UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20202021
OR
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 0-22462
GIBRALTAR INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
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Delaware | | 16-1445150 |
(State or incorporation ) | | (I.R.S. Employer Identification No.) |
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3556 Lake Shore Road | P.O. Box 2028 | Buffalo | New York | | 14219-0228 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (716) 826-6500
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | | Trading Symbol | | Name of each exchange on which registered |
Common Stock, $0.01 par value per share | | ROCK | | NASDAQ Stock Market |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 26, 2020,August 2, 2021, the number of common shares outstanding was: 32,522,138.32,636,340.
GIBRALTAR INDUSTRIES, INC.
INDEX
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PART I. | | | |
Item 1. | | | |
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Item 2. | | | |
Item 3. | | | |
Item 4. | | | |
PART II. | | | |
Item 1. | | | |
Item 1A. | | | |
Item 2. | | | |
Item 3. | | | |
Item 4. | | | |
Item 5. | | | |
Item 6. | | | |
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PART I. FINANCIAL INFORMATION
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, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
Net Sales | Net Sales | $ | 329,665 | | | $ | 299,236 | | | $ | 864,918 | | | $ | 789,308 | | Net Sales | $ | 348,389 | | | $ | 255,184 | | | $ | 635,981 | | | $ | 470,585 | |
Cost of sales | Cost of sales | 244,222 | | | 222,658 | | | 650,830 | | | 605,272 | | Cost of sales | 267,458 | | | 189,623 | | | 495,032 | | | 355,163 | |
Gross profit | Gross profit | 85,443 | | | 76,578 | | | 214,088 | | | 184,036 | | Gross profit | 80,931 | | | 65,561 | | | 140,949 | | | 115,422 | |
Selling, general, and administrative expense | Selling, general, and administrative expense | 41,584 | | | 45,158 | | | 120,448 | | | 115,444 | | Selling, general, and administrative expense | 49,522 | | | 34,813 | | | 96,725 | | | 71,897 | |
| Income from operations | Income from operations | 43,859 | | | 31,420 | | | 93,640 | | | 68,592 | | Income from operations | 31,409 | | | 30,748 | | | 44,224 | | | 43,525 | |
Interest expense | Interest expense | 218 | | | 17 | | | 385 | | | 2,297 | | Interest expense | 245 | | | 222 | | | 689 | | | 266 | |
Other expense (income) | 53 | | | 84 | | | (1,542) | | | 660 | | |
Other income | | Other income | (4,666) | | | (1,892) | | | (4,351) | | | (1,374) | |
Income before taxes | Income before taxes | 43,588 | | | 31,319 | | | 94,797 | | | 65,635 | | Income before taxes | 35,830 | | | 32,418 | | | 47,886 | | | 44,633 | |
Provision for income taxes | Provision for income taxes | 9,828 | | | 6,843 | | | 21,686 | | | 14,901 | | Provision for income taxes | 9,457 | | | 7,961 | | | 11,017 | | | 10,274 | |
| Income from continuing operations | | Income from continuing operations | 26,373 | | | 24,457 | | | 36,869 | | | 34,359 | |
Discontinued operations: | | Discontinued operations: | |
(Loss) Income before taxes | | (Loss) Income before taxes | (502) | | | 3,746 | | | 2,068 | | | 6,576 | |
(Benefit from) Provision for income taxes | | (Benefit from) Provision for income taxes | (78) | | | 911 | | | 226 | | | 1,584 | |
(Loss) Income from discontinued operations | | (Loss) Income from discontinued operations | (424) | | | 2,835 | | | 1,842 | | | 4,992 | |
Net income | Net income | $ | 33,760 | | | $ | 24,476 | | | $ | 73,111 | | | $ | 50,734 | | Net income | $ | 25,949 | | | $ | 27,292 | | | $ | 38,711 | | | $ | 39,351 | |
Net earnings per share – Basic: | | Net earnings per share – Basic: | | | | | | | |
Income from continuing operations | | Income from continuing operations | $ | 0.80 | | | $ | 0.75 | | | $ | 1.12 | | | $ | 1.05 | |
(Loss) Income from discontinued operations | | (Loss) Income from discontinued operations | (0.01) | | | 0.09 | | | 0.06 | | | 0.16 | |
Net income | | Net income | $ | 0.79 | | | $ | 0.84 | | | $ | 1.18 | | | $ | 1.21 | |
Weighted average shares outstanding -- Basic | | Weighted average shares outstanding -- Basic | 32,790 | | | 32,605 | | | 32,791 | | | 32,596 | |
Net earnings per share – Diluted: | | Net earnings per share – Diluted: | | | | | | | |
Income from continuing operations | | Income from continuing operations | $ | 0.80 | | | $ | 0.74 | | | $ | 1.11 | | | $ | 1.05 | |
(Loss) Income from discontinued operations | | (Loss) Income from discontinued operations | (0.01) | | | 0.09 | | | 0.06 | | | 0.15 | |
Net income | | Net income | $ | 0.79 | | | $ | 0.83 | | | $ | 1.17 | | | $ | 1.20 | |
Weighted average shares outstanding -- Diluted | | Weighted average shares outstanding -- Diluted | 33,056 | | | 32,860 | | | 33,071 | | | 32,868 | |
| | Net earnings per share: | | |
Basic | $ | 1.03 | | | $ | 0.75 | | | $ | 2.24 | | | $ | 1.57 | | |
Diluted | $ | 1.02 | | | $ | 0.75 | | | $ | 2.22 | | | $ | 1.55 | | |
Weighted average shares outstanding: | | | | | | | | |
Basic | 32,635 | | | 32,470 | | | 32,606 | | | 32,357 | | |
Diluted | 32,969 | | | 32,770 | | | 32,902 | | | 32,677 | | |
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
Net income | Net income | $ | 33,760 | | | $ | 24,476 | | | $ | 73,111 | | | $ | 50,734 | | Net income | $ | 25,949 | | | $ | 27,292 | | | $ | 38,711 | | | $ | 39,351 | |
Other comprehensive income (loss): | Other comprehensive income (loss): | | Other comprehensive income (loss): | |
Foreign currency translation adjustment | Foreign currency translation adjustment | 2,200 | | | (664) | | | (883) | | | 1,176 | | Foreign currency translation adjustment | 761 | | | 2,815 | | | 3,959 | | | (3,083) | |
| Minimum pension and post retirement benefit plan adjustments | 18 | | | 12 | | | 54 | | | 36 | | |
Minimum post retirement benefit plan adjustments | | Minimum post retirement benefit plan adjustments | 27 | | | 18 | | | 54 | | | 36 | |
| Other comprehensive income (loss) | Other comprehensive income (loss) | 2,218 | | | (652) | | | (829) | | | 1,212 | | Other comprehensive income (loss) | 788 | | | 2,833 | | | 4,013 | | | (3,047) | |
Total comprehensive income | Total comprehensive income | $ | 35,978 | | | $ | 23,824 | | | $ | 72,282 | | | $ | 51,946 | | Total comprehensive income | $ | 26,737 | | | $ | 30,125 | | | $ | 42,724 | | | $ | 36,304 | |
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
| | | September 30, 2020 | | December 31, 2019 | | June 30, 2021 | | December 31, 2020 |
| | (unaudited) | | | | (unaudited) | | |
Assets | Assets | | Assets | |
Current assets: | Current assets: | | Current assets: | |
Cash and cash equivalents | Cash and cash equivalents | $ | 179,816 | | | $ | 191,363 | | Cash and cash equivalents | $ | 16,963 | | | $ | 32,054 | |
Accounts receivable, net of allowance of $3,319 and $6,330 | 203,488 | | | 147,515 | | |
Accounts receivable, net of allowance of $5,294 and $3,529 | | Accounts receivable, net of allowance of $5,294 and $3,529 | 225,315 | | | 197,990 | |
Inventories, net | Inventories, net | 77,943 | | | 78,476 | | Inventories, net | 133,625 | | | 98,307 | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets | 20,306 | | | 19,748 | | Prepaid expenses and other current assets | 23,641 | | | 19,671 | |
Assets of discontinued operations | | Assets of discontinued operations | 0 | | | 77,438 | |
Total current assets | Total current assets | 481,553 | | | 437,102 | | Total current assets | 399,544 | | | 425,460 | |
Property, plant, and equipment, net | Property, plant, and equipment, net | 94,983 | | | 95,409 | | Property, plant, and equipment, net | 95,837 | | | 89,562 | |
Operating lease assets | Operating lease assets | 32,359 | | | 27,662 | | Operating lease assets | 21,651 | | | 25,229 | |
Goodwill | Goodwill | 382,427 | | | 329,705 | | Goodwill | 508,857 | | | 514,279 | |
Acquired intangibles | Acquired intangibles | 108,821 | | | 92,592 | | Acquired intangibles | 159,734 | | | 156,365 | |
Other assets | Other assets | 1,703 | | | 1,980 | | Other assets | 510 | | | 1,599 | |
| | $ | 1,101,846 | | | $ | 984,450 | | | $ | 1,186,133 | | | $ | 1,212,494 | |
Liabilities and Shareholders’ Equity | | | | |
Liabilities and Stockholders’ Equity | | Liabilities and Stockholders’ Equity | | | |
Current liabilities: | Current liabilities: | | Current liabilities: | |
Accounts payable | Accounts payable | $ | 131,746 | | | $ | 83,136 | | Accounts payable | $ | 168,917 | | | $ | 134,738 | |
Accrued expenses | Accrued expenses | 106,480 | | | 98,463 | | Accrued expenses | 68,677 | | | 83,505 | |
Billings in excess of cost | Billings in excess of cost | 31,267 | | | 47,598 | | Billings in excess of cost | 49,215 | | | 34,702 | |
| Liabilities of discontinued operations | | Liabilities of discontinued operations | 0 | | | 49,295 | |
Total current liabilities | Total current liabilities | 269,493 | | | 229,197 | | Total current liabilities | 286,809 | | | 302,240 | |
| Long-term debt | | Long-term debt | 32,309 | | | 85,636 | |
Deferred income taxes | Deferred income taxes | 40,942 | | | 40,334 | | Deferred income taxes | 37,555 | | | 39,057 | |
Non-current operating lease liabilities | Non-current operating lease liabilities | 23,314 | | | 19,669 | | Non-current operating lease liabilities | 14,391 | | | 17,730 | |
Other non-current liabilities | Other non-current liabilities | 22,022 | | | 21,286 | | Other non-current liabilities | 27,461 | | | 24,026 | |
Shareholders’ equity: | | |
Stockholders’ equity: | | Stockholders’ equity: | |
Preferred stock, $0.01 par value; authorized 10,000 shares; NaN outstanding | Preferred stock, $0.01 par value; authorized 10,000 shares; NaN outstanding | 0 | | | 0 | | Preferred stock, $0.01 par value; authorized 10,000 shares; NaN outstanding | 0 | | | 0 | |
Common stock, $0.01 par value; authorized 50,000 shares; 33,519 shares and 33,192 shares issued and outstanding in 2020 and 2019 | 335 | | | 332 | | |
Common stock, $0.01 par value; 100,000 and 50,000 shares authorized as June 30, 2021 and December 31, 2020, respectively; 33,718 shares and 33,568 shares issued and outstanding in 2021 and 2020 | | Common stock, $0.01 par value; 100,000 and 50,000 shares authorized as June 30, 2021 and December 31, 2020, respectively; 33,718 shares and 33,568 shares issued and outstanding in 2021 and 2020 | 337 | | | 336 | |
Additional paid-in capital | Additional paid-in capital | 302,107 | | | 295,582 | | Additional paid-in capital | 310,728 | | | 304,870 | |
Retained earnings | Retained earnings | 478,488 | | | 405,668 | | Retained earnings | 508,654 | | | 469,943 | |
Accumulated other comprehensive loss | (6,220) | | | (5,391) | | |
Cost of 1,024 and 906 common shares held in treasury in 2020 and 2019 | (28,635) | | | (22,227) | | |
Total shareholders’ equity | 746,075 | | | 673,964 | | |
Accumulated other comprehensive income (loss) | | Accumulated other comprehensive income (loss) | 1,552 | | | (2,461) | |
Cost of 1,083 and 1,028 common shares held in treasury in 2021 and 2020 | | Cost of 1,083 and 1,028 common shares held in treasury in 2021 and 2020 | (33,663) | | | (28,883) | |
Total stockholders’ equity | | Total stockholders’ equity | 787,608 | | | 743,805 | |
| | $ | 1,101,846 | | | $ | 984,450 | | | $ | 1,186,133 | | | $ | 1,212,494 | |
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | Nine Months Ended September 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2021 | | 2020 |
Cash Flows from Operating Activities | Cash Flows from Operating Activities | | | | Cash Flows from Operating Activities | | | |
Net income | Net income | $ | 73,111 | | | $ | 50,734 | | Net income | $ | 38,711 | | | $ | 39,351 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | |
Income from discontinued operations | | Income from discontinued operations | 1,842 | | | 4,992 | |
Income from continuing operations | | Income from continuing operations | 36,869 | | | 34,359 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |
| Depreciation and amortization | Depreciation and amortization | 17,325 | | | 14,923 | | Depreciation and amortization | 16,014 | | | 9,942 | |
Stock compensation expense | Stock compensation expense | 6,151 | | | 10,087 | | Stock compensation expense | 4,935 | | | 4,171 | |
| Gain on sale of business | Gain on sale of business | (1,881) | | | 0 | | Gain on sale of business | 0 | | | (1,881) | |
Exit activity costs, non-cash | Exit activity costs, non-cash | 505 | | | 479 | | Exit activity costs, non-cash | 1,193 | | | 346 | |
| Provision for (benefit of) deferred income taxes | 668 | | | (429) | | |
Benefit of deferred income taxes | | Benefit of deferred income taxes | (36) | | | (195) | |
| Other, net | Other, net | 1,402 | | | 3,267 | | Other, net | 349 | | | 429 | |
| Changes in operating assets and liabilities, excluding the effects of acquisitions: | Changes in operating assets and liabilities, excluding the effects of acquisitions: | | Changes in operating assets and liabilities, excluding the effects of acquisitions: | |
Accounts receivable | Accounts receivable | (40,176) | | | (56,645) | | Accounts receivable | (29,150) | | | (26,289) | |
Inventories | Inventories | 6,102 | | | 18,617 | | Inventories | (42,686) | | | 3,289 | |
Other current assets and other assets | Other current assets and other assets | 6,095 | | | (6,949) | | Other current assets and other assets | (611) | | | 1,893 | |
Accounts payable | Accounts payable | 13,408 | | | 22,770 | | Accounts payable | 35,174 | | | (989) | |
Accrued expenses and other non-current liabilities | Accrued expenses and other non-current liabilities | (26,516) | | | 15,640 | | Accrued expenses and other non-current liabilities | (9,274) | | | (36,042) | |
| Net cash provided by operating activities | 56,194 | | | 72,494 | | |
Net cash provided by (used in) operating activities of continuing operations | | Net cash provided by (used in) operating activities of continuing operations | 12,777 | | | (10,967) | |
Net cash (used in) provided by operating activities of discontinued operations | | Net cash (used in) provided by operating activities of discontinued operations | (2,002) | | | 3,712 | |
Net cash provided by (used in) operating activities | | Net cash provided by (used in) operating activities | 10,775 | | | (7,255) | |
Cash Flows from Investing Activities | Cash Flows from Investing Activities | | | | Cash Flows from Investing Activities | | | |
Purchases of property, plant, and equipment | | Purchases of property, plant, and equipment | (9,474) | | | (4,178) | |
Acquisitions, net of cash acquired | Acquisitions, net of cash acquired | (54,385) | | | (8,665) | | Acquisitions, net of cash acquired | (2) | | | (54,385) | |
Net proceeds from sale of property and equipment | 568 | | | 87 | | |
Purchases of property, plant, and equipment | (9,335) | | | (7,703) | | |
Net proceeds from sale of business | Net proceeds from sale of business | 2,000 | | | 0 | | Net proceeds from sale of business | 39,991 | | | 704 | |
| Net proceeds from sale of property and equipment | | Net proceeds from sale of property and equipment | 0 | | | 59 | |
Net cash provided by (used in) investing activities of continuing operations | | Net cash provided by (used in) investing activities of continuing operations | 30,515 | | | (57,800) | |
Net cash used in investing activities of discontinued operations | | Net cash used in investing activities of discontinued operations | (176) | | | (1,053) | |
Net cash provided by (used in) investing activities | | Net cash provided by (used in) investing activities | 30,339 | | | (58,853) | |
Cash Flows from Financing Activities | | Cash Flows from Financing Activities | | | |
Proceeds from long-term debt | | Proceeds from long-term debt | 31,200 | | | 0 | |
Long-term debt payments | | Long-term debt payments | (83,636) | | | 0 | |
| Net cash used in investing activities | (61,152) | | | (16,281) | | |
Cash Flows from Financing Activities | | | | |
| Long-term debt payments | 0 | | | (212,000) | | |
Payment of debt issuance costs | 0 | | | (1,235) | | |
| Purchase of treasury stock at market prices | Purchase of treasury stock at market prices | (6,408) | | | (3,495) | | Purchase of treasury stock at market prices | (4,780) | | | (4,462) | |
Net proceeds from issuance of common stock | Net proceeds from issuance of common stock | 377 | | | 400 | | Net proceeds from issuance of common stock | 924 | | | 78 | |
| Net cash used in financing activities | Net cash used in financing activities | (6,031) | | | (216,330) | | Net cash used in financing activities | (56,292) | | | (4,384) | |
Effect of exchange rate changes on cash | Effect of exchange rate changes on cash | (558) | | | 729 | | Effect of exchange rate changes on cash | 87 | | | (12) | |
Net decrease in cash and cash equivalents | Net decrease in cash and cash equivalents | (11,547) | | | (159,388) | | Net decrease in cash and cash equivalents | (15,091) | | | (70,504) | |
Cash and cash equivalents at beginning of year | Cash and cash equivalents at beginning of year | 191,363 | | | 297,006 | | Cash and cash equivalents at beginning of year | 32,054 | | | 191,363 | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $ | 179,816 | | | $ | 137,618 | | Cash and cash equivalents at end of period | $ | 16,963 | | | $ | 120,859 | |
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| | | Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Total Shareholders’ Equity | | Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive (Loss) Income | | Treasury Stock | | Total Stockholders’ Equity |
| | Shares | | Amount | | Shares | | Amount | | | Shares | | Amount | | Shares | | Amount | |
Balance at December 31, 2019 | 33,192 | | | $ | 332 | | | $ | 295,582 | | | $ | 405,668 | | | $ | (5,391) | | | 906 | | | $ | (22,227) | | | $ | 673,964 | | |
Balance at December 31, 2020 | | Balance at December 31, 2020 | 33,568 | | | $ | 336 | | | $ | 304,870 | | | $ | 469,943 | | | $ | (2,461) | | | 1,028 | | | $ | (28,883) | | | $ | 743,805 | |
Net income | Net income | — | | | — | | | — | | | 12,059 | | | — | | | — | | | — | | | 12,059 | | Net income | — | | | — | | | — | | | 12,762 | | | — | | | — | | | — | | | 12,762 | |
Foreign currency translation adjustment | Foreign currency translation adjustment | — | | | — | | | — | | | — | | | (5,898) | | | — | | | — | | | (5,898) | | Foreign currency translation adjustment | — | | | — | | | — | | | — | | | 3,198 | | | — | | | — | | | 3,198 | |
