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ROCK Gibraltar Industries

Filed: 3 Aug 21, 3:48pm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
rock-20210630_g1.jpg
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
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) 
Delaware 16-1445150
(State or incorporation ) (I.R.S. Employer Identification No.)
3556 Lake Shore RoadP.O. Box 2028BuffaloNew 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:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.01 par value per shareROCKNASDAQ 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):
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging 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 August 2, 2021, the number of common shares outstanding was: 32,636,340.


GIBRALTAR INDUSTRIES, INC.
INDEX
 

2

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
June 30,
Six Months Ended
June 30,
 2021202020212020
Net Sales$348,389 $255,184 $635,981 $470,585 
Cost of sales267,458 189,623 495,032 355,163 
Gross profit80,931 65,561 140,949 115,422 
Selling, general, and administrative expense49,522 34,813 96,725 71,897 
Income from operations31,409 30,748 44,224 43,525 
Interest expense245 222 689 266 
Other income(4,666)(1,892)(4,351)(1,374)
Income before taxes35,830 32,418 47,886 44,633 
Provision for income taxes9,457 7,961 11,017 10,274 
Income from continuing operations26,373 24,457 36,869 34,359 
Discontinued operations:
(Loss) Income before taxes(502)3,746 2,068 6,576 
(Benefit from) Provision for income taxes(78)911 226 1,584 
(Loss) Income from discontinued operations(424)2,835 1,842 4,992 
Net income$25,949 $27,292 $38,711 $39,351 
Net earnings per share – Basic:
Income from continuing operations$0.80 $0.75 $1.12 $1.05 
(Loss) Income from discontinued operations(0.01)0.09 0.06 0.16 
Net income$0.79 $0.84 $1.18 $1.21 
Weighted average shares outstanding -- Basic32,790 32,605 32,791 32,596 
Net earnings per share – Diluted:
Income from continuing operations$0.80 $0.74 $1.11 $1.05 
(Loss) Income from discontinued operations(0.01)0.09 0.06 0.15 
Net income$0.79 $0.83 $1.17 $1.20 
Weighted average shares outstanding -- Diluted33,056 32,860 33,071 32,868 
See accompanying notes to consolidated financial statements.
3

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 
Three Months Ended
June 30,
Six Months Ended
June 30,
 2021202020212020
Net income$25,949 $27,292 $38,711 $39,351 
Other comprehensive income (loss):
Foreign currency translation adjustment761 2,815 3,959 (3,083)
Minimum post retirement benefit plan adjustments27 18 54 36 
Other comprehensive income (loss)788 2,833 4,013 (3,047)
Total comprehensive income$26,737 $30,125 $42,724 $36,304 
See accompanying notes to consolidated financial statements.
4

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
June 30,
2021
December 31,
2020
(unaudited)
Assets
Current assets:
Cash and cash equivalents$16,963 $32,054 
Accounts receivable, net of allowance of $5,294 and $3,529225,315 197,990 
Inventories, net133,625 98,307 
Prepaid expenses and other current assets23,641 19,671 
Assets of discontinued operations77,438 
Total current assets399,544 425,460 
Property, plant, and equipment, net95,837 89,562 
Operating lease assets21,651 25,229 
Goodwill508,857 514,279 
Acquired intangibles159,734 156,365 
Other assets510 1,599 
$1,186,133 $1,212,494 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$168,917 $134,738 
Accrued expenses68,677 83,505 
Billings in excess of cost49,215 34,702 
Liabilities of discontinued operations49,295 
Total current liabilities286,809 302,240 
Long-term debt32,309 85,636 
Deferred income taxes37,555 39,057 
Non-current operating lease liabilities14,391 17,730 
Other non-current liabilities27,461 24,026 
Stockholders’ equity:
Preferred stock, $0.01 par value; authorized 10,000 shares; NaN outstanding
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 2020337 336 
Additional paid-in capital310,728 304,870 
Retained earnings508,654 469,943 
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(33,663)(28,883)
Total stockholders’ equity787,608 743,805 
$1,186,133 $1,212,494 
See accompanying notes to consolidated financial statements.
5

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited) 
Six Months Ended
June 30,
 20212020
Cash Flows from Operating Activities
Net income$38,711 $39,351 
Income from discontinued operations1,842 4,992 
Income from continuing operations36,869 34,359 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization16,014 9,942 
Stock compensation expense4,935 4,171 
Gain on sale of business(1,881)
Exit activity costs, non-cash1,193 346 
Benefit of deferred income taxes(36)(195)
Other, net349 429 
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable(29,150)(26,289)
Inventories(42,686)3,289 
Other current assets and other assets(611)1,893 
Accounts payable35,174 (989)
Accrued expenses and other non-current liabilities(9,274)(36,042)
Net cash provided by (used in) operating activities of continuing operations12,777 (10,967)
Net cash (used in) provided by operating activities of discontinued operations(2,002)3,712 
Net cash provided by (used in) operating activities10,775 (7,255)
Cash Flows from Investing Activities
Purchases of property, plant, and equipment(9,474)(4,178)
Acquisitions, net of cash acquired(2)(54,385)
Net proceeds from sale of business39,991 704 
Net proceeds from sale of property and equipment59 
Net cash provided by (used in) investing activities of continuing operations30,515 (57,800)
Net cash used in investing activities of discontinued operations(176)(1,053)
Net cash provided by (used in) investing activities30,339 (58,853)
Cash Flows from Financing Activities
Proceeds from long-term debt31,200 
Long-term debt payments(83,636)
Purchase of treasury stock at market prices(4,780)(4,462)
Net proceeds from issuance of common stock924 78 
Net cash used in financing activities(56,292)(4,384)
Effect of exchange rate changes on cash87 (12)
Net decrease in cash and cash equivalents(15,091)(70,504)
Cash and cash equivalents at beginning of year32,054 191,363 
Cash and cash equivalents at end of period$16,963 $120,859 
See accompanying notes to consolidated financial statements.
6

