intangible asset amortization expense for the three and nine months ended September 30, (in thousands):
Three Months Ended
September 30, Nine Months Ended
September 30,
2023 2022 2023 2022
Amortization expense $ 2,893 $ 2,801 $ 8,419 $ 8,718
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 $ 2,899 $ 11,416 $ 11,204 $ 9,738 $ 8,111 $ 7,244
(8) LONG-TERM DEBT
The Company had no outstanding debt as of September 30, 2023 and unamortized debt issuance costs, included in other assets on the consolidated balance sheet, were $ 1.9 million. As of December 31, 2022, the Company's total outstanding debt was $ 88.8 million, which included $ 91.0 million on the Company's revolving credit facility net of $ 2.2 million in unamortized debt issuance costs.
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 September 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 nine months ended September 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 $ 3.9 million have been issued under the Credit Agreement to third parties on behalf of the Company as of September 30, 2023. These letters of credit reduce the amount otherwise available under the revolving credit facility. The Company had $ 396.1 million and $ 304.5 million of availability under the revolving credit facility as of September 30, 2023 and December 31, 2022, respectively.
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(9) ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
The following tables summarize the cumulative balance of each component of accumulated other comprehensive loss, net of tax, for the three months ended September 30, (in thousands):
Foreign
Currency
Translation
Adjustment Postretirement
Benefit Plan
Adjustments Total
Pre-Tax
Amount Tax
(Benefit)
Expense Accumulated
Other
Comprehensive
Loss
Balance at June 30, 2023 $ ( 4,081 ) $ ( 373 ) $ ( 4,454 ) $ ( 339 ) $ ( 4,115 )
Postretirement health care plan adjustments — 11 11 3 8
Foreign currency translation adjustment ( 1,376 ) — ( 1,376 ) — ( 1,376 )
Balance at September 30, 2023 $ ( 5,457 ) $ ( 362 ) $ ( 5,819 ) $ ( 336 ) $ ( 5,483 )
Balance at June 30, 2022 $ ( 1,785 ) $ ( 2,212 ) $ ( 3,997 ) $ ( 784 ) $ ( 3,213 )
Postretirement health care plan adjustments — 17 17 5 12
Foreign currency translation adjustment ( 3,568 ) — ( 3,568 ) — ( 3,568 )
Balance at September 30, 2022 $ ( 5,353 ) $ ( 2,195 ) $ ( 7,548 ) $ ( 779 ) $ ( 6,769 )
The following tables summarize the cumulative balance of each component of accumulated other comprehensive (loss) income, net of tax, for the nine months ended September 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 — 33 33 9 24
Foreign currency translation adjustment ( 2,075 ) — ( 2,075 ) — ( 2,075 )
Balance at September 30, 2023 $ ( 5,457 ) $ ( 362 ) $ ( 5,819 ) $ ( 336 ) $ ( 5,483 )
Balance at December 31, 2021 $ 1,640 $ ( 2,247 ) $ ( 607 ) $ ( 794 ) $ 187
Postretirement health care plan adjustments — 52 52 15 37
Foreign currency translation adjustment ( 6,993 ) — ( 6,993 ) — ( 6,993 )
Balance at September 30, 2022 $ ( 5,353 ) $ ( 2,195 ) $ ( 7,548 ) $ ( 779 ) $ ( 6,769 )
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 available 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.
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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 nine months ended September 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 89,713 $ 61.21 123,351 $ 43.42
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 September 30, 2023 were $ 18.3 million, of which $ 2.0 million was included in current accrued expenses and $ 16.3 million was included in non-current liabilities. 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. The value of the restricted stock units within the MSPP liabilities was $ 15.9 million and $ 13.4 million at September 30, 2023 and December 31, 2022, respectively.