Minimum pension and post retirement benefit plan adjustments, net of taxes of $7 | — | | | — | | | — | | | — | | | 18 | | | — | | | — | | | 18 | | |
| Stock compensation expense | — | | | — | | | 1,665 | | | — | | | — | | | — | | | — | | | 1,665 | | |
Cumulative effect of accounting change (See Note 2) | — | | | — | | | — | | | (291) | | | — | | | — | | | — | | | (291) | | |
Stock options exercised | 3 | | | — | | | 24 | | | — | | | — | | | — | | | — | | | 24 | | |
| Net settlement of restricted stock units | 193 | | | 2 | | | (2) | | | — | | | — | | | 80 | | | (4,184) | | | (4,184) | | |
| Balance at March 31, 2020 | 33,388 | | | $ | 334 | | | $ | 297,269 | | | $ | 417,436 | | | $ | (11,271) | | | 986 | | | $ | (26,411) | | | $ | 677,357 | | |
Net income | — | | | — | | | — | | | 27,292 | | | — | | | — | | | — | | | 27,292 | | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | 2,815 | | | — | | | — | | | 2,815 | | |
Minimum pension and post retirement benefit plan adjustments, net of taxes of $6 | — | | | — | | | — | | | — | | | 18 | | | — | | | — | | | 18 | | |
Stock compensation expense | — | | | — | | | 2,506 | | | — | | | — | | | — | | | — | | | 2,506 | | |
Stock options exercised | 6 | | | — | | | 54 | | | — | | | — | | | — | | | — | | | 54 | | |
Awards of common shares | 4 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | |
Net settlement of restricted stock units | 15 | | | 0 | | | 0 | | | — | | | — | | | 7 | | | (278) | | | (278) | | |
| Balance at June 30, 2020 | 33,413 | | | $ | 334 | | | $ | 299,829 | | | $ | 444,728 | | | $ | (8,438) | | | 993 | | | $ | (26,689) | | | $ | 709,764 | | |
Net income | — | | | — | | | — | | | 33,760 | | | — | | | — | | | — | | | 33,760 | | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | 2,200 | | | — | | | — | | | 2,200 | | |
Minimum pension and post retirement benefit plan adjustments, net of taxes of $7 | — | | | — | | | — | | | — | | | 18 | | | — | | | — | | | 18 | | |
Minimum post retirement benefit plan adjustments, net of taxes of $10 | | Minimum post retirement benefit plan adjustments, net of taxes of $10 | — | | | — | | | — | | | — | | | 27 | | | — | | | — | | | 27 | |
Stock compensation expense | Stock compensation expense | — | | | — | | | 1,980 | | | — | | | — | | | — | | | — | | | 1,980 | | Stock compensation expense | — | | | — | | | 2,368 | | | — | | | — | | | — | | | — | | | 2,368 | |
| Stock options exercised | Stock options exercised | 31 | | | — | | | 299 | | | — | | | — | | | — | | | — | | | 299 | | Stock options exercised | 25 | | | — | | | 910 | | | — | | | — | | | — | | | — | | | 910 | |
| Net settlement of restricted stock units | Net settlement of restricted stock units | 75 | | | 1 | | | (1) | | | — | | | — | | | 31 | | | (1,946) | | | (1,946) | | Net settlement of restricted stock units | 118 | | | 1 | | | (1) | | | — | | | — | | | 54 | | | (4,662) | | | (4,662) | |
| Balance at September 30, 2020 | 33,519 | | | $ | 335 | | | $ | 302,107 | | | $ | 478,488 | | | $ | (6,220) | | | 1,024 | | | $ | (28,635) | | | $ | 746,075 | | |
Balance at March 31, 2021 | | Balance at March 31, 2021 | 33,711 | | | $ | 337 | | | $ | 308,147 | | | $ | 482,705 | | | $ | 764 | | | 1,082 | | | $ | (33,545) | | | $ | 758,408 | |
Net income | | Net income | — | | | — | | | — | | | 25,949 | | | — | | | — | | | — | | | 25,949 | |
Foreign currency translation adjustment | | Foreign currency translation adjustment | — | | | — | | | — | | | — | | | 761 | | | — | | | — | | | 761 | |
Minimum post retirement benefit plan adjustments, net of taxes of $10 | | Minimum post retirement benefit plan adjustments, net of taxes of $10 | — | | | — | | | — | | | — | | | 27 | | | — | | | — | | | 27 | |
Stock compensation expense | | Stock compensation expense | — | | | — | | | 2,567 | | | — | | | — | | | — | | | — | | | 2,567 | |
Stock options exercised | | Stock options exercised | 1 | | | — | | | 14 | | | — | | | — | | | — | | | — | | | 14 | |
Awards of common shares | | Awards of common shares | 3 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Net settlement of restricted stock units | | Net settlement of restricted stock units | 3 | | | 0 | | | 0 | | | — | | | — | | | 1 | | | (118) | | | (118) | |
Balance at June 30, 2021 | | Balance at June 30, 2021 | 33,718 | | | $ | 337 | | | $ | 310,728 | | | $ | 508,654 | | | $ | 1,552 | | | 1,083 | | | $ | (33,663) | | | $ | 787,608 | |
|
See accompanying notes to consolidated financial statements.
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| | | Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Total Shareholders’ Equity | | | Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Total Stockholders’ Equity | |
| | Shares | | Amount | | Shares | | Amount | | | | Shares | | Amount | | Shares | | Amount | | |
Balance at December 31, 2018 | 32,887 | | | $ | 329 | | | $ | 282,525 | | | $ | 338,995 | | | $ | (7,234) | | | 796 | | | $ | (17,922) | | | $ | 596,693 | | | |
Balance at December 31, 2019 | | Balance at December 31, 2019 | 33,192 | | | $ | 332 | | | $ | 295,582 | | | $ | 405,668 | | | $ | (5,391) | | | 906 | | | $ | (22,227) | | | $ | 673,964 | | |
Net income | Net income | — | | | — | | | — | | | 6,345 | | | — | | | — | | | — | | | 6,345 | | | Net income | — | | | — | | | — | | | 12,059 | | | — | | | — | | | — | | | 12,059 | | |
Foreign currency translation adjustment | Foreign currency translation adjustment | — | | | — | | | — | | | — | | | 842 | | | — | | | — | | | 842 | | | Foreign currency translation adjustment | — | | | — | | | — | | | — | | | (5,898) | | | — | | | — | | | (5,898) | | |
Minimum pension and post retirement benefit plan adjustments, net of taxes of $4 | — | | | — | | | — | | | — | | | 12 | | | — | | | — | | | 12 | | | |
Minimum post retirement benefit plan adjustments, net of taxes of $7 | | Minimum post retirement benefit plan adjustments, net of taxes of $7 | — | | | — | | | — | | | — | | | 18 | | | — | | | — | | | 18 | | |
| Stock compensation expense | Stock compensation expense | — | | | — | | | 2,371 | | | — | | | — | | | — | | | — | | | 2,371 | | | Stock compensation expense | — | | | — | | | 1,665 | | | — | | | — | | | — | | | — | | | 1,665 | | |
Cumulative effect of accounting change | Cumulative effect of accounting change | — | | | — | | | — | | | 1,582 | | | — | | | — | | | — | | | 1,582 | | | Cumulative effect of accounting change | — | | | — | | | — | | | (291) | | | — | | | — | | | — | | | (291) | | |
Stock options exercised | Stock options exercised | 12 | | | — | | | 139 | | | — | | | — | | | — | | | — | | | 139 | | | Stock options exercised | 3 | | | — | | | 24 | | | — | | | — | | | — | | | — | | | 24 | | |
| Net settlement of restricted stock units | Net settlement of restricted stock units | 127 | | | 1 | | | (1) | | | — | | | — | | | 59 | | | (2,151) | | | (2,151) | | | Net settlement of restricted stock units | 193 | | | 2 | | | (2) | | | — | | | — | | | 80 | | | (4,184) | | | (4,184) | | |
| Balance at March 31, 2019 | 33,026 | | | $ | 330 | | | $ | 285,034 | | | $ | 346,922 | | | $ | (6,380) | | | 855 | | | $ | (20,073) | | | $ | 605,833 | | | |
Balance at March 31, 2020 | | Balance at March 31, 2020 | 33,388 | | | $ | 334 | | | $ | 297,269 | | | $ | 417,436 | | | $ | (11,271) | | | 986 | | | $ | (26,411) | | | $ | 677,357 | | |
Net income | Net income | — | | | — | | | — | | | 19,913 | | | — | | | — | | | — | | | 19,913 | | | Net income | — | | | — | | | — | | | 27,292 | | | — | | | — | | | — | | | 27,292 | | |
Foreign currency translation adjustment | Foreign currency translation adjustment | — | | | — | | | — | | | — | | | 998 | | | — | | | — | | | 998 | | | Foreign currency translation adjustment | — | | | — | | | — | | | — | | | 2,815 | | | — | | | — | | | 2,815 | | |
Minimum pension and post retirement benefit plan adjustments, net of taxes of $5 | — | | | — | | | — | | | — | | | 12 | | | — | | | — | | | 12 | | | |
Minimum post retirement benefit plan adjustments, net of taxes of $6 | | Minimum post retirement benefit plan adjustments, net of taxes of $6 | — | | | — | | | — | | | — | | | 18 | | | — | | | — | | | 18 | | |
Stock compensation expense | Stock compensation expense | — | | | — | | | 3,720 | | | — | | | — | | | — | | | — | | | 3,720 | | | Stock compensation expense | — | | | — | | | 2,506 | | | — | | | — | | | — | | | — | | | 2,506 | | |
Stock options exercised | Stock options exercised | 5 | | | — | | | 69 | | | — | | | — | | | — | | | — | | | 69 | | | Stock options exercised | 6 | | | — | | | 54 | | | — | | | — | | | — | | | — | | | 54 | | |
Awards of common shares | Awards of common shares | 8 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Awards of common shares | 4 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | |
Net settlement of restricted stock units | Net settlement of restricted stock units | 62 | | | 1 | | | (1) | | | — | | | — | | | 25 | | | (998) | | | (998) | | | Net settlement of restricted stock units | 15 | | | 0 | | | 0 | | | — | | | — | | | 7 | | | (278) | | | (278) | | |
| Balance at June 30, 2019 | 33,101 | | | $ | 331 | | | $ | 288,822 | | | $ | 366,835 | | | $ | (5,370) | | | 880 | | | $ | (21,071) | | | $ | 629,547 | | | |
Net income | — | | | — | | | — | | | 24,476 | | | — | | | — | | | — | | | 24,476 | | | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | (664) | | | — | | | — | | | (664) | | | |
Minimum pension and post retirement benefit plan adjustments, net of taxes of $4 | — | | | — | | | — | | | — | | | 12 | | | — | | | — | | | 12 | | | |
Stock compensation expense | — | | | — | | | 3,996 | | | — | | | — | | | — | | | — | | | 3,996 | | | |
Stock options exercised | 16 | | | — | | | 192 | | | — | | | — | | | — | | | — | | | 192 | | | |
| Net settlement of restricted stock units | 28 | | | 1 | | | (1) | | | — | | | — | | | 8 | | | (346) | | | (346) | | | |
| Balance at September 30, 2019 | 33,145 | | | $ | 332 | | | $ | 293,009 | | | $ | 391,311 | | | $ | (6,022) | | | 888 | | | $ | (21,417) | | | $ | 657,213 | | | |
Balance at June 30, 2020 | | Balance at June 30, 2020 | 33,413 | | | $ | 334 | | | $ | 299,829 | | | $ | 444,728 | | | $ | (8,438) | | | 993 | | | $ | (26,689) | | | $ | 709,764 | | |
| |
See accompanying notes to consolidated financial statements.
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, such as the impact of the COVID-19 pandemic, financial results for any interim period are not necessarily indicative of the results expected for any subsequent interim period or for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our annual Form 10-K for the year ended December 31, 2019.2020.
The balance sheet at December 31, 20192020 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.
(2) RECENT ACCOUNTING PRONOUNCEMENTS
Recent Accounting Pronouncements Adopted
| | | | | | | | | | | | | | |
Standard | | Description | | Financial Statement Effect or Other Significant Matters |
ASU No. 2016-13
Financial Instruments - Credit Losses
(Topic 326)
| | The objective of this standard is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit, including trade receivables, held by an entity at each reporting date. The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.
| | The standard is effective for the Company as of January 1, 2020. The Company adopted the amendments in this update using the modified retrospective approach through a cumulative-effect adjustment to retained earnings of $291,000, net of $96,000 of income taxes, on the opening consolidated balance sheet as of January 1, 2020. The Company's financial assets that are in the scope of the standard are contract assets and accounts receivables which are short-term in nature. Additionally, the Company has identified and implemented appropriate changes to the Company's business processes, policies and internal controls to support reporting and disclosures.
Date of adoption: Q1 2020
|
ASU 2018-15
Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
| | The amendments in this update require an entity to apply the same requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract as the entity would for implementation costs incurred to develop or obtain internal-use software. The accounting for the service element is not affected by the amendments in this update.
| | The standard is effective for the Company as of January 1, 2020. The Company adopted the amendments in this update using the prospective method of adoption, and the adoption did not have a material impact to the Company's financial statements.
Date of adoption: Q1 2020
|
Recent Accounting Pronouncements Not Yet Adopted
| | | | | | | | | | | | | | |
Standard | | Description | | Financial Statement Effect or Other Significant Matters |
ASU No. 2019-12 Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes
| | The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and improve consistent application by clarifying and amending existing guidance. The amendments of this standard are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued, with the amendments to be applied on a respective, modified retrospective or prospective basis, depending on the specific amendment.
| | The Company is currently evaluating the requirements of this standard. The standard is effective for the Company as of January 1, 2021. The Company adopted the amendments in this update and the adoption did not expected to have a material impact onto the Company'sCompany’s financial statements.
Date of adoption: Q1 2021 |
(3) ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable consists of the following (in thousands):
| | | September 30, 2020 | | December 31, 2019 | | June 30, 2021 | | December 31, 2020 |
Trade accounts receivable | Trade accounts receivable | $ | 171,375 | | | $ | 133,238 | | Trade accounts receivable | $ | 182,015 | | | $ | 174,604 | |
Costs in excess of billings | Costs in excess of billings | 35,432 | | | 20,607 | | Costs in excess of billings | 48,594 | | | 26,915 | |
Total accounts receivables | Total accounts receivables | 206,807 | | | 153,845 | | Total accounts receivables | 230,609 | | | 201,519 | |
Less allowance for doubtful accounts and contract assets | Less allowance for doubtful accounts and contract assets | (3,319) | | | (6,330) | | Less allowance for doubtful accounts and contract assets | (5,294) | | | (3,529) | |
Accounts receivable | $ | 203,488 | | | $ | 147,515 | | |
Accounts receivable, net | | Accounts receivable, net | $ | 225,315 | | | $ | 197,990 | |
Refer to Note 4 "Revenue" concerning the Company's costs in excess of billings.
The Company is exposed to credit losses through sales of products and services. The Company’s expected loss allowance methodology for accounts receivable and costs in excess of billings (collectively "accounts receivable") is developed using historical collection experience, current and future economic and market conditions, and a review of the current status of customers' accounts receivables. Due to the short-term nature of such accounts receivable, the estimated amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances. Additionally, specific allowance amounts are established to record the appropriate provision for customers that no longer share risk characteristics similar with other accounts receivable. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and determined that the estimate of credit losses was not significantly impacted as of September 30, 2020.
Estimates are used to determine the allowance. It is based on assessment of anticipated payment and all other historical, current and future information that is reasonably available.
The following table provides a roll-forward of the allowance for credit losses, for the six month period ended June 30, 2021, that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected.
| | | | | |
Beginning balance as of January 1, 20202021 | $ | 6,3303,529 | |
Adoption of ASU 2016-13, cumulative-effect adjustment to retained earnings | 387 | |
Bad debt expense, net of recoveries | 7801,297 | |
Write-off chargedAccounts written off against the allowance and other adjustments | (4,178)468 | |
Ending balance as of SeptemberJune 30, 20202021 | $ | 3,3195,294 | |
(4) REVENUE
Sales includes revenue from contracts with customers forfor: designing, engineering, manufacturing and installation of solar racking systems and greenhouse structures; extractionsystems; electrical balance of systems; roof and foundation ventilation products; centralized mail systems and electronic package solutions; retractable awnings; gutter guards; rain dispersion productsproducts; trims and roofingflashings and other accessories; expandeddesigning, engineering, manufacturing and perforated metal; perimeter security solutions;installation of greenhouses; botanical extraction systems; structural bearings; expansion jointsjoints; pavement sealant; elastomeric concrete; and structural bearings.bridge cable protection systems.
Refer to Note 1415 "Segment Information" for additional information related to revenue recognized by timing of transfer of control by reportable segment.
As of SeptemberJune 30, 2020,2021, 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. Contract liabilities consist of billings in excess of cost and unearned revenue. The following table presents the beginning and ending balances of costs in excess of billings, billings in excess of cost and unearnedUnearned revenue as of SeptemberJune 30, 20202021 and December 31, 2019, respectively,
2020 was $4.7 million and revenue$21.3 million, respectively. Revenue recognized during the ninethree months ended SeptemberJune 30, 20202021 and 2019, respectively,2020 that was in billings in excess of cost and unearned revenuecontract liabilities at the beginning of the period (in thousands):
| | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 |
Costs in excess of billings | $ | 35,432 | | | $ | 20,607 | |
Billings in excess of cost | (31,267) | | | (47,598) | |
Unearned revenue | (18,951) | | | (17,311) | |
| | | | | | | | | | | |
| Nine Months Ended September 30, 2020 | | Nine Months Ended September 30, 2019 |
Revenue recognized in the period from: | | | |
Amounts included in billings in excess of cost at the beginning of the period | $ | 44,723 | | | $ | 14,137 | |
Amounts included in unearned revenue at the beginning of the period | $ | 13,614 | | | $ | 11,052 | |
respective periods was $49.2 million and $53.3 million, respectively.