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited) 
 Common StockAdditional
Paid-In Capital
Retained EarningsAccumulated
Other
Comprehensive (Loss) Income
Treasury StockTotal
Stockholders’ Equity
 SharesAmountSharesAmount
Balance at December 31, 202033,568 $336 $304,870 $469,943 $(2,461)1,028 $(28,883)$743,805 
Net income— — — 12,762 — — — 12,762 
Foreign currency translation adjustment— — — — 3,198 — — 3,198 
Minimum post retirement benefit plan adjustments, net of taxes of $10— — — — 27 — — 27 
Stock compensation expense— — 2,368 — — — — 2,368 
Stock options exercised25 — 910 — — — — 910 
Net settlement of restricted stock units118 (1)— — 54 (4,662)(4,662)
Balance at March 31, 202133,711 $337 $308,147 $482,705 $764 1,082 $(33,545)$758,408 
Net income— — — 25,949 — — — 25,949 
Foreign currency translation adjustment— — — — 761 — — 761 
Minimum post retirement benefit plan adjustments, net of taxes of $10— — — — 27 — — 27 
Stock compensation expense— — 2,567 — — — — 2,567 
Stock options exercised— 14 — — — — 14 
Awards of common shares— — — — — — — 
Net settlement of restricted stock units— — (118)(118)
Balance at June 30, 202133,718 $337 $310,728 $508,654 $1,552 1,083 $(33,663)$787,608 

See accompanying notes to consolidated financial statements.
7

GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited) 
Common StockAdditional
Paid-In Capital
Retained EarningsAccumulated
Other
Comprehensive Loss
Treasury StockTotal
Stockholders’ Equity
SharesAmountSharesAmount
Balance at December 31, 201933,192 $332 $295,582 $405,668 $(5,391)906 $(22,227)$673,964 
Net income— — — 12,059 — — — 12,059 
Foreign currency translation adjustment— — — — (5,898)— — (5,898)
Minimum post retirement benefit plan adjustments, net of taxes of $7— — — — 18 — — 18 
Stock compensation expense— — 1,665 — — — — 1,665 
Cumulative effect of accounting change— — — (291)— — — (291)
Stock options exercised— 24 — — — — 24 
Net settlement of restricted stock units193 (2)— — 80 (4,184)(4,184)
Balance at March 31, 202033,388 $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 post retirement benefit plan adjustments, net of taxes of $6— — — — 18 — — 18 
Stock compensation expense— — 2,506 — — — — 2,506 
Stock options exercised— 54 — — — — 54 
Awards of common shares— — — — — — — 
Net settlement of restricted stock units15 — — (278)(278)
Balance at June 30, 202033,413 $334 $299,829 $444,728 $(8,438)993 $(26,689)$709,764 

See accompanying notes to consolidated financial statements.
8

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, 2020.

The balance sheet at December 31, 2020 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.



9



(2)    RECENT ACCOUNTING PRONOUNCEMENTS

Recent Accounting Pronouncements Adopted
StandardDescriptionFinancial 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.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 have a material impact to the Company’s financial statements.


Date of adoption: Q1 2021


(3)    ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts receivable consists of the following (in thousands):
June 30, 2021December 31, 2020
Trade accounts receivable$182,015 $174,604 
Costs in excess of billings48,594 26,915 
Total accounts receivables230,609 201,519 
Less allowance for doubtful accounts and contract assets(5,294)(3,529)
Accounts receivable, net$225,315 $197,990 

Refer to Note 4 "Revenue" concerning the Company's costs in excess of billings.

The following table provides a roll-forward of the allowance for credit losses, for the six month period ended June 30, 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, 2021$3,529 
Bad debt expense, net of recoveries1,297 
Accounts written off against allowance and other adjustments468 
Ending balance as of June 30, 2021$5,294 


(4)    REVENUE

Sales includes revenue from contracts with customers for: designing, engineering, manufacturing and installation of solar racking systems; electrical balance of systems; roof and foundation ventilation products; centralized mail systems and electronic package solutions; retractable awnings; gutter guards; rain dispersion products; trims and flashings and other accessories; designing, engineering, manufacturing and installation of greenhouses; botanical extraction systems; structural bearings; expansion joints; pavement sealant; elastomeric concrete; and bridge cable protection systems.

Refer to Note 15 "Segment Information" for additional information related to revenue recognized by timing of transfer of control by reportable segment.

10

As of June 30, 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. Unearned revenue as of June 30, 2021 and December 31, 2020 was $4.7 million and $21.3 million, respectively. Revenue recognized during the three months ended June 30, 2021 and 2020 that was in contract liabilities at the beginning of the respective periods was $49.2 million and $53.3 million, respectively.


(5)    INVENTORIES

Inventories consist of the following (in thousands):
June 30, 2021December 31, 2020
Raw material$99,074 $66,018 
Work-in-process6,197 5,382 
Finished goods33,623 31,205 
Gross inventory$138,894 $102,605 
Less reserves(5,269)(4,298)
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.


