Gibraltar Industries(ROCK) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This part encompasses the company's interim financial statements, management's discussion, and related disclosures Item 1. Financial Statements This section presents Gibraltar Industries, Inc.'s unaudited consolidated financial statements and related notes for the interim period Consolidated Statements of Income This section presents the company's consolidated statements of income for the interim periods Consolidated Statements of Income (in thousands, except per share data): | Metric | 3 Months Ended June 30, 2023 ($ thousands) | 3 Months Ended June 30, 2022 ($ thousands) | 6 Months Ended June 30, 2023 ($ thousands) | 6 Months Ended June 30, 2022 ($ thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net sales | $364,914 | $366,949 | $658,181 | $684,814 | | Gross profit | $96,739 | $90,271 | $173,668 | $155,115 | | Income from operations | $43,077 | $40,139 | $72,447 | $61,334 | | Net income | $30,723 | $29,307 | $51,822 | $44,763 | | Basic EPS | $1.01 | $0.90 | $1.69 | $1.37 | | Diluted EPS | $1.00 | $0.90 | $1.68 | $1.36 | Consolidated Statements of Comprehensive Income This section presents the company's consolidated statements of comprehensive income for the interim periods Consolidated Statements of Comprehensive Income (in thousands): | Metric | 3 Months Ended June 30, 2023 ($ thousands) | 3 Months Ended June 30, 2022 ($ thousands) | 6 Months Ended June 30, 2023 ($ thousands) | 6 Months Ended June 30, 2022 ($ thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income | $30,723 | $29,307 | $51,822 | $44,763 | | Foreign currency translation adjustment | $(584) | $(3,198) | $(699) | $(3,425) | | Postretirement benefit plan adjustments, net of tax | $8 | $1 | $16 | $25 | | Other comprehensive loss | $(576) | $(3,197) | $(683) | $(3,400) | | Total comprehensive income | $30,147 | $26,110 | $51,139 | $41,363 | Consolidated Balance Sheets This section presents the company's consolidated balance sheets as of June 30, 2023, and December 31, 2022 Consolidated Balance Sheets (in thousands): | Metric | June 30, 2023 (unaudited) ($ thousands) | December 31, 2022 ($ thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Assets: | | | | Total current assets | $462,970 | $423,937 | | Property, plant, and equipment, net | $106,130 | $109,584 | | Goodwill | $511,961 | $512,363 | | Total assets | $1,238,577 | $1,210,613 | | Liabilities and Stockholders' Equity: | | | | Total current liabilities | $293,048 | $215,320 | | Long-term debt | $9,790 | $88,762 | | Total stockholders' equity | $850,310 | $822,099 | | Total liabilities and stockholders' equity | $1,238,577 | $1,210,613 | Consolidated Statements of Cash Flows This section presents the company's consolidated statements of cash flows for the interim periods Consolidated Statements of Cash Flows (in thousands): | Metric | Six Months Ended June 30, 2023 ($ thousands) | Six Months Ended June 30, 2022 ($ thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $114,094 | $544 | | Net cash used in investing activities | $(4,730) | $(11,202) | | Net cash (used in) provided by financing activities | $(107,970) | $16,032 | | Net increase in cash and cash equivalents | $1,013 | $4,300 | | Cash and cash equivalents at end of period | $18,621 | $17,149 | Consolidated Statement of Stockholders' Equity This section presents the company's consolidated statement of stockholders' equity for the interim period - Total stockholders' equity increased from $822,099 thousand at December 31, 2022, to $850,310 thousand at June 30, 2023, primarily driven by net income of $51,822 thousand, partially offset by common stock repurchases of $25,181 thousand and foreign currency translation adjustments[23] Notes to Consolidated Financial Statements This section provides detailed notes to the company's unaudited consolidated financial statements (1) CONSOLIDATED FINANCIAL STATEMENTS This note details the basis of presentation for the unaudited interim consolidated financial statements - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information, with all necessary adjustments included. The Company's operations are seasonal, meaning interim results are not necessarily indicative of full-year performance[26] (2) RECENT ACCOUNTING PRONOUNCEMENTS This note discusses the company's assessment of recent accounting pronouncements and their expected impact - The Company assessed recent Accounting Standards Updates (ASUs) effective in or after 2023 and determined they are either not applicable or are expected to have minimal impact on its consolidated financial