(5) INVENTORIES
Inventories consist of the following (in thousands):
| | | September 30, 2020 | | December 31, 2019 | | June 30, 2021 | | December 31, 2020 |
Raw material | Raw material | $ | 47,275 | | | $ | 48,799 | | Raw material | $ | 99,074 | | | $ | 66,018 | |
Work-in-process | Work-in-process | 6,195 | | | 5,988 | | Work-in-process | 6,197 | | | 5,382 | |
Finished goods | Finished goods | 29,264 | | | 28,021 | | Finished goods | 33,623 | | | 31,205 | |
Gross inventory | Gross inventory | $ | 82,734 | | | $ | 82,808 | | Gross inventory | $ | 138,894 | | | $ | 102,605 | |
Less reserves | Less reserves | (4,791) | | | (4,332) | | Less reserves | (5,269) | | | (4,298) | |
Total inventories | $ | 77,943 | | | $ | 78,476 | | |
Total inventories, net | | Total inventories, net | $ | 133,625 | | | $ | 98,307 | |
(6) ACQUISITIONS
2020 Acquisitions
During the year ended December 31, 2020, the Company acquired 5 businesses in separate transactions, 2 of which are included within our Renewables segment, 2 in our Agtech segment, and 1 in our Residential segment. The purchase consideration for each acquisition was allocated to the assets acquired and liabilities assumed based upon their respective fair values.
On December 31, 2020, the Company purchased all the outstanding membership interests of TerraSmart LLC and TerraTrak LLC (collectively, "TerraSmart"), a leading provider of screw-based, ground-mount solar racking technology, particularly used for solar projects installed on challenging terrain. The results of TerraSmart have been included in the Company's consolidated financial results since the date of acquisition within the Company's Renewables segment. The purchase consideration for the acquisition of TerraSmart was $223.9 million, which includes a working capital adjustment and certain other adjustments provided for in the equity purchase agreement.
The purchase price for the TerraSmart acquisition was 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 values of such acquired assets and assumed liabilities and to determine the amount of goodwill to be recognized as of the date of acquisition. Due to the timing of the acquisition, we continue to gather information supporting the acquired assets and assumed liabilities. Accordingly, all amounts recorded are provisional. These provisional amounts are subject to change if new information is obtained concerning facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. The final determination of the fair value of certain assets and liabilities will be completed within a measurement period of up to one year from the date of acquisition. The final values may also result in changes to depreciation and amortization expense related to certain assets such as property, plant and equipment and acquired intangible assets. The preliminary excess consideration was recorded as goodwill and approximated $139.1 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 solar energy market. The final purchase price allocation will be completed no later than December 31, 2021.
(6) ACQUISITIONSThe preliminary allocation of the TerraSmart purchase consideration to the estimated fair value of the assets acquired and liabilities assumed is as follows as of the date of the acquisition (in thousands):
| | | | | |
Cash | $ | 1,491 | |
Working capital | 7,148 | |
Property, plant and equipment | 11,758 | |
Acquired intangible assets | 64,150 | |
Other assets | 1,854 | |
Other liabilities | (1,640) | |
Goodwill | 139,106 | |
Fair value of purchase consideration | $ | 223,867 | |
The intangible assets acquired in the TerraSmart acquisition consisted of the following (in thousands):
| | | | | | | | | | | |
| Fair Value | | Weighted-Average Amortization Period |
Trademarks | $ | 20,830 | | | Indefinite |
| | | |
Technology | 1,940 | | | 12 years |
Customer relationships | 35,110 | | | 12 years |
| | | |
Backlog | 6,270 | | | Less than 1 year |
Total | $ | 64,150 | | | |
On December 11, 2020, Acquisitionsthe Company purchased all the outstanding stock of Sunfig Corporation ("Sunfig"), a provider of software solutions that optimize solar energy investments through upstream design, performance and financial modeling, for a purchase consideration of $3.8 million, which includes a working capital adjustment and certain other adjustments provided for in the stock purchase agreement. The results of Sunfig have been included in the Company's consolidated financial results since the date of acquisition within the Company's Renewables segment. The excess consideration was recorded as goodwill and approximated $3.2 million, all of which is deductible for tax purposes.
On October 15, 2020, the Company purchased substantially all of the assets of Architectural Mailboxes LLC ("Architectural Mailboxes"), a complementary addition to the Company's existing mail and package solutions business within the Residential segment, for a purchase consideration of $26.9 million, which includes a working capital adjustment and certain other adjustments provided for in the asset purchase agreement. The results of Architectural Mailboxes have been included in the Company's consolidated financial results since the date of acquisition within the Company's Residential segment. The excess consideration was recorded as goodwill and approximated $7.4 million, all of which is deductible for tax purposes.
On February 13, 2020, the Company purchased substantially all of the assets of Delta Separations, LLC a California limited liability company, and Teaching Tech, LLC a California limited liability company (collectively, "Delta Separations"). for a purchase consideration of $47.1 million, which includes a working capital adjustment and certain other adjustments provided for in the asset purchase agreement. Delta Separations was a privately-held engineering company primarily engaged in the assembly and sale of centrifugal ethanol-based extraction systems. The results of Delta Separations have been included in the Company's consolidated financial results since the date of acquisition within the Company's Renewable Energy and ConservationAgtech segment. The purchase consideration for the acquisition of Delta Separations was $47.1 million, which includes a working capital adjustment and certain other adjustments provided for in the asset purchase agreement.
The purchase price for the acquisition of the assets was allocated to the assets acquired and liabilities assumed based upon their respective fair values. The excess consideration was recorded as goodwill and approximated $32.2 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 presence in the extraction processing markets.
The allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed is as follows as of the date of the acquisition (in thousands):
| | | | | |
| |
Working capital | $ | 3,918 | |
Property, plant and equipment | 219 | |
Acquired intangible assets | 13,900 | |
Other assets | 951 | |
Other liabilities | (4,027) | |
Goodwill | 32,151 | |
Fair value of purchase consideration | $ | 47,112 | |
The intangible assets acquired in this acquisition consisted of the following (in thousands):
| | | | | | | | | | | |
| Fair Value | | Weighted-Average Amortization Period |
Trademarks | $ | 6,900 | | | Indefinite |
Technology | 3,200 | | | 10 years |
Customer relationships | 3,200 | | | 11 years |
Non-compete agreements | 300 | | | 5 years |
Backlog | 300 | | | 0.25 years |
Total | $ | 13,900 | | | |
On January 15, 2020, the Company purchased substantially all of the assets of Thermo Energy Systems Inc. ("Thermo"), a Canadian-based, privately held provider of commercial greenhouse solutions in North America providing growing infrastructure for the plant based organic food market.market, for a purchase consideration of $7.3 million. The results of Thermo have been included in the Company's consolidated financial results since the date of acquisition within the Company's Renewable Energy and ConservationAgtech segment. The preliminary purchase consideration for the acquisition of Thermo was $7.3 million.
The purchase price for the acquisition was preliminarily allocated to the assets acquired and liabilities assumed based upon their respective estimated fair values and the remaining consideration was recorded to goodwill. Goodwill of approximately $19.5$18.7 million was recorded, all of which is deductible for tax purposes.
The preliminary allocation of the purchase price for Sunfig and Architectural Mailboxes remains subject to adjustments during the measurement period as third-party valuations are finalized. The preliminary and final allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed in the acquisitions of Sunfig, Architectural Mailboxes, Delta Separations and Thermo is as follows as of the respective date of the acquisition (in thousands):
| | | | | | | |
Cash | $ | 200 | | | |
Working capital | (14,957) | | | |
Property, plant and equipment | 1,740 | | | |
Acquired intangible assets | 38,296 | | | |
Other current assets | 1,528 | | | |
Other assets | 2,381 | | | |
Other liabilities | (5,508) | | | |
Goodwill | 61,422 | | | |
Fair value of purchase consideration | $ | 85,102 | | | |
Goodwill represents future economic benefits arising from other assets acquired that could not be individually identified including workforce additions, growth opportunities, and increased presence in the commercial greenhouse
respective markets. The preliminary allocation of the purchase price is subject to adjustments during the measurement period as third-party valuations are finalized. The final purchase price allocation will be completed no later than the first quarter of 2021.
The preliminary allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed is as follows as of the date of the acquisition (in thousands):
| | | | | |
Cash | $ | 135 | |
Working capital | (23,450) | |
Property, plant and equipment | 1,087 | |
Acquired intangible assets | 10,102 | |
| |
Other assets | 1,363 | |
Other liabilities | (1,363) | |
Goodwill | 19,459 | |
Fair value of purchase consideration | $ | 7,333 | |
The intangible assets acquired in this acquisitionthe acquisitions of Sunfig, Architectural Mailboxes, Delta Separations and Thermo consisted of the following (in thousands):
| | | | | | | | | | | |
| Fair Value | | Weighted-Average Amortization Period |
Trademarks | $ | 1,1228,200 | | | Indefinite |
Trademarks | 1,177 | | | 3 years |
Technology | 3,2188,175 | | | 107 - 15 years |
Customer relationships | 4,93918,780 | | | 125 - 13 years |
Non-compete agreements | 2241,036 | | | 5 years |
Backlog | 599928 | | | 0.75 yearsLess than 1 year |
Total | $ | 10,102 | | | |
2019 Acquisition
On August 30, 2019, the Company acquired all of the outstanding membership interests of Apeks LLC ("Apeks"), a designer and manufacturer of botanical oil extraction systems and equipment. The results of Apeks have been included in the Company's consolidated financial results since the date of acquisition within the Company's Renewable Energy and Conservation segment. The aggregate purchase consideration for the acquisition of Apeks was $12.6 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. The excess consideration was recorded as goodwill and approximated $6.4 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 presence in the extraction processing markets.
The allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed is as follows as of the date of the acquisition (in thousands):
| | | | | |
Cash | $ | 4,154 | |
Working capital | (1,515) | |
Property, plant and equipment | 1,059 | |
Acquired intangible assets | 3,000 | |
Other assets | 508 | |
Other liabilities | (1,081) | |
Goodwill | 6,436 | |
Fair value of purchase consideration | $ | 12,561 | |
The intangible assets acquired in this acquisition consisted of the following (in thousands):
| | | | | | | | | | | |
| Fair Value | | Weighted-Average Amortization Period |
Trademarks | $ | 1,400 | | | Indefinite |
Technology | 900 | | | 7 years |
Customer relationships | 700 | | | 6 years |
Total | $ | 3,00038,296 | | | |
In determining the allocation of the purchase price to the assets acquired and the 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 TerraSmart was financed through a combination of cash on hand and borrowings under the Company's revolving credit facility. The acquisitions of Sunfig, Architectural Mailboxes, Delta Separations Thermo and ApeksThermo were funded from available cash on hand.
The Company recognized costs as a component of cost of sales related to the sale of inventory at fair value as a result of allocating the purchase price of recent acquisitions. The Company also incurred certain acquisition-related costs composed of legal and consulting fees. These costs were recognized as a component of selling, general, and administrative expenses in the consolidated statement of operations. The Company also 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 acquisition-related costs consisted of the following for the three and ninesix months ended SeptemberJune 30 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
Selling, general and administrative costs | $ | 16 | | | $ | 470 | | | $ | 1,564 | | | $ | 474 | |
Cost of sales | 0 | | | 134 | | | 634 | | | 134 | |
Total acquisition-related costs | $ | 16 | | | $ | 604 | | | $ | 2,198 | | | $ | 608 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Cost of sales | $ | 0 | | | $ | 634 | | | $ | 0 | | | $ | 634 | |
Selling, general and administrative costs | 0 | | | 288 | | | 893 | | | 1,548 | |
Total acquisition-related costs | $ | 0 | | | $ | 922 | | | $ | 893 | | | $ | 2,182 | |
(7) GOODWILL AND RELATED INTANGIBLE ASSETS
Goodwill
The changes in the carrying amount of goodwill for the ninesix months ended SeptemberJune 30, 20202021 are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Renewable Energy & Conservation | | Residential Products | | Industrial and Infrastructure Products | | Total |
Balance at December 31, 2019 | $ | 77,602 | | | $ | 198,075 | | | $ | 54,028 | | | $ | 329,705 | |
Acquired goodwill | 51,629 | | | 0 | | | 0 | | | 51,629 | |
Adjustments to prior year acquisitions | 579 | | | 0 | | | 0 | | | 579 | |
Foreign currency translation | 664 | | | 0 | | | (150) | | | 514 | |
Balance at September 30, 2020 | $ | 130,474 | | | $ | 198,075 | | | $ | 53,878 | | | $ | 382,427 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Renewables | | Residential | | Agtech | | Infrastructure | | Total |
Balance at December 31, 2020 | $ | 192,527 | | | $ | 205,452 | | | $ | 84,622 | | | $ | 31,678 | | | $ | 514,279 | |
Adjustments to prior year acquisitions | (4,593) | | | 0 | | | 0 | | | 0 | | | (4,593) | |
| | | | | | | | | |
Foreign currency translation | (990) | | | 0 | | | 161 | | | 0 | | | (829) | |
Balance at June 30, 2021 | $ | 186,944 | | | $ | 205,452 | | | $ | 84,783 | | | $ | 31,678 | | | $ | 508,857 | |
The Company conducts its annual goodwill impairment test as of October 31 each year. All of the Company’s 10 reporting units had fair values exceeding their carrying values as of October 31, 2019. In addition to the annual impairment test, the Company is required to regularly assess whether a triggering event has occurred which would require interim impairment testing. The Company considered the current and future macroeconomic and market conditions, along with its current market capitalization, projected cash flows and internal and external forecasts, and projections relating to the impact of the COVID-19 pandemic on each of its reporting units. The Company determined that a triggering event has not occurred which would require an interim impairment test to be performed.
Acquired Intangible Assets
Acquired intangible assets consist of the following (in thousands):
| | | September 30, 2020 | | December 31, 2019 | | | June 30, 2021 | | December 31, 2020 | |
| | Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization | | | Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization | |
Indefinite-lived intangible assets: | Indefinite-lived intangible assets: | | | | | | | | | Indefinite-lived intangible assets: | | | | | | | | |
Trademarks | Trademarks | $ | 52,170 | | | $ | 0 | | | $ | 45,770 | | | $ | 0 | | | Trademarks | $ | 61,100 | | | $ | 0 | | | $ | 56,570 | | | $ | 0 | | |
Finite-lived intangible assets: | Finite-lived intangible assets: | | | Finite-lived intangible assets: | | |
Trademarks | Trademarks | 7,235 | | | 4,557 | | | 6,139 | | | 4,105 | | | Trademarks | 5,550 | | | 3,747 | | | 5,818 | | | 3,385 | | |
Unpatented technology | Unpatented technology | 35,962 | | | 17,970 | | | 29,544 | | | 15,807 | | | Unpatented technology | 38,386 | | | 19,194 | | | 38,752 | | | 17,765 | | |
Customer relationships | Customer relationships | 79,702 | | | 44,723 | | | 71,195 | | | 40,294 | | | Customer relationships | 109,329 | | | 35,658 | | | 98,500 | | | 31,580 | | |
Non-compete agreements | Non-compete agreements | 2,174 | | | 1,689 | | | 1,649 | | | 1,499 | | | Non-compete agreements | 2,691 | | | 1,859 | | | 4,885 | | | 1,747 | | |
Backlog | Backlog | 899 | | | 382 | | | — | | | 0 | | | Backlog | 7,216 | | | 4,080 | | | 7,228 | | | 911 | | |
| | 125,972 | | | 69,321 | | | 108,527 | | | 61,705 | | | | 163,172 | | | 64,538 | | | 155,183 | | | 55,388 | | |
Total acquired intangible assets | Total acquired intangible assets | $ | 178,142 | | | $ | 69,321 | | | $ | 154,297 | | | $ | 61,705 | | | Total acquired intangible assets | $ | 224,272 | | | $ | 64,538 | | | $ | 211,753 | | | $ | 55,388 | | |
The following table summarizes the acquired intangible asset amortization expense for the three and ninesix months ended SeptemberJune 30 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | | | 2020 | | 2019 | | 2020 | | 2019 |
Amortization expense | | | | | $ | 3,041 | | | $ | 1,840 | | | $ | 7,531 | | | $ | 5,434 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Amortization expense | $ | 4,736 | | | $ | 2,018 | | | $ | 9,479 | | | $ | 4,002 | |
Amortization expense related to acquired intangible assets for the remainder of fiscal 20202021 and the next five years thereafter is estimated as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | 2025 |
Amortization expense | $ | 2,247 | | | $ | 8,772 | | | $ | 8,294 | | | $ | 7,664 | | | $ | 7,132 | | | $ | 6,961 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 |
Amortization expense | $ | 9,414 | | | $ | 12,167 | | | $ | 11,236 | | | $ | 11,055 | | | $ | 10,820 | | | $ | 9,186 | |
(8) LONG-TERM DEBT
The Company did 0t have any long-termLong-term debt outstanding at September 30, 2020 and December 31, 2019.consists of the following (in thousands):
| | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
Revolving credit facility | $ | 33,200 | | | $ | 85,000 | |
Other debt | 0 | | | 636 | |
Less unamortized debt issuance costs | (891) | | | 0 | |
Total debt | $ | 32,309 | | | $ | 85,636 | |
Senior Credit Agreement
On January 24, 2019, the Company entered into a Sixth Amended and Restated Credit Agreement ("Senior Credit Agreement"), which amended and restated the Company’s Fifth Amended and Restated Credit Agreement dated December 9, 2015, and provides for a revolving credit facility and letters of credit in an aggregate amount equal to $400 million. The Company can request additional financing from the lenders to increase the revolving credit facility to $700 million or enter into a term loan of up to $300 million subject to conditions set forth in the Senior Credit Agreement. The Senior Credit Agreement contains 3 financial covenants. As of SeptemberJune 30, 2020,2021, the Company iswas in compliance with all 3 covenants.
Interest rates on the revolving credit facility are based on LIBOR plus an additional margin that ranges from 1.125% to 2.00%. In addition, the revolving credit facility is subject to an undrawn commitment fee ranging between 0.15% and 0.25% based on the Total Leverage Ratio (as defined in the Senior Credit Agreement) and the daily average undrawn balance. The Senior Credit Agreement terminates on January 23, 2024.
