SEC Filing | Gibraltar Industries, Inc.

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rock-20220930

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			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 000-22462

GIBRALTAR INDUSTRIES, INC.

(Exact name of Registrant as specified in its charter)

Delaware

16-1445150

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)

3556 Lake Shore Road

P.O. Box 2028

Buffalo

New York

14219-0228

(Address of principal executive offices)

(Zip Code)

(716) 826-6500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.01 par value per share

ROCK

NASDAQ Stock Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 2, 2022, the number of common shares outstanding was: 30,970,972.

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GIBRALTAR INDUSTRIES, INC.

INDEX


		PAGE NUMBER
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Income for the Three and Nine Months Ended Sep tember 30, 2022 and 2021 (unaudited)	3
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended Sept ember 30, 2022 and 2021 (unaudited)	4
	Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited)	6
	Consolidated Statement of Stockholders’ Equity for the Nine Months Ended Sept ember 30, 2022 and 2021 (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	37
	SIGNATURES	38

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net sales	$	391,291	$	369,353	$	1,076,105	$	1,005,334
Cost of sales	296,735		286,101		826,434		781,133
Gross profit	94,556		83,252		249,671		224,201
Selling, general, and administrative expense	47,160		45,274		140,941		141,999

Income from operations	47,396		37,978		108,730		82,202
Interest expense	1,048		491		2,189		1,180
Other expense (income)	363		72		797		(4,279)
Income before taxes	45,985		37,415		105,744		85,301
Provision for income taxes	11,690		9,561		26,686		20,578
Income from continuing operations	34,295		27,854		79,058		64,723
Discontinued operations:
(Loss) income before taxes	—		(201)		—		1,867
Provision for income taxes	—		97		—		323
(Loss) income from discontinued operations	—		(298)		—		1,544
Net income	$	34,295	$	27,556	$	79,058	$	66,267
Net earnings per share – Basic:
Income from continuing operations	$	1.08	$	0.85	$	2.44	$	1.97
(Loss) income from discontinued operations	—		(0.01)		—		0.05
Net income	$	1.08	$	0.84	$	2.44	$	2.02
Weighted average shares outstanding – Basic	31,707		32,802		32,396		32,791
Net earnings per share – Diluted:
Income from continuing operations	$	1.08	$	0.84	$	2.43	$	1.96
(Loss) income from discontinued operations	—		(0.01)		—		0.05
Net income	$	1.08	$	0.83	$	2.43	$	2.01
Weighted average shares outstanding – Diluted	31,812		33,050		32,503		33,055

See accompanying notes to consolidated financial statements.

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GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	34,295	$	27,556	$	79,058	$	66,267
Other comprehensive (loss) income:
Foreign currency translation adjustment	(3,568)		(1,057)		(6,993)		2,902

Minimum post retirement benefit plan adjustments, net of tax	12		27		37		81

Other comprehensive (loss) income	(3,556)		(1,030)		(6,956)		2,983
Total comprehensive income	$	30,739	$	26,526	$	72,102	$	69,250

See accompanying notes to consolidated financial statements.

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GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)


	September 30, 2022		December 31, 2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	21,919	$	12,849
Accounts receivable, net of allowance of $3,847 and $3,738, respectively	275,704		236,444
Inventories, net	204,000		176,207
Prepaid expenses and other current assets	37,578		21,467

Total current assets	539,201		446,967
Property, plant, and equipment, net	105,097		96,885
Operating lease assets	24,850		18,120
Goodwill	510,866		510,942
Acquired intangibles	145,374		141,504
Other assets	875		483
	$	1,326,263	$	1,214,901
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	157,167	$	172,286
Accrued expenses and other current liabilities	82,789		67,993
Billings in excess of cost	42,412		46,711



Total current liabilities	282,368		286,990
Long-term debt	121,840		23,781
Deferred income taxes	40,257		40,278
Non-current operating lease liabilities	17,956		11,390
Other non-current liabilities	20,351		27,204
Stockholders’ equity:
Preferred stock, $0.01 par value; authorized 10,000 shares; none outstanding	—		—
Common stock, $0.01 par value; authorized 100,000 shares in 2022 and 2021; 34,034 shares and 33,799 shares issued and outstanding in 2022 and 2021	340		338
Additional paid-in capital	320,428		314,541
Retained earnings	624,630		545,572
Accumulated other comprehensive (loss) income	(6,769)		187
Treasury stock, at cost, 2,530 and 1,107 shares in 2022 and 2021	(95,138)		(35,380)
Total stockholders’ equity	843,491		825,258
	$	1,326,263	$	1,214,901

See accompanying notes to consolidated financial statements.

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GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2022		2021
Cash Flows from Operating Activities
Net income	$	79,058	$	66,267
Income from discontinued operations	—		1,544
Income from continuing operations	79,058		64,723
Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization	19,192		23,958
Stock compensation expense	5,889		6,769


Exit activity costs, non-cash	1,427		1,193


Provision for (benefit of) deferred income taxes	181		(689)

Other, net	3,620		1,274

Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable	(25,538)		(65,297)
Inventories	(19,840)		(65,906)
Other current assets and other assets	393		(316)
Accounts payable	(24,756)		32,029
Accrued expenses and other non-current liabilities	(1,065)		(12,261)
Net cash provided by (used in) operating activities of continuing operations	38,561		(14,523)
Net cash used in operating activities of discontinued operations	—		(2,002)
Net cash provided by (used in) operating activities	38,561		(16,525)
Cash Flows from Investing Activities
Acquisitions, net of cash acquired	(51,621)		4,143
Purchases of property, plant, and equipment	(15,704)		(13,251)
Net proceeds from sale of business	—		38,062


Net cash (used in) provided by investing activities of continuing operations	(67,325)		28,954
Net cash used in investing activities of discontinued operations	—		(176)
Net cash (used in) provided by investing activities	(67,325)		28,778
Cash Flows from Financing Activities
Proceeds from long-term debt	197,800		58,500
Long-term debt payments	(100,000)		(83,636)


Purchase of common stock at market prices	(58,125)		(6,161)
Net proceeds from issuance of common stock	—		1,021

Net cash provided by (used in) financing activities	39,675		(30,276)
Effect of exchange rate changes on cash	(1,841)		(97)
Net increase (decrease) in cash and cash equivalents	9,070		(18,120)
Cash and cash equivalents at beginning of year	12,849		32,054
Cash and cash equivalents at end of period	$	21,919	$	13,934

See accompanying notes to consolidated financial statements.

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GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount								Shares	Amount
Balance at December 31, 2021	33,799	$	338	$	314,541	$	545,572	$	187	1,107	$	(35,380)	$	825,258
Net income	—	—		—		15,456		—		—	—		15,456
Foreign currency translation adjustment	—	—		—		—		(227)		—	—		(227)
Minimum post retirement benefit plan adjustments, net of taxes of $10	—	—		—		—		24		—	—		24
Stock compensation expense	—	—		1,352		—		—		—	—		1,352



Net settlement of restricted stock units	173	2		(2)		—		—		72	(3,461)		(3,461)
Balance at March 31, 2022	33,972	$	340	$	315,891	$	561,028	$	(16)	1,179	$	(38,841)	$	838,402
Net income	—	—		—		29,307		—		—	—		29,307
Foreign currency translation adjustment	—	—		—		—		(3,198)		—	—		(3,198)
Minimum post retirement benefit plan adjustments, net of taxes of $0	—	—		—		—		1		—	—		1
Stock compensation expense	—	—		2,773		—		—		—	—		2,773
Awards of common stock	16	—		—		—		—		—	—		—
Net settlement of restricted stock units	1	—		—		—		—		—	(7)		(7)
Common stock repurchased under stock repurchase program	—	—		—		—		—		1,195	(50,000)		(50,000)
Balance at June 30, 2022	33,989	$	340	$	318,664	$	590,335	$	(3,213)	2,374	$	(88,848)	$	817,278
Net income	—	—		—		34,295		—		—	—		34,295
Foreign currency translation adjustment	—	—		—		—		(3,568)		—	—		(3,568)
Minimum post retirement benefit plan adjustments, net of taxes of $5	—	—		—		—		12		—	—		12
Stock compensation expense	—	—		1,764		—		—		—	—		1,764

Awards of common shares	—	—		—		—		—		—	—		—
Net settlement of restricted stock units	45	—		—		—		—		18	(749)		(749)
Common stock repurchased under stock repurchase program	—	—		—		—		—		138	(5,541)		(5,541)
Balance at September 30, 2022	34,034	$	340	$	320,428	$	624,630	$	(6,769)	2,530	$	(95,138)	$	843,491

See accompanying notes to consolidated financial statements.