statements and disclosures[28] (3) ACCOUNTS RECEIVABLE, NET This note provides a breakdown of accounts receivable, net, and the allowance for credit losses Accounts Receivable, Net (in thousands): | Metric | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :-------------------------------- | :------------ | :---------------- | | Trade accounts receivable | $232,177 | $179,170 | | Costs in excess of billings | $39,159 | $41,732 | | Total accounts receivable | $271,336 | $220,902 | | Less allowance for doubtful accounts and contract assets | $(4,849) | $(3,746) | | Accounts receivable, net | $266,487 | $217,156 | Allowance for Credit Losses Roll-Forward (in thousands) for Six Months Ended June 30, 2023: | Metric | Amount ($ thousands) | | :-------------------------------- | :----- | | Beginning balance as of January 1, 2023 | $3,746 | | Bad debt expense, net of recoveries | $1,328 | | Accounts written off against allowance and other adjustments | $(225) | | Ending balance as of June 30, 2023 | $4,849 | (4) REVENUE This note describes the company's revenue streams and contract liabilities - The Company's revenue streams include designing, engineering, manufacturing, and installation services for solar racking systems, electrical balance of systems, various residential building products, greenhouses, and infrastructure products[31] Contract Liabilities (in thousands): | Metric | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :-------------------------------- | :------------ | :---------------- | | Unearned revenue | $6,500 | $4,600 | | Revenue recognized from beginning-of-period contract liabilities (6 months) | $33,700 | $38,600 | (5) INVENTORIES This note provides a detailed breakdown of the company's inventories, including raw materials and finished goods Inventories (in thousands): | Metric | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :-------------------------------- | :------------ | :---------------- | | Raw material | $105,401 | $111,187 | | Work-in-process | $13,658 | $17,944 | | Finished goods | $46,336 | $47,523 | | Gross inventory | $165,395 | $176,654 | | Less reserves | $(5,853) | $(6,294) | | Total inventories, net | $159,542 | $170,360 | (6) ACQUISITION This note details the acquisition of Quality Aluminum Products (QAP), including purchase price allocation and goodwill - On August 22, 2022, Gibraltar Industries acquired Quality Aluminum Products (QAP) for $52.1 million, a manufacturer of aluminum and steel products, integrating it into the Residential segment. The acquisition resulted in $4.0 million in goodwill, deductible for tax purposes[36][37] QAP Acquisition Purchase Price Allocation (in thousands): | Asset/Liability | Fair Value ($ thousands) | | :-------------------------------- | :--------- | | Cash | $1,018 | | Working capital | $23,372 | | Property, plant and equipment | $8,486 | | Acquired intangible assets | $14,700 | | Other assets | $1,813 | | Other liabilities | $(1,295) | | Goodwill | $3,991 | | Fair value of purchase consideration | $52,085 | QAP Acquired Intangible Assets (in thousands): | Intangible Asset | Fair Value ($ thousands) | Weighted-Average Amortization Period | | :-------------------------------- | :--------- | :----------------------------------- | | Trademarks | $2,800 | Indefinite | | Customer relationships | $11,900 | 12 years | | Total | $14,700 | | (7) GOODWILL AND RELATED INTANGIBLE ASSETS This note provides information on goodwill carrying amounts by segment and acquired intangible assets Goodwill Carrying Amount by Segment (in thousands): | Segment | Balance at Dec 31, 2022 ($ thousands) | Adjustments to prior year acquisitions ($ thousands) | Foreign currency translation ($ thousands) | Balance at June 30, 2023 ($ thousands) | | :-------------------------------- | :---------------------- | :----------------------------------- | :--------------------------- | :----------------------- | | Renewables | $188,030 | — | $(990) | $187,040 | | Residential | $209,056 | $387 | — | $209,443 | | Agtech | $83,599 | — | $201 | $83,800 | | Infrastructure | $31,678 | — | — | $31,678 | | Total | $512,363 | $387 | $(789) | $511,961 | Acquired Intangible Assets (in thousands): | Asset Type | Gross Carrying Amount (June 30, 2023) ($ thousands) | Accumulated Amortization (June 30, 2023) ($ thousands) | Gross Carrying Amount (Dec 31, 2022) ($ thousands) | Accumulated Amortization (Dec 31, 2022) ($ thousands) | | :-------------------------------- | :------------------------------------ | :--------------------------------------- | :----------------------------------- | :-------------------------------------- | | Indefinite-lived