Borrowings under the Senior Credit Agreement are secured by the trade receivables, inventory, personal property, equipment, and general intangibles of the Company’s significant domestic subsidiaries.
Standby letters of credit of $5.9$6.6 million have been issued under the Senior Credit Agreement on behalf of the Company as of SeptemberJune 30, 2020.2021. These letters of credit reduce the amount otherwise available under the revolving credit facility. As of September 30, 2020, theThe Company had $394.1$360.2 million and $309.2 million of availability under the revolving credit facility. NaN borrowings were outstanding under the Company's revolving credit facility at SeptemberJune 30, 20202021 and December 31, 2019.2020, respectively.
(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 and ninesix months ended SeptemberJune 30, (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign Currency Translation Adjustment | | Minimum pension and post retirement benefit plan adjustments | | Total Pre-Tax Amount | | Tax (Benefit) Expense | | Accumulated Other Comprehensive (Loss) Income | | |
Balance at December 31, 2019 | $ | (4,173) | | | $ | (1,939) | | | $ | (6,112) | | | $ | (721) | | | $ | (5,391) | | | |
| | | | | | | | | | | |
Minimum pension and post retirement health care plan adjustments | — | | | 25 | | | 25 | | | 7 | | | 18 | | | |
Foreign currency translation adjustment | (5,898) | | | — | | | (5,898) | | | — | | | (5,898) | | | |
Balance at March 31, 2020 | $ | (10,071) | | | $ | (1,914) | | | $ | (11,985) | | | $ | (714) | | | $ | (11,271) | | | |
Minimum pension and post retirement health care plan adjustments | — | | | 24 | | | 24 | | | 6 | | | 18 | | | |
Foreign currency translation adjustment | 2,815 | | | — | | | 2,815 | | | — | | | 2,815 | | | |
Balance at June 30, 2020 | $ | (7,256) | | | $ | (1,890) | | | $ | (9,146) | | | $ | (708) | | | $ | (8,438) | | | |
Minimum pension and post retirement health care plan adjustments | — | | | 25 | | | 25 | | | 7 | | | 18 | | | |
Foreign currency translation adjustment | 2,200 | | | — | | | 2,200 | | | — | | | 2,200 | | | |
Balance at September 30, 2020 | $ | (5,056) | | | $ | (1,865) | | | $ | (6,921) | | | $ | (701) | | | $ | (6,220) | | | |
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| Foreign Currency Translation Adjustment | | Minimum post retirement benefit plan adjustments | | Total Pre-Tax Amount | | Tax (Benefit) Expense | | Accumulated Other Comprehensive (Loss) Income | | |
Balance at December 31, 2020 | $ | (872) | | | $ | (2,426) | | | $ | (3,298) | | | $ | (837) | | | $ | (2,461) | | | |
| | | | | | | | | | | |
Minimum post retirement health care plan adjustments | — | | | 37 | | | 37 | | | 10 | | | 27 | | | |
Foreign currency translation adjustment | 3,198 | | | — | | | 3,198 | | | — | | | 3,198 | | | |
Balance at March 31, 2021 | $ | 2,326 | | | $ | (2,389) | | | $ | (63) | | | $ | (827) | | | $ | 764 | | | |
| | | | | | | | | | | |
Minimum post retirement health care plan adjustments | — | | | 37 | | | 37 | | | 10 | | | 27 | | | |
Foreign currency translation adjustment | 761 | | | — | | | 761 | | | — | | | 761 | | | |
Balance at June 30, 2021 | $ | 3,087 | | | $ | (2,352) | | | $ | 735 | | | $ | (817) | | | $ | 1,552 | | | |
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| Foreign Currency Translation Adjustment | | Minimum pension and post retirement benefit plan adjustments | | Total Pre-Tax Amount | | Tax (Benefit) Expense | | Accumulated Other Comprehensive (Loss) Income |
Balance at December 31, 2018 | $ | (5,939) | | | $ | (2,040) | | | $ | (7,979) | | | $ | (745) | | | $ | (7,234) | |
| | | | | | | | | |
Minimum pension and post retirement health care plan adjustments | — | | | 16 | | | 16 | | | 4 | | | 12 | |
Foreign currency translation adjustment | 842 | | | — | | | 842 | | | — | | | 842 | |
Balance at March 31, 2019 | $ | (5,097) | | | $ | (2,024) | | | $ | (7,121) | | | $ | (741) | | | $ | (6,380) | |
Minimum pension and post retirement health care plan adjustments | — | | | 17 | | | 17 | | | 5 | | | 12 | |
Foreign currency translation adjustment | 998 | | | — | | | 998 | | | — | | | 998 | |
Balance at June 30, 2019 | $ | (4,099) | | | $ | (2,007) | | | $ | (6,106) | | | $ | (736) | | | $ | (5,370) | |
Minimum pension and post retirement health care plan adjustments | — | | | 16 | | | 16 | | | 4 | | | 12 | |
Foreign currency translation adjustment | (664) | | | — | | | (664) | | | — | | | (664) | |
Balance at September 30, 2019 | $ | (4,763) | | | $ | (1,991) | | | $ | (6,754) | | | $ | (732) | | | $ | (6,022) | |
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| 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, 2019 | $ | (4,173) | | | $ | (1,939) | | | $ | (6,112) | | | $ | (721) | | | $ | (5,391) | |
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Minimum post retirement health care plan adjustments | — | | | 25 | | | 25 | | | 7 | | | 18 | |
Foreign currency translation adjustment | (5,898) | | | — | | | (5,898) | | | — | | | (5,898) | |
Balance at March 31, 2020 | $ | (10,071) | | | $ | (1,914) | | | $ | (11,985) | | | $ | (714) | | | $ | (11,271) | |
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Minimum post retirement health care plan adjustments | — | | | 24 | | | 24 | | | 6 | | | $ | 18 | |
Foreign currency translation adjustment | 2,815 | | | — | | | 2,815 | | | — | | | 2,815 | |
Balance at June 30, 2020 | $ | (7,256) | | | $ | (1,890) | | | $ | (9,146) | | | $ | (708) | | | $ | (8,438) | |
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The realized adjustments relating to the Company’s minimum pension liability and 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, 2018, the shareholdersstockholders of the Company approved the adoption of the Gibraltar Industries, Inc. 2018 Equity Incentive Plan (the "2018 Plan"). The 2018 Plan provides for the issuance of up to 1,000,000 shares of common stock and supplements the remaining shares available for issuance under the existing Gibraltar Industries, Inc. 2015 Equity Incentive Plan (the "2015 Plan"). 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.
In 2016, the shareholdersstockholders of the Company approved the adoption of the Gibraltar Industries, Inc. 2016 Stock Plan for Non-Employee Directors ("Non-Employee Directors Plan") which provides for the issuance of up to 100,000 shares, allows the Company to grant awards of shares of the Company's common stock to 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 ninesix months ended SeptemberJune 30, which will convert to shares upon vesting, along with the weighted average grant date fair values:
| | | 2020 | | 2019 | | 2021 | | 2020 |
Awards | Awards | Number of Awards | | Weighted Average Grant Date Fair Value | | Number of Awards (2) | | Weighted Average Grant Date Fair Value | Awards | Number of Awards | | Weighted Average Grant Date Fair Value | | Number of Awards (2) | | Weighted Average Grant Date Fair Value |
Performance stock units (1) | Performance stock units (1) | 129,513 | | | $ | 53.30 | | | 183,908 | | | $ | 40.49 | | Performance stock units (1) | 62,778 | | | $ | 87.84 | | | 127,397 | | | $ | 53.16 | |
Restricted stock units | Restricted stock units | 74,247 | | | $ | 56.24 | | | 144,172 | | | $ | 39.43 | | Restricted stock units | 33,187 | | | $ | 87.91 | | | 43,842 | | | $ | 52.12 | |
Deferred stock units | Deferred stock units | 12,402 | | | $ | 45.98 | | | 7,509 | | | $ | 37.95 | | Deferred stock units | 7,536 | | | $ | 83.58 | | | 12,402 | | | $ | 45.98 | |
Common shares | Common shares | 4,134 | | | $ | 45.98 | | | 7,509 | | | $ | 37.95 | | Common shares | 2,512 | | | $ | 83.58 | | | 4,134 | | | $ | 45.98 | |
|
(1) The Company’s performance stock units (“PSUs”) represent shares granted for which the final number of shares earned depends on financial performance or market conditions. The number of shares to be issued may vary between 0% and 200% of the number of performance stock unitsPSUs granted depending on the relative achievement to targeted thresholds. The Company's PSUs with a financial performance
condition are based on either the Company’s return on invested capital (“ROIC”) over a one-year performance period or other criteria such as revenue, gross profit and operating profit thresholds over a two or three-year performance period. The Company's PSUs with a market condition are based on the ranking of the Company’s total shareholderstockholder return (“TSR”) performance, on a percentile basis, over a three year performance period compared to the S&P Small Cap Industrial sector, over the same three year performance period.
(2) Performance stock unitsPSUs granted in 20192020 include 168,68874,676 PSUs tothat will be converted to shares and issued to recipients in the first quarter of 2022, representing 116%2023 at 109.5% of the targeted 2019 award,target amount granted, based on the Company’s actual ROIC compared to ROIC target for the performance period ended December 31, 2019 and 38,488 PSUs with a performance end date of December 31, 2021.2020.
Equity Based Awards - Settled in Cash
The Company's equity-based liability is comprised of awards under a management stock purchase plan. As of SeptemberJune 30, 2020,2021, the Company's total share-based liabilities recorded on the consolidated balance sheet were $30.2$21.6 million, of which $13.5$18.0 million was included in non-current liabilities. The share-based liabilities as of December 31, 20192020 were $28.0$18.2 million, of which $13.2$14.7 million was included in non-current liabilities.
The Company's Management Stock Purchase Plan ("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 company-matchingrelated company match are credited to an account that represents a share-based liability. Eligible employees may direct their deferrals to invest in phantom restricted stock units that are measured on the 200-day averageThe portion of the Company’s stock price, hypothetical investment alternatives available under the Company’s 401(k) plan that areaccount deferred to unrestricted investments is measured at fair market value or a combination of both. Non-employee directors may only direct their deferrals into phantom restricted stock units that are measured on the 200-day average of the Company’s stock price. The company-matching is made in phantomunrestricted investments, and the portion of the account deferred to restricted stock units and company-matching restricted stock units is measured on theat 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.
The following table provides the number of restricted stock units credited to active participant accounts and the payments made with respect to restricted stock units issued under the MSPP during the ninesix months ended SeptemberJune 30,:
| | | 2020 | | 2019 | | 2021 | | 2020 |
Restricted stock units credited | Restricted stock units credited | 54,974 | | | 51,381 | | Restricted stock units credited | 26,240 | | | 52,965 | |
Share-based liabilities paid (in thousands) | Share-based liabilities paid (in thousands) | $ | 4,433 | | | $ | 5,742 | | Share-based liabilities paid (in thousands) | $ | 3,510 | | | $ | 4,433 | |
(11) DISCONTINUED OPERATIONS
On February 23, 2021, the Company sold the stock of its Industrial business which had been classified as held for sale and reported as a discontinued operation in the Company’s consolidated financial statements for the year ended December 31, 2020. Net proceeds of $38 million, consisting of cash and a $13 million seller note, resulted in an estimated pre-tax loss of $30 million, subject to working capital and other adjustments, of which $29.6 million was recorded when the assets of the Industrial business were written down to fair market value during the fourth quarter of 2020. The seller note was paid in full to the Company during the second quarter of 2021.
The results of operations and financial position of the Industrial business have been presented as a discontinued operation in the Company's consolidated financial statements for all periods presented. The Company allocates interest to its discontinued operations in accordance with ASC Subtopic 205-20, “Presentation of Financial Statements – Discontinued Operations.” Interest was allocated based on the amount of net assets held by the discontinued operation in comparison to consolidated net assets.
The following carrying amounts of the major classes of assets and liabilities included in discontinued operations related to the Industrial business have been segregated from the Company's continuing operations and are reported as assets and liabilities of discontinued operations, respectively, in the consolidated balance sheet at December 31, 2020 (in thousands):
| | | | | | | | | |
| December 31, 2020 | | | | |
Assets | | | | | |
Accounts receivable, net | $ | 11,261 | | | | | |
Inventories, net | 13,041 | | | | | |
Prepaid expenses and other current assets | 21,310 | | | | | |
Total current assets (1) | 45,612 | | | | | |
Property, plant, and equipment, net | 16,999 | | | | | |
Operating lease assets | 6,470 | | | | | |
Goodwill | 22,475 | | | | | |
Acquired intangibles | 15,482 | | | | | |
Loss recognized on classification as held for sale | (29,600) | | | | | |
Total noncurrent assets (1) | 31,826 | | | | | |
Total assets classified as held for sale | $ | 77,438 | | | | | |
| | | | | |
Liabilities | | | | | |
Accounts payable | $ | 10,708 | | | | | |
Accrued expenses | 9,274 | | | | | |
Total current liabilities (1) | 19,982 | | | | | |
Deferred income taxes | 24,657 | | | | | |
Non-current operating lease liabilities | 4,639 | | | | | |
Other non-current liabilities | 17 | | | | | |
Total noncurrent liabilities (1) | 29,313 | | | | | |
Total liabilities classified as held for sale | $ | 49,295 | | | | | |
(1) The assets and liabilities of the discontinued operations were classified as current on the December 31, 2020 consolidated balance sheet, as it was probable that the sale would occur and proceeds would be collected within one year.
Components of income from discontinued operations before taxes, including the interest allocated to discontinued operations, for the three and six months ended June 30 are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, | | | | |
| 2021 | | 2020 | | 2021 | | 2020 | | | | |
Net sales | $ | 0 | | | $ | 30,630 | | | $ | 20,391 | | | $ | 64,668 | | | | | |
Operating expenses | 0 | | | 26,850 | | | 17,493 | | | 58,052 | | | | | |
Adjustment to loss on disposal | 502 | | | 0 | | | 830 | | | 0 | | | | | |
Interest expense allocation | 0 | | | 34 | | | 0 | | | 40 | | | | | |
(Loss) Income from discontinued operations before taxes | $ | (502) | | | $ | 3,746 | | | $ | 2,068 | | | $ | 6,576 | | | | | |
(12) EXIT ACTIVITY COSTS AND ASSET IMPAIRMENTS
The Company has incurred exit activity costs and asset impairment charges as a result of its 80/20 simplification and portfolio management initiatives. These initiatives have resulted in the identification of low-volume, low margin, internally-produced products which have been or will be outsourced or discontinued, the simplification of processes, the sale and exiting of less profitable businesses or product lines, and thea reduction in our manufacturing footprint.
Exit activity costs were incurred during the ninesix months ended SeptemberJune 30, 20202021 and 20192020 which related to moving and closing costs, contract terminations, and severance, incurredalong with asset impairment charges related to the write-down of inventory and impairment of machinery and equipment associated with discontinued product lines, as a result of process simplification initiatives. In conjunction with these initiatives, the Company closed 2 facilities during the six months ended June 30, 2021, and 1 facility and, separately, sold a facility closed in 2017 during the ninesix months ended SeptemberJune 30, 2020. During the nine months ended September 30, 2019, the Company closed 1 facility as a result of these initiatives.
The following tables set forth the asset impairment charges and exit activity costs incurred by segment during the three and ninesix months ended SeptemberJune 30, related to the restructuring activities described above (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, |
| 2021 | | 2020 |
| Exit activity costs | | Asset impairment charges | | Total | | Exit activity costs | | Asset impairment charges | | Total |
Renewables | $ | 786 | | | $ | 0 | | | $ | 786 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
Residential | 29 | | | 0 | | | 29 | | | 263 | | | 0 | | | 263 | |
Agtech | 1,287 | | | 0 | | | 1,287 | | | 316 | | | 72 | | | 388 | |
Infrastructure | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
Corporate | 59 | | | 0 | | | 59 | | | 45 | | | 0 | | | 45 | |
Total exit activity costs & asset impairments | $ | 2,161 | | | $ | 0 | | | $ | 2,161 | | | $ | 624 | | | $ | 72 | | | $ | 696 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, |
| 2021 | | 2020 |
| Exit activity costs | | Asset impairment charges | | Total | | Exit activity costs | | Asset impairment charges | | Total |
Renewables | $ | 4,564 | | | $ | 1,193 | | | $ | 5,757 | | | $ | 18 | | | $ | 0 | | | $ | 18 | |
Residential | 94 | | | 0 | | | 94 | | | 484 | | | 0 | | | 484 | |
Agtech | 1,491 | | | 0 | | | 1,491 | | | 316 | | | 72 | | | 388 | |
Infrastructure | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
Corporate | 59 | | | 0 | | | 59 | | | 99 | | | 0 | | | 99 | |
Total exit activity costs & asset impairments | $ | 6,208 | | | $ | 1,193 | | | $ | 7,401 | | | $ | 917 | | | $ | 72 | | | $ | 989 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, |
| 2020 | | 2019 |
| Inventory write-downs &/or asset impairment charges | | Exit activity costs | | Total | | Inventory write-downs &/or asset impairment (recoveries) charges, net | | Exit activity costs | | Total |
Renewable Energy and Conservation | $ | 0 | | | $ | 172 | | | $ | 172 | | | $ | (9) | | | $ | 46 | | | $ | 37 | |
Residential Products | 21 | | | 165 | | | 186 | | | 478 | | | 2,937 | | | 3,415 | |
Industrial and Infrastructure Products | 138 | | | 114 | | | 252 | | | 10 | | | 275 | | | 285 | |
Corporate | 0 | | | 17 | | | 17 | | | 0 | | | 246 | | | 246 | |
Total exit activity costs & asset impairments | $ | 159 | | | $ | 468 | | | $ | 627 | | | $ | 479 | | | $ | 3,504 | | | $ | 3,983 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine months ended September 30, |
| 2020 | | 2019 |
| Inventory write-downs &/or asset impairment charges | | Exit activity costs | | Total | | Inventory write-downs &/or asset impairment (recoveries) charges, net | | Exit activity costs | | Total |
Renewable Energy and Conservation | $ | 72 | | | $ | 506 | | | $ | 578 | | | $ | (9) | | | $ | 45 | | | $ | 36 | |
Residential Products | 21 | | | 649 | | | 670 | | | 478 | | | 3,307 | | | 3,785 | |
Industrial and Infrastructure Products | 412 | | | 152 | | | 564 | | | 10 | | | 1,588 | | | 1,598 | |
Corporate | 0 | | | 116 | | | 116 | | | 0 | | | 919 | | | 919 | |
Total exit activity costs & asset impairments | $ | 505 | | | $ | 1,423 | | | $ | 1,928 | | | $ | 479 | | | $ | 5,859 | | | $ | 6,338 | |
The following table provides a summary of where the asset impairments and exit activity costs were recorded in the consolidated statements of income for the three and ninesix months ended SeptemberJune 30, (in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
Cost of sales | Cost of sales | $ | 325 | | | $ | 683 | | | $ | 1,198 | | | $ | 968 | | Cost of sales | $ | 718 | | | $ | 472 | | | $ | 5,765 | | | $ | 541 | |
Selling, general, and administrative expense | Selling, general, and administrative expense | 302 | | | 3,300 | | | 730 | | | 5,370 | | Selling, general, and administrative expense | 1,443 | | | 224 | | | 1,636 | | | 448 | |
Total asset impairment and exit activity charges | Total asset impairment and exit activity charges | $ | 627 | | | $ | 3,983 | | | $ | 1,928 | | | $ | 6,338 | | Total asset impairment and exit activity charges | $ | 2,161 | | | $ | 696 | | | $ | 7,401 | | | $ | 989 | |
The following table reconciles the beginning and ending liability for exit activity costs relating to the Company’s facility consolidation efforts (in thousands):
| | | 2020 | | 2019 | | 2021 | | 2020 |
Balance at January 1 | Balance at January 1 | $ | 5,449 | | | $ | 1,923 | | Balance at January 1 | $ | 1,030 | | | $ | 2,083 | |
Exit activity costs recognized | Exit activity costs recognized | 1,423 | | | 5,859 | | Exit activity costs recognized | 6,208 | | | 917 | |
Cash payments | Cash payments | (6,179) | | | (3,032) | | Cash payments | (4,646) | | | (2,171) | |
Balance at September 30 | $ | 693 | | | $ | 4,750 | | |
Balance at June 30 | | Balance at June 30 | $ | 2,592 | | | $ | 829 | |
On June 30, 2020, the Company sold its self-guided apartment tour application business to a third party from its Residential Products segment. The $2.0 million net proceeds from the sale resulted in pre-tax net gain of $1.9 million and has been presented within other (income) expense in the consolidated statements of income. This
divestiture does not meet the criteria to be reported as a discontinued operation nor will it have a major effect on the Company's operations.
