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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 https://cdn.kscope.io/23845b9ad4796cd31e24db43437f0432-rock-20200630_g1.gif
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, 2020
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: (716826-6500
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 filer
Accelerated filer
Non-accelerated filer
Smaller 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 3, 2020, the number of common shares outstanding was: 32,423,220.



Table of Contents
GIBRALTAR INDUSTRIES, INC.
INDEX
 
 PAGE 
NUMBER
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2


Table of Contents
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,
 2020201920202019
Net Sales$285,814  $262,655  $535,253  $490,072  
Cost of sales213,556  199,097  406,608  382,614  
Gross profit72,258  63,558  128,645  107,458  
Selling, general, and administrative expense37,667  36,952  78,864  70,286  
Income from operations34,591  26,606  49,781  37,172  
Interest expense214  219  167  2,280  
Other (income) expense (1,787) (13) (1,595) 576  
Income before taxes36,164  26,400  51,209  34,316  
Provision for income taxes8,872  6,487  11,858  8,058  
Net income$27,292  $19,913  $39,351  $26,258  
Net earnings per share:
Basic$0.84  $0.62  $1.21  $0.81  
Diluted$0.83  $0.61  $1.20  $0.80  
Weighted average shares outstanding:
Basic32,605  32,321  32,596  32,300  
Diluted32,860  32,642  32,868  32,630  
See accompanying notes to consolidated financial statements.
3


Table of Contents
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 
Three Months Ended 
 
June 30,
Six Months Ended 
 
June 30,
 2020201920202019
Net income $27,292  $19,913  $39,351  $26,258  
Other comprehensive income (loss):
Foreign currency translation adjustment2,815  998  (3,083) 1,840  
Minimum pension and post retirement benefit plan adjustments18  12  36  24  
Other comprehensive income (loss)2,833  1,010  (3,047) 1,864  
Total comprehensive income $30,125  $20,923  $36,304  $28,122  
See accompanying notes to consolidated financial statements.
4


Table of Contents
GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
June 30,
2020
December 31,
2019
(unaudited)
Assets
Current assets:
Cash and cash equivalents$120,859  $191,363  
Accounts receivable, net of allowance of $6,270 and $6,330
193,609  147,515  
Inventories79,058  78,476  
Prepaid expenses and other current assets22,849  19,748  
Total current assets416,375  437,102  
Property, plant, and equipment, net94,723  95,409  
Operating lease assets33,383  27,662  
Goodwill378,740  329,705  
Acquired intangibles110,481  92,592  
Other assets1,794  1,980  
$1,035,496  $984,450  
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable$116,853  $83,136  
Accrued expenses94,009  98,463  
Billings in excess of cost29,281  47,598  
Total current liabilities240,143  229,197  
Deferred income taxes40,022  40,334  
Non-current operating lease liabilities24,400  19,669  
Other non-current liabilities21,167  21,286  
Shareholders’ equity:
Preferred stock, $0.01 par value; authorized 10,000 shares; none outstanding
    
Common stock, $0.01 par value; authorized 50,000 shares; 33,413 shares and 33,192 shares issued and outstanding in 2020 and 2019
334  332  
Additional paid-in capital299,829  295,582  
Retained earnings444,728  405,668  
Accumulated other comprehensive loss(8,438) (5,391) 
Cost of 993 and 906 common shares held in treasury in 2020 and 2019
(26,689) (22,227) 
Total shareholders’ equity709,764  673,964  
$1,035,496  $984,450  
See accompanying notes to consolidated financial statements.
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GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited) 
Six Months Ended 
 