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GIBRALTAR INDUSTRIES, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount								Shares	Amount
Balance at December 31, 2020	33,568	$	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 exercised	25	—		910		—		—		—	—		910

Net settlement of restricted stock units	118	1		(1)		—		—		54	(4,662)		(4,662)

Balance at March 31, 2021	33,711	$	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	1	—		14		—		—		—	—		14
Awards of common shares	3	—		—		—		—		—	—		—
Net settlement of restricted stock units	3	—		—		—		—		1	(118)		(118)

Balance at June 30, 2021	33,718	$	337	$	310,728	$	508,654	$	1,552	1,083	$	(33,663)	$	787,608
Net income	—	—		—		27,556		—		—	—		27,556
Foreign currency translation adjustment	—	—		—		—		(1,057)		—	—		(1,057)
Minimum post retirement benefit plan adjustments, net of taxes of $9	—	—		—		—		27		—	—		27
Stock compensation expense	—	—		1,834		—		—		—	—		1,834
Stock options exercised	10	—		97		—		—		—	—		97

Net settlement of restricted stock units	54	1		(1)		—		—		19	(1,381)		(1,381)
Total other comprehensive loss	—	—		—		—		—		—	—		—
Balance at September 30, 2021	33,782	$	338	$	312,658	$	536,210	$	522	1,102	$	(35,044)	$	814,684

See accompanying notes to consolidated financial statements.

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GIBRALTAR INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1) CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited consolidated financial statements of Gibraltar Industries, Inc. (the "Company") have been prepared by management in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for the fair presentation of results for the interim period have been included. The Company's operations are seasonal; for this and other reasons financial results for any interim period are not necessarily indicative of the results expected for any subsequent interim period or for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2021.

The consolidated balance sheet at December 31, 2021 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

(2) RECENT ACCOUNTING PRONOUNCEMENTS

Recent Accounting Pronouncements Not Yet Adopted

Standard

Description

Financial Statement Effect or Other Significant Matters

ASU No. 2020-04
Reference Rate Reform (Topic 848), Facilitation of Effects of Reference Rate Reform on Financial Reporting, and
ASU No. 2021-01 Reference Rate Reform (Topic 848), Scope

The amendments in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met, and apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued as a result of reference rate reform. The expedients and exceptions provided by the amendments in ASU 2020-04 do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The amendments in ASU 2021-01 clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

The amendments in these updates are effective as of March 12, 2020 through December 31, 2022, and may be applied retrospectively to contract modifications and hedging relationships from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date the financial statements are available to be issued. The adoption of the amendments in these updates is not expected to have a material impact on the Company's financial statements.

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(3) ACCOUNTS RECEIVABLE, NET

Accounts receivable consists of the following (in thousands):


	September 30, 2022		December 31, 2021
Trade accounts receivable	$	222,368	$	185,745
Costs in excess of billings	57,183		54,437
Total accounts receivables	279,551		240,182
Less allowance for doubtful accounts and contract assets	(3,847)		(3,738)
Accounts receivable, net	$	275,704	$	236,444

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

The following table provides a roll-forward of the allowance for credit losses, for the nine month period ended September 30, 2022, 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, 2022	$	3,738

Bad debt expense, net of recoveries	960
Accounts written off against allowance and other adjustments	(851)
Ending balance as of September 30, 2022	$	3,847

(4) REVENUE

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

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

As of September 30, 2022, the Company's remaining performance obligations are part of contracts that have an original expected duration of one year or less.

Contract assets consist of costs in excess of billings presented within accounts receivable in the Company's consolidated balance sheets. Contract liabilities consist of billings in excess of cost, classified as current liabilities, and unearned revenue, presented within accrued expenses, in the Company's consolidated balance sheets. Unearned revenue as of September 30, 2022 and December 31, 2021 was $3.4 million and $3.7 million, respectively. Revenue recognized during the nine months ended September 30, 2022 and 2021 that was in contract liabilities at the beginning of the respective periods was $41.2 million and $52.6 million, respectively.

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(5) INVENTORIES

Inventories consist of the following (in thousands):


	September 30, 2022		December 31, 2021
Raw material	$	132,084	$	135,558
Work-in-process	21,642		5,858
Finished goods	56,955		39,256
Gross inventory	210,681		180,672
Less reserves	(6,681)		(4,465)
Total inventories, net	$	204,000	$	176,207

(6) ACQUISITION

On August 22, 2022, the Company purchased all the issued and outstanding membership interests of Quality Aluminum Products ("QAP"), a manufacturer of aluminum and steel products including soffit, fascia, trim coil, rain carrying products and aluminum siding. The results of QAP have been included in the Company's consolidated financial results since the date of acquisition within the Company's Residential segment. The preliminary purchase consideration for the acquisition of QAP was $52.6 million, which includes a preliminary working capital adjustment and certain other adjustments provided for in the membership interest purchase agreement.

The purchase price for the acquisition was preliminarily allocated to the assets acquired and liabilities assumed based upon their respective fair values estimated as of the date of acquisition. The Company has commenced the process to confirm the existence, condition, and completeness of the assets acquired and liabilities assumed to establish fair value of such assets and liabilities and to determine the amount of goodwill to be recognized as of the date of acquisition. Due to the timing of the acquisition, 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 $3.5 million, all of which is deductible for tax purposes. Goodwill represents future economic benefits arising from other assets acquired that could not be individually identified including workforce additions, growth opportunities, and increased presence in the domestic building products markets. The final purchase price allocation will be completed no later than the third quarter of fiscal year 2023.

The preliminary allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed is as follows as of the date of the acquisition (in thousands):


Cash	$	1,018
Working capital	24,279
Property, plant and equipment	3,462
Acquired intangible assets	20,000
Other assets	404

Goodwill	3,476
Fair value of purchase consideration	$	52,639

The intangible assets acquired in this acquisition consisted of the following (in thousands):

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	Fair Value		Weighted-Average Amortization Period
Trademarks	$	5,000	Indefinite


Customer relationships	15,000		15 years
Total	$	20,000

In determining the preliminary allocation of the purchase price to the assets acquired and liabilities assumed, the Company uses all available information to make fair value determinations using Level 3 unobservable inputs in which little or no market data exists, and therefore, engages independent valuation specialists to assist in the fair value determination of the acquired long-lived assets.

The acquisition of QAP was financed primarily through borrowings under the Company's revolving credit facility.

The Company incurred costs related to the acquisition of QAP that have been recognized in the consolidated statements of income. Within cost of sales, the Company recognizes the amortization of the purchase price allocated to the step up of inventory to fair value. Legal and consulting fees incurred as a result of the acquisition were recognized as a component of selling, general, and administrative expenses.

The acquisition-related costs consisted of the following for the three and nine months ended September 30 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Cost of sales	$	476	$	—	$	476	$	—
Selling, general and administrative costs	522		53		529		946
Total acquisition related costs	$	998	$	53	$	1,005	$	946

(7) GOODWILL AND RELATED INTANGIBLE ASSETS

Goodwill

The changes in the carrying amount of goodwill for the nine months ended September 30, 2022 are as follows (in thousands):


	Renewables		Residential		Agtech		Infrastructure		Total
Balance at December 31, 2021	$	188,680	$	205,452	$	85,132	$	31,678	$	510,942
Acquired goodwill	—		3,476		—		—		3,476
Adjustments to prior year acquisitions	904		—		—		—		904
Foreign currency translation	(2,545)		—		(1,911)		—		(4,456)
Balance at September 30, 2022	$	187,039	$	208,928	$	83,221	$	31,678	$	510,866

The Company is required to regularly assess whether a triggering event has occurred which would require interim impairment testing. The Company determined that no triggering event had occurred as of September 30, 2022 which would require an interim impairment test to be performed.

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Acquired Intangible Assets

Acquired intangible assets consist of the following (in thousands):


	September 30, 2022				December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Indefinite-lived intangible assets:
Trademarks	$	57,700	$	—	$	52,700	$	—
Finite-lived intangible assets:
Trademarks	5,432		4,337		5,521		4,011
Unpatented technology	34,117		21,456		38,474		20,656
Customer relationships	117,429		43,914		108,591		39,832
Non-compete agreements	2,368		1,965		2,686		1,969
Backlog	6,852		6,852		7,200		7,200
	166,198		78,524		162,472		73,668
Total acquired intangible assets	$	223,898	$	78,524	$	215,172	$	73,668

The following table summarizes the acquired intangible asset amortization expense for the three and nine months ended September 30 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Amortization expense	$	2,801	$	4,646	$	8,718	$	14,125

Amortization expense related to acquired intangible assets for the remainder of fiscal 2022 and the next five years thereafter is estimated as follows (in thousands):


	2022		2023		2024		2025		2026		2027
Amortization expense	$	2,905	$	11,140	$	10,960	$	10,820	$	9,397	$	7,747

(8) LONG-TERM DEBT

Long-term debt consists of the following (in thousands):


	September 30, 2022		December 31, 2021
Revolving credit facility	$	122,300	$	24,500

Less unamortized debt issuance costs	(460)		(719)
Total debt	$	121,840	$	23,781

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 three financial covenants. As of September 30, 2022, the Company was in compliance with all three covenants.