trademarks | $55,500 | — | $55,500 | — | | Finite-lived trademarks | $5,472 | $4,572 | $5,448 | $4,481 | | Unpatented technology | $34,232 | $23,205 | $34,163 | $22,037 | | Customer relationships | $114,507 | $50,303 | $115,125 | $46,557 | | Non-compete agreements | $2,374 | $2,080 | $2,371 | $2,006 | | Total acquired intangible assets | $212,085 | $80,160 | $212,607 | $75,081 | Amortization Expense (in thousands): | Period | 2023 ($ thousands) | 2022 ($ thousands) | | :-------------------------------- | :--- | :--- | | Three Months Ended June 30 | $2,760 | $2,819 | | Six Months Ended June 30 | $5,526 | $5,917 | | Estimated Amortization Expense (2023-2028) | $5,526 (2023), $10,872 (2024), $10,735 (2025), $9,335 (2026), $7,702 (2027), $6,834 (2028) | | (8) LONG-TERM DEBT This note details the company's long-term debt, including its revolving credit facility and compliance with covenants Long-Term Debt (in thousands): | Metric | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :-------------------------------- | :------------ | :---------------- | | Revolving credit facility | $11,800 | $91,000 | | Less unamortized debt issuance costs | $(2,010) | $(2,238) | | Total debt | $9,790 | $88,762 | - The Company entered into a new Credit Agreement on December 8, 2022, providing a $400 million revolving credit facility (expandable to $700 million) and term loan options. As of June 30, 2023, the Company was in compliance with all financial covenants and had $383.9 million available under the facility[46][50] - Borrowings under the Credit Agreement bear interest based on a base rate, SOFR, or foreign currency rate, with applicable margins ranging from 0.125% to 2.00% depending on the Company's Total Net Leverage Ratio. An annual commitment fee also applies[47] (9) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) This note presents the components of accumulated other comprehensive income (loss) for the interim period Accumulated Other Comprehensive (Loss) Income (in thousands): | Component | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :-------------------------------- | :------------ | :---------------- | | Foreign Currency Translation Adjustment | $(4,081) | $(3,382) | | Postretirement Benefit Plan Adjustments | $(373) | $(395) | | Total Accumulated Other Comprehensive (Loss) Income | $(4,115) | $(3,432) | (10) EQUITY-BASED COMPENSATION This note describes the company's equity-based compensation plans, including awards granted and related liabilities - Stockholders approved the Amended and Restated 2018 Equity Incentive Plan on May 3, 2023, increasing authorized shares for issuance to 1,550,000 and consolidating unissued shares from the 2015 Plan[52] Equity-Based Awards Granted (Settled in Stock): | Award Type | Number of Awards (2023) | Weighted Average Grant Date Fair Value (2023) ($) | Number of Awards (2022) | Weighted Average Grant Date Fair Value (2022) ($) | | :-------------------------------- | :---------------------- | :-------------------------------------------- | :---------------------- | :-------------------------------------------- | | Performance stock units | 85,323 | $53.22 | 108,464 | $47.00 | | Restricted stock units | 53,862 | $53.49 | 67,158 | $45.84 | | Deferred stock units | 6,351 | $54.33 | 2,460 | $42.69 | | Common shares | 8,468 | $54.33 | 15,652 | $42.49 | Management Stock Purchase Plan (MSPP) Liabilities (in thousands): | Metric | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :-------------------------------- | :------------ | :---------------- | | Total MSPP liabilities | $16,900 | $15,400 | | Current accrued expenses portion | $2,000 | $2,300 | | Non-current liabilities portion | $14,900 | $13,100 | | Value of restricted stock units within MSPP liability | $14,600 | $13,400 | (11) EXIT ACTIVITY COSTS AND ASSET IMPAIRMENTS This note details exit activity costs and asset impairment charges incurred due to simplification initiatives - The Company incurred exit activity costs and asset impairment charges due to 80/20 simplification and portfolio management initiatives, including outsourcing/discontinuing low-margin products, process simplification, and facility closures. For the six months ended June 30, 2023, total exit activity and asset impairment charges were $3.717 million, down from $4.006 million in 2022[60][62][63] Exit Activity Costs and Asset Impairment Charges (in thousands): | Segment | 3 Months Ended June 30, 2023 (Total) ($ thousands) | 3 Months Ended June 30, 2022 (Total) ($ thousands) | 6 Months Ended June 30, 2023 (Total) ($ thousands) | 6 Months Ended June 30, 