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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 nine months ended September 30,:
2023 2022
Restricted stock units credited 46,843 9,564
MSPP liabilities paid (in thousands) $ 2,392 $ 2,961
(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 nine months ended September 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 and other charges associated with discontinued product lines, as a result of process simplification initiatives. In conjunction with these initiatives, the Company recorded costs during the nine months ended September 30, 2023 associated with the final closure and sale of a facility closed during the fourth quarter of 2022. During the nine months ended September 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 nine months ended September 30, related to the restructuring activities described above (in thousands):
Three Months Ended September 30,
2023 2022
Exit Activity Asset Impairment Total Exit Activity Asset Impairment Total
Renewables $ 4,389 $ ( 59 ) $ 4,330 $ ( 44 ) $ — $ ( 44 )
Residential 22 654 676 — 12 12
Agtech 5 — 5 15 217 232
Infrastructure — — — — — —
Corporate ( 33 ) — ( 33 ) 11 — 11
Total $ 4,383 $ 595 $ 4,978 $ ( 18 ) $ 229 $ 211
Nine Months Ended September 30,
2023 2022
Exit Activity Asset Impairment Total Exit Activity Asset Impairment Total
Renewables $ 7,298 $ ( 82 ) $ 7,216 $ 1,359 $ 1,198 $ 2,557
Residential 136 654 790 1,298 12 1,310
Agtech 722 — 722 103 217 320
Infrastructure — — — ( 63 ) — ( 63 )
Corporate ( 33 ) — ( 33 ) 93 — 93
Total $ 8,123 $ 572 $ 8,695 $ 2,790 $ 1,427 $ 4,217
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The following table provides a summary of where the exit activity costs and asset impairment charges were recorded in the consolidated statements of income for the three and nine months ended September 30, (in thousands):
Three Months Ended
September 30, Nine Months Ended
September 30,
2023 2022 2023 2022
Cost of sales $ 4,544 $ ( 39 ) $ 8,155 $ 2,249
Selling, general, and administrative expense 434 250 540 1,968
Total exit activity and asset impairment charges $ 4,978 $ 211 $ 8,695 $ 4,217
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 8,123 2,790
Cash payments ( 3,254 ) ( 2,782 )
Balance at September 30 $ 7,286 $ 280
(12) INCOME TAXES
The following table summarizes the provision for income taxes for continuing operations (in thousands) for the three and nine months ended September 30, and the applicable effective tax rates:
Three Months Ended
September 30, Nine Months Ended
September 30,
2023 2022 2023 2022
Provision for income taxes $ 14,536 $ 11,690 $ 33,268 $ 26,686
Effective tax rate 27.0 % 25.4 % 26.7 % 25.2 %
The effective tax rate for the three and nine months ended September 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 nine months ended September 30, (in thousands):
Three Months Ended
September 30, Nine Months Ended
September 30,
2023 2022 2023 2022
Numerator:
Net income available to common stockholders $ 39,277 $ 34,295 $ 91,099 $ 79,058
Denominator for basic earnings per share:
Weighted average shares outstanding 30,485 31,707 30,638 32,396
Denominator for diluted earnings per share:
Weighted average shares outstanding 30,485 31,707 30,638 32,396
Common stock units 230 105 170 107
Weighted average shares and conversions 30,715 31,812 30,808 32,503
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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 nine months ended September 30, (in thousands):
Three Months Ended
September 30, Nine Months Ended
September 30,
2023 2022 2023 2022
Common stock units 17 51 19 48
(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 nine months ended September 30, (in thousands):
Three Months Ended
September 30, Nine Months Ended
September 30,
2023 2022 2023 2022
Net sales:
Renewables $ 106,362 $ 111,119 $ 243,026 $ 291,451
Residential 227,747 215,592 635,476 595,322
Agtech 31,666 44,217 102,546 130,325
Infrastructure 24,969 20,363 67,877 59,007
Total net sales $ 390,744 $ 391,291 $ 1,048,925 $ 1,076,105
Income from operations:
Renewables $ 12,907 $ 14,216 $ 21,084 $ 14,061
Residential 42,158 35,802 115,626 104,901
Agtech 2,136 3,777 3,349 5,350
Infrastructure 6,386 2,572 14,928 6,640
Unallocated Corporate Expenses ( 10,397 ) ( 8,971 ) ( 29,350 ) ( 22,222 )
Total income from operations $ 53,190 $ 47,396 $ 125,637 $ 108,730
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September 30,
2023 December 31,
2022
Total assets:
Renewables $ 399,969 $ 392,368
Residential 539,800 519,567
Agtech 182,988 193,966
Infrastructure 79,877 80,264
Unallocated corporate assets 85,412 24,448
$ 1,288,046 $ 1,210,613
The following tables illustrate segment revenue disaggregated by timing of transfer of control to the customer for the three and nine months ended September 30 (in thousands):
Three Months Ended September 30, 2023
Renewables Residential Agtech Infrastructure Total
Net sales:
Point in Time $ 15,903 $ 225,985 $ 777 $ 9,922 $ 252,587
Over Time 90,459 1,762 30,889 15,047 138,157
Total net sales $ 106,362 $ 227,747 $ 31,666 $ 24,969 $ 390,744
Three Months Ended September 30, 2022
Renewables Residential Agtech Infrastructure Total
Net sales:
Point in Time $ 7,660 $ 214,175 $ 3,510 $ 9,938 $ 235,283
Over Time 103,459 1,417 40,707 10,425 156,008
Total net sales $ 111,119 $ 215,592 $ 44,217 $ 20,363 $ 391,291
Nine Months Ended September 30, 2023
Renewables Residential Agtech Infrastructure Total
Net sales:
Point in Time $ 35,630 $ 630,545 $ 5,580 $ 24,831 $ 696,586
Over Time 207,396 4,931 96,966 43,046 352,339
Total net sales $ 243,026 $ 635,476 $ 102,546 $ 67,877 $ 1,048,925
Nine Months Ended September 30, 2022
Renewables Residential Agtech Infrastructure Total
Net sales:
Point in Time $ 18,569 $ 591,160 $ 9,152 $ 25,177 $ 644,058
Over Time 272,882 4,162 121,173 33,830 432,047
Total net sales $ 291,451 $ 595,322 $ 130,325 $ 59,007 $ 1,076,105
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