(12)(13) INCOME TAXES
The following table summarizes the provision for income taxes for continuing operations (in thousands) for the three and ninesix months ended SeptemberJune 30, and the applicable effective tax rates:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
Provision for income taxes | Provision for income taxes | $ | 9,828 | | | $ | 6,843 | | | $ | 21,686 | | | $ | 14,901 | | Provision for income taxes | $ | 9,457 | | | $ | 7,961 | | | $ | 11,017 | | | $ | 10,274 | |
Effective tax rate | Effective tax rate | 22.5 | % | | 21.8 | % | | 22.9 | % | | 22.7 | % | Effective tax rate | 26.4 | % | | 24.6 | % | | 23.0 | % | | 23.0 | % |
The effective tax rate for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively, was moregreater than the U.S. federal statutory rate of 21% due to state taxes and nondeductible permanent differences partially offset by favorable discrete items.
On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The CARES Act, among other things, includes certain incomeitems due to an excess tax provisions for individuals and corporations, however, these benefits do not materially impact the Company’s income tax provision.
On July 20, 2020, the Department of the Treasury and the Internal Revenue Service issued final regulations addressing the treatment of income earned by certain foreign corporations related to the treatment of income that is subject to high rate of foreign tax under the global intangible low-taxed income ("GILTI") and subpart F income regimes.The Company determined that the impact of GILTI is not material to the financial statements.benefit on stock-based compensation.
(13)
(14) EARNINGS PER SHARE
Basic earnings and weighted-average of diluted weighted-average shares outstanding are as follows for the three and ninesix months ended SeptemberJune 30, (in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
Numerator: | Numerator: | | | | | | | | Numerator: | | | | | | | |
| Net income available to common shareholders | $ | 33,760 | | | $ | 24,476 | | | $ | 73,111 | | | $ | 50,734 | | |
Income from continuing operations | | Income from continuing operations | $ | 26,373 | | | $ | 24,457 | | | $ | 36,869 | | | $ | 34,359 | |
(Loss) Income from discontinued operations | | (Loss) Income from discontinued operations | (424) | | | 2,835 | | | 1,842 | | | 4,992 | |
Net income available to common stockholders | | Net income available to common stockholders | $ | 25,949 | | | $ | 27,292 | | | $ | 38,711 | | | $ | 39,351 | |
Denominator for basic earnings per share: | Denominator for basic earnings per share: | | | | | | | | Denominator for basic earnings per share: | | | | | | | |
Weighted average shares outstanding | Weighted average shares outstanding | 32,635 | | | 32,470 | | | 32,606 | | | 32,357 | | Weighted average shares outstanding | 32,790 | | | 32,605 | | | 32,791 | | | 32,596 | |
Denominator for diluted earnings per share: | Denominator for diluted earnings per share: | | | | | | | | Denominator for diluted earnings per share: | | | | | | | |
Weighted average shares outstanding | Weighted average shares outstanding | 32,635 | | | 32,470 | | | 32,606 | | | 32,357 | | Weighted average shares outstanding | 32,790 | | | 32,605 | | | 32,791 | | | 32,596 | |
Common stock options and stock units | Common stock options and stock units | 334 | | | 300 | | | 296 | | | 320 | | Common stock options and stock units | 266 | | | 255 | | | 280 | | | 272 | |
Weighted average shares and conversions | Weighted average shares and conversions | 32,969 | | | 32,770 | | | 32,902 | | | 32,677 | | Weighted average shares and conversions | 33,056 | | | 32,860 | | | 33,071 | | | 32,868 | |
The weighted average number of diluted shares does not include potential anti-dilutive common shares issuable pursuant to equity based incentive compensation awards, aggregating to 9,000awards. There were 52,000 and 346,00077,000 anti-dilutive shares outstanding for the three months ended SeptemberJune 30, 2021 and 2020, and 2019, respectively, and 24,000 and 324,000respectively. There were 0 anti-dilutive shares outstanding for the ninesix months ended SeptemberJune 30, 20202021 and 2019, respectively.47,000 for the six months ended June 30, 2020.
(14)(15) SEGMENT INFORMATION
The Company is organized into 34 reportable segments on the basis of the production processes, products and services provided by each segment, identified as follows:
(i)Renewable Energy and Conservation,Renewables, which primarily includes designing, engineering, manufacturing and installation of solar racking and electrical balance of systems, extraction systems and greenhouse structures;systems;
(ii)Residential, Products, which primarily includes roof and foundation ventilation products, rain dispersion products and roofing accessories, centralized mail systems and electronic package solutions;solutions, retractable awnings and gutter guards, and rain dispersion products, trims and flashings and other accessories;
(iii)IndustrialAgtech, which provides growing and processing solutions including the designing, engineering, manufacturing and installation of greenhouses, and botanical extraction systems; and
(iv)Infrastructure, Products, which primarily includes expanded and perforated metal, perimeter security systems,structural bearings, expansion joints and structural bearings.pavement sealant for bridges, airport runways and roadways, elastomeric concrete, and bridge cable protection systems.
When determining the reportable segments, the Company aggregated operating segments based on their similar economic and operating characteristics. During the first quarter of 2021, the Company reassessed its reportable segments. As a result, the Company's former Renewable Energy and Conservation segment was divided into two reportable segments: Renewables and Agtech.
The following table illustrates certain measurements used by management to assess performance of the segments described above for the three and ninesix months ended SeptemberJune 30, (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
Net sales: | | | | | | | |
Renewable Energy and Conservation | $ | 128,258 | | | $ | 116,771 | | | $ | 323,014 | | | $ | 261,612 | |
Residential Products | 151,718 | | | 126,275 | | | 394,609 | | | 360,417 | |
Industrial and Infrastructure Products | 49,767 | | | 56,361 | | | 147,831 | | | 168,096 | |
Less: Intersegment sales | (78) | | | (171) | | | (536) | | | (817) | |
Net Industrial and Infrastructure Products | 49,689 | | | 56,190 | | | 147,295 | | | 167,279 | |
Total consolidated net sales | $ | 329,665 | | | $ | 299,236 | | | $ | 864,918 | | | $ | 789,308 | |
| | | | | | | |
Income from operations: | | | | | | | |
Renewable Energy and Conservation | $ | 14,195 | | | $ | 19,633 | | | $ | 29,082 | | | $ | 30,914 | |
Residential Products | 32,454 | | | 17,012 | | | 74,143 | | | 49,880 | |
Industrial and Infrastructure Products | 5,199 | | | 5,462 | | | 15,832 | | | 13,660 | |
Unallocated Corporate Expenses | (7,989) | | | (10,687) | | | (25,417) | | | (25,862) | |
Total consolidated income from operations | $ | 43,859 | | | $ | 31,420 | | | $ | 93,640 | | | $ | 68,592 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Net sales: | | | | | | | |
Renewables | $ | 107,751 | | | $ | 55,950 | | | $ | 193,263 | | | $ | 103,213 | |
Residential | 164,209 | | | 139,472 | | | 304,426 | | | 242,891 | |
Agtech | 53,696 | | | 42,309 | | | 100,435 | | | 91,543 | |
Infrastructure | 22,733 | | | 17,453 | | | 37,857 | | | 32,938 | |
Total net sales | $ | 348,389 | | | $ | 255,184 | | | $ | 635,981 | | | $ | 470,585 | |
| | | | | | | |
Income from operations: | | | | | | | |
Renewables | $ | 9,510 | | | $ | 8,422 | | | $ | 8,989 | | | $ | 12,781 | |
Residential | 27,155 | | | 27,964 | | | 50,089 | | | 41,689 | |
Agtech | 977 | | | 766 | | | 1,906 | | | 2,106 | |
Infrastructure | 4,186 | | | 2,801 | | | 6,223 | | | 4,377 | |
Unallocated Corporate Expenses | (10,419) | | | (9,205) | | | (22,983) | | | (17,428) | |
Total income from operations | $ | 31,409 | | | $ | 30,748 | | | $ | 44,224 | | | $ | 43,525 | |
| | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
Total assets: | | | |
Renewables | $ | 424,884 | | | $ | 402,796 | |
Residential | 443,903 | | | 407,132 | |
Agtech | 204,264 | | | 216,275 | |
Infrastructure | 86,748 | | | 80,796 | |
Unallocated corporate assets | 26,334 | | | 28,057 | |
Assets of discontinued operations | 0 | | | 77,438 | |
| $ | 1,186,133 | | | $ | 1,212,494 | |
The following tables illustrate segment revenue disaggregated by timing of transfer of control to the customer for the three and ninesix months ended SeptemberJune 30 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2020 |
| Renewable Energy and Conservation | | Residential Products | | Industrial and Infrastructure Products | | Total |
Net sales: | | | | | | | |
Point in Time | $ | 29,632 | | | $ | 150,608 | | | $ | 39,251 | | | $ | 219,491 | |
Over Time | 98,626 | | | 1,110 | | | 10,438 | | | 110,174 | |
Total net sales | $ | 128,258 | | | $ | 151,718 | | | $ | 49,689 | | | $ | 329,665 | |
| | | Three Months Ended September 30, 2019 | | Three Months Ended June 30, 2021 |
| | Renewable Energy and Conservation | | Residential Products | | Industrial and Infrastructure Products | | Total | | Renewables | | Residential | | Agtech | | Infrastructure | | Total |
Net sales: | Net sales: | | | | | | | | Net sales: | | | | | | | | | |
Point in Time | Point in Time | $ | 12,682 | | | $ | 125,350 | | | $ | 46,781 | | | $ | 184,813 | | Point in Time | $ | 6,049 | | | $ | 162,978 | | | $ | 7,388 | | | $ | 11,637 | | | $ | 188,052 | |
Over Time | Over Time | 104,089 | | | 925 | | | 9,409 | | | 114,423 | | Over Time | 101,702 | | | 1,231 | | | 46,308 | | | 11,096 | | | 160,337 | |
Total net sales | Total net sales | $ | 116,771 | | | $ | 126,275 | | | $ | 56,190 | | | $ | 299,236 | | Total net sales | $ | 107,751 | | | $ | 164,209 | | | $ | 53,696 | | | $ | 22,733 | | | $ | 348,389 | |
| | | Nine Months Ended September 30, 2020 | | Three Months Ended June 30, 2020 |
| | Renewable Energy and Conservation | | Residential Products | | Industrial and Infrastructure Products | | Total | | Renewables | | Residential | | Agtech | | Infrastructure | | Total |
Net sales: | Net sales: | | Net sales: | | | | | | | | | |
Point in Time | Point in Time | $ | 56,636 | | | $ | 391,227 | | | $ | 115,925 | | | $ | 563,788 | | Point in Time | $ | 5,512 | | | $ | 138,288 | | | $ | 12,088 | | | $ | 6,549 | | | $ | 162,437 | |
Over Time | Over Time | 266,378 | | | 3,382 | | | 31,370 | | | 301,130 | | Over Time | 50,438 | | | 1,184 | | | 30,221 | | | 10,904 | | | 92,747 | |
Total net sales | Total net sales | $ | 323,014 | | | $ | 394,609 | | | $ | 147,295 | | | $ | 864,918 | | Total net sales | $ | 55,950 | | | $ | 139,472 | | | $ | 42,309 | | | $ | 17,453 | | | $ | 255,184 | |
| | | Nine Months Ended September 30, 2019 | | Six Months Ended June 30, 2021 |
| | Renewable Energy and Conservation | | Residential Products | | Industrial and Infrastructure Products | | Total | | Renewables | | Residential | | Agtech | | Infrastructure | | Total |
Net sales: | Net sales: | | Net sales: | | | | | | | | | |
Point in Time | Point in Time | $ | 28,441 | | | $ | 357,808 | | | $ | 138,383 | | | $ | 524,632 | | Point in Time | $ | 13,020 | | | $ | 301,997 | | | $ | 12,531 | | | $ | 17,107 | | | $ | 344,655 | |
Over Time | Over Time | 233,171 | | | 2,609 | | | 28,896 | | | 264,676 | | Over Time | 180,243 | | | 2,429 | | | 87,904 | | | 20,750 | | | 291,326 | |
Total net sales | Total net sales | $ | 261,612 | | | $ | 360,417 | | | $ | 167,279 | | | $ | 789,308 | | Total net sales | $ | 193,263 | | | $ | 304,426 | | | $ | 100,435 | | | $ | 37,857 | | | $ | 635,981 | |
(15) SUBSEQUENT EVENTS
On October 15, 2020, the Company acquired substantially all of the assets of Architectural Mailboxes, LLC ("Architectural Mailboxes") in an all cash transaction for approximately $27 million. Architectural Mailboxes was a privately-held company in the business of designing, developing, and selling decorative residential mailboxes and related products. A preliminary purchase price allocation for the Architectural Mailboxes business has not yet been determined. Architectural Mailboxes will be reported as a part of our Residential Products segment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2020 |
| Renewables | | Residential | | Agtech | | Infrastructure | | Total |
Net sales: | | | | | | | | | |
Point in Time | $ | 9,208 | | | $ | 240,619 | | | $ | 26,184 | | | $ | 12,006 | | | $ | 288,017 | |
Over Time | 94,005 | | | 2,272 | | | 65,359 | | | 20,932 | | | 182,568 | |
Total net sales | $ | 103,213 | | | $ | 242,891 | | | $ | 91,543 | | | $ | 32,938 | | | $ | 470,585 | |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Certain information set forth herein includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and, therefore are, or may be deemed to be, “forward-looking statements.” These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “anticipates,” "aspires," “expects,” “estimates,” “seeks,” “projects,” “intends,” “plans,” “may,” “will”���will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, competition, strategies and the industries in which we operate. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those described in the “Risk Factors” disclosed in our Annual Report on Form 10-K along with Item 1A of this Form 10-Q. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition, liquidity and the development of the industries in which we operate may differ materially from those made in or suggested by the forward-looking statements contained herein. In addition, even if our results of operations, financial condition, liquidity, and the development of the industries in which we operate are consistent with the forward-looking statements contained in this quarterly report, those results or developments may not be indicative of results or developments in subsequent periods. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statements that we make herein speak only as of the date of those statements, and we undertake no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.
We use certain operating performance measures, specifically consolidated gross margin, operating margin by segment and consolidated operating margin, to manage our businesses, set operational goals, and establish performance targets for incentive compensation for our employees. We define consolidated gross margin as a percentage of total consolidated gross profit to total consolidated net sales. We define operating margin by segment as a percentage of total income from operations by segment to total net sales by segment and consolidated operating margin as a percentage of total consolidated income from operations to total consolidated net sales. We believe consolidated gross margin, operating margin and consolidated operating margin may be useful to investors in evaluating the profitability of our segments and Company on a consolidated basis.
Overview
Gibraltar Industries, Inc. (the "Company") is a leading manufacturer and provider of products and services for the renewable energy, conservation, residential, industrialagtech, and infrastructure markets.
The Company operates and reports its results in the following threefour reporting segments:
•Renewable Energy and Conservation;Renewables;
•Residential Products;Residential;
•Agtech; and
•Industrial and Infrastructure Products.Infrastructure.
The Company serves customers primarily in North America including renewable energy (solar) developers, home improvement retailers, wholesalers, distributors, institutional and commercial growers of food and plants, home improvement retailers, wholesalers, distributors, and contractors. As part of Septemberour continuing operations at June 30, 2020,2021, we operated 4536 facilities, which include 32comprised of 26 manufacturing facilities, one distribution center, and five distribution centers,nine offices, which are located in 1916 states, Canada, China, and Japan. Our operational infrastructure provides the necessary scale to support local, regional and national customers in each of our markets.
COVID-19 Update
While the Company continues to encounter challenges and uncertainty associated with COVID-19, the pandemic did not have a material adverse effect on our reported results for the three and nine months ended September 30, 2020. While most of our operations have been considered essential businesses and have remained open during the pandemic, the decision to keep our team intact despite some pandemic related softness in demand in certain businesses enabled us to deliver revenue and earnings growth during this period.2021. Our top priorities continuepriority continues to be
focused on our organization - keeping theour team and their families as safe as possible, maintaining the timely and effective functioning of our supply chain operating well, and providing a high level of responsiveness to customer needs. We will continue to actively monitor the impact of the COVID-19 outbreak on operations for the remainder of 2020 and beyond,proactively execute our pandemic “playbook” in 2021 and make adjustments to our operating protocols as necessary.we navigate forward. The extent to which our operations will be impacted by the outbreak, will largely depend on future developments, which are highly uncertainincluding but not limited to the current impact of supply chain, transportation and cannot be accurately predicted, includinglabor challenges, along with new information which may emerge concerning the severity,requirements or resurgence, of the outbreak and actionsregulations mandated by government authorities, remains uncertain and challenging to contain the outbreak or respond to its impact, among other things.predict, Refer to the Company's Outlook section in this management discussion and analysis for consideration relative to future periods.