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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. Capital distributions under the Senior Credit Agreement are capped at an annual aggregate limit of $75 million if the Company's leverage ratio is over 3.0 times.

Standby letters of credit of $4.5 million have been issued under the Senior Credit Agreement on behalf of the Company as of September 30, 2022. These letters of credit reduce the amount otherwise available under the revolving credit facility. The Company had $273.2 million and $369.3 million of availability under the revolving credit facility at September 30, 2022 and December 31, 2021, respectively.

(9) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables summarize the cumulative balance of each component of accumulated other comprehensive income (loss), net of tax, for the three and nine months ended September 30, (in thousands):


	Foreign Currency Translation Adjustment		Minimum Post Retirement Benefit Plan Adjustments		Total Pre-Tax Amount		Tax Benefit (Expense)		Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2021	$	1,640	$	(2,247)	$	(607)	$	794	$	187

Minimum post retirement health care plan adjustments	—		34		34		(10)		24
Foreign currency translation adjustment	(227)		—		(227)		—		(227)
Balance at March 31, 2022	1,413		(2,213)		(800)		784		(16)

Minimum post retirement health care plan adjustments	—		1		1		—		1
Foreign currency translation adjustment	(3,198)		—		(3,198)		—		(3,198)
Balance at June 30, 2022	(1,785)		(2,212)		(3,997)		784		(3,213)
Minimum post retirement health care plan adjustments	—		17		17		(5)		12
Foreign currency translation adjustment	(3,568)		—		(3,568)		—		(3,568)
Balance at September 30, 2022	$	(5,353)	$	(2,195)	$	(7,548)	$	779	$	(6,769)


	Foreign Currency Translation Adjustment		Minimum Post Retirement Benefit Plan Adjustments		Total Pre-Tax Amount		Tax Benefit (Expense)		Accumulated Other Comprehensive (Loss) Income
Balance at December 31, 2020	$	(872)	$	(2,426)	$	(3,298)	$	837	$	(2,461)

Minimum post retirement health care plan adjustments	—		37		37		(10)		27
Foreign currency translation adjustment	3,198		—		3,198		—		3,198
Balance at March 31, 2021	2,326		(2,389)		(63)		827		764
Minimum post retirement health care plan adjustments	—		37		37		(10)		27
Foreign currency translation adjustment	761		—		761		—		761
Balance at June 30, 2021	3,087		(2,352)		735		817		1,552
Minimum post retirement health care plan adjustments	—		36		36		(9)		27
Foreign currency translation adjustment	(1,057)		—		(1,057)		—		(1,057)
Balance at September 30, 2021	$	2,030	$	(2,316)	$	(286)	$	808	$	522

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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, 2022, the stockholders of the Company approved the adoption of the Gibraltar Industries, Inc. Amended and Restated 2016 Stock Plan for Non-Employee Directors ("Non-Employee Directors Plan") which increases the total number of shares for issuance by the Company thereunder from 100,000 shares to 200,000 shares, allows the Company to grant awards of shares of the Company's common stock to current non-employee Directors of the Company, and permits the Directors to defer receipt of such shares pursuant to the terms of the Non-Employee Directors Plan.

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.

Equity Based Awards - Settled in Stock

The following table sets forth the number of equity-based awards granted during the nine months ended September 30, which will convert to shares upon vesting, along with the weighted average grant date fair values:


	2022			2021
Awards	Number of Awards	Weighted Average Grant Date Fair Value		Number of Awards (2)	Weighted Average Grant Date Fair Value
Performance stock units (1)	108,464	$	47.00	62,778	$	87.84
Restricted stock units	123,351	$	43.42	62,873	$	80.43
Deferred stock units	2,460	$	42.69	7,536	$	83.58
Common shares	15,652	$	42.49	2,512	$	83.58

(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 the Company’s return on invested capital (“ROIC”) over a one-year performance period.

(2) All PSUs granted in the first quarter of 2021 were forfeited in the first quarter of 2022 as the threshold level of achievement was not met based on the Company's actual ROIC achievement level for the performance period ended December 31, 2021.

Equity Based Awards - Settled in Cash

The Company's equity-based awards that are settled in cash are the awards under the Management Stock Purchase Plan (the “MSPP”) which is authorized under the Company's equity incentive plans. The MSPP provides participants the ability to defer a portion of their compensation, convertible to unrestricted investments, restricted stock units, or a combination of both, or defer a portion of their directors’ fees, convertible to restricted stock units. Employees eligible to defer a portion of their compensation also receive a company-matching award in restricted stock units equal to a percentage of their compensation.

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The deferrals and related company match are credited to an account that represents a share-based liability. The portion of the account deferred to unrestricted investments is measured at fair market value of the unrestricted investments, and the portion of the account deferred to restricted stock units and company-matching restricted stock units is measured at a 200-day average of the Company’s stock price. The account will be converted to and settled in cash payable to participants upon retirement or a termination of their service to the Company.

Total MSPP liabilities recorded on the consolidated balance sheet as of September 30, 2022 was $16.2 million, of which $2.8 million was included in current accrued expenses and $13.4 million was included in non-current liabilities. Total MSPP liabilities recorded on the consolidated balance sheet as of December 31, 2021 was $22.6 million, of which $2.9 million was included in current accrued expenses and $19.7 million was included in non-current liabilities. The value of the restricted stock units within the MSPP liabillity were $14.2 million and $20.7 million at September 30, 2022 and December 31, 2021, respectively.

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 nine months ended September 30,:


	2022		2021
Restricted stock units credited	9,564		28,230
Share-based liabilities paid (in thousands)	$	2,961	$	4,022

(11) HELD FOR SALE AND DISCONTINUED OPERATIONS

Held for Sale

During the first quarter of 2022, the Company committed to a plan to sell its Processing business (the "disposal group") which is a business within the Company's Agtech reportable segment. The planned sale does not meet the criteria to be classified as a discontinued operation. As a result, the Company will continue reporting the operating results of the disposal group in the Company's consolidated operating results from continuing operations until the sale of the business is completed.

The Company classifies assets and related liabilities as held for sale when: (i) management has committed to a plan to sell the assets, (ii) the net assets are available for immediate sale, (iii) there is an active program to locate a buyer and (iv) the sale and transfer of the net assets is probable within one year. Assets and liabilities held for sale are presented separately on our consolidated balance sheets with a valuation allowance, if necessary, to recognize the net carrying amount at the lower of cost or fair value, less costs to sell.

As of September 30, 2022, the assets and liabilities of the disposal group have been classified as held for sale. The following table summarizes these assets and liabilities which have been measured at the lower of (i) the carrying value when classified as held for sale and (ii) the fair value of the business less costs to sell.

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(in thousands)	September 30, 2022
Assets held for sale
Accounts receivable, net of allowance	$	89
Inventories, net of reserves	8,498
Other current assets	1,609
Property, plant, and equipment, net	331
Operating lease asset	603
Goodwill (1)	—
Acquired intangibles, net	6,213
Total assets held for sale	$	17,343
Liabilities held for sale
Accounts payable	$	803
Accrued expenses	74
Non-current operating lease liabilities	165
Total liabilities held for sale	$	1,042

(1) The assignment of goodwill was based on the relative fair value of the disposal group compared to the fair value of the total reporting unit it was included in prior to being reclassified as held for sale.

Net sales and operating loss for held for sale operations for the three and nine months ended September 30 are as follows (in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net sales	$	2,326	$	3,825	$	6,897	$	16,062
Operating loss	$	(481)	$	(1,387)	$	(4,115)	$	(2,689)

Effective with the classification of the disposal group as held for sale, depreciation of property, plant, and equipment and amortization of finite-lived intangible assets and right-of-use assets are not recorded while these assets are classified as held for sale. As a result of our evaluation of the recoverability of the carrying value of the assets and liabilities held for sale relative to an estimated sales price, adjusted for costs to sell, no losses were recorded during the nine months ended September 30, 2022. The recoverability of the disposal group will be evaluated each reporting period until the sale of the business is completed.

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, 2021. 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.

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Components of income from discontinued operations before taxes, including the interest allocated to discontinued operations, for the three and nine months ended September 30 are as follows (in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net sales	$	—	$	—	$	—	$	20,391
Operating expenses	—		—		—		17,493
Adjustment to loss on disposal	—		201		—		1,031

(Loss) Income from discontinued operations before taxes	$	—	$	(201)	$	—	$	1,867

(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 (recoveries) were incurred during the nine months ended September 30, 2022 and 2021 which related to moving and closing costs, severance, and contract terminations, 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 exited a facility, relocating to a new one, and separately, closed one other facility during the nine months ended September 30, 2022. During the nine months ended September 30, 2021, the Company closed two facilities as a result of these initiatives.