2022 (Total) ($ thousands) | | :-------------------------------- | :----------------------------------- | :----------------------------------- | :----------------------------------- | :----------------------------------- | | Renewables | $2,949 | $75 | $2,886 | $2,601 | | Residential | — | $1,295 | $114 | $1,298 | | Agtech | $156 | $97 | $717 | $88 | | Infrastructure | — | — | — | $(63) | | Corporate | — | $62 | — | $82 | | Total | $3,105 | $1,529 | $3,717 | $4,006 | Exit Activity Costs Liability Roll-Forward (in thousands): | Metric | 2023 ($ thousands) | 2022 ($ thousands) | | :-------------------------------- | :--- | :--- | | Balance at January 1 | $2,417 | $272 | | Exit activity costs recognized | $3,740 | $2,808 | | Cash payments | $(2,377) | $(1,951) | | Balance at June 30 | $3,780 | $1,129 | (12) INCOME TAXES This note provides information on the provision for income taxes and effective tax rates for the interim periods Provision for Income Taxes (in thousands) and Effective Tax Rates: | Metric | 3 Months Ended June 30, 2023 ($ thousands) | 3 Months Ended June 30, 2022 ($ thousands) | 6 Months Ended June 30, 2023 ($ thousands) | 6 Months Ended June 30, 2022 ($ thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Provision for income taxes | $11,555 | $9,895 | $18,732 | $14,996 | | Effective tax rate | 27.3% | 25.2% | 26.6% | 25.1% | - The effective tax rates for both periods (27.3% and 26.6% for 3 and 6 months ended June 30, 2023, respectively) were higher than the U.S. federal statutory rate of 21% due to state taxes and nondeductible permanent differences, partially offset by favorable discrete items from excess tax benefits on stock-based compensation[64] (13) EARNINGS PER SHARE This note presents the calculation of basic and diluted earnings per share and weighted average shares outstanding Earnings Per Share and Weighted Average Shares Outstanding (in thousands): | Metric | 3 Months Ended June 30, 2023 ($ thousands) | 3 Months Ended June 30, 2022 ($ thousands) | 6 Months Ended June 30, 2023 ($ thousands) | 6 Months Ended June 30, 2022 ($ thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income available to common stockholders | $30,723 | $29,307 | $51,822 | $44,763 | | Basic weighted average shares outstanding (shares) | 30,554 | 32,585 | 30,725 | 32,748 | | Diluted weighted average shares outstanding (shares) | 30,684 | 32,660 | 30,846 | 32,843 | | Potential anti-dilutive common stock units (shares) | 19 | 225 | 17 | 65 | (14) SEGMENT INFORMATION This note provides financial information by reportable segment, including net sales and income from operations - The Company operates in four reportable segments: Renewables, Residential, Agtech, and Infrastructure, based on production processes, products, and services. These segments serve customers primarily in North America[67][68][73] Net Sales by Reportable Segment (in thousands): | Segment | 3 Months Ended June 30, 2023 ($ thousands) | 3 Months Ended June 30, 2022 ($ thousands) | 6 Months Ended June 30, 2023 ($ thousands) | 6 Months Ended June 30, 2022 ($ thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Renewables | $77,459 | $101,549 | $136,664 | $180,332 | | Residential | $228,234 | $200,245 | $407,729 | $379,730 | | Agtech | $35,028 | $43,680 | $70,880 | $86,108 | | Infrastructure | $24,193 | $21,475 | $42,908 | $38,644 | | Total net sales | $364,914 | $366,949 | $658,181 | $684,814 | Income from Operations by Reportable Segment (in thousands): | Segment | 3 Months Ended June 30, 2023 ($ thousands) | 3 Months Ended June 30, 2022 ($ thousands) | 6 Months Ended June 30, 2023 ($ thousands) | 6 Months Ended June 30, 2022 ($ thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Renewables | $5,908 | $6,829 | $8,177 | $(155) | | Residential | $43,959 | $35,664 | $73,468 | $69,099 | | Agtech | $(1,117) | $1,542 | $1,213 | $1,573 | | Infrastructure | $5,828 | $2,887 | $8,542 | $4,068 | | Unallocated Corporate Expenses | $(11,501) | $(6,783) | $(18,953) | $(13,251) | | Total income from operations | $43,077 | $40,139 | $72,447 | $61,334 | (15) SUBSEQUENT EVENT This note discloses a subsequent event regarding an acquisition completed after the reporting period - On July 5, 2023, the Company acquired the assets of a Utah-based privately held company manufacturing roof flashing and accessory products for $10.4 million in cash. This acquisition will be reported as part of the Residential segment[70][83] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, results of operations, and liquidity for the interim period Forward-Looking Statements This section contains forward-looking