Business Strategy
The Company’sCompany's mission is to create compounding and sustainable value for our stockholders and other stakeholders with strong and relevantleadership positions in higher growth, and profitable end markets.markets focused on addressing some of the world's most challenging opportunities. The foundation of the Company's operational foundation employs a Three-Pillar strategy focusingis built on three core tenets:pillars: Business Systems,System, Portfolio Management, and OrganizationalOrganization Development.
1.Business Systems - operational excellenceSystem reflects the necessary systems, processes, and product innovation supported by an execution reviewmanagement tools required to deliver consistent and continuous performance improvement, every day. Our Business System is a critical enabler to grow, scale, and deliver our plans. Our Business System is focused on deploying effective tools to drive growth, improve operating performance, and develop the organization. Our Business System challenges existing paradigms, drives day-to-day performance, forces prioritization of the Company's monthlyresources, challenges our business performance, implementation of key investments, information technology operatingmodels, and digital systems performance, andbrings focus to new product and services development and innovation.
2.Portfolio Management - acquisitions and portfolio management is focused on optimizing the Company’s business portfolio and ensuringensures our human and financial capital and human resources are investedeffectively and efficiently deployed to providedeliver sustainable, profitable growth while expandingincreasing our relevance towith customers and shaping our markets. The acquisitionsFor a description of Apeks, LLC ("Apeks")recent portfolio management activities, see the actions described below in August 2019, Thermo Energy Systems Inc. ("Thermo") in January 2020, Delta Separations LLC and Teaching Tech LLC (collectively, “Delta Separations”) in February 2020 and, most recently, the acquisition of Architectural Mailboxes, LLC ("Architectural Mailboxes") in October 2020, were the direct result of executing our Portfolio Management strategy.Recent Developments section.
3.OrganizationalOrganization Development - execution ofdrives the Business SystemsCompany’s continuous focus on strengthening and Portfolio Management pillars of our strategy requires a strongscaling the organization that must continuously developto execute the Company’s plans and improve.meet commitments. The Company aspires to make our workplaceplace of work the "Best Place to Work", by focusingwhere we focus on creating the best development and learningan environment for our people proactively operating businesses that mitigate environmentalto have the best opportunity for success, continue to develop, grow, and climate related impacts,learn. At core of this pillar is the Company’s development process focused on helping employees reach their potential, improve performance, develop career roadmaps, identify ongoing education requirements, and engaging with and supporting the communities in which we are located.respective succession plans. We believe doing so helps us attract and retain the best people enhancing our ability toso we can execute our business plans.
As a part of our on-going Three-Pillar strategy, the Company:
•implemented new management tools to complement our core 80/20 toolkit and drive improvements in our operating margins;
•increased the percentage of our sales that are direct to end customers, allowing us to have a more meaningful connection with our end customers, providing the opportunity to better understand the challenges our customers face, and developing solutions to these challenges; and
•continued to shift the focus of our portfolio to take advantage of rising tides in the renewable energy and conservation markets.
We believe the key elements of our strategy have, and will continue to, enable us to respond timely to changes in the end markets we serve, including evolving changes due to COVID-19 and the outbreak of COVID-19.challenges noted above. We have and expect to continue to examine the need for restructuring of our operations, including consolidation of facilities, reducing overhead costs, curtailing investments in inventory, and managing our business to generate incremental cash. We believe our enhanced strategy has enabled us to better react to volatility in commodity and other input costs and fluctuations in customer demand, along with helping to improve margins. We have used the improved cash flows generated by these initiatives to pay down debt, improve our liquidity position, and invest in growth initiatives. Overall, we continue to strive to achieve stronger financial results, make more efficient use of capital, and deliver higher shareholderstockholder returns.
Recent Developments
On October 15, 2020, the Company acquired substantially all of the assets of Architectural Mailboxes, a privately-held company in the business of designing, developing, and selling decorative residential mailboxes and related products in an all cash transaction for approximately $27 million. The results of operations for Architectural
Mailboxes will beRecent Developments
During the first quarter of 2021, the Company sold its Industrial business as a result of its Portfolio Management strategy to focus on participation in higher value and faster growing markets. The Industrial business, previously reported in the Company's Industrial and Infrastructure Products segment, was reported as a partdiscontinued operations as of our Residential Products segment and are expected to contribute annual revenues of approximately $26 million.December 31, 2020.
On February 13,During 2020, the Company acquiredcompleted the assets of California-based Delta Separations, a privately held ethanol-based extraction systems manufacturer and training and laboratory design and operations consultative partner for $50 million in an all cash transaction.following acquisitions:
On January 15, 2020, the Company acquired the assets of Canadian-based Thermo, a privately held provider of commercial greenhouse solutions in North America providing growing infrastructure for the plant based organic food market, in an all cash transaction for approximately $7 million. The Company also expects to invest approximately $42 million into Thermo to provide an appropriate level of working capital. | | | | | | | | | | | | | | |
Business Acquired | Date of Acquisition in 2020 | Purchase price ( in millions)1 | Description | Segment |
TerraSmart LLC | December 31 | $ | 223.7 | | Provider of screw-based, ground-mount solar racking technology, particularly used for solar projects installed on challenging terrain | Renewables |
Sunfig Corporation | December 11 | $ | 3.8 | | Provider of software solutions that optimize solar energy investments through upstream design, performance and financial modeling | Renewables |
Architectural Mailboxes | October 15 | $ | 26.9 | | Provider, designer, and developer of decorative residential mailboxes and related products | Residential |
Delta Separations | February 13 | $ | 47.1 | | Provider of ethanol-based extraction systems manufacturer and training and laboratory design and operations consultative partner | Agtech |
Thermo Energy Systems | January 15 | $ | 7.3 | | Provider of commercial greenhouse solutions in North America supporting the biologically grown organic food market | Agtech |
On August 30, 2019,Note 1: Except for TerraSmart, which was financed through a combination of cash on hand and borrowings under the Company acquiredCompany's revolving credit facility, all of the outstanding membership interests of Apeks, a designer and manufacturer of botanical oil extraction systems utilizing subcritical and supercritical carbon dioxide. The acquisition was financed throughabove 2020 acquisitions were funded from cash on hand of $12 million.
hand. The financial results frompurchase price for the acquisitions of Thermo,TerraSmart, Sunfig, and Architectural Mailboxes represents the preliminary allocation to the assets acquired and liabilities assumed in each transaction. The purchase price shown above for Delta and Apeks have been reported as a part of our Renewables Energy and Conservation segment since their respective dates of acquisition.
Thermo represents the final purchase price in each transaction.
Results of Operations
Three Months Ended SeptemberJune 30, 20202021 Compared to the Three Months Ended SeptemberJune 30, 20192020
The following table sets forth selected results of operations data and its percentage of net sales for the three months ended SeptemberJune 30 (in thousands):
| | | 2020 | | 2019 | | 2021 | | 2020 |
Net sales | Net sales | $ | 329,665 | | | 100.0 | % | | $ | 299,236 | | | 100.0 | % | Net sales | $ | 348,389 | | | 100.0 | % | | $ | 255,184 | | | 100.0 | % |
Cost of sales | Cost of sales | 244,222 | | | 74.1 | % | | 222,658 | | | 74.4 | % | Cost of sales | 267,458 | | | 76.8 | % | | 189,623 | | | 74.3 | % |
Gross profit | Gross profit | 85,443 | | | 25.9 | % | | 76,578 | | | 25.6 | % | Gross profit | 80,931 | | | 23.2 | % | | 65,561 | | | 25.7 | % |
Selling, general, and administrative expense | Selling, general, and administrative expense | 41,584 | | | 12.6 | % | | 45,158 | | | 15.1 | % | Selling, general, and administrative expense | 49,522 | | | 14.2 | % | | 34,813 | | | 13.7 | % |
| Income from operations | Income from operations | 43,859 | | | 13.3 | % | | 31,420 | | | 10.5 | % | Income from operations | 31,409 | | | 9.0 | % | | 30,748 | | | 12.0 | % |
Interest expense | Interest expense | 218 | | | 0.1 | % | | 17 | | | 0.0 | % | Interest expense | 245 | | | 0.0 | % | | 222 | | | 0.0 | % |
Other expense | 53 | | | 0.0 | % | | 84 | | | 0.0 | % | |
Other income | | Other income | (4,666) | | | (1.3) | % | | (1,892) | | | (0.7) | % |
Income before taxes | Income before taxes | 43,588 | | | 13.2 | % | | 31,319 | | | 10.5 | % | Income before taxes | 35,830 | | | 10.3 | % | | 32,418 | | | 12.7 | % |
Provision for income taxes | Provision for income taxes | 9,828 | | | 3.0 | % | | 6,843 | | | 2.3 | % | Provision for income taxes | 9,457 | | | 2.7 | % | | 7,961 | | | 3.1 | % |
| Income from continuing operations | | Income from continuing operations | 26,373 | | | 7.6 | % | | 24,457 | | | 9.6 | % |
(Loss) income from discontinued operations | | (Loss) income from discontinued operations | (424) | | | (0.2) | % | | 2,835 | | | 1.1 | % |
Net income | Net income | $ | 33,760 | | | 10.2 | % | | $ | 24,476 | | | 8.2 | % | Net income | $ | 25,949 | | | 7.4 | % | | $ | 27,292 | | | 10.7 | % |
The following table sets forth the Company’s net sales by reportable segment for the three months ended SeptemberJune 30, (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Change due to |
| 2020 | | 2019 | | Total Change | | | | Acquisitions | | Operations |
Net sales: | | | | | | | | | | | |
Renewable Energy and Conservation | $ | 128,258 | | | $ | 116,771 | | | $ | 11,487 | | | | | $ | 24,061 | | | $ | (12,574) | |
Residential Products | 151,718 | | | 126,275 | | | 25,443 | | | | | — | | | 25,443 | |
Industrial and Infrastructure Products | 49,767 | | | 56,361 | | | (6,594) | | | | | — | | | (6,594) | |
Less: Intersegment sales | (78) | | | (171) | | | 93 | | | | | — | | | 93 | |
Net Industrial and Infrastructure Products | 49,689 | | | 56,190 | | | (6,501) | | | | | — | | | (6,501) | |
Consolidated | $ | 329,665 | | | $ | 299,236 | | | $ | 30,429 | | | | | $ | 24,061 | | | $ | 6,368 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Change due to |
| 2021 | | 2020 | | Total Change | | | | Acquisitions | | Operations |
Net sales: | | | | | | | | | | | |
Renewables | $ | 107,751 | | | $ | 55,950 | | | $ | 51,801 | | | | | $ | 49,825 | | | $ | 1,976 | |
Residential | 164,209 | | | 139,472 | | | 24,737 | | | | | 7,705 | | | 17,032 | |
Agtech | 53,696 | | | 42,309 | | | 11,387 | | | | | — | | | 11,387 | |
Infrastructure | 22,733 | | | 17,453 | | | 5,280 | | | | | — | | | 5,280 | |
Consolidated | $ | 348,389 | | | $ | 255,184 | | | $ | 93,205 | | | | | $ | 57,530 | | | $ | 35,675 | |
Consolidated net sales increased by $30.4$93.2 million, or 10.2%36.5%, to $329.7$348.4 million for the three months ended SeptemberJune 30, 20202021 compared to the three months ended SeptemberJune 30, 2019.2020. The 10.2%36.5% increase in revenue was driven by the Residential ProductsRenewables and Renewable Energy and Conservation segments. Organic growth accounted for 2.1%, or $6.4 million, the result of increased volume in our Residential Products segment, which more than offset the organic volume declines in both our Renewable Energy and Conservation and our Industrial and Infrastructure Products segments. Sales generated from our first quarter 2020prior year acquisitions of ThermoTerraSmart and Delta Separations, and the prior year acquisition of Apeks,Architectural Mailboxes contributed 8.1%22.5%, or $24.1$57.5 million to the growth from the prior year quarter. The $35.7 million, or 14.0% increase in organic growth during the current year quarter was driven by volume increases across all of our segments, the result of strong end market demand and participation gains, along with increases in pricing to customers. Consolidated backlog increased 54% to $403 million up from $262 million at the end of the prior year quarter.
Net sales in our Renewable Energy and ConservationRenewables segment increased 9.8%$51.8 million, or 92.5%, or $11.5 million, to $128.3$107.8 million for the three months ended SeptemberJune 30, 20202021 compared to $116.8$56.0 million for the three months ended SeptemberJune 30, 2019.2020. Sales generated from the current year acquisitions of Thermo and Delta Separations, and the prior year acquisition of Apeks,TerraSmart of $49.8 million primarily contributed $24.1 million to the increase in the current year quarter. Organic revenue decreased $12.6 million, or 10.8%,increased 3.5% during the quarter driven by strong demand across our broad offering of fixed tilt, tracker, canopy and electrical balance-of-system product solutions serving the community and commercial and industrial market segments. This growth was partially offset by headwinds impacting the solar industry including steel inflation, supply chain challenges with solar panels, as well as, a decline in our core conservation businesssafe-harbor related demand due to a slowdownthe extension of the investment tax credit in the cannabis and hemp markets, partially offset by participation gains in our renewable energy related business.late 2020. Backlog improved 28%120% year over year, or 54% on a proforma basis for this segment, which was the result of strong end market demand in renewable energy, and in conservation, driven by strength in the fruit and vegetable market and increasing activity in the cannabis market.
Net sales in our Residential Products segment increased 20.1%, or $25.4 million, to $151.7 million for the three months ended September 30, 2020 compared to $126.3 million for the three months ended September 30, 2019.segment.
Net sales in our Residential segment increased 17.7%, or $24.7 million, to $164.2 million for the three months ended June 30, 2021 compared to $139.5 million for the three months ended June 30, 2020. The increase from the prior year quarter was largely due to continued solidstrong activity across all residential businesses along with increased pricing that offset challenges from supply chain dynamics related to material, labor and logistics availability. Sales from the prior year acquisition of Architectural Mailboxes also contributed $7.7 million to the increase in the repair and remodel market, along with participation gains across our various distribution channels.current year quarter.
Net sales in our Industrial and Infrastructure ProductsAgtech segment decreased 11.6%increased 27.0%, or $6.5$11.4 million, to $49.7$53.7 million for the three months ended SeptemberJune 30, 20202021 compared to $56.2$42.3 million for the three months ended SeptemberJune 30, 2019. Lower2020. The revenue increase was led by solid demand across the produce, commercial, car wash, retail and processing equipment segments, despite the shift in timing of projects from the second quarter into future quarters as schedules have been impacted by permit delays, re-scoping of projects and supply chain disruptions. While backlog experienced a slight and temporary decrease of 7% year over year, due to the impact of re-scoping of projects and supply chain disruptions impacting project scheduling, subsequent order activity is accelerating backlog momentum.
Net sales in our Infrastructure segment increased 29.7%, or $5.3 million, to $22.7 million for the three months ended June 30, 2021 compared to $17.5 million for the three months ended June 30, 2020. During the current year quarter, demand for its core industrialfabricated and non-fabricated products resulted in a decrease in revenue infrom this segment increased as state project funding improved and the Industrial businesses. While revenue in the Infrastructure business was down modestly, as the pandemic affected spending on infrastructure projects in certain end markets, infrastructure backlog grew slightlydomestic economy strengthened. Backlog remained strong increasing 11% compared to the prior year quarter.
Our consolidated gross margin increaseddecreased to 25.9%23.2% for the three months ended SeptemberJune 30, 20202021 compared to 25.6%25.7% for the three months ended SeptemberJune 30, 2019. This modest increase2020. The decrease was the result of improved operating execution in all our core businesses compared to the prior year quarter, effective price and material cost management, and benefits from our 80/20 simplification initiatives. Partially offsetting the above improvements were expected lower gross margins generated from our recent acquisitions as we continue to integrate them operationally.operationally, along with timing and alignment of higher input costs to price increases, supply chain disruptions, and shifts in project timing in the Agtech and Renewables segments. Partially offsetting the decrease was improved operating execution in our core businesses compared to the prior year quarter.
Selling, general, and administrative ("SG&A") expenses decreasedincreased by $3.6$14.7 million, or 7.9%42.3%, to $41.6$49.5 million for the three months ended SeptemberJune 30, 20202021 from $45.2$34.8 million for the three months ended SeptemberJune 30, 2019.2020. The $3.6$14.7 million decreaseincrease was largely the resultprimarily due to $6.3 million of a decrease in costs of approximately $7.2 million related to exit activities, senior leadership transition and completing acquisitions, partially offset by $3.8 million in incremental SG&A expenses recorded quarter over quarter forfrom our recent acquisitions.acquisitions and transaction costs to complete those acquisitions, along with $1.3 million of higher performance-based compensation expenses as compared to the prior year quarter. Additionally, we have invested in the development of our organization and safety of our team through actions including but not limited to the expansion of headcount in key positions and the launch of other improvement initiatives. Furthermore, healthcare costs increased year over year as prior year spend was down due to COVID-related closures of medical facilities, while the current year quarter spend was impacted by deferred treatments due to those closures. SG&A expenses as a percentage of net sales decreasedincreased to 12.6%14.2% for the three months ended SeptemberJune 30, 20202021 compared to 15.1%13.7% for the three months ended SeptemberJune 30, 2019.2020.