11

The 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 capital7,148 
Property, plant and equipment11,758 
Acquired intangible assets64,150 
Other assets1,854 
Other liabilities(1,640)
Goodwill139,106 
Fair value of purchase consideration$223,867 

The intangible assets acquired in the TerraSmart acquisition consisted of the following (in thousands):
Fair ValueWeighted-Average Amortization Period
Trademarks$20,830 Indefinite
Technology1,940 12 years
Customer relationships35,110 12 years
Backlog6,270 Less than 1 year
Total$64,150 


On December 11, 2020, the Company purchased all the outstanding stock of Sunfig Corporation ("Sunfig"), a provider of software solutions that optimize solar energy investments through upstream design, performance and financial modeling, for a purchase consideration of $3.8 million, which includes a working capital adjustment and certain other adjustments provided for in the stock purchase agreement. The results of Sunfig have been included in the Company's consolidated financial results since the date of acquisition within the Company's Renewables segment. The excess consideration was recorded as goodwill and approximated $3.2 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 and Teaching Tech, LLC (collectively, "Delta Separations") for a purchase consideration of $47.1 million, which includes a working capital adjustment and certain other adjustments provided for in the asset purchase agreement. Delta Separations was a privately-held engineering company primarily engaged in the assembly and sale of centrifugal ethanol-based extraction systems. The results of Delta Separations have been included in the Company's consolidated financial results since the date of acquisition within the Company's Agtech segment. The excess consideration was recorded as goodwill and approximated $32.2 million, all of which is deductible for tax purposes.

On January 15, 2020, the Company purchased substantially all of the assets of Thermo Energy Systems Inc. ("Thermo"), a Canadian-based, privately held provider of commercial greenhouse solutions in North America providing growing infrastructure for the plant based organic food market, for a purchase consideration of $7.3 million. The results of Thermo have been included in the Company's consolidated financial results since the date of acquisition within the Company's Agtech segment. Goodwill of approximately $18.7 million was recorded, all of which is deductible for tax purposes.

12

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 equipment1,740 
Acquired intangible assets38,296 
Other current assets1,528 
Other assets2,381 
Other liabilities(5,508)
Goodwill61,422 
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 respective markets.

The intangible assets acquired in the acquisitions of Sunfig, Architectural Mailboxes, Delta Separations and Thermo consisted of the following (in thousands):
Fair ValueWeighted-Average Amortization Period
Trademarks$8,200 Indefinite
Trademarks1,177 3 years
Technology8,175 7 - 15 years
Customer relationships18,780 5 - 13 years
Non-compete agreements1,036 5 years
Backlog928 Less than 1 year
Total$38,296 

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 and Thermo 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.

13

The acquisition-related costs consisted of the following for the three and six months ended June 30 (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
Cost of sales$$634 $$634 
Selling, general and administrative costs288 893 1,548 
Total acquisition-related costs$$922 $893 $2,182 


(7)    GOODWILL AND RELATED INTANGIBLE ASSETS

Goodwill
The changes in the carrying amount of goodwill for the six months ended June 30, 2021 are as follows (in thousands):
RenewablesResidentialAgtechInfrastructureTotal
Balance at December 31, 2020$192,527 $205,452 $84,622 $31,678 $514,279 
Adjustments to prior year acquisitions(4,593)(4,593)
Foreign currency translation(990)161 (829)
Balance at June 30, 2021$186,944 $205,452 $84,783 $31,678 $508,857 

The Company is required to regularly assess whether a triggering event has occurred which would require interim impairment testing. 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):
 June 30, 2021December 31, 2020
 Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Indefinite-lived intangible assets:
Trademarks$61,100 $$56,570 $
Finite-lived intangible assets:
Trademarks5,550 3,747 5,818 3,385 
Unpatented technology38,386 19,194 38,752 17,765 
Customer relationships109,329 35,658 98,500 31,580 
Non-compete agreements2,691 1,859 4,885 1,747 
Backlog7,216 4,080 7,228 911 
163,172 64,538 155,183 55,388 
Total acquired intangible assets$224,272 $64,538 $211,753 $55,388 

14

The following table summarizes the acquired intangible asset amortization expense for the three and six months ended June 30 (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
Amortization expense$4,736 $2,018 $9,479 $4,002 
Amortization expense related to acquired intangible assets for the remainder of fiscal 2021 and the next five years thereafter is estimated as follows (in thousands):
202120222023202420252026
Amortization expense$9,414 $12,167 $11,236 $11,055 $10,820 $9,186 


(8)    LONG-TERM DEBT

Long-term debt consists of the following (in thousands):
June 30, 2021December 31, 2020
Revolving credit facility$33,200 $85,000 
Other debt636 
Less unamortized debt issuance costs(891)
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 June 30, 2021, the Company was 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 $6.6 million have been issued under the Senior Credit Agreement on behalf of the Company as of June 30, 2021. These letters of credit reduce the amount otherwise available under the revolving credit facility. The Company had $360.2 million and $309.2 million of availability under the revolving credit facility at June 30, 2021 and December 31, 2020, respectively.