statements that involve risks and uncertainties, cautioning against undue reliance - The report contains forward-looking statements regarding future events, results, and financial conditions, which involve risks and uncertainties. Readers are cautioned not to place undue reliance on these statements, as actual results may differ materially[71] Overview This section provides an overview of Gibraltar Industries, Inc.'s business, markets, and operational footprint - Gibraltar Industries, Inc. is a leading manufacturer and provider of products and services for the renewable energy, residential, agtech, and infrastructure markets, operating through four reportable segments. The Company serves customers primarily in North America and operates 30 facilities across 15 states, Canada, China, and Japan[73] Recent Trends This section discusses recent market trends, including supply chain challenges, macroeconomic uncertainty, and regulatory impacts - The Company continues to face challenges from recovering global supply chains, particularly shortages of solar modules impacting project delays. Macro-economic uncertainty and higher interest rates are expected to persist in 2023[74][75] - The Uyghur Forced Labor Prevention Act (UFLPA) has caused solar panel import delays, leading some customers to shift sourcing. The U.S. Department of Commerce's preliminary ruling on AD/CVD circumvention for Southeast Asian solar panels also creates uncertainty, though duties are suspended until June 2024[76][77][78] - The Inflation Reduction Act (IRA) provides enhanced Investment Tax Credits (ITC) and Manufacturers Tax Credits (MTC) for renewable energy and domestic content, which the Company believes will offer long-term industry certainty and reduce demand swings[79] Business Strategy This section outlines the company's core business strategy pillars: Business System, Portfolio Management, and Organization Development - The Company's strategy is built on three core pillars: Business System (driving continuous performance improvement through 80/20 and lean initiatives), Portfolio Management (optimizing business portfolio in high-growth markets, including strategic acquisitions and divestitures), and Organization Development (focusing on employee growth and retention)[80][86] - The strategy aims to enable timely responses to market changes, manage commodity volatility, improve margins, and generate cash flow for debt reduction, liquidity, growth investments, and shareholder returns through share repurchases[82] Recent Developments This section highlights recent company developments, including acquisitions, credit agreements, and share repurchase activities - On July 5, 2023, the Company acquired a Utah-based roof flashing and accessory products manufacturer for $10.4 million[83] - A new Credit Agreement was entered into on December 8, 2022, providing a $400 million revolving credit facility, replacing the prior agreement. The Company was in compliance with all financial covenants as of June 30, 2023[84] - The Company repurchased 2,518,941 shares for $111.0 million under its $200 million share repurchase program, authorized in May 2022 and ending May 2, 2025[86] Results of Operations - Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022 This section analyzes the company's consolidated and segment-wise results for the three months ended June 30, 2023, versus 2022 Consolidated Financial Performance (3 Months Ended June 30, in thousands): | Metric | 2023 ($ thousands) | % of Net Sales (%) | 2022 ($ thousands) | % of Net Sales (%) | Change ($ thousands) | Change (%) | | :-------------------------------- | :--- | :------------- | :--- | :------------- | :--------- | :--------- | | Net sales | $364,914 | 100.0% | $366,949 | 100.0% | $(2,035) | (0.5%) | | Gross profit | $96,739 | 26.5% | $90,271 | 24.6% | $6,468 | 7.2% | | SG&A expense | $53,662 | 14.7% | $50,132 | 13.7% | $3,530 | 7.0% | | Income from operations | $43,077 | 11.8% | $40,139 | 10.9% | $2,938 | 7.3% | | Net income | $30,723 | 8.4% | $29,307 | 8.0% | $1,416 | 4.8% | - Consolidated net sales decreased by 0.5% due to a 7.0% organic revenue decline (8% volume decrease, 1% price increase), largely offset by $25.6 million from the QAP acquisition. Consolidated backlog remained flat at $411 million[87] Segment Net Sales Performance (3 Months Ended June 30, in thousands): | Segment | 2023 ($ thousands) | 2022 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | :--------- | | Renewables | $77,459 | $101,549 | $(24,090) | (23.6%) | | Residential | $228,234 | $200,245 | $27,989 | 14.0% | | Agtech | $35,028 | $43,680 | $(8,652) | (19.9%) | | Infrastructure | $24,193 | $21,475 | $2,718 | 12.6% | Segment Operating Margin Performance (3 Months Ended June 30): | Segment | 2023 Operating Margin (%) | 2022 Operating Margin (%) | Change (pp) | | :-------------------------------- | :-------------------- | :-------------------- | :---------- | | Renewables | 7.6% | 6.7% | 0.9 | | Residential | 19.3% | 17.8% | 1.5 | | Agtech | (3.2%) | 3.5% | (6.7) | | Infrastructure | 24.1% | 13.4% | 10.7 | | Unallocated Corporate Expenses | (3.2%) | (1.8%) | (1.4) | | Consolidated Income from Operations | 11.8% | 10.9% | 0.9 | Results of Operations - Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022 This section analyzes the company's consolidated and segment-wise results for the six months ended June 30, 2023, versus 2022 Consolidated Financial Performance (6 Months Ended June 30, in thousands): | Metric | 2023 ($ thousands) | % of Net Sales (%) | 2022 ($ thousands) | % of Net Sales (%) | Change ($ thousands) | Change (%) | | :-------------------------------- | :--- | :------------- | :--- | :------------- | :--------- | :--------- | | Net sales | $658,181 | 100.0% | $684,814 | 100.0% | $(26,633) | (3.9%) | | Gross profit | $173,668 | 26.4% | $155,115 | 22.7% | $18,553 | 12.0% | | SG&A expense | $101,221 | 15.4% | $93,781 | 13.7% | $7,440 | 7.9% | | Income from operations | $72,447 | 11.0% | $61,334 | 9.0% | $11,113 | 18.1% | | Net income | $51,822 | 7.9% | $44,763 | 6.5% | $7,059 | 15.8% | - Consolidated net sales decreased by 3.9% due to a 9.5% organic revenue decline (11% volume decrease, 1% price increase), partially offset by $39.8 million from the QAP acquisition. Consolidated backlog remained flat at $411 million[103] Segment Net Sales Performance (6 Months Ended June 30, in thousands): | Segment | 2023 ($ thousands) | 2022 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | :--------- | | Renewables | $136,664 | $180,332 | $(43,668) | (24.2%) | | Residential | $407,729 | $379,730 | $27,999 | 7.4% | | Agtech | $70,880 | $86,108 | $(15,228) | (17.7%) | | Infrastructure | $42,908 | $38,644 | $4,264 | 11.1% | Segment Operating Margin Performance (6 Months Ended June 30): | Segment | 2023 Operating Margin (%) | 2022 Operating Margin (%) | Change (pp) | | :-------------------------------- | :-------------------- | :-------------------- | :---------- | | Renewables | 6.0% | (0.1%) | 6.1 | | Residential | 18.0% | 18.2% | (0.2) | | Agtech | 1.7% | 1.8% | (0.1) | | Infrastructure | 19.9% | 10.5% | 9.4 | | Unallocated Corporate Expenses | (2.9%) | (1.9%) | (1.0) | | Consolidated Income from Operations | 11.0% | 9.0% | 2.0 | Liquidity and Capital Resources This section discusses the company's liquidity position, capital resources, and expected funding for short-term and long-term needs Liquidity Position (in thousands): | Metric | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $18,621 | $17,608 | | Availability on revolving credit facility | $383,855 | $304,505 | | Total liquidity | $402,476 | $322,113 | - The Company's primary liquidity sources are cash on hand and its $400 million revolving credit facility (expandable to $700 million). Management believes these sources provide ample liquidity for operational excellence, growth initiatives, and organizational development[119] - Short-term cash requirements include accounts payable, employee benefits, operating leases, debt service, and capital expenditures. Long-term capital needs for acquisitions and stock repurchases are expected to be funded by operating cash flows, the credit facility, or new financing[123][125] Cash Flows This section analyzes the company's cash flows from operating, investing, and financing activities for the interim periods Selected Cash Flow Data (in thousands): | Activity | 6 Months Ended June 30, 2023 ($ thousands) | 6 Months Ended June 30, 2022 ($ thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | | Operating activities | $114,094 | $544 | | Investing activities | $(4,730) | $(11,202) | | Financing activities | $(107,970) | $16,032 | | Effect of foreign exchange rate changes | $(381) | $(1,074) | | Net increase in cash and cash equivalents | $1,013 | $4,300 | - Net cash from operating activities significantly increased to $114.1 million in H1 2023 (from $0.5 million in H1 2022), driven by net income, non-cash charges, and $40.7 million from working capital improvements (increases in accounts payable and billings in excess of costs, and reduced inventory investment)[130][131] - Net cash used in investing activities decreased to $4.7 million in H1 2023 (from $11.2 million in H1 2022), primarily due