The following table sets forth the Company’s income from operations and income from operations as a percentage of net sales by reportable segment for the three months ended SeptemberJune 30, (in thousands):
| | | | 2020 | | 2019 | | Total Change | | | 2021 | | 2020 | | Total Change | |
Income from operations: | Income from operations: | | | | | | | Income from operations: | | | | | | |
Renewable Energy and Conservation | $ | 14,195 | | | 11.1 | % | | $ | 19,633 | | | 16.8 | % | | $ | (5,438) | | | |
Residential Products | 32,454 | | | 21.4 | % | | 17,012 | | | 13.5 | % | | 15,442 | | | |
Industrial and Infrastructure Products | 5,199 | | | 10.5 | % | | 5,462 | | | 9.7 | % | | (263) | | | |
Renewables | | Renewables | $ | 9,510 | | | 8.8 | % | | $ | 8,422 | | | 15.1 | % | | $ | 1,088 | | |
Residential | | Residential | 27,155 | | | 16.5 | % | | 27,964 | | | 20.0 | % | | (809) | | |
Agtech | | Agtech | 977 | | | 1.8 | % | | 766 | | | 1.8 | % | | 211 | | |
Infrastructure | | Infrastructure | 4,186 | | | 18.4 | % | | 2,801 | | | 16.0 | % | | 1,385 | | |
Unallocated Corporate Expenses | Unallocated Corporate Expenses | (7,989) | | | (2.4) | % | | (10,687) | | | (3.6) | % | | 2,698 | | | Unallocated Corporate Expenses | (10,419) | | | (3.0) | % | | (9,205) | | | (3.6) | % | | (1,214) | | |
Consolidated income from operations | Consolidated income from operations | $ | 43,859 | | | 13.3 | % | | $ | 31,420 | | | 10.5 | % | | $ | 12,439 | | | Consolidated income from operations | $ | 31,409 | | | 9.0 | % | | $ | 30,748 | | | 12.0 | % | | $ | 661 | | |
Our Renewable Energy and ConservationThe Renewables segment generated an operating margin of 11.1%8.8% in the current year quarter compared to 16.8%15.1% in the prior year quarter. The decrease in operating margin was partly due to the combined result of expected lower margins generated by our recent acquisitions, the result of backlog amortization and integration costs, as we continue to integrate them operationally and near-term market challenges impactingthese businesses operationally. Additionally contributing to the conservation business related to a slowdown in the cannabis and hemp markets. Partially offsetting this decrease, was favorable product and services mix and strong executiona one-time tariff credit received in our renewable energy business.
The Residential Products segment generated an operating margin of 21.4% during the three months ended September 30, 2020 compared to 13.5% during the three months ended September 30, 2019. The increase in operating margin was the result of volume leverage, effective price and material cost management, and continued benefits from 80/20 simplification initiatives, along with a $3.2 million decrease in exit activity costs compared to the prior year quarter.
Our Industrialquarter along with the impact of timing and Infrastructure Products segment generated an operating marginalignment of 10.5% during the three months ended September 30, 2020 comparedprice to 9.7% during the three months ended September 30, 2019. The increase resulted from continued improvement in execution in our industrial business,input costs and effective price and material cost management.
Unallocated corporate expenses decreased $2.7 million from $10.7 million during the three months ended September 30, 2019 to $8.0 million during the three months ended September 30, 2020. A decline in costs related to senior leadership transition, restructuring and completing acquisitions of approximately $3.2 million resulted in the current year quarter decrease as compared to the prior year quarter.project movement associated
with supply chain challenges. Partially offsetting the lower margin is improvement in our core business resulting from 80/20 productivity initiatives. TerraSmart's operating margin nearly doubled over the first quarter and remains on track relative to our full year integration plans.
The Residential segment generated an operating margin of 16.5% in the current year quarter compared to 20.0% in the prior year quarter. The decrease in operating margin was the result of accelerated inflation, material and labor availability and the timing and alignment of price actions and input costs. While multiple price increases have been implemented, historically, operating margin alignment lags and recovers within a one to two quarter period. Partially offsetting the lower margin is continued solid execution and continued benefits from 80/20 simplification initiatives.
Our Agtech segment generated an operating margin of 1.8% during both the three months ended June 30, 2021 and 2020, respectively. Operating margin was flat due to the combined results of improvements in the legacy greenhouse structures, cannabis greenhouse structures, and processing equipment businesses along with lower restructuring and acquisition costs incurred as compared to the prior year quarter. These improvements were essentially offset by abovementioned movement of certain projects into the second half of the year, higher input costs, and supply chain and logistics challenges incurred in the current year quarter.
Our Infrastructure segment generated an operating margin of 18.4% during the three months ended June 30, 2021 compared to 16.0% during the three months ended June 30, 2020. The increase was driven by higher margin mix resulting from increased non-fabricated product volumes, along with strong execution on higher volumes and continued investment in 80/20 productivity initiatives.
Unallocated corporate expenses increased $1.2 million from $9.2 million during the three months ended June 30, 2020 to $10.4 million during the three months ended June 30, 2021. The increase in expense was primarily the result of $1.1 million of higher performance-based compensation expenses as compared to the prior year quarter.
Interest expense was negligible$0.2 million for both the three months ended SeptemberJune 30, 2021 and 2020, and Septemberrespectively. Expense in the current year quarter was the net result of $32.3 million in the outstanding balance on the Company's revolving credit facility as of June 30, 2019.2021, partially offset by interest income. No amounts were outstanding under our revolving credit facility during the three months ended SeptemberJune 30, 2020 and 2019.2020.
The Company recorded other income of $4.7 million for the three months ended June 30, 2021, compared to $1.9 million recorded for the three months ended June 30, 2020. The $2.8 million increase from the prior year quarter was largely the result of a $4.7 million gain recognized on the sale of securities received from the sellers of Thermo Energy Systems, Inc. ("Thermo") to settle indemnification claims, partially offset by a $1.9 million pre-tax gain in the prior year quarter on the sale of the Company's self-guided apartment tour application business within the Residential segment.
We recognized a provision for income taxes of $9.8$9.5 million and $6.8$8.0 million, with effective tax rates of 22.5%26.4% and 21.8%24.6% for the three months ended SeptemberJune 30, 2020,2021, and 2019,2020, respectively. The effective tax rates for the three months ended SeptemberJune 30, 20202021 and 2019,2020, respectively, were greater than the U.S. federal statutory rate of 21% due to state taxes and nondeductible permanent differences partially offset by favorable discrete items.items due to an excess tax benefit on stock-based compensation.
Nine
Six Months Ended SeptemberJune 30, 20202021 Compared to the NineSix Months Ended SeptemberJune 30, 20192020
The following table sets forth selected results of operations data and its percentage of net sales for the ninesix months ended SeptemberJune 30 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| 2020 | | 2019 |
Net sales | $ | 864,918 | | | 100.0 | % | | $ | 789,308 | | | 100.0 | % |
Cost of sales | 650,830 | | | 75.2 | % | | 605,272 | | | 76.7 | % |
Gross profit | 214,088 | | | 24.8 | % | | 184,036 | | | 23.3 | % |
Selling, general, and administrative expense | 120,448 | | | 14.0 | % | | 115,444 | | | 14.6 | % |
| | | | | | | |
Income from operations | 93,640 | | | 10.8 | % | | 68,592 | | | 8.7 | % |
Interest expense | 385 | | | 0.0 | % | | 2,297 | | | 0.3 | % |
Other (income) expense | (1,542) | | | (0.2) | % | | 660 | | | 0.1 | % |
Income before taxes | 94,797 | | | 11.0 | % | | 65,635 | | | 8.3 | % |
Provision for income taxes | 21,686 | | | 2.5 | % | | 14,901 | | | 1.9 | % |
| | | | | | | |
| | | | | | | |
Net income | $ | 73,111 | | | 8.5 | % | | $ | 50,734 | | | 6.4 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 |
Net sales | $ | 635,981 | | | 100.0 | % | | $ | 470,585 | | | 100.0 | % |
Cost of sales | 495,032 | | | 77.8 | % | | 355,163 | | | 75.5 | % |
Gross profit | 140,949 | | | 22.2 | % | | 115,422 | | | 24.5 | % |
Selling, general, and administrative expense | 96,725 | | | 15.2 | % | | 71,897 | | | 15.3 | % |
| | | | | | | |
Income from operations | 44,224 | | | 7.0 | % | | 43,525 | | | 9.2 | % |
Interest expense | 689 | | | 0.1 | % | | 266 | | | 0.0 | % |
Other income | (4,351) | | | (0.6) | % | | (1,374) | | | (0.3) | % |
Income before taxes | 47,886 | | | 7.5 | % | | 44,633 | | | 9.5 | % |
Provision for income taxes | 11,017 | | | 1.7 | % | | 10,274 | | | 2.2 | % |
Income from continuing operations | 36,869 | | | 5.8 | % | | 34,359 | | | 7.3 | % |
Income from discontinued operations | 1,842 | | | 0.3 | % | | 4,992 | | | 1.1 | % |
Net income | $ | 38,711 | | | 6.1 | % | | $ | 39,351 | | | 8.4 | % |
The following table sets forth the Company’s net sales by reportable segment for the ninesix months ended SeptemberJune 30, (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Change due to |
| 2020 | | 2019 | | Total Change | | | | Acquisitions | | Operations |
Net sales: | | | | | | | | | | | |
Renewable Energy and Conservation | $ | 323,014 | | | $ | 261,612 | | | $ | 61,402 | | | | | $ | 58,858 | | | $ | 2,544 | |
Residential Products | 394,609 | | | 360,417 | | | 34,192 | | | | | — | | | 34,192 | |
Industrial and Infrastructure Products | 147,831 | | | 168,096 | | | (20,265) | | | | | — | | | (20,265) | |
Less: Intersegment sales | (536) | | | (817) | | | 281 | | | | | — | | | 281 | |
Net Industrial and Infrastructure Products | 147,295 | | | 167,279 | | | (19,984) | | | | | — | | | (19,984) | |
Consolidated | $ | 864,918 | | | $ | 789,308 | | | $ | 75,610 | | | | | $ | 58,858 | | | $ | 16,752 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Change due to |
| 2021 | | 2020 | | Total Change | | | | Acquisitions | | Operations |
Net sales: | | | | | | | | | | | |
Renewables | $ | 193,263 | | | $ | 103,213 | | | $ | 90,050 | | | | | $ | 87,081 | | | $ | 2,969 | |
Residential | 304,426 | | | 242,891 | | | 61,535 | | | | | 16,439 | | | 45,096 | |
Agtech | 100,435 | | | 91,543 | | | 8,892 | | | | | 4,600 | | | 4,292 | |
Infrastructure | 37,857 | | | 32,938 | | | 4,919 | | | | | — | | | 4,919 | |
Consolidated | $ | 635,981 | | | $ | 470,585 | | | $ | 165,396 | | | | | $ | 108,120 | | | $ | 57,276 | |
Consolidated net sales increased by $75.6$165.4 million, or 9.6%35.1%, to $864.9$636.0 million for the ninesix months ended SeptemberJune 30, 20202021 compared to the ninesix months ended SeptemberJune 30, 2019.2020. The 35.1% increase in revenue was driven by the Renewables and Residential segments. Sales generated from our currentprior year acquisitions of TerraSmart, Thermo, and Delta Separations and the prior year acquisition of ApeksArchitectural Mailboxes contributed 7.5%23.0%, or $58.9$108.1 million to the growth from the prior year. The $16.8$57.3 million, or 2.1%12.1% increase, in organic growth during the current year was primarily the result of an increase in volume across all of our segments, the result of strong end market demand and participation gains, along with increases in pricing to customers. Consolidated backlog increased volume54% to $403 million up from $262 million at the end of the prior year period.
Net sales in both our Residential ProductsRenewables segment increased $90.1 million, or 87.3%, to $193.3 million for the six months ended June 30, 2021 compared to $103.2 million for the six months ended June 30, 2020. Sales generated from the prior year acquisition of TerraSmart of $87.1 million, primarily contributed to the increase in the current year. Organic revenue increased 2.9% during the current year driven by strong demand across our broad offering of fixed tilt, tracker, canopy and Renewable Energyelectrical balance-of-system product solutions serving the community and Conservation segments, which more thancommercial and industrial market segments. This growth was partially offset by projects impacted by headwinds impacting the volumesolar industry including steel inflation, supply chain challenges withsolar panels, as well as, a decline in our Industrial and Infrastructure Productssafe-harbor related demand due to the extension of the investment tax credit in late 2020. Backlog improved 120% year over year, or 54% on a proforma basis for this segment.
Net sales in our Renewable Energy and ConservationResidential segment increased 23.5%25.3%, or $61.4$61.5 million, to $323.0$304.4 million for the ninesix months ended SeptemberJune 30, 20202021 compared to $261.6$242.9 million for the ninesix months ended SeptemberJune 30, 2019.2020. The increase from the prior year was largely due to continued strong demand across all residential businesses along with increased pricing and participation gains across that offset challenges from supply chain dynamics. Sales generated by the current year acquisitions of Thermo and Delta Separations, along withfrom the prior year acquisition of Apeks,Architectural Mailboxes also contributed $58.9$16.4 million or 22.5%, to the increase in the current year.
Net sales in our Agtech segment increased 9.7%, or $8.9 million, to $100.4 million for the six months ended June 30, 2021 compared to $91.5 million for the six months ended June 30, 2020. Sales generated from Thermo and Delta Separations acquired in the first quarter of 2020, contributed $4.6 million, to the increase in this segment.
Organic growth of $2.5revenue increased $4.3 million, or 1.0%, waslargely driven by participation gains in our renewable energy related businesses, partially offset by a decline in our core conservation business related to a slowdowngrowth in the cannabisproduce market along with slower but improving market conditions for commercial, car wash, retail and hemp markets. Backlog improved 28%processing equipment segments. Partially offsetting the segment increase was the shift in timing of projects from the current period into the second half of the year as schedules have been impacted by permit delays, re-scoping of projects and supply chain disruptions. While backlog experienced a slight and temporary decrease of7% year over year, for this segment, which wasdue to the resultimpact of strong end market demand in renewable energy,re-scoping of projects and in conservation, driven by strength in the fruit and vegetable market and increasingsupply chain disruptions impacting project scheduling, subsequent order activity in the cannabis market.
is accelerating backlog momentum.
Net sales in our Residential ProductsInfrastructure segment increased 9.5%14.9%, or $34.2$4.9 million, to $394.6$37.9 million for the ninesix months ended SeptemberJune 30, 20202021 compared to $360.4$32.9 million for the ninesix months ended SeptemberJune 30, 2019. The increase2020. During the current year, demand for fabricated and non-fabricated products from this segment increased as the prior year was largely due to continued solid activity in the repaireconomy strengthened and remodel market, along with participation gains across our various distribution channels.
Net sales in our Industrial and Infrastructure Products segment decreased 12.0%, or $20.0 million, to $147.3 million for the nine months ended September 30, 2020state project funding improved. Backlog remained strong increasing 11% compared to $167.3 million for the nine months ended September 30, 2019. Lower demand and lower steel prices impacting its core industrial products resulted in a decrease in revenue in the Industrial businesses. Revenue in the Infrastructure business was essentially flat year over year, while its ending backlog improved slightly from the prior year.
Our consolidated gross margin increaseddecreased to 24.8%22.2% for the ninesix months ended SeptemberJune 30, 20202021 compared to 23.3%24.5% for the ninesix months ended SeptemberJune 30, 2019.2020. This increasedecrease was duethe result of costs incurred during the current year related to the planned discontinuation of our organic solar tracker solution as we migrate towards the solution offered by our recently acquired TerraSmart business. Additionally, lower gross margins generated from our recent acquisitions contributed to the decline as we continue to integrate them operationally along with timing and alignment of higher input costs to price increases, supply chain disruptions, and shifts in project timing in the Agtech and Renewables segments. Partially offsetting the decrease was improved operating execution in all of our core businesses compared to the prior year period that included incremental costs for design refinementyear.
Selling, general, and field improvements for our solar tracking solution, effective price and material cost management and benefits from our 80/20 simplification initiatives. Partially offsetting the above improvements were lower gross margins generated from our recent acquisitions.
administrative ("SG&A&A") expenses increased by $5.0$24.8 million, or 4.3%34.5%, to $120.4$96.7 million for the ninesix months ended SeptemberJune 30, 20202021 from $115.4$71.9 million for the ninesix months ended SeptemberJune 30, 2019.2020. The $5.0$24.8 million increase was largely the result of $11.0primarily due to $12.9 million of incremental SG&A expenses recorded year over year forfrom our recent acquisitions and transaction costs to complete those acquisitions, closed during the year, along with investments$4.6 million of higher performance-based compensation expenses as compared to the prior year. Additionally, we have invested in the development of our organization and safety of our team through actions including but not limited to the expansion of headcount in key positions and the launch of additional developmental improvement initiatives. Furthermore, healthcare costs increased year over year as prior year spend was down due to COVID-related closures of medical facilities, while the current year spend was impacted by reallocating SG&A spending. Partially offsetting thesedeferred treatments due to those closures. Despite the above increases, was decreased spending for exit activity costs of approximately $4.6 million. SG&A expenses as a percentage of net sales modestly decreased to 14.0%15.2% for the ninesix months ended SeptemberJune 30, 20202021 compared to 14.6%15.3% for the ninesix months ended SeptemberJune 30, 2019.2020.
The following table sets forth the Company’s income from operations and income from operations as a percentage of net sales by reportable segment for the ninesix months ended SeptemberJune 30, (in thousands):
| | | | 2020 | | 2019 | | Total Change | | | 2021 | | 2020 | | Total Change | |
Income from operations: | Income from operations: | | | | | | | Income from operations: | | | | | | |
Renewable Energy and Conservation | $ | 29,082 | | | 9.0 | % | | $ | 30,914 | | | 11.8 | % | | $ | (1,832) | | | |
Residential Products | 74,143 | | | 18.8 | % | | 49,880 | | | 13.8 | % | | 24,263 | | | |
Industrial and Infrastructure Products | 15,832 | | | 10.7 | % | | 13,660 | | | 8.2 | % | | 2,172 | | | |
Renewables | | Renewables | $ | 8,989 | | | 4.7 | % | | $ | 12,781 | | | 12.4 | % | | $ | (3,792) | | |
Residential | | Residential | 50,089 | | | 16.5 | % | | 41,689 | | | 17.2 | % | | 8,400 | | |
Agtech | | Agtech | 1,906 | | | 1.9 | % | | 2,106 | | | 2.3 | % | | (200) | | |
Infrastructure | | Infrastructure | 6,223 | | | 16.4 | % | | 4,377 | | | 13.3 | % | | 1,846 | | |
Unallocated Corporate Expenses | Unallocated Corporate Expenses | (25,417) | | | (2.9) | % | | (25,862) | | | (3.3) | % | | 445 | | | Unallocated Corporate Expenses | (22,983) | | | (3.6) | % | | (17,428) | | | (3.7) | % | | (5,555) | | |
Consolidated income from operations | Consolidated income from operations | $ | 93,640 | | | 10.8 | % | | $ | 68,592 | | | 8.7 | % | | $ | 25,048 | | | Consolidated income from operations | $ | 44,224 | | | 7.0 | % | | $ | 43,525 | | | 9.2 | % | | $ | 699 | | |
Our Renewable Energy and Conservation
The Renewables segment generated an operating margin of 9.0% during4.7% in the nine months ended September 30, 2020current year compared to 11.8% during12.4% in the nine months ended September 30, 2019.prior year. The decrease in operating margin was the netcombined result of costs incurred during the current year related to the discontinuation of our organic solar tracker solution along with expected lower margins generated fromby our recent acquisitions, the result of backlog amortization and integration costs, as we continue to integrate them operationally, largely offset by favorable product and services mix and strong executionoperationally. Additionally contributing to the decrease, was a one-time tariff credit received in our renewable energy businesses, as well as, the absence of incremental costs incurred during the prior year for design refinementalong with the impact of timing and field improvements foralignment of price to input costs and project movement associated with supply chain challenges. Partially offsetting the lower margin is improvement in our solar tracking solution.core business resulting from 80/20 productivity initiatives. TerraSmart's operating margin continues to improve in the first half of 2021 and remains on track relative to our full year integration plans.