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(9)    ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The following tables summarize the cumulative balance of each component of accumulated other comprehensive loss, net of tax, for the three and six months ended June 30, (in thousands):
Foreign Currency Translation AdjustmentMinimum post retirement benefit plan
adjustments
Total Pre-Tax AmountTax (Benefit) ExpenseAccumulated  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 adjustment3,198 — 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 adjustment761 — 761 — 761 
Balance at June 30, 2021$3,087 $(2,352)$735 $(817)$1,552 
Foreign Currency Translation AdjustmentMinimum post retirement benefit plan
adjustments
Total Pre-Tax AmountTax (Benefit) ExpenseAccumulated  Other
Comprehensive
(Loss) Income
Balance at December 31, 2019$(4,173)$(1,939)$(6,112)$(721)$(5,391)
Minimum post retirement health care plan adjustments— 25 25 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 post retirement health care plan adjustments— 24 24 $18 
Foreign currency translation adjustment2,815 — 2,815 — 2,815 
Balance at June 30, 2020$(7,256)$(1,890)$(9,146)$(708)$(8,438)

The realized adjustments relating to the Company’s minimum post retirement health care costs were reclassified from accumulated other comprehensive loss and included in other expense in the consolidated statements of income.


(10)    EQUITY-BASED COMPENSATION
On May 4, 2018, the stockholders of the Company approved the adoption of the Gibraltar Industries, Inc. 2018 Equity Incentive Plan (the "2018 Plan"). The 2018 Plan provides for the issuance of up to 1,000,000 shares of common stock and supplements the remaining shares available for issuance under the Gibraltar Industries, Inc. 2015 Equity Incentive Plan (the "2015 Plan"). Both the 2018 Plan and the 2015 Plan allow the Company to grant equity-based incentive compensation awards, in the form of non-qualified options, restricted shares, restricted stock units, performance shares, performance stock units, and stock rights to eligible participants.
In 2016, the stockholders 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.

16

Equity Based Awards - Settled in Stock

The following table sets forth the number of equity-based awards granted during the six months ended June 30, which will convert to shares upon vesting, along with the weighted average grant date fair values:
 20212020
AwardsNumber of
Awards
Weighted
Average
Grant Date
Fair Value
Number of
Awards (2)
Weighted
Average
Grant Date
Fair Value
Performance stock units (1)62,778 $87.84 127,397 $53.16 
Restricted stock units33,187 $87.91 43,842 $52.12 
Deferred stock units7,536 $83.58 12,402 $45.98 
Common shares2,512 $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 PSUs granted depending on the relative achievement to targeted thresholds. The Company's PSUs with a financial performance condition are based on either the Company’s return on invested capital (“ROIC”) over a one-year 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 stockholder 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) PSUs granted in 2020 include 74,676 PSUs that will be converted to shares and issued to recipients in the first quarter of 2023 at 109.5% of the target amount granted, based on the Company’s actual ROIC compared to ROIC target for the performance period ended December 31, 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 June 30, 2021, the Company's total share-based liabilities recorded on the consolidated balance sheet were $21.6 million, of which $18.0 million was included in non-current liabilities. The share-based liabilities as of December 31, 2020 were $18.2 million, of which $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 related company match are credited to an account that represents a share-based liability. The portion of the account deferred to unrestricted investments is measured at fair market value of the unrestricted investments, and the portion of the account deferred to restricted stock units and company-matching restricted stock units is measured at a 200-day average of the Company’s stock price. The account will be converted to and settled in cash payable to participants upon retirement or a termination of their service to the Company.

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 six months ended June 30,:
20212020
Restricted stock units credited26,240 52,965 
Share-based liabilities paid (in thousands)$3,510 $4,433 



17

(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, net13,041 
Prepaid expenses and other current assets21,310 
Total current assets (1)45,612 
Property, plant, and equipment, net16,999 
Operating lease assets6,470 
Goodwill22,475 
Acquired intangibles15,482 
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 expenses9,274 
Total current liabilities (1)19,982 
Deferred income taxes24,657 
Non-current operating lease liabilities4,639 
Other non-current liabilities17 
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.

18

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,
2021202020212020
Net sales$$30,630 $20,391 $64,668 
Operating expenses26,850 17,493 58,052 
Adjustment to loss on disposal502 830 
Interest expense allocation34 40 
(Loss) Income from discontinued operations before taxes$(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 a reduction in our manufacturing footprint.

Exit activity costs were incurred during the six months ended June 30, 2021 and 2020 which related to moving and closing costs, contract terminations, and severance, along with asset impairment charges related to the write-down of inventory and impairment of machinery and equipment associated with discontinued product lines, as a result of process simplification initiatives. In conjunction with these initiatives, the Company closed 2 facilities during the six months ended June 30, 2021, and 1 facility during the six months ended June 30, 2020.

The following tables set forth the asset impairment charges and exit activity costs incurred by segment during the three and six months ended June 30, related to the restructuring activities described above (in thousands):
Three months ended June 30,
20212020
Exit activity costsAsset impairment chargesTotalExit activity costsAsset impairment chargesTotal
Renewables$786 $$786 $$$
Residential29 29 263 263 
Agtech1,287 1,287 316 72 388 
Infrastructure
Corporate59 59 45 45 
Total exit activity costs & asset impairments$2,161 $$2,161 $624 $72 $696 
Six months ended June 30,
20212020
Exit activity costsAsset impairment chargesTotalExit activity costsAsset impairment chargesTotal
Renewables$4,564 $1,193 $5,757 $18 $$18 
Residential94 94 484 484 
Agtech1,491 1,491 316 72 388 
Infrastructure
Corporate59 59 99 99 
Total exit activity costs & asset impairments$6,208 $1,193 $7,401 $917 $72 $989 
19