to lower capital expenditures and a working capital settlement from the QAP acquisition. Net cash used in financing activities was $108.0 million in H1 2023, mainly due to net long-term debt payments ($79.2 million) and common stock repurchases ($28.8 million)[132][133] Critical Accounting Estimates This section confirms no material changes to the company's critical accounting estimates during the interim period - There have been no material changes to the Company's critical accounting estimates during the six months ended June 30, 2023, compared to those disclosed in the 2022 Annual Report on Form 10-K[135] Recent Accounting Pronouncements This section refers to Note 2 for information on recent accounting pronouncements and their impact - For information on recent accounting pronouncements, refer to Note 2 of the consolidated financial statements[136] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the company's market risk exposures, including interest rates and foreign exchange, with no material changes - The Company is exposed to market risks such as changes in general economic conditions, competition, interest rates, foreign exchange rates, and raw materials pricing and availability. No material changes in these risks occurred during the six months ended June 30, 2023[137] Item 4. Controls and Procedures Management confirmed the effectiveness of disclosure controls and procedures, with no material changes in internal controls during the period - The Company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of June 30, 2023[138] - There were no material changes in the Company's internal control over financial reporting during the period covered by this report[139] PART II. OTHER INFORMATION This part includes legal proceedings, risk factors, equity security sales, and other required disclosures Item 1. Legal Proceedings The company is involved in ordinary course legal proceedings, with no material impact expected on financial condition or results - Management does not believe that the ultimate outcome of any pending litigation will have a material effect on the Company's consolidated financial condition, results of operations, or liquidity[140] - No material legal proceedings were terminated, settled, or otherwise resolved during the quarter ended June 30, 2023[141] Item 1A. Risk Factors No material changes to the risk factors from the 2022 Annual Report on Form 10-K were reported during the current quarter - No material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, occurred during the quarter ended June 30, 2023[142] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's $200 million share repurchase program and recent equity security sales - The Company's Board of Directors authorized a share repurchase program of up to $200 million of common stock in May 2022, with a duration of three years ending May 2, 2025[143] Issuer Purchases of Equity Securities (Quarter Ended June 30, 2023): | Period | Total Number of Shares Purchased (shares) | Average Price Paid per Share ($) | Total Number of Shares Purchased as Part of Publicly Announced Program (shares) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program ($) | | :-------------------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------- | :----------------------------------------------------------------------------- | | April 1 - 30, 2023 | 342,562 | $48.31 | 342,562 | $90,206,650 | | May 1 - 31, 2023 | 25,476 | $49.58 | 25,476 | $88,943,472 | | June 1 - 30, 2023 | — | — | — | $88,943,472 | | Total | 368,038 | $48.40 | 368,038 | | Item 3. Defaults Upon Senior Securities This item is not applicable to the Company for the reporting period - Not applicable[146] Item 4. Mine Safety Disclosures This item is not applicable to the Company for the reporting period - Not applicable[146] Item 5. Other Information This item is not applicable to the Company for the reporting period - Not applicable[147] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents and certifications - The exhibits include the Certificate of Incorporation, By-Laws, Amended and Restated 2018 Equity Incentive Plan, forms of award for restricted and performance units, Change in Control Executive Severance Plan, and various certifications (Sarbanes-Oxley Act Section 302 and 906)[149] SIGNATURES The report is signed by the Chairman, President, CEO, and CFO of Gibraltar Industries, Inc. as of August 2, 2023 - The report is signed by William T. Bosway, Chairman of the Board, President and Chief Executive Officer, and Timothy F. Murphy, Senior Vice President and Chief Financial Officer, on August 2, 2023[152]