June 30,
 20202019
Cash Flows from Operating Activities
Net income $39,351  $26,258  
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization11,054  9,892  
Stock compensation expense4,171  6,091  
Gain on sale of business(1,881)   
Exit activity costs, non-cash346    
(Benefit of) provision for deferred income taxes(216) 278  
Other, net1,018  2,437  
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable(25,842) (41,156) 
Inventories5,661  13,464  
Other current assets and other assets1,996  (4,983) 
Accounts payable(1,732) 4,012  
Accrued expenses and other non-current liabilities(41,181) (9,807) 
Net cash (used in) provided by operating activities(7,255) 6,486  
Cash Flows from Investing Activities
Acquisitions, net of cash acquired(54,385) (264) 
Net proceeds from sale of property and equipment59  60  
Purchases of property, plant, and equipment(5,231) (6,265) 
Net proceeds from sale of business704    
Net cash used in investing activities(58,853) (6,469) 
Cash Flows from Financing Activities
Long-term debt payments  (212,000) 
Payment of debt issuance costs  (1,235) 
Purchase of treasury stock at market prices(4,462) (3,149) 
Net proceeds from issuance of common stock78  208  
Net cash used in financing activities(4,384) (216,176) 
Effect of exchange rate changes on cash(12) 1,035  
Net decrease in cash and cash equivalents(70,504) (215,124) 
Cash and cash equivalents at beginning of year191,363  297,006  
Cash and cash equivalents at end of period$120,859  $81,882  
See accompanying notes to consolidated financial statements.
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GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(in thousands)
(unaudited) 
 Common StockAdditional
Paid-In Capital
Retained EarningsAccumulated
Other
Comprehensive Loss
Treasury StockTotal
Shareholders’ Equity
 SharesAmountSharesAmount
Balance at December 31, 2019
33,192  $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 pension and post retirement benefit plan adjustments, net of taxes of $7
—  —  —  —  18  —  —  18  
Stock compensation expense—  —  1,665  —  —  —  —  1,665  
Cumulative effect of accounting change (See Note 2)
—  —  —  (291) —  —  —  (291) 
Stock options exercised3  —  24  —  —  —  —  24  
Net settlement of restricted stock units
193  2  (2) —  —  80  (4,184) (4,184) 
Balance at March 31, 2020
33,388  $334  $297,269  $417,436  $(11,271) 986  $(26,411) $677,357  
Net income—  —  —  27,292  —  —  —  27,292  
Foreign currency translation adjustment—  —  —  —  2,815  —  —  2,815  
Minimum pension and post retirement benefit plan adjustments, net of taxes of $6
—  —  —  —  18  —  —  18  
Stock compensation expense—  —  2,506  —  —  —  —  2,506  
Stock options exercised6  —  54  —  —  —  —  54  
Awards of common shares
4  —  —  —  —  —  —  —  
Net settlement of restricted stock units
15      —  —  7  (278) (278) 
Balance at June 30, 2020
33,413  $334  $299,829  $444,728  $(8,438) 993  $(26,689) $709,764  

See accompanying notes to consolidated financial statements.
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GIBRALTAR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(in thousands)
(unaudited) 
Common StockAdditional
Paid-In Capital
Retained EarningsAccumulated
Other
Comprehensive Loss
Treasury StockTotal
Shareholders’ Equity
SharesAmountSharesAmount
Balance at December 31, 201832,887  $329  $282,525  $338,995  $(7,234) 796  $(17,922) $596,693  
Net income—  —  —  6,345  —  —  —  6,345  
Foreign currency translation adjustment—  —  —  —  842  —  —  842  
Minimum pension and post retirement benefit plan adjustments, net of taxes of $4
—  —  —  —  12  —  —  12  
Stock compensation expense—  —  2,371  —  —  —  —  2,371  
Cumulative effect of accounting change
—  —  —  1,582  —  —  —  1,582  
Stock options exercised12  —  139  —  —  —  —  139  
Net settlement of restricted stock units
127  1  (1) —  —  59  (2,151) (2,151) 
Balance at March 31, 201933,026  $330  $285,034  $346,922  $(6,380) 855  $(20,073) $605,833  
Net income—  —  —  19,913  —  —  —  19,913  
Foreign currency translation adjustment—  —  —  —  998  —  —  998  
Minimum pension and post retirement benefit plan adjustments, net of taxes of $5
—  —  —  —  12  —  —  12  
Stock compensation expense—  —  3,720  —  —  —  —  3,720  
Stock options exercised5  —  69  —  —  —  —  69  
Awards of common shares8  —  —  —  —  —  —  —  
Net settlement of restricted stock units62  1  (1) —  —  25  (998) (998) 
Balance at June 30, 201933,101  $331  $288,822  $366,835  $(5,370) 880  $(21,071) $629,547  

See accompanying notes to consolidated financial statements.
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GIBRALTAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(1) CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited consolidated financial statements of Gibraltar Industries, Inc. (the "Company") have been prepared by management in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting of normal recurring adjustments considered necessary for the fair presentation of results for the interim period have been included. The Company's operations are seasonal; for this and other reasons, such as the impact of the COVID-19 pandemic, financial results for any interim period are not necessarily indicative of the results expected for any subsequent interim period or for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our annual Form 10-K for the year ended December 31, 2019.

The balance sheet at December 31, 2019 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.



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(2) RECENT ACCOUNTING PRONOUNCEMENTS

Recent Accounting Pronouncements Adopted
StandardDescriptionFinancial Statement Effect or Other Significant Matters
ASU No. 2016-13
Financial Instruments - Credit Losses
(Topic 326)

The objective of this standard is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit, including trade receivables, held by an entity at each reporting date. The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.
The standard is effective for the Company as of January 1, 2020. The Company adopted the amendments in this update using the modified retrospective approach through a cumulative-effect adjustment to retained earnings of $291,000, net of $96,000 of income taxes, on the opening consolidated balance sheet as of January 1, 2020. The Company's financial assets that are in the scope of the standard are contract assets and accounts receivables which are short-term in nature. Additionally, the Company has identified and implemented appropriate changes to the Company's business processes, policies and internal controls to support reporting and disclosures.