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 six months ended June 30, (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
Cost of sales$718 $472 $5,765 $541 
Selling, general, and administrative expense1,443 224 1,636 448 
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):
20212020
Balance at January 1$1,030 $2,083 
Exit activity costs recognized6,208 917 
Cash payments(4,646)(2,171)
Balance at June 30$2,592 $829 



(13)    INCOME TAXES

The following table summarizes the provision for income taxes for continuing operations (in thousands) for the three and six months ended June 30, and the applicable effective tax rates:
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
Provision for income taxes$9,457 $7,961 $11,017 $10,274 
Effective tax rate26.4 %24.6 %23.0 %23.0 %
The effective tax rate for the three and six months ended June 30, 2021 and 2020, respectively, was greater than the U.S. federal statutory rate of 21% due to state taxes and nondeductible permanent differences partially offset by favorable discrete items due to an excess tax benefit on stock-based compensation.


20

(14)    EARNINGS PER SHARE

Basic earnings and weighted-average of diluted shares outstanding are as follows for the three and six months ended June 30, (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
Numerator:
Income from continuing operations$26,373 $24,457 $36,869 $34,359 
(Loss) Income from discontinued operations(424)2,835 1,842 4,992 
Net income available to common stockholders$25,949 $27,292 $38,711 $39,351 
Denominator for basic earnings per share:
Weighted average shares outstanding32,790 32,605 32,791 32,596 
Denominator for diluted earnings per share:
Weighted average shares outstanding32,790 32,605 32,791 32,596 
Common stock options and stock units266 255 280 272 
Weighted average shares and conversions33,056 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. There were 52,000 and 77,000 anti-dilutive shares outstanding for the three months ended June 30, 2021 and 2020, respectively. There were 0 anti-dilutive shares outstanding for the six months ended June 30, 2021 and 47,000 for the six months ended June 30, 2020.


(15)    SEGMENT INFORMATION

The Company is organized into 4 reportable segments on the basis of the production processes, products and services provided by each segment, identified as follows:
(i)Renewables, which primarily includes designing, engineering, manufacturing and installation of solar racking and electrical balance of systems;
(ii)Residential, which primarily includes roof and foundation ventilation products, centralized mail systems and electronic package solutions, retractable awnings and gutter guards, and rain dispersion products, trims and flashings and other accessories;
(iii)Agtech, which provides growing and processing solutions including the designing, engineering, manufacturing and installation of greenhouses, and botanical extraction systems; and
(iv)Infrastructure, which primarily includes structural bearings, expansion joints and pavement sealant for bridges, airport runways and roadways, elastomeric concrete, and bridge cable protection systems.

When determining the reportable segments, the Company aggregated operating segments based on their similar economic and operating characteristics. During the first quarter of 2021, the Company reassessed its reportable segments. As a result, the Company's former Renewable Energy and Conservation segment was divided into two reportable segments: Renewables and Agtech.
21

The following table illustrates certain measurements used by management to assess performance of the segments described above for the three and six months ended June 30, (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
Net sales:
Renewables$107,751 $55,950 $193,263 $103,213 
Residential164,209 139,472 304,426 242,891 
Agtech53,696 42,309 100,435 91,543 
Infrastructure22,733 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 
Residential27,155 27,964 50,089 41,689 
Agtech977 766 1,906 2,106 
Infrastructure4,186 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, 2021December 31, 2020
Total assets:
Renewables$424,884 $402,796 
Residential443,903 407,132 
Agtech204,264 216,275 
Infrastructure86,748 80,796 
Unallocated corporate assets26,334 28,057 
Assets of discontinued operations77,438 
$1,186,133 $1,212,494 

22

The following tables illustrate segment revenue disaggregated by timing of transfer of control to the customer for the three and six months ended June 30 (in thousands):
Three Months Ended June 30, 2021
RenewablesResidentialAgtechInfrastructureTotal
Net sales:
Point in Time$6,049 $162,978 $7,388 $11,637 $188,052 
Over Time101,702 1,231 46,308 11,096 160,337 
Total net sales$107,751 $164,209 $53,696 $22,733 $348,389 

Three Months Ended June 30, 2020
RenewablesResidentialAgtechInfrastructureTotal
Net sales:
Point in Time$5,512 $138,288 $12,088 $6,549 $162,437 
Over Time50,438 1,184 30,221 10,904 92,747 
Total net sales$55,950 $139,472 $42,309 $17,453 $255,184 

Six Months Ended June 30, 2021
RenewablesResidentialAgtechInfrastructureTotal
Net sales:
Point in Time$13,020 $301,997 $12,531 $17,107 $344,655 
Over Time180,243 2,429 87,904 20,750 291,326 
Total net sales$193,263 $304,426 $100,435 $37,857 $635,981 

Six Months Ended June 30, 2020
RenewablesResidentialAgtechInfrastructureTotal
Net sales:
Point in Time$9,208 $240,619 $26,184 $12,006 $288,017 
Over Time94,005 2,272 65,359 20,932 182,568 
Total net sales$103,213 $242,891 $91,543 $32,938 $470,585 

23

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” 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, residential, agtech, and infrastructure markets.