OurThe Residential Products segment generated an operating margin of 18.8% during16.5% in the nine months ended September 30, 2020current year compared to 13.8% during17.2% in the nine months ended September 30, 2019.prior year. The increasedecrease in operating margin was largely the result of volume leverage, effective priceaccelerated inflation, material and material cost management and continued benefits from 80/20 simplification initiatives, along with a $3.1 million decrease in exit activity costs compared to the prior year.labor availability
The Industrial and Infrastructure Productsthe timing and alignment of price actions and input costs. While multiple price increases have been implemented, historically, operating margin alignment lags and recovers within a one to two quarter period. Partially offsetting the lower margin is continued solid execution and continued benefits from 80/20 simplification initiatives.
Our Agtech segment generated an operating margin of 10.7%1.9% during the ninesix months ended SeptemberJune 30, 20202021 compared to 8.2%2.3% during the ninesix months ended SeptemberJune 30, 2019.2020. The increasedecrease in operating margin was the combined result of the abovementioned movement of certain projects into the second half of the year, higher input costs and supply chain and logistics challenges incurred in the current year along with integration delays incurred by Thermo during the earlier months of 2021. Partially offsetting the lower margin was improvements in the legacy greenhouse structures, cannabis greenhouse structures, and processing equipment businesses along with lower restructuring and acquisition costs incurred as compared to the prior year period.
Our Infrastructure segment generated an operating margin of 16.4% during the six months ended June 30, 2021 compared to 13.3% during the six months ended June 30, 2020. The increase was driven by higher margin mix resulting from increased non-fabricated product volumes, along with strong execution on higher volumes and higher revenue and continued improvementinvestment in execution in our industrial business, effective price and material cost management and ongoing benefit from the Company's 80/20 productivity initiatives.
Unallocated corporate expenses decreased $0.4increased $5.6 million from $25.9$17.4 million during the ninesix months ended SeptemberJune 30, 20192020 to $25.4$23.0 million during the ninesix months ended SeptemberJune 30, 2020.2021. The slight decreaseincrease in expense was primarily duethe result of $4.2 million of higher performance-based compensation expenses as compared to lower performance based compensation expense.the prior year.
Interest expense decreasedincreased by $1.9$0.4 million to $0.4$0.7 million for the ninesix months ended SeptemberJune 30, 20202021 compared to $2.3$0.3 million for the ninesix months ended SeptemberJune 30, 2019.2020. The decreaseincrease in expense resulted fromwas primarily the redemptionresult of $32.3 million in the outstanding balance on the Company's outstanding $210 millionrevolving credit facility as of 6.25% Senior Subordinated Notes during the first quarter of 2019.June 30, 2021. No amounts were outstanding under our revolving credit facility during the ninesix months ended SeptemberJune 30, 2020 and 2019.2020.
The Company recorded other income of $1.5$4.4 million for the ninesix months ended SeptemberJune 30, 2020 and other expense of $0.72021 compared to the $1.4 million recorded for the ninesix months ended SeptemberJune 30, 2019.2020. The change$3.0 million increase from the prior year was largely the result of a $4.7 million gain recognized on the sale of securities received from the sellers of Thermo to settle indemnification claims, partially offset by the prior year period $1.9 million pre-tax gain on the sale of the Company's self-guided apartment tour application business within the Residential Products segment.
We recognized a provision for income taxes of $21.7$11.0 million and $14.9$10.3 million, with effective tax rates of 22.9% and 22.7%,23.0% for both the ninesix months ended SeptemberJune 30, 2020,2021, and 2019,2020, respectively. The effective tax rates for the ninesix months ended SeptemberJune 30, 2021 and 2020, and 2019, respectively, exceededwere greater than the U.S. federal statutory rate of 21% due to state taxes and nondeductible permanent differences partially offset by favorable discrete items.items due to an excess tax benefit on stock-based compensation.
Outlook
The Company deliveredexpects that the current business environment, which has been dynamic since the beginning of the year, to remain so throughout the second half of 2021, and will continue to manage inflation, minimize supply chain disruptions, operate in a tight labor market, and continue with its COVID operating protocols. The Company is currently positioned well with solid revenueend market demand, record order backlog, a very healthy balance sheet, and growth in earnings per sharestrong focus on daily execution, acquisition integrations, and strengthening its organization and operating systems.
As such, the Company is maintaining its full year guidance of revenues based on its performance to date in 2021, which is consistent with its historical patterns, and outlook and initiatives for improving profitability across each business Consolidated revenue is expected to range between $1.30 billion and $1.35 billion, up from $1.03 billion in 2020 and expects fourth quarter performance to surpass 2019 results. Given the ongoing level of uncertainty related to the pandemicGAAP EPS from continuing operations between $2.78 and the economy Gibraltar is maintaining the practice of providing qualitative guidance.
Our momentum and end market trends continue to be positive, and we continue to monitor the pandemic's impact on our businesses and potential impact on the U.S. and global economy. We remain focused on executing our operating protocols, maintaining a safe environment for our people, and meeting our customers’ needs every day. We will also continue$2.95, compared with key organic and inorganic investments to strengthen our business platforms for the markets we serve.$2.53 in 2020.
Liquidity and Capital Resources
Our principal capital requirements are to fund our operations' working capital and capital improvements and to provide capital for acquisitions. We will continue to invest in growth opportunities as appropriate while focusing on working capital efficiency and profit improvement opportunities to minimize the cash invested to operate our business. The following table sets forth our liquidity position as of:
| (in thousands) | (in thousands) | | September 30, 2020 | | December 31, 2019 | (in thousands) | | June 30, 2021 | | December 31, 2020 |
Cash and cash equivalents | Cash and cash equivalents | | $ | 179,816 | | | $ | 191,363 | | Cash and cash equivalents | | $ | 16,963 | | | $ | 32,054 | |
Availability on revolving credit facility | Availability on revolving credit facility | | 394,100 | | | 393,991 | | Availability on revolving credit facility | | 360,179 | | | 309,175 | |
| | $ | 573,916 | | | $ | 585,354 | | | $ | 377,142 | | | $ | 341,229 | |
We believe that our cash on hand lack of outstanding debt, and available borrowing capacity provided under the Seniorour Sixth Amended and Restated Credit Agreement (the "Senior Credit Agreement") provide us with ample liquidity and capital resources to weather the economic impacts of the COVID-19 pandemic while continuing to invest in operational excellence, growth initiatives and the development of our organization. After pausing earlier in the year as the pandemic unfolded, we have begun to cautiously re-engage in acquisition processes that are aligned with our strategic initiatives and invest in opportunities that strengthen our business platforms for the markets we serve, while being mindful of the continued impact of the COVID-19 pandemic on our economic outlook. We continue to remain focused on managing our working capital, which may include adjusting scheduled deliveries of inventory to match current demand levels, closely monitoring customer credit and collection activities, and working to extend payment terms.
We believe our liquidity, together with the cash expected to be generated from operations, should be sufficient to fund working capital needs and growth initiatives.
Our Senior Credit Agreement provides us with liquidity and capital resources for use by our U.S. operations. Historically, our foreign operations have generated cash flow from operations sufficient to invest in working capital and fund their capital improvements. As of SeptemberJune 30, 2020,2021, our foreign subsidiaries held $38.8$14.9 million of cash in U.S. dollars.
We are taking advantage of the optionDuring 2020, we opted to defer remittance of the employer portion of Social Security tax as provided in the Coronavirus, Aid, Relief and Economic Security Act ("CARES Act"), and estimate that this deferral will allowwhich allowed us to retain approximately $4$4.4 million in cash during 2020 that would have otherwise been remitted to the federal government. The deferred tax payments will be repaid equally inon December 31, 2021 and 2022. The CARES Act, along with other foreign government initiatives, also provides for job retention programs, which have allowed some of our businesses to receive payroll tax credits or subsidies during 2020.
Over the long-term, we expect that future investments, including strategic business opportunities such as acquisitions, may be financed through a number of sources, including internally available cash, availability under our revolving credit facility, new debt financing, the issuance of equity securities, or any combination of the above. All potential acquisitions are evaluated based on our acquisition strategy, which includes the enhancement of our existing products, operations, or capabilities, expanding our access to new products, markets, and customers, with the goal of creating compounding and sustainable shareholderstockholder value.
These expectations are forward-looking statements based upon currently available plans and information and may change if conditions in the credit and equity markets deteriorate or other circumstances change. To the extent that operating cash flows are lower than current or expected levels, or sources of financing are not available or not available at acceptable terms, our future liquidity may be adversely affected.
Cash Flows
The following table sets forth selected cash flow data for the ninesix months ended SeptemberJune 30, (in thousands):
| | | 2020 | | 2019 | | 2021 | | 2020 |
Cash provided by (used in): | Cash provided by (used in): | | | | Cash provided by (used in): | | | |
Operating activities of operations | $ | 56,194 | | | $ | 72,494 | | |
Investing activities of operations | (61,152) | | | (16,281) | | |
Financing activities of operations | (6,031) | | | (216,330) | | |
| Operating activities of continuing operations | | Operating activities of continuing operations | $ | 12,777 | | | $ | (10,967) | |
Investing activities of continuing operations | | Investing activities of continuing operations | 30,515 | | | (57,800) | |
Financing activities of continuing operations | | Financing activities of continuing operations | (56,292) | | | (4,384) | |
Discontinued operations | | Discontinued operations | (2,178) | | | 2,659 | |
Effect of foreign exchange rate changes | Effect of foreign exchange rate changes | (558) | | | 729 | | Effect of foreign exchange rate changes | 87 | | | (12) | |
Net decrease in cash and cash equivalents | Net decrease in cash and cash equivalents | $ | (11,547) | | | $ | (159,388) | | Net decrease in cash and cash equivalents | $ | (15,091) | | | $ | (70,504) | |
Operating Activities
Net cash provided by operating activities of continuing operations for the ninesix months ended SeptemberJune 30, 20202021 of $56.2$12.8 million consisted of net income from continuing operations of $73.1$36.9 million and non-cash net charges totaling $24.2 $22.4
million, which include depreciation, amortization, stock compensation, exit activity costs and other non-cash charges, offset by a $41.1$46.5 million investment in working capital and other net assets. The investment in net working capital and other net assets was driven by the investment in net working capital and other net assets was largely driven by an investment of $42.4 millionincrease in Thermo, one of our recent acquisitions, which was undercapitalized at purchase, along withinventory due to rising material costs and accounts receivable due to seasonal increases in demand, offset by an increase in accounts receivable due to strong demandpayable as the result of seasonal increases in our Residential Products segment and a decrease in accrued expenses and other non-current liabilities correlated to the timing of customer billings and payments.manufacturing activity.
Net cash provided byused in operating activities of $72.5 million duringcontinuing operations for the ninesix months ended SeptemberJune 30, 20192020 of $11.0 million consisted of net income of $50.7$34.4 million and $28.3non-cash net charges totaling $12.8 million, of non-cash charges includingwhich include depreciation, amortization, stock compensation, exit activity and other non-cash charges, more than offset by ana $58.1 million investment in working capital and other net assetsassets. The working capital investment was largely comprised of $6.6 million.$42.4 million related to our acquisition of Thermo, which was undercapitalized at time of purchase in the first quarter of 2020.
Investing Activities
Net cash provided by investing activities of continuing operations for the six months ended June 30, 2021 of $30.5million was primarily due to $40.0 million in net proceeds received from the sale of the Company's Industrial business, offset by capital expenditures of $9.5 million.
Net cash used in investing activities of continuing operations for the ninesix months ended SeptemberJune 30, 2020 of $61.2$57.8 million primarily consisted of net cash paid for the acquisitions of Delta Separations of $47.1 million and Thermo of $7.3 million and
capital expenditures of $9.3$4.2 million, offset by $2.0$0.8 million in proceeds from the sale of a business within the Residential Products segment and $0.6 million in proceeds from the sale of property and equipment.
Net cash used in investing activities for the nine months ended September 30, 2019 of $16.3 million consisted of $8.7 million net cash paid for the acquisition of Apeks and capital expenditures of $7.7 million.
Financing Activities
Net cash used in financing activities of continuing operations for the ninesix months ended SeptemberJune 30, 20202021 of $6.0$56.3 million was primarily the result of $6.4$83.6 million in payments on long-term debt and $4.8 million of purchases of treasury stock related to the net settlement of tax obligations for participants in the Company's equity incentive plans, offset by $0.4$31.2 million in proceeds from borrowing on our long-term credit facility and $0.9 million from the issuance of common stock from stock option exercises during the period.
Net cash used in financing activities of continuing operations for the ninesix months ended SeptemberJune 30, 20192020 of $216.3$4.4 million consistedwas primarily the result of the repayment of $210.0 million of 6.25% Senior Subordinated Notes along with $2.0 million in other debt repayments, purchases of treasury stock of $3.5 million related to the net settlement of tax obligations for participants in the Company's equity incentive plans, and the payment of debt issuance costs of $1.2 million, partially offset by proceeds received from the issuance of common stock of $0.4 million from stock options exercised.plans.
See Note 8 to the Company's consolidated financial statements in Part I, Item 1, Financial Statements, of this Form 10-Q for further information on the Company’s Senior Credit Agreement.
Off Balance Sheet Financing Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
Contractual Obligations
Our contractual obligations have not changed materially from the disclosures included in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Critical Accounting Estimates
In the current year, there have been no changes to our critical accounting estimates from those disclosed in the consolidated financial statements and accompanying notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Recent Accounting Pronouncements
See Note 2 to the Company's consolidated financial statements in Part I, Item 1 of this Form 10-Q for further information on recent accounting pronouncements.
Item 3. Qualitative and Quantitative Disclosures About Market Risk
In the ordinary course of business, the Company is exposed to various market risk factors, including changes in general economic conditions, competition, foreign exchange rates, and raw materials pricing and availability. In addition, the Company is exposed to other financial market risks, primarily related to its foreign operations. Refer to Item 7A in the Company's Form 10-K for the year ended December 31, 20192020 for more information about the Company's exposure to market risk.
Item 4. Controls and Procedures
(a)Evaluation of Disclosure Controls and Procedures
The Company maintains a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). The Company’s Chief Executive Officer and the Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls as of the end of the period covered in this report. Based upon that evaluation and the definition of disclosure controls and procedures contained in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of the end of such period the Company’s disclosure controls and procedures were effective.
(b)Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as defined by Rule 13a-15(f) or 15d-15(f)) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risks discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.2020. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operation, cash flows, and future prospects. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may materially adversely impact our business, financial condition, or operating results. We believe there have been no material changes from the risk factors previously disclosed in our Form 10-K. During the nine months ended September 30, 2020, there have been no material changes to the risk factors previously disclosed under Part I, Item 1A. “Risk Factors” in our 2019 Annual Report, other than the addition of the risk factor set forth below, which was included in Part II, Item 1A of our Form 10-Q reports for the quarters ended March 31, 2020 and June 30, 2020.
The COVID-19 pandemic has significantly impacted worldwide economic conditions and could have a material adverse effect on our business, results of operations, financial condition, and cash flows.
The COVID-19 pandemic began to impact our operations late in the first quarter of 2020 and is likely to continue to affect our business as government authorities impose mandatory closures, work-from-home orders and social distancing protocols, seek voluntary facility closures or impose other restrictions to help control the spread of COVID-19. Although we cannot predict the duration or scope of the COVID-19 pandemic, current actions to control the spread of COVID-19 may adversely impact our business, including limiting our ability to implement our strategic growth initiatives, causing delays in our receipt of raw materials and other product components due to disruptions in our supply chain, limiting access to our distribution channels, reducing the availability of our workforce and subcontractors and increased threats of cyber attacks on our information technology infrastructure. The instability in global financial markets and unpredictable changes in our supply chain or our production capacity and customer demand resulting from the COVID-19 pandemic may pose material risk to our results of operations, financial condition, and cash flows. We are continuously monitoring the impact to our business and operations and taking action to mitigate the risks involved. However, prolonged disruption to the economy and the end markets we serve may have a material adverse impact our business, results of operations, financial condition, and cash flows.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
(a) Exhibits
| | | | | | | | |
| | Certificate of Incorporation of Gibraltar Industries, Inc., as amended by: (i) Certificate of Amendment of Certificate of Incorporation of Gibraltar Industries, Inc. filed October 27, 2004, (ii) Certificate of Change of Registered Agent and Registered Office of Gibraltar Industries, Inc. filed May 11, 2005, (iii) Certificate of Amendment of Certificate of Incorporation of Gibraltar Industries, Inc. executed May 22, 2012, (iv) Certificate of Amendment of Certificate of Incorporation of Gibraltar Industries, Inc. executed May 11, 2015, and (v) Certificate of Amendment of Certificate of Incorporation of Gibraltar Industries, Inc. executed May 5, 2021 |
| | Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002. |
| | Certification of Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002. |
| | Certification of the President and Chief Executive Officer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002. |
| | Certification of the Senior Vice President and Chief Financial Officer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002. |
| 101.INS | XBRL Instance Document * |
| 101.SCH | XBRL Taxonomy Extension Schema Document * |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document * |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document * |
| 101.PRA | XBRL Taxonomy Extension Presentation Linkbase Document * |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document * |
| | | | | |
* | Submitted electronically with this Quarterly Report on Form 10-Q. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GIBRALTAR INDUSTRIES, INC.
(Registrant)
| | |
/s/ William T. Bosway |
William T. Bosway |
President and Chief Executive Officer |
| | |
/s/ Timothy F. Murphy |
Timothy F. Murphy |
Senior Vice President and Chief Financial Officer |
Date: October 29, 2020August 3, 2021