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The following tables set forth the exit activity costs (recoveries) and asset impairment charges incurred by segment during the three and nine months ended September 30, related to the restructuring activities described above (in thousands):


	Three months ended September 30,
	2022						2021
	Exit activity (recoveries) costs, net		Asset impairment charges		Total		Exit activity costs		Asset impairment charges		Total
Renewables	$	(44)	$	—	$	(44)	$	131	$	—	$	131
Residential	—		12		12		83		—		83
Agtech	15		217		232		293		—		293
Infrastructure	—		—		—		—		—		—
Corporate	11		—		11		37		—		37
Total exit activity (recoveries) costs & asset impairments	$	(18)	$	229	$	211	$	544	$	—	$	544


	Nine months ended September 30,
	2022						2021
	Exit activity costs (recoveries), net		Asset impairment charges		Total		Exit activity costs		Asset impairment charges		Total
Renewables	$	1,359	$	1,198	$	2,557	$	4,695	$	1,193	$	5,888
Residential	1,298		12		1,310		177		—		177
Agtech	103		217		320		1,784		—		1,784
Infrastructure	(63)		—		(63)		—		—		—
Corporate	93		—		93		96		—		96
Total exit activity costs & asset impairments	$	2,790	$	1,427	$	4,217	$	6,752	$	1,193	$	7,945

The following table provides a summary of where the exit activity costs and asset impairment charges were recorded in the consolidated statements of income for the three and nine months ended September 30, (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Cost of sales	$	(39)	$	194	$	2,249	$	5,959
Selling, general, and administrative expense	250		350		1,968		1,986
Total exit activity and asset impairment charges	$	211	$	544	$	4,217	$	7,945

The following table reconciles the beginning and ending liability for exit activity costs relating to the Company’s facility consolidation efforts (in thousands):


	2022		2021
Balance at January 1	$	272	$	1,030
Exit activity costs recognized	2,790		6,752
Cash payments	(2,782)		(5,970)
Balance at September 30	$	280	$	1,812

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(13) INCOME TAXES

The following table summarizes the provision for income taxes for continuing operations (in thousands) for the three and nine months ended September 30, and the applicable effective tax rates:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Provision for income taxes	$	11,690		$	9,561		$	26,686		$	20,578
Effective tax rate	25.4		%	25.6		%	25.2		%	24.1		%

The effective tax rate for the three months ended September 30, 2022 and 2021, respectively, was greater than the U.S. federal statutory rate of 21% due to state taxes and nondeductible permanent differences. Furthermore, the three months ended September 30, 2021 period was partially offset by favorable discrete items due to an excess tax benefit on stock-based compensation. The effective tax rate for the nine months ended September 30, 2022 and 2021, 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.

(14) EARNINGS PER SHARE

Earnings per share and the weighted average shares outstanding used in calculating basic and diluted earnings per share are as follows for the three and nine months ended September 30, (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator:
Income from continuing operations	$	34,295	$	27,854	$	79,058	$	64,723
(Loss) income from discontinued operations	—		(298)		—		1,544
Net income available to common stockholders	$	34,295	$	27,556	$	79,058	$	66,267
Denominator for basic earnings per share:
Weighted average shares outstanding	31,707		32,802		32,396		32,791
Denominator for diluted earnings per share:
Weighted average shares outstanding	31,707		32,802		32,396		32,791
Common stock options and stock units	105		248		107		264
Weighted average shares and conversions	31,812		33,050		32,503		33,055

The weighted average number of diluted shares does not include potential anti-dilutive common shares issuable pursuant to equity based incentive compensation awards. The following table provides the potential anti-dilutive common stock options and stock units for the three and nine months ended September 30, (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Common stock options and stock units	51	30	48	—

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(15) SEGMENT INFORMATION

The Company is organized into four reportable segments on the basis of the production processes, products and services provided by each segment, identified as follows:

(i)Renewables, which primarily includes designing, engineering, manufacturing and installation of solar racking and electrical balance of systems;

(ii)Residential, which primarily includes roof and foundation ventilation products, centralized mail systems and electronic package solutions, retractable awnings and gutter guards, 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

(iv)Infrastructure, which primarily includes structural bearings, expansion joints and pavement sealant for bridges, airport runways and roadways, elastomeric concrete, and bridge cable protection systems.

When determining the reportable segments, the Company aggregated operating segments based on their similar economic and operating characteristics.

The following table illustrates certain measurements used by management to assess performance of the segments described above for the three and nine months ended September 30, (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net sales:
Renewables	$	111,119	$	130,162	$	291,451	$	323,425
Residential	215,592		171,545		595,322		475,971
Agtech	44,217		48,975		130,325		149,410
Infrastructure	20,363		18,671		59,007		56,528
Total net sales	$	391,291	$	369,353	$	1,076,105	$	1,005,334

Income from operations:
Renewables	$	14,216	$	12,206	$	14,061	$	21,195
Residential	35,802		29,482		104,901		79,571
Agtech	3,777		2,227		5,350		4,133
Infrastructure	2,572		1,640		6,640		7,863
Unallocated Corporate Expenses	(8,971)		(7,577)		(22,222)		(30,560)
Total income from operations	$	47,396	$	37,978	$	108,730	$	82,202


	September 30, 2022		December 31, 2021
Total assets:
Renewables	$	419,214	$	445,486
Residential	581,167		453,469
Agtech	219,800		212,038
Infrastructure	84,626		82,662
Unallocated corporate assets	21,456		21,246

	$	1,326,263	$	1,214,901

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The following tables illustrate segment revenue disaggregated by timing of transfer of control to the customer for the three and nine months ended September 30 (in thousands):


	Three Months Ended September 30, 2022
	Renewables		Residential		Agtech		Infrastructure		Total
Net sales:
Point in Time	$	7,660	$	214,175	$	3,510	$	9,938	$	235,283
Over Time	103,459		1,417		40,707		10,425		156,008
Total net sales	$	111,119	$	215,592	$	44,217	$	20,363	$	391,291


	Three Months Ended September 30, 2021
	Renewables		Residential		Agtech		Infrastructure		Total
Net sales:
Point in Time	$	8,835	$	170,280	$	4,010	$	8,194	$	191,319
Over Time	121,327		1,265		44,965		10,477		178,034
Total net sales	$	130,162	$	171,545	$	48,975	$	18,671	$	369,353


	Nine Months Ended September 30, 2022
	Renewables		Residential		Agtech		Infrastructure		Total
Net sales:
Point in Time	$	18,569	$	591,160	$	9,152	$	25,177	$	644,058
Over Time	272,882		4,162		121,173		33,830		432,047
Total net sales	$	291,451	$	595,322	$	130,325	$	59,007	$	1,076,105


	Nine Months Ended September 30, 2021
	Renewables		Residential		Agtech		Infrastructure		Total
Net sales:
Point in Time	$	21,855	$	472,277	$	16,541	$	25,301	$	535,974
Over Time	301,570		3,694		132,869		31,227		469,360
Total net sales	$	323,425	$	475,971	$	149,410	$	56,528	$	1,005,334

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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, margins, integration of acquired businesses, the industries in which we operate and the expected impact of evolving laws and regulation. 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” disclosures in our most recent Annual Report on Form 10-K as updated in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, along with Item 1A of this Quarterly Report on 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 on Form 10-Q, 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. At September 30, 2022, we operated 36 facilities, comprised of 26 manufacturing facilities, two distribution centers, and eight offices, which are located in 15 states, Canada, China, and Japan. Our operational infrastructure provides the necessary scale to support regional and national customers in each of our markets.

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Recent Trends

The broader market dynamics over the past two years, which have included the impact of COVID-19, have resulted in impacts to our company, including material cost inflation, labor availability issues and logistics costs increases. We have also been impacted from supply constraints for materials and commodities used in our operations and used by our customers in conjunction with the goods and services we provide. In certain instances these constraints have resulted in project delays, cost inflation and logistical delays. We continue to work with our customers and suppliers in this dynamic environment to better align pricing, understand the existing and potential future impacts to the supply chain, and make efforts to mitigate such impacts as we expect these supply chain and labor availability pressures along with the impact of inflation on material cost, labor and logistics will continue throughout 2022.

In early 2022, the U.S. Department of Commerce ("USDOC") was petitioned to investigate alleged circumvention of antidumping and countervailing duties on Chinese imports of solar panels produced in other countries in Southeast Asia. In March 2022, the USDOC announced that it would investigate the circumvention alleged in the petition. In June 2022, the President of the United States issued an Executive Order to suspend any tariffs that result from this investigation for two years. The USDOC has not yet issued a ruling to implement this order and the preliminary ruling, including any preliminary duty rates, which was initially expected in August 2022, but is currently delayed until November 2022. Furthermore, in June 2022, the Uyghur Forced Labor Prevention Act ("UFLPA") was enacted. The UFLPA requires traceability of components of imported goods to validate that the components are not sourced from areas in the Xinjiang region of China. There are reports that up to three-gigawatts of solar panels are being held at U.S. customs until the importer is able to prove where they have been sourced, and it is our understanding that these panels have not yet been released by U.S. customs. As the timing and progress of many of our customers’ projects depend upon the supply of solar panels, our operating results have been and could be impacted by these actions. We continue to work with customers who are assessing their ability to source panels needed to complete projects.

On August 16, 2022, the Inflation Reduction Act ("IRA") was signed into law. Among other things, the IRA provides for Investment Tax Credits ("ITC") for renewable energy. The IRA provides a 30% ITC for projects started prior to the forthcoming issuance of guidance by the Department of the Treasury regarding new wage and apprenticeship standards. Sixty days after the issuance of such guidance the base ITC will be 6%, with an additional 24% available if the new labor standards are met or the project is less than one megawatt. The IRA also provides the option to earn an additional 10% credit for domestic content, and separately, an additional 10% credit for siting a project in an “energy community.” Lastly, there are Manufacturers Tax Credits available to suppliers of certain, specific solar tracker components, including mechanical parts and battery storage, that are made in the U.S. We expect the ITC to accrue to our downstream customers, solar investors, and expect Manufacturers Tax Credits to accrue to the Company's upstream suppliers. Both tax credits will provide long-term certainty for the industry and should reduce policy driven demand swings for our products. As provided for in the issued guidance relative to prevailing wage and sourcing provisions, we will work with our customers to maximize the tax credits available to them.

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 focus is on deploying effective tools to drive growth, improve operating performance, and develop the organization utilizing 80/20 and lean quote-to-cash initiatives along with digital systems for speed, agility and responsiveness. Our Business System challenges existing paradigms, drives day-to-day performance, forces prioritization of resources, tests 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 in higher growth markets with leadership positions ensuring our financial capital and human resources are effectively and efficiently deployed to deliver sustainable, profitable growth while increasing our relevance with customers and

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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 ensuring we have the right design and structure to scale the organization in order 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 the broader market dynamics experienced over the past two years. 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 working capital, and managing our business to generate incremental cash. We believe our strategy enables us to respond to volatility in commodity and other input costs and fluctuations in customer demand, along with striving to maintain and improve margins. We have used cash flows generated by these initiatives to minimize debt, improve our liquidity position, invest in growth initiatives and return capital to our shareholders through share repurchases. Overall, we continue to strive to achieve stronger financial results, make more efficient use of capital, and deliver higher stockholder returns.

Recent Developments

On August 22, 2022, the Company purchased all the issued and outstanding membership interest of Quality Aluminum Products ("QAP"), a manufacturer of aluminum and steel products including soffit, fascia, trim coil, rain carrying products and aluminum siding, for an aggregate purchase price of $52.6 million, which may be adjusted for working capital adjustments and certain other adjustments provided for in the membership interest purchase agreement. The acquisition was financed primarily through borrowings under the Company's revolving credit facility. The results of operations of QAP have been included in the Residential segment of the Company's consolidated financial statements from the date of acquisition.

In May 2022, the Company's Board of Directors authorized a share repurchase program of up to $200 million of the Company's issued and outstanding common stock. The program has a duration of three years, ending May 2, 2025. Repurchases may be made, from time to time, in amounts and at prices the Company deems appropriate, subject to market conditions, applicable legal requirements, debt covenants and other considerations. Any such repurchases may be executed using open market purchases, privately negotiated agreements or other transactions. The repurchase program may be suspended or discontinued at any time at the Company's discretion. As of September 30, 2022, the Company has repurchased 1,333,453 shares for an aggregate price of $55.5 million under this repurchase program.

During the first quarter of 2022, the Company committed to a plan to sell its processing equipment business, which is a business within the Company's Agtech reportable segment, as a result of its portfolio management strategy in order to focus its resources on the higher growth and more profitable growing business within the Agtech segment. The processing equipment business was classified as held for sale as of March 31, 2022 and remains under such classification as of September 30, 2022.

During the first quarter of 2021, the Company sold its Industrial business which was previously included in the Company's Industrial and Infrastructure Products segment, now the Infrastructure segment, and was reported as discontinued operations as of December 31, 2020.

Results of Operations

Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021

The following table sets forth selected results of operations data and its percentage of net sales for the three months ended September 30 (in thousands):

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	2022				2021
Net sales	$	391,291	100.0	%	$	369,353	100.0	%
Cost of sales	296,735		75.8	%	286,101		77.5	%
Gross profit	94,556		24.2	%	83,252		22.5	%
Selling, general, and administrative expense	47,160		12.1	%	45,274		12.2	%

Income from operations	47,396		12.1	%	37,978		10.3	%
Interest expense	1,048		0.2	%	491		0.2	%
Other expense	363		0.1	%	72		0.0	%
Income before taxes	45,985		11.8	%	37,415		10.1	%
Provision for income taxes	11,690		3.0	%	9,561		2.6	%
Income from continuing operations	34,295		8.8	%	27,854		7.5	%
Loss from discontinued operations	—		0.0	%	(298)		0.0	%
Net income	$	34,295	8.8	%	$	27,556	7.5	%

The following table sets forth the Company’s net sales by reportable segment for the three months ended September 30, (in thousands):


							Impact of
	2022		2021		Total Change		Acquisitions		Portfolio Management		Ongoing Operations
Net sales:
Renewables	$	111,119	$	130,162	$	(19,043)	$	—	$	—	$	(19,043)
Residential	215,592		171,545		44,047		11,461		—		32,586
Agtech	44,217		48,975		(4,758)		—		(1,499)		(3,259)
Infrastructure	20,363		18,671		1,692		—		—		1,692
Consolidated	$	391,291	$	369,353	$	21,938	$	11,461	$	(1,499)	$	11,976

Consolidated net sales increased by $21.9 million, or 5.9%, to $391.3 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. The 5.9% increase in revenue was driven by a 3.2% or $12.0 million increase in organic revenue and 3.1% increase or $11.5 million generated from the acquisition of QAP, acquired in the third quarter of 2022 and reported as part of our Residential segment. This increase was partially offset by a decline in revenues in the Company's processing business which was reclassified as held-for-sale as of March 31, 2022. The organic revenue growth in the Residential and Infrastructure segments more than offset volume declines in both our Renewables and Agtech segments. The improvement year over year was driven by a 11% increase in pricing to customers, partially offset by a net volume decline of 8%. The increase during the current year quarter was also driven by participation gains and price management in our Residential segment, partially offset by project delays caused by continuing end market supply chain challenges in the Agtech and Renewables segments. While the Company committed to a plan of sale of its Processing business within the Agtech segment, and has reclassified the assets and liabilities as held-for-sale as of March 31, 2022, the Company will continue reporting its operating results in the Company's consolidated operating results from continuing operations until the sale of the business is completed. Consolidated backlog decreased 7% to $358 million down from $385 million at the end of the prior year quarter.

Net sales in our Renewables segment decreased $19.0 million, or 14.7%, to $111.1 million for the three months ended September 30, 2022 compared to $130.2 million for the three months ended September 30, 2021. Revenue decreased in line with our expectations during the quarter as the market demand for solar panel installation continues to be impacted by the UFLPA, which was implemented in June 2022, and a three-month delay by the Department of Commerce for its preliminary ruling on its solar panel anti-dumping / countervailing duties ("AD/CVD") anti-circumvention investigation. As a result, backlog decreased 9% year over year, however, given the current conversations with our customers, we expect backlog to improve once the DOC issues preliminary and then final order and there is better understanding of enforcement and compliance relative to the UFLPA.

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Net sales in our Residential segment increased 25.7%, or $44.0 million, to $215.6 million for the three months ended September 30, 2022 compared to $171.5 million for the three months ended September 30, 2021. The increase from the prior year quarter, the ninth consecutive quarter of double-digit growth, was driven by price management, participation gains and market demand. Sales generated from QAP, acquired in the third quarter of 2022, also contributed $11.5 million or 6.7% to the increase.

Net sales in our Agtech segment decreased 9.8%, or $4.8 million, to $44.2 million for the three months ended September 30, 2022 compared to $49.0 million for the three months ended September 30, 2021. Excluding the impact of the processing equipment business which has been classified as held for sale as of March 31, 2022, revenue declined in our produce and cannabis businesses as projects shifted into the fourth quarter and 2023, the result of continued licensing and permit delays. The commercial greenhouse business was relatively flat compared to the prior year quarter. While quote activity remains robust, backlog decreased 7% year over year.

Net sales in our Infrastructure segment increased 9.1%, or $1.7 million, to $20.4 million for the three months ended September 30, 2022 compared to $18.7 million for the three months ended September 30, 2021. The increase in revenue was due to solid market demand for non-fabricated products, and timing of project work. The business has strong bidding activity which resulted in an 11% increase in backlog year over year. Management expects continued positive impact from increased infrastructure spending related to the Infrastructure Investment and Jobs Act through the end of this year and into 2023.

Our consolidated gross margin increased to 24.2% for the three months ended September 30, 2022 compared to 22.5% for the three months ended September 30, 2021. The increase was largely the result of favorable price / cost management, business mix, and improved operating execution from lean enterprise initiatives, along with the impact of participation gains in our residential segment.

Selling, general, and administrative ("SG&A") expenses increased by $1.9 million, or 4.2% to $47.2 million for the three months ended September 30, 2022 compared to $45.3 million for the three months ended September 30, 2021. The $1.9 million increase was the net result of expenses associated with investing in our enterprise resource planning ("ERP") systems to simplify and digitize our businesses, along with transaction costs to complete the acquisition of QAP which closed during the quarter, partially offset by lower performance-based compensation expense as compared to the prior year quarter, largely the result of equity-based awards in the Company's deferred compensation plan that are valued based on its 200-day average stock price Despite the above increases, SG&A expenses as a percentage of net sales modestly decreased to 12.1% for the three months ended September 30, 2022 compared to 12.2% for the three months ended September 30, 2021.

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 September 30, (in thousands):


											Impact of
	2022				2021				Total Change		Portfolio Management		Ongoing Operations
Income from operations:
Renewables	$	14,216	12.8	%	$	12,206	9.4	%	$	2,010	$	—	$	2,010
Residential	35,802		16.6	%	29,482		17.2	%	6,320		—		6,320
Agtech	3,777		8.5	%	2,227		4.5	%	1,550		906		644
Infrastructure	2,572		12.6	%	1,640		8.8	%	932		—		932
Unallocated Corporate Expenses	(8,971)		(2.3)	%	(7,577)		(2.1)	%	(1,394)		—		(1,394)
Consolidated income from operations	$	47,396	12.1	%	$	37,978	10.3	%	$	9,418	$	906	$	8,512

The Renewables segment generated an operating margin of 12.8% in the current year quarter compared to 9.4% in the prior year quarter. The increase in operating margin was driven by improved project management, favorable alignment of material costs to customer selling prices and field operations efficiencies. During the quarter, the segment completed the implementation of a common platform for its ERP system. Execution of other integration plans, such as in-sourcing production, remain on track.

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The Residential segment generated an operating margin of 16.6% in the current year quarter compared to 17.2% in the prior year quarter. While operating profit increased $6.3 million as compared to the prior year quarter, margin decreased due to the anticipated lower margins from our recent acquisition of QAP. We expect QAP margins to improve as we continue to integrate it operationally through 80/20 initiatives.

Our Agtech segment generated an operating margin of 8.5% in the current year quarter compared to 4.5% in the prior year quarter. Operating margin improved year over year, the result of business mix, price / cost management, supply chain improvement and 80/20 initiatives.

Our Infrastructure segment generated an operating margin of 12.6% during the three months ended September 30, 2022 compared to 8.8% during the three months ended September 30, 2021. The margin improved year over year driven by favorable alignment of material costs to pricing, volume leverage, positive mix and improved operating execution.

Unallocated corporate expenses increased $1.4 million from $7.6 million during the three months ended September 30, 2021 to $9.0 million during the three months ended September 30, 2022. The increase in expense was primarily the result of expenses associated with investing in our ERP systems to simplify and digitize our businesses as compared to the prior year quarter along with transaction costs to complete the acquisition of QAP which closed during the quarter. These increases were partially offset by lower performance-based compensation expense for equity-based awards in the Company's deferred compensation plan that are valued based on its 200-day average stock price as compared to the prior year quarter.

Interest expense increased year over year with $1.0 million for the three months ended September 30, 2022 compared to $0.5 million for the three months ended September 30, 2021. The increase in expense was due to both higher outstanding balances on the Company's revolving credit facility during the quarter along with higher interest rates compared to the prior year quarter. The outstanding balances on the Company's revolving credit facility were $121.8 million and $59.7 million as of September 30, 2022, and 2021, respectively.

The Company recorded other expense of $0.4 million for the three months ended September 30, 2022, compared to the $0.1 million recorded for the three months ended September 30, 2021. The increase in expense from the prior year quarter was primarily the result of foreign currency translation fluctuations.

We recognized a provision for income taxes of $11.7 million and $9.6 million, with effective tax rates of 25.4% and 25.6% for the three months ended September 30, 2022, and 2021, respectively. The effective tax rate for the three months ended September 30, 2022, and 2021, respectively, was greater than the U.S. federal statutory rate of 21% due to state taxes and nondeductible permanent differences. Furthermore, the increase in provision during the three months ended September 30, 2021 period was partially offset by an excess tax benefit on stock-based compensation.

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Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021

The following table sets forth selected results of operations data and its percentage of net sales for the nine months ended September 30 (in thousands):


	2022				2021
Net sales	$	1,076,105	100.0	%	$	1,005,334	100.0	%
Cost of sales	826,434		76.8	%	781,133		77.7	%
Gross profit	249,671		23.2	%	224,201		22.3	%
Selling, general, and administrative expense	140,941		13.1	%	141,999		14.1	%

Income from operations	108,730		10.1	%	82,202		8.2	%
Interest expense	2,189		0.2	%	1,180		0.1	%
Other expense (income)	797		0.1	%	(4,279)		(0.4)	%
Income before taxes	105,744		9.8	%	85,301		8.5	%
Provision for income taxes	26,686		2.5	%	20,578		2.1	%
Income from continuing operations	79,058		7.3	%	64,723		6.4	%
Income from discontinued operations	—		0.0	%	1,544		0.2	%
Net income	$	79,058	7.3	%	$	66,267	6.6	%

The following table sets forth the Company’s net sales by reportable segment for the nine months ended September 30, (in thousands):


							Impact of
	2022		2021		Total Change		Acquisitions		Portfolio Management		Ongoing Operations
Net sales:
Renewables	$	291,451	$	323,425	$	(31,974)	$	—	$	—	$	(31,974)
Residential	595,322		475,971		119,351		11,461		—		107,890
Agtech	130,325		149,410		(19,085)		—		(9,165)		(9,920)
Infrastructure	59,007		56,528		2,479		—		—		2,479
Consolidated	$	1,076,105	$	1,005,334	$	70,771	$	11,461	$	(9,165)	$	68,475

Consolidated net sales increased by $70.8 million, or 7.0%, to $1.1 billion for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The 7.0% increase in revenue was driven by a 6.8% or $68.5 million increase in organic revenue along with a 1.1% or $11.5 million generated from the acquisition of QAP this quarter in the Residential segment. The increase was partially offset by a decline in revenue in the Company's processing business which was reclassified as held-for-sale as of March 31, 2022. The organic revenue growth in the Residential and Infrastructure segments more than offset volume declines in both our Renewables and Agtech segments. This net improvement year over year was driven by a 13% increase in pricing to customers, partially offset by a net volume decline of 7%. The increase in net sales during the current year was also driven by price management and participation gains in our Residential segment, partially offset by continued project delays caused by supply chain challenges in the Agtech and Renewables segments. While the Company committed to a plan of sale of its Processing business within the Agtech segment, and has reclassified the assets and liabilities as held-for-sale as of March 31, 2022, the Company will continue reporting its operating results in the Company's consolidated operating results from continuing operations until the sale of the business is completed. Consolidated backlog decreased 7% to $358 million down from $385 million at the end of the prior year period.

Net sales in our Renewables segment decreased $32.0 million, or 9.9%, to $291.5 million for the nine months ended September 30, 2022 compared to $323.4 million for the nine months ended September 30, 2021. Revenue decreased as anticipated by 9.9% during the current year as the market demand for solar panel installation continues to be impacted by the UFLPA, which was implemented in June 2022, and a three-month delay by the Department of Commerce for its preliminary ruling on its solar panel AD/CVD anti-circumvention investigation. As a result, backlog decreased 9% year over year, however, given the current conversations with our customers, we

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expect backlog to improve once the DOC issues preliminary and then final order and there is better understanding of enforcement and compliance relative to the UFLPA.

Net sales in our Residential segment increased 25.1%, or $119.4 million, to $595.3 million for the nine months ended September 30, 2022 compared to $476.0 million for the nine months ended September 30, 2021. The increase from the prior year was primarily driven by pricing actions, along with participation gains and increased market demand. Sales generated from QAP, acquired in the third quarter of 2022, also contributed $11.5 million or 2.4% to the increase.

Net sales in our Agtech segment decreased 12.8%, or $19.1 million, to $130.3 million for the nine months ended September 30, 2022 compared to $149.4 million for the nine months ended September 30, 2021. Excluding the impact of the processing equipment business which has been classified as held for sale as of March 31, 2022, revenue declined $9.9 million as our produce and cannabis businesses due to project delays, the result of continued licensing and permit delays. Despite these headwinds, the commercial greenhouse business continued solid growth across its core product lines. While quote activity remains robust, backlog decreased 7% year over year.

Net sales in our Infrastructure segment increased 4.4%, or $2.5 million, to $59.0 million for the nine months ended September 30, 2022 compared to $56.5 million for nine months ended September 30, 2021. The increase in revenue was driven by growth in demand for fabricated products with strong bidding activity which resulted in an 11% increase in backlog year over year. Management expects continued positive impact from the increased infrastructure spending related to the Infrastructure Investment and Jobs Act through the end of this year and into 2023.

Our consolidated gross margin increased to 23.2% for the nine months ended September 30, 2022 compared to 22.3% for the nine months ended September 30, 2021. The increase was primarily the result of favorable price / cost management and favorable revenue mix and improved operating execution from lean enterprise initiatives along with participation gains in our residential segment. These actions more than offset the impacts of supply chain challenges and severe weather which were experienced in the early part of the year that resulted in increased costs due to project disruptions.

SG&A expenses as a percentage of net sales decreased to 13.1% for the nine months ended September 30, 2022 compared to 14.1% for the nine months ended September 30, 2021. The decrease of $1.1 million, or 0.7%, to $140.9 million for the current year period compared to $142.0 million for the prior year period was primarily due to lower performance-based compensation expense for equity-based awards in the Company's deferred compensation plan that are valued based on its 200-day average stock price. This increase was partially offset by higher expenses associated with investing in our ERP systems to simplify and digitize our businesses as compared to the prior year.

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 nine months ended September 30, (in thousands):


											Impact of
	2022				2021				Total Change		Portfolio Management		Ongoing Operations
Income from operations:
Renewables	$	14,061	4.8	%	$	21,195	6.6	%	$	(7,134)	$	—	$	(7,134)
Residential	104,901		17.6	%	79,571		16.7	%	25,330		—		25,330
Agtech	5,350		4.1	%	4,133		2.8	%	1,217		(1,426)		2,643
Infrastructure	6,640		11.3	%	7,863		13.9	%	(1,223)		—		(1,223)
Unallocated Corporate Expenses	(22,222)		(2.1)	%	(30,560)		(3.0)	%	8,338		—		8,338
Consolidated income from operations	$	108,730	10.1	%	$	82,202	8.2	%	$	26,528	$	(1,426)	$	27,954

The Renewables segment generated an operating margin of 4.8% in the current year period compared to 6.6% in the prior year period. The decrease in operating margin on lower volume was the result of project management

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inefficiencies related to project delays and disruptions associated with market supply chain challenges and prolonged inflation on structural steel used in solar canopy projects in the earlier part of the year. Improved project management, favorable alignment of material costs to customer selling prices and field operations efficiencies beginning in May and sustained through the current period is largely offsetting the challenges experienced at the beginning of the year. Execution of integration plans, such as in-sourcing production, remain on track.

The Residential segment generated an operating margin of 17.6% in the current year period compared to 16.7% in the prior year period. The increase in operating margin was the result of favorable price / cost management, segment mix, labor management, volume leverage and 80/20 initiatives. During the year, we completed the implementation a new ERP system in the mail and package business.

Our Agtech segment generated an operating margin of 4.1% in the current year period compared to 2.8% in the prior year period. Excluding the impact of the Processing business which has been classified as held for sale as of March 31, 2022, operating profit and margin improved year over year as a result of improved business mix, price / cost management, continued execution from 80/20 and lean enterprise initiatives and ongoing integration activities.

Our Infrastructure segment generated an operating margin of 11.3% in the current year period compared to 13.9% during the prior year period. The margin declined year over year due to the impact of plate steel inflation on fixed price and was partially offset by improving operating execution.

Unallocated corporate expenses decreased $8.3 million from $30.6 million during the nine months ended September 30, 2021 to $22.2 million during the nine months ended September 30, 2022. The decrease in expense was largely the result of lower performance-based compensation expense for equity-based awards in the Company's deferred compensation plan that are valued based on its 200-day average stock price as compared to the prior year.

Interest expense increased year over year with $2.2 million for the nine months ended September 30, 2022 compared to $1.2 million for the nine months ended September 30, 2021. The increase in expense was primarily due to higher outstanding balances on the Company's revolving credit facility during the current year along with higher interest rates compared to the prior year period. The outstanding balances on the Company's revolving credit facility were $121.8 million and $59.7 million as of September 30, 2022, and 2021, respectively.

The Company recorded other expense of $0.8 million for the nine months ended September 30, 2022, compared to other income of $4.3 million for the nine months ended September 30, 2021. The change from income in the prior year to expense in the current year was primarily the result of the $4.7 million gain recognized on the sale of securities received from the sellers of Thermo Energy Systems, Inc. ("Thermo") to settle indemnification claims recorded in the prior year.

We recognized a provision for income taxes of $26.7 million and $20.6 million, with effective tax rates of 25.2% and 24.1% for the nine months ended September 30, 2022, and 2021, respectively. The effective tax rate for the nine months ended September 30, 2022, and 2021, respectively, was greater than the U.S. federal statutory rate of 21% due to state taxes and nondeductible permanent differences partially offset by an excess tax benefit on stock-based compensation.

Liquidity and Capital Resources

The following table sets forth our liquidity position as of:


(in thousands)	September 30, 2022		December 31, 2021
Cash and cash equivalents	$	21,919	$	12,849
Availability on revolving credit facility	273,205		369,305
	$	295,124	$	382,154

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Sources of Liquidity

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 invest in key business strategies that drive our mission. We have been able to weather the economic impacts of the broader market dynamics, including the current inflationary cost environment, while continuing to make investments that support our strategy. 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 to invest in operational excellence, growth initiatives and stock repurchases for the foreseeable future.

We use our Senior Credit Agreement to provide liquidity and capital resources primarily for 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 September 30, 2022, our foreign subsidiaries held $15.7 million of cash.

Outstanding balances on our revolving credit facility under our Senior Credit Agreement accrue interest at a rate based on LIBOR plus an additional margin. We do not expect a material change in interest expense as a result of transitioning from a LIBOR rate to a new reference rate. See Note 8 to the Company's consolidated financial statements in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for further information on the Company’s Senior Credit Agreement.

Uses of Cash / Cash Requirements

Our material short-term cash requirements primarily include accounts payable, certain employee and retiree benefit-related obligations, operating lease obligations, interest payments on outstanding debt, repayments of borrowing on our revolving credit facility, capital expenditures, and other purchase obligations originating in the normal course of business for inventory purchase orders and contractual service agreements. Our principal capital requirements are to fund our operations' working capital and capital improvements, to provide capital for acquisitions and to strategically allocate capital through repurchases of Company stock. 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. We intend to fund our cash requirements through cash generated from operations and, as necessary, from the availability on our revolving credit facility.

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 were required to be repaid in two installments occurring near the end of each year 2021 and 2022, of which $1.9 million was repaid in 2021 and the remaining $2.5 million will be repaid by the end of 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 Senior Credit Agreement, new debt financing, the issuance of equity securities, or any combination of the above. The $52.6 million preliminary purchase price for the acquisition of QAP was financed primarily through borrowing on our revolving credit facility. Additional cash payments may be required for customary adjustments related to QAP's net working capital and certain other adjustments as provided for in the membership interest purchase agreement. 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.

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These expectations are forward-looking statements based upon currently available 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 expected levels, or sources of financing are not available or not available at acceptable terms, our future liquidity may be adversely affected.

Except as disclosed above, there have been no material changes in our cash requirements since December 31, 2021, the end of fiscal year 2021. See Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2021.

Cash Flows

The following table sets forth selected cash flow data for the nine months ended September 30, (in thousands):


	2022		2021
Cash provided by (used in):
Operating activities of continuing operations	$	38,561	$	(14,523)
Investing activities of continuing operations	(67,325)		28,954
Financing activities of continuing operations	39,675		(30,276)
Discontinued operations	—		(2,178)
Effect of foreign exchange rate changes	(1,841)		(97)
Net increase (decrease) in cash and cash equivalents	$	9,070	$	(18,120)

Operating Activities

Net cash provided by operating activities of continuing operations for the nine months ended September 30, 2022 of $38.6 million consisted of income from continuing operations of $79.1 million and non-cash net charges totaling $30.3 million, which include depreciation, amortization, stock-based compensation, exit activity costs and other non-cash charges, offset by a $70.8 million investment in working capital and other net assets. The investment in working capital and other net assets was due to increases in accounts receivable and inventory, largely the result of seasonal increases in demand, holding increased quantities due to general supply chain disruption, along with increased raw material and freight costs impacting inventory. A decrease in accounts payable as a result of the correlation between the timing of inventory receipts and vendor payments also contributed to the increase.

Net cash used in operating activities of continuing operations for the nine months ended September 30, 2021 of $14.5 million consisted of income from continuing operations of $64.7 million and non-cash net charges totaling $32.6 million, which include depreciation, amortization, stock-based compensation, exit activity costs and other non-cash charges, offset by a $111.8 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 provisioning for potential supply chain disruptions along with accounts receivable due to seasonal increases in demand, offset by an increase in accounts payable as the result of seasonal increases in manufacturing activity.

Investing Activities

Net cash used in investing activities of continuing operations for the nine months ended September 30, 2022 of $67.3 million consisted of net cash paid of $51.6 million for the acquisition of QAP and capital expenditures of $15.7 million.

Net cash provided by investing activities of continuing operations for the nine months ended September 30, 2021 of $29.0 million was primarily due to $38.1 million in net proceeds received from the sale of the Company's Industrial business and receipt of the $4.1 million final working capital settlement resulting from the 2020 acquisition of TerraSmart, offset by capital expenditures of $13.3 million.

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Financing Activities

Net cash provided by financing activities of continuing operations for the nine months ended September 30, 2022 of $39.7 million was the result of $197.8 million in proceeds from borrowing on our long-term credit facility, offset by $100.0 million in payments on long-term debt and $58.1 million of common stock repurchases. Share repurchases of 1,333,453 under the Company’s recently authorized share repurchase program totaled $55.5 million with the balance repurchased for the net settlement of tax obligations for participants in the Company's equity incentive plans.

Net cash used in financing activities of continuing operations for the nine months ended September 30, 2021 of $30.3 million was primarily the result of $83.6 million in payments on long-term debt and $6.2 million of common stock repurchases related to the net settlement of tax obligations for participants in the Company's equity incentive plans, offset by $58.5 million in proceeds from borrowing on our long-term credit facility and $1.0 million from the issuance of common stock from stock option exercises during the period.

Critical Accounting Estimates

There have been no material changes to our critical accounting estimates during the nine months ended September 30, 2022 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, 2021.

Recent Accounting Pronouncements

See Note 2 to the Company's consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on recent accounting pronouncements.

Item 3. Quantitative and Qualitative 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, interest rates, 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. In the current year, there have been no material changes in the information provided under Item 7A in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

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, as amended). Management of the Company, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures 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, as amended, 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

We implemented a new Enterprise Resource Planning (“ERP”) system for one of our operating units in our Renewables segment during the quarter ended September 30, 2022. The implementation of this ERP system is expected to, among other things, improve user access security and automate a number of accounting and reporting processes and activities, thereby decreasing the amount of manual processes previously required. Also, the Company acquired Quality Aluminum Products ("QAP") on August 22, 2022. This completed acquisition will be excluded from management's annual report on internal control over financial reporting for the year ending December 31, 2022.

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Except for the implementation of the new ERP system and the acquisition of QAP, 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) under the Securities Exchange Act of 1934, as amended) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to litigation from time to time in the ordinary course of business, however, there is no current material pending litigation to which we are a party and no material legal proceedings were terminated, settled, or otherwise resolved during the three months ended September 30, 2022, other than ordinary, routine litigation incidental to its business. The Company maintains liability insurance against risks arising out of the normal course of business.

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, 2021 and in our Form 10-Q for the quarterly period ended March 31, 2022. 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. During the quarter ended September 30, 2022, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as amended by the risk factors disclosed in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, respectively, except as follows.

Macroeconomic factors outside of our control may adversely affect our business, our industry, and the businesses and industries of many of our customer and suppliers.

Macroeconomic factors have a significant impact on our business, customer demand and the availability of credit and other capital, affecting our ability to generate profitable margins. Our operations are subject to the effects of domestic and international economic conditions, including global industrial production rates, inflation, deflation, interest rates, availability of capital, debt levels, consumer spending, energy availability, commodity prices, and the effects of governmental initiatives to manage economic conditions, including government monetary and trade policies, tax laws and regulations. Tariffs placed on imported products used by our customers, such as solar panels, could impact cost and availability of these products to our customers which could impact the demand for our products or services. In addition, fluctuations in the U.S. dollar impact the prices we charge and costs we incur to export and import products. We are unable to predict the impact on our business of changes in domestic and international economic conditions. We currently face challenging market conditions, and domestic or global economies, or certain industry sectors of those economies that are key to our sales, may further deteriorate, which could result in a corresponding decrease in demand for our products and negatively impact our results of operations and financial condition.

In addition, the United States currently imposes antidumping and countervailing duties on certain imported solar panels and components from certain countries in Southeast Asia. The antidumping and countervailing duties can change over time pursuant to annual reviews conducted by the U.S. Department of Commerce ("USDOC"), and a change in duty rates could have an adverse impact on our operating results. In early 2022, the USDOC was petitioned to investigate alleged circumvention of antidumping and countervailing duties on Chinese imports of solar panels and components produced in other countries in Southeast Asia. In March 2022, the USDOC announced that it would investigate the circumvention alleged in the petition which is still ongoing at this time. Furthermore, in June 2022, the Uyghur Forced Labor Prevention Act ("UFLPA") was enacted. The UFLPA requires traceability of components of imported goods to validate that the components are not sourced from areas in the Xinjiang region of China, which may be held at U.S. customs until the importer is able to prove where they have been sourced. As the timing and progress of many of our customers’ projects depend upon the supply of solar panels and components, our operating results could be adversely impacted by any negative circumvention determinations made by the USDOC and timing of review by U.S. customs.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In May 2022, the Company's Board of Directors authorized a share repurchase program of up to $200 million of the Company's issued and outstanding common stock. The program was publicly announced on May 4, 2022 and has a duration of three years, ending May 2, 2025. Repurchases may be made, from time to time, in amounts and at prices the Company deems appropriate, subject to market conditions, applicable legal requirements, debt covenants and other considerations. Any such repurchases may be executed using open market purchases, privately negotiated agreements or other transactions. The repurchase program may be suspended or discontinued at any time at the Company's discretion.

The following table sets forth purchases made by or on behalf of the Company during the quarter ended September 30, 2022.


	Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
July 1 - 31, 2022	—	$	—	—	$	150,000,002
August 1 - 31, 2022	—	$	—	—	$	150,000,002
September 1 - 30, 2022	138,528	$	40.00	138,528	$	144,459,470
Total	138,528	$	40.00	138,528

The Company did not sell unregistered equity securities during the period covered by this report.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

(a) Exhibits


			3.1			Certificate of Incorporation of Gibraltar Industries, Inc., as amended by: (i) Certificate of Amendment of Certificate of Incorporation of Gibraltar Industries, Inc. filed on October 27, 2004, (ii) Certificate of Change of Registered Agent and Registered Office of Gibraltar Industries, Inc. filed on May 11, 2005, (iii) Certificate of Amendment of Certificate of Incorporation of Gibraltar Industries, Inc. filed on May 22, 2012, (iv) Certificate of Amendment of Certificate of Incorporation of Gibraltar Industries, Inc. filed on May 11, 2015, (v) Certificate of Change of Registered Agent and/or Registered Office filed on January 10, 2019, and (vi) Certificate of Amendment of Certificate of Incorporation of Gibraltar Industries, Inc. filed on May 6, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on August 3, 2021)
			3.2			Amended and Restated By Laws of Gibraltar Industries, Inc. effective January 1, 2015 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on January 5, 2015)
			31.1			Certification of Chairman of the Board, President and Chief Executive Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002.*
			31.2			Certification of Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002.*
			32.1			Certification of the Chairman of the Board, 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.* **
			32.2			Certification of the Senior Vice President and Chief Financial Officer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002.* **
			101.INS			Inline XBRL Instance Document *
			101.SCH			Inline XBRL Taxonomy Extension Schema Document *
			101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document *
			101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document *
			101.PRA			Inline XBRL Taxonomy Extension Presentation Linkbase Document *
			101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document *
			104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*			Submitted electronically with this Quarterly Report on Form 10-Q.
**			Documents are furnished not filed.

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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
Chairman of the Board, President and Chief Executive Officer


/s/ Timothy F. Murphy
Timothy F. Murphy
Senior Vice President and Chief Financial Officer

Date: November 3, 2022

Document

EXHIBIT 31.1

CERTIFICATIONS

I, William T. Bosway, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Gibraltar Industries, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	November 3, 2022	/s/ William T. Bosway
		William T. Bosway
		Chairman of the Board, President and Chief Executive Officer

Document

EXHIBIT 31.2

CERTIFICATIONS

I, Timothy F. Murphy, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Gibraltar Industries, Inc.;

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	November 3, 2022	/s/ Timothy F. Murphy
		Timothy F. Murphy
		Senior Vice President and Chief Financial Officer

Document

EXHIBIT 32.1

CERTIFICATION OF 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

I, William T. Bosway, President and Chief Executive Officer, of Gibraltar Industries, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

The Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ William T. Bosway
William T. Bosway
Chairman of the Board, President and Chief Executive Officer

November 3, 2022

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Document

EXHIBIT 32.2

CERTIFICATION OF 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

I, Timothy F. Murphy, Senior Vice President and Chief Financial Officer, of Gibraltar Industries, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Timothy F. Murphy
Timothy F. Murphy
Senior Vice President and Chief Financial Officer

November 3, 2022