The Company operates and reports its results in the following four reporting segments:
Renewables;
Residential;
Agtech; and
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, and contractors. As part of our continuing operations at June 30, 2021, we operated 36 facilities, comprised of 26 manufacturing facilities, one distribution center, and nine offices, which are located in 16 states, Canada, China, and Japan. Our operational infrastructure provides the necessary scale to support regional and national customers in each of our markets.


24

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 during 2021. Our top priority continues to be focused on our organization - keeping our team and their families as safe as possible, maintaining the timely and effective functioning of our supply chain operating and providing a high level of responsiveness to customer needs. We continue to proactively execute our pandemic “playbook” in 2021 and make adjustments to our operating protocols as we navigate forward. The extent to which our operations will be impacted by the outbreak, including but not limited to the current impact of supply chain, transportation and labor challenges, along with new requirements or regulations mandated by government authorities, remains uncertain and challenging to predict, Refer to the Company's Outlook section in this management discussion and analysis for consideration relative to future periods.

Business Strategy
The Company's mission is to create compounding and sustainable value for our stockholders and other stakeholders with strong and relevant leadership positions in higher growth, profitable end markets focused on addressing some of the world's most challenging opportunities. The foundation of the Company's strategy is built on three core pillars: Business System, Portfolio Management, and Organization Development.

1.Business System reflects the necessary systems, processes, and management 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 resources, challenges our business models, and brings focus to new product and services development and innovation.

2.Portfolio Management is focused on optimizing the Company’s business portfolio and ensures our financial capital and human resources are effectively and efficiently deployed to deliver sustainable, profitable growth while increasing our relevance with customers and shaping our markets. For a description of recent portfolio management activities, see the actions described below in the Recent Developments section.

3.Organization Development drives the Company’s continuous focus on strengthening and scaling the organization to execute the Company’s plans and meet commitments. The Company aspires to make our place of work the "Best Place to Work", where we focus on creating an environment for our people to have the best opportunity for success, continue to develop, grow, and 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 respective succession plans. We believe doing so helps us attract and retain the best people so we can execute our business plans.

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 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 stockholder returns.


25

Recent 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 discontinued operations as of December 31, 2020.

During 2020, the Company completed the following acquisitions:

Business AcquiredDate of Acquisition in 2020
Purchase price
 ( in millions) 1
DescriptionSegment
TerraSmart LLCDecember 31$223.7 Provider of screw-based, ground-mount solar racking technology, particularly used for solar projects installed on challenging terrainRenewables
Sunfig CorporationDecember 11$3.8 Provider of software solutions that optimize solar energy investments through upstream design, performance and financial modelingRenewables
Architectural MailboxesOctober 15$26.9 Provider, designer, and developer of decorative residential mailboxes and related productsResidential
Delta SeparationsFebruary 13$47.1 Provider of ethanol-based extraction systems manufacturer and training and laboratory design and operations consultative partnerAgtech
Thermo Energy SystemsJanuary 15$7.3 Provider of commercial greenhouse solutions in North America supporting the biologically grown organic food marketAgtech

Note 1: Except for TerraSmart, which was financed through a combination of cash on hand and borrowings under the Company's revolving credit facility, all of the above 2020 acquisitions were funded from cash on hand. The purchase price for the acquisitions of 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 Thermo represents the final purchase price in each transaction.

26

Results of Operations
Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020
The following table sets forth selected results of operations data and its percentage of net sales for the three months ended June 30 (in thousands):
20212020
Net sales$348,389 100.0 %$255,184 100.0 %
Cost of sales267,458 76.8 %189,623 74.3 %
Gross profit80,931 23.2 %65,561 25.7 %
Selling, general, and administrative expense49,522 14.2 %34,813 13.7 %
Income from operations31,409 9.0 %30,748 12.0 %
Interest expense245 0.0 %222 0.0 %
Other income(4,666)(1.3)%(1,892)(0.7)%
Income before taxes35,830 10.3 %32,418 12.7 %
Provision for income taxes9,457 2.7 %7,961 3.1 %
Income from continuing operations26,373 7.6 %24,457 9.6 %
(Loss) income from discontinued operations(424)(0.2)%2,835 1.1 %
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 June 30, (in thousands):
Change due to
20212020Total
Change
AcquisitionsOperations
Net sales:
Renewables$107,751 $55,950 $51,801 $49,825 $1,976 
Residential164,209 139,472 24,737 7,705 17,032 
Agtech53,696 42,309 11,387 — 11,387 
Infrastructure22,733 17,453 5,280 — 5,280 
Consolidated$348,389 $255,184 $93,205 $57,530 $35,675 

Consolidated net sales increased by $93.2 million, or 36.5%, to $348.4 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The 36.5% increase in revenue was driven by the Renewables and Residential segments. Sales generated from our prior year acquisitions of TerraSmart and Architectural Mailboxes contributed 22.5%, or $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 Renewables segment increased $51.8 million, or 92.5%, to $107.8 million for the three months ended June 30, 2021 compared to $56.0 million for the three months ended June 30, 2020. Sales generated from the prior year acquisition of TerraSmart of $49.8 million primarily contributed to the increase in the current year quarter. Organic revenue 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 safe-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.
27

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 strong 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 current year quarter.
Net sales in our Agtech segment increased 27.0%, or $11.4 million, to $53.7 million for the three months ended June 30, 2021 compared to $42.3 million for the three months ended June 30, 2020. 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 fabricated and non-fabricated products from this segment increased as state project funding improved and the domestic economy strengthened. Backlog remained strong increasing 11% compared to the prior year quarter.