Date of adoption: Q1 2020

ASU 2018-15
Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

The amendments in this update require an entity to apply the same requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract as the entity would for implementation costs incurred to develop or obtain internal-use software. The accounting for the service element is not affected by the amendments in this update.
The standard is effective for the Company as of January 1, 2020. The Company adopted the amendments in this update using the prospective method of adoption, and the adoption did not have a material impact to the Company's financial statements.


Date of adoption: Q1 2020

Recent Accounting Pronouncements Not Yet Adopted
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. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued, with the amendments to be applied on a respective, modified retrospective or prospective basis, depending on the specific amendment.
The Company is currently evaluating the requirements of this standard. The standard is not expected to have a material impact on the Company's financial statements.










Date of adoption: Q1 2021

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(3) ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts receivable consists of the following (in thousands):
June 30, 2020December 31, 2019
Trade accounts receivable$175,251  $133,238  
Costs in excess of billings24,628  20,607  
Total accounts receivables199,879  153,845  
Less allowance for doubtful accounts and contract assets(6,270) (6,330) 
Accounts receivable$193,609  $147,515  

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

The Company is exposed to credit losses through sales of products and services. The Company’s expected loss allowance methodology for accounts receivable and costs in excess of billings (collectively "accounts receivable") is developed using historical collection experience, current and future economic and market conditions, and a review of the current status of customers' accounts receivables. Due to the short-term nature of such accounts receivable, the estimated amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances. Additionally, specific allowance amounts are established to record the appropriate provision for customers that no longer share risk characteristics similar with other accounts receivable. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and determined that the estimate of credit losses was not significantly impacted as of June 30, 2020.

Estimates are used to determine the allowance. It is based on assessment of anticipated payment and all other historical, current and future information that is reasonably available.

The following table provides a roll-forward of the allowance for credit losses 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, 2020$6,330  
Adoption of ASU 2016-13, cumulative-effect adjustment to retained earnings387  
Bad debt expense687  
Write-off charged against the allowance and other adjustments(1,134) 
Ending balance as of June 30, 2020$6,270  


(4) REVENUE

Sales includes revenue from contracts with customers for designing, engineering, manufacturing and installation of solar racking systems and greenhouse structures; extraction systems; roof and foundation ventilation products; centralized mail systems and electronic package solutions; rain dispersion products and roofing accessories; expanded and perforated metal; perimeter security solutions; expansion joints and structural bearings.

Refer to Note 14 "Segment Information" for additional information related to revenue recognized by timing of transfer of control by reportable segment.

As of June 30, 2020, the Company's remaining performance obligations are part of contracts that have an original expected duration of one year or less.

Contract assets consist of costs in excess of billings. Contract liabilities consist of billings in excess of cost and unearned revenue. The following table presents the beginning and ending balances of costs in excess of billings, billings in excess of cost and unearned revenue as of June 30, 2020 and December 31, 2019, respectively, and
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revenue recognized during the six months ended June 30, 2020 and 2019, respectively, that was in billings in excess of cost and unearned revenue at the beginning of the period (in thousands):
June 30, 2020December 31, 2019
Costs in excess of billings$24,627  $20,607  
Billings in excess of cost(29,281) (47,598) 
Unearned revenue(16,503) (17,311) 
Six Months Ended
June 30, 2020
Six Months Ended
June 30, 2019
Revenue recognized in the period from:
Amounts included in billings in excess of cost
at the beginning of the period
$42,115  $11,357  
Amounts included in unearned revenue
at the beginning of the period
$12,553  $6,153  


(5) INVENTORIES

Inventories consist of the following (in thousands):
June 30, 2020December 31, 2019
Raw material$43,234  $45,700  
Work-in-process6,206  5,988  
Finished goods29,618  26,788  
Total inventories$79,058  $78,476  

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(6) ACQUISITIONS

2020 Acquisitions

On February 13, 2020, the Company purchased substantially all of the assets of Delta Separations, LLC, a California limited liability company, and Teaching Tech, LLC, a California limited liability company (collectively described as "Delta Separations"). Delta Separations was a privately-held engineering company primarily engaged in the assembly and sale of centrifugal ethanol-based extraction systems. The results of Delta Separations have been included in the Company's consolidated financial results since the date of acquisition within the Company's Renewable Energy and Conservation segment. The purchase consideration for the acquisition of Delta Separations was $47.1 million, which includes a working capital adjustment and certain other adjustments provided for in the asset purchase agreement.

The purchase price for the acquisition of the assets was allocated to the assets acquired and liabilities assumed based upon their respective fair values. The excess consideration was recorded as goodwill and approximated $32.9 million, all of which is deductible for tax purposes. Goodwill represents future economic benefits arising from other assets acquired that could not be individually identified including workforce additions, growth opportunities, and presence in the extraction processing markets.

The allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed is as follows as of the date of the acquisition (in thousands):
Working capital$4,063  
Property, plant and equipment219  
Acquired intangible assets13,000  
Other assets951  
Other liabilities(