Our consolidated gross margin decreased to 23.2% for the three months ended June 30, 2021 compared to 25.7% for the three months ended June 30, 2020. The decrease was the result of lower gross margins generated from our recent acquisitions 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 our core businesses compared to the prior year quarter.
Selling, general, and administrative ("SG&A") expenses increased by $14.7 million, or 42.3%, to $49.5 million for the three months ended June 30, 2021 from $34.8 million for the three months ended June 30, 2020. The $14.7 million increase was primarily due to $6.3 million of incremental SG&A expenses recorded quarter over quarter from our recent 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 increased to 14.2% for the three months ended June 30, 2021 compared to 13.7% for the three months ended June 30, 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 June 30, (in thousands):
20212020Total
Change
Income from operations:
Renewables$9,510 8.8 %$8,422 15.1 %$1,088 
Residential27,155 16.5 %27,964 20.0 %(809)
Agtech977 1.8 %766 1.8 %211 
Infrastructure4,186 18.4 %2,801 16.0 %1,385 
Unallocated Corporate Expenses(10,419)(3.0)%(9,205)(3.6)%(1,214)
Consolidated income from operations$31,409 9.0 %$30,748 12.0 %$661 
The Renewables segment generated an operating margin of 8.8% in the current year quarter compared to 15.1% in the prior year quarter. The decrease in operating margin was partly due to the expected lower margins generated by our recent acquisitions, the result of backlog amortization and integration costs, as we continue to integrate these businesses operationally. Additionally contributing to the decrease, was a one-time tariff credit received in the prior year quarter along with the impact of timing and alignment of price to input costs and project movement associated
28

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 $0.2 million for both the three months ended June 30, 2021 and 2020, respectively. 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, 2021, partially offset by interest income. No amounts were outstanding under our revolving credit facility during the three months ended June 30, 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 $9.5 million and $8.0 million, with effective tax rates of 26.4% and 24.6% for the three months ended June 30, 2021, and 2020, respectively. The effective tax rates for the three months ended June 30, 2021 and 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 due to an excess tax benefit on stock-based compensation.

Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020
The following table sets forth selected results of operations data and its percentage of net sales for the six months ended June 30 (in thousands):
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20212020
Net sales$635,981 100.0 %$470,585 100.0 %
Cost of sales495,032 77.8 %355,163 75.5 %
Gross profit140,949 22.2 %115,422 24.5 %
Selling, general, and administrative expense96,725 15.2 %71,897 15.3 %
Income from operations44,224 7.0 %43,525 9.2 %
Interest expense689 0.1 %266 0.0 %
Other income(4,351)(0.6)%(1,374)(0.3)%
Income before taxes47,886 7.5 %44,633 9.5 %
Provision for income taxes11,017 1.7 %10,274 2.2 %
Income from continuing operations36,869 5.8 %34,359 7.3 %
Income from discontinued operations1,842 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 six months ended June 30, (in thousands):
Change due to
20212020Total
Change
AcquisitionsOperations
Net sales:
Renewables$193,263 $103,213 $90,050 $87,081 $2,969 
Residential304,426 242,891 61,535 16,439 45,096 
Agtech100,435 91,543 8,892 4,600 4,292 
Infrastructure37,857 32,938 4,919 — 4,919 
Consolidated$635,981 $470,585 $165,396 $108,120 $57,276 

Consolidated net sales increased by $165.4 million, or 35.1%, to $636.0 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The 35.1% increase in revenue was driven by the Renewables and Residential segments. Sales generated from our prior year acquisitions of TerraSmart, Thermo, Delta Separations and Architectural Mailboxes contributed 23.0%, or $108.1 million to the growth from the prior year. The $57.3 million, or 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 54% to $403 million up from $262 million at the end of the prior year period.

Net sales in our Renewables 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 electrical balance-of-system product solutions serving the community and commercial and industrial market segments. This growth was partially offset by projects impacted by headwinds impacting the solar industry including steel inflation, supply chain challenges with solar panels, as well as, a decline in safe-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 Residential segment increased 25.3%, or $61.5 million, to $304.4 million for the six months ended June 30, 2021 compared to $242.9 million for the six months ended June 30, 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 from the prior year acquisition of Architectural Mailboxes also contributed $16.4 million 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.
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Organic revenue increased $4.3 million, largely driven by growth in the produce market along with slower but improving market conditions for commercial, car wash, retail and 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 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 14.9%, or $4.9 million, to $37.9 million for the six months ended June 30, 2021 compared to $32.9 million for the six months ended June 30, 2020. During the current year, demand for fabricated and non-fabricated products from this segment increased as the economy strengthened and state project funding improved. Backlog remained strong increasing 11% compared to the prior year.
Our consolidated gross margin decreased to 22.2% for the six months ended June 30, 2021 compared to 24.5% for the six months ended June 30, 2020. This decrease was the 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 our core businesses compared to the prior year.
Selling, general, and administrative ("SG&A") expenses increased by $24.8 million, or 34.5%, to $96.7 million for the six months ended June 30, 2021 from $71.9 million for the six months ended June 30, 2020. The $24.8 million increase was primarily due to $12.9 million of incremental SG&A expenses recorded year over year from our recent acquisitions and transaction costs to complete those acquisitions, along with $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 deferred treatments due to those closures. Despite the above increases, SG&A expenses as a percentage of net sales modestly decreased to 15.2% for the six months ended June 30, 2021 compared to 15.3% for the six months ended June 30, 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 six months ended June 30, (in thousands):
20212020Total
Change
Income from operations:
Renewables$8,989 4.7 %$12,781 12.4 %$(3,792)
Residential50,089 16.5 %41,689 17.2 %8,400 
Agtech1,906 1.9 %2,106 2.3 %(200)
Infrastructure6,223 16.4 %4,377 13.3 %1,846 
Unallocated Corporate Expenses(22,983)(3.6)%(17,428)(3.7)%(5,555)
Consolidated income from operations$44,224 7.0 %$43,525 9.2 %$699 

The Renewables segment generated an operating margin of 4.7% in the current year compared to 12.4% in the prior year. The decrease in operating margin was the combined result of costs incurred during the current year related to the discontinuation of our organic solar tracker solution along with expected lower margins generated by our recent acquisitions, the result of backlog amortization and integration costs, as we continue to integrate them operationally. Additionally contributing to the decrease, was a one-time tariff credit received in the prior year along with the impact of timing and alignment of price to input costs and 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 continues to improve in the first half of 2021 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 compared to 17.2% in the prior year. The decrease in operating margin was the result of accelerated inflation, material and labor availability
31

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 1.9% during the six months ended June 30, 2021 compared to 2.3% during the six months ended June 30, 2020. The decrease 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 investment in 80/20 productivity initiatives.

Unallocated corporate expenses increased $5.6 million from $17.4 million during the six months ended June 30, 2020 to $23.0 million during the six months ended June 30, 2021. The increase in expense was primarily the result of $4.2 million of higher performance-based compensation expenses as compared to the prior year.

Interest expense increased by $0.4 million to $0.7 million for the six months ended June 30, 2021 compared to $0.3 million for the six months ended June 30, 2020. The increase in expense was primarily the result of $32.3 million in the outstanding balance on the Company's revolving credit facility as of June 30, 2021. No amounts were outstanding under our revolving credit facility during the six months ended June 30, 2020.

The Company recorded other income of $4.4 million for the six months ended June 30, 2021 compared to the $1.4 million recorded for the six months ended June 30, 2020. The $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 segment.

We recognized a provision for income taxes of $11.0 million and $10.3 million, with effective tax rates of 23.0% for both the six months ended June 30, 2021, and 2020, respectively. The effective tax rates for the six months ended June 30, 2021 and 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 due to an excess tax benefit on stock-based compensation.


Outlook

The Company expects 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 end market demand, record order backlog, a very healthy balance sheet, and strong 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 GAAP EPS from continuing operations between $2.78 and $2.95, compared with $2.53 in 2020.


Liquidity and Capital Resources

32

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)June 30, 2021December 31, 2020
Cash and cash equivalents$16,963 $32,054 
Availability on revolving credit facility360,179 309,175 
$377,142 $341,229 

We believe that our cash on hand and available borrowing capacity provided under our 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. We continue to remain focused on managing our working capital, 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 June 30, 2021, our foreign subsidiaries held $14.9 million of cash in U.S. dollars.

During 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"), which allowed us to retain $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 on December 31, 2021 and 2022.

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 stockholder 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 six months ended June 30, (in thousands):
20212020
Cash provided by (used in):
Operating activities of continuing operations$12,777 $(10,967)
Investing activities of continuing operations30,515 (57,800)
Financing activities of continuing operations(56,292)(4,384)
Discontinued operations(2,178)2,659 
Effect of foreign exchange rate changes87 (12)
Net decrease in cash and cash equivalents$(15,091)$(70,504)

Operating Activities

Net cash provided by operating activities of continuing operations for the six months ended June 30, 2021 of $12.8 million consisted of income from continuing operations of $36.9 million and non-cash net charges totaling $22.4
33

million, which include depreciation, amortization, stock compensation, exit activity costs and other non-cash charges, offset by a $46.5 million investment in working capital and other net assets. The investment in net working capital and other net assets was largely driven by an increase in inventory due to rising material costs and accounts receivable due to seasonal increases in demand, offset by an increase in accounts payable as the result of seasonal increases in manufacturing activity.

Net cash used in operating activities of continuing operations for the six months ended June 30, 2020 of $11.0 million consisted of net income of $34.4 million and non-cash net charges totaling $12.8 million, which include depreciation, amortization, stock compensation, and other non-cash charges, more than offset by a $58.1 million investment in working capital and other net assets. The working capital investment was largely comprised of $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 $30.5 million 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 six months ended June 30, 2020 of $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 $4.2 million, offset by $0.8 million in proceeds from the sale of a business within the Residential Products segment and the sale of property and equipment.

Financing Activities

Net cash used in financing activities of continuing operations for the six months ended June 30, 2021 of $56.3 million was primarily the result of $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 $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 six months ended June 30, 2020 of $4.4 million was primarily the result of purchases of treasury stock related to the net settlement of tax obligations for participants in the Company's equity incentive 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, 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, 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.
34


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, 2020 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, 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.
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.
35

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.INSXBRL Instance Document *
101.SCHXBRL Taxonomy Extension Schema Document *
101.CALXBRL Taxonomy Extension Calculation Linkbase Document *
101.LABXBRL Taxonomy Extension Label Linkbase Document *
101.PRAXBRL Taxonomy Extension Presentation Linkbase Document *
101.DEFXBRL Taxonomy Extension Definition Linkbase Document *
*Submitted electronically with this Quarterly Report on Form 10-Q.
36

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